<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997.
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
WINDY HILL PET FOOD COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MINNESOTA 2047 41-0323270
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
------------------------------
TWO MARYLAND FARMS
BRENTWOOD, TENNESSEE 37027
(615) 373-7774
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
ROBERT V. DALE
PRESIDENT
WINDY HILL PET FOOD COMPANY, INC.
TWO MARYLAND FARMS
BRENTWOOD, TENNESSEE 37027
(615) 373-7774
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
------------------------------
<TABLE>
<S> <C>
COPIES TO:
MR. RAY CHUNG NANCY YOUNG, ESQ.
DARTFORD PARTNERSHIP L.L.C. RICHARDS & O'NEIL, LLP
456 MONTGOMERY STREET 885 THIRD AVENUE
SUITE 2200 NEW YORK, NEW YORK 10022-4802
SAN FRANCISCO, CALIFORNIA 94104 (212) 207-1200
(415) 982-3019
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 3/4% Senior Subordinated Notes
due 2007........................... $120,000,000 100% $120,000,000 $36,363.64
</TABLE>
(1) In accordance with Rule 457(F)(2), the registration fee is calculated based
on the book value, which has been computed as of June 27, 1997 of the
outstanding 9 3/4% Senior Subordinated Notes due 2007 of Windy Hill Pet Food
Company, Inc. to be cancelled in the exchange transaction hereunder.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
CROSS-REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-4 ITEM AND CAPTION LOCATION OR PROSPECTUS CAPTION
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page; Outside Back Cover Page
of Prospectus......................................
3. Risk Factors, Ratio of Earnings to Fixed Charges and Prospectus Summary; Risk Factors; The Company;
Other Information.................................. Selected Historical Financial Data; and Pro Forma
Financial Information
4. Terms of the Transaction............................. Prospectus Summary; Risk Factors; The Exchange Offer;
Description of Notes
5. Pro Forma Financial Information...................... Prospectus Summary; Pro Forma Financial Information
6. Material Contacts with the Company Being Acquired.... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters...... Not Applicable
8. Interests of Named Experts and Counsel............... Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Not Applicable
10. Information with Respect to S-3 Registrants.......... Not Applicable
11. Incorporation of Certain Information by Reference.... Not Applicable
12. Information with Respect to S-2 or S-3 Registrants... Not Applicable
13. Incorporation of Certain Information by Reference.... Not Applicable
14. Information with Respect to Registrants Other Than Outside Front Cover Page; Prospectus Summary; Risk
S-3 or S-2 Registrants............................. Factors; The Company; Use of Proceeds;
Capitalization; Selected Historical Financial Data;
Pro Forma Financial Information; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Financial
Statements
15. Information with Respect to S-3 Companies............ Not Applicable
16. Information with Respect to S-2 or S-3 Companies..... Not Applicable
17. Information with Respect to Companies Other Than S-3
or S-2 Companies................................... Not Applicable
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................ Not Applicable
19. Information if Proxies, Consents or Authorizations Management; Security Ownership; Certain Related
are not to be Solicited or in an Exchange Offer.... Transactions
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
OFFER FOR ALL OUTSTANDING 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
WINDY HILL PET FOOD COMPANY, INC.
[LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED
Windy Hill Pet Food Company, Inc., a Minnesota corporation (the "Company")
hereby offers to exchange an aggregate principal amount of up to $120,000,000 of
its 9 3/4% Senior Subordinated Notes due 2007 (the "New Notes") for a like
principal amount of its 9 3/4% Senior Subordinated Notes due 2007 (the "Old
Notes") outstanding on the date hereof upon terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal
(which together constitute the "Exchange Offer"). The New Notes and Old Notes
are collectively referred to herein as the "Notes." The terms of the New Notes
are identical in all material respects to those of the Old Notes, except for
certain transfer restrictions and registration rights relating to the Old Notes.
The New Notes will be issued pursuant to, and entitled to the benefits of, the
Indenture (as defined) governing the Old Notes.
Additionally, interest on the New Notes will accrue from the last interest
payment date on which interest was paid on the Old Notes surrendered in exchange
therefor or, if no interest has been paid on the Old Notes, from the date of
original issue of the Old Notes.
Interest on the New Notes is payable semiannually on May 15 and November 15 of
each year, commencing on November 15, 1997. The New Notes will mature on May 15,
2007. Except as described below, the Company may not redeem the New Notes prior
to May 15, 2002. On or after such date, the Company may redeem the New Notes in
whole or in part, at any time at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time on or prior to May 15, 2000, the
Company may, subject to certain requirements, redeem up to $42 million of the
aggregate principal amount of the Notes with the cash proceeds of one or more
Equity Offerings (as defined) at a redemption price equal to 109.750% of the
principal amount to be redeemed, together with accrued and unpaid interest, if
any, to the date of redemption, provided that at least $78 million of the
aggregate principal amount of the Notes remain outstanding after each such
redemption. The New Notes will not be subject to any sinking fund requirement.
Upon the occurrence of a Change of Control (as defined), (i) the Company will
have the option, at any time on or prior to May 15, 2002, to redeem the New
Notes in whole but not in part at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium set forth herein, plus
accrued and unpaid interest to the date of redemption and (ii) if the Company
does not so redeem the New Notes or if such Change of Control occurs after May
15, 2002, the Company will be required to make an offer to repurchase the Notes
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of purchase. See "Description of
Notes."
The New Notes will be unsecured and will be subordinated to all existing and
future Senior Indebtedness (as defined) of the Company and will be effectively
subordinated to all obligations of any subsidiaries of the Company as may exist
from time to time. The Company does not have any active subsidiaries. See
"Description of Notes -- General." However, the Indenture will not restrict the
ability of the Company to create, acquire, or capitalize subsidiaries in the
future. The New Notes will rank PARI PASSU with any future Senior Subordinated
Indebtedness of the Company and will rank senior to all other subordinated
indebtedness of the Company. As of April 30, 1997, on a pro forma basis after
giving effect to the Transaction and the AF Sale (as defined), the aggregate
amount of the Company's outstanding Senior Indebtedness would have been
approximately $15 million (excluding unused commitments of $65 million under the
Senior Bank Facilities) and the Company would have had no Senior Subordinated
Indebtedness outstanding other than the Notes. See "Description of Notes --
Ranking."
SEE "RISK FACTORS" ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS
OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
----------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
(CONTINUED FROM COVER)
The Old Notes were originally issued and sold on May 21, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemptions provided in Rule 144A and
Regulation D under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold, or otherwise pledged, hypothecated, or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available.
The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on , 1997, unless extended by the Company in its sole discretion
(the "Expiration Date"). The Expiration Date will not in any event be extended
to a date later than , 1997. Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. In
the event the Company terminates the Exchange Offer and does not accept for
exchange any Old Notes with respect to the Exchange Offer, the Company will
promptly return the Old Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange, but is otherwise subject to certain customary conditions. The Old
Notes may be tendered only in integral multiples of $1,000.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement, dated as of May 21, 1997 (the "Exchange and Registration Rights
Agreement"), by and between the Company, Chase Securities Inc., and Credit
Suisse First Boston Corporation, as the initial purchasers (the "Initial
Purchasers"), with respect to the initial sale of the Old Notes. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") rendered to third parties in similar transactions, the New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by respective holders thereof
(other than any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the New Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement with any person to participate in the
distribution of such New Notes and is not engaged in and does not intend to
engage in a distribution of the New Notes. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
Only broker-dealers which acquired the Old Notes as a result of market making
activities or other trading activities may participate in the Exchange Offer.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of the New Notes received in exchange for Old Notes
if such New Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
There has not previously been any public market for the New Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the New Notes will develop. To the extent
that an active market for the New Notes does develop, the market value of the
New Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition,
and other factors. Such conditions might cause the New Notes, to the extent that
they are actively traded, to trade at a significant discount from face values.
See "Risk Factors--Lack of Public Market."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
ii
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THE PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON.
------------------------
Until , 1997, (90 days after commencement of this offering), all
dealers effecting transactions in the New Notes, whether or not participating in
this offering, may be required to deliver a Prospectus.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act, with respect to the
New Notes. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Items of information omitted from this Prospectus but contained in
the Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the following regional offices of
the Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates. Electronic filings filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval System ("EDGAR")
are publicly available through the Commission's home page on the Internet at
http://www.sec.gov.
As a result of this offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed to file with the Commission and provide to the
Trustee and the holders of Notes annual reports and the information, documents
and other reports otherwise required pursuant to Sections 13 and 15(d) of the
Exchange Act. See "Description of Notes--Certain Covenants--SEC Reports."
------------------------
Except as provided below, the New Notes will be available initially only in
book-entry form. The Company expects that, except as provided below, the New
Notes sold pursuant hereto will be issued in the form of one fully registered
global note (the "Global Note"). The Global Note will be deposited with, or on
behalf of, The Depositary Trust Company ("DTC") and registered in its name or in
the name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the New Notes will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and its participants. After the
initial issuance of the Global Note, New Notes in certificated form will be
issued in exchange for the Global Note only as set forth in the Indenture.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED IN
THIS PROSPECTUS, UNLESS THE CONTEXT REQUIRES OTHERWISE, (I) THE "COMPANY" MEANS
WINDY HILL PET FOOD COMPANY, INC., WHICH INCLUDES HUBBARD AND THE BUSINESS OF
OLD WINDY HILL PRIOR TO THE TRANSACTION, (II) "HOLDINGS" MEANS WINDY HILL PET
FOOD HOLDINGS, INC., A DELAWARE CORPORATION, (III) "HUBBARD" MEANS THE HUBBARD
PET FOOD BUSINESS OF HUBBARD MILLING, (IV) "HUBBARD MILLING" MEANS HUBBARD
MILLING COMPANY, A MINNESOTA CORPORATION, (V) "MERGERSUB" MEANS WINDY HILL PET
FOOD ACQUISITION CO., A MINNESOTA CORPORATION AND A WHOLLY-OWNED SUBSIDIARY OF
OLD WINDY HILL, (VI) "OLD WINDY HILL" MEANS WINDY HILL PET FOOD COMPANY, INC., A
DELAWARE CORPORATION AND A WHOLLY-OWNED SUBSIDIARY OF HOLDINGS, PRIOR TO
COMPLETION OF THE TRANSACTION, AND (VII) "WHPF" MEANS OLD WINDY HILL AFTER THE
COMPLETION OF THE TRANSACTION WHEN IT WAS RENAMED WHPF INC. EXCEPT AS OTHERWISE
INDICATED, (I) ALL REFERENCES TO THE COMPANY'S SALES REFER TO THE COMBINED PRO
FORMA NET SALES BASED ON THE HISTORICAL STATEMENTS OF HUBBARD AND OLD WINDY
HILL, (II) ALL REFERENCES TO THE PET FOOD INDUSTRY REFER TO THE U.S. DOG AND CAT
PET FOOD INDUSTRY, (III) ALL REFERENCES TO THE UPPER MIDWEST REFER TO IOWA,
MICHIGAN, MINNESOTA, NORTH DAKOTA, SOUTH DAKOTA, AND WISCONSIN, (IV) ALL
REGIONAL MARKET, CATEGORY AND SEGMENT DATA REFLECT GROCERY SALES AS GATHERED BY
A.C. NIELSEN FOR THE U.S. MARKETS FOR THE 52 WEEK PERIOD ENDING FEBRUARY 15,
1997, AND (V) ALL INDUSTRY DATA IN THIS PROSPECTUS IS CALCULATED WITH RESPECT TO
DOLLAR SALES AND BASED ON INFORMATION IN THE MAXWELL CONSUMER REPORT FOR 1995.
WHILE MANAGEMENT BELIEVES THAT SUCH ESTIMATES ARE REASONABLE AND RELIABLE, NO
ASSURANCE CAN BE GIVEN THAT SUCH INDUSTRY DATA ARE ACCURATE IN ALL MATERIAL
RESPECTS. TRAIL BLAZER-REGISTERED TRADEMARK-, TUFFY'S-REGISTERED TRADEMARK-,
BONKERS-REGISTERED TRADEMARK-, AND G. WHISKERS-REGISTERED TRADEMARK- ARE
REGISTERED TRADEMARKS OF THE COMPANY. THIS PROSPECTUS ALSO INCLUDES TRADEMARKS
OF COMPANIES OTHER THAN THE COMPANY.
THE COMPANY
OVERVIEW
The Company is one of the leading manufacturers of private label and economy
branded pet food products. Based on its production volume, including that of its
joint ventures, management believes that the Company is the second largest
producer of private label dry pet food products overall and the leader in
private label dog biscuits, accounting for approximately 25% of all private
label dog biscuit tonnage produced in 1996. The Company's private label products
are broadly distributed through all channels of distribution and consist of
sales to over 500 customers including national and regional grocery chains, mass
merchandisers, membership clubs, specialty pet store chains, and farm and feed
store chains. The Company also manufactures and markets economy dry dog and cat
food products that are sold predominantly to grocery store chains under its KOZY
KITTEN, TRAIL BLAZER, and TUFFY'S brand names. These brands generally have the
leading or number two share in the regional areas in which they compete. In
addition, approximately 11% of the Company's sales are related to contract
manufacturing for other pet food companies. To sell its products and to service
its customers, the Company utilizes both an in-house sales force and a network
of independent brokers. The Company operates 14 manufacturing plants, nine of
which are wholly owned and five of which are operated under joint venture
agreements. The Company's plants, located throughout the United States, enable
the Company to provide an efficient nationwide distribution of a broad range of
quality products for all price points to all distribution channels. For the
twelve months ended March 31, 1997, the Company had pro forma sales and EBITDA
(as defined) of $222.5 million and $29.1 million, respectively.
1
<PAGE>
INDUSTRY
The pet food industry in which the Company competes is a large and growing
industry. In terms of retail sales, it is a $9.3 billion industry that grew at a
compound annual rate of approximately 5% from 1991 to 1995. Certain segments
have grown at even faster rates. The private label and economy segments of this
industry represent approximately 35% of total industry sales and grew at a
compound annual rate of approximately 12% over the same period. The super
premium segment, which is comprised of high priced items offering superior
nutrition, palatability, and digestibility, represents approximately 16% of
total industry sales and grew at a compound annual rate of approximately 10%
over the same period. Growth in the private label and economy segments has been
driven by the lower prices of these products relative to branded products,
improved product quality, and increased retail support for private label items
in all distribution channels. Within the super premium segment, growth has been
driven by pet owners' increased awareness and concern about pet diets and
nutrition and the growth of pet specialty retail stores, which have focused on
promoting and supporting the super premium products. These trends are expected
to continue and, as a result, the Company believes that these segments should
continue to grow at a faster rate than the overall pet food industry.
The industry's growth has occurred primarily outside of the traditional
retail grocery channel, whose share of pet food sales has declined over the last
10 years from over 80% to approximately 60%. Most of the growth has been
captured by mass merchandisers, which have gained share by selling items
produced by private label manufacturers that are comparable in quality to the
national brands but sell at a lower price, and by pet specialty stores, which
carry the faster growing super premium products that are not available in the
retail grocery channel. The Company believes this shift away from the retail
grocery channel will continue, but at a slower rate, as the grocery stores
respond with higher quality private label products and their own super premium
products.
An emphasis on improving product quality has led private label manufacturers
to upgrade their manufacturing plants and production processes. This improvement
in quality, combined with a trend among a number of branded pet food companies
to outsource their manufacturing in order to focus on their marketing and brand
building activities, has resulted in more contract manufacturing opportunities
for private label producers. The Company believes that the trends toward better
product quality and production outsourcing will continue.
COMPETITIVE STRENGTHS
Management believes that the following characteristics contribute to the
Company's position as a leading manufacturer of pet food products in the United
States and serve as a foundation for the Company's business strategy.
- LEADING MARKET POSITIONS. The Company has a strong position in the private
label segment of the pet food industry. Within this segment, the Company
is the leading manufacturer of dog biscuits and semi-moist pet foods and
the second largest manufacturer of dry pet food products. The Company's
strength in private label products is complemented by a strong regional
presence in economy branded dry pet food products. The Company's TRAIL
BLAZER and KOZY KITTEN in the South and TUFFY'S in the Upper Midwest have
the leading or number two position in the segments in which they compete.
The Company believes that its positions in the private label and economy
branded pet food segments provide a strong platform from which to expand
its business.
- COMPREHENSIVE AND QUALITY PRODUCT LINE. The Company's leading market
positions are supported by a comprehensive product mix. Specifically, the
Company offers full product lines of dry dog food (180 formulations), dry
cat food (38 formulations), dog biscuits (64 formulations), semi-moist dog
food (6 formulations), semi-moist cat food (8 formulations), and dog and
cat treats (32 formulations). The Company believes that its broad
portfolio of private label and
2
<PAGE>
economy branded products makes it well-positioned to take advantage of
growth in certain segments of the pet food industry. In addition, the
Company's products are well-known for their high quality in terms of
nutritional content, palatability, and digestibility as well as their
overall value to both retailers and end-use consumers. The Company's
ability to fully service its customer's product needs with a full line of
quality product offerings has enabled it to compete effectively against
national branded pet food offerings and gain leading market positions.
- LOW COST MANUFACTURING. The Company has an extensive manufacturing network
consisting of 14 manufacturing facilities that are strategically
positioned to be near major consumer markets, raw and packaging material
suppliers and low cost labor sources. These facilities enable the Company
to service customers at competitive prices on a national basis. The
Company's facilities currently have approximately 20% excess capacity,
which represents an integral resource for growing the Company's business.
- STABLE BASE OF CASH FLOW. The Company's broad product line and leading
market positions provide it with a stable base of cash flow. Over the last
four years, the Company has produced an average EBITDA margin (as defined)
of approximately 12%. The Company believes that its cash flow performance
has been driven by multiple factors, including strong demand for higher
margin pet food products, significant expansion of the Company's customer
base, selective acquisitions, low working capital requirements, increased
manufacturing efficiency and reduced operating costs. The Company's strong
cash flow provides resources that can be used to pursue its growth
strategy.
STRATEGY FOR GROWTH
The Company believes that it is well positioned for volume and profit
growth, given its competitive strengths and the growth trends in certain
segments of the pet food industry. Its objective is to be the leading supplier
to all channels of distribution of private label pet food products for all price
points and economy branded pet food products by pursuing the following
strategies:
- CAPITALIZE ON LEADERSHIP POSITION IN DOG BISCUITS. The Company is the
leader in private label dog biscuits, accounting for approximately 25% of
all private label dog biscuit tonnage produced in 1996. It operates three
dedicated biscuit manufacturing plants strategically located throughout
the United States. The Company's strategy is to capitalize on its current
leadership position by (i) offering a greater variety of premium specialty
biscuit formulations and (ii) increasing capacity at its three biscuit
plants by approximately 15% to service more private label customers.
- EXPAND PRESENCE IN MASS MERCHANDISING AND PET SPECIALTY RETAIL
CHANNELS. Most of the recent growth in the pet food industry has occurred
in the mass merchandising and pet specialty retail channels. The Company
plans to increase sales to these channels by providing a broader range of
pet foods to its current private label customers as well as by offering
these products to new private label accounts.
- INCREASE CONTRACT MANUFACTURING BUSINESS. Approximately 11% of the
Company's sales are to other pet food manufacturers who have contracted
out their manufacturing in order to better focus on their marketing and
brand building activities. Increasingly, these companies are using outside
contract manufacturers to satisfy their production requirements. The
Company believes that its strategically located, broad network of
manufacturing plants, excess capacity, and ability to produce quality
products at competitive prices enable it to capitalize on this trend and
to increase its contract manufacturing business.
- INCREASE PENETRATION OF SUPER PREMIUM PET FOOD PRODUCTS. Super premium pet
food products have been one of the fastest growing segments of the pet
food industry. The Company believes there is an opportunity to market
private label super premium products to retail grocery
3
<PAGE>
chains, which have been requesting such products in order to grow their
pet food sales. The Company also plans to supply specialty pet stores,
which want private label super premium alternatives to the national
brands.
- BROADEN USAGE OF THE KOZY KITTEN BRAND. The Company's KOZY KITTEN brand
has a leading position in economy cat foods, but the business has
historically been concentrated primarily in the South. The Company plans
to use the Hubbard facilities and distribution resources to strengthen its
KOZY KITTEN cat food business on the East and West coasts. The Company is
also developing a line of economy cat treats using KOZY KITTEN as an
umbrella brand. The cat treat segment has been a fast growing segment of
the cat food industry, and the Company sees strong growth potential for an
economy cat treat under an established brand name.
- MAKE SELECTED STRATEGIC ACQUISITIONS. The Company believes there are
opportunities to acquire additional pet food businesses at attractive
prices. Most of these businesses are established, privately-held companies
that would be a strategic complement to the Company's existing business in
terms of products, geographic scope, distribution channels, and new export
sales. The Company and its owners have substantial experience in making
strategic acquisitions.
OWNERSHIP AND MANAGEMENT
The Company was incorporated in 1897 and is indirectly owned by Windy Hill
Pet Food Company L.L.C. ("Windy Hill LLC") and Bruckmann, Rosser, Sherrill &
Co., L.P. ("BRS"). Windy Hill LLC is owned by Dartford Partnership L.L.C.
("Dartford") and its partners, management of the Company, and certain other
investors. The Company is managed by Dartford and an operating team led by
Robert V. Dale, the Company's President.
Dartford was formed by Managing Partner Ian R. Wilson, former Vice Chairman
of The Coca-Cola Company and former Chairman and Chief Executive Officer of
Castle & Cooke, Inc. (Dole Food Company, Inc.), to make investments in the
consumer food and beverage categories. Dartford's five partners have extensive
experience in building and managing leveraged investments in the food and
beverage categories. Over the past eleven years, Dartford has successfully built
and managed a number of food companies including Wyndham Foods Inc. ("Wyndham"),
which Dartford grew to become the fourth largest cookie company in the United
States, Windmill Holding Corp. ("Windmill"), a branded baking products company,
and Van de Kamp's, Inc. ("Van de Kamp's"), a leading frozen convenience food
company. Under Dartford's management, Van de Kamp's has grown into a diversified
branded frozen convenience food company, with annual revenues increasing from
approximately $150 million at September 30, 1995 to approximately $400 million
at December 31, 1996. Most recently, Dartford formed Aurora Foods Inc.
(formerly, MBW Foods Inc.) ("Aurora"), which on December 31, 1996 acquired Mrs.
Butterworth's, the nation's number one brand of regular syrup and a producer of
pancake mix.
BRS is a private equity investment firm with $400 million of committed
capital. The principals of BRS -- Bruce C. Bruckmann, Harold O. Rosser, Stephen
C. Sherrill, and Stephen F. Edwards -- are former senior officers of Citicorp
Venture Capital, Ltd. ("Citicorp Venture Capital") where they worked from the
mid 1980s until forming BRS in 1995. At Citicorp Venture Capital, they completed
25 acquisitions. Since its inception, BRS has completed six acquisitions
including: Old Windy Hill; Jitney-Jungle Stores of America, Inc., the largest
supermarket chain in Mississippi; Restaurant Associates Corp., a restaurant
operator and contract food service provider; and Bloch & Guggenheimer/Burns &
Ricker, Inc., a processor and marketer of consumer food products.
The Company's President, Mr. Dale, is the former president of Martha White
Foods, Inc. ("Martha White"). Prior to joining Martha White, Mr. Dale was the
president of Beatrice Specialty Products Division, a $1.2 billion division of
Beatrice Companies, Inc. The Company's senior management team all have extensive
experience in operating consumer packaged food businesses in a leveraged
environment.
4
<PAGE>
THE TRANSACTION
The Old Notes were offered in connection with the acquisition of beneficial
ownership of the Company by Holdings. As part of the acquisition, Windy Hill Pet
Food Acquisition Co., a newly-formed indirect subsidiary of Holdings
("MergerSub"), was merged with and into Hubbard and Old Windy Hill purchased all
of the capital stock of Armour Corporation ("Armour"), a holding company, which
prior to the Closing Date owned 5% of the capital stock of Hubbard Milling and
which after the consummation of the Transaction owned 39% of the capital stock
of Hubbard Milling. Concurrently therewith, Hubbard Milling, the surviving
corporation in the merger, was renamed Windy Hill Pet Food Company, Inc. (the
"Company"), and Holdings transferred all the operating assets and liabilities,
including $27 million of equity and $51 million of indebtedness (the "Existing
Indebtedness") of Old Windy Hill to the Company. A portion of the proceeds of
the Company's offering of the Old Notes (the "Offering") was used to repay
Existing Indebtedness. The Company sold its animal feed business for net
proceeds of approximately $50 million simultaneously with the acquisition. See
"-- Sale of Animal Feed Business" below. Holdings beneficially owns all of the
capital stock of the Company. (The merger, acquisition, transfer of Old Windy
Hill's operating assets and liabilities, and repayment of Existing Indebtedness
are hereinafter collectively referred to as the "Transaction.")
On the Closing Date, $195 million in cash was required to consummate the
Transaction, consisting of approximately (i) $133 million to purchase all of the
outstanding capital stock of Hubbard Milling, net of cash acquired, including
(a) $126 million paid to the shareholders of Hubbard Milling in the merger and
(b) $7 million to acquire the stock of Armour, (ii) $51 million to repay the
Existing Indebtedness, (iii) $1 million for general corporate purposes and (iv)
$10 million in fees and expenses. The funds required to consummate the
Transaction were provided by (i) the net proceeds of the Offering, (ii)
borrowing by the Company of $45 million under an acquisition loan facility (the
"Acquisition Facility") and $20 million under a term loan facility (the "Term
Loan Facility"), and (iii) the proceeds of $10 million of equity financing by
Holdings contributed by Armour to the Company (items (i), (ii), and (iii) being
referred to herein as the "Financing"). In addition, the Company has a $20
million working capital facility (the "Working Capital Facility"), which was
undrawn at the closing of the Transaction. The Acquisition Facility, Term Loan
Facility, and Working Capital Facility are hereinafter collectively referred to
as the "Senior Bank Facilities." See "Description of Notes" and "Description of
Senior Bank Facilities."
The following table sets forth the sources and uses of funds in connection
with the Transaction:
<TABLE>
<CAPTION>
AMOUNT
---------------------
<S> <C>
(DOLLARS IN MILLIONS)
SOURCES:
Senior Bank Facilities(1):
Acquisition Facility..................................................... $ 45.0
Term Loan Facility....................................................... 20.0
The Notes.................................................................... 120.0
Equity contribution(2)....................................................... 10.0
-------
Total sources............................................................ $ 195.0
-------
-------
USES:
Purchase price............................................................... $ 133.0
Repay Existing Indebtedness.................................................. 51.2
General corporate purposes................................................... .8
Fees and expenses(3)......................................................... 10.0
-------
Total uses............................................................... $ 195.0
-------
-------
</TABLE>
- ------------------------
(1) In addition to the Acquisition Facility and the Term Loan Facility, the
Company has a Working Capital Facility of $20 million, which was undrawn at
the closing of the Transaction. See "Description of Senior Bank Facilities."
(2) BRS, Windy Hill LLC, and PNC Capital Corp invested $10 million in Holdings
and Holdings contributed the proceeds of such investment to Armour, which in
turn contributed the proceeds to the Company.
(3) Reflects fees and expenses in connection with the Financing, including the
discount to the Initial Purchasers and other legal and accounting fees and
expenses incurred in connection with the Transaction.
5
<PAGE>
SALE OF ANIMAL FEED BUSINESS
An asset purchase agreement to sell the assets and liabilities comprising
the animal feed business of Hubbard Milling (the "AF Sale") was entered into on
April 25, 1997, among Old Windy Hill, MergerSub, and Feed-Rite (US) Animal
Feeds, Inc., a subsidiary of The Ridley Group (the "AF Buyer"). The closing of
the AF Sale occurred simultaneously with the closing of the Offering. After
providing for estimated taxes, net proceeds from the sale were approximately $50
million. A portion of the proceeds from the AF Sale was used to repay in full
the $45 million drawn at closing under the Acquisition Facility and to repay $5
million of the term loan facility which cannot be reborrowed. The Company's pro
forma financial data reflects the consummation of the AF Sale. See "--Summary
Pro Forma Financial Data" and "Pro Forma Financial Information."
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The New Notes........... The forms and terms of the New Notes are identical in all
material respects to the terms of the Old Notes for which they
may be exchanged pursuant to the Exchange Offer, except for
certain transfer restrictions, registration rights and liquidated
damages provisions relating to the Old Notes described below
under "Description of Notes" and "Exchange and Registration
Rights Agreement."
The Exchange Offer...... The Company is offering to exchange up to $120,000,000 aggregate
principal amount of the New Notes for up to $120,000,000
aggregate principal amount of the Old Notes. Old Notes may be
exchanged only in integral multiples of $1,000.
Expiration Date;
Withdrawal of
Tender................ The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1997, or such later date and time to which it is
extended by the Company (the "Expiration Date"). The tender of
Old Notes pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. The Expiration Date will not
in any event be extended to a date later than , 1997.
Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof as
promptly as practicable after the expiration or termination of
the Exchange Offer.
Certain Conditions to
the Exchange Offer.... The Exchange Offer is subject to customary conditions, which may
be waived by the Company. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
Procedures for Tendering
Old Notes............. Each holder of Old Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Old Notes and
any other required documentation to the Exchange Agent (as
defined) at the address set forth herein. By executing the Letter
of Transmittal, each holder will represent to the Company that,
among other things, (i) any New Notes to be received by it will
be acquired in the ordinary course of its business, (ii) it has
no arrangement with any person to participate in the distribution
of the New Notes and (iii) it is not an "affiliate," as defined
in Rule 405 of the Securities Act, of the Company or, if it is an
affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent
applicable. Each holder whose Old Notes are held through DTC (as
defined) and wishes to participate in the Exchange Offer may do
so through DTC's Automated Tender Offer Program ("ATOP") by which
each tendering participant will agree to be bound by the Letter
of Transmittal.
Interest on the New
Notes................. Interest on the New Notes will accrue from the date of issuance
(the "New Note Issue Date") at the rate of 9 3/4% per annum, and
will be payable semi-annually in arrears on each May 15 and
November 15, commencing on November 15, 1997. Holders of the New
Notes will also on November 15, 1997 receive an amount equal to
the accrued interest on the Old Notes. Interest on the Old Notes
accepted for exchange will cease to accrue upon issuance of the
New Notes.
Special Procedures for
Beneficial Owners..... Any beneficial owner whose Old Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender such Old Notes in the Exchange
Offer should
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the
Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership
may take considerable time and may not be able to be completed
prior to the Expiration Date.
Guaranteed Delivery
Procedure............. Holders of Old Notes who wish to tender their Old Notes and whose
Old Notes are not immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange Agent,
prior to the Expiration Date, must tender their Old Notes
according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Registration
Requirements.......... The Company has agreed to use its best efforts to consummate on
or prior to 180 days after May 21, 1997, the date of original
issuance of the Old Notes (the "Issue Date") the registered
Exchange Offer pursuant to which holders of the Old Notes will be
offered an opportunity to exchange their Old Notes for the New
Notes which will be issued without legends restricting the
transfer thereof. In the event that applicable interpretations of
the staff of the Commission do not permit the Company to effect
the Exchange Offer or in certain other circumstances, the Company
has agreed to file a Shelf Registration Statement covering
resales of the Old Notes and to use its best efforts to cause
such Shelf Registration Statement to be declared effective under
the Securities Act and, subject to certain exceptions, keep such
Shelf Registration Statement effective until three years after
the Issue Date. If the Company fails to consummate the Exchange
Offer on or prior to 180 days after the Issue Date or, in the
event that the Company is not in compliance with certain
obligations under the Exchange and Registration Rights Agreement,
the Company shall be obligated to pay liquidated damages to
holders of the Old Notes. See "Exchange and Registration Rights
Agreement."
Certain Federal Income
Tax Considerations.... For a discussion of certain federal income tax considerations
relating to the exchange of the New Notes for the Old Notes, see
"Certain United States Federal Income Tax Considerations."
Use of Proceeds......... There will be no proceeds to the Company from the exchange of
Notes pursuant to the Exchange Offer.
Exchange Agent.......... Wilmington Trust Company is the Exchange Agent. The address and
telephone number of the Exchange Agent are set forth in "The
Exchange Offer--Exchange Agent."
</TABLE>
TERMS OF THE NOTES
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that the New Notes are registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof and will
not contain the registration rights and liquidated damages provisions relating
to the Old Notes. See "Description of Notes" and "Exchange and Registration
Rights Agreement."
8
<PAGE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by participants in connection with the Exchange Offer.
THE NEW NOTES
The terms of the New Notes are identical in all material respects to the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes.
<TABLE>
<S> <C>
Issuer.................. Windy Hill Pet Food Company, Inc.
Securities Offered...... $120,000,000 principal amount of 9 3/4% Senior Subordinated Notes
due 2007. See "Description of Notes."
Maturity................ May 15, 2007.
Interest Payment
Dates................. May 15 and November 15 of each year, commencing on November 15,
1997.
Sinking Fund............ None.
Optional Redemption..... Except as described below and under "Change of Control," the
Company may not redeem the New Notes prior to May 15, 2002. On or
after such date, the Company may redeem the New Notes, in whole
or in part, at any time at the redemption prices set forth
herein, together with accrued and unpaid interest, if any, to the
date of redemption. In addition, at any time and from time to
time on or prior to May 15, 2000, the Company may, subject to
certain requirements, redeem up to $42 million of the aggregate
principal amount of the Notes with the cash proceeds of one or
more Equity Offerings (as defined) at a redemption price equal to
109.750% of the principal amount to be redeemed, together with
accrued and unpaid interest, if any, to the date of redemption,
provided that at least $78 million of the aggregate principal
amount of the Notes remain outstanding after each such
redemption. See "Description of Notes -- Optional Redemption."
Change of Control....... Upon the occurrence of a Change of Control, (i) the Company will
have the option, at any time prior to May 15, 2002, to redeem the
New Notes in whole but not in part at a redemption price equal to
100% of the principal amount thereof plus the Applicable Premium
set forth herein, plus accrued interest to the date of redemption
and (ii) if the Company does not so redeem the New Notes or if
such Change of Control occurs after May 15, 2002, the Company
will be required to make an offer to repurchase the New Notes at
a price equal to 101% of the principal amount thereof, together
with accrued and unpaid interest, if any, to the date of
purchase. See "Description of Notes -- Optional Redemption" and
"-- Change of Control."
Ranking................. The New Notes will be unsecured and will be subordinated to all
existing and future Senior Indebtedness of the Company. The New
Notes will rank PARI PASSU with any future Senior Subordinated
Indebtedness of the Company and will rank senior to all other
subordinated indebtedness of the Company. As of April 30, 1997,
on a pro forma basis after giving effect to the Transaction, the
Financing, and the AF Sale, the aggregate amount of the Company's
outstanding Senior Indebtedness would have been approximately $15
million (excluding unused commitments of $65 million under the
Senior Bank Facilities) and the Company would have had no Senior
Subordinated Indebtedness outstanding other than the Old Notes.
The New Notes will be effectively subordinated to the claims of
creditors,
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
including trade creditors and preferred shareholders (if any), of
any subsidiary of the Company. See "Description of Notes --
Ranking." The Company does not have any active subsidiaries. See
"Description of Notes -- General." However, the Indenture (as
defined) does not restrict the ability of the Company to create,
acquire, or capitalize subsidiaries in the future.
Restrictive Covenants... The indenture under which the New Notes will be issued (the
"Indenture") contains covenants relating to, among other things,
(i) the incurrence of additional indebtedness by the Company and
its subsidiaries, (ii) the payment of dividends on, and
redemption of, capital stock of the Company and the redemption of
certain subordinated obligations of the Company, (iii)
investments, (iv) sales of assets and subsidiary stock, (v)
transactions with affiliates and (vi) consolidations, mergers and
transfers of all or substantially all the assets of the Company.
However, all of these limitations and prohibitions are subject to
a number of important qualifications and exceptions. See
"Description of Notes -- Certain Covenants."
</TABLE>
10
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
The following table sets forth certain unaudited summary pro forma financial
data of the Company for the periods ended and as of the dates indicated. The
unaudited summary pro forma statement of operations data give effect to (i) the
Transaction, (ii) the Financing, (iii) the acquisition of the 50% interest in
the Maumee joint venture not previously owned and accounted for using the equity
method, (iv) adjustments made to reflect the elimination of certain
administrative operations, and (v) adjustments to include the effects of the
Kozy Kitten Acquisition to reflect a full year of operating data, in each case,
as if such transaction had occurred on January 1, 1996 for the year ended
December 31, 1996, on January 1, 1997 for the three months ended March 31, 1997,
and on April 1, 1996 for the twelve months ended March 31, 1997. The unaudited
summary pro forma balance sheet data give effect to the Transaction, the
Financing, and the AF Sale as if they had occurred on April 30, 1997. The pro
forma financial data set forth below reflect pro forma adjustments that are
based upon available information and certain assumptions that the Company
believes are reasonable. The pro forma financial data do not purport to
represent the Company's results of operations or financial position that would
have resulted had the transactions to which pro forma effect is given been
consummated as of the dates or for the periods indicated. See "Pro Forma
Financial Information" and the separate historical financial statements of Old
Windy Hill and Hubbard and the notes thereto included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 216,710 $ 55,179 $ 222,527
Cost of goods sold.............................. 160,660 39,452 164,441
---------- -------- ----------
Gross profit.................................. 56,050 15,727 58,086
---------- -------- ----------
Selling, distribution and marketing expenses:
Selling, distribution and advertising......... 16,618 4,232 16,537
Trade promotions and other marketing.......... 9,429 3,519 11,415
---------- -------- ----------
Total selling, distribution and marketing
expenses...................................... 26,047 7,751 27,952
General and administrative expenses............. 9,000 2,610 9,000
Amortization of intangibles and other assets.... 3,062 832 3,062
---------- -------- ----------
Total operating expenses........................ 38,109 11,193 40,014
---------- -------- ----------
Operating income.............................. 17,941 4,534 18,072
Equity in earnings of joint ventures............ 421 153 496
Interest expense, net........................... 13,160 3,291 13,160
Amortization of deferred financing fees......... 1,115 279 1,115
Other income (expense).......................... -- 43 25
---------- -------- ----------
Income before income taxes.................... 4,087 1,160 4,318
Income tax expense.............................. 1,635 464 1,727
---------- -------- ----------
Net income.................................... $ 2,452 $ 696 $ 2,591
---------- -------- ----------
---------- -------- ----------
OTHER FINANCIAL DATA:
EBITDA(1)....................................... $ 28,516 $ 7,731 $ 29,051
EBITDA margin(2)................................ 13.2% 14.0% 13.1%
Depreciation and amortization................... $ 11,269 $ 3,280 $ 11,573
Ratio of EBITDA to interest expense............. 2.2x 2.3x 2.2x
Ratio of earnings to fixed charges(3)........... 1.3x 1.3x 1.3x
</TABLE>
- ------------------------
(1) EBITDA is defined as net income before interest, taxes, depreciation, and
amortization and is presented because it is commonly used by certain
investors and analysts to analyze and compare operating performance and to
determine a company's ability to service and incur debt. EBITDA should not
be considered in isolation from or as a substitute for net income, cash
flows from operating activities, or other consolidated income or cash flow
statement data prepared in accordance with generally accepted accounting
principles or as a measure of profitability or liquidity.
(2) EBITDA margin is computed as EBITDA as a percentage of net sales.
(3) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as net income before provision for income taxes, plus fixed
charges. Fixed charges consist of interest expense on all indebtedness,
amortization of deferred financing fees and one-third of rental expense on
operating leases, representing that portion of rental expense deemed by the
Company to be attributable to interest.
11
<PAGE>
RISK FACTORS
Prospective investors should carefully consider all the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth below for risks involved with the Exchange Offer.
SUBSTANTIAL LEVERAGE
The Company is significantly leveraged. At April 30, 1997, after giving pro
forma effect to the Transaction, the Financing, and the AF Sale, the Company's
long-term indebtedness would have been $135 million (excluding unused
commitments of $65 million under the Senior Bank Facilities) and the Company
would have had stockholders' equity of $33.9 million. The degree to which the
Company is leveraged could have important consequences to holders of the Notes,
including the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions
or general corporate purposes may be impaired; (ii) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of interest
on the Notes and its other indebtedness, thereby reducing the funds available to
the Company for other purposes; (iii) the agreements governing the Company's
long-term indebtedness contain certain restrictive financial and operating
covenants; (iv) the indebtedness under the Senior Bank Facilities will be, and
other indebtedness of the Company may be, at variable rates of interest, which
expose the Company to the risk of increased interest rates; (v) all of the
indebtedness outstanding under the Senior Bank Facilities will be secured by
substantially all the assets of the Company and matures prior to the maturity of
the Notes; and (vi) the Company's substantial degree of leverage may limit its
flexibility to adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a downturn in
general economic conditions or its business. See "Description of Senior Bank
Facilities" and "Description of Notes."
The Company believes that its cash flow from operations may be sufficient to
meet mandatory principal installments on the Term Loan Facility and other
operational requirements. If the Company is unable to generate sufficient cash
flow from operations, it may be required to refinance all or a portion of the
Senior Bank Facilities at or prior to their maturity, which is prior to the
maturity of the Notes. Other potential measures to raise cash include the sale
of assets or equity. However, the Company's ability to raise funds by selling
assets is restricted by the Senior Bank Facilities, and its ability to effect
equity financings is dependent on results of operations and market conditions.
In the event that the Company is unable to refinance such indebtedness or raise
funds through asset sales, sales of equity or otherwise, its ability to pay
principal of and interest on the Notes would be adversely affected.
SUBORDINATION OF NOTES; ASSET ENCUMBRANCE
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes, will be subordinated to the prior
payment in full of all existing and future Senior Indebtedness of the Company,
including all amounts owing under the Senior Bank Facilities. At April 30, 1997,
assuming consummation of the Transaction, the Financing, and the AF Sale, the
Company would have had $15 million of Senior Indebtedness outstanding (excluding
unused commitments of $65 million under the Senior Bank Facilities).
Consequently, in the event of a bankruptcy, liquidation, dissolution,
reorganization or similar proceeding with respect to the Company, 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 can be no assurance that there will
be sufficient assets to pay amounts due on all or any of the Notes. The payment
of principal of and interest on, and any premium or other amounts owing in
respect of, the Notes, will also be effectively subordinated to all obligations
of each subsidiary of the Company as may exist from time to time. See
"Description of Senior Bank Facilities" and "Description of Notes." The Company
does not have any active subsidiaries. See "Description of Notes -- General."
However, the
12
<PAGE>
Indenture does not restrict the ability of the Company to create, acquire, or
capitalize subsidiaries in the future.
The Company has granted the lenders under the Senior Bank Facilities
security interests in substantially all of the current and future assets of the
Company, including a pledge of all of the issued and outstanding shares of
capital stock of the Company's future domestic subsidiaries. In the event of a
default on such indebtedness (whether as a result of the failure to comply with
a payment or other covenant, a cross-default, or otherwise), the parties granted
such security interests will have a prior secured claim on the capital stock of
the Company and its subsidiaries and the assets of the Company and any
guarantors under the Senior Bank Facilities. If such parties should attempt to
foreclose on their collateral, the Company's financial condition and the value
of the Notes would be materially adversely affected. See "Description of Senior
Bank Facilities."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture restricts, among other things, the Company's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, enter into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. In addition, the Senior Bank Facilities contain
other and more restrictive covenants that, among other things, restrict (i) the
making of investments, loans, and advances and the paying of dividends and other
restricted payments; (ii) the incurrence of additional indebtedness; (iii) the
granting of liens, other than liens created pursuant to the Senior Bank
Facilities and certain permitted liens; (iv) mergers, consolidations and sales
of all or a substantial part of the Company's business or property; (v) the sale
of assets; and (vi) the making of capital expenditures.
The Senior Bank Facilities require the Company to maintain certain financial
ratios, including interest coverage, leverage and fixed charge ratios. There can
be no assurance that these requirements will be met in the future. If they are
not, the holders of the indebtedness under the Senior Bank Facilities will be
entitled to declare such indebtedness immediately due and payable. See
"Description of Senior Bank Facilities."
LIMITATION ON CHANGE OF CONTROL
The Indenture requires the Company, in the event of a Change of Control in
respect of which it has not elected to redeem the Notes, to repurchase any Notes
that holders thereof desire to have repurchased at 101% of the principal amount
thereof, plus accrued interest to the Change of Control repurchase date. See
"Description of Notes -- Change of Control."
The Change of Control purchase feature of the Notes may in certain
circumstances discourage or make more difficult a sale or takeover of the
Company. There can be no assurance that the Company will have funds available to
redeem or repurchase the Notes upon the occurrence of a Change of Control. In
particular, a Change of Control may cause an acceleration of the Senior Bank
Facilities and other indebtedness, if any, of the Company, in which case such
indebtedness would be required to be repaid in full before redemption or
repurchase of the Notes. The inability to repay such indebtedness, if
accelerated, or to redeem or repurchase all of the Notes upon the occurrence of
a Change in Control would constitute an event of default under the Indenture.
See "Description of Notes--Change of Control" and "Description of Senior Bank
Facilities."
13
<PAGE>
COMPETITION
The pet food business is highly competitive. The Company's sales represent
less than 3% of the total pet food industry. It competes with a significant
number of companies of varying sizes, including divisions or subsidiaries of
larger companies. Many of these competitors have multiple product lines, have
substantially greater financial and other resources available to them and may be
substantially less leveraged than the Company. There is no assurance that the
Company can compete successfully with such other competitors. Also, the
Company's economy brands and the private label products sold by the Company's
customers compete with national branded products and other private label
products on the basis of quality and price. To the extent that there is
significant price competition from the national branded products and other
private label products, the Company's sales and operating results could be
adversely affected. See "Business -- Competition."
IMPACT OF 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, animal 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
upon the earnings or competitive position of the Company. The Company, however,
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. See "Business -- Certain
Legal and Regulatory Matters."
RAW MATERIALS
The Company purchases agricultural commodities, other raw materials and
packaging supplies from growers, commodity processors, other food companies, and
packaging manufacturers. While all such materials are available from numerous
independent suppliers, commodity raw materials are subject to fluctuations in
price attributable to a number of factors, including changes in crop size,
federal and state agricultural programs, export demand, and weather conditions
during the growing and harvesting seasons. During calendar 1996, market prices
for certain commodity grains and food stocks used in the Company's production
process increased significantly. While the Company implemented price increases
for its products during the year, such price increases only partially offset the
impact of increases in raw materials costs, primarily due to the lag between the
time of the cost increases and the effective implementation of the price
increases. In the event of further increases in raw materials costs, the Company
would be required to further increase sales prices for its products in order to
maintain contribution margins. There can be no assurance that any future sales
price increases could be successfully implemented by the Company or that any
such increases would not adversely affect future sales volumes. See "Business --
Raw Materials."
RISKS RELATING TO FUTURE ACQUISITIONS
The Company plans to continue to pursue additional acquisitions of pet food
businesses. There can be no assurance, however, that the Company will be able to
identify additional acquisitions or that, if consummated, any anticipated
benefits will be realized from such acquisitions. In addition, the availability
of additional acquisition financing cannot be assured and, depending on the
terms of such additional acquisitions, could be restricted by the terms of the
Senior Bank Facilities and/or the Indenture. The process of integrating acquired
operations into the Company's existing operations may result in unforeseen
operating difficulties, may require significant financial resources that would
otherwise be available for the ongoing development or expansion of the Company's
existing operations. Possible future acquisitions by the Company could result in
the incurrence of additional debt, contingent
14
<PAGE>
liabilities and amortization expenses related to goodwill and other intangible
assets, all of which could materially adversely affect the Company's financial
condition and operating results.
CONTROL BY INVESTORS
All of the outstanding shares of the Company's Common Stock are beneficially
owned by Holdings. BRS and Windy Hill LLC own collectively 72.1% of the
outstanding Common Stock of Holdings and have entered into a Stockholders
Agreement pursuant to which they have agreed, among other things, to vote their
shares together for the election of directors. Accordingly, BRS and Windy Hill
LLC control the Company and have the power to elect all of its directors
(subject to the right of PNC, (as defined) pursuant to the Stockholders
Agreement to designate a director in certain circumstances), appoint new
management and approve any action requiring the approval of the holders of the
Company's Common Stock, including adopting amendments to the Company's
Certificate of Incorporation and approving mergers or sales of substantially all
of the Company's assets. See "Security Ownership" and "Certain Related
Transactions--Stockholders Agreement."
ENVIRONMENTAL MATTERS
The business operations of the Company and the ownership and operation of
real property by the Company are subject to extensive and changing federal,
state, and local environmental laws and regulations pertaining to the discharge
of materials into the environment and the handling and disposition of wastes
(including solid and hazardous wastes) or otherwise relating to protection of
the environment. Compliance with such laws and regulations is not expected to
have a material impact on the Company's capital expenditures, earnings or
competitive position. Certain environmental assessments of Hubbard's properties
conducted in connection with the Transaction revealed groundwater conditions
that may require investigation or remediation. If the extent of environmental
conditions that may require remediation or the cost of such remediation exceeds
the Company's expectations or the Company is unable to obtain sufficient
indemnification from the Sellers (as defined) pursuant to the Acquisition
Agreements (as defined) or cannot obtain indemnification in a timely manner,
such additional costs could adversely affect the Company's financial condition
or results of operations. See "Business -- Certain Legal and Regulatory
Matters."
FRAUDULENT CONVEYANCE
As part of the Transaction, the stockholders of Hubbard received
approximately $126 million in cash and the stockholders of Armour received $7
million in cash. See "The Transaction."
The incurrence of indebtedness (such as the Old Notes) in connection with
the Transaction and payments to consummate the Transaction with the proceeds
thereof are subject to review under relevant federal and state fraudulent
conveyance statutes in a bankruptcy or reorganization case or a lawsuit by or on
behalf of creditors of the Company. Under these statutes, if a court were to
find that obligations (such as the Old Notes) were incurred with the intent of
hindering, delaying or defrauding present or future creditors or that the
Company received less than a reasonably equivalent value or fair consideration
for those obligations and, at the time of the incurrence of the obligations, the
Company either (i) was insolvent or rendered insolvent by reason thereof, (ii)
was engaged or was about to engage in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital or (iii)
intended to or believed that it would incur debts beyond its ability to pay such
debts as they matured or became due, such court could void the Company's
obligations under the Notes, subordinate the Notes to other indebtedness of the
Company or take other action detrimental to the holders of the Notes. Some
courts have held that an obligor's purchase of its own capital stock does not
constitute reasonably equivalent value or fair consideration for indebtedness
incurred to finance that purchase.
The measure of insolvency for purposes of a fraudulent conveyance claim will
vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent at a
15
<PAGE>
particular time if the sum of its debts at that time is greater than the then
fair value of its assets or if the fair saleable value of its assets at that
time is less than the amount that would be required to pay its probable
liability on its existing debts as they become absolute and mature. The Company
believes that it is (i) neither insolvent nor rendered insolvent by the
incurrence of indebtedness in connection with the Transaction and the Financing,
(ii) in possession of sufficient capital to run its business effectively and
(iii) incurring debts within its ability to pay as the same mature or become
due. There can be no assurance, however, as to what standard a court would apply
to evaluate the parties' intent or to determine whether the Company was
insolvent at the time of, or rendered insolvent upon consummation of, the
Transaction and the Financing or that, regardless of the standard, a court would
not determine that the Company was insolvent at the time of, or rendered
insolvent upon consummation of, the Transaction and the Financing.
LACK OF PUBLIC MARKET
The New Notes are new securities for which there currently is no market.
Although the Initial Purchasers have informed the Company that it currently
intends to make a market in the New Notes, it is not obligated to do so and any
such market making may be discontinued at any time without notice. In addition,
such market making activity may be limited during the pendency of the Exchange
Offer or the effectiveness of a shelf registration statement in lieu thereof.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the New Notes. The Old Notes have been designated for trading in the
PORTAL market. The New Notes will not be eligible for trading in the PORTAL
market and the Company does not intend to apply for listing of the New Notes on
any securities exchange or on any automated dealer quotation system.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
16
<PAGE>
THE TRANSACTION
The Old Notes were offered in connection with the acquisition of beneficial
ownership of the Company by Holdings.
PRIOR TO CLOSING.
Windy Hill LLC, BRS, PNC Capital Corp ("PNC") and certain members of
management beneficially own all of the voting Common Stock of Holdings which,
through its wholly-owned subsidiary Old Windy Hill, owned all of the capital
stock of MergerSub. Old Windy Hill and MergerSub have entered into agreements
(the "Acquisition Agreements") pursuant to which Holdings, through Old Windy
Hill acquired, own all of the outstanding stock of the Company from the
shareholders of Hubbard Milling and Armour (the "Sellers"). The Acquisition
Agreements contain customary representations, warranties, covenants, conditions,
and indemnities.
CLOSING DATE.
On the closing date of the Transaction (the "Closing Date"), (i) all of the
stock of Armour (which prior to the Closing Date owned 5% of the stock of
Hubbard Milling and which after the consummation of the Transaction owned 39% of
the stock of Hubbard Milling) was acquired by Old Windy Hill, (ii) MergerSub was
merged into Hubbard Milling, and Hubbard Milling, as the surviving corporation,
changed its name to Windy Hill Pet Food Company, Inc. (which has been defined
herein as the "Company"), (iii) the operating assets and liabilities of Old
Windy Hill (including $27 million of equity and $51 million of Existing
Indebtedness) was transferred to the Company, and (iv) the Existing Indebtedness
was repaid. Upon consummation of the Transaction, Holdings owned all of the
capital stock of the Company. At closing, $10 million of the purchase price was
placed in escrow for a period of 18 months to be paid to WHPF or the Company to
cover indemnities of the Sellers under the Acquisition Agreements.
On the Closing Date, $195 million in cash was required to consummate the
Transaction, consisting of approximately (i) $133 million to purchase all of the
outstanding capital stock of Hubbard Milling, net of cash acquired, including
(a) $126 million paid to the shareholders of Hubbard Milling in the merger and
(b) $7 million to acquire the stock of Armour, (ii) $51 million to repay the
Existing Indebtedness, (iii) $1 million for general corporate purposes and (iv)
$10 million in fees and expenses. The funds required to consummate the
Transaction were provided by (i) net proceeds from the Offering, (ii) borrowing
by the Company of $45 million under the Acquisition Facility and $20 million
under the Term Loan Facility, and (iii) the proceeds of $10 million of equity
financing by Holdings which was contributed by Armour to the Company (items (i),
(ii), and (iii) being referred to herein as the "Financing"). In addition, the
Company has a $20 million Working Capital Facility, which was undrawn at the
closing of the Transaction. See "Description of Notes" and "Description of
Senior Bank Facilities."
17
<PAGE>
The following charts depict the ownership of the Company immediately prior
to and upon completion of the Transaction.
IMMEDIATELY PRIOR TO THE TRANSACTION
This chart graphically depicts the ownership of the Company prior to the
Transaction.
IMMEDIATELY AFTER THE TRANSACTION
This chart graphically depicts the ownerhip of the Company after the
Transaction.
18
<PAGE>
The following table sets forth the sources and uses of funds in connection
with the Transaction.
<TABLE>
<CAPTION>
AMOUNT
-------------------
<S> <C>
(DOLLARS IN
MILLIONS)
SOURCES:
Senior Bank Facilities(1):
Acquisition Facility................................................. $ 45.0
Term Loan Facility................................................... 20.0
The Notes................................................................ 120.0
Equity contribution(2)................................................... 10.0
-------
Total sources........................................................ $ 195.0
-------
-------
USES:
Purchase price........................................................... $ 133.0
Repay Existing Indebtedness.............................................. 51.2
General corporate purposes............................................... .8
Fees and expenses(3)..................................................... 10.0
-------
Total uses........................................................... $ 195.0
-------
-------
</TABLE>
- ------------------------
(1) In addition to the Acquisition Facility and the Term Loan Facility, the
Company has a Working Capital Facility of $20 million, which was undrawn at
the closing of the Transaction. See "Description of Senior Bank Facilities."
(2) BRS, Windy Hill LLC, and PNC invested $10 million in Holdings and Holdings
contributed the proceeds of such investment to Armour, which in turn
contributed the proceeds to the Company.
(3) Reflects fees and expenses in connection with the Financing, including the
discount to the Initial Purchasers and other legal and accounting fees and
expenses incurred in connection with the Transaction.
SALE OF ANIMAL FEED BUSINESS
An asset purchase agreement to sell the assets and liabilities comprising
the animal feed business of Hubbard Milling (the "AF Sale") was entered into on
April 25, 1997, among Old Windy Hill, MergerSub, and Feed-Rite (US) Animal
Feeds, Inc., a subsidiary of The Ridley Group (the "AF Buyer"). The closing of
the AF Sale occurred simultaneously with the closing of the Offering. After
providing for estimated taxes, net proceeds from the sale were approximately $50
million. A portion of the proceeds from the AF Sale was used to repay in full
the $45 million drawn at closing under the Acquisition Facility and to repay $5
million of the term loan facility which cannot be reborrowed. The Company's pro
forma financial data reflects the consummation of the AF Sale. See "--Summary
Pro Forma Financial Data" and "Pro Forma Financial Information."
19
<PAGE>
USE OF PROCEEDS OF THE NEW NOTES
This Exchange Offer is intended to satisfy obligations of the Company under
the Exchange and Registration Rights Agreement. The Company will not receive any
proceeds from the issuance of the New Notes Offered hereby. In consideration for
issuing the New Notes as contemplated in this Prospectus, the Company will
receive, in exchange, Old Notes in like principal amount. The form and terms of
the New Notes are identical in all material respects to the form and terms of
the Old Notes, except as otherwise described herein under "The Exchange
Offer--Terms of the Exchange Offer." The Old Notes surrendered in exchange for
the New Notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any increase in the outstanding
debt of the Company.
CAPITALIZATION
The following table sets forth (i) the historical capitalization of Old
Windy Hill, (ii) the unaudited pro forma capitalization of the Company after
giving effect to the Transaction and the Financing and (iii) the unaudited pro
forma capitalization of the Company after giving effect to the AF Sale, the
Transaction, and the Financing, in each case as of April 30, 1997. This table
should be read in conjunction with "The Transaction," and "Pro Forma Financial
Information" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MAY 3, 1997 APRIL 30, 1997
--------------- --------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL --------------------------------
OLD WINDY HILL PRIOR TO AF SALE AFTER AF SALE
--------------- ----------------- -------------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Long-term debt (including current maturities):
Working Capital Facility(1)............................... $ -- $ -- $ --
Acquisition Facility...................................... -- 45.0 --
Term Loan Facility........................................ -- 20.0 15.0
The Notes................................................. -- 120.0 120.0
Existing Indebtedness..................................... 51.2 -- --
----- ------- -------------
Total long-term debt.................................... 51.2 185.0 135.0
Total stockholders' equity.................................... 26.5 34.1 $ 34.1
----- ------- -------------
Total capitalization.......................................... $ 77.7 $ 219.1 $ 169.1
----- ------- -------------
----- ------- -------------
</TABLE>
- ------------------------------
(1) The Working Capital Facility provides revolving loans of up to $20 million
for working capital, which was undrawn at the closing of the Transaction.
See "The Transaction" and "Description of Senior Bank Facilities."
20
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Exchange and Registration Rights Agreement, the Company has
agreed (i) to file a registration statement with respect to an offer to exchange
the Old Notes for senior debt securities of the Company with terms substantially
identical to the Old Notes (except that the New Notes will not contain terms
with respect to transfer restrictions, registration rights and liquidated
damages) on or prior to 60 days after the Issue Date and (ii) to use best
efforts to cause such registration statement to become effective under the
Securities Act within 150 days after the Issue Date. In the event that
applicable interpretations of the staff of the Commission do not permit the
Company to effect the Exchange Offer as contemplated thereby, or if certain
holders of the Old Notes notify the Company that they are not eligible to
participate in, or would not receive freely tradeable New Notes in exchange for
tendered Old Notes pursuant to the Exchange Offer, the Company will use its best
efforts to cause to become effective a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Old Notes and to keep
the Shelf Registration Statement effective until three years after the Issue
Date. In the event that the Company is not in compliance with certain
obligations under the Exchange and Registration Rights Agreement, the Company
shall be obligated to pay liquidated damages to holders of the Old Notes. See
"Exchange and Registration Rights Agreement."
Each holder of the Old Notes that wishes to exchange such Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the New Notes, and (iii) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or Holdings or if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
RESALE OF NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than a holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder does not intend to participate and has no
arrangement of understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention or for the purpose of participating in a distribution of the New Notes
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Unless an
exemption from registration is otherwise available, any such resale transaction
should be covered by an effective registration statement containing the selling
security holder's information required by Item 507 of Regulation S-K under the
Securities Act. This Prospectus may be used for an offer to resell, resale or
other retransfer of New Notes only as specifically set forth herein. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Old Notes properly tendered and not
21
<PAGE>
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The
Company will issue $1,000 principal amount of New Notes in exchange for each
$1,000 principal amount of outstanding Old Notes surrendered pursuant to the
Exchange Offer. Old Notes may be tendered only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes, except the New Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the Indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $120.0 million aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of Old Notes. There will be
no fixed record date for determining registered holders of Old Notes entitled to
participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Exchange and Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and continue to accrue interest and will
be entitled to the rights and benefits such holders have under the Indenture and
the Exchange and Registration Rights Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Old Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 1 of
the Exchange and Registration Rights Agreement. The Exchange Agent will act as
agent for the tendering holders for the purposes of receiving the New Notes from
the Company. The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under "--Certain Conditions to the Exchange Offer."
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole description, (i) to delay
accepting for exchange any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
"--Certain Conditions to the Exchange Offer" shall not have been satisfied, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms
22
<PAGE>
of the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders of Old Notes. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer, depending upon the significance of
the amendment and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such period.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 9 3/4% per annum, payable
semi-annually, on May 15 and November 15 of each year, commencing on November
15, 1997. Holders of New Notes will receive interest on November 15, 1997 from
the date of initial issuance of the New Notes, plus an amount equal to the
accrued interest on the Old Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court of
by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable judgment, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
(b) any rule, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's reasonable judgment,
might materially impair the ability of the Company to proceed with the
Exchange Offer; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified above under "--Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
23
<PAGE>
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signature there guaranteed
if required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date or, in the alternative, comply
with DTC's ATOP procedures described below. In addition, either (i) Old Notes
must be received by the Exchange Agent along with the Letter of Transmittal, or
(ii) a timely confirmation of book-entry transfer (a "Book-Entry Confirmation")
of such Old Notes, if such procedure is available, into the Exchange Agent's
account at the Depository Trust Company (the "Book-Entry Transfer Facility" or
"DTC") pursuant to the procedure for book-entry transfer described below or
properly transmitted Agent's Message (as defined below) must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth below under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York city time, on the
Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTION FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder of Old Notes to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's must, prior to completing and
executing the Letter of Transmittal and delivering such owner's Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in
such owner's name or obtain a properly completed bond power from the registered
holder of Old Notes. The transfer of registered ownership may take considerable
time and may not be able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial
24
<PAGE>
bank or trust company having an office or correspondent in the United States or
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of one of the recognized signature guarantee
programs identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
provide evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing the
Depositary to transfer the Old Notes to the Exchange Agent in accordance with
the Depositary's ATOP procedures for transfer. The Depositary will then send an
Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that the Depositary has received an express acknowledgement from a participant
in DTC's ATOP that is tendering Old Notes which are the subject of such book
entry confirmation, that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal (or, in the case of an Agent's Message
relating to guaranteed delivery, that such participant has received and agrees
to be bound by the applicable Notice of Guaranteed Delivery), and that the
agreement may be enforced against such participant.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes, the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Old Notes or a timely Book-Entry Confirmation of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility,
a properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for exchange for
any reason set forth in the terms and conditions of the Exchange Offer or if Old
Notes are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned
25
<PAGE>
without expense to the tendering holder thereof (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the address
set forth below under "--Exchange Agent" on or prior to the Expiration Date, or
if the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or and delivery)
setting forth the name and address of the holder, the registered number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
(3) New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the Old Notes or
a Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile there), or properly transmitted Agent's Message as well as all
tendered Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three (3) New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, (i) a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent" or (ii) holders must comply with the appropriate procedures
of DTC's ATOP system. Any such notice of withdrawal must specify the
26
<PAGE>
name of the person having tendered the Old Notes to be withdrawn, identify the
Old Notes to be withdrawn (including the principal amount of such Old Notes),
and (where certificates for Old Notes have been transmitted) specify the name in
which such Old Notes were registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer procedures described above, such Old Notes will
be credited to an account maintained with such Book-Entry Transfer Facility for
the Old Notes as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering" above at any time on or prior to the Expiration Date.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL OR BY BY HAND:
OVERNIGHT COURIER: Wilmington Trust Company
Wilmington Trust Company c/o Harris Trust Company of New York,
Corporate Trust Administration as Agent
1100 North Market Street 77 Water Street
Rodney Square North New York, New York 10004
Wilmington, Delaware 19890-0001
</TABLE>
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302) 651-8864
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$600,000. Such expenses include
27
<PAGE>
registration fees, fees and expenses of the Exchange Agent and Trustee,
accounting and legal fees and printing costs, and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
Old Notes for principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of Old Notes tendered, or if tendered Old Notes are registered
in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth (i) in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws and (ii) otherwise set forth in the
Offering Memorandum dated May 16, 1997 distributed in connection with the
Offering. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Notes under the Securities Act. Based on interpretations by the staff of the
Commission, New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold or otherwise transferred by holders thereof (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in ordinary course of such holders' business and such holders
have no arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer. Any holder who tenders in
the Exchange Offer for the purpose of participating in a distribution of the New
Notes (i) could not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or such securities laws have been complied with. The
Company has agreed, pursuant to the Exchange and Registration Rights Agreement
and subject to certain specified limitations therein, to register or qualify the
New Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the New Notes may request in writing.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
OLD WINDY HILL
The selected historical financial information set forth for Old Windy Hill
with respect to the statement of operations data for the ten months ended
December 30, 1995, the year ended December 28, 1996, and with respect to the
balance sheet data at December 30, 1995, and December 28, 1996, was derived from
the financial statements of Old Windy Hill included elsewhere in this
Prospectus, and which have been audited by KPMG Peat Marwick LLP. The selected
historical financial information set forth as of and for the three months ended
March 30, 1996 and March 29, 1997, and for the twelve months ended March 29,
1997, was derived from Old Windy Hill's unaudited financial information which is
not included elsewhere in this Prospectus and which, in the opinion of
management, include all adjustments necessary for a fair presentation and is not
indicative of a full year's results. The selected historical financial
information of Old Windy Hill set forth below should be read in conjunction with
Old Windy Hill's historical financial statements and related notes thereto
included elsewhere in this Prospectus. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
TEN MONTHS THREE MONTHS ENDED
ENDED YEAR ENDED ---------------------------- TWELVE MONTHS
DECEMBER 30, DECEMBER 28, MARCH 30, MARCH 29, ENDED
1995 1996 1996 1997 MARCH 29, 1997
--------------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $ 34,481 $ 82,993 $ 10,985 $ 25,937 $ 97,945
Cost of goods sold......................... 22,107 54,379 7,384 16,061 63,056
--------------- --------------- ------------- ------------- ---------------
Gross profit........................... 12,374 28,614 3,601 9,876 34,889
--------------- --------------- ------------- ------------- ---------------
Selling, distribution and marketing
expenses:
Selling and distribution............... 4,751 8,090 1,452 2,441 9,079
Trade promotions and other marketing... 3,732 9,075 1,289 3,519 11,305
--------------- --------------- ------------- ------------- ---------------
Total selling, distribution and marketing
expenses................................. 8,483 17,165 2,741 5,960 20,384
General and administrative expenses........ 1,526 3,618 690 1,287 4,215
Amortization of intangibles and other
assets................................... 452 1,316 142 463 1,637
--------------- --------------- ------------- ------------- ---------------
Total operating expenses............... 10,461 22,099 3,573 7,710 26,236
--------------- --------------- ------------- ------------- ---------------
Operating income....................... 1,913 6,515 28 2,166 8,653
Amortization of deferred financing fees.... 67 259 31 98 326
Interest expense, net...................... 1,125 3,800 344 1,207 4,663
--------------- --------------- ------------- ------------- ---------------
Income (loss) before income taxes and
extraordinary item................... 721 2,456 (347) 861 3,664
Income tax expense(1)...................... -- 1,209 -- 344 1,553
--------------- --------------- ------------- ------------- ---------------
Income (loss) before extraordinary
item................................. 721 1,247 (347) 517 2,111
Extraordinary loss on early extinguishment
of debt(2)............................... -- 604 -- -- 604
--------------- --------------- ------------- ------------- ---------------
Net income (loss)...................... $ 721 $ 643 $ (347) $ 517 $ 1,507
--------------- --------------- ------------- ------------- ---------------
--------------- --------------- ------------- ------------- ---------------
OPERATING AND OTHER DATA:
EBITDA(3).................................. $ 2,633 $ 8,910 $ 270 $ 2,994 $ 11,634
EBITDA margin(4)........................... 7.6% 10.7% 2.5% 11.5% 11.9%
Depreciation and amortization.............. $ 787 $ 2,654(5) $ 273 $ 926 $ 3,307
Capital expenditures....................... 1,120 1,091 133 287 1,245
Pet food sold (thousands of tons).......... 75 157 22 48 183
BALANCE SHEET DATA (AT PERIOD END):
Inventories................................ $ 1,720 $ 5,141 $ 1,815 $ 5,060 $ 5,060
Property, plant and equipment, net......... 6,201 22,484 6,235 22,406 22,406
Total assets............................... 27,484 92,225 26,986 90,696 90,696
Total liabilities.......................... 20,872 66,193 20,723 64,145 64,145
Total stockholder's equity................. 6,612 26,032 6,263 26,550 26,550
</TABLE>
- ------------------------------
(1) Prior to April 29, 1996, Old Windy Hill was organized as a limited liability
company. As such, income tax expense was not computed for the ten months
ended December 30, 1995, and only applies to the period subsequent to April
29, 1996.
(2) Reflects the write-off of deferred financing fees in connection with
refinancing of indebtedness at April 29, 1996.
(3) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and extraordinary items and is presented because it is
commonly used by certain investors and analysts to analyze and compare
operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities, or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(4) EBITDA margin is computed as EBITDA as a percentage of net sales.
(5) Excludes amortization of discount on note payable.
29
<PAGE>
HUBBARD
The selected historical financial information set forth for Hubbard with
respect to the statement of operations for the years ended April 30, 1995, 1996
and 1997, and the nine months ended January 31, 1997, and with respect to the
balance sheets as of April 30, 1995, 1996 and 1997, and January 31, 1997, was
derived from the financial statements of Hubbard included elsewhere in this
Prospectus and which have been audited by KPMG Peat Marwick LLP. The selected
historical financial information set forth as of and for the nine months ended
January 31, 1996 was derived from Hubbard's unaudited financial information
which is not included elsewhere in this Prospectus and which, in the opinion of
management, include all adjustments necessary for a fair presentation. The
selected historical financial information of Hubbard set forth below should be
read in conjunction with Hubbard's historical financial statements and related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
--------------------------------
------------------------
1995 1996 1997 1997
--------- ---------- ---------- 1996 ---------
-------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $ 87,736 $ 102,268 $ 108,523 $ 76,241 $ 82,241
Cost of sales......................................... 67,052 80,658 87,768 59,536 67,317
--------- ---------- ---------- ------------- ---------
Gross profit...................................... 20,684 21,610 20,755 16,705 14,924
--------- ---------- ---------- ------------- ---------
Operating expenses:
Warehouse and delivery............................ 246 200 188 148 130
Selling and advertising........................... 6,469 7,035 6,924 5,333 5,105
General and administrative........................ 5,743 5,917 6,099 4,564 3,753
--------- ---------- ---------- ------------- ---------
Total operating expenses.............................. 12,458 13,152 13,211 10,045 8,988
--------- ---------- ---------- ------------- ---------
Operating income.................................. 8,226 8,458 7,544 6,660 5,936
Interest income....................................... 790 774 867 623 645
Equity in earnings of joint ventures.................. 1,356 981 976 783 703
Other income (expense)................................ 5 10 70 (3) 32
--------- ---------- ---------- ------------- ---------
Income before income taxes........................ 10,377 10,223 9,457 8,063 7,316
Income tax expense.................................... 4,133 3,935 3,684 3,225 2,880
--------- ---------- ---------- ------------- ---------
Net income........................................ $ 6,244 $ 6,288 $ 5,773 $ 4,838 $ 4,436
--------- ---------- ---------- ------------- ---------
--------- ---------- ---------- ------------- ---------
OPERATING AND OTHER DATA:
EBITDA(1)............................................. $ 12,679 $ 13,206 $ 12,616 $ 10,337 $ 9,476
EBITDA margin(2)...................................... 14.4% 12.9% 11.6% 13.6% 11.5%
Depreciation and amortization......................... $ 3,092 $ 3,757 $ 4,026 $ 2,897 $ 2,805
Capital expenditures.................................. 2,607 3,839 2,406 3,427 1,844
Pet food sold (thousands of tons)..................... 179 204 201 154 152
BALANCE SHEET DATA (AT PERIOD END):
Inventories........................................... $ 6,194 $ 5,763 $ 5,373 $ 5,821 $ 5,426
Property, plant and equipment, net.................... 27,903 26,627 25,250 27,005 25,843
Total assets.......................................... 57,865 62,096 59,318 63,152 65,445
Total liabilities..................................... 12,865 13,843 11,835 16,099 16,537
Net assets............................................ 45,000 48,253 47,484 47,053 48,908
<CAPTION>
TWELVE MONTHS
ENDED
JANUARY 31, 1997
-------------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $ 108,268
Cost of sales......................................... 88,439
----------
Gross profit...................................... 19,829
----------
Operating expenses:
Warehouse and delivery............................ 182
Selling and advertising........................... 6,807
General and administrative........................ 5,106
----------
Total operating expenses.............................. 12,095
----------
Operating income.................................. 7,734
Interest income....................................... 796
Equity in earnings of joint ventures.................. 901
Other income (expense)................................ 45
----------
Income before income taxes........................ 9,476
Income tax expense.................................... 3,590
----------
Net income........................................ $ 5,886
----------
----------
OPERATING AND OTHER DATA:
EBITDA(1)............................................. $ 12,345
EBITDA margin(2)...................................... 11.4%
Depreciation and amortization......................... $ 3,665
Capital expenditures.................................. 2,258
Pet food sold (thousands of tons)..................... 202
BALANCE SHEET DATA (AT PERIOD END):
Inventories........................................... $ 5,426
Property, plant and equipment, net.................... 25,843
Total assets.......................................... 65,445
Total liabilities..................................... 16,537
Net assets............................................ 48,908
</TABLE>
- ------------------------
(1) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and extraordinary items and is presented because it is
commonly used by certain investors and analysts to analyze and compare,
operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities, or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(2) EBITDA margin is computed as EBITDA as a percentage of net sales.
30
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following presents certain unaudited pro forma financial information of
the Company for the periods ended and as of the dates indicated. The unaudited
summary pro forma statement of operations data give effect to (i) the
Transaction, (ii) the Financing, (iii) the acquisition of the 50% interest in
the Maumee joint venture not previously owned, (iv) adjustments made to reflect
the elimination of certain administrative operations, and (v) adjustments to
include the effects of the Kozy Kitten Acquisition to reflect a full year of
operating data, in each case, as if such transaction had occurred on January 1,
1996 for the year ended December 31, 1996, on January 1, 1997 for the three
months ended March 31, 1997 (using the quarter ended April 30, 1997 financial
data for Hubbard) and on April 1, 1996 for the twelve months ended March 31,
1997. The unaudited summary pro forma balance sheet data give effect to the
Transaction, the Financing, and the AF Sale as if they had occurred on April 30,
1997. For quarterly and annual financial reporting purposes, the Company uses 13
week quarters with years ending on the last Saturday in December. For purposes
of the Pro Forma Statements of Operations, the Company's year end for 1996 and
the first quarter for 1997 have been designated December 31 and March 31,
respectively. In addition, the Pro Forma Balance Sheet gives effect to the
Transaction as if it occurred on April 30, 1997.
The pro forma financial information set forth below reflect pro forma
adjustments that are based upon available information, contractual agreements
and certain assumptions that the Company believes are reasonable. The pro forma
financial information does not purport to represent the Company's results of
operations or financial position that would have resulted had the transactions
to which pro forma effect is given been consummated as of the dates or for the
periods indicated. In preparing the pro forma information, the Company believes
it has utilized reasonable methods to conform the basis of presentation. Upon
finalization of the Transaction, a thorough review of all accounting practices
and policies will be made. In addition, the acquisition of Hubbard Milling will
be accounted for by the purchase method of accounting. The pro forma information
reflects preliminary estimates of the allocation of the purchase price and is
subject to final determination.
The pro forma financial statements and accompanying notes should be read in
conjunction with the historical financial statements of Old Windy Hill and
Hubbard and other financial information pertaining to the Company including
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
31
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF APRIL 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
OLD WINDY HILL HUBBARD PRO FORMA COMPANY
MAY 3, 1997 APRIL 30, 1997 ADJUSTMENTS PRO FORMA
-------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Cash................................................... $ 893 $ 15,006 $ (13,896)(a) $ 2,003
Accounts receivable.................................... 6,729 5,357 421(b) 12,507
Inventories and prepaids............................... 6,149 5,433 90(b) 11,672
Deferred tax assets.................................... -- -- 1,192(c) 1,192
-------------- -------------- ------------ -----------
Total current assets............................. 13,771 25,796 (12,193) 27,374
Property, plant and equipment, net..................... 22,386 25,250 23,360(d) 70,996
Goodwill and other intangible assets, net.............. 51,158 3,461 40,608(e) 95,227
Investment in joint ventures........................... -- 4,190 (225)(f) 3,965
Other assets........................................... 3,339 622 6,954(g) 10,915
-------------- -------------- ------------ -----------
Total assets..................................... $ 90,654 $ 59,319 $ 58,504 $ 208,477
-------------- -------------- ------------ -----------
-------------- -------------- ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Bank overdraft......................................... $ 2,173 $ -- $ -- $ 2,173
Senior secured revolving facility...................... 4,000 -- (4,000)(h) --
Current portion of long term debt...................... 5,800 -- (5,050)(h) 750
Accounts payable and accrued expenses.................. 8,731 7,568 4,718 )(i 21,017
Deferred tax liability................................. 50 -- -- 50
Income tax payable..................................... 24 262 (262)(c) 24
-------------- -------------- ------------ -----------
Total current liabilities........................ 20,778 7,830 (4,594) 24,014
Senior secured term debt............................... 32,850 -- (18,600)(j) 14,250
Senior subordinated notes.............................. 7,580 -- (7,580)(k) --
The Notes.............................................. -- -- 120,000(l) 120,000
Deferred tax liability................................. 2,581 649 9,181(m) 12,411
Other liabilities...................................... 334 3,356 -- 3,690
-------------- -------------- ------------ -----------
Total liabilities................................ 64,123 11,835 98,407 174,365
-------------- -------------- ------------ -----------
Stockholders' equity:
Common stock......................................... -- -- --
Paid in capital...................................... 25,681 -- 9,719(n) 35,400
Retained earnings/parent investment.................. 850 47,484 (49,622)(o) (1,288)
-------------- -------------- ------------ -----------
Total stockholders' equity....................... 26,531 47,484 (39,903) 34,112
-------------- -------------- ------------ -----------
Total liabilities and stockholders' equity....... $ 90,654 $ 59,319 $ 58,504 $ 208,477
-------------- -------------- ------------ -----------
-------------- -------------- ------------ -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Balance Sheet
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) Reflects cash distributed to Hubbard Milling shareholders.
(b) Reflects the addition of working capital and other assets from the
acquisition of the Maumee joint venture.
(c) To adjust current tax payable and deferred taxes to reflect the write-off of
the deferred financing and discount on notes related to the repayment of
Existing Indebtedness.
(d) Reflects a write-up of property, plant and equipment of $22.9 million to
estimated fair market value as part of the Hubbard purchase price allocation
and the acquisition of the fixed assets owned by the Maumee joint venture.
(e) Reflects the excess of cost over the fair market value of the net assets
acquired in connection with the acquisition of Hubbard. The Company will
evaluate the net realizable value of intangible assets on an ongoing basis
relying on a number of factors, including operating results and future cash
flows.
(f) Reflects the adjustment to the investment in joint ventures account as a
result of the acquisition of the Maumee joint venture.
(g) Reflects the capitalization of deferred financing costs of $9.6 million
incurred in connection with the Transaction and the Offering, net of the
write-off of deferred financing costs on the Existing Indebtedness of $2.7
million.
(h) Reflects the repayment of the current portion of the Existing Indebtedness
and the current portion of new debt under the Term Loan Facility.
(i) Includes acquisition related costs which will be paid after the closing
date.
(j) Reflects the net of (i) repayment of Old Windy Hill senior debt of $32.9
million and (ii) debt of $14.3 million under the Term Loan Facility which
reflects the use of net proceeds of $50 million from the AF Sale to repay in
full the $45 million Acquisition Facility and to repay $5 million of the
Term Loan Facility which cannot be reborrowed.
(k) Reflects the repayment of Old Windy Hill subordinated notes.
(l) Reflects the issuance of the Notes.
(m) Reflects the tax effect of the write-up of $22.9 million in property, plant
and equipment.
(n) Reflects the $10 million equity contribution from Holdings, net of
syndication expenses.
(o) Reflects the sum of (i) elimination of Hubbard equity of $47.5 million, (ii)
reduction of equity related to the write-off of Old Windy Hill deferred
financing costs of $2.7 million due to the refinancing of the Existing
Indebtedness, and (iii) reduction of equity related to the write-off of Old
Windy Hill discount on subordinated debt of $.9 million, net of tax effect
on (ii) and (iii) of $1.4 million.
33
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL COMPANY
OLD WINDY HILL HISTORICAL HUBBARD PRO FORMA
YEAR ENDED TWELVE MONTHS ENDED PRO FORMA YEAR ENDED
DECEMBER 31, 1996 JANUARY 31, 1997 ADJUSTMENTS DECEMBER 31, 1996
------------------- --------------------- ------------ -------------------
<S> <C> <C> <C> <C>
Net sales.............................. $ 82,993 $ 108,268 $ 25,449(a) $ 216,710
Cost of goods sold..................... 54,379 88,439 17,842 160,660
-------- ---------- ------------ ----------
Gross profit......................... 28,614 19,829 7,607 56,050
-------- ---------- ------------ ----------
Selling, distribution and marketing
expenses:
Selling, distribution and
advertising........................ 8,090 6,989 1,539(c) 16,618
Trade promotions
and other marketing................ 9,075 -- 354(e) 9,429
-------- ---------- ------------ ----------
Total selling, distribution and
marketing expenses................. 17,165 6,989 1,893 26,047
General and administrative expenses.... 3,618 5,106 276(d) 9,000
Amortization of intangibles and other
assets............................... 1,316 -- 1,746(f) 3,062
-------- ---------- ------------ ----------
Total operating expenses............. 22,099 12,095 3,915 38,109
-------- ---------- ------------ ----------
Operating income..................... 6,515 7,734 3,692 17,941
Equity in earnings of joint ventures... -- 901 (480)(g) 421
Other income (expense)................. -- 45 (45) --
Interest (income) expense, net......... 3,800 (796) 10,156(h) 13,160
Amortization of deferred financing
expenses............................. 259 -- 856(h) 1,115
-------- ---------- ------------ ----------
Income before income taxes and
extraordinary item................. 2,456 9,476 (7,845) 4,087
Income tax expense..................... 1,209 3,590 (3,164)(i) 1,635
-------- ---------- ------------ ----------
Income before extraordinary item..... 1,247 5,886 (4,681) 2,452
Extraordinary loss on early
extinguishment of debt............... 604 -- (604)(j) --
-------- ---------- ------------ ----------
Net income........................... $ 643 $ 5,886 $ (4,077) $ 2,452
-------- ---------- ------------ ----------
-------- ---------- ------------ ----------
EBITDA(k).............................. $ 28,516
----------
----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations
34
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL COMPANY
HISTORICAL HUBBARD PRO FORMA
OLD WINDY HILL THREE MONTHS THREE MONTHS
THREE MONTHS ENDED ENDED PRO FORMA ENDED
MARCH 31, 1997 APRIL 30, 1997 ADJUSTMENTS MARCH 31, 1997
--------------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 25,937 $ 26,282 $ 2,960(a) $ 55,179
Cost of goods sold......................... 16,061 20,451 2,940(b) 39,452
-------- -------------- ------------ ---------------
Gross profit........................... 9,876 5,831 20 15,727
-------- -------------- ------------ ---------------
Selling, distribution and marketing
expenses:
Selling, distribution and
advertising.......................... 2,441 1,877 (86)(c) 4,232
Trade promotions and other marketing... 3,519 -- -- 3,519
-------- -------------- ------------ ---------------
Total selling, distribution and marketing
expenses................................. 5,960 1,877 (86) 7,751
General and administrative expenses........ 1,287 2,346 (1,023)(d) 2,610
Amortization of intangibles and other
assets................................... 463 -- 369(f) 832
-------- -------------- ------------ ---------------
Total operating expenses............... 7,710 4,223 (740) 11,193
-------- -------------- ------------ ---------------
Operating income....................... 2,166 1,608 760 4,534
Equity in earnings of joint ventures....... -- 273 (120)(g) 153
Other income (expense)..................... -- 43 43
Interest expense/(income), net............. 1,207 (222) 2,306(h) 3,291
Amortization of deferred financing
expenses................................. 98 -- 181(h) 279
-------- -------------- ------------ ---------------
Income before income taxes............. 861 2,146 (1,847) 1,160
Income tax expense......................... 344 804 (684)(i) 464
-------- -------------- ------------ ---------------
Net income................................. $ 517 $ 1,342 $ (1,163) $ 696
-------- -------------- ------------ ---------------
-------- -------------- ------------ ---------------
EBITDA(k).................................. $ 7,731
---------------
---------------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations
35
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL COMPANY
OLD WINDY HILL HISTORICAL HUBBARD PRO FORMA
TWELVE MONTHS YEAR ENDED TWELVE MONTHS
ENDED ENDED PRO FORMA ENDED
MARCH 31, 1997 APRIL 30, 1997 ADJUSTMENTS MARCH 31, 1997
------------------- ------------------- ------------ -------------------
<S> <C> <C> <C> <C>
Net sales................................. $ 97,945 $ 108,523 $ 16,059(a) $ 222,527
Cost of goods sold........................ 63,056 87,768 13,617(b) 164,441
-------- ---------- ------------ ----------
Gross profit........................ 34,889 20,755 2,442 58,086
-------- ---------- ------------ ----------
Selling, distribution and marketing
expenses:
Selling, distribution and
advertising......................... 9,079 7,113 345(c) 16,537
Trade promotion and other
marketing........................... 11,305 -- 110(e) 11,415
-------- ---------- ------------ ----------
Total selling, distribution and marketing
expenses................................ 20,384 7,113 455 27,952
General and administrative expenses....... 4,215 6,099 (1,314)(d) 9,000
Amortization of intangibles and other
assets.................................. 1,637 -- 1,425(f) 3,062
-------- ---------- ------------ ----------
Total operating expenses............ 26,236 13,212 566 40,014
-------- ---------- ------------ ----------
Operating income.................... 8,653 7,543 1,876 18,072
Equity in earnings of joint ventures...... -- 976 (480)(g) 496
Other income (expense).................... -- 70 (45) 25
Interest expense (income), net............ 4,663 (867) 9,364(h) 13,160
Amortization of deferred financing
expenses................................ 326 -- 789(h) 1,115
-------- ---------- ------------ ----------
Income before income taxes and
extraordinary item................ 3,664 9,456 (8,802) 4,318
Income tax expense........................ 1,553 3,683 (3,509)(i) 1,727
-------- ---------- ------------ ----------
Income before extraordinary item.... 2,111 5,773 (5,293) 2,591
Extraordinary loss on early extinguishment
of debt................................. 604 -- (604)(j) --
-------- ---------- ------------ ----------
Net income................................ $ 1,507 $ 5,773 $ (4,689) $ 2,591
-------- ---------- ------------ ----------
-------- ---------- ------------ ----------
EBITDA(k)................................. $ 29,051
----------
----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Statements of Operations
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
The following pro forma adjustments give effect to (i) the Transaction, (ii)
the Financing, (iii) the acquisition of the 50% interest in the Maumee joint
venture not previously owned and accounted for using the equity method, (iv)
adjustments made to reflect the elimination of certain administrative
operations, and (v) adjustments to include the effects of the Kozy Kitten
Acquisition to reflect a full year of operating data for that business. In the
latter case, four months unaudited information is included in the year ended
December 31, 1996 results, and one month unaudited information is included in
the March 31, 1997 results.
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997
------------------- ----------------- ---------------
<S> <C> <C> <C>
(a) Adjustments to net sales reflect the following:
Sales of products from Kozy Kitten Acquisition
for the relevant period prior to April 29, 1996.. $ 13,607 $ -- $ 4,218
Sales of Maumee joint venture.................... 11,842 2,960 11,841
-------- ------- ---------------
$ 25,449 $ 2,960 $ 16,059
-------- ------- ---------------
-------- ------- ---------------
(b) Adjustments to cost of sales reflect the following:
Cost of sales of products from Kozy Kitten
Acquisition for the relevant period prior to
April 29, 1996................................ $ 6,123 $ -- $ 1,898
Depreciation on fair market value write-up of
fixed assets.................................. 2,295 583 2,295
Cost of sales of the Maumee joint venture....... 10,194 2,549 10,194
Fixed overhead savings related to plant
closure(1)...................................... (500) (125) (500)
Reclassification of goodwill amortization from
Hubbard's historical statements................. (270) (67) (270)
-------- ------- ---------------
$ 17,842 $ 2,940 $ 13,617
-------- ------- ---------------
-------- ------- ---------------
</TABLE>
- --------------------------
<TABLE>
<S> <C> <C> <C>
(c) Adjustments to selling and distribution and
advertising costs reflect the following:
Expense from Kozy Kitten Acquisition
for the relevant period prior to
April 29, 1996.................... $ 1,984 $ -- $ 790
Expense of Maumee joint venture..... 701 175 701
Logistics efficiencies to be
realized(1)....................... (500) (125) (500)
Reclassification of fixed selling
costs to general and
administrative.................... (646) (136) (646)
-------- ------- ---------------
$ 1,539 $ (86) $ 345
-------- ------- ---------------
-------- ------- ---------------
</TABLE>
- --------------------------
<TABLE>
<S> <C> <C> <C>
(1) Cost savings primarily resulting from lower distribution costs associated with moving the production
of Kozy Kitten products to the Allentown and McKenzie facilities which are located closer to this
product line's primary market area.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997
------------------- ----------------- ---------------
<S> <C> <C> <C>
(d) Adjustment to general and administrative expenses
reflect the following:
Kozy Kitten expense for the relevant
period prior to
April 29, 1996.................... $ 800 $ -- $ 200
Reduction in Hubbard administrative
costs(1).......................... (2,356) (1,432)(1) (3,354)
Management fee...................... 600 125 600
Reclassification from selling
expense........................... 646 136 646
Incremental administrative costs.... 586 148 594
-------- ------- ---------------
$ 276 $ (1,023) $ (1,314)
-------- ------- ---------------
-------- ------- ---------------
</TABLE>
- --------------------------
<TABLE>
<S> <C> <C> <C>
(1) Reduction in administrative costs achieved by the closure of Hubbard Milling's corporate headquarters
in Mankato, Minnesota pursuant to the Merger Agreement and the consolidation of corporate functions
to the Company's headquarters in Brentwood, Tennessee.
(e) Reflects trade promotion expense related to Kozy Kitten Acquisition for the relevant period prior to April 29,
1996.
(f) Reflects the increase in intangibles amortization expense as a result of the acquisition of Hubbard plus the
reclassification from cost of sales reflected in (b) above. Goodwill will be amortized on a straight-line
basis over 40 years, and other intangibles over periods ranging from five to 20 years.
(g) Represents a decrease in investment in joint ventures due to the acquisition of the remaining 50% interest in
the Maumee joint venture not previously owned.
(h) Represents adjustment necessary to reflect pro forma interest expense and amortization of deferred financing
expense as shown below based upon pro forma debt levels and applicable interest rates. The table below presents
pro forma interest expense, noted with the respective interest rates and fees, and pro forma amortization of
deferred financing costs:
TWELVE MONTHS THREE MONTHS TWELVE MONTHS
ENDED ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997
------------------- ----------------- ---------------
Interest income (5.5%).................................... $ (121) $ (29) $ (121)
Term facility (8.375%).................................... 1,256 313 1,256
Senior subordinated notes offered hereby (9.75%).......... 11,700 2,925 11,700
Commitment fee on Revolving Facility (0.5%)............... 325 82 325
-------- ------- ---------------
Total pro forma interest expense........................ $ 13,160 $ 3,291 $ 13,160
-------- ------- ---------------
-------- ------- ---------------
Pro forma amortization of deferred financing costs........ $ 1,115 $ 279 $ 1,115
-------- ------- ---------------
-------- ------- ---------------
</TABLE>
(i) Reflects a reduction in the provision for income taxes as a result of the
pro forma decrease in income before income taxes, computed at an effective
rate of 40%, and includes the tax effect of the extraordinary item
eliminated (see j).
(j) Reflects the elimination of the extraordinary item as a nonrecurring,
one-time charge.
(k) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization and extraordinary items and is presented because it is commonly
used by certain investors and analysts to analyze and compare on the basis
of operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company derives substantially all of its revenues from selling dry pet
food products. The majority of its revenues comes from the sale of private label
pet food products to customers throughout the country. Other revenues are
generated by the sale of economy branded pet food products, mainly to customers
concentrated in the South and the Upper Midwest, and contract manufacturing for
other pet food companies. The Company typically has slightly higher sales during
the fall and winter months, when cooler weather leads to increased dog food
consumption.
Prior to the Transaction, Hubbard Milling operated both a pet food business
and an animal feed business, with total sales of approximately $260 million.
Hubbard Milling maintained a corporate overhead structure to support its pet
food and animal feed businesses with administrative expenses of approximately
$7.0 million in 1996. Approximately 60% of the corporate overhead was allocated
to the animal feed division and the remaining 40% was allocated to the pet food
division. The animal feed division was sold to the AF Buyer simultaneously with
the closing of the Transaction. See "The Transaction--Sale of Animal Feed
Business." Over the course of the six months following the AF Sale, the Company
plans to eliminate the administrative operations in Mankato, Minnesota, and
consolidate the corporate overhead functions with Old Windy Hill's corporate
functions in Brentwood, Tennessee. See "Business--Marketing, Sales and
Distribution." As a result of this consolidation, the Company believes that
substantially all of Hubbard Milling's allocated expenses can be eliminated and
that the corporate offices in Brentwood can adequately support the business
going forward. The historical financial information presented for Hubbard
Milling represents only the results of operations of its pet food business,
including its allocable portion of corporate overhead.
The following discussion is based on the historical financial statements for
both Old Windy Hill and Hubbard. Because Old Windy Hill was formed in February
1995, the results of operations for 1995 reflects only a 10 month period ended
December 30, 1995. In addition, Old Windy Hill's results of operations for the
year ended December 28, 1996 and the four months ended May 3, 1997 have been
significantly affected by the acquisition of the KOZY KITTEN and TUFFY'S pet
food businesses (the "Kozy Kitten Acquisition") on April 29, 1996. The total
purchase price of such acquisition was $52.5 million. To finance such
acquisition and refinance $17.0 million of existing debt, Old Windy Hill
received an equity contribution of $19.8 million from Holdings and incurred new
bank debt of $60.5 million, which included a revolving credit facility of $9.0
million. As a result of the above mentioned transactions, the periods may not be
comparable.
39
<PAGE>
RESULTS OF OPERATIONS
OLD WINDY HILL
The following table sets forth for the periods indicated the components of
Old Windy Hill's statements of income expressed in dollar amounts and as a
percentage net of sales for such period.
<TABLE>
<CAPTION>
FOUR MONTHS FOUR MONTHS
TEN MONTHS ENDED YEAR ENDED ENDED ENDED
DECEMBER 30, DECEMBER 28, APRIL 27, MAY 3,
1995 1996 1996 1997
-------------------------- ---------------------- ---------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(DOLLARS IN THOUSANDS)
AMOUNT % AMOUNT % AMOUNT % AMOUNT
--------------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ 34,481 100.0% $ 82,993 100.0% $ 13,488 100.0% $ 35,567
Cost of goods sold................. 22,107 64.1 54,379 65.5 9,024 66.9 21,640
--------------- --------- ----------- --------- ----------- --------- -----------
Gross profit................. 12,374 35.9 28,614 34.5 4,464 33.1 13,927
--------------- --------- ----------- --------- ----------- --------- -----------
Selling, distribution and marketing
expenses:
Selling and distribution....... 4,751 13.8 8,090 9.7 1,804 13.4 3,500
Trade promotions and other
marketing.................... 3,732 10.8 9,075 10.9 1,457 10.8 5,277
--------------- --------- ----------- --------- ----------- --------- -----------
Total selling, distribution and
marketing expenses............... 8,483 24.6 17,165 20.6 3,261 24.2 8,777
General and administrative
expenses......................... 1,526 4.4 3,618 4.4 931 6.9 1,799
Amortization of intangibles and
other assets..................... 452 1.3 1,316 1.6 193 1.4 623
--------------- --------- ----------- --------- ----------- --------- -----------
Total operating expense............ 10,461 30.3 22,099 26.6 4,385 32.5 11,199
--------------- --------- ----------- --------- ----------- --------- -----------
Operating income............. 1,913 5.6 6,515 7.9 79 0.6 2,728
Amortization of deferred financing
fees............................. 67 0.2 259 0.3 604 4.5 149
Interest expense, net.............. 1,125 3.3 3,800 4.6 460 3.4 1,647
--------------- --------- ----------- --------- ----------- --------- -----------
Income (loss) before
extraordinary item and
income taxes............... 721 2.1 2,456 3.0 (985) (7.3) 932
Income tax expense................. -- -- 1,209 1.5 -- -- 433
--------------- --------- ----------- --------- ----------- --------- -----------
Income (loss) before
extraordinary item......... 721 2.1 1,247 1.5 (985) (7.3) 499
Extraordinary loss on early
extinguishment of debt........... -- -- 604 0.7 -- -- --
--------------- --------- ----------- --------- ----------- --------- -----------
Net income (loss)............ $ 721 2.1% $ 643 0.8% $ (985) (7.3)% $ 499
--------------- --------- ----------- --------- ----------- --------- -----------
--------------- --------- ----------- --------- ----------- --------- -----------
<CAPTION>
<S> <C>
%
---------
<S> <C>
Net sales.......................... 100.0%
Cost of goods sold................. 60.8
---------
Gross profit................. 39.2
---------
Selling, distribution and marketing
expenses:
Selling and distribution....... 9.8
Trade promotions and other
marketing.................... 14.8
---------
Total selling, distribution and
marketing expenses............... 24.7
General and administrative
expenses......................... 5.1
Amortization of intangibles and
other assets..................... 1.8
---------
Total operating expense............ 31.5
---------
Operating income............. 7.7
Amortization of deferred financing
fees............................. 0.4
Interest expense, net.............. 4.6
---------
Income (loss) before
extraordinary item and
income taxes............... 2.6
Income tax expense................. 1.2
---------
Income (loss) before
extraordinary item......... 1.4
Extraordinary loss on early
extinguishment of debt........... --
---------
Net income (loss)............ 1.4%
---------
---------
</TABLE>
FOUR MONTHS ENDED MAY 3, 1997 COMPARED TO FOUR MONTHS ENDED APRIL 27, 1996
NET SALES in the four months ended May 3, 1997, increased 164% to $35.6
million from $13.5 million in the four months ended April 27, 1996. The sales
increase was due mainly to the sales of products arising from the businesses
acquired in the Kozy Kitten Acquisition on April 29, 1996, which were $13.6
million in the four months ended May 3, 1997. Sales of Old Windy Hill's other
products also increased, due principally to additional private label dog food
business and gains in branded economy cat food.
GROSS PROFIT as a percentage of net sales was 39.2% in the 1997 period as
compared to 33.1% in the prior period. The gross margin improvement was due
principally to a higher proportion of cat food sales as a percentage of total
net sales, which have a higher gross margin than dog food. As a result of the
Kozy Kitten Acquisition, cat food sales increased to 40% of total net sales in
the 1997 period from 23% of total net sales in the prior period.
40
<PAGE>
OPERATING INCOME as a percentage of net sales was 7.7% in the 1997 period as
compared to 0.6% in the prior period. The increase was attributable to the
increase in the gross margin and a decline in operating expenses as a percentage
of sales. The sales of products arising from the Kozy Kitten Acquisition did not
require a commensurate increase in operating expenses and, as a result,
operating expenses as a percentage of sales dropped to 31.5% in the 1997 period,
as compared to 32.5% in the prior period.
INTEREST EXPENSE, NET in the 1997 period increased to $1.6 million versus
$0.5 million in the prior period. The increase in interest expense was due to
the additional debt incurred to finance the Kozy Kitten Acquisition.
NET INCOME for the 1997 period was $0.5 million, compared to a net loss of
$1.0 million in the 1996 period. The profit improvement was principally a result
of the additional sales and gross profit generated by the businesses acquired in
the Kozy Kitten Acquisition.
YEAR ENDED DECEMBER 28, 1996 COMPARED TO TEN MONTHS ENDED DECEMBER 30, 1995
NET SALES in the year ended December 28, 1996, increased 141% to $83.0
million from $34.5 million in the ten months ended December 30, 1995. The sales
increase was due to the sales of products arising from the businesses acquired
in the Kozy Kitten Acquisition, which were $39.3 million in the 1996 period, and
the effect of the two additional months of operations.
GROSS PROFIT as a percentage of net sales was 34.5% in the 1996 period as
compared to 35.9% in the 1995 period. Gross margin decreased, due to the effect
of higher ingredient costs only partially offsetting the impact of a greater
proportion of high margin cat food as a percentage of total sales. Prices of
major ingredients, such as corn and soybean meal, increased sharply during the
year. For example, during the 1996 period corn prices increased over 60% from
approximately $3.25 per bushel to approximately $5.25 per bushel due to adverse
weather conditions. In addition, soybean meal prices increased over 20% from
approximately $204 per bale to $250 per bale. While Old Windy Hill was able to
implement price increases, such increases generally lagged behind the increase
in raw ingredient costs and were not sufficient to offset such higher costs.
OPERATING INCOME as a percentage of net sales was 7.9% in the 1996 period as
compared to 5.6% in the 1995 period. This increase was primarily due to a
decline in operating expenses as a percentage of sales. The sales of products
arising from the Kozy Kitten Acquisition did not require a commensurate increase
in operating expenses, and as a result, operating expenses as a percentage of
sales dropped to 26.6% in 1996, as compared to 30.3% in the prior period.
INTEREST EXPENSE, NET in the 1996 period grew to $3.8 million versus $1.1
million in the 1995 period. The increase in interest expense was due to the
additional debt incurred to finance the Kozy Kitten Acquisition.
NET INCOME for the 1996 period was $0.6 million, compared to $0.7 million in
the 1995 period. Net income declined, despite the increase in operating profit,
due to the incurrence of income tax expense and an extraordinary loss in the
1996 period. Prior to becoming a corporation in April 29, 1996, Old Windy Hill
was a limited liability company and income taxes were the responsibility of the
individual members of Old Windy Hill. The extraordinary loss in the 1996 period
resulted from early extinguishment of debt when Old Windy Hill refinanced its
debt in conjunction with the Kozy Kitten Acquisition.
41
<PAGE>
HUBBARD
The following table sets forth for the periods indicated the components of
Hubbard's statements of operations expressed in dollar amounts and as a
percentage net of sales for such period.
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
------------------------------------------------------------------
1995 1996 1997
---------------------- -------------------- --------------------
AMOUNT % AMOUNT % AMOUNT %
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales................................................. $ 87,736 100.0% $ 102,268 100.0% $ 108,523 100.0%
Cost of sales............................................. 67,052 76.4 80,658 78.9 87,768 80.9
----------- --------- --------- --------- --------- ---------
Gross profit........................................ 20,864 23.6 21,610 21.1 20,755 19.1
----------- --------- --------- --------- --------- ---------
Operating expenses:
Warehouse and delivery.................................. 246 0.3 200 0.2 188 0.2
Selling and advertising................................. 6,469 7.4 7,035 6.9 6,924 6.4
General and administrative.............................. 5,743 6.5 5,917 5.8 6,099 5.6
----------- --------- --------- --------- --------- ---------
Total operating expenses............................ 12,458 14.2 13.152 12.9 13,212 12.2
----------- --------- --------- --------- --------- ---------
Operating income.......................................... 8.226 9.4 8.458 8.2 7,544 7.0
Interest income........................................... 790 0.9 774 0.8 867 0.8
Equity in earnings of joint ventures...................... 1,356 1.5 981 1.0 976 0.9
Other income (expenses)................................... 5 -- 10 -- 71 --
----------- --------- --------- --------- --------- ---------
Income before income taxes.......................... 10,377 11.8 10,223 10.1 9,458 8.7
Income tax expense........................................ 4,133 4.7 3,935 3.8 3,684 3.4
----------- --------- --------- --------- --------- ---------
Net income.......................................... $ 6,244 7.1% $ 6,288 6.3% $ 5,773 5.3%
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
</TABLE>
YEAR ENDED APRIL 30, 1997 COMPARED TO YEAR ENDED APRIL 30, 1996
NET SALES in the year ended April 30, 1997 increased 6.1% to $108.5 million
from $102.3 million in the year ended April 30, 1996. The increase was due to a
7.6% increase in average selling prices, partially offset by a 1.5% decline in
sales tonnage. Average selling prices were higher due to price increases
implemented during the year to offset the impact of higher ingredient costs.
Sales tonnage declined due to lower contract manufacturing volumes, as several
pet food manufacturers for which Hubbard was manufacturing product experienced
volume declines.
GROSS PROFIT as a percentage of net sales was 19.1% in 1997 as compared to
21.1% in the prior year. The decline was due to higher ingredient costs. During
the first nine months of the period, prices of principal ingredients, such as
corn and flour, increased sharply. While Hubbard was able to implement price
increases, such increases were not sufficient to offset the higher costs. During
the three months ended April 30, 1997 ingredient costs began to decline and
gross profit as a percentage of sales increased.
OPERATING INCOME as a percentage of net sales was 7.0% of net sales in 1997
as compared to 8.2% in the prior year. The reduction was due to the decline in
the gross profit margin. The impact of lower gross margins was partially offset
by an increase in sales.
YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995
NET SALES in the year ended April 30, 1996 increased 16.6% to $102.3 million
from $87.7 million in the year ended April 30, 1995. The increase was due to a
14.0% increase in sales tonnage and a 2.7% increase in average selling prices.
The increase in sales tonnage was principally due to increased business
associated with the acquisition in 1996 of the Hillburn dog biscuit plant.
Volumes for other product lines also showed increases, as Hubbard was able to
use its expanded dog biscuit position to generate additional sales growth for
other pet food items. Average selling prices were higher due to an improved
sales mix toward higher priced biscuits and price increases to cover ingredient
cost increases.
GROSS PROFIT as a percentage of net sales was 21.1% in 1996 as compared to
23.6 % in the prior year. During the latter half of fiscal 1996, principal
ingredient costs began to escalate. While Hubbard was able
42
<PAGE>
to implement price increases, such increases generally lagged behind the
increase in raw ingredient costs and were not sufficient to offset the higher
costs and maintain the 1995 gross margin.
OPERATING INCOME as a percentage of net sales was 8.2% in 1996 as compared
to 9.4% in the prior year. The decline was primarily due to the decline in the
gross margin. The impact of lower gross margins was partially offset by lower
operating expenses which declined to 12.9% of sales in 1996 from 14.2% of sales
in 1995. Operating expenses did not increase at the same rate as sales, due to
the fixed nature of some of these expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred substantial indebtedness in connection with the
Transaction. Interest payments on the Notes and the Senior Bank Facilities will
represent significant cash requirements for the Company. As of April 30, 1997,
on a pro forma basis, after giving effect to the Transaction, the Financing, and
the AF Sale, the Company would have had $120 million in aggregate principal
amount of indebtedness outstanding under the Notes and $15 million of borrowings
under the Term Loan Facility and availability of $20 million under the Working
Capital Facility. The Company will be required to make periodic payments of
interest on the Notes and the Senior Bank Facilities. See "Description of Notes"
and "Description of the Senior Bank Facilities."
The Company plans to exercise its option to acquire its partner's 50%
interest in the joint venture at Maumee for $1.8 million in 1997. The Company
also plans to complete the expansion of the capacity of its three biscuit plants
by the first half of 1998. Capital expenditures required for such expansion is
expected to be $3.5 million. See "Business -- Strategy for Growth."
The Company's historical liquidity needs were primarily for debt service
payments on its borrowings, working capital and capital expenditures. Capital
expenditures for Old Windy Hill were $.4 million for the four months ended May
3, 1997 and $1.1 million in both the 10 months ended December 30, 1995 and the
year ended December 28, 1996. Capital expenditures for Hubbard were
approximately $2.6 million, $3.8 million and $2.4 million for the years ended
April 30, 1995, 1996, and 1997, respectively. In addition, Hubbard Milling spent
$6.1 million on the acquisition of the Hillburn dog biscuit facility and
equipment in fiscal 1995. Capital expenditure requirements historically have
been financed with internally generated funds and bank loans and have been
primarily related to refurbishment and improvement of machinery and equipment.
The Company's future liquidity needs will be primarily for debt service
obligations, working capital and capital expenditures. The Company's primary
sources of liquidity are cash flows from operations and borrowings under the
Working Capital Facility. The Company anticipates that its working capital
requirements, capital expenditures and acquisition of the remaining interest in
the Maumee joint venture in 1997 will be satisfied through a combination of
available cash, credit availability under the Working Capital Facility, and cash
flow from operations.
43
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company is one of the leading manufacturers of private label and economy
branded pet food products. Based on its production volume, including that of its
joint ventures, management believes that the Company is the second largest
producer of private label dry pet food products overall and the leader in
private label dog biscuits, accounting for approximately 25% of all private
label dog biscuit tonnage produced in 1996. The Company's private label products
are broadly distributed through all channels of distribution and consists of
sales to over 500 customers including national and regional grocery chains, mass
merchandisers, membership clubs, specialty pet store chains, and farm and feed
store chains. The Company also manufactures and markets economy dry dog and cat
food products that are sold predominantly to grocery store chains under its KOZY
KITTEN, TRAIL BLAZER, and TUFFY'S brand names. These brands generally have the
leading or number two share in the regional areas in which they compete. In
addition, approximately 11% of the Company's sales are to contract manufacturing
for other pet food companies. To sell its products and to service its customers,
the Company utilizes both an in-house sales force and a network of independent
brokers. The Company operates 14 manufacturing plants, nine of which are wholly
owned and five of which are operated under joint venture agreements. The
Company's plants, located throughout the United States, enable the Company to
provide an efficient nationwide distribution of a broad range of quality
products for all price points to all distribution channels. For the twelve
months ended March 31, 1997, the Company had pro forma sales and EBITDA of
$222.5 million and $29.1 million, respectively.
The Company's principal executive office is located at Two Maryland Farms,
Brentwood, Tennessee 37027. The Company's telephone number is (615) 373-7774.
INDUSTRY OVERVIEW
The pet food industry in which the Company competes is a large and growing
industry. In terms of retail sales, it is a $9.3 billion industry that grew at a
compound annual rate of approximately 5% from 1991 to 1995. As of 1995, there
were approximately 55 million dogs and 68 million cats in U.S. households and
this number has been growing at approximately a 1.3% compound annual rate.
Certain segments have grown at even faster rates. The private label and economy
segments of this industry represent approximately 35% of total industry sales
and grew at a compound annual rate of approximately 12% over the same period.
The super premium segment, which is comprised of high priced items offering
superior nutrition, palatability, and digestibility, represents approximately
16% of total industry sales and grew at a compound annual rate of approximately
10% over the same period. Growth in the private label and economy segments has
been driven by the lower prices of these products relative to branded products,
improved product quality, and increased retail support for private label items
in all distribution channels. Within the super premium segment, growth has been
driven by pet owners' increased awareness and concern about pet diets and
nutrition and the growth of the pet specialty retail stores, which have focused
on promoting and supporting the super premium products. These trends are
expected to continue and, as a result, the Company believes that these segments
should continue to grow at a faster rate than the overall pet food industry.
The industry's growth has occurred primarily outside of the traditional
retail grocery channel, whose share of pet food sales has declined over the last
10 years from over 80% to approximately 60%. Most of the growth has been
captured by mass merchandisers, which have gained share by selling items
produced by private label manufacturers that are comparable in quality to the
national brands but sell at a lower price, and by pet specialty stores, which
carry the faster growing super premium products that are not available in the
retail grocery channel. The Company believes this shift away from the retail
grocery channel will continue, but at a slower rate, as the grocery stores
respond with higher quality private label products and their own super premium
products.
44
<PAGE>
An emphasis on improving product quality has led private label manufacturers
to upgrade their manufacturing plants and production processes. This improvement
in quality, combined with a trend among a number of branded pet food companies
to outsource their manufacturing in order to focus on their marketing and brand
building activities, has resulted in more contract manufacturing opportunities
for private label producers. The Company believes that the trends toward better
product quality and production outsourcing will continue.
Within the total pet food industry, dog and cat food account for
approximately 58% and 42% of sales, respectively. Dog food is sold predominantly
in large bags, ranging in size from 18 to 25 pounds, while cat food is mainly
sold in cans or three to four pound bags. Due to the different nutritional needs
of cats and dogs, dog food is less expensive on a per pound basis than cat food.
The pet food industry can also be segmented according to product types.
Approximately 50% of the industry is dry products, 35% is wet or canned
products, and the remaining 15% is in treats and semi-moist products. The
Company does not produce any wet or canned pet food products.
COMPETITIVE STRENGTHS
Management believes that the following characteristics contribute to the
Company's position as a leading manufacturer of pet food products in the United
States and serve as a foundation for the Company's business strategy.
- LEADING MARKET POSITIONS. The Company has a strong position in the private
label segment of the pet food industry. Within this segment, the Company
is the leading manufacturer of dog biscuits and semi-moist pet foods and
the second largest manufacturer of dry pet food products. The Company's
strength in private label products is complemented by a strong regional
presence in economy branded dry pet food products. The Company's TRAIL
BLAZER and KOZY KITTEN in the South and TUFFY'S in the Upper Midwest have
the leading or number two position in the segments in which they compete.
The Company believes that its positions in the private label and economy
branded pet food segments provide a strong platform from which to expand
its business.
- COMPREHENSIVE AND QUALITY PRODUCT LINE. The Company's leading market
positions are supported by a comprehensive product mix. Specifically, the
Company offers full product lines of dry dog food (180 formulations), dry
cat food (38 formulations), dog biscuits (64 formulations), semi-moist dog
food (6 formulations), semi-moist cat food (8 formulations), and dog and
cat treats (32 formulations). The Company believes that its broad
portfolio of private label and economy branded products makes it
well-positioned to take advantage of growth in certain segments of the pet
food industry. In addition, the Company's products are well-known for
their high quality in terms of nutritional content, palatability, and
digestibility as well as their overall value to both retailers and end-use
consumers. The Company's ability to fully service its customer's product
needs with a full line of quality product offerings has enabled it to
compete effectively against national branded pet food offerings and gain
leading market positions.
- LOW COST MANUFACTURING. The Company has an extensive manufacturing network
consisting of 14 manufacturing facilities that are strategically
positioned to be near major consumer markets, raw and packaging material
suppliers and low cost labor sources. These facilities enable the Company
to service customers at competitive prices on a national basis. The
Company's facilities currently have approximately 20% excess capacity,
which represents an integral resource for growing the Company's business.
- STABLE BASE OF CASH FLOW. The Company's broad product line and leading
market positions provide it with a stable base of cash flow. Over the last
four years, the Company has produced an average EBITDA margin of
approximately 12%. The Company believes that its cash flow performance has
been driven by multiple factors, including strong demand for higher margin
pet
45
<PAGE>
food products, significant expansion of the Company's customer base,
selective acquisitions, low working capital requirements, increased
manufacturing efficiency and reduced operating costs. The Company's strong
cash flow provides resources that can be used to pursue its growth
strategy.
STRATEGY FOR GROWTH
The Company believes that it is well positioned for volume and profit
growth, given its competitive strengths and the growth trends in certain
segments of the pet food industry. Its objective is to be the leading supplier
to all channels of distribution of private label pet food products for all price
points and economy branded pet food products by pursuing the following
strategies:
- CAPITALIZE ON LEADERSHIP POSITION IN DOG BISCUITS. The Company is the
leader in private label dog biscuits, accounting for approximately 25% of
all private label dog biscuit tonnage produced in 1996. It operates three
dedicated biscuit manufacturing plants strategically located throughout
the United States. The Company's strategy is to capitalize on its current
leadership position by (i) offering a greater variety of premium specialty
biscuit formulations and (ii) increasing capacity at its three biscuit
plants by approximately 15% to service more private label customers.
- EXPAND PRESENCE IN MASS MERCHANDISING AND PET SPECIALTY RETAIL CHANNELS.
Most of the recent growth in the pet food industry has occurred in the
mass merchandising and pet specialty retail channels. The Company plans to
increase sales to these channels by providing a broader range of pet foods
to its current private label customers as well as by offering these
products to new private label accounts.
- INCREASE CONTRACT MANUFACTURING BUSINESS. Approximately 11% of the
Company's sales are to other pet food manufacturers who have contracted
out their manufacturing in order to better focus on their marketing and
brand building activities. Increasingly, these companies are using outside
contract manufacturers to satisfy their production requirements. The
Company believes that its strategically located, broad network of
manufacturing plants, excess capacity, and ability to produce quality
products at competitive prices enable it to capitalize on this trend and
to increase its contract manufacturing business.
- INCREASE PENETRATION OF SUPER PREMIUM PET FOOD PRODUCTS. Super premium pet
food products have been one of the fastest growing segments of the pet
food industry. The Company believes there is an opportunity to market
super premium products to retail grocery chains, which have been
requesting such products in order to grow their pet food sales. The
Company also plans to supply specialty pet stores, which want private
label super premium alternatives to the national brands.
- BROADEN USAGE OF THE KOZY KITTEN BRAND. The Company's KOZY KITTEN brand
has a leading position in economy cat foods, but the business has
historically been concentrated primarily in the South. The Company plans
to use the Hubbard facilities and distribution resources to strengthen its
KOZY KITTEN cat food business on the East and West coasts. The Company is
also developing a line of economy cat treats using KOZY KITTEN as an
umbrella brand. The cat treat segment has been a fast growing segment of
the cat food industry, and the Company sees strong growth potential for an
economy cat treat under an established brand name.
- MAKE STRATEGIC SELECTED ACQUISITIONS. The Company believes there are
opportunities to acquire additional pet food businesses at attractive
prices. Most of these businesses are established, privately-held companies
that would be a strategic complement to the Company's existing business in
terms of products, geographic scope, and distribution channels. The
Company and its owners have substantial experience in making strategic
acquisitions.
46
<PAGE>
HISTORY
Old Windy Hill was formed by Dartford in February 1995 to acquire the pet
food assets of Martha White, a predominantly flour and baking mix company that
had been sold to The Pillsbury Company, as an acquisition platform for acquiring
other economy branded products and private label pet food companies. In April
1996, Old Windy Hill acquired the KOZY KITTEN economy cat food brand and the
TUFFY'S economy dog and cat food brands from H.J. Heinz Company ("Heinz").
PRODUCTS
The Company is one of the leading manufacturers of private label and economy
branded pet food products in the United States. The Company produces and sells
primarily dry pet food products. Dry pet food generally consists of a variety of
bite size pieces containing various food nutrients and ingredients that provide
specified levels of carbohydrates, proteins, fats and vitamins. The Company
sells dry pet food under private label and its economy proprietary brand names.
The Company's private label product range includes super premium, premium,
economy and generic products. These products differ according to nutritional
content, overall food quality and price.
DRY DOG FOOD (44% of 1996 sales). The Company believes it is the second
largest producer of private label dry dog food in the country. The Company's
private label products are complemented by its dog food brands which include
TRAIL BLAZER and TUFFY'S. Both are economy brands, which are premium products
comparable to the national brands in quality but which sell at a lower price.
TRAIL BLAZER is the number two economy brand in the South, while TUFFY'S is a
leading economy brand in the Upper Midwest. Dry dog food represents the
Company's broadest product line, consisting of approximately 180 formulations.
The Company manufactures and sells a number of varieties of dry dog food,
including high protein, chunk style, gravy style, premium blended, and puppy
food.
DRY CAT FOOD (25% of 1996 sales). The Company believes it is the second
largest producer of private label dry cat food in the country. The Company's cat
food brands include KOZY KITTEN and G. WHISKERS. Both brands are economy brands,
which are comparable in quality to the national brands but sell at a lower
price. The two brands give the Company the leading position in economy cat food
in the South. Dry cat food represents the Company's second broadest product line
consisting of approximately 40 formulations. The Company manufactures and sells
a variety of flavors, including poultry, fish, tuna and blended.
DOG BISCUITS (23% of 1996 sales). The Company believes it is the leading
producer of private label dog biscuits in the United States, accounting for
approximately 25% of all private label dog biscuit production. Dog biscuits are
grain and flour based dog treats which are formed in various "bone-like" shapes.
Most of the Company's dog biscuit products are sold as private label products
and the remainder are sold under the TRAIL BLAZER brand name in the South. Dog
biscuits are generally served as snacks rather than as meals and come in a
variety of sizes and flavors. The Company produces over 60 dog biscuit
formulations.
SEMI-MOIST FOODS AND TREATS (7% of 1996 sales). Semi-moist products are
moist, soft and chewy pet food products that come in a variety of flavors for
both dogs and cats. These products are sold both as private label items and as
branded products. The Company's brands include TRAIL BLAZER dog treats, which
are sold in the South and BONKERS cat treats, which are sold throughout the
United States.
MARKETING, SALES AND DISTRIBUTION
The Company's marketing program for its proprietary brands emphasizes
retailer trade promotions, in-store advertising and couponing in retailer
flyers. Consumer promotions primarily consist of special packaging and in-pack
coupons designed to generate trial usage and increase purchase frequency.
Because of the value positioning of its brands, the Company does not use any
media advertising.
47
<PAGE>
The Company sells its products using both a direct sales force and a network
of independent brokers. The Company's private label products are sold by a
direct sales force who focus their selling activities on category managers and
merchandise buyers at retail accounts. The direct sales force consists of six
regional sales managers, a national sales manager, and a marketing manager under
the responsibility of a vice president for private label sales.
The Company's branded products are sold through a network of 70 independent
brokers. These brokers call and service retail accounts, which are primarily
grocery chains. These brokers are supervised by eight regional sales managers,
who report to a national sales manager for branded products.
Customer orders are currently received and processed at Mankato, Minnesota
and Brentwood, Tennessee. The Company plans to centralize these functions in
Brentwood after an appropriate transition period to avoid disruption or
deterioration in customer service.
The Company's system of 14 manufacturing facilities and 13 public warehouses
provide national distribution coverage. The Company's products are distributed
from its plants either directly to the customer's warehouses or through one of
its public warehouses using independent freight carriers. In addition, customers
may pick up products directly from the Company's plants.
CUSTOMERS
The Company's principal customers are retailers and wholesalers of pet food.
Retail grocery stores represent the Company's largest customer category,
accounting for 60% of sales in 1996. Customers in this category include both
national retail grocery chains and wholesale grocery buying groups servicing
regional grocery chains. Farm feed stores, mass merchandisers and pet specialty
stores represent the Company's other principal retail customers. These
categories accounted for 16%, 5% and 4%, respectively, of the Company's sales in
1996.
In addition to retailers and wholesalers of pet food, the Company sells
products to other pet food manufacturers under various co-packing agreements.
Sales under co-packing agreements represented 11% of the Company's 1996 sales.
COMPETITION
The pet food industry is fragmented and highly competitive. The Company's
sales represent less than 3% of the total U.S. pet food market. In the private
label and economy branded segments, the Company's major competitors include
Doane Products Company, a national private label producer whose principal
customer is Wal-Mart Stores, Inc., American Nutrition Inc., a regional private
label producer with plants in the western United States, and Sunshine Mills,
Inc., a producer of economy and private label pet food products with plants in
the southeastern and eastern regions of the United States. It competes with a
significant number of companies of varying sizes, including divisions or
subsidiaries of larger companies. The major competitors with branded offerings
include companies such as Ralston Purina Co., Heinz, Nestle S.A., Mars, Inc.,
and Colgate-Palmolive Company. Brands owned by these companies make up
approximately 60% of the total U.S. pet food market.
The Company competes with other pet food companies on the basis of quality
and price. It believes that it differentiates itself from its branded
competitors by offering comparable products at lower prices and that it
differentiates itself from other private label dry pet food producers by
offering higher quality products, a broader product line, and national
production and distribution capabilities.
48
<PAGE>
RAW MATERIALS
The principal raw materials required for the Company's manufacturing
operations are bulk commodity grains and food stocks, including corn, soybean
meal, wheat flour and middlings, meat and bone meal, and corn gluten meal. The
Company generally purchases raw materials one to three months in advance. Its
raw material requirements are generally purchased from sources near its
manufacturing facilities in order to minimize the high transportation costs
associated with transporting bulk commodity products. As a result, raw material
costs may vary among its manufacturing facilities due to local supply and
transportation costs. The Company purchases its raw materials from a variety of
suppliers and alternative sources of supply are readily available.
The Company's manufacturing operations also use packaging material, which
include paper bags, cartons, poly bags, and corrugated boxes. These supplies are
purchased on a centralized basis to take advantage of economies of scale. The
Company purchases packaging materials from a variety of suppliers and
alternative sources of supply are readily available.
MANUFACTURING FACILITIES
The Company operates 14 manufacturing plants, nine of which are wholly owned
and five of which are managed under joint venture agreements in which the
Company owns a 50% equity interest. The plants are strategically located to be
near major customer markets, raw and packaging materials suppliers, and low cost
labor sources. In addition, the plants are highly automated facilities with a
low overhead structure and are currently operating at approximately 80% of
capacity, based on a three-shift, five-day production schedule.
<TABLE>
<CAPTION>
LOCATION PRINCIPAL PRODUCTS OWNERSHIP STATUS SQUARE FOOTAGE
- ---------------- -------------------------------------------------------- ------------------ ----------------
<S> <C> <C> <C>
Allentown, PA Dry Dog/Cat Food Owned 35,000
Butler, MO Dry Dog/Cat Food Joint Venture 37,500
Caldwell, ID Dry Dog/Cat Food Joint Venture 27,900
Cartersville, GA Dry Dog/Cat Food Joint Venture 44,100
DeGraff, MN Dry Dog/Cat Food Owned 19,850
Delavan, WI Semi-Moist Food/Treats Owned 55,000
Hereford, TX Dry Dog/Cat Food Joint Venture 40,000
Hillburn, NY Dog Biscuits Owned 93,000
Inman, KS Dry Dog/Cat Food Owned 33,644
LeSueur, MN Dry Dog/Cat Food/Dog Biscuits Owned 160,000
Maumee, OH Dry Dog/Cat Food Joint Venture 72,915
McKenzie, TN Dry Dog/Cat Food Owned 57,000
Perham, MN Dry Dog/Cat Food/Semi-Moist Food/Treats Owned 218,000
Portland, IN Dry Dog/Cat Food/Dog Biscuits Owned 120,000
----------------
Total 1,013,909
</TABLE>
JOINT VENTURES
The Company has a 50% equity interest in each of five manufacturing joint
ventures. In general, the Company has utilized joint ventures as a means of
increasing production capacity while minimizing capital requirements and
operating risks. The operating costs, earnings, and cash flows of each joint
venture generally are shared equally by the Company and its joint venture
partner. Management authority is vested in a committee comprised of a
representative of each party. Either party can terminate a joint venture after
an appropriate notice period. One joint venture has a six month notice period
and the other joint ventures have a twelve month notice period. Upon
termination, the Company has the option of buying the other party's interest in
each of the joint ventures at Butler, Maumee, and Cartersville. The Company has
advised its joint venture partner in Maumee, Ohio, that it intends to exercise
its option to purchase the remaining 50% interest in its joint venture. Based on
the terms in the joint venture agreement, the purchase price for this remaining
50% interest is approximately $1.8 million. During the year ended April 30,
1997, the joint ventures had total sales of $45.0 million and pretax earnings of
approximately $2.4 million. The Company accounts for the joint ventures using
the equity method of accounting.
49
<PAGE>
TRADEMARKS
The Company owns a number of registered trademarks including TRAIL BLAZER,
TUFFY'S, BONKERS, and G. WHISKERS. In addition, the Company has a royalty-free
licensing agreement with Heinz that allows it to use the KOZY KITTEN brand for
dry and semi-moist cat food until April 29, 2006. At any time between April 29,
2001 and April 29, 2006, the Company has an irrevocable right to purchase the
brand from Heinz for a net cash payment of $2.5 million subject to a perpetual
royalty-free license back to Heinz for use in canned cat food. The Company is
not aware of any fact that would negatively impact the continuing use of either
the KOZY KITTEN trademark and trade name or any of its own trademarks and trade
names.
EMPLOYEES
As of April 30, 1997, the Company had a total of 686 employees in
manufacturing and 85 employees in administrative positions including personnel
at two of the Company's manufacturing joint ventures. None of the Company's
employees are union members. The Company believes that its relations with its
employees are generally excellent.
CERTAIN LEGAL AND REGULATORY MATTERS
PUBLIC HEALTH. The Company is subject to the Food, Drug and Cosmetic Act
and regulations promulgated thereunder by the Food and Drug Administration (the
"FDA"). This comprehensive regulatory program governs, among other things, the
manufacturing, composition and ingredients, labeling, packaging and safety of
pet food. The Company is subject to regulation by certain other governmental
agencies, including the U.S. Department of Agriculture.
The operations and products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement by
state health agencies of various state standards and inspection of facilities.
Enforcement actions for violations of federal, state and local regulations may
include seizure and condemnation of products, cease and desist orders,
injunctions 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.
EMPLOYEE SAFETY REGULATIONS. The Company is subject to certain health and
safety regulations, including regulations issued pursuant to the Occupational
Safety and Health Act. These regulations require the Company to comply with
certain manufacturing, health and safety standards to protect its employees from
accidents.
INSURANCE. The Company maintains general liability, product liability,
property, workers compensation and other insurance in accounts and on terms that
it believes are customary for companies in the pet food industry.
LITIGATION. The Company, in the ordinary course of business, is involved in
various legal proceedings in which its exposure is not considered material to
the Company.
ENVIRONMENTAL. The business operations of the Company and the ownership and
operation of real property by the Company are subject to numerous and changing
federal, state and local environmental laws and regulations pertaining to the
discharge of materials into the environment and the handling and disposition of
wastes (including solid and hazardous wastes) or otherwise relating to
protection of the environment. Certain environmental assessments of the
Company's properties conducted in connection with the Transaction revealed
groundwater conditions that may require investigation or remediation. Pursuant
to the Acquisition Agreements, the Sellers have agreed to indemnify the Company
for certain losses or liabilities up to $10 million for claims made within 18
months following the Closing Date. In the case of any losses relating to certain
environmental matters, only 50% of any such loss is included in such
indemnification provision. Management believes that the amounts required for any
such remediation would not have a material adverse effect on the financial
condition or results of operations of the Company. See "Risk Factors --
Environmental Matters."
50
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names and positions of the directors and executive
officers of the Company. All directors hold office until the next annual meeting
of the Company and until their successors are duly elected and qualified. All
officers serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------------------------------------ --- -----------------------------------------------
<S> <C> <C>
Ian R. Wilson......................................... 67 Chairman of the Board of Directors and Chief
Executive Officer
Robert V. Dale........................................ 60 President and Director
Ray Chung............................................. 49 Executive Vice President and Director
James B. Ardrey....................................... 39 Executive Vice President
F. Donald Cowan, Jr................................... 51 Vice President, Operations
Donald L. Gadd........................................ 40 Vice President, Finance
Vaughn Oakley......................................... 49 Vice President, Sales
M. Laurie Cummings.................................... 33 Vice President and Secretary
Kase Lawal............................................ 42 Director
Stephen C. Sherrill................................... 44 Director
Stephen F. Edwards.................................... 34 Director
Donald Welge.......................................... 61 Director
</TABLE>
IAN R. WILSON--CHAIRMAN AND CHIEF EXECUTIVE OFFICER. Mr. Wilson is the
Managing Partner of Dartford, a private investment partnership focused on the
food and beverage industries. Mr. Wilson was formerly Chairman and Chief
Executive Officer of Windmill, a leading specialty miller and supplier of
branded consumer products which he founded in March 1989. Mr. Wilson was also
formerly Chairman and Chief Executive Officer of Wyndham, a major cookie company
he founded in 1985 and positioned as the leading popular priced cookie company
in the United States. From 1983 to 1984 Mr. Wilson was the Chairman and Chief
Executive Officer of Castle & Cooke, Inc. (Dole Food Company, Inc.), an
international food and real estate concern. Prior to Castle & Cooke, Inc., Mr.
Wilson spent 25 years with The Coca-Cola Company, initially in South Africa,
where he was Vice President--Area Manager for Southern Africa, and he also
served in a series of international operating management positions. Ultimately,
Mr. Wilson served as Vice Chairman of the Coca-Cola Company and President of the
Pacific Group. Mr. Wilson's past and present service as a director includes
membership on the boards of Van de Kamp's, Aurora, Novell, Inc., Revlon, Inc.,
Crown Zellerbach Corporation, Castle & Cooke, Inc., Wilson Bottling Corporation,
Golden State Foods, New Age Beverages, Ltd., and CAMAC Holdings, Inc. ("CAMAC").
ROBERT V. DALE--PRESIDENT AND DIRECTOR. Prior to the completion of the
Transaction, Mr. Dale had served as President of Old Windy Hill since 1995. From
1985 to 1994, Mr. Dale was the President of Martha White, a major producer and
marketer of branded consumer flour, corn meal and baking mix products. Prior to
this position, Mr. Dale was President of Beatrice Specialty Products Division, a
diversified food division of Beatrice Companies, Inc., that had acquired Martha
White in 1975. Mr. Dale's past and present service as a director includes
membership on the boards of Third National Bank of Nashville, Cracker Barrel Old
Country Store, Inc., Zatarain's, Inc., Van de Kamp's and Mid-State Automotive
Distributors, Inc. He has served as President of the National Soft Wheat Millers
Association and President of the American Corn Millers Federation.
RAY CHUNG--EXECUTIVE VICE PRESIDENT AND DIRECTOR. Mr. Chung is a partner of
Dartford. Prior to forming Dartford with Mr. Wilson, Mr. Chung served as
Executive Vice President and Chief Financial Officer of Wyndham from 1989 to
1995 and Windmill from 1985 to 1990. Mr. Chung also served as Vice
President--Finance for the Kendall Company from May 1984 to September 1985,
which at that time was
51
<PAGE>
a subsidiary of the Colgate-Palmolive Company. Before joining the Kendall
Company, Mr. Chung was Vice President of Finance for Riviana Foods, Inc. between
1981 and 1984, the largest rice milling and marketing company in the United
States. Mr. Chung is also a director of Aurora.
JAMES B. ARDREY--EXECUTIVE VICE PRESIDENT. Mr. Ardrey is a partner of
Dartford. Since 1995, he has been Executive Vice President and Director of Van
de Kamp's. From January 1993 to February 1995, Mr. Ardrey was a consultant to
Windmill, conducting its divesture program. Over the period 1984 to 1992, Mr.
Ardrey was an investment banker with PaineWebber Incorporated, serving as
Managing Director from 1990 to 1992. Prior to joining PaineWebber, Mr. Ardrey
was a consultant for Booz, Allen & Hamilton. Mr. Ardrey is also a director of
Aurora.
F. DONALD COWAN, JR.--VICE PRESIDENT, OPERATIONS. Prior to the completion
of the Transaction, Mr. Cowan had served as Vice President of Operations for Old
Windy Hill since 1995. Prior to joining Old Windy Hill, Mr. Cowan was Vice
President of Operations for Martha White. From 1987 to 1995, Mr. Cowan held
various positions at Martha White, including Vice President of Operations. From
1984 to 1986, Mr. Cowan was Director of Purchasing for Beatrice Foods' Grocery
Products Division and Senior Grain Merchant at Cook Industries.
DONALD L. GADD--VICE PRESIDENT, FINANCE. Prior to the completion of the
Transaction, Mr. Gadd had served as Vice President, Finance of Old Windy Hill
since 1995. Prior to joining Old Windy Hill, Mr. Gadd was Controller for Martha
White from 1990 to 1995. From 1987 to 1990, Mr. Gadd was Assistant Secretary for
DESA International, an industrial tools company, where he was responsible for
tax and corporate financial reporting. Prior to joining DESA International, Mr.
Gadd was a Manager with Ernst & Young LLP. He is a certified public accountant
in the state of Tennessee.
VAUGHN OAKLEY--VICE PRESIDENT, SALES AND MARKETING. Prior to the completion
of the Transaction, Mr. Oakley had served as Vice President, Sales and Marketing
for Old Windy Hill since 1995. Prior to joining Old Windy Hill, Mr. Oakley was
Vice President of Business Development at Martha White. Since 1976, Mr. Oakley
has held sales and marketing positions of increasing responsibility at Martha
White, including Vice President of Sales. Before joining Martha White, he was a
sales supervisor with the Carnation Company.
M. LAURIE CUMMINGS--VICE PRESIDENT AND SECRETARY. Ms. Cummings is a partner
of Dartford. Ms. Cummings was Vice President, Controller and Treasurer for
Windmill from 1989 to 1995. Between 1987 and 1990, Ms. Cummings was the
Controller and Assistant Treasurer of Wyndham. Ms. Cummings currently serves as
Vice President of WHPF, Van de Kamp's and Aurora.
STEPHEN C. SHERRILL--DIRECTOR. Since its formation in 1995, Mr. Sherrill
has been a principal of BRS. Mr. Sherrill was an officer of Citicorp Venture
Capital from 1983 through 1994. Previously, he was an associate at the New York
law firm of Paul, Weiss, Rifkind, Wharton & Garrison. Mr. Sherrill is a director
of Galey & Lord, Inc., Jitney-Jungle Stores of America, Inc., Holdings,
Restaurant Associates Corp., and Bloch & Guggenheimer/Burns & Ricker, Inc.
STEPHEN F. EDWARDS--DIRECTOR. Since its formation in 1995, Mr. Edwards has
been a principal of BRS. Mr. Edwards was an officer of Citicorp Venture Capital
from 1993 through 1994. From 1988 through 1991, he was an associate of Citicorp
Venture Capital. Prior to joining Citicorp Venture Capital, Mr. Edwards worked
with Citicorp/Citibank in various corporate finance positions. Mr. Edwards is a
director of Holdings and Town Sports International, Inc.
KASE LAWAL--DIRECTOR. Since 1986, Mr. Lawal has been Chairman and Chief
Executive Officer of CAMAC, a company with interests in energy exploration,
development, engineering and consulting. Investments in the food and beverage
industry, environmental sector, oil-field service and supply, real estate and
financial institutions are also a significant part of CAMAC. Mr. Lawal serves as
a director of International Tool and Supply plc, a major supplier of oil field
equipment to international operators. He also serves as a director of Old Windy
Hill and serves as Chairman of Allied Energy Corporation,
52
<PAGE>
Houston, Texas, an oil and gas company. Mr. Lawal currently serves as Vice
Chairman of African Renaissance Holdings Ltd., a major South African investment
company.
DONALD WELGE--DIRECTOR. Mr. Welge is President and Chief Executive Officer
of Gilster-Marylee Corporation, one of the largest private label manufacturers
of dry grocery packaged foods in the country, and has served in this position
since 1971. Mr. Welge joined Gilster-Marylee Corporation in 1957 and has held
various positions of increasing responsibility during his tenure.
DIRECTOR COMPENSATION
Directors of the Company are not expected to receive compensation for their
services as directors. Directors of the Company are entitled to reimbursement of
their reasonable out-of-pocket expenses in connection with their travel to and
attendance at meetings of the board of directors or committees thereof.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth a summary of the compensation paid or accrued
by Old Windy Hill in the fiscal years ended December 31, 1995 and 1996 to its
Chief Executive Officer and its four most highly compensated executive officers:
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION
------------------------
<S> <C> <C> <C>
NAME POSITION 1995 1996
- -------------------------------------- --------------------------------- ----------- -----------
Ian R. Wilson......................... Chief Executive Officer -- --
Robert V. Dale........................ President $ 132,853(1) $ 183,276(1)
F. Donald Cowan, Jr................... Vice President, Operations 118,979(2) 150,273(2)
Donald L. Gadd........................ Vice President, Finance 48,553(3) 95,662(3)
Vaughn Oakley......................... Vice President, Sales 101,145(4) 129,603(4)
</TABLE>
- ------------------------
(1) Includes 401(k) matching payments of $7,810 and $4,742 in 1995 and 1996,
respectively.
(2) Includes 401(k) matching payments of $6,435 and $3,408 in 1995 and 1996,
respectively.
(3) Includes 401(k) matching payments of $3,510 and $1,808 in 1995 and 1996,
respectively.
(4) Includes 401(k) matching payments of $5,268 and $2,741 in 1995 and 1996,
respectively.
EMPLOYMENT AGREEMENTS.
On April 29, 1996, Old Windy Hill entered into employment agreements (the
"Employment Agreements") with each of Robert V. Dale, F. Donald Cowan, Jr.,
Donald L. Gadd and Vaughn Oakley (collectively, the "Executives"). The rights
and obligations of the Employment Agreements were assumed by the Company in
connection with the Transaction. Pursuant to the Employment Agreements, Mr. Dale
will serve as President of the Company and receive an annual base salary of
$190,000 (subject to annual adjustment); Mr. Cowan will serve as Vice President,
Operations of the Company and receive an annual base salary of $150,000 (subject
to annual adjustment); Mr. Gadd will serve as Vice President, Finance of the
Company and receive an annual base salary of $102,000 (subject to annual
adjustment); and Mr. Oakley will serve as Vice President, Sales of the Company
and receive an annual base salary of $130,000 (subject to annual adjustment). In
addition to the base salary, each Executive is eligible to be paid a bonus
pursuant to the terms and conditions of any bonus policy of the Company in
effect and applicable to such Executive.
The Employment Agreements also provide that the terms of such agreements
expire on May 1, 1998, however on April 29, 1997 and on each anniversary
thereafter, the term of each of the Employment Agreements was and will be
automatically extended for one additional year (the "Automatic Extension") so
that such term ends two years after any such anniversary, unless notice by
either the Company or the Executive to terminate is given 30 days prior to the
Automatic Extension. If the Company terminates an
53
<PAGE>
Executive without cause, such Executive shall be entitled to receive all
compensation due under his Employment Agreement until the end of the current two
year term of his Employment Agreement.
In addition, the Employment Agreements provide that for one year following
an Executive's termination of employment with the Company, unless such
termination was without cause, such Executive may not compete with or solicit
employees from the Company.
54
<PAGE>
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of the issued and outstanding shares of common stock of the Company are
beneficially owned by Holdings. The Class A Common Stock (the "Common Stock") is
the only class of Holdings's that currently possesses voting rights. The Class B
Common Stock (the "Class B Common Stock") currently does not possess voting
rights and is convertible into Common Stock on a one to one share basis(1).
There are 3,131 shares of Holdings's Common Stock outstanding on a fully diluted
basis assuming exercise of a warrant convertible into shares of Common Stock.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of Holdings, by each person who beneficially owns
more than 5% of Holdings's Common Stock, and by the directors and certain
executive officers of Holdings, individually, and by the directors and executive
officers of Holdings as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES OF SHARES OF
NAME AND ADDRESS OF OWNER COMMON STOCK(2) COMMON STOCK(2)
- -------------------------------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
5% STOCKHOLDERS:
Bruckmann, Rosser, Sherrill & Co., L.P. .............................. 1,391(3) 44.4%
126 East 56th Street
29th Floor
New York, NY 10022
Windy Hill Pet Food Company L.L.C..................................... 867 27.7%
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
PNC Capital Corp...................................................... 310(4) 9.9%
One PNC Plaza, 19th Floor
Fifth Avenue and Wood Street
Pittsburgh, PA 15265
OFFICERS AND DIRECTORS:
Ian R. Wilson(5)...................................................... 1,149 36.7%
Robert V. Dale(6)..................................................... 946 30.2%
Ray Chung(5).......................................................... 1,149 36.7%
James B. Ardrey(5).................................................... 282 9.0%
F. Donald Cowan, Jr................................................... 45 1.4%
Donald L. Gadd........................................................ 45 1.4%
Vaughn Oakley......................................................... 45 1.4%
M. Laurie Cummings(5)................................................. 282 9.0%
Kase Lawal(7)......................................................... 867 27.7%
Stephen C. Sherrill(8)................................................ 1,391 44.4%
Stephen F. Edwards(8)................................................. 1,391 44.4%
Donald Welge(9)....................................................... 867 27.7%
All directors and executive officers of
Holdings as a group (12 persons).................................... 2,754 87.9%
</TABLE>
- ------------------------
(1) The Class B Common Stock does not possess voting rights until $17 million
of capital has been returned to the holders of Common Stock.
55
<PAGE>
(2) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared power
to dispose, or direct the disposition of, a security.
(3) Includes shares held by certain other entities and individuals affiliated
with BRS. BRS disclaims the beneficial ownership of such shares.
(4) Includes 27.77 shares of Class B Common Stock.
(5) Mr. Wilson is the managing partner of Dartford and Messrs. Chung and Ardrey
and Ms. Cummings are partners of Dartford and as such, may be deemed to have
the power to vote or dispose of the Class B Common Stock held by Dartford.
Messrs. Wilson, Chung, and Ardrey and Ms. Cummings disclaim the existence of
a group and disclaim beneficial ownership of Class B Common Stock held by
Dartford. Messrs. Wilson and Chung are managing members of Windy Hill LLC
and as such, may be deemed to have the power to vote or dispose of the
Common Stock held by Windy Hill LLC. Messrs. Wilson and Chung disclaim the
existence of a group and disclaim beneficial ownership of Common Stock held
by Windy Hill LLC.
(6) Includes 79 shares of Class B Common Stock. Mr. Robert V. Dale is a managing
member of Windy Hill LLC and as such, may be deemed to have beneficial
ownership of the Common Stock held by Windy Hill LLC. Mr. Dale disclaims
beneficial ownership of the Common Stock held by Windy Hill LLC.
(7) Mr. Kase Lawal is a director of CAMAC International, Ltd. which is a
managing member of Windy Hill LLC and as such, may be deemed to have the
power to vote or dispose of the shares of Common Stock held by Windy Hill
LLC. Mr. Lawal disclaims beneficial ownership of the Common Stock held by
Windy Hill LLC.
(8) Includes shares held by BRS and certain other entities and individuals
affiliated with BRS. Messrs. Sherrill and Edwards each disclaim beneficial
ownership of such shares. The address for such persons is c/o BRS & Co., 126
East 56th St., New York, New York 10022.
(9) Mr. Donald Welge is the President and Chief Executive Officer of
Gilster-Marylee Corporation which is a managing member of Windy Hill LLC and
as such, may be deemed to have the power to vote or dispose of the Common
Stock held by Windy Hill LLC. Mr. Donald Welge disclaims beneficial
ownership of Common Stock held by Windy Hill LLC.
56
<PAGE>
CERTAIN RELATED TRANSACTIONS
MANAGEMENT SERVICES AGREEMENTS
The Company is a party to a Management Services Agreement with Dartford
pursuant to which Dartford will provide management oversight to the Company.
Management services provided by Dartford include, but are not limited to,
operations oversight, corporate and financial planning, identification of
possible acquisitions and advice on the financing thereof and definition and
development of business opportunities. The annual management fee for these
services is $1 million.
The Company is also a party to a Management Services Agreement with
Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS & Co."), an affiliate of BRS.
Pursuant to this agreement, BRS & Co. will be paid $500,000 on April 29, 2001
for management, financial and other corporate advisory services rendered by BRS
& Co. in connection with the Kozy Kitten Acquisition.
STOCKHOLDERS AGREEMENT
Holdings, BRS, certain affiliates of BRS (together with BRS, the "BRS
Group") Windy Hill LLC, PNC, Dartford and members of management of Old Windy
Hill, including Robert V. Dale, F. Donald Cowan, Jr., Donald L. Gadd, and Vaughn
Oakley (the "Management") have entered into a stockholders agreement (the
"Stockholders Agreement"). The Stockholders Agreement provides, among other
things, that the board of directors of the Company shall be identical to that of
Holdings. Under such agreement, the BRS Group and Windy Hill LLC each have the
power to designate two directors, (ii) the holders of Class B Common Stock have
the power to designate one director, provided that its designee shall be Robert
V. Dale as long as Mr. Dale is president of WHPF, (iii) until 1998, Kase Lawal
and Donald Welge shall serve as directors, thereafter, any replacement members
of Mr. Lawal and Mr. Welge must be reasonably acceptable to the designees of the
BRS Group and Windy Hill LLC; (iv) PNC, or such other persons holding in the
aggregate a majority of the shares of Common Stock and Class B Common Stock
acquired by PNC on April 29, 1996 and May 21, 1997 (the "PNC Shares"), is
entitled to designate one director for so long as PNC or certain affiliates of
PNC or their respective directors, officers or employees hold at least 25%
individually or in the aggregate of the PNC Shares, and (v) either the BRS Group
or Windy Hill LLC is entitled to designate an additional director for so long as
either of such party's ownership interest in the Common Stock is equal to 110%
of the ownership interest of the Common Stock of the other party. Pursuant to
the Stockholders Agreement, the BRS Group is entitled to appoint an additional
director.
REGISTRATION RIGHTS AGREEMENT
Holdings, the BRS Group and certain principals, Windy Hill LLC, PNC,
Dartford, and members of management of Dartford have entered into a registration
rights agreement (the "Registration Rights Agreement"), pursuant to which
Holdings has granted certain registration rights to the BRS Group, Windy Hill
LLC and PNC with respect to the Common Stock.
OTHER RELATED ARRANGEMENTS
On April 29, 1996, BRS and Dartford entered into a letter agreement pursuant
to which they agreed that for so long as BRS or its affiliates own at least 25%
of its initial investment in Holdings, Dartford will not sell or transfer its
interests in Windy Hill LLC, without the prior consent of BRS.
In connection with the Kozy Kitten Acquisition, Old Windy Hill paid (i)
Dartford $525,000 in consideration of the general management, financial and
other corporate advisory services rendered by Dartford, (ii)PNC $255,000 as a
deferred financing fee relating to subordinated debt financing provided by PNC
and (iii) PNC Securities Corp., an affiliate of PNC, a fee of $715,000 in
connection with financing provided by PNC Bank. In connection with the Kozy
Kitten Acquisition, Old Windy Hill borrowed $8.5 million under a senior
subordinated debt facility with PNC. Such facility was repaid in full in
connection with the Transaction.
In consideration of general management, financial and other corporate
advisory services rendered by Dartford and BRS to Old Windy Hill in connection
with the Transaction, Dartford and BRS were paid $1,300,000 and $650,000,
respectively on the Closing Date.
57
<PAGE>
DESCRIPTION OF SENIOR BANK FACILITIES
The description set forth below does not purport to be complete and is
qualified in its entirety by reference to certain agreements setting forth the
principal terms and conditions of the Company's Senior Bank Facilities, which
are available upon request from the Company.
SENIOR BANK FACILITIES
The Credit Agreement, dated as of May 21, 1997, among Windy Hill Pet Food
Acquisition Co., Credit Suisse First Boston, The Chase Manhattan Bank and the
several banks and other financial institutions parties thereto, provides the
Company with senior secured credit facilities (the "Senior Bank Facilities") in
an aggregate principal amount not to exceed $85 million.
The Senior Bank Facilities consist of (a) a senior secured term loan
facility providing for term loans to the Company in a principal amount not to
exceed $20 million (the "Term Loan Facility"), (b) a credit facility providing
for revolving loans to the Company for permitted acquisitions in a principal
amount not to exceed $45 million (the "Acquisition Facility"), and (c) a working
capital revolving credit facility providing for revolving loans to the Company
and the issuance of letters of credit for the account of the Company as well as
swing line loans in an aggregate principal and stated amount at any time not to
exceed $20 million a portion of which may be represented by letters of credit
and not more than $5 million of which may be represented by swing line loans
(the "Working Capital Facility"), the Working Capital Facility and the
Acquisition Facility (collectively referred to as the "Revolving Facility").
The full amount of the Term Loan Facility was drawn in a single drawing at the
Closing and amounts repaid or prepaid under the Term Loan Facility may not be
reborrowed. The full amount of the Acquisition Facility was drawn at the Closing
but amounts repaid under the Acquisition Facility may be reborrowed. Loans and
letters of credit under the Revolving Facility will be available for borrowing
at any time after the Closing and prior to the date six and one-half years
thereafter.
The Term Loan Facility will amortize in quarterly installments over six and
one-half years beginning in the fourth quarter of fiscal year 1997.
The Company will be required to make mandatory prepayments of loans, subject
to certain exceptions in amounts equal to (a) 100% of the net proceeds of (i)
certain dispositions of material assets, (ii) any sale and lease-back for
proceeds in excess of a certain threshold, or (iii) the issuance of equity or
the incurrence of certain indebtedness other than the Offering by Holdings, the
Company or any of its subsidiaries and (b) 75% of excess cash flow of the
Company after giving effect to debt service on the Senior Bank Facilities and
the Notes, which, commencing on the Company's fiscal year ending December 31,
1998, may be reduced to 50% depending on the Company's financial performance. At
the Company's option, loans may be prepaid, and Acquisition Facility and Working
Capital credit commitments may be permanently reduced, in whole or in part at
any time.
The obligations of the Company under the Senior Bank Facilities will be
unconditionally and irrevocably guaranteed by WHPF, Holdings and each of the
existing and future direct or indirect domestic subsidiaries of the Company
(collectively, the "Guarantors"). In addition, the Senior Bank Facilities will
be secured by first priority or equivalent security interests in (i) all capital
stock of the Company and each of the direct or indirect domestic subsidiaries of
the Company),(ii) a pledge of up to a certain percentage of the capital stock of
any foreign subsidiary, and (iii) the tangible and intangible assets of the
Company and the Guarantors.
At the Company's option, the interest rates per annum applicable to the
Senior Bank Facilities will be either the rate (grossed-up for maximum statutory
reserve requirements for eurocurrency liabilities) at which eurodollar deposits
for one, two, three or six months (as selected by the Company) are offered in
the interbank eurodollar market (the "Eurodollar Rate") plus a margin of 2.50%
or the Alternate Base
58
<PAGE>
Rate plus a margin of 1.50%, such margins being subject to reduction if certain
performance targets are achieved (the "Applicable Margin"). The Alternate Base
Rate is the higher of (a) the rate of interest publicly announced by CSFB as its
prime rate in effect at its principal office in New York City and (b) the
federal funds effective rate plus 0.50%.
The Company will pay (i) a per annum fee equal to 0.50% on the aggregate
undrawn portion of the Acquisition Facility and Working Capital Facility
commitments in respect of the Revolving Facility, which fee will be reduced if
certain performance targets are met, (ii) a per annum fee on all outstanding
undrawn amounts under letters of credit equal to the Applicable Margin for
Eurodollar Rate Loans then in effect under the Working Capital Facility, and
(iii) a per annum fee bearing interest at 0.25% on the face amount of each such
letter of credit. Swing line loans will bear interest based at the Alternate
Base Rate plus the Applicable Margin.
The Senior Bank Facilities contain a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness, repay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, enter into leases,
investments or acquisitions, engage in mergers or consolidations, make capital
expenditures, or engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities. In addition, under the Senior Bank
Facilities, the Company is required to comply with specified financial ratios
and tests, including minimum interest coverage, minimum fixed charge coverage,
and maximum leverage ratios and maximum capital expenditure amounts.
The Senior Bank Facilities also contain provisions that prohibit any
modification of the Indenture in any manner adverse to the banks, financial
institutions and other entities under the Senior Bank Facilities (the "Lenders")
and that limit the Company's ability to refinance the Notes without the consent
of such Lenders.
59
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The New Notes are to be issued, and the Old Notes were issued, under an
Indenture, dated as of May 21, 1997 (the "Indenture"), between the Company and
Wilmington Trust Company, as Trustee (the "Trustee"), a copy of which is
available upon request to the Company. For purposes of the following summary,
the Old Notes and the New Notes shall be collectively referred to as the
"Notes." The following summary of certain provisions of the Indenture and the
Notes does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture (including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended) and the Notes. Capitalized terms used
herein and not otherwise defined have the meanings set forth in "--Certain
Definitions."
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, except that, at the
option of the Company, payment of interest may be made by check mailed to the
address of the holders as such address appears in the Note Register.
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. No service
charge will be made for any registration of transfer or exchange of Notes, but
the Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $120.0 million aggregate principal amount, and will mature on May 15,
2007. Each Note will bear interest at the rate per annum shown on the front
cover of this Prospectus from the date of issuance, or from the most recent date
to which interest has been paid or provided for, payable semi-annually on May 15
and November 15 of each year commencing on November 15, 1997 to holders of
record at the close of business on the May 1 or November 1 (whether or not a
Business Day) immediately preceding the interest payment date.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option of
the Company prior to May 15, 2002. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days prior notice mailed by first-class mail to
the registered address of each holder of Notes to be redeemed, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12 month period commencing on May 15 of the years set
forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ------------------------------------------------------ ------------------
<S> <C>
2002.................................................. 104.875%
2003.................................................. 103.250%
2004.................................................. 101.625%
2005 and thereafter................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to May 15, 2000, the
Company may redeem up to $42.0 million of the aggregate principal amount of
Notes with the cash proceeds of one or more Equity Offerings received by, or
invested in, the Company at a redemption price (expressed as a percentage of
principal amount) of 109.750%, plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest
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payment date); provided, however, that at least $78.0 million of the aggregate
principal amount of the Notes remain outstanding after each such redemption.
At any time on or prior to May 15, 2002, the Notes may also be redeemed as a
whole at the option of the Company upon the occurrence of a Change of Control,
upon not less than 30 nor more than 60 days prior notice (but in no event more
than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued and unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at May 15, 2002 (such redemption price being described under "-- Optional
Redemption") plus (2) all required interest payments due on such Note through
May 15, 2002, computed using a discount rate equal to the Treasury Rate plus 50
basis points over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to May 15, 2002; provided, however, that if the
period from the Redemption Date to May 15, 2002 is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less will be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note.
RANKING
The payment of Indebtedness evidenced by, and all other obligations in
respect of, the Notes is subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash or Cash Equivalents when due of
all Senior Indebtedness of the Company. However, payment from the money or the
proceeds of U.S. Government Obligations held in any defeasance trust described
under "Defeasance" below is not subordinate to any Senior Indebtedness or
subject to the restrictions described herein. At April 30, 1997 on a pro forma
basis after giving effect to the Transaction, the Financing and the AF Sale, the
aggregate amount of the Company's Senior Indebtedness would have been
approximately $15 million (excluding unused commitments of $65 million under the
Senior Bank Facilities). Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company may Incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "-- Certain Covenants --
Limitation on Indebtedness."
"Senior Indebtedness" means the principal of, premium (if any), and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization of the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, the Bank Indebtedness and all other Indebtedness of
the Company, whether outstanding on the Issue Date or thereafter issued, unless,
in the instrument creating or evidencing the
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same is outstanding, it is provided that the obligations in respect of such
Indebtedness are not superior in right of payment to the Notes; provided,
however, that Senior Indebtedness will not include (i) any obligation of the
Company to any Subsidiary, (ii) any liability for Federal, state, foreign, local
or other taxes owed or owing by the Company, (iii) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (iv)
any Indebtedness, Guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated Indebtedness and
any Subordinated Obligations or (v) any Capital Stock.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank PARI PASSU with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in any respect to Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured.
The Company may not pay principal of, premium (if any), or interest on, or
liquidated damages with respect to, or make any payment on account of any other
obligations with respect to, the Notes or make any deposit pursuant to the
provisions described under "Defeasance" below and may not otherwise purchase or
retire any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness
is not paid when due in cash or Cash Equivalents or (ii) any other default on
Senior Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, the default has
been cured or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full in cash or Cash Equivalents. However, the
Company may pay any such amounts without regard to the foregoing if the Company
and the Trustee receive written notice approving such payment from the
Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay any
amounts in respect of the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full in
cash or Cash Equivalents). Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the maturity
of such Designated Senior Indebtedness, the Company may resume payments on the
Notes after the end of such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360 day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization or bankruptcy of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full in cash or Cash
Equivalents of the Senior Indebtedness before the holders of the Notes are
entitled to receive any
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payment, and until the Senior Indebtedness is paid in full in cash or Cash
Equivalents, any payment or distribution to which holders would be entitled but
for the subordination provisions of the Indenture will be made to holders of the
Senior Indebtedness as their interests may appear. If a distribution is made to
holders of the Notes that, due to the subordination provisions, should not have
been made to them, such holders are required to hold it in trust for the holders
of Senior Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness or of Senior Subordinated
Indebtedness (including the Notes) may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than the holders of Senior
Subordinated Indebtedness.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of the Notes will have the right to require the Company
to repurchase all or any part of such holder's Notes at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date): (i)prior to the first public offering of Voting Stock of the
Company, Holdings or WHPF, as the case may be, the Permitted Holders cease to be
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of majority voting power of the Voting Stock of
the Company, whether as a result of issuance of securities of the Company,
Holdings or WHPF, as the case may be, any merger, consolidation, liquidation or
dissolution of the Company, Holdings or WHPF, as the case may be, any direct or
indirect transfer of securities by any Permitted Holder or otherwise (for
purposes of this clause (i) and clause (ii) below, the Permitted Holders will be
deemed to beneficially own any Voting Stock of a Person (the "specified
corporation") held by any other Person (the "parent corporation") so long as the
Permitted Holders beneficially own (as defined), directly or indirectly, a
majority of the voting power of the Voting Stock of the parent corporation);
(ii) following the first public offering of Voting Stock of the Company,
Holdings or WHPF, as the case may be, any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in clause (i) above,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock of
the Company, Holdings or WHPF, as the case may be; provided that the Permitted
Holders beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power of
the Voting Stock of the Company, Holdings or WHPF, as the case may be, than such
other person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of the Company, Holdings or WHPF, as the case may be, (for purposes of
this clause (ii), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if such
other person "beneficially owns" (as defined in this clause (ii)), directly or
indirectly, more than 35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders "beneficially own" (as defined in clause
(i) above), directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent corporation and do not have the
right or ability by voting
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power, contract or otherwise to elect or designate for election a majority of
the board of directors of such parent corporation); or (iii)during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors of the Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder of record of the Notes with a copy to the Trustee stating: (i) that a
Change of Control has occurred and that such holder has the right to require the
Company to purchase such holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on a record
date to receive interest on the relevant interest payment date); (ii) the
circumstances and relevant facts and financial information concerning such
Change of Control; (iii) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and (iv) the
procedures determined by the Company, consistent with the Indenture, that a
holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Agreement. Future
Senior Indebtedness of the Company and its Subsidiaries may contain prohibitions
of certain events that would constitute a Change of Control or require such
Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the
exercise by the holders of their right to require the Company to repurchase the
Notes could cause a default under such Senior Indebtedness, even if the Change
of Control itself does not, due to the financial effect of such repurchase on
the Company. Finally, the Company's ability to pay cash to the holders upon a
repurchase may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when necessary
to make any required repurchases. Even if sufficient funds were otherwise
available, the terms of the Senior Credit Agreement generally prohibit the
Company's prepayment of the Notes prior to their scheduled maturity.
Consequently, if the Company is not able to prepay the Bank Indebtedness and any
other Senior Indebtedness containing similar restrictions or obtain requisite
consents or waivers, as described above, the Company will be unable to fulfill
its repurchase obligations if holders of Notes exercise their repurchase rights
following a Change of Control, thereby resulting in a default under the
Indenture.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit
any of its Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company and any of its Subsidiaries may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio would be greater than 2.00:1.00.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Subsidiaries may Incur the following Indebtedness: (i) Bank Indebtedness
provided that the aggregate principal amount of Indebtedness Incurred pursuant
to this clause (i) does not exceed an amount outstanding at any time
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equal to $80.0 million less the aggregate amount of permanent reductions of
commitments and repayments of principal thereof (without duplication of
repayments required as a result of such reductions of commitments); provided,
however, in the event that the AF Sale is not consummated simultaneously with
the Transaction, the application of the AF Sale Proceeds shall not be deemed a
permanent reduction of commitment thereunder; (ii) Indebtedness (A) of the
Company to any Wholly-Owned Subsidiary and (B) of any Subsidiary to the Company
or any Wholly-Owned Subsidiary; (iii) Indebtedness represented by the Notes, any
Indebtedness (other than the Indebtedness described in clauses (i)-(ii) above)
outstanding on the date of the Indenture and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iii) or this
paragraph (b); (iv) Indebtedness represented by the Note Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause (i) above; (v)
Indebtedness under Currency Agreements and Interest Rate Agreements which are
entered into for bona fide hedging purposes of the Company or its Subsidiaries
(as determined in good faith by the Board of Directors or senior management of
the Company) and correspond in terms of notional amount, duration, currencies
and interest rates, as applicable, to Indebtedness of the Company or its
Subsidiaries Incurred without violation of the Indenture or to business
transactions of the Company or its Subsidiaries on customary terms entered into
in the ordinary course of business; and (vi) Indebtedness of the Company or any
of its Subsidiaries (which may comprise Bank Indebtedness) in an aggregate
principal amount at any time outstanding not in excess of $15.0 million.
(c) Notwithstanding any other provision of this covenant, the Company shall
not Incur any Indebtedness (i) pursuant to paragraph (b) above if the proceeds
thereof are used, directly or indirectly, to repay, prepay, redeem, defease,
retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes to at least the same extent as
such Subordinated Obligations or (ii) pursuant to paragraph (a) or (b) if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
(d) The Company shall not Incur any Secured Indebtedness which is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with such Secured Indebtedness for so long
as such Secured Indebtedness is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except (A) dividends or distributions payable in its Capital Stock
(other than Disqualified Stock) and (B) dividends or distributions payable to
the Company or another Subsidiary (and, if such Subsidiary is not a Wholly-Owned
Subsidiary, to its other stockholders on a pro rata basis), (ii) purchase,
redeem, retire or otherwise acquire for value any Capital Stock of the Company
or any Subsidiary held by Persons other than the Company or another Subsidiary,
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Obligations (other than the purchase, repurchase
or other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment"), if
at the time the Company or such Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Company could not Incur at least an additional $1.00 of Indebtedness
pursuant to paragraph (a) under "Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution of the Board of Directors) or made
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subsequent to the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the Issue Date to the end of the most recent fiscal quarter ending
prior to the date of such Restricted Payment as to which financial results are
available (but in no event more than 135 days prior to the date of such
Restricted Payment) (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds
received by the Company from the issue or sale of its Capital Stock (other than
Disqualified Stock) or other cash contributions to its capital subsequent to the
Issue Date (other than an issuance or sale to a Subsidiary of the Company or an
employee stock ownership plan or other trust established by the Company or any
of its Subsidiaries); (C) aggregate Net Cash Proceeds from the issue or sale of
its Capital Stock to an employee stock ownership plan or similar trust,
provided, however, that if such plan or trust Incurs any Indebtedness to or
Guaranteed by the Company to finance the acquisition of such Capital Stock, such
aggregate amount shall be limited to any increase in the Consolidated Net Worth
of the Company resulting from principal repayments made by such plan or trust
with respect to Indebtedness Incurred by it to finance the purchase of such
Capital Stock; and (D) the amount by which Indebtedness of the Company or its
Subsidiaries is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary) subsequent to the Issue Date of any
Indebtedness of the Company or its Subsidiaries convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company (less the amount of
any cash, or other property, distributed by the Company or any Subsidiary upon
such conversion or exchange).
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan
or other trust established by the Company or any of its Subsidiaries); provided,
however, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds
from such sale shall be excluded from clause (3)(B) of paragraph (a); (ii) any
purchase or redemption of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company; provided, however, that such purchase
or redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under "Limitation on Sales of Assets and
Subsidiary Stock" below; provided, however, that such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments; (iv)
dividends paid within 60 days after the date of declaration if at such date of
declaration such dividend would have complied with this provision; provided,
however, that such dividend shall be included in the calculation of the amount
of Restricted Payments; (v) payment of dividends or other distributions by the
Company for the purposes set forth in clauses (A) through (D) below; provided,
however, that any such dividend or distribution described in clauses (A) and (B)
will be excluded in the calculation of the amount of Restricted Payments and any
such dividend or distribution described in clauses (C) and (D) will be included
in the calculation of the amount of Restricted Payments: (A) in amounts equal to
the amounts required for Holdings and WHPF to pay franchise taxes and other fees
required to maintain its legal existence and provide for audit, accounting,
legal and other operating costs of up to $500,000 per fiscal year; (B) in
amounts equal to amounts required for Holdings and WHPF to pay Federal, state
and local income taxes to the extent such income taxes are attributable to the
income of the Company and its Subsidiaries; (C) in amounts equal to amounts
expended by the Company, Holdings or WHPF to repurchase Capital Stock of the
Company, Holdings or WHPF owned by employees (including former employees) of the
Company or its Subsidiaries or their assigns, estates and heirs; provided that
the aggregate amount paid, loaned or advanced pursuant to this clause (C) shall
not, in the aggregate, exceed the sum of $3.0 million plus any amounts
contributed by WHPF or Holdings to the Company as a result of resales of such
repurchased shares of Capital Stock; and (D) distributions to Holdings
commencing in 2004 in amounts equal to the interest payments under the
Convertible Subordinated Promissory Note issued to Heinz Pet Products Company
and in 2006 up to
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$10.0 million to be applied toward the repayment of the outstanding principal
amount thereunder; provided, however, in the case of clause (D), no Event of
Default shall have occurred or be continuing at the time of such payment or as a
result thereof; or (vi) any repurchase of equity interest deemed to occur upon
exercise of stock options if such equity interests represent a portion of the
exercise price of such options.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES. The Company
shall not, and shall not permit any of its Subsidiaries to, create or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or other obligation
owed to the Company, (ii) make any loans or advances to the Company or (iii)
transfer any of its property or assets to the Company; except: (A) any
encumbrance or restriction pursuant to an agreement in effect on the Issue Date,
including those arising under the Senior Credit Documents; (B) any encumbrance
or restriction with respect to a Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by a Subsidiary prior to the date on which such
Subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary was acquired by the Company); (C)
any encumbrance or restriction with respect to a Subsidiary pursuant to an
agreement effecting a refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clauses (A) or (B) or this clause (C) or contained in
any amendment, supplement or modification (including an amendment and
restatement) to an agreement referred to in clauses (A) or (B) or this clause
(C); provided, however, that the encumbrances and restrictions contained in any
such refinancing agreement or amendment taken as a whole are no less favorable
to the holders of the Notes in any material respect than encumbrances and
restrictions contained in such agreements; (D) in the case of clause (iii), any
encumbrance or restriction (1) that restricts in a customary manner the
subletting, assignment or transfer of any property or asset that is subject to a
lease, license, or similar contract, (2) by virtue of any transfer of, agreement
to transfer, option or right with respect to, or Lien on, any property or assets
of the Company or any Subsidiary not otherwise prohibited by the Indenture, or
(3) contained in security agreements securing Indebtedness of a Subsidiary to
the extent such encumbrance or restrictions restrict the transfer of the
property subject to such security agreements; (E) any such restriction imposed
by applicable law; (F) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition; and (G) purchase obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired.
LIMITATION ON SALES OF ASSETS. (a) The Company shall not, and shall not
permit any Subsidiary to, make any Asset Disposition unless (i) the Company or
such Subsidiary receives consideration (including by way of relief from, or by
any other Person assuming sole responsibility for, any liabilities, contingent
or otherwise) at the time of such Asset Disposition at least equal to the fair
market value of the shares and assets subject to such Asset Disposition, (ii) at
least 85% of the consideration thereof received by the Company or such
Subsidiary is in the form of cash and (iii) an amount equal to 100% of the Net
Available Cash from such Asset Disposition is applied by the Company (or such
Subsidiary, as the case may be) (A) first, to the extent the Company elects (or
is required by the terms of any Senior Indebtedness or Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary), to prepay, repay or purchase
Senior Indebtedness or such Indebtedness (other than Preferred Stock) of a
Wholly-Owned Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company) within one year after the later of the
date of such Asset Disposition or the receipt of such Net Available Cash; (B)
second, to the extent of the balance of Net Available Cash after application in
accordance with clause (A), to the extent the Company or such Subsidiary elects,
to reinvest in Additional Assets (including by means of an Investment in
Additional Assets by a Subsidiary with Net Available Cash received by the
Company or another Subsidiary) within one year after the later of
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the date of such Asset Disposition or the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to purchase
Notes pursuant and subject to the conditions of the Indenture to the Noteholders
at a purchase price of 100% of the principal amount thereof plus accrued and
unpaid interest to the purchase date; and (D) fourth, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A), (B) and (C), to (x) acquire Additional Assets (other than Indebtedness and
Capital Stock) or (y) prepay, repay or purchase Indebtedness of the Company
(other than Indebtedness owed to an Affiliate of the Company and other than
Disqualified Stock of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each case
described in this clause (D) within one year from the receipt of such Net
Available Cash or, if the Company has made an Offer pursuant to clause (C), six
months from the date such Offer is consummated; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A), (C) or (D) above, the Company or such Subsidiary shall retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased; provided, further, however that the foregoing proviso will
not apply to the AF Sale Proceeds in the event the AF Sale is not consummated
simultaneously with the Transaction. Notwithstanding the foregoing provisions,
the Company and its Subsidiaries shall not be required to apply any Net
Available Cash in accordance herewith except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this covenant at any time exceed $1.0 million. The Company shall
not be required to make an offer for Notes pursuant to this covenant if the Net
Available Cash available therefor (after application of the proceeds as provided
in clauses (A) and (B)) is less than $10.0 million for any particular Asset
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption of Indebtedness (other than Disqualified Stock) of the
Company or any Subsidiary and the release of the Company or such Subsidiary from
all liability on such Indebtedness in connection with such Asset Disposition and
(y) securities received by the Company or any Subsidiary of the Company from the
transferee that are promptly converted by the Company or such Subsidiary into
cash.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C), the Company will be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes at a purchase price
of 100% of their principal amount plus accrued interest to the purchase date in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate purchase price of
the Notes tendered pursuant to the offer is less than the Net Available Cash
allotted to the purchase of the Notes, the Company will apply the remaining Net
Available Cash in accordance with clause (a)(iii)(D) above.
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company will not, and will
not permit any Subsidiary to, directly or indirectly, enter into or conduct any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless: (i) the terms of such Affiliate Transaction are no less
favorable to the Company or such Subsidiary, as the case may be, than those that
could be obtained at the time of such transaction in arm's-length dealings with
a Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction
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involves an aggregate amount in excess of $1.0 million, the terms of such
transaction have been approved by a majority of the members of the Board of
Directors of the Company and by a majority of the disinterested members of such
Board, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (i) above); and (iii)
in the event such Affiliate Transaction involves an aggregate amount in excess
of $5.0 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Subsidiary, as the case may be, from
a financial point of view.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"-- Limitation on Restricted Payments" (and in the case of Permitted
Investments, only those described in clauses (v), (vi), (ix) and (x) of the
definition of Permitted Investments), (ii) the performance of the Company's or
Subsidiary's obligations under any employment contract, collective bargaining
agreement, employee benefit plan, related trust agreement or any other similar
arrangement heretofore or hereafter entered into in the ordinary course of
business, (iii) payment of compensation to, and indemnity provided on behalf of,
employees, officers, directors or consultants (excluding the Management Services
Agreements) in the ordinary course of business, (iv) maintenance in the ordinary
course of business of benefit programs or arrangements for employees, officers
or directors, including vacation plans, health and life insurance plans,
deferred compensation plans, and retirement or savings plans and similar plans,
(v) any transaction between the Company and a Wholly-Owned Subsidiary or between
Wholly-Owned Subsidiaries or (vi) the payment of certain fees under the
Management Services Agreements as in effect on the Issue Date.
LIMITATION ON SALE OF SUBSIDIARY CAPITAL STOCK. The Company (i) will not,
and will not permit any Subsidiary to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Subsidiary to any Person (other
than to the Company or a Wholly-Owned Subsidiary) and (ii) will not permit any
Subsidiary to issue any of its Capital Stock (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly-Owned Subsidiary; provided, however, that
the foregoing shall not prohibit such conveyance, sale, lease or other
disposition of all the Capital Stock of a Subsidiary if the net cash proceeds
from such transfer, conveyance, sale, lease, other disposition or issuance are
applied in accordance with the covenant described above under "-- Limitation on
Sales of Assets."
SEC REPORTS. Notwithstanding that the Company may not be required to be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the Commission, and within 15 days after such
reports are filed, provide the Trustee and the holders (at their addresses as
set forth in the register of Notes) with the annual reports and the information,
documents and other reports which are otherwise required pursuant to Section 13
and 15(d) of the Exchange Act. Such requirements may also be satisfied, prior to
July 20, 1997, with the filing with the Commission of a registration statement
under the Securities Act that contains the foregoing information (including
financial statements) and by providing copies thereof to the Trustee and the
holders. In addition, following the registration of the common stock of the
Company pursuant to Section 12(b) or 12(g) of the Exchange Act, the Company
shall furnish to the Trustee and the holders, promptly upon their becoming
available, copies of the Company's annual report to stockholders and any other
information provided by the Company to its public stockholders generally.
FUTURE NOTE GUARANTORS. The Company will cause each Subsidiary which Incurs
Indebtedness or which is a guarantor of Indebtedness Incurred pursuant to clause
(b)(i) of the covenant described under "-- Limitation on Indebtedness" to
execute and deliver to the Trustee a Note Guarantee pursuant to which such
Subsidiary will Guarantee, jointly and severally, to the holders and the
Trustee, subject to subordination provisions substantially the same as those
described above, the full and prompt payment of the Notes in the Indenture. Each
Note Guarantee will be limited in amount to an amount not to exceed the maximum
amount that can be Guaranteed by that Subsidiary without rendering the Note
Guarantee,
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as it relates to such Subsidiary, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
LIMITATION ON LINES OF BUSINESS. The Company will not, and will not permit
any Subsidiary to, engage in any business, other than the pet food business and
such other business activities which are incidental or related thereto and, in
the event the AF Sale is not consummated simultaneously with the Transaction,
the animal feed business of Hubbard Milling.
MERGER AND CONSOLIDATION. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) expressly assumes, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Successor Company as a result of such transaction as having
been Incurred by the Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction, the Successor Company would
be able to Incur at least an additional $1.00 of Indebtedness pursuant to
paragraph (a) of "-- Limitation on Indebtedness"; (iv) immediately after giving
effect to such transaction, the Successor Company will have Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor, the Company, in the case of a lease of all or substantially all its
assets will not be released from the obligation to pay the principal of and
interest on the Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), (1) any
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company or another Wholly-Owned
Subsidiary of the Company and (2) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "-- Merger
and Consolidation" above, (iv) the failure by the Company to comply for 30 days
after notice with any of its obligations under the covenants described under
"Change of Control" above or under covenants described under "Certain Covenants"
above (in each case, other than a failure to purchase Notes which shall
constitute an Event of Default under clause (ii) above), other than "-- Merger
and Consolidation", (v) the failure by the Company to comply for 60 days after
notice with its other agreements contained in the Indenture, (vi) Indebtedness
of the Company or any Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated exceeds
$5.0 million and such default shall not have been cured or such acceleration
rescinded within a 10-day period (the "cross acceleration provision"), (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or
decree for the payment of money in excess of $5.0 million (to the extent not
covered by insurance) is rendered against the Company or a Significant
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Subsidiary and such judgment or decree shall remain undischarged or unstayed for
a period of 60 days after such judgment becomes final and non-appealable (the
"judgment default provision") or (ix) the failure of any Note Guarantee to be in
full force and effect (except as contemplated by the terms thereof) or the
denial or disaffirmation by any Note Guarantor of its obligations under the
Indenture or any Note Guarantee if such default continues for 10 days. However,
a default under clauses (iv) and (v) will not constitute an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and accrued
and unpaid interest shall be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60 day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the Trustee in personal liability. Prior to taking any action under the
Indenture, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its Trust Officers in good
faith determines that withholding notice is in the interests of the Noteholders.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any events which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
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AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the holders of a majority in principal amount of the Notes then
outstanding. However, without the consent of each holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the
redemption or repurchase of any Note or change the time at which any Note may be
redeemed as described under "Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Note, (vi) make any change to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of the Notes, (vii) impair the right of any holder to receive payment
of principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes or (viii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions.
Without the consent of any holder, the Company and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f) (2) (B) of
the Code), to add Guarantees with respect to the Notes, to secure the Notes, to
add to the covenants of the Company for the benefit of the Noteholders or to
surrender any right or power conferred upon the Company, to make any change that
does not adversely affect the rights of any holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act. However, no amendment may be made to
the subordination provisions of the Indenture that adversely affects the rights
of any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under covenants
described under "Certain Covenants" (other than "Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Subsidiaries and the judgment default provision described under
"Events of Default" above and the limitations contained in clauses (iii) and
(iv) under "Certain Covenants -- Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company
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exercises its covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in clause (iv), (vi), (vii)
(with respect only to Subsidiaries), or (viii) or (ix) under "Events of Default"
above or because of the failure of the Company to comply with clause (iii) or
(iv) under "Certain Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
Wilmington Trust Company is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Subsidiary in a
Related Business; (ii) the Capital Stock of a Person that becomes a Subsidiary
as a result of the acquisition of such Capital Stock by the Company or another
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Subsidiary; provided, however, that, in the case
of clauses (ii) and (iii), such Subsidiary is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any Person who is a director or
officer (a) of such Person, (b) of any Subsidiary of such Person or (c) of any
Person described in clause (i) above. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "Certain Covenants -- Limitation on
Sales of Assets and Subsidiary Stock", "-- Limitation on Restricted Payments"
and "-- Limitation on Affiliate Transactions" only, "Affiliate" shall also mean
any beneficial owner of shares representing 5% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"AF Sale Proceeds" means the net proceeds received by the Company from the
sale of its animal feed business, less $5 million used to repay the term loan
facility under the Senior Credit Agreement.
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"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or a Wholly-Owned Subsidiary or by the Company or a
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory or
Temporary Cash Investments in the ordinary course of business, (iii) a
disposition of obsolete equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Subsidiaries and that is disposed
of in each case in the ordinary course of business, (iv) the sale of other
assets so long as the fair market value of the assets disposed of pursuant to
this clause (iv) does not exceed $1.0 million in the aggregate in any fiscal
year and $5.0 million in the aggregate prior to May 15, 2007, (v) for the
purposes of the covenant described under "Certain Covenants -- Limitation on
Sales of Assets" only, a disposition subject to the covenant described under "--
Limitation on Restricted Payments" and (vi) the disposition of all or
substantially all of the assets of the Company in the manner permitted pursuant
to the provisions described under the caption "-- Merger and Consolidation" or
any disposition that constitutes a Change of Control pursuant to the Indenture.
"Attributable Indebtedness" in respect of a Sale/ Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to Preferred Stock multiplied by the
amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Senior Credit Documents and any Indebtedness that is incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) Indebtedness under such Senior Credit Documents
including Indebtedness that refinances such Indebtedness, as amended from time
to time, including principal, premium (if any), interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for postfiling
interest is allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees and all other amounts payable thereunder or in respect
thereof (including, without limitation, cash collateralization of letters of
credit).
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City or Wilmington, Delaware are authorized
or required by law to close.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last
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payment of rent or any other amount due under such lease prior to the first date
such lease may be terminated without penalty.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (iii) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any domestic commercial bank the long-term debt of which is rated at the time
of acquisition thereof at least "A" or the equivalent thereof by Standard &
Poor's Ratings Group, or "A" or the equivalent thereof by Moody's Investors
Service, Inc., and having capital and surplus in excess of $500.0 million; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i), (ii) and (iii) entered into
with any bank meeting the qualifications specified in clause (iii) above; (v)
commercial paper rated at the time of acquisition thereof at least "A-2" or the
equivalent thereof by Standard & Poor's Ratings Group or "P-2" or the equivalent
thereof by Moody's Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in either case maturing within 270
days after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses (i)
through (v) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus, to the extent deducted in calculating such Consolidated
Net Income, (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense, in each case for such period,
and (v) other non-cash charges reducing Consolidated Net Income (excluding any
such non-cash charge to the extent that it represents an accrual of or reserve
for cash charges in any future period or amortization of a prepaid cash expense
that was paid in a prior period), in each case for such period, and minus, to
the extent not already deducted in calculating Consolidated Net Income, (i) the
aggregate amount of "earnout" payments paid in cash during such period in
connection with acquisitions previously made by the Company and (ii) non-cash
items increasing Consolidated Net Income for such period.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any of its Subsidiaries
has Incurred any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (2) if since the beginning of such
period the Company or any of its Subsidiaries shall have made any Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
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attributable to any Indebtedness of the Company or any of its Subsidiaries
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Subsidiary of the
Company is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Subsidiary to the extent the Company
and its continuing Subsidiaries are no longer liable for such Indebtedness after
such sale), (3) if since the beginning of such period the Company or any of its
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Subsidiary of the Company (or any Person which becomes a Subsidiary of the
Company) or an acquisition of assets, including any Investment in a Subsidiary
of the Company or any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any Indebtedness and
including the pro forma expenses and cost reductions calculated on a basis
consistent with Regulation S-X of the Securities Act) as if such Investment or
acquisition occurred on the first day of such period and (4) if since the
beginning of such period any Person (that subsequently became a Subsidiary of
the Company or was merged with or into the Company or any Subsidiary of the
Company since the beginning of such period) shall have made any Asset
Disposition or any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (2) or (3) above if made by the Company or a
Subsidiary of the Company during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Subsidiaries, plus, to the extent not included in
such interest expense, (i) interest expense attributable to Capitalized Lease
Obligations and imputed interest with respect to Attributable Indebtedness, (ii)
amortization of debt discount and debt issuance cost (other than those debt
discounts and debt issuance costs incurred on the Issue Date), (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Subsidiary
under any Guarantee of Indebtedness or other obligation of any other Person,
(vii) net costs associated with Currency Agreements and Interest Rate Agreements
(including amortization of fees), (viii) the product of (A) all Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly-Owned Subsidiary multiplied by (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined Federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, determined on a consolidated basis in accordance with GAAP and (ix)
the cash contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Subsidiary, except that (A) subject
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to the limitations contained in clause (iv) below, the Company's equity in the
net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other distribution
to a Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income;(ii) any net income (loss)
of any person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income (loss) of any Subsidiary if such Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Subsidiary, directly or indirectly, to the Company, except
that (A) subject to the limitations contained in (iv) below, the Company's
equity in the net income of any such Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Subsidiary during such period to the Company
or another Subsidiary as a dividend (subject, in the case of a dividend that
could have been made to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain (but not loss) realized upon the sale or other disposition of any
assets of the Company or its consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which are not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person; (v) any extraordinary gain
or loss; and (vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $5.0
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to 123 days after the Stated
Maturity of the Notes.
"Equity Investors" means the equity owners of Holdings on the Issue Date.
"Equity Offering" means any public or private sales of equity securities
(excluding Disqualified Stock) of the Company, Holdings or WHPF.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of any other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holdings" means Windy Hill Pet Food Holdings, Inc., a Delaware corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, Notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (other than contingent or
"earn-out" payment obligations and Trade Payables and accrued expenses incurred
in the ordinary course of business), which purchase price is due more than six
months after the date of placing such property in service or taking delivery and
title thereto or the completion of such services, (v) all Capitalized Lease
Obligations and all Attributable Indebtedness of such Person, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person, provided, however,
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the amount
of such Indebtedness of such other Persons, (vii) all Indebtedness of other
Persons to the extent Guaranteed by such Person, (viii) the amount of all
obligations of such Person with respect to the redemption, repayment or other
repurchase of any Disqualified Stock or, with respect to any Subsidiary of the
Company, any Preferred Stock (but excluding, in each case, any accrued
dividends) and (ix) to the extent not otherwise included in this definition,
obligations of such Person under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be the
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outstanding balance at such date of all unconditional obligations as described
above as such amount would be reflected on a balance sheet in accordance with
GAAP and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement, but excluding
any debt or extension of credit represented by a bank deposit other than a time
deposit) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person.
"Issue Date" means the date on which the Old Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Services Agreements" means (i) the Management Services Agreement
dated as of April 29, 1996 between Old Windy Hill and Dartford Partnership
L.L.C. (and its permitted successors and assigns thereunder) as amended as of
May 2, 1997 and (ii) the Management Services Agreement dated as of April 29,
1996 between Old Windy Hill and Bruckman, Rosser, Sherrill & Co., Inc. (and its
permitted successors and assigns thereunder), in each case without giving effect
to any amendment or other modification thereto.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a Note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to any Person owning a beneficial interest in assets subject
to sale or minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition, (iv) the deduction of appropriate amounts to
be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained by the Company or any Subsidiary of the Company after such Asset
Disposition and (v) any portion of the purchase price from an Asset Disposition
placed in escrow (whether as a reserve for adjustment of the purchase price, for
satisfaction of indemnities in respect of such Asset Disposition or otherwise in
connection with such Asset Disposition) provided, however, that upon the
termination of such escrow, Net Available Cash shall be increased by any portion
of funds therein released to the Company or any Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock
or Indebtedness, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
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incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"Note Guarantee" means any guarantee which may from time to time be executed
and delivered by a Subsidiary of the Company pursuant to the provisions of the
covenant described under "Certain Covenants --Future Note Guarantors." Each such
Note Guarantee will have subordination provisions equivalent to those contained
in the Indenture.
"Note Guarantor" means any Subsidiary that has issued a Note Guarantee.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means the Equity Investors and their respective
Affiliates.
"Permitted Investment" means (i) any Investment in a Subsidiary of the
Company or a Person which will, upon making such Investment, become a
Subsidiary; provided, however, that the primary business of such Subsidiary is a
Related Business; (ii) any Investment in another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Subsidiary of the Company; provided, however, that such Person's primary
business is a Related Business; (iii) any Investment in Temporary Cash
Investments; (iv) receivables owing to the Company or any of its Subsidiaries,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business of the Company or such Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Subsidiaries
or in satisfaction of judgments or claims; (viii) Investments the payment for
which consists exclusively of equity securities (exclusive of Disqualified
Stock) of the Company; (ix) any Investment existing on the Issue Date, (x) loans
or advances to employees and directors to purchase equity securities of the
Company, Holdings or WHPF; provided that the aggregate amount of such loans and
advances shall not exceed $2.0 million at any time outstanding; (xi) any
Investment in another Person to the extent such Investment is received by the
Company or any Subsidiary as consideration for Asset Disposition effected in
compliance with the covenant under "Limitations on Sales of Assets"; (xii)
prepayment and other credits to suppliers made in the ordinary course of
business consistent with the past practices of the Company and its Subsidiaries;
(xiii) Investments in connection with pledges, deposits, payments or performance
bonds made or given in the ordinary course of business in connection with or to
secure statutory, regulatory or similar obligations, including obligations under
health, safety or environmental obligations; and (xiv) any Investment in another
Person provided that the aggregate Investments made pursuant to this clause
(xiv) shall not exceed in the aggregate $4.0 million at any one time outstanding
(measured as of the date made and without giving effect to subsequent changes in
value) provided further that such amount shall be increased by an amount equal
to any return of capital received from any Investment.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision hereof or any other entity.
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"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances Indebtedness of any Subsidiary and Indebtedness of any
Subsidiary that refinances Indebtedness of another Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness, provided, however, that
(i) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced and (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced (plus the
amount of any premium required to be paid in connection therewith and plus
reasonable fees and expenses in connection therewith); provided further that
Refinancing Indebtedness shall not include Indebtedness of a Subsidiary which
refinances Indebtedness of the Company.
"Related Business" means the pet food business and such other business
activities which are incidental or related thereto.
"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Subsidiary transfers such
property to a Person and the Company or a Subsidiary leases it from such Person.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Agreement" means the Credit Agreement dated as of May 21,
1997, among Windy Hill Pet Food Acquisition Co., and the lenders parties
thereto.
"Senior Credit Documents" means the collective reference to the Senior
Credit Agreement, the notes issued pursuant thereto, the Guarantee, the
Collateral Agreement and the Patent and Trademark Security Agreement (each as
defined in the Senior Credit Agreement) and each of the mortgages and other
security agreements, guarantees and other instruments and documents executed and
delivered pursuant to any of the foregoing or the Senior Credit Agreement, in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amounts of
available borrowing thereunder provided that such increase in borrowing is
permitted by the covenant described under the caption "-- Limitation on
Indebtedness" or adding Subsidiaries of the Company as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement whether by the same or any
other agent, lender or group of lenders.
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"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock of such Person
then outstanding and normally entitled to vote in the election of directors or
managers.
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"Wholly-Owned Subsidiary" means a Subsidiary of the Company, all of the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or another Wholly-Owned Subsidiary.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will initially be issued in the
form of one or more registered Notes in global form without coupons (each a
"Global Note"). Each Global Note will be deposited upon issuance with, or on
behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC, or
will remain in the custody of the Trustee pursuant to the FAST Balance
Certificate Agreement between DTC and the Trustee.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a member of the Federal
Reserve System, (iii) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participation (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Holders who are not Participants may
beneficially own securities held by or on behalf of the Depository only through
Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Note, DTC will credit the accounts of Participants who
elect to exchange Old Notes with an interest in the Global Note and (ii)
ownership of the Notes will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
interest of Participants), the Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interest in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Notes or to
pledge the Notes as collateral will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Securities, and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
giving of any directions, instruction or approval to the Trustee thereunder. As
a result, the ability of a person having a beneficial interest in Notes
represented by a Global Note to pledge or transfer such interest to persons or
entities that do not participate in DTC's system or to otherwise take action
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Accordingly, each holder owning a beneficial interest in a Global Note must
rely on the procedures of DTC and, if such holder is not a Participant or an
Indirect Participant, on the procedures of the Participant through which such
holder owns its interest, to exercise any rights of a holder of Notes under the
Indenture or such Global Note. The Company understands that under existing
industry practice, in the event the Company requests any action of holders of
Notes or a holder that is an owner of a beneficial interest in a Global Note
desires to take any action that DTC, as the holder of such Global Note, is
entitled to take, DTC would authorize the Participants to take such action and
the Participant
83
<PAGE>
would authorize holders owning through such Participants to take such action or
would otherwise act upon the instruction of such holders. Neither the Company
nor the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of Notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on,
any Notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of interest in the Global Note (including principal, premium, if any, and
interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global Note as shown on the
records of DTC. Payments by the Participants and the Indirect Participants to
the beneficial owners of interests in the Global Note will be governed by
standing instructions and customary practice and will be the responsibility of
the Participants or the Indirect Participants and DTC.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the occurrence of certain
other events, then, upon surrender by DTC of its Global Notes, Certificated
Securities will be issued to each person that DTC identifies as the beneficial
owner of the Notes represented by the Global Note. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of such
person or persons (or the nominee of any thereof), and cause the same to be
delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
84
<PAGE>
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
The Company and the Initial Purchasers entered into an exchange and
registration rights agreement (the "Exchange and Registration Rights Agreement")
on May 21, 1997. Pursuant to the Exchange and Registration Rights Agreement, the
Company agreed to (i) file with the Commission on or prior to 60 days after the
date of issuance of the Old Notes (the "Issue Date") a registration statement on
an appropriate form under the Securities Act (the "Exchange Offer Registration
Statement") relating to a registered exchange offer (the "Exchange Offer") for
the Old Notes under the Securities Act and (ii) use its best efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the Issue Date. As soon as practicable
after the effectiveness of the Exchange Offer Registration Statement, the
Company will offer to the holders of the Old Notes who are not prohibited by any
law or policy of the Commission from participating in the Exchange Offer the
opportunity to exchange their Old Notes for an issue of a second series of notes
(the "New Notes"), identical in all material respects to the Old Notes (except
that the New Notes will not contain terms with respect to transfer restrictions)
that would be registered under the Securities Act. The Company will keep the
Exchange Offer open for not less than 30 days (or longer, if required by law)
after the date notice of the Exchange Offer is mailed to the holders of the Old
Notes. If (i) applicable interpretations of the staff of the Commission do not
permit the Company to effect the Exchange Offer as contemplated thereby or (ii)
for any other reason the Exchange Offer is not consummated within 180 days after
the Issue Date or (iii) any holder either (A) is not eligible to participate in
the Exchange Offer or (B) participates in the Exchange Offer and does not
receive freely transferrable New Notes in exchange for tendered Old Notes, the
Company will file with the Commission a shelf registration statement (the "Shelf
Registration Statement") to cover resales of Transfer Restricted Securities by
such holders who satisfy certain conditions relating to, among other things, the
provision of information in connection with the Shelf Registration Statement.
For purposes of the foregoing, "Transfer Restricted Securities" means each Old
Note until (i) the date on which such Old Note has been exchanged for a freely
transferable New Note in the Exchange Offer, (ii) the date on which such Old
Note has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) the date on which such
Old Note is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
The Company will use its best efforts to have the Exchange Offer
Registration Statement and, if applicable, a Shelf Registration Statement (each
a "Registration Statement") declared effective by the Commission as promptly as
practicable after the filing thereof. Unless the Exchange Offer would not be
permitted by a policy of the Commission, the Company will commence the Exchange
Offer and will use its best efforts to consummate the Exchange Offer as promptly
as practicable, but in any event prior to 180 days after the Issue Date. If
applicable, the Company will use its best efforts to keep the Shelf Registration
Statement effective for a period of three years after the Issue Date, subject to
certain exceptions, including suspending the effectiveness thereof for certain
valid business reasons. If (i) the applicable Registration Statement is not
filed with the Commission on or prior to 60 days after the Issue Date, (ii) the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is not declared effective within 150 days after the Issue Date
(or in the case of a Shelf Registration Statement required to be filed in
response to a change in law or the applicable interpretations of Commission's
staff, if later, within 45 days after publication of the change in law or
interpretation), (iii) the Exchange Offer is not consummated on or prior to 180
days after the Issue Date, or (iv) the Shelf Registration Statement is filed and
declared effective within 150 days after the Issue Date (or in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or the applicable interpretations of Commission's staff, if later, within 45
days after publication of the change in law or interpretation), but shall
thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 60 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will generally be obligated to pay liquidated damages to each
85
<PAGE>
holder of Transfer Restricted Securities, during the period of such Registration
Default, in an amount equal to $0.192 per week per $1,000 principal amount of
the Old Notes constituting Transfer Restricted Securities held by such holder
until the applicable Registration Statement is filed or declared effective, the
Exchange Offer is consummated or the Shelf Registration Statement again becomes
effective, as the case may be; provided, however, no liquidated damages shall be
payable for a Registration Default under clause (iii) above if a Shelf
Registration Statement covering resales of the Transfer Restricted Securities
for which the Exchange Offer was intended shall have been declared effective.
All accrued liquidated damages shall be paid to holders in the same manner as
interest payments on the Old Notes on semi-annual payment dates which correspond
to interest payment dates for the Notes. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.
The Exchange and Registration Rights Agreement will also provide that the
Company (i) shall make available for a period of 90 days after the consummation
of the Exchange Offer a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such New
Notes and (ii) shall pay all expenses incident to the Exchange Offer (including
the expenses of one counsel to the holders of the Old Notes) and will indemnify
certain holders of the Old Notes (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act, and will be bound by the provisions of the Exchange and
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of the Old Notes that wishes to exchange such Old Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any New Notes to be received
by it will be acquired in the ordinary course of its business, (ii) it has no
arrangement with any person to participate in the distribution of the New Notes
and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities
Act, of the Company or Holdings or if it is an affiliate, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
If a holder is not a broker-dealer, it will be required to represent that it
is not engaged in, and does not intend to engage in, the distribution of the New
Notes. If a holder is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of market
making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
Holders of the Old Notes will be required to make certain representations to
the Company (as described above) in order to participate in the Exchange Offer,
and will be required to deliver information to be used in connection with the
Shelf Registration Statement in order to have their Old Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
liquidated damages set forth in the preceding paragraphs. A holder who sells Old
Notes pursuant to the Shelf Registration Statement generally will be required to
be named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Exchange and Registration Rights Agreement which
are applicable to such a holder (including certain indemnification obligations).
For so long as the Old Notes are outstanding, the Company will continue to
provide to holders of the Notes and to prospective purchasers of the Old Notes
the information required by paragraph (d)(4) of Rule 144A under the Securities
Act ("Rule 144A"). The Company will provide a copy of the Exchange and
Registration Rights Agreement to prospective purchasers of Old Notes identified
to the Company by any Initial Purchaser upon request.
86
<PAGE>
The foregoing description of the Exchange and Registration Rights Agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the Exchange and Registration Rights
Agreement.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relevant to the Exchange Offer, but does not purport to be a
complete analysis of all potential tax effects. It is based upon the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated and proposed thereunder, judicial authority and
current administrative rulings and practice, all of which are subject to change,
possibly on a retroactive basis. There are no Treasury Regulations, judicial
decisions or other authority that have considered a transaction closely
comparable to the Exchange Offer, and there can be no assurance that the
Internal Revenue Service will not take a contrary position to the positions
taken herein. The description does not consider the effect of any application
foreign, state, local or other tax laws or estate or gift tax considerations. No
rulings will be sought from the Internal Revenue Service with respect to the
federal income tax consequences of the Exchange Offer. The legal conclusions
expressed in this summary are the opinions of Richards & O'Neil, LLP, counsel to
the Company.
THE EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not constitute a material modification of the terms of the Old Notes and,
therefore, such exchange will not constitute an exchange for federal income tax
purposes. Accordingly, such exchange will have no federal income tax
consequences to holders of New Notes.
EACH HOLDER SHOULD CONSULT WITH ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
PLAN OF DISTRIBUTION
Based on interpretations by the Commission set forth in no-action letters
issued to third parties, the Company believes that New Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Notes directly from the
Company or (iii) broker-dealers who acquired Notes as a result of market-making
or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such Notes
are acquired in the ordinary course of such holders' business, and such holders
are not engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such Notes;
provided that broker-dealers ("Participating Broker-Dealers") receiving New
Notes in the Exchange Offer will be subject to a prospectus delivery requirement
with respect to resales of such New Notes. To date, the Commission has taken the
position that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Old Notes to the Initial Purchasers) with
the prospectus contained in the Exchange Offer Registration Statement. Pursuant
to the Exchange and Registration Rights Agreement, the Company has agreed to
permit Participating Broker-Dealers if any, subject to similar prospectus
delivery requirements to use this Prospectus in connection with the resale of
such New Notes. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus, and any amendment or supplement
to this Prospectus, available to any broker-dealer that requests such documents
in the Letter of Transmittal.
87
<PAGE>
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer--Purpose and Effect of the
Exchange Offer." In addition, each holder who is a broker-dealer and who
receives New Notes for its own account in exchange for Old Notes that were
acquired by it as a result of market-making activities or other trading
activities, will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Exchange and Registration Rights Agreement.
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by
Richards & O'Neil, LLP, New York, New York.
EXPERTS
The financial statements of Old Windy Hill as of May 3, 1997, December 28,
1996 and December 30, 1995, for the four-month period ended May 3, 1997, for the
year ended December 28, 1996, and for the ten month period ended December 30,
1995, included in this Prospectus, have been audited by KPMG Peat Marwick LLP,
independent accountants, as stated in their report appearing herein.
The financial statements of Hubbard as of April 30, 1997, 1996, and 1995,
and for each of the years in the three-year period ended April 30, 1997,
included in this Prospectus, have been audited by KPMG Peat Marwick LLP,
independent accountants, as stated in their report appearing herein.
The statement of revenue and certain expenses of Certain Acquired Product
Lines of the Heinz Pet Products Division of Star-Kist Foods, Inc. for the years
ended May 1, 1996 and May 3, 1995, included in this Prospectus have been audited
by Coopers & Lybrand L.L.P., independent accountants, as stated in their report
appearing herein.
88
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
WINDY HILL PET FOOD COMPANY, INC.
Independent Auditors' Report............................................................................ F-2
Balance Sheets as of May 3, 1997, December 28, 1996 and December 30, 1995............................... F-3
Statements of Operations for the four month period ended May 3, 1997, the year ended December 28, 1996
and the ten month period ended December 30, 1995...................................................... F-4
Statements of Stockholder's Equity for the four month period ended May 3, 1997, the year ended December
28, 1996 and the ten month period ended December 30, 1995............................................. F-5
Statements of Cash Flows for the four month period ended May 3, 1997, the year ended December 28, 1996
and the ten month period ended December 30, 1995...................................................... F-6
Notes to Financial Statements........................................................................... F-7
HUBBARD MILLING COMPANY
Independent Auditors' Report............................................................................ F-18
Balance Sheets as of April 30, 1997, 1996 and 1995...................................................... F-19
Statements of Earnings for the years ended April 30, 1997, 1996 and 1995................................ F-20
Statements of Cash Flows for the years ended April 30, 1997, 1996 and 1995.............................. F-21
Notes to Financial Statements........................................................................... F-22
STAR-KIST FOODS, INC.
Report of Independent Accountants....................................................................... F-33
Statement of Revenue and Certain Expenses of Certain Acquired Product Lines for
the years ended May 1, 1996 and May 3, 1995........................................................... F-34
Notes to Statement of Revenue and Certain Expenses of Certain Acquired Product Lines.................... F-35
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Windy Hill Pet Food Company, Inc.:
We have audited the accompanying balance sheets of Windy Hill Pet Food
Company, Inc. (a wholly owned subsidiary of Windy Hill Pet Food Holdings, Inc;
formerly Windy Hill Pet Food Company, LLC) as of May 3, 1997, December 28, 1996
and December 30, 1995, and the related statements of operations, stockholder's
equity and cash flows for the four month period ended May 3, 1997, for the year
ended December 28, 1996 and for the period from inception (March 1, 1995)
through December 30, 1995. 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. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Windy Hill Pet Food Company,
Inc. as of May 3, 1997, December 28, 1996 and December 30, 1995, and the results
of its operations and its cash flows for the four month period ended May 3,
1997, for the year ended December 28, 1996 and for the period from inception
through December 30, 1995 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
June 6, 1997
San Francisco, California
F-2
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
BALANCE SHEETS
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28, DECEMBER 30,
1997 1996 1995
--------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 893 $ 570 $ 327
Accounts receivable (less allowance of $56, $48 and $20,
respectively)..................................................... 6,715 8,224 2,750
Accounts receivable--other.......................................... 14 19 179
Inventories (Note 4)................................................ 5,098 5,141 1,720
Prepaid expenses.................................................... 1,051 811 398
Deferred tax assets (Note 8)........................................ -- 30 --
--------- -------------- --------------
Total current assets............................................ 13,771 14,795 5,374
Property, plant and equipment, net (Note 5)........................... 22,386 22,484 6,201
Goodwill and other intangible assets, net (Note 6).................... 51,158 51,515 14,556
Other assets.......................................................... 3,339 3,431 1,353
--------- -------------- --------------
Total assets (Note 7)........................................... $ 90,654 $ 92,225 $ 27,484
--------- -------------- --------------
--------- -------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank overdrafts..................................................... $ 2,173 $ 977 $ --
Current portion of long term debt (Note 7).......................... 5,800 5,800 1,500
Senior secured revolving debt facility (Note 7)..................... 4,000 2,000 --
Accounts payable.................................................... 7,822 8,839 3,591
Income taxes payable................................................ 24 -- --
Accrued liabilities................................................. 909 2,699 281
Deferred tax liability--current..................................... 50 -- --
--------- -------------- --------------
Total current liabilities....................................... 20,778 20,315 5,372
Senior secured term debt (Note 7)..................................... 32,850 35,750 15,500
Senior subordinated note (Note 7)..................................... 7,580 7,551 --
Deferred tax liability (Note 8)....................................... 2,581 2,252 --
Other liabilities (Note 11)........................................... 334 325 --
--------- -------------- --------------
Total liabilities............................................... 64,123 66,193 20,872
--------- -------------- --------------
Stockholder's equity (Note 12):
Common stock, $0.01 par value; 10,000 shares authorized;
100 shares issued and outstanding................................. -- -- --
Paid in capital..................................................... 25,681 25,681 5,891
Retained earnings................................................... 850 351 721
--------- -------------- --------------
Total stockholder's equity...................................... 26,531 26,032 6,612
--------- -------------- --------------
Commitments and contingent liabilities (Notes 4, 7, 9 and 13)
Total liabilities and stockholder's equity...................... $ 90,654 $ 92,225 $ 27,484
--------- -------------- --------------
--------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
STATEMENTS OF OPERATIONS
FOR THE FOUR MONTH PERIOD ENDED MAY 3, 1997, THE YEAR ENDED DECEMBER 28, 1996
AND
THE TEN MONTH PERIOD ENDED DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOUR MONTH TEN MONTH
PERIOD ENDED PERIOD ENDED
MAY 3, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------- -------------- --------------
<S> <C> <C> <C>
Net sales......................................................... $ 35,567 $ 82,993 $ 34,481
Cost of goods sold................................................ 21,640 54,379 22,107
------------- -------------- --------------
Gross profit................................................ 13,927 28,614 12,374
------------- -------------- --------------
Selling, distribution and marketing expenses:
Selling and distribution.................................... 3,500 8,090 4,751
Trade promotions and other marketing........................ 5,277 9,075 3,732
------------- -------------- --------------
Total selling, distribution and marketing expenses.......... 8,777 17,165 8,483
General and administrative expenses............................... 1,799 3,618 1,526
Amortization of intangibles and other assets...................... 623 1,316 452
------------- -------------- --------------
Total operating expenses.................................... 11,199 22,099 10,461
------------- -------------- --------------
Operating income............................................ 2,728 6,515 1,913
Interest income................................................... (20) (65) (30)
Interest expense.................................................. 1,667 3,825 1,155
Amortization of deferred financing expense........................ 132 259 67
Other bank and financing expenses................................. 17 40 --
------------- -------------- --------------
Income before income taxes and extraordinary item........... 932 2,456 721
Income tax expense (Note 8)....................................... 433 1,209 --
------------- -------------- --------------
Income before extraordinary item............................ 499 1,247 721
Extraordinary loss on early extinguishment of debt (Note 7)....... -- 604 --
------------- -------------- --------------
Net income.................................................. $ 499 $ 643 $ 721
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE FOUR MONTH PERIOD ENDED MAY 3, 1997, THE YEAR ENDED DECEMBER 28, 1996
AND
THE TEN MONTH PERIOD ENDED DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
MEMBERS' ------------------------ PAID IN RETAINED
CAPITAL SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------- ----------- ----------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Member contribution, net of syndication costs of
$109............................................. $ 5,891 -- $ -- $ -- $ -- $ 5,891
Net income......................................... -- -- -- -- 721 721
----------- ----- ----- -------------- ----------- ---------
Balance at December 30, 1995....................... 5,891 -- -- -- 721 6,612
Contribution of Windy Hill Pet Food Company, LLC
members' capital to Windy Hill Pet Food Company,
Inc. (Note 1 and Note 12)........................ (5,891) 23 -- 5,891 -- --
Deferred tax liability recognized.................. -- -- -- -- (1,013) (1,013)
Capital contribution from Windy Hill Pet Food
Holdings, Inc., net of syndication costs of
$210............................................. -- 77 -- 19,790 -- 19,790
Net income......................................... -- -- -- -- 643 643
----------- ----- ----- -------------- ----------- ---------
Balance at December 28, 1996....................... -- 100 -- 25,681 351 26,032
Net income......................................... -- -- -- -- 499 499
----------- ----- ----- -------------- ----------- ---------
Balance at May 3, 1997............................. $ -- 100 $ -- $ 25,681 $ 850 $ 26,531
----------- ----- ----- -------------- ----------- ---------
----------- ----- ----- -------------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
STATEMENTS OF CASH FLOWS
FOR THE FOUR MONTH PERIOD ENDED MAY 3, 1997, THE YEAR ENDED DECEMBER 28, 1996
AND
THE TEN MONTH PERIOD ENDED DECEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOUR MONTH TEN MONTH
PERIOD ENDED PERIOD ENDED
MAY 3, DECEMBER 28, DECEMBER 30,
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................................... $ 499 $ 643 $ 721
Adjustments to reconcile net income to cash provided by
operating activities:
Loss on early extinguishment of debt....................... -- 604 --
Depreciation and amortization.............................. 1,282 2,719 787
Deferred income taxes...................................... 409 1,209 --
Changes in assets and liabilities, net of effects from
businesses acquired:
Decrease/(Increase) in accounts receivable, net........ 1,514 (3,941) (960)
Decrease/(Increase) decrease in inventories............ 43 (454) 352
(Increase) in prepaid expenses......................... (240) (412) (34)
(Decrease)/Increase in accounts payable and accrued
liabilities.......................................... (2,807) 6,336 847
Increase in income taxes payable....................... 24 -- --
------- -------------- --------------
Net cash provided by operating activities........................ 724 6,704 1,713
------- -------------- --------------
Cash flows from investing activities:
Additions to property, plant and equipment..................... (389) (1,091) (1,120)
Additions to other assets and other intangible assets.......... (308) (357) (321)
Payment for acquisition of businesses, net of cash acquired.... -- (56,768) (22,165)
------- -------------- --------------
Net cash used in investing activities............................ (697) (58,216) (23,606)
------- -------------- --------------
Cash flows from financing activities:
Proceeds from senior secured revolving and term debt........... 4,000 48,000 17,000
Proceeds from senior subordinated note......................... -- 8,500 --
Repayment of borrowings........................................ (4,900) (21,450) --
Capital contributions.......................................... -- 19,000 6,000
Debt and equity issuance costs................................. -- (3,272) (780)
Increase in bank overdrafts.................................... 1,196 977 --
------- -------------- --------------
Net cash provided by financing activities........................ 296 51,755 22,220
------- -------------- --------------
Net increase in cash and cash equivalents........................ 323 243 327
Cash and cash equivalents, beginning of period................... 570 327 --
------- -------------- --------------
Cash and cash equivalents, end of period......................... $ 893 $ 570 $ 327
------- -------------- --------------
------- -------------- --------------
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the respective period ended:
Interest....................................................... $ 2,331 $ 3,759 $ 1,179
------- -------------- --------------
------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 1--THE COMPANY
ORGANIZATION
Windy Hill Pet Food Company, Inc. (the "Company"), a Delaware corporation,
is a privately held pet food company. The Company is a wholly owned subsidiary
of Windy Hill Pet Food Holdings, Inc. ("Holdings"), which is also a Delaware
corporation. The Company commenced operations March 1, 1995 under its previous
ownership structure as Windy Hill Pet Food Company, LLC (the "LLC"). In
connection with the Company's acquisition of certain brands from Heinz Pet
Products in April 1996, as further described in Note 3, the LLC's net assets
were contributed at net book value to Holdings. The Company was capitalized with
senior secured term debt and a senior subordinated note (Note 7), and a capital
infusion from Holdings (Note 12).
OPERATIONS
The Company manufactures and sells dog and cat food products and treats
which are sold across the United States. The products are manufactured in
McKenzie, Tennessee and Perham, Minnesota. The principal trademarks under which
the products are sold are Kozy Kitten-Registered Trademark-, Trail
Blazer-Registered Trademark-, Tuffy's-Registered Trademark-, G.
Whiskers-Registered Trademark- and Bonkers-Registered Trademark-.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in preparation of the financial
statements conform to generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities. Actual amounts could differ from these estimates and
assumptions. The Company uses the accrual basis of accounting in the preparation
of its financial statements.
FISCAL YEAR
The Company's fiscal year ends on the last Saturday in December.
Accordingly, the results of operations reflect activity for the year ended
December 28, 1996 and for the ten month period March 1, 1995 (commencement of
operations) through December 30, 1995. Also included in this report are the
Company's financial statement as of and for the four month period ended May 3,
1997. Certain prior year amounts have been reclassified to conform with the
current period's presentation.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months
or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method. Inventories include the
cost of raw materials, packaging, labor and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation expense is computed using the straight line method
over the estimated useful lives of the individual assets ranging from four to
thirty years. Costs for major renewal and additions are capitalized, while
repairs and maintenance costs are expensed as incurred.
F-7
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include trademarks, goodwill and certain identifiable
intangible assets. Trademarks and goodwill are being amortized over twenty to
forty years using the straight line method. Other intangible assets are being
amortized using the straight line method over three to five years. Amortization
of goodwill and other intangible assets charged against income during the four
month period ended May 3, 1997, the year ended December 28, 1996 and the ten
month period ended December 30, 1995 was $546,000, $1,111,000 and $294,000,
respectively.
OTHER ASSETS
Other assets consist of deferred loan acquisition costs, packaging design
costs and other miscellaneous assets. Deferred loan acquisition costs of the
senior subordinated note are being amortized using the interest method over the
term of the note. Deferred loan acquisition costs of the senior secured debt are
being amortized using the straight line method over the terms of the debt.
Amortization of deferred loan costs charged against income during the four month
period ended May 3,1997, the year ended December 28, 1996 and the ten month
period ended December 30, 1995 was $132,000, $259,000 and $67,000, respectively.
Amortization of packaging design costs charged against income during the four
month period ended May 3, 1997, the year ended December 28, 1996 and the ten
month period ended December 30, 1995 was $77,000, $205,000 and $158,000,
respectively.
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
For the purposes of financial reporting, the Company has determined that the
fair value of the financial instruments approximates book value at May 3, 1997,
December 28, 1996 and December 30, 1995, based on terms currently available to
the Company in financial markets for similar instruments.
DISCLOSURE ABOUT LONG-LIVED ASSET VALUATION
Statement of Financial Accounting Standards No. 121 (Statement 121),
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF, establishes the accounting and reporting requirements for
recognizing and measuring impairment of long-lived assets to be either held and
used or held for disposal. The Company has evaluated the carrying value for
evidence of impairment, and management believes at May 3, 1997, there were no
indications of impairment.
The Company assesses the recoverability of long-lived assets by determining
whether the recorded balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operation. The amount
of impairment, if any, is measured based upon projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds. The assessment of the recoverability of the asset will be impacted if
estimated future operating cash flows are not achieved.
CONCENTRATION OF CREDIT RISK
The Company sells its products to supermarkets, wholesalers and other
retailers. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains reserves for
potential credit losses and had no significant concentration of credit risk at
May 3, 1997, December 28, 1996 and December 30, 1995.
F-8
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company records income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES. This method of accounting for income taxes uses an asset and liability
approach which requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of assets and liabilities.
NOTE 3--BUSINESS ACQUISITIONS
On February 28, 1995, LLC acquired substantially all of the assets and
liabilities of the pet food division of Martha White Foods for $21,000,000. The
acquisition has been accounted for by the purchase method of accounting. To
finance the acquisition, a senior debt revolving facility was established with a
bank from which $16,000,000 was drawn at closing. In addition, $6,000,000 of
limited liability company interests were issued.
On April 29, 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of the Kozy Kitten-Registered Trademark- and
Tuffy's-Registered Trademark- dry pet food brands from Heinz Pet Products
("Heinz"), a division of Heinz, Inc. The purchase price was $52,500,000 which
included a contractually agreed upon amount of non-cash working capital (as
defined in the agreement). In conjunction with the acquisition, the Company and
Heinz entered into a royalty-free licensing agreement which entitles the Company
to use the Kozy Kitten trademark and trade name for dry cat food until April 29,
2006. The Trademark License and Option Agreement gives the Company the
irrevocable right to purchase the trademark and trade name from Heinz no earlier
than April 29, 2001 and no later than April 29, 2006 for a cash payment of
$2,500,000. The acquired assets also included a manufacturing facility in
Perham, Minnesota. The acquisition was accounted for using the purchase method
of accounting.
In order to effect the acquisition and to refinance the $17,000,000 of
existing debt of LLC at April 29, 1996, the Company entered into a series of
financings, as further described in Note 7. The financings included (i) a net
equity capital contribution of $19,800,000 from Holdings (Note 12), (ii) senior
secured term debt of $43,000,000 and a senior secured revolving debt facility of
$9,000,000, and (iii) issuance of a senior subordinated note in the gross amount
of $8,500,000.
The purchase prices of the acquired business have been allocated to tangible
and intangible assets as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash paid to acquire businesses........................................ $ 52,500 $ 21,000
Other direct acquisition costs......................................... 4,257 1,486
--------- ---------
56,757 22,486
Cost assigned to net tangible assets................................... (19,282) (7,371)
--------- ---------
Cost assigned to intangible assets..................................... $ 37,475 $ 15,115
--------- ---------
--------- ---------
</TABLE>
A portion of other acquisition costs reflected in the 1995 acquisition, in
the amount of $321,000, was recorded in the year ended December 28, 1996.
Concurrent with the 1996 purchase of assets, the Company and Heinz entered
into a five year co-packing agreement in which the Company will manufacture
certain pet food products for Heinz. The agreement requires Heinz to meet a
minimum supply amount at a co-packing rate which covers the
F-9
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 3--BUSINESS ACQUISITIONS (CONTINUED)
variable costs of the pet food products as well as an amount to cover a
specified rate of fixed costs at the Perham facility where the products are
manufactured.
Following is a summarized statement of operations which reflects activity
for the Company subsequent to the acquisition of the Heinz pet food brands (in
thousands):
<TABLE>
<CAPTION>
FOUR MONTH EIGHT MONTH
PERIOD ENDED PERIOD ENDED
MAY 3, 1997 DECEMBER 30, 1996
(AUDITED) (UNAUDITED)
------------- -------------------
<S> <C> <C>
NET SALES................................................ $ 35,567 $ 69,505
GROSS PROFIT............................................. 13,927 24,151
SELLING, DISTRIBUTION AND MARKETING EXPENSES............. 8,777 13,903
OPERATING INCOME......................................... 2,728 6,439
INCOME BEFORE TAXES...................................... 932 2,839
NET INCOME............................................... $ 499 $ 1,629
</TABLE>
Had the Heinz acquisition taken place at January 1, 1996, the unaudited pro
forma net sales and income before income taxes would have been $96,600,000 and
$5,762,000 for the year ended December 31, 1996.
NOTE 4--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28, DECEMBER 30,
1997 1996 1995
--------- -------------- --------------
<S> <C> <C> <C>
Raw materials...................................... $ 1,230 $ 1,253 $ 338
Packaging supplies................................. 2,267 2,339 850
Finished goods..................................... 1,601 1,549 532
--------- ------- -------
$ 5,098 $ 5,141 $ 1,720
--------- ------- -------
--------- ------- -------
</TABLE>
At May 3, 1997, the Company had commitments to purchase raw materials
aggregating approximately $5,228,000.
NOTE 5--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28, DECEMBER 30,
1997 1996 1995
--------- -------------- --------------
<S> <C> <C> <C>
Land.............................................. $ 203 $ 203 $ 128
Machinery and equipment........................... 17,043 17,043 4,572
Buildings and improvements........................ 6,266 6,266 1,681
Furniture and fixtures............................ 238 238 75
Transportation equipment.......................... 70 70 14
Construction-in-progress.......................... 399 11 --
--------- -------------- -------
24,219 23,831 6,470
Less accumulated depreciation..................... (1,833) (1,347) (269)
--------- -------------- -------
$ 22,386 $ 22,484 $ 6,201
--------- -------------- -------
--------- -------------- -------
</TABLE>
F-10
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 6--GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28, DECEMBER 30,
1997 1996 1995
--------- -------------- --------------
<S> <C> <C> <C>
Goodwill.......................................... $ 7,588 $ 7,588 $ 1,794
Trademarks........................................ 45,000 45,000 13,000
Other intangibles................................. 521 332 56
--------- -------------- --------------
53,109 52,920 14,850
Less accumulated amortization..................... (1,951) (1,405) (294)
--------- -------------- --------------
$ 51,158 $ 51,515 $ 14,556
--------- -------------- --------------
--------- -------------- --------------
</TABLE>
F-11
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 7--LONG TERM DEBT
Long term debt includes the following (in thousands):
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28, DECEMBER 30,
1997 1996 1995
--------- -------------- --------------
<S> <C> <C> <C>
SENIOR SECURED DEBT
Senior secured revolving debt; weighted average interest rate of 8.39%
at December 30, 1995; principal due in annual installments through
December 31, 2001; floating interest rate at the prime rate plus .50%
or alternatively, the one, three or six month Eurodollar rate plus
2.50%, payable quarterly or at the termination of the Eurodollar
contract interest period. ............................................ $ -- $ -- $ 17,000
Senior secured tranche A-1 debt, interest is variable, (8.44% at May
3, 1997 and 8.29% at December 28, 1996), principal due in quarterly
installments through April 30, 2003; floating interest rate at the
prime rate plus 1.75%, or alternatively, the one, two, three or six
month Eurodollar rate plus 2.75%, payable quarterly or at the
termination of the Eurodollar contract interest period. .............. 24,650 27,550 --
Senior secured tranche A-2 debt, interest is variable, (8.44% at May
3, 1997 and 8.29% at December 28, 1996), principal due in quarterly
installments beginning January 31, 2000 through April 30, 2003;
floating interest at the prime plus 1.75%, or alternatively, the one,
two, three or six month Eurodollar rate plus 2.75%, payable quarterly
or at the termination of the Eurodollar contract interest period. .... 14,000 14,000 --
SENIOR SUBORDINATED NOTE
Senior subordinated note issued April 29, 1996; coupon interest rate
of 12.0% with interest payable quarterly; matures on April 29, 2004;
net of original issue discount of $920,000. .......................... 7,580 7,551 --
--------- -------------- --------------
46,230 49,101 17,000
Less: current portion............................................. (5,800) (5,800) (1,500)
--------- -------------- --------------
Long-term debt.................................................... $ 40,430 $ 43,301 $ 15,500
--------- -------------- --------------
--------- -------------- --------------
</TABLE>
F-12
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 7--LONG TERM DEBT (CONTINUED)
Annual principal payments for the next five years and thereafter are as
follows (in thousands):
<TABLE>
<S> <C>
May-December 1997................................................. $ 2,900
1998.............................................................. 5,800
1999.............................................................. 5,800
2000.............................................................. 5,800
2001.............................................................. 5,800
Thereafter........................................................ 20,130
---------
$ 46,230
---------
---------
</TABLE>
As a result of the acquisition of certain brands from Heinz (Note 3), the
$17,000,000 of senior secured debt outstanding at December 30, 1995 was
refinanced. In connection with the retirement of debt, $604,000 of deferred loan
acquisition costs were written off as an extraordinary item in the statement of
operations for the year ended December 28, 1996. No income tax effect is
reflected, as the write-off was attributable to the members of LLC.
SENIOR SECURED DEBT
On April 29, 1996, the Company and Holdings entered into a Credit and
Guarantee Agreement ("the Agreement") with several banks for $43,000,000 of
senior secured term and revolving debt. The proceeds from the debt were used to
acquire certain assets and brands from Heinz, pay fees and expenses and fund
working capital. The debt is guaranteed by Holdings and the Company. The
Agreement contains optional prepayment provisions with no premium. Substantially
all the assets of the Company are pledged as collateral for the debt.
The Agreement includes $9,000,000 of available borrowing under a revolving
debt facility, of which $2,500,000 is reserved to support the Trademark License
and Option Agreement (Note 3). The available borrowings are also subject to
limitations related to aggregate inventory and accounts receivable levels. At
May 3, 1997 and December 28, 1996, the Company had an outstanding balance of
$4,000,000 and $2,000,000, respectively, under the revolver. The unused
borrowing availability was $2,500,000 and $4,500,000, after adjustment for the
reserve related to the Trademark License and Option Agreement at May 3, 1997 and
December 28, 1996, respectively. The Agreement requires a commitment fee of
0.50% per annum payable quarterly on the unused portions of the revolving debt
facility.
The Agreement includes restrictive covenants which limit additional
borrowing, cash dividends, and capital expenditures while also requiring the
Company to maintain certain financial ratios. The Company was in compliance with
these covenants at May 3, 1997.
SENIOR SUBORDINATED NOTE
On April 29, 1996, the Company issued a senior subordinated note (the
"Note") in the gross amount of $8,500,000 to a bank. The Note can be prepaid at
any time, subject to a prepayment penalty of 4% in the first year, 3% in the
second year, 2% in the third year, and 1% in the fourth year, and no prepayment
penalty thereafter.
The Note includes a provision for warrants for 10% of the stock of Holdings
with a nominal exercise price. The warrants are subject to anti-dilution
covenants. The warrants expire the later of ten years from the date of issuance
or four years after the Note has been repaid. The warrants are freely assignable
and detachable. The holder of the Note also has the right to "put" the warrants
or stock to Holdings, beginning after the earlier of five years from the
closing, a sale or merger of the Company, or an event of
F-13
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 7--LONG TERM DEBT (CONTINUED)
default on the Note. The value assigned to the warrants as of the issuance date
was $1,000,000 and was recorded at Holdings and contributed to the Company as
paid in capital. The capital contribution was recorded by the Company with a
corresponding discount to the value of the Note. The discount is being amortized
over the eight year life of the Note. Accumulated amortization as of May 3, 1997
and December 28, 1996 was $80,000 and $51,000, respectively.
The Note includes restrictive covenants which limit cash dividends, loans
and investments and capital expenditures while also requiring the Company to
maintain certain financial ratios. The Company was in compliance with these
covenants at May 3, 1997.
INTEREST RATE HEDGE AGREEMENT
The Company entered into an interest rate collar agreement (the "Collar") in
order to reduce the impact of changes in interest rates on its floating rate
term debt. The Collar consists of a floor rate and a cap rate. The current
effective cap rate is set at 7.50% (plus the applicable margin). The effective
floor rate is set at 5.50% (plus the applicable margin). The applicable margin
rates are set quarterly. The cost of the Collar was $74,000, which is recorded
in other assets in the accompanying balance sheets, and is being amortized over
the life of the agreement. Amortization expense for the four month period and
year ended May 3, 1997 and December 26, 1996 totaled $8,000 and $43,000,
respectively. As of May 3, 1997, the Company had total variable interest rate
debt outstanding in the amount of $42,650,000 of which $25,000,000 was covered
by the Collar. The Company has exposure to credit loss in the event of non-
performance by the other parties to the agreement; however, the Company does not
anticipate any credit losses related to the Collar.
NOTE 8--INCOME TAXES
The Company files a federal income tax return on a consolidated basis with
Holdings. State income tax returns are filed by Holdings and the Company on a
separate company basis or on a combined basis depending on the particular rules
in each state. The Company's income tax provision was computed as if all income
tax returns were filed on a separate company basis.
LLC filed separate federal and state information returns only. LLC's taxable
income or loss was reportable by the individual members of the LLC. Deferred tax
assets and liabilities were calculated on the differences between the tax bases
of the assets and liabilities and the book bases at April 29, 1996, the date on
which LLC contributed its assets and liabilities to the Company through
Holdings. A $1,013,000 deferred income tax liability associated with such
differences was recognized by Holdings, and is reflected as a reduction in
retained earnings as of that date.
F-14
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 8--INCOME TAXES (CONTINUED)
The provision for income taxes is summarized as follows (in thousands):
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28,
1997 1996
----------- --------------
<S> <C> <C>
Current tax expense:
Federal.......................................................... $ 7 $ --
State............................................................ 17 --
----- -------
Total current provision.............................................. 24 --
----- -------
Deferred tax expense:
Federal.......................................................... 345 938
State............................................................ 64 271
----- -------
Total deferred provision............................................. 409 1,209
----- -------
Total provision for income taxes..................................... $ 433 $ 1,209
----- -------
----- -------
</TABLE>
Deferred tax assets (liabilities) are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28,
1997 1996
-------------- --------------
<S> <C> <C>
Deferred tax assets--current -- 30
Deferred tax assets--noncurrent:
Loss carryforwards........................................ $ 578 $ 693
Other..................................................... 7 --
------- -------
Total deferred tax assets--noncurrent......................... 585 693
------- -------
Deferred tax liabilities--current (50) --
Deferred tax liabilities--noncurrent:
Goodwill.................................................. (2,891) (2,743)
Other..................................................... (275) (202)
------- -------
Total deferred tax liabilities--noncurrent.................... (3,166) (2,945)
------- -------
Net deferred tax liability.................................... $ (2,631) $ (2,222)
------- -------
------- -------
</TABLE>
The Company has not recorded a valuation allowance for its deferred tax
assets. Management believes that the Company's deferred tax assets will more
likely than not be realized.
At May 3, 1997, the Company has federal net operating loss carryforwards of
approximately $1,450,000. These losses can be used to offset future taxable
income through the year 2011. The Company is a loss corporation as defined in
section 382 of the Internal Revenue Code. Therefore, if certain substantial
changes of the Company's ownership should occur, there could be significant
annual limitations on the amount of net operating loss carryforwards which can
be utilized.
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate of
34% to the Company's pretax income of $932,00 and
F-15
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 8--INCOME TAXES (CONTINUED)
$2,839,000 for the four month period ended May 3, 1997 and for the eight month
period ended December 28, 1996, respectively, as a result of the following
differences (in thousands):
<TABLE>
<CAPTION>
MAY 3, DECEMBER 28,
1997 1996
--------- --------------
<S> <C> <C>
Provision for income taxes at U.S. statutory rate................... $ 317 $ 965
Increase in rate resulting from:
State tax provision, net of federal benefit..................... 75 179
Nondeductible expenses.......................................... 41 65
--------- -------
$ 433 $ 1,209
--------- -------
--------- -------
</TABLE>
NOTE 9--LEASES
The Company leases certain facilities, machinery and equipment under
operating lease agreements with varying terms and conditions. The leases are
noncancellable operating leases which expire on various dates through 2000.
Future annual minimum lease payments under these leases are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- --------------------------------------------------------------------------------------
<S> <C>
1997 $ 319
1998 284
1999 241
2000 83
2001 --
Thereafter.................................................................... --
---------
$ 927
---------
---------
</TABLE>
Rent expense was $145,427, $248,000 and $159,000 for the four month period
ended May 3, 1997, for the year ended December 28, 1996 and for the ten month
period ended December 30, 1995, respectively.
NOTE 10--SAVINGS PLANS
The Company maintains a defined contribution plan for all employees with
eligibility conditioned upon full-time employment. The Company makes annual
contributions based on a percent of the employee's annual taxable wages. Vesting
in the plan is according to a graduated scale of one third per year with full
vesting at the end of the third year of employment. The employer contribution
expense for the four months ended May 3, 1997, for the year ended December 28,
1996 and the ten month period ended December 30, 1995 was $102,000, $206,000 and
$72,000, respectively. Eligible employees are also given the opportunity to make
their own contributions to the plan on a tax deferred basis.
NOTE 11--RELATED PARTY TRANSACTIONS
The Company has a management services agreement with Dartford Partnership,
LLC ("Dartford") to provide consulting services and management oversight on
financial and operational matters. The Company paid fees totaling $167,000 and
$458,000 to Dartford, a member of LLC, during the four month period ended May 3,
1997 and the year ended December 28, 1996, respectively. The annual management
fee prior to the acquisition of the Heinz pet food brands and for the ten month
period
F-16
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF WINDY HILL PET FOOD HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 3, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995
NOTE 11--RELATED PARTY TRANSACTIONS (CONTINUED)
ended December 30, 1995 was $250,000. The charges are included in general and
administrative expenses in the statements of operations.
In connection with the acquisition of the Heinz pet food brands, a fee in
the amount of $500,000 is payable to a stockholder of Holdings for services
rendered to facilitate the acquisition. The fee is due on April 29, 2001 or
earlier under certain conditions. The fee has been recorded on the accompanying
balance sheet as an other liability at a discounted value. The accretion of the
interest factor for the four month period ended May 3, 1997 and for the year
ended December 28, 1996 was $9,000 and $15,000, respectively.
The Company paid certain members of LLC fees totaling $525,000 during the
year ended December 28, 1996 and $420,000 during the ten month period ended
December 30, 1995. The fees were paid for services provided in identifying,
negotiating and consummating the Company's acquisitions. The fees were included
in the costs of the acquisitions.
NOTE 12--STOCKHOLDER'S EQUITY
The authorized capital stock of the Company consists of 10,000 shares of
common stock, no par value, of which 100 shares were issued and outstanding and
held by Holdings as of May 3, 1997 and December 28, 1996. On April 29, 1996, LLC
contributed its members' capital of $5,891,000, which is net of syndication
costs of $109,000, to Holdings (Note 1). Holdings in turn contributed this
capital to the Company.
In conjunction with the acquisition of the Heinz pet food brands, Holdings
contributed additional capital to the Company in the amount of $19,790,000,
which is net of syndication costs of $210,000 (Note 3).
NOTE 13--COMMITMENTS AND CONTINGENCIES
The Company is subject to litigation in the ordinary course of business. In
the opinion of management, the ultimate outcome of any existing litigation would
not have a material adverse effect on the Company's financial condition or
results of operations.
NOTE 14--SUBSEQUENT EVENTS
On May 21, 1997, Windy Hill Pet Food Company, Inc., and its newly created
subsidiary, Windy Hill Pet Food Acquisition Co. ("WHAC"), merged with Hubbard
Milling Company ("Hubbard"). Hubbard is a privately held company which
manufactures and sells pet food and animal feed products across the United
States. Hubbard's corporate headquarters are in Mankato, Minnesota, and it
operates 26 manufacturing facilities. Hubbard was the surviving entity and
immediately changed its name to Windy Hill Pet Food Company, Inc. (New Windy
Hill). Upon consummation of the merger, the company contributed its assets to
New Windy Hill and changed its name to WHPF, Inc.
The Company and WHAC acquired 100% of the stock of Hubbard for cash. The
acquisition will be accounted for by the purchase method of accounting. The
purchase price was $149,000,000 and is subject to adjustment based on conditions
stated in the merger agreement. The acquisition, along with the refinancing of
the Company's current debt (Note 7), was financed with (i) a capital
contribution of $10,000,000 from Holdings, (ii) senior subordinated notes of
$120,000,000, and (iii) senior secured term debt facility of $20,000,000 and a
senior secured revolving debt facility of $45,000,000.
Immediately subsequent to the merger on May 21, 1997, New Windy Hill sold
the Animal Feed Division of Hubbard to Feed-Rite (US) Animal Feeds, Inc. The net
proceeds from the sale of $50,000,000 was used to retire $5,000,000 of the
senior secured term debt facility and prepay $45,000,000 of the senior secured
revolving debt facility.
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Hubbard Milling Company:
We have audited the accompanying balance sheets of Pet Food Division (a
division of Hubbard Milling Company) as of April 30, 1997, 1996 and 1995, and
the related statements of earnings and cash flows each of the years in the
three-year period ended April 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pet Food Division (a
division of Hubbard Milling Company) at April 30, 1997, 1996 and 1995, and the
results of its operations and its cash flows for each of the years in the
three-year period ended April 30, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
June 6, 1997
Minneapolis, Minnesota
F-18
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-----------------------------------------------
ASSETS 1997 1996 1995
- --------------------------------------------------------------- --------------- -------------- --------------
<S> <C> <C> <C>
Current assets:
Cash and short-term investments, at cost which approximates
market..................................................... $ 15,006,116 $ 13,846,705 $ 11,882,585
Trade receivables, less allowance for doubtful accounts of
$274,000, $258,500 and $224,221, respectively.............. 5,356,769 5,773,101 4,999,458
Inventories.................................................. 5,372,905 5,762,544 6,194,481
Prepaid expenses............................................. 59,764 102,155 177,467
--------------- -------------- --------------
Total current assets....................................... 25,795,554 25,484,505 23,253,991
--------------- -------------- --------------
Property, plant and equipment, at cost:
Land......................................................... 1,348,540 1,340,063 1,345,190
Buildings.................................................... 12,904,693 12,085,731 11,641,431
Equipment.................................................... 35,986,524 34,658,895 32,395,959
--------------- -------------- --------------
50,239,757 48,084,689 45,382,580
Less accumulated depreciation................................ (25,164,947) (21,575,369) (18,902,486)
--------------- -------------- --------------
25,074,810 26,509,320 26,480,094
Construction in progress..................................... 174,959 117,342 1,422,542
--------------- -------------- --------------
Net property, plant and equipment.......................... 25,249,769 26,626,662 27,902,636
--------------- -------------- --------------
Investments in and advances to joint ventures and
partnerships................................................. 4,190,414 4,756,956 2,342,012
Other assets................................................... 4,082,569 5,227,497 4,366,328
--------------- -------------- --------------
$ 59,318,306 $ 62,095,620 $ 57,864,967
--------------- -------------- --------------
--------------- -------------- --------------
<CAPTION>
LIABILITIES AND INVESTMENT AND ADVANCES BY PARENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued expenses...................... $ 7,341,254 $ 8,686,131 $ 7,274,333
Associates' profit sharing trust, bonus and savings plan... 226,909 1,944,507 1,614,852
Income tax payable......................................... 262,430 223,144 25,862
--------------- -------------- --------------
Total current liabilities.............................. 7,830,593 10,853,782 8,915,047
Deferred credits............................................. 2,393,560 1,565,007 2,864,497
Accrued postretirement and pension expense................... 1,610,471 1,423,852 1,085,814
--------------- -------------- --------------
Total liabilities...................................... 11,834,624 13,842,641 12,865,358
--------------- -------------- --------------
Investment and advances by Parent............................ 47,483,682 48,252,979 44,999,609
Contingencies................................................
--------------- -------------- --------------
$ 59,318,306 $ 62,095,620 $ 57,864,967
--------------- -------------- --------------
--------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
----------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales................................................... 108,523,031 $ 102,268,658 $ 87,736,386
Cost of sales............................................... 87,767,776 80,658,065 67,052,037
---------------- ---------------- ----------------
Gross profit............................................ 20,755,255 21,610,593 20,684,349
---------------- ---------------- ----------------
Operating expenses:
Warehouse and delivery.................................... 188,327 200,119 245,690
Selling and advertising................................... 6,924,434 7,035,518 6,468,689
General and administrative................................ 6,098,926 5,917,179 5,743,380
---------------- ---------------- ----------------
Total operating expenses................................ 13,211,687 13,152,816 12,457,759
---------------- ---------------- ----------------
Operating income........................................ 7,543,568 8,457,777 8,226,590
---------------- ---------------- ----------------
Other income:
Interest.................................................. 867,180 774,582 789,672
Equity in earnings of joint ventures...................... 976,179 980,576 1,355,832
Other..................................................... 80,865 36,910 46,207
---------------- ---------------- ----------------
Total other income...................................... 1,924,224 1,792,068 2,191,711
---------------- ---------------- ----------------
Income before other expenses and income taxes........... 9,467,792 10,249,845 10,418,301
Other expenses.............................................. 10,778 26,456 41,124
---------------- ---------------- ----------------
Earnings before income taxes............................ 9,457,014 10,223,389 10,377,177
Income tax expense.......................................... 3,683,678 3,935,682 4,133,387
---------------- ---------------- ----------------
Net earnings............................................ 5,773,336 $ 6,287,707 $ 6,243,790
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------------------
<S> <C> <C> <C>
1997 1996 1995
--------------- --------------- ---------------
Cash flows from operating activities:
Net earnings................................................ 5,773,336 $ 6,287,707 $ 6,243,790
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation.............................................. 3,755,973 3,490,004 3,060,395
Amortization of goodwill and other intangible assets...... 269,623 265,668 31,797
Deferred income taxes..................................... 1,112,636 (1,916,094) 503,931
Deferred compensation..................................... 180,147 152,519 724,434
(Gain) loss on disposal of property, plant and
equipment............................................... (1,017) 22,418 22,036
Change in assets and liabilities excluding effects of
acquisitions:
(Increase) decrease in trade receivables.................. 416,332 (773,643) (925,844)
Decrease in inventories................................... 389,639 431,937 662,535
Decrease in prepaid expenses.............................. 42,391 75,312 351,511
(Increase) decrease in other assets....................... 411,220 (662,752) (226,584)
Increase (decrease) in accounts payable and accrued
expenses................................................ (1,158,260) 1,749,836 1,490,813
Increase (decrease) in income taxes payable............... 39,286 197,282 (286,302)
Increase (decrease) in other current liabilities.......... (1,717,598) 329,655 423,347
--------------- --------------- ---------------
Total adjustments....................................... 3,740,372 3,362,142 5,832,069
--------------- --------------- ---------------
Net cash provided by operating activities............... 9,513,708 9,649,849 12,075,859
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from disposal of property, plant and equipment..... 27,599 946 167,663
Additions to property, plant and equipment.................. (2,405,805) (3,839,178) (2,607,308)
Payments and advances for acquisitions, joint ventures and
partnerships.............................................. 566,542 (813,160) (10,597,258)
--------------- --------------- ---------------
Net cash used in investing activities................... (1,811,664) (4,651,392) (13,036,903)
--------------- --------------- ---------------
Cash flows from financing activities:
Increase (decrease) in intercompany account................. (6,542,633) (3,034,337) 4,890,319
--------------- --------------- ---------------
Net cash provided by (used by) financing activities..... (6,542,633) (3,034,337) 4,890,319
--------------- --------------- ---------------
Net increase in cash and cash equivalents............... 1,159,411 1,964,120 3,929,275
Cash and cash equivalents at beginning of period.............. 13,846,705 11,882,585 7,953,310
--------------- --------------- ---------------
Cash and cash equivalents at end of period.................... $ 15,006,116 $ 13,846,705 $ 11,882,585
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL INFORMATION AND BASIS OF STATEMENT PRESENTATION
Pet Food Division ("Pet Food" or the "Company") is a division of Hubbard
Milling Company ("Hubbard"). Pet Food is a North American manufacturer and
marketer of private label dog and cat food.
The accompanying financial statements do not necessarily reflect the
financial position and results of operations of Pet Food in the future, or what
the financial position and results of operations would have been had it been an
independent entity during the periods presented.
RECEIVABLES
The Company provides an allowance for estimated collection losses. The
estimated losses are based on a review of the current status of existing
receivables in conjunction with historical collection experience.
INVENTORIES
Inventories are valued substantially at the lower of cost (first in, first
out) or market.
PROPERTY, DEPRECIATION AND AMORTIZATION
The cost of buildings and equipment is capitalized and charged to earnings
utilizing the straight-line method of depreciation over the estimated useful
lives of the related assets. The cost of significant improvements to properties
is similarly depreciated, while the cost of repairs and routine maintenance is
charged to earnings as incurred. Goodwill is generally amortized over a period
of 15 years. Other intangible assets are amortized over the life of the related
assets.
PENSION PLANS
The Company has defined benefit plans covering substantially all of its
associates. The benefits are based on years of service and associate
compensation. The Company's funding policy is to contribute annually the amount
recommended by its actuaries. Contributions are intended to provide not only for
benefits attributed to service to-date but also for those expected to be earned
in the future.
OTHER POSTRETIREMENT BENEFITS
The Company has adopted Statement of Financial Accounting Standards (SFAS)
106 "Employers' Accounting for Postretirement Benefits Other Than Pensions."
SFAS 106 requires the accrual of postretirement benefits over the years the
associates provide service to the date of their first eligibility for such
benefits. The Company is fully reserved to cover anticipated costs.
INCOME TAXES
The Company follows the practice of recognizing the income tax effects of
transactions in the year in which they enter into the determination of
accounting income, regardless of when they are recognized for income tax
purposes. Accordingly, income tax expense includes charges and credits for
deferred income taxes and the accumulated deferred income taxes are recorded in
the accompanying balance sheets.
The Company has adopted Statement of Financial Accounting Standards (SFAS)
109 "Accounting for Income Taxes." SFAS 109 requires that deferred tax
liabilities and assets be established based on the
F-22
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
difference between the financial and income tax carrying values of assets and
liabilities using existing tax rates.
STATEMENTS OF CASH FLOWS
Investments are valued at cost which approximates market. Short-term
investments with maturities of 60 days or less and investments which can be
redeemed immediately are considered cash equivalents.
CASH PAID FOR INCOME TAXES:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
$ 2,747,334 $ 7,933,594 $ 4,777,076
</TABLE>
The noncash investment activity during the fiscal year ended April 30, 1996
of $1,601,784 was for a transfer of property, plant & equipment to a joint
venture.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
F-23
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(2) SUPPLEMENTAL ASSET AND LIABILITY INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
--------------------------------------------
1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Inventories:
Raw materials.................................................... $ 1,015,665 $ 980,509 $ 1,090,260
Finished and in-process goods.................................... 2,005,206 2,205,168 2,070,094
Packaging and supplies........................................... 2,352,034 2,576,867 3,034,127
-------------- ------------- -------------
Total inventories.............................................. $ 5,372,905 $ 5,762,544 $ 6,194,481
-------------- ------------- -------------
-------------- ------------- -------------
Other assets:
Goodwill......................................................... $ 3,357,027 $ 3,615,663 $ 3,871,113
Other intangible assets.......................................... 104,158 114,574 123,696
Deferred taxes................................................... -- 464,085 --
Restricted insurance deposits.................................... 288,886 229,971 --
Other............................................................ 332,498 803,204 371,519
-------------- ------------- -------------
Total other assets............................................. $ 4,082,569 $ 5,227,497 $ 4,366,328
-------------- ------------- -------------
-------------- ------------- -------------
Accounts payable and accrued expenses:
Accounts payable................................................. $ 4,368,548 $ 5,496,369 $ 4,912,216
Accrued insurance................................................ 1,246,563 1,631,510 841,987
Accrued vacation................................................. 889,363 852,068 612,890
Other............................................................ 836,780 706,184 907,240
-------------- ------------- -------------
Total accounts payable and accrued expenses.................... $ 7,341,254 $ 8,686,131 $ 7,274,333
-------------- ------------- -------------
-------------- ------------- -------------
Deferred credits:
Deferred taxes................................................... $ 648,551 $ -- $ 1,452,009
Deferred compensation............................................ 1,745,009 1,565,007 1,412,488
-------------- ------------- -------------
Total deferred credits......................................... $ 2,393,560 $ 1,565,007 $ 2,864,497
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
(3) INVESTMENT AND ADVANCES BY PARENT
Investment and advances by parent represents Hubbard's ownership interest in
the recorded net assets of Pet Food. All cash transactions and intercompany
transactions flow through this account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
----------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at beginning of period.................................. $ 48,252,979 $ 44,999,609 $ 33,865,500
Net earnings.................................................... 5,773,336 6,287,707 6,243,790
Net intercompany activity....................................... (6,542,633) (3,034,337) 4,890,319
-------------- -------------- --------------
Balance at end of period.................................... $ 47,483,682 $ 48,252,979 $ 44,999,609
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
F-24
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(4) RELATED PARTY TRANSACTIONS
Transactions with Hubbard include certain disbursements by Hubbard on behalf
of Pet Food and charges for certain operating expenses.
Expenses are charged based upon the specific identification of applicable
costs, and in certain instances, a proportional cost allocation. Management
believes that the basis of all such charges is reasonable. The amount of general
and administrative expenses charged by Hubbard to Pet Food is as follows:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
$ 2,872,473 $ 2,201,489 $ 2,358,819
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Sales to and purchases from the Hubbard Animal Feed Division amounted to the
following:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Sales............................................................... $ 3,492,207 $ 3,631,688 $ 3,161,613
------------- ------------- -------------
------------- ------------- -------------
Purchases........................................................... $ 909,291 $ 601,549 $ 407,835
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
(5) ACQUISITIONS
On April 3, 1995, the Company acquired substantially all the manufacturing
assets of Triumph Pet Industries, Inc. for cash. The facility manufactures and
markets pet biscuit products. The acquisition has been accounted for as a
purchase and included in the accompanying financial statements from the date of
purchase.
The components of cash used for the acquisition, as reflected in the
statement of cash flows, were as follows:
<TABLE>
<S> <C>
Fixed assets.................................................. $ 6,147,745
Inventory..................................................... 1,314,038
Prepaid expenses.............................................. 127,231
Goodwill...................................................... 3,680,000
Noncompete agreements......................................... 100,000
-----------
$11,369,014
-----------
</TABLE>
Assuming the acquisition had been made on May 1, 1994, pro forma net sales
in fiscal year 1995 and earnings of the Company would have been $98,549,343 and
$6,772,418, respectively.
(6) INCOME TAXES
The Company is part of a consolidated federal income tax return with Hubbard
and is allocated a federal tax provision as if the Company filed a separate
return. The state tax provision is allocated by applying a weighted-average
state tax rate to the Company's federal taxable income.
F-25
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(6) INCOME TAXES (CONTINUED)
Income tax expense is comprised of the following components:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current tax expense:
Federal........................................................... $ 2,268,403 $ 6,294,306 $ 3,435,412
State............................................................. 472,021 1,450,830 754,759
Deferred federal and state.......................................... 943,254 (3,809,454) (56,784)
------------- ------------- -------------
Total income tax expense........................................ $ 3,623,678 $ 3,935,682 $ 4,133,387
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Income tax expense on earnings before income taxes differs from the amounts
derived by applying the federal statutory rate for the following reasons:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
------------------------------------------------------
1997 PERCENT 1996 PERCENT
------------- OF PRETAX ------------- OF PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Computed "expected" federal tax expense...................... $ 3,309,955 35.0% $ 3,475,952 34.0%
State income tax, net of federal income tax benefit.......... 406,652 4.3% 480,499 4.7%
Other, net................................................... (32,929) (0.3%) (20,769) (0.2%)
------------- ----------- ------------- -----------
Total income tax expense................................. $ 3,683,678 39.0% $ 3,935,682 38.5%
------------- ----------- ------------- -----------
------------- ----------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30, 1995
--------------------------
<S> <C> <C> <C> <C>
PERCENT
OF PRETAX
AMOUNT EARNINGS
------------- -----------
Computed "expected" federal tax expense...................... $ 3,632,012 35.0%
State income tax, net of federal income tax benefit.......... 487,727 4.7%
Other, net................................................... 13,648 0.1%
------------- -----------
Total income tax expense................................. $ 4,133,387 39.8%
------------- -----------
------------- -----------
</TABLE>
F-26
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(6) INCOME TAXES (CONTINUED)
Deferred income tax assets and liabilities result from temporary differences
in the carrying values of assets and liabilities for financial statement and
income tax purposes. The deferred tax assets and liabilities relate to the
following asset and liability accounts:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
--------------------------------------------
1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Deferred tax assets related to:
Associate and retiree benefit accruals............................ $ 1,696,798 $ 1,289,462 $ 1,183,228
Inventory......................................................... 538,599 616,518 727,405
Other accrued expenses............................................ 360,773 494,844 175,892
Allowance for doubtful accounts................................... 109,600 103,400 89,688
Other, net........................................................ 67,688 598,132 97,096
-------------- ------------- -------------
Total deferred tax assets....................................... $ 2,773,458 $ 3,102,356 $ 2,273,309
-------------- ------------- -------------
-------------- ------------- -------------
Deferred tax liabilities related to:
Property, plant and equipment................................... (2,340,332) (2,509,652) (2,822,069)
Other, net...................................................... (1,081,677) (128,619) (903,249)
-------------- ------------- -------------
Total deferred tax liabilities.................................. (3,422,009) (2,638,271) (3,725,318)
-------------- ------------- -------------
-------------- ------------- -------------
Net deferred tax assets (liabilities)........................... (648,551) $ 464,085 (1,452,009)
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
SFAS 109 also requires consideration of a valuation allowance if it is "more
likely than not" that benefits of deferred tax assets will not be realized.
Management has determined, based on prior earnings history and anticipated
earnings, that no valuation allowance is necessary at April 30, 1997, 1996, or
1995.
F-27
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(7) ASSOCIATE BENEFIT PLANS
The Company has two noncontributory, defined benefit pension plans covering
hourly and salaried associates. Total pension expense for the plans for the
years ended April 30, 1997, 1996 and 1995 was $159,290, $211,914 and $193,546,
respectively.
The following tables set forth the funded status of the pension plans and
the amount recognized in the Company's balance sheets:
<TABLE>
<CAPTION>
APRIL 30, 1997
-------------------------------------------
<S> <C> <C> <C>
HOURLY SALARIED
PLAN PLAN TOTAL
------------- ------------- -------------
Actuarial present value of benefit obligations:
Vested............................................................ $ 4,312,313 $ 3,502,569 $ 7,814,882
Nonvested......................................................... 243,606 200,333 443,939
------------- ------------- -------------
Accumulated benefit obligation.................................. 4,555,919 3,702,902 8,258,821
Effect of projected future salary increases......................... 24,928 656,313 681,241
------------- ------------- -------------
Projected benefit obligation.................................... 4,580,847 4,359,215 8,940,062
Market value of plan assets......................................... 4,327,689 4,848,895 9,176,584
------------- ------------- -------------
Plan assets in (deficit) excess of projected benefit
obligation.................................................... (253,158) 489,680 236,522
Unrecognized net transition asset................................... (229,225) (295,599) (524,824)
Unrecognized prior service cost..................................... 168,572 90,740 259,312
Unrecognized net loss (gain)........................................ 499,731 (421,792) 77,939
------------- ------------- -------------
Prepaid pension cost (pension liability)........................ $ 185,920 $ (136,971) $ 48,949
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996
-------------------------------------------
<S> <C> <C> <C>
HOURLY SALARIED
PLAN PLAN TOTAL
------------- ------------- -------------
Actuarial present value of benefit obligations:
Vested............................................................ $ 3,800,501 $ 2,693,190 $ 6,493,691
Nonvested......................................................... 199,035 147,002 $ 346,037
------------- ------------- -------------
Accumulated benefit obligation.................................. 3,999,536 2,840,192 6,839,728
Effect of projected future salary increases......................... 42,593 538,180 580,773
------------- ------------- -------------
Projected benefit obligation.................................... 4,042,129 3,378,372 7,420,501
Market value of plan assets......................................... 3,938,066 3,638,533 7,576,599
------------- ------------- -------------
Plan assets in (deficit) excess of projected benefit
obligation.................................................... (104,063) 260,161 156,098
Unrecognized net transition asset................................... (260,765) (281,621) (542,386)
Unrecognized prior service cost..................................... 171,088 85,210 256,298
Unrecognized net loss (gain)........................................ 349,934 (192,126) 157,808
------------- ------------- -------------
Prepaid pension cost (pension liability)........................ $ 156,194 $ (128,376) $ 27,818
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-28
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(7) ASSOCIATE BENEFIT PLANS (CONTINUED)
<TABLE>
<CAPTION>
APRIL 30, 1995
-------------------------------------------
<S> <C> <C> <C>
HOURLY SALARIED
PLAN PLAN TOTAL
------------- ------------- -------------
Actuarial present value of benefit obligations:
Vested............................................................ $ 3,073,766 $ 2,020,267 $ 5,094,033
Nonvested......................................................... 191,633 129,893 $ 321,526
------------- ------------- -------------
Accumulated benefit obligation.................................. 3,265,399 2,150,160 5,415,559
Effect of projected future salary increases......................... 27,779 404,386 432,165
------------- ------------- -------------
Projected benefit obligation.................................... 3,293,178 2,554,546 5,847,724
Market value of plan assets......................................... 3,140,553 2,655,823 5,796,376
------------- ------------- -------------
Plan assets in (deficit) excess of projected benefit
obligation.................................................... (152,625) 101,277 (51,348)
Unrecognized net transition asset................................... (280,934) (283,665) (564,599)
Unrecognized prior service cost..................................... 127,238 84,928 212,166
Unrecognized net loss (gain)........................................ 409,465 (50,292) 359,173
------------- ------------- -------------
Prepaid pension cost (pension liability)........................ $ 103,144 $ (147,752) $ (44,608)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The net periodic pension cost components were as follows:
<TABLE>
<CAPTION>
HOURLY SALARIED
PLAN PLAN TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Service cost--benefits earned during the year........................... $ 108,381 $ 156,150 $ 264,531
Interest cost on projected benefit obligation........................... 330,229 307,990 638,219
Gain on plan assets..................................................... 91,312 (175,232) (83,920)
Net amortization and other components................................... (449,558) (209,982) (659,540)
------------ ------------ ------------
Total pension expense for the year ended April 30, 1997............. $ 80,364 $ 78,926 $ 159,290
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
HOURLY SALARIED
PLAN PLAN TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Service cost--benefits earned during the year.............................. $ 103,112 $ 131,845 $ 234,957
Interest cost on projected benefit obligation.............................. 290,642 237,334 527,976
Gain on plan assets........................................................ (368,043) (534,211) (902,254)
Net amortization and other components...................................... 70,016 239,891 309,907
----------- ----------- -----------
Total pension expense for the year ended April 30, 1996................ $ 95,727 $ 74,859 $ 170,586
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
HOURLY SALARIED
PLAN PLAN TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
Service cost--benefits earned during the year............................... $ 81,541 $ 97,412 $ 178,953
Interest cost on projected benefit obligation............................... 252,525 191,678 444,203
Loss on plan assets......................................................... 211,690 94,462 306,152
Net amortization and other components....................................... (456,371) (318,175) (774,546)
---------- ---------- -----------
Total pension expense for the year ended April 30, 1995................. $ 89,385 $ 65,377 $ 154,762
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
F-29
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(7) ASSOCIATE BENEFIT PLANS (CONTINUED)
The principal actuarial assumptions used were:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996
-------------------------- --------------------------
<CAPTION>
HOURLY SALARIED HOURLY SALARIED
PLAN PLAN PLAN PLAN
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Discount rate at period end............................................... 7.5% 7.5% 7.5% 7.5%
Long-term rate of compensation increase................................... 5.0% 5.0% 5.0% 5.0%
Long-term rate of return on plan assets................................... 8.0% 8.0% 8.0% 8.0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED
APRIL 30, 1995
--------------------------
<CAPTION>
HOURLY SALARIED
PLAN PLAN
----------- -------------
<S> <C> <C>
Discount rate at period end................................................................... 8.0% 8.0%
Long-term rate of compensation increase....................................................... -- 5.0%
Long-term rate of return on plan assets....................................................... 8.0% 8.0%
</TABLE>
The Company sponsors a profit sharing plan covering all salaried associates
and office clerical associates, with the exception of commissioned associates.
Contributions and costs are determined by Hubbard's Board of Directors and are
allocated to each participating associate in the proportion of the individual
associate's salary to the aggregate salaries of all participating associates.
Contribution expense for the years ended April 30, 1997, 1996 and 1995 was
$198,500, $0 and $286,980, respectively. In addition, the Company sponsors a
non-contributory 401(k) plan for its associates.
(8) OTHER POSTRETIREMENT BENEFITS
The Company provides health care benefits for eligible retired associates
and their covered dependents and spouses. Associates must be 55 years old or
older with 10 years of service upon retirement to be eligible for coverage under
the current plan. Depending on the date of retirement, the retiree must pay the
premium cost associated with health care coverage. The plan in effect is not
funded.
Under SFAS 106, postretirement benefit expense included the following
components:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
--------------------------------------
<S> <C> <C> <C>
1997 1996 1995
-------------- --------- -----------
Current service cost..................................................... 26,510 $ 21,947 $ 38,400
Interest on accumulated benefit obligation............................... 104,661 99,946 84,371
Amortization of unrecognized net gain.................................... (70,092) (33,269) --
-------------- --------- -----------
Total postretirement benefits expense................................ 61,079 $ 88,624 $ 122,771
-------------- --------- -----------
-------------- --------- -----------
</TABLE>
F-30
<PAGE>
PET FOOD DIVISION
(A DIVISION OF HUBBARD MILLING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1997, 1996 AND 1995
(8) OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The accumulated postretirement obligation included the following components:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------- ------------- -------------
Eligible active plan participants................................... 1,215,459 $ 968,118 $ 964,542
Retirees............................................................ 79,569 46,491 53,450
Other active plan participants...................................... 161,007 130,450 108,490
------------- ------------- -------------
Accumulated postretirement benefit obligation................... 1,456,035 $ 1,145,059 $ 1,126,482
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The discount rate used to determine the accumulated postretirement benefit
obligation was 8%. The assumed health care cost trend rate used to measure the
obligation was 8% for 1997, and 8% thereafter. A one-percentage point increase
in the assumed health care cost trend rate would have increased the expense for
the year ended April 30, 1997 by $20,413 and the accumulated postretirement
obligation by $207,732.
(9) CONTINGENCIES
The Company is a party to several lawsuits and claims arising out of the
conduct of its business. While the ultimate results of lawsuits or other
proceedings against the Company cannot be predicted with certainty, management
does not expect that these matters will have a material adverse effect on the
financial position or results of operations of the Company.
F-31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Star-Kist Foods, Inc.
Newport, Kentucky:
We have audited the statement of revenue and certain expenses of Certain
Acquired Product Lines, as described in Note 1, of the Heinz Pet Products
Division of Star-Kist Foods, Inc. (the "Company"), for the years ended May 1,
1996 and May 3, 1995. This financial statement is the responsibility of
Star-Kist Foods, Inc. management. Our responsibility is to express an opinion on
this special purpose statement based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
As discussed in Note 1 to the statement, the accompanying statement presents
a carved-out portion of the results of operations of the Heinz Pet Products
Division of Star-Kist Foods, Inc.. The operations covered by the statement of
revenue and certain expenses referred to above have no separate legal status or
existence. The accompanying statement was prepared, as described in Note 1, for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a registration of securities in a
Regulation 144A filing for subordinated debt, and subsequent inclusion in a
Registration Statement on Form S-4, of Windy Hill Pet Food Company, Inc. Various
costs incurred by the Company were allocated to the Acquired Product Lines based
on estimates, as described in the notes to the statement. Accordingly, the
resulting statement is not necessarily indicative of the costs and expenses that
would have resulted if the Acquired Product Lines had been operated as a
separate entity.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses, as described in Note
1, of the Acquired Product Lines for each of the years ended May 1, 1996 and May
3, 1995, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Cincinnati, Ohio
May 1, 1997
F-32
<PAGE>
HEINZ PET PRODUCTS
DIVISION OF STAR-KIST FOODS, INC.
STATEMENT OF REVENUE AND CERTAIN EXPENSES OF CERTAIN ACQUIRED PRODUCT LINES
FOR THE YEARS ENDED MAY 1, 1996 AND MAY 3, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 1, MAY 3,
1996 1995
--------- ---------
<S> <C> <C>
Net sales.................................................................................. $ 35,864 $ 37,217
Cost of product sold....................................................................... 24,523 20,692
--------- ---------
Gross profit............................................................................. 11,341 16,525
--------- ---------
Selling and distribution expenses.......................................................... 3,872 3,849
Marketing expenses......................................................................... 938 967
General and administrative expenses........................................................ 1,839 2,297
--------- ---------
6,649 7,113
--------- ---------
Revenue in excess of certain expenses.................................................... $ 4,692 $ 9,412
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-33
<PAGE>
HEINZ PET PRODUCTS
DIVISION OF STAR-KIST FOODS, INC.
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
OF CERTAIN ACQUIRED PRODUCT LINES
1. BASIS OF PRESENTATION:
In April 1996, Windy Hill Pet Food Company, Inc. ("Windy Hill") acquired the
Kozy Kitten Dry, Kozy Kitten Moist, Tuffy's, and Vet's Dry pet food product
lines (the "Acquired Product Lines") from Star-Kist Foods, Inc. (the "Company").
The accompanying statement of revenues and certain expenses of the Acquired
Product Lines represent a carved-out portion of the results of operations of the
Heinz Pet Products Division of the Company. These revenues and certain expenses
may not necessarily be indicative of the results of operations of the Acquired
Products Lines had they existed on a stand-alone basis. Certain expenses are the
result of the allocation of total expenses incurred by the Company and certain
expenses of its Parent Company, H.J. Heinz Company, to the Acquired Product
Lines. All of the allocations and estimates in the financial statements, as
described in Note 2, are based on assumptions that Company management believes
are reasonable.
The accompanying statement of revenue and certain expenses has been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments and
eliminations, consisting only of normal recurring adjustments, necessary to
present fairly the statement of revenue and certain expenses of the Acquired
Product Lines for the year ended May 1, 1996 and May 3, 1995, have been
included.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. COST OF PRODUCT SOLD: Cost of product sold is comprised of standard costs
and also includes amounts for purchase price variances, yield variances, labor
variances, and fixed and variable overhead variances. The fixed and variable
manufacturing variances are allocated to the product lines based on the
percentage of their volume of production to total production. This percentage is
determined by dividing production of product line goods by total production on a
plant by plant basis.
Cost of product sold in 1996, as a percentage of sales, is greater than in
1995 principally due to the Company's transfer of the production of Kozy Kitten
Dry product from one of its plants to another plant, which had higher costs of
production.
B. SELLING AND DISTRIBUTION EXPENSES: Selling and distribution expenses
include storage, and certain brokerage costs, which are allocated based on the
percentage of net sales to total sales. Also included in selling and
distribution expenses are delivery costs, which are allocated based on the
percentage of forecasted sales to total sales. These percentages are determined
by dividing product line net or forecasted sales by total net or forecasted
sales.
C. GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
include costs such as incentive bonuses, non-direct salary and related benefit
expenses, and depreciation. These costs are allocated to product lines based on
their percentage of net sales to total sales. This percentage is determined by
dividing product line net sales by total net sales.
D. INTEREST COSTS: The accompanying statement of revenue and certain
expenses does not include an allocation of interest charges. An intercompany
interest charge has not historically been provided for product lines, due to the
inherent difficulty in distinguishing the specific components of the Company's
and its Parent Company's capital structure attributable to product lines.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
F-34
<PAGE>
ANNEX A TO OFFERING PROSPECTUS
FORM OF
TRANSFEREE LETTER OF REPRESENTATION
Windy Hill Pet Food Company, Inc.
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Dear Sirs:
This certificate is delivered to request a transfer of $ principal
amount of the 9 3/4% Senior Subordinated Notes due 2007 (the "Notes") of Windy
Hill Pet Food Company, Inc. (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: __________________________________________________________________________
Address: _______________________________________________________________________
Taxpayer ID Number: ____________________________________________________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) and (7) under the Securities Act of 1933, as amended
(the "Securities Act"), purchasing for our own account or for the account of
such an institutional "accredited investor" at least $250,000 principal
amount of the Notes, and we are acquiring the Notes not with a view to, or
for offer or sale in connection with, any distribution in violation of the
Securities Act. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes and invest in or purchase securities similar to the
Notes in the normal course of our business. We, and any accounts for which
we are acting, are each able to bear the economic risk of our or its
investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Notes to offer,
sell or otherwise transfer such Notes prior to the date which is two years
after the later of the date of original issue and the last date on which the
Company or any affiliate of the Company was the owner of such Notes (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to
the Company, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) in a transaction complying
with the requirements of Rule 144A under the Securities Act, to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule
144A, (d) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" (within the meaning of Rule 501(a)(1),
(2), (3) and (7) under the Securities Act) that is purchasing for its own
account or for the account of such an institutional "accredited investor,"
in each case in a minimum principal amount of Notes of $250,000 or (f)
pursuant to any other available exemption from the registration requirements
of the Securities
A-1
<PAGE>
Act, subject in each of the foregoing cases to any requirement of law that
the disposition of our property or the property of such investor account or
accounts be at all times within our or their control and in compliance with
any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Notes is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the
form of this letter to the Company and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) and (7) under the
Securities Act and that is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Company and the Trustee reserve the right prior to the
offer, sale or other transfer prior to the Resale Termination Date of the
Notes pursuant to clause (d), (e) or (f) above to require the delivery of an
opinion of counsel, certifications and/or other information satisfactory to
the Company and the Trustee.
TRANSFEREE: __________________________
By: __________________________________
A-2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- -------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 12
The Transaction....................... 17
Use of Proceeds of the New Notes...... 20
Capitalization........................ 20
The Exchange Offer.................... 21
Selected Historical Financial Data.... 29
Pro Forma Financial Information....... 31
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 39
Business.............................. 45
Management............................ 52
Security Ownership.................... 55
Certain Related Transactions.......... 57
Description of Senior Bank
Facilities.......................... 58
Description of Notes.................. 60
Exchange and Registration Rights
Agreement........................... 85
Certain United States Federal Income
Tax Considerations.................. 87
Plan of Distribution.................. 87
Legal Matters......................... 88
Experts............................... 88
Index to Financial Statements......... F-1
Annex A -- Form of Transferee Letter
of Representation................... A-1
</TABLE>
PROSPECTUS
EXCHANGE OFFER FOR ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2007 OF
WINDY HILL PET FOOD
COMPANY, INC.
[LOGO]
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Unless prohibited or limited in a corporation's articles or bylaws,
Section302A.521 of the Minnesota Business Corporation Act ("MBCA") requires
indemnification of a person made or threatened to be made a party to a
proceeding by reason of the former or present official capacity of such person,
against judgments, penalties, fines, settlements and reasonable expenses
(including attorney's fees and disbursements) incurred by such person in
connection with a threatened or pending proceeding if the person (1) has not
been indemnified by another organization or employee benefit plan for the same
judgments, penalties or fines; (2) acted in good faith; (3) received no improper
personal benefit and statutory procedure has been followed in the case of any
conflict or interest by a director; (4) in the case of a criminal proceeding,
and no reasonable cause to believe the conduct was unlawful; and (5) reasonably
believed the conduct to be in the best interests of the corporation or, in the
case of conduct occurring in such person's official capacity for another
organization, reasonably believed the conduct was not opposed to the best
interests of the corporation. Section 302A.521, subd. 3, requires payment by the
Company of reasonable expenses in advance of final disposition of the proceeding
in certain instances.
Article VIII of the Company's Bylaws provides that the Company shall
indemnify any director, officer or employee of the Company made or threatened to
be made a party to a proceeding by reason of the former or present official
capacity of the person in accordance with the MBCA.
As permitted by Section 302A.251, subd. 4, of the MBCA, Article IX of the
Articles of Incorporation of the Company (the "Articles") eliminates the
liability of the directors of the Company for monetary damages arising from
breach of fiduciary duties as a member of the Company's Board of Directors
except: (1) for any breach of the director's duty of loyalty to the corporation
or its shareholders; (2) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) under Section 302A.559
or 80A.23; (4) for any transaction from which the director derived an improper
personal benefit; or (5) for any act or omission occurring prior to the date
when the provision in the Articles became effective.
The foregoing statements are subject to the detailed provisions of Section
302A.52 of the MBCA, Article VII of the Bylaws of the Company and Article IX of
the Articles, as applicable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed as part of the Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Merger Agreement, dated as of March 21, 1997, by and among Hubbard Milling Company, Windy Hill Pet Food
Co., Inc. and Windy Hill Pet Food Acquisition Co. (the "Merger Agreement")
2.2 Amendment to Merger Agreement, dated as of March 31, 1997
2.3 Articles of Merger, dated May 21, 1997, of Windy Hill Pet Food Acquisition Co. into Hubbard Milling
Company
2.4 Stock Purchase Agreement, dated as of April 22, 1997, by and between Windy Hill Pet Food Company, Inc.
and the shareholders of Armour Corporation
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.6 Asset Purchase Agreement, dated as of April 25, 1997, by and among Windy Hill Pet Food Company, Inc.,
Windy Hill Pet Food Acquisition Co. and Feed-Rite (US) Animal Feeds, Inc.
2.7 Asset Purchase Agreement, dated as of April 17, 1996, among Heinz Pet Products Company, a division of
Star-Kist Foods, Inc., H.J. Heinz Company, Perk Foods Co., Incorporated, ProMark International, Inc.,
Windy Hill Pet Food Holdings, Inc. and Windy Hill Pet Food Company, Inc.
2.8 Amendment to Asset Purchase Agreement, dated as of April 26, 1996, among Heinz Pet Products Company, a
Star-Kist Foods, Inc., Perk Foods Co., Incorporated, ProMark International, Inc., H.J. Heinz Company,
Windy Hill Pet Food Holdings, Inc. and Windy Hill Pet Food Company, Inc.
3.1 Certificate of Amended and Restated Articles of Incorporation of Windy Hill Pet Food Company, Inc.
3.2 By-Laws of Windy Hill Pet Food Company, Inc.
4.1 Indenture, dated as of May 21, 1997, between Windy Hill Pet Food Company, Inc. and Wilmington Trust
Company
4.2 Form of Exchange Note (contained in Exhibit 4.1 hereto)
4.3 Registration Rights Agreement, dated May 21, 1997, between Windy Hill Pet Food Company, Inc., Chase
Securities Inc. and Credit Suisse First Boston Corporation
4.4 Global Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to the Depository Trust
Company and registered in the name of Cede & Co. in the principal amount of $120,000,000
5.1 Opinion of Richards & O'Neil, LLP regarding legality of New Notes*
8.1 Opinion of Richards & O'Neil, LLP regarding certain tax matters*
10.1 Distribution Agreement, dated May 21, 1997, by and between Windy Hill Pet Food Company, Inc. and
Feed-Rite (US) Animal Feeds, Inc.
10.2 License Agreement, dated May 21, 1997, by and between Feed-Rite (US) Animal Feeds, Inc. and Windy Hill
Pet Food Company, Inc.
10.3 Guaranty Agreement, dated April 25, 1997, among Feed-Rite Ltd., Windy Hill Pet Food Acquisition Co. and
Windy Hill Pet Food Company, Inc.
10.4 Memorandum of Agreement, dated as of May 21, 1997, among Windy Hill Pet Food Company, Inc., Windy Hill
Pet Food Acquisition Co. and Feed-Rite (US) Animal Feeds, Inc.
10.5 Assignment of Trademarks, dated May 21, 1997, by Windy Hill Pet Food Company, Inc. to Feed-Rite (US)
Animal Feeds, Inc.
10.6 Employee Benefits Agreement, dated May 21, 1997, by and between Windy Hill Pet Food Company, Inc. and
Feed-Rite (US) Animal Feeds, Inc.
10.7 Disbursing Agreement, dated as of May 21, 1997, by and among Hubbard Milling Company, Richard P. Confer,
Windy Hill Pet Food Company, Inc. and Norwest Bank of Minnesota, N.A.
10.8 Term Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to BankBoston, N.A. in the
principal amount of $1,505,882.35
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.9 Term Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to SouthTrust Bank of
Alabama, National Association in the principal amount of $1,505,882.35
10.10 Term Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to First Source Financial LLP
in the principal amount of $1,505,882.35
10.11 Term Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to NationsBank of Tennessee,
N.A. in the principal amount of $1,505,882.35
10.12 Acquisition Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to BankBoston, N.A. in
the principal amount of $3,388,235.30
10.13 Acquisition Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to First Source
Financial LLP in the principal amount of $3,388,235.30
10.14 Acquisition Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to SouthTrust Bank of
Alabama, National Association in the principal amount of $3,388,235.30
10.15 Acquisition Note, dated May 21, 1997, issued by Windy Hill Pet Food Company, Inc. to NationsBank of
Tennessee, N.A. in the principal amount of $3,388,235.30
10.16 Credit Agreement, dated as of May 21, 1997, among Windy Hill Pet Food Acquisition Co., the several banks
and other financial institutions from time to time parties thereto, Credit Suisse First Boston, as
Administrative Agent, and The Chase Manhattan Bank, as Documentation Agent
10.17 Guarantee and Collateral Agreement, dated as of May 21, 1997, made by Windy Hill Pet Food Holdings,
Inc., WHPF Inc., Armour Corporation, Windy Hill Pet Food Company, Inc., each of the signatories thereto
in favor of Credit Suisse First Boston, as Administrative Agent for the banks and other financial
institutions, and The Chase Manhattan Bank, as Documentation Agent
10.18 Consent and Release of Lenders, dated May 19, 1997, related to the credit facility, dated as of April
29, 1996, by and among Windy Hill Pet Food Company, Inc., Windy Hill Pet Food Holdings, Inc. and their
subsidiaries, NationsBank of Tennessee, N.A. as Administrative Agent and PNC Bank, National Association,
as Documentation Agent
10.19 Consent and Release of PNC Capital Corp., dated May 20, 1997, related to the Note Purchase Agreement
dated as of April 29, 1996 between Windy Hill Pet Food Company, Inc. and PNC Capital Corp.
10.20 Statement of Understanding regarding Pet Food Joint Venture, dated June 1, 1984, between The Andersons
and Hubbard Milling Company
10.21 Supplement No. 1 to Statement of Understanding regarding Pet Food Joint Venture, dated as of May 31,
1989, between The Andersons and Hubbard Milling Company
10.22 Supplement No. 2 to Statement of Understanding regarding Pet Food Joint Venture, dated as of November
27, 1990, between The Andersons and Hubbard Milling Company
10.23 Supplement No. 3 to Statement of Understanding regarding Pet Food Joint Venture, dated as of November
18, 1992, between The Andersons and Hubbard Milling Company
10.24 Supplement No. 4 to Statement of Understanding regarding Pet Food Joint Venture, dated as of November 9,
1994, between The Andersons and Hubbard Milling Company
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.25 Supplement No. 5 to Statement of Understanding regarding Pet Food Joint Venture, dated as of January 16,
1997, between The Andersons and Hubbard Milling Company
10.26 Statement of Understanding regarding Pet Food Joint Venture, dated as of January 28, 1988, between
Merrick Pet Foods and Hubbard Milling Company
10.27 Joint Venture Agreement, dated as of January 9, 1992, between MFA, Inc. and Hubbard Milling Company
10.28 Joint Venture Agreement, dated as of July 28, 1993, between J.R. Simplot Company and Hubbard Milling
Company
10.29 Joint Venture Agreement, dated as of April 7, 1995, between Flint River Mills, Inc. and Hubbard Milling
Company
10.30 Statement of Understanding regarding Pet Food Ventures, dated as of August 10, 1993, between Phelps
Industries, Inc. and Hubbard Milling Company
10.31 Purchase Agreement, dated May 16, 1997, among the Windy Hill Pet Food Acquisition Co., Chase Securities
Inc., and Credit Suisse First Boston Corporation
10.32 Trademark License and Option Agreement, dated April 29, 1996, among Windy Hill Pet Food Company, Inc.,
Promark International, Inc., Heinz Pet Products Company, a division of Star-Kist Foods, Inc. and H.J.
Heinz Company
10.33 Trademark License Agreement, dated April 29, 1996, between Windy Hill Pet Food Company, Inc. and Heinz
Pet Products Company, a division of Star-Kist Foods, Inc.
10.34 License Agreement, dated April 29,1996, between Park Foods Co., Incorporated and Windy Hill Pet Food
Company, Inc.
10.35 Transition Storage and Handling Agreement, dated as of April 29, 1996, between Heinz Pet Products
Company, a division of Star-Kist Foods, Inc. and Windy Hill Pet Food Company, Inc.
10.36 Transition Services Agreement, dated as of April 29, 1996, among Heinz Pet Products Company, a division
of Star-Kist Foods, Inc., H.J. Heinz Company of Canada, Ltd., and Windy Hill Pet Food Company, Inc.
10.37 Lease Agreement, dated as of May 16, 1997, between W. Fred Williams, Trustee for the Benefit of
Highwoods/Tennessee Holdings, L.P., as Lessor and Windy Hill Pet Food Company, Inc., as Lessee
10.38 Lease Agreement, dated as of February 25, 1995, between Eastpark, L.P., as Lessor and Windy Hill Pet
Food Company, Inc. as Successor in interest to P.F.B. Partnership, as Lessee
10.39 Software License Agreement, dated April 29, 1996, between Agri-Data System, Inc. and Windy Hill Pet Food
Company, Inc.
10.40 Employment Agreement, dated April 29, 1996, by and between Windy Hill Pet Food Company, Inc. and Robert
V. Dale
10.41 Employment Agreement, dated April 29, 1996, by and between Windy HIll Pet Food Company, Inc. and Donald
L. Gadd
10.42 Employment Agreement, dated April 29, 1996, by and between Windy Hill Pet Food Company, Inc. and F.
Donald Cowan, Jr.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.43 Employment Agreement, dated April 29, 1996, by and between Windy Hill Pet Food Company, Inc. and Vaughn
R. Oakley
10.44 Amended and Restated Management Services Agreement, dated as of May 2, 1997 between Windy Hill Pet Food
Company, Inc. and Dartford Partnership L.L.C.
10.45 Letter Agreement, dated April 29, 1996, between Windy Hill Pet Food Company, Inc. and Bruckmann, Rosser,
Sherrill & Co., Inc.
10.46 Letter Agreement, dated May 21, 1997, among WHPF, Inc., Windy Hill Pet Food Company, Inc. and Bruckmann,
Rosser, Sherrill & Co., Inc.
12.1 Statement of Computation of Ratios
23.1 Consent of KPMG Peat Marwick L.L.P.*
23.2 Consent of Coopers & Lybrand L.L.P.*
23.3 Consent of Richards & O'Neil, LLP (included in Exhibit 5.1 and Exhibit 8.1 hereto)*
25.1 Statement of Eligibility on Form T-1 of Wilmington Trust Company
99.1 Form of Exchange Agent Agreement to be entered into by Windy Hill Pet Food Company, Inc. and Wilmington
Trust Company
99.2 Form of Letter of Transmittal
99.3 Form of Notice of Guarantee Delivery
</TABLE>
- ------------------------
*To be filed by amendment
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(i) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(ii) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the
II-5
<PAGE>
ITEM 22. UNDERTAKINGS (CONTINUED)
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offer.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Brentwood,
State of Tennessee, on June , 1997.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ ROBERT V. DALE
-----------------------------------------
Name: Robert V. Dale
Title PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ ROBERT V. DALE
- ------------------------------ President and Director June , 1997
Robert V. Dale
Executive Vice President
/s/ RAY CHUNG (Principal financial and
- ------------------------------ accounting officer) and June , 1997
Ray Chung Director
/s/ IAN R. WILSON
- ------------------------------ Chairman of the Board June , 1997
Ian R. Wilson
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director June , 1997
Stephen C. Sherrill
/s/ STEPHEN F. EDWARDS
- ------------------------------ Director June , 1997
Stephen F. Edwards
/s/ KASE LAWAL
- ------------------------------ Director June , 1997
Kase Lawal
/s/ DONALD WELGE
- ------------------------------ Director June , 1997
Donald Welge
<PAGE>
- ------------------------------------------------------------------------------
MERGER AGREEMENT
by and among
HUBBARD MILLING COMPANY,
WINDY HILL PET FOOD CO., INC.
and
WINDY HILL PET FOOD ACQUISITION CO.
Dated as of March 21,1997
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of the Agreement)
Page
ARTICLE I THE MERGER ..................................................... 1
1.01 PLAN OF MERGER ............................................. 1
1.02 EFFECTIVE TIME OF THE MERGER ................................ 2
1.03 CONVERSION OF HUBBARD SHARES. ............................... 2
1.04 DISSENTERS' RIGHTS .......................................... 5
ARTICLE II CLOSING, PAYMENT FOR SHARES AND RELATED MATTERS ............... 6
2.01 GENERALLY ................................................... 6
2.02 PAYMENT FOR SHARES .......................................... 6
2.03 DEFERRED COMPENSATION PLAN PAYMENTS ......................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES ............................... 9
3.01 REPRESENTATIONS AND WARRANTIES OF HUBBARD ................... 9
3.02 REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER SUBSIDIARY. 28
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME .......... 30
4.01 OPERATION OF BUSINESS OF HUBBARD UNTIL EFFECTIVE TIME ....... 30
4.02 SHAREHOLDERS' MEETING; PROXY MATERIAL ....................... 32
4.03 NO SHOPPING ................................................. 32
4.04 ACCESS TO INFORMATION ....................................... 33
4.05 AMENDMENT OF HUBBARD'S EMPLOYEE PLANS ....................... 33
4.06 HART-SCOTT-RODINO ACT ....................................... 33
4.07 SUPPLEMENTS TO DISCLOSURE SCHEDULE .......................... 34
4.08 ENGAGEMENT OF AUDITORS ...................................... 34
4.09 EMPLOYEE SAVINGS PLAN PAYMENTS .............................. 34
4.10 LANDLORD ESTOPPELS .......................................... 35
4.11 MONTHLY FINANCIAL STATEMENTS ................................ 35
4.12 PAYMENTS TO ELIMINATE OR LIMIT CERTAIN TIME EXCEPTIONS ...... 35
4.13 CONFIDENTIALITY ............................................. 35
ARTICLE V CONDITIONS PRECEDENT ........................................... 36
5.01 CONDITIONS TO THE OBLIGATIONS OF BUYER AND BUYER SUBSIDIARY . 36
5.02 CONDITIONS TO THE OBLIGATIONS OF HUBBARD .................... 39
ARTICLE VI CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME ............. 41
6.01 POST-CLOSING OPERATIONS ..................................... 41
6.02 EMPLOYEE BENEFIT PLANS ...................................... 41
-i-
<PAGE>
6.03 DIRECTOR AND OFFICER EXCULPATION AND INDEMNIFICATION ........ 42
6.04 FILING OF TAX RETURNS ....................................... 42
6.05 INSURANCE COVERAGE. ........................................ 43
ARTICLE VII TERMINATION AND ABANDONMENT .................................. 43
7.01 GENERALLY. .................................................. 43
7.02 PROCEDURE AND EFFECT OF TERMINATION AND ABANDONMENT ......... 44
ARTICLE VIII SHAREHOLDER REPRESENTATIVE .................................. 45
8.01 DESIGNATION ................................................. 45
8.02 AUTHORITY ................................................... 45
8.03 RESIGNATION ................................................. 46
8.04 RELIANCE BY THIRD PARTIES ON THE SHAREHOLDER
REPRESENTATIVE'S AUTHORITY ................................. 46
8.05 EXCULPATION AND INDEMNIFICATION ............................. 46
ARTICLE IX MISCELLANEOUS PROVISIONS ...................................... 47
9.01 LIMITATIONS ON SURVIVAL ..................................... 47
9.02 INDEMNIFICATION ............................................. 47
9.03 AMENDMENT AND MODIFICATION .................................. 50
9.04 ALTERNATIVE DISPUTE RESOLUTION .............................. 50
9.05 WAIVER OF COMPLIANCE; CONSENTS .............................. 51
9.O6 EXPENSES .................................................... 51
9.07 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS ..................... 51
9.08 ADDITIONAL AGREEMENTS ....................................... 51
9.O9 NOTICES ..................................................... 52
9.1O ASSIGNMENT .................................................. 53
9.11 GOVERNING LAW ............................................... 53
9.12 COUNTERPARTS ................................................ 53
9.13 KNOWLEDGE ................................................... 53
9.14 HEADINGS; INTERNAL REFERENCES ............................... 53
9.15 ENTIRE AGREEMENT ............................................ 53
9.16 SEVERABILITY ................................................ 53
EXHIBITS
A Armour Stock Purchase Agreement
B Plan of Merger
C Amendment to Hubbard Articles of Incorporation
D Form of Opinion of Counsel to Hubbard
E Environmental Reports to be Delivered
F Form of Opinion of Counsel to Buyer and Buyer Subsidiary
-ii-
<PAGE>
INDEX OF DEFINED TERMS
(Not Part of the Agreement)
Section
-------
Active Subsidiaries ............................................ 3.01(b)
Active Subsidiary .............................................. 3.01(b)
Adjusted Working Capital ....................................... 1.03(b)
Agenda Items ................................................... 4.02
Annual Reports ................................................. 3.01(e)
Armour ......................................................... Recitals
Armour Capital Stock ........................................... Recitals
Armour Shareholders ............................................ Recitals
Armour Stock Purchase Agreement ................................ Recitals
Authorized Persons ............................................. 4.04
Balance Sheet .................................................. 3.01(g)
Buyer .......................................................... Introduction
Buyer Subsidiary ............................................... Introduction
Chase Bridge Financing Commitment .............................. 3.02(d)
Closing ........................................................ 2.01
Closing Date ................................................... 2.01
Closing Date Balance Sheet ..................................... 1.03(b)
Closing Documents .............................................. 9.02(a)
Code ........................................................... 3.0l(h)(iii)
Common Equity Amount ........................................... 1.03(b)
Common Stock Merger Consideration .............................. 2.02(c)
Common Stock Merger Consideration Per Share .................... 1.03(b)
Compensation Continuation Benefit Agreements ................... 1.03(b)
Confidentiality Agreement ...................................... 4.13
CSFB ........................................................... 3.01(o)
CSFB Bridge Financing Commitment ............................... 3.02(d)
Current Property ............................................... 3.01(q)(ii)(C)
Damages ........................................................ 9.02(a)
Disbursing Agent ............................................... 2.02(a)
Disbursing Agreement ........................................... 2.02(a)
Disclosure Schedule ............................................ 3.01
Dissenting Holders ............................................. 2.02(e)
Dissenting Share ............................................... 1.04(c)
Dissenting Shares .............................................. 1.04(c)
Effective Time ................................................. 1.02
Employee Benefit Plan .......................................... 3.01(p)(v)
Employee Pension Benefit Plan .................................. 3.01(p)(v)
Employee Welfare Benefit Plan .................................. 3.01(p)(v)
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<PAGE>
Environmental Law .............................................. 3.01(q)(i)(A)
Environmental Liabilities ...................................... 9.02(a)
ERISA .......................................................... 3.01(p)(v)
ERISA Affiliate... ............................................. 3.01(p)(v)
Escrow Amount.... .............................................. 2.02(a)
Estimated Common Stock Merger Consideration .................... 2.02(a)
Extraordinary Expenditures ..................................... 1.03(b)
Fee Property ................................................... 3.01(i)(i)
Fiduciary ...................................................... 3.0l(p)(v)
Former Property ................................................ 3.01(q)(ii)(C)
Hart-Scott-Rodino Act .......................................... 3.01(d)
Hazardous Substance ............................................ 3.01(q)(i)(B)
Hubbard ........................................................ Introduction
Hubbard Capital Stock .......................................... Recitals
Hubbard Class A Common Stock ................................... 3.01(b)
Hubbard Class B Common Stock ................................... 3.01(b)
Hubbard 5% Preferred Stock ..................................... 3.01(b)
Hubbard Preferred Stock ........................................ 3.01(b)
Hubbard Undesignated Preferred Stock ........................... 3.01(b)
Indemnified Environmental Liabilities .......................... 9.02(a)
Indemnified Litigation and Claims .............................. 9.02(a)
Indemnified Party .............................................. 9.02(c)
Indemnified Title Costs and Expenses ........................... 4.12
Indemnifying Party ............................................. 9.02(c)
Interim Audit Report ........................................... 4.08(a)
Leasehold Property ............................................. 3.01(i)(i)
Material Contracts ............................................. 3.01(k)
MBCA ........................................................... 1.02
Merger ......................................................... Recitals
Multiemployer Plan ............................................. 3.01(p)(v)
1997 Incentive Plan Program .................................... 1.03(b)
Normalizing Amount ............................................. 1.03(b)
PBGC ........................................................... 3.01(p)(v)
Permitted Exceptions ........................................... 3.01(i)(ii)
Plan of Merger ................................................. Recitals
Preferred Stock Merger Consideration ........................... 1.03(a)
Prohibited Transaction ......................................... 3.01(p)(v)
Proprietary Rights ............................................. 3.01(1)
Reportable Event ............................................... 3.01(p)(v)
Shareholder Representative ..................................... 8.01
Shareholders ................................................... 8.01
Statement ...................................................... 4.02
-iv-
<PAGE>
Stay Pay Agreements ............................................. 1.03(b)
Subsidiaries .................................................... 3.01(b)
Subsidiary ...................................................... 3.01(b)
Tax Returns ..................................................... 3.01(h)(i)
Taxes ........................................................... 3.01(h)(i)
-v-
<PAGE>
MERGER AGREEMENT dated as of March 21, 1997, by and among HUBBARD
MILLING COMPANY, a Minnesota corporation ("Hubbard"), WINDY HILL PET FOOD CO.,
INC. a Delaware corporation ("Buyer"), and WINDY HILL PET FOOD ACQUISITION CO.,
a Minnesota corporation ("Buyer Subsidiary").
WITNESSETH:
WHEREAS, all of the issued and outstanding capital stock of Hubbard
("Hubbard Capital Stock") is owned by Armour Corporation, a Delaware corporation
("Armour"), and certain other persons;
WHEREAS, Buyer desires to acquire Hubbard by (i) purchasing all of
the issued and outstanding capital stock of Armour (the "Armour Capital Stock")
from the holders thereof (the "Armour Shareholders") pursuant to a Stock
Purchase Agreement between Buyer and the Armour Shareholders in the form of
Exhibit A (the "Armour Stock Purchase Agreement"), and (ii) thereafter effecting
the merger (the "Merger") of Buyer Subsidiary, a wholly-owned subsidiary of
Buyer, with and into Hubbard pursuant to a Plan of Merger in the form of Exhibit
B (the "Plan of Merger") whereby the shareholders of Hubbard other than Armour
receive cash for their shares of Hubbard Capital Stock;
WHEREAS, the Boards of Directors of Hubbard and Buyer Subsidiary
deem the Merger desirable and in the best interests of their respective
corporations; the Boards of Directors of Hubbard and Buyer Subsidiary have, by
resolutions duly adopted, approved this Agreement and directed that the Plan of
Merger be submitted to a vote of the shareholders of each of their respective
corporations in accordance with the laws of Minnesota; the sole shareholder of
Buyer Subsidiary has duly approved the Plan of Merger in accordance with the
laws of Minnesota; and Hubbard will call a special meeting of its shareholders
to consider the approval of the Plan of Merger in accordance with the laws of
Minnesota.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.01 Plan of Merger. Subject to the conditions precedent hereinafter
contained, on the Closing Date (as defined in Section 2.01), after the purchase
of the Armour Capital Stock by Buyer in accordance with the Armour Stock
Purchase Agreement, Buyer Subsidiary shall be merged with and into Hubbard in
accordance with the Plan of Merger.
<PAGE>
1.02 Effective Time of the Merger. The Merger shall become effective
immediately upon filing of Articles of Merger with the Minnesota Secretary of
State in accordance with Section 302A.615 of the Minnesota Business Corporation
Act (the "MBCA"). The term "Effective Time" shall mean the date and time when
the Merger becomes effective.
1.03 Conversion of Hubbard Shares.
(a) As provided in the Plan of Merger, at and as of the Effective
Time, (i) each share, other than a Dissenting Share (as defined in Section
1.04(c)), of Hubbard 5% Preferred Stock (as defined in Section 3.01(b)) shall be
converted into the right to receive in cash an amount equal to Fifty Dollars
($50.00) per share, plus accrued but unpaid dividends thereon up to the
Effective Time (the "Preferred Stock Merger Consideration"); (ii) each share,
other than a Dissenting Share, of Hubbard Class A Common Stock (as defined in
Section 3.01(b)) and Hubbard Class B Common Stock (as defined in Section
3.01(b)) held by a person other than Armour shall be converted into the right to
receive in cash an amount equal to the Common Stock Merger Consideration Per
Share (as hereinafter defined); and (iii) each Dissenting Share shall be
converted into the right to receive in cash an amount equal to the fair value
thereof determined in accordance with Section 302A.473 of MBCA.
(b) For purposes of this Agreement, the terms set forth below are
defined as follows:
"Adjusted Working Capital" shall mean accounts and current notes
receivable (excluding the $3,000,000 note receivable due in January 1998), plus
inventories, prepaid expenses and the Normalizing Amount (as hereinafter
defined), less accounts payable, accrued expenses and income taxes payable, all
as reflected on, or determined by reference to, the Closing Date Balance Sheet.
"Normalizing Amount" shall mean the retiree health benefit obligation (to the
extent included in accounts payable and/or accrued expenses), plus self
insurance reserves (to the extent included in accounts payable and/or accrued
expenses), less the restricted insurance deposit.
"Closing Date Balance Sheet" shall mean the consolidated balance
sheet of Hubbard and its Subsidiaries (as defined in Section 3.01(b)) as of the
Closing Date audited by KPMG Peat Marwick LLP in accordance with Section 4.08.
"Compensation Continuation Benefit Agreements" shall mean the letter
agreements between Hubbard and each of Richard P. Confer, Ogden W. Confer, Paul
R. Holzhueter, Timothy C. Violet and Gerald R. Underwood dated as of September
12, 1996, as such letter agreements may be amended to provide for acceleration
and payment on or prior to the Closing Date of the compensation continuation
benefits established thereunder.
-2-
<PAGE>
"1997 Incentive Plan Program" shall mean the incentive compensation
program evidenced by letter agreements between Hubbard and each of the employees
listed in the Disclosure Schedule (as defined in Section 3.01) under the caption
"Retirement and Benefit Plans -- 1996-97 Bonus Plan," copies of which have been
delivered to Buyer.
"Stay Pay Agreements" shall mean the letter agreements between
Hubbard and each of the employees listed in the Disclosure Schedule under the
caption "No Undisclosed Liabilities -- Obligations triggered by the Merger under
'Stay Pay' Agreements," copies of which have been delivered to Buyer.
"Common Equity Amount" shall mean the amount calculated as follows--
(i) One Hundred Thirty Million Dollars ($130,000,000);
(ii) plus:
(A) the amount of "cash and short term investments"
reflected on the Closing Date Balance Sheet;
(B) the amount of any Extraordinary Expenditures (as
hereinafter defined) which are made by Hubbard from and
after the date of this Agreement and on or prior to the
Closing Date;
(C) if Hubbard shall have discharged on or prior to the
Closing Date all obligations under the Compensation
Continuation Benefit Agreements, an amount equal to 50%
of all payments made thereunder (net of any reduction in
taxes resulting from the deduction of such 50% of all
payments); and
(D) if Adjusted Working Capital exceeds $11,800,000
immediately prior to Closing, an amount equal to the
excess of Adjusted Working Capital immediately prior to
Closing over $11,800,000.
(iii) less:
(A) the Preferred Stock Merger Consideration;
(B) the amount of "long-term debt," including the "current
portion of long-term debt" reflected on the Closing Date
Balance Sheet and accrued interest thereon, together
with the amount of any prepayment premiums in respect
thereof applicable to prepayment of such debt on the
Closing Date;
(C) the amount (if any) of any undistributed balance of the
Hubbard Employee Savings Plan and accrued interest
thereon reflected on the Closing Date Balance Sheet;
(D) the amount (if any) of fees and out-of-pocket expenses
of Hubbard payable to financial advisors, lawyers,
accountants, environmental consultants and any other
service providers incurred in connection with the
transactions contemplated by this Agreement and not paid
on or prior to the Closing Date,
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including without limitation fees and expenses of Credit
Suisse First Boston, fees and disbursements of Faegre &
Benson LLP, fees and disbursements of KPMG Peat Marwick
LLP, and fees and disbursements of Braun Intertec,
Dahl & Associates, Inc. and E. Roberts Alley &
Associates, Inc.;
(E) if Hubbard shall not have discharged such obligations on
or prior to the Closing Date, an amount equal to unpaid
contributions for fiscal year 1997 to the Hubbard Profit
Sharing Plan, any unpaid incentive compensation under
the 1997 Incentive Plan Program, any unpaid "stay pay"
bonus payments under the Stay Pay Agreements, and any
unpaid deferred compensation under the Hubbard Deferred
Compensation Plan, in each case reflected on the Closing
Date Balance Sheet;
(F) if Hubbard shall not have discharged on or prior to the
Closing Date all obligations under the Compensation
Continuation Benefit Agreements, an amount equal to 50%
of all payments required to be made thereunder less any
amounts theretofore paid by Hubbard in respect of the
Compensation Continuation Benefit Agreements (net of any
reduction in taxes resulting from the deduction of such
50% of all payments less any amounts theretofore paid);
(G) the amount (if any) of any unpaid commitments of Hubbard
to the George M. Palmer Foundation reflected on the
Closing Date Balance Sheet;
(H) if Adjusted Working Capital is less than $11,800,000
immediately prior to Closing, an amount equal to the
excess of $11,800,000 over Adjusted Working Capital
immediately prior to Closing; and
(I) $20,000 to defray the costs and expenses incurred or to
be incurred by Buyer for real estate surveys pursuant to
Section 5.01(K).
"Common Stock Merger Consideration Per Share" shall mean an amount
equal to (i) the Common Equity Amount, divided by (ii) the aggregate number of
shares of Hubbard Class A Common Stock and Hubbard Class B Common Stock
outstanding at the Effective Time (including, without limitation, the 800,000
shares of Hubbard Class A Common Stock held by Armour).
"Extraordinary Expenditures" shall mean (i) cash payments for
capital assets purchased alter the date hereof not included in Hubbard's most
recent capital expenditures budget delivered to Buyer but approved in writing by
Buyer; (ii) cash payments for equity interests in D&D Partners LP IV required by
the Limited Partnership Agreement dated as of August 22, 1996, (iii) equity
investments in other customers of the Feed Division approved in
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writing by Buyer, (iv) loans to Vista Farms in an amount not to exceed
$1,000,000; and; (v) long term loans in excess of $20,000 to other customers of
the Feed Division approved in writing by Buyer.
1.04 Dissenters' Rights.
(a) If any holder of Hubbard Capital Stock (i) prior to the taking
of the vote of the shareholders of Hubbard on the Plan of Merger, shall file
with Hubbard a written notice of intent to demand payment of the fair value for
such holder's shares of Hubbard Capital Stock if the Merger is effected, (ii)
shall not vote in favor of the Plan of Merger, and (iii) after the taking of
such vote, shall make written demand for payment of the fair value for such
holder's shares of Hubbard Capital Stock as provided in Section 302A.473 of the
MBCA and comply in all other respects with Sections 302A.471 and 302A.473 of the
MBCA, then such holder shall not be entitled to receive the consideration
described in the Plan of Merger unless and until the right of such holder to
payment for such holder's shares of Hubbard Capital Stock under Section 302A.473
of the MBCA shall cease.
(b) If any holder of Hubbard Capital Stock shall effectively
withdraw or lose (through failure to perfect or otherwise) such holder's right
to payment for such holder's shares of Hubbard Capital Stock under Section
302A.473 of the MBCA, then as of the later of the Effective Time or the
occurrence of such event, such holder's shares of Hubbard Capital Stock shall
automatically be converted into and represent only the right to receive the
consideration described in the Plan of Merger, without interest thereon.
(c) Each holder of Hubbard Capital Stock who becomes entitled,
pursuant to the provisions of Section 302A.473 of the MBCA, to payment of the
fair value of such holder's shares (collectively the "Dissenting Shares," and
individually a "Dissenting Share") shall receive payment therefor from Hubbard,
as the surviving corporation of the Merger, pursuant to such provisions.
(d) Hubbard shall give Buyer prompt notice upon receipt by Hubbard
at any time prior to the Effective Time of any notice of intent to demand
payment of the fair value for shares under Section 302A.473 of the MBCA and any
withdrawal of any such notice of intent to demand. Hubbard agrees that it will
not, except with the prior written consent of Buyer, negotiate, voluntarily make
any payment with respect to, or settle or offer to settle, any such demands at
any time prior to the Effective Time.
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ARTICLE II
CLOSING, PAYMENT FOR SHARES
AND RELATED MATTERS
2.01 Generally. The closing (the "Closing") of the purchase and sale
of Armour Capital Stock in accordance with the Armour Stock Purchase Agreement
and the subsequent consummation of the Merger in accordance with Article I shall
occur on May 15, 1997, or at such other time as Hubbard and Buyer may mutually
agree (the "Closing Date"). The Closing shall be held at the offices of Richards
& O'Neil LLP, 885 Third Avenue, New York, New York, or such other place as
Hubbard and Buyer may mutually agree.
2.02 Payment for Shares.
(a) On the Closing Date, prior to the purchase by Buyer of the
Armour Capital Stock pursuant to the Armour Stock Purchase Agreement, (i)
Hubbard shall deliver to Buyer a written estimate of the Common Equity Amount
and Common Stock Merger Consideration Per Share, such estimate to be prepared by
Hubbard upon consultation with Buyer, and (ii) Buyer shall remit or cause to be
remitted in immediately available funds to Norwest Bank Minnesota, N.A.,
Minneapolis, Minnesota, or any other disbursing agent that is selected by
Hubbard and reasonably satisfactory to Buyer (the "Disbursing Agent"), for
application in accordance with a Disbursing Agreement in form and substance
reasonably satisfactory to Hubbard, Buyer and the Disbursing Agent (the
"Disbursing Agreement"), an amount equal to the sum of (A) the Preferred Stock
Merger Consideration, and (B) the estimated Common Stock Merger Consideration
Per Share multiplied by the number of shares of Hubbard Class A Common Stock and
Hubbard Class B Common Stock issued and outstanding on the Closing Date
(excluding the 800,000 shares of Hubbard Class A Common Stock held by Armour)
(the "Estimated Common Stock Merger Consideration"). Of the amount remitted to
the Disbursing Agent by Buyer pursuant to this Section 2.02(a), the Disbursing
Agent shall hold in escrow, pursuant to the escrow provisions of the Disbursing
Agreement, an amount equal to Thirteen Million Dollars ($13,000,000) or, if the
Interim Audit Report (as defined in Section 4.08(a)) shall have been completed
prior to Closing and reflects no material adverse variance in financial
condition or results of operation for the nine-month period ended January 31,
1997 from that reflected in the financial statements for the nine-month period
ended January 31, 1997 and delivered to Buyer pursuant to Section 3.01(e), Ten
Million Dollars ($10,000,000), in either case multiplied by a fraction, the
numerator of which is the aggregate number of shares of Hubbard Class A Common
Stock and Hubbard Class B Common Stock issued and outstanding on the Closing
Date (excluding the 800,000 shares of Common Stock held by Armour), and the
denominator of which is the aggregate number of shares of Hubbard Class A Common
Stock and Hubbard Class B Common Stock issued and outstanding on the Closing
Date (including the 800,000 shares of Hubbard Class A Common Stock held by
Armour). The amount so held in escrow by the
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Disbursing Agent pursuant to this Section 2.02(a), subject to reduction pursuant
to Section 2.02(b), is hereinafter called the "Escrow Amount."
(b) If the Escrow Amount shall have been calculated under Section
2.02 (a) based on Thirteen Million Dollars ($13,000,000) and the Interim Audit
Report was not completed prior to Closing, upon completion of the Interim Audit
Report the Escrow Amount shall be recalculated based on Ten Million Dollars
($10,000,000) if the Interim Audit Report reflects no material variance in
financial condition or results of operation for the nine-month period ended
January 31, 1997 from that reflected in the financial statements for the
nine-month period ended January 31, 1997 and delivered to Buyer pursuant to
Section 3.01(e), in which event the excess of the Escrow Amount as originally
calculated pursuant to Section 2.02(a) over the Escrow Amount as recalculated
pursuant to this Section 2.02(b) shall be released from escrow and held by the
Disbursing Agent for distribution in accordance with Section 2.02(f).
(c) Within two (2) business days of delivery of the Closing Date
Balance Sheet (as defined in Section 1.03) to Buyer, Buyer shall remit or cause
to be remitted in immediately available funds to the Disbursing Agent for
application in accordance with the Disbursing Agreement an amount equal to the
excess (if any) of (i) the Common Stock Merger Consideration Per Share (as
finally determined by reference to the Closing Date Balance Sheet) multiplied by
the number of shares of Hubbard Class A Common Stock and Hubbard Class B Common
Stock issued and outstanding on the Closing Date (excluding the 800,000 shares
of Hubbard Class A Common Stock held by Armour) (the "Common Stock Merger
Consideration"), over (ii) the Estimated Common Stock Merger Consideration.
Alternatively, if the Estimated Common Stock Merger Consideration exceeds the
Common Stock Merger Consideration (as finally determined by reference to the
Closing Date Balance Sheet), the Disbursing Agreement shall provide for the
Disbursing Agent to remit the amount of such excess to Buyer within two (2) days
of receipt of a written request from Buyer.
(d) The Disbursing Agreement shall authorize the Disbursing Agent to
invest as therein provided any amounts from time to time held by the Disbursing
Agent under the Disbursing Agreement, and to apply as therein provided any net
profit resulting from, or interest or income produced by, such investments.
(e) The Disbursing Agreement shall provide that the Disbursing
Agent, upon receipt of (i) a certificate which immediately prior to the
Effective Time represented Hubbard Capital Stock owned by persons other than
Armour or a holder who has exercised dissenters' rights pursuant to Section
302A.473 of the MBCA and has not subsequently withdrawn or lost such rights (all
such holders so exercising dissenter's rights not subsequently withdrawn or lost
hereinafter called "Dissenting Holders") and (ii) a letter of transmittal in
form and substance reasonably satisfactory to the Disbursing Agent, duly
executed and accompanied by any other items specified in the letter of
transmittal, shall pay by cashier's check to the person or persons entitled
thereto, the amount determined as
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hereinafter set forth with respect to such certificate: (A) in the case of a
certificate evidencing Hubbard 5% Preferred Stock, an amount per share equal to
the quotient of (x) the Preferred Stock Merger Consideration, divided by (y) the
aggregate number of shares of Hubbard 5% Preferred Stock issued and outstanding
on the Closing Date; and (B) in the case of a certificate evidencing Hubbard
Class A Common Stock or Hubbard Class B Common Stock, an amount per share equal
to 95% of the quotient of (x) the Estimated Common Stock Merger Consideration
less the Escrow Amount, divided by (y) the aggregate number of shares of Hubbard
Class A Common Stock and Hubbard Class B Common Stock issued and outstanding on
the Closing Date (excluding the 800,000 shares of Hubbard Class A Common Stock
held by Armour). Said payment shall be made at the Effective Time with respect
to all certificates duly delivered to the Disbursing Agent at least two (2)
business days prior to the Effective Time and as soon as practicable following
receipt thereof with respect to all certificates thereafter duly delivered to
the Disbursing Agent. No interest will be paid or accrued on the cash payable
upon the surrender of a certificate.
(f) The Disbursing Agreement shall further provide that following
the remittance to or by the Disbursing Agent in accordance with Section 2.02(c),
the Disbursing Agent, upon receipt of a certificate and letter of transmittal
referred to in Section 2.02(e) (if not theretofore received by the Disbursing
Agent), shall pay by cashier's check to the person or persons entitled thereto,
the amount per share determined as hereinafter set forth with respect to the
shares of Hubbard Class A Common Stock or Hubbard Class B Common Stock evidenced
by such certificate: the excess of (i) the quotient of (A) the Common Stock
Merger Consideration (as finally determined by reference to the Closing Date
Balance Sheet) less the Escrow Amount (as originally calculated pursuant to
Section 2.02(a) or as recalculated pursuant to Section 2.02(b), as the case may
be), divided by (B) the aggregate number of shares of Hubbard Class A Common
Stock and Hubbard Class B Common Stock issued and outstanding on the Closing
Date (excluding the 800,000 shares of Hubbard Class A Common Stock held by
Armour), over (ii) any amount theretofore distributed by the Disbursing Agent
per share of common stock evidenced by such certificate pursuant to Section
2.02(e). Said payment shall be made within two (2) business days following the
remittance by or to the Disbursing Agent pursuant to Section 2.02(c) with
respect to all certificates duly delivered to the Disbursing Agent at least two
(2) business days prior to the date of such remittance by or to the Disbursing
Agent, and as soon as practical following receipt of such certificates with
respect to all certificates thereafter duly delivered to the Disbursing Agent.
(g) In the event any certificate evidencing Hubbard 5% Preferred
Stock, Hubbard Class A Common Stock or Hubbard Class B Common Stock shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such certificate to have been lost, stolen or destroyed, the
amount to which such person would have been entitled under this Article II but
for failure to deliver such certificate to the Disbursing Agent shall
nevertheless be paid to such person; provided, however, that Hubbard, as the
surviving corporation of the Merger, or Buyer may, in their sole discretion and
as a condition precedent to such payment, require such person to give Hubbard or
Buyer, as appropriate, a
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bond in such sum as it directs as indemnity against any claim that may be had
against Hubbard or Buyer, respectively, with respect to the certificate alleged
to have been lost, stolen or destroyed.
(h) The Disbursing Agreement shall provide that any amount held by
the Disbursing Agent under the Disbursing Agreement (excluding the Escrow Amount
and any net profit resulting from, or interest income produced by the investment
thereof) six (6) months after the Effective Time shall be refunded to Hubbard,
as the surviving corporation of the Merger, at its option; provided, however,
that Hubbard, as the surviving corporation of the Merger, shall be liable for
any cash payments required to be made thereafter pursuant to the Plan of Merger.
(i) The Disbursing Agreement shall provide that any remaining Escrow
Amount held by the Disbursing Agent under the Disbursing Agreement eighteen (18)
months after the Effective Time (subject to the provisions of the Disbursing
Agreement providing for retention of the Escrow Amount in respect of any escrow
claims then pending) shall be distributed in respect of the Hubbard Class A
Common Stock and Hubbard Class B Common Stock issued and outstanding immediately
prior to the Effective Time (excluding shares of such common stock held by
Armour or by Dissenting Holders).
2.03 Deferred Compensation Plan Payments. At or prior to Closing,
Hubbard shall pay by cashier's check to each participant in the Hubbard Deferred
Compensation Plan an aggregate amount equal to the benefit payable to such
participant under Section 5 of such plan as a result of the "Extraordinary
Corporate Event" (as defined in such plan) occasioned by the transactions
contemplated by this Agreement. Hubbard reserves the right to amend such plan to
the extent it deems necessary to provide for such aggregate payments at or prior
to Closing. In addition, in the event the Closing is prior to April 30, 1997,
Hubbard reserves the right to further amend such plan prior to Closing to assure
that plan participants receive on the Closing Date (i) their respective
allocated percentages of the Bonus Fund (as defined in such plan) established
for the plan year ending April 30, 1997 (with the Bonus Fund for the partial
plan year to be calculated on plan year earnings for the period May 1, 1996 to
the date of Closing), and (ii) the benefit of any additional Incentive Units (as
defined in such plan) with respect to dividends paid on Hubbard Class A Common
Stock and Hubbard Class B Common Stock during the period May 1, 1996 to the date
of Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Hubbard. Except as otherwise
set forth in the disclosure schedule executed and delivered by Hubbard to Buyer
immediately
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prior to the execution and delivery of this Agreement (the "Disclosure
Schedule"), Hubbard represents and warrants to Buyer and Buyer Subsidiary as
follows:
(a) Organization, Standing, Qualification. Hubbard and each of its
Active Subsidiaries (as defined in Section 3.01(b)) is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation and has the requisite corporate power and authority to own,
lease and operate all of its properties and assets and to carry on its business
as it is now being conducted. Hubbard and each Active Subsidiary is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction (which are listed on the Disclosure Schedule) where the
character of its properties owned, operated or leased, or the nature of its
activities, makes such qualification necessary, except such jurisdictions where
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect upon the business, operations, properties or financial
condition of Hubbard and such Subsidiaries, taken as a whole. The copies of the
articles or certificate of incorporation and by-laws of Hubbard and each Active
Subsidiary, which have been delivered to Buyer, are complete and correct as of
the date of this Agreement, and the minute books of Hubbard and each Active
Subsidiary, which have been made available to Buyer, are complete in all
material respects and accurately reflect all material action taken prior to the
date of this Agreement by the Board of Directors and Shareholders of Hubbard and
each Active Subsidiary.
(b) Capitalization. The authorized capital stock of Hubbard consists
of 100,000 shares of 5% Preferred Stock, $50 par value (the "Hubbard 5%
Preferred Stock"); 1,000,000 shares of Preferred Stock, $.05 par value,
undesignated as to series ("Hubbard Undesignated Preferred Stock"); 2,500,000
shares of Class A Voting Common Stock, $.05 par value (the "Hubbard Class A
Common Stock"); and 37,500,000 shares of Class B Non-Voting Common Stock, $.05
par value (the "Hubbard Class B Common Stock"). The issued and outstanding
capital stock of Hubbard consists of 18,329 shares of Hubbard 5% Preferred
Stock, 1,145,050 shares of Hubbard Class A Common Stock and 14,511,823 shares of
Hubbard Class B Common Stock. The Disclosure Schedule contains a complete and
correct list of all record owners of shares of Hubbard 5% Preferred Stock,
Hubbard Class A Common Stock and Hubbard Class B Common Stock and the number of
shares owned by each such person or entity. Hubbard has no other issued or
outstanding shares of capital stock. The aggregate accrued but unpaid dividends
on the Hubbard 5% Preferred Stock as of the date hereof are equal to $1,400.04.
Under the terms of the Hubbard 5% Preferred Stock, each share of Hubbard 5%
Preferred Stock is entitled to receive no more than $50 per share plus accrued
but unpaid dividends with respect thereto upon consummation of the Merger.
Except as otherwise specified in the Disclosure Schedule, Hubbard owns 100% of
the issued and outstanding capital stock of every class of the corporations
listed in the Disclosure Schedule under the heading "Subsidiaries" (collectively
the "Subsidiaries," and individually a "Subsidiary"). The only Subsidiaries of
Hubbard engaged in any trade or business or having any assets or liabilities are
designated on the Disclosure Schedule as "Active Subsidiaries" (collectively the
"Active Subsidiaries" and individually an "Active Subsidiary"). There are no
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outstanding subscriptions, options, warrants, calls or other agreements or
commitments by which Hubbard or any Subsidiary is bound in respect of the
capital stock of Hubbard or such Subsidiary, whether issued or unissued, and no
outstanding securities convertible into or exchangeable for any such capital
stock. All of the outstanding shares of capital stock of Hubbard and each
Subsidiary are validly issued, fully paid and nonassessable. The Disclosure
Schedule contains a complete and correct list of each corporation, partnership,
joint venture or other business association in which Hubbard has any equity
ownership interest.
(c) Authorization and Execution. Hubbard has the corporate power and
authority to execute and deliver this Agreement and, subject to obtaining the
approval of its shareholders, to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement have been duly
and effectively authorized by the Board of Directors of Hubbard, and no further
corporate action of Hubbard, other than the approval of its shareholders, is
necessary to consummate the transactions contemplated hereby. This Agreement
constitutes a legal, valid and binding obligation of Hubbard, enforceable
against it in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
(d) No Conflicts. Neither the execution and delivery of this
Agreement by Hubbard, nor the consummation by Hubbard of the transactions
contemplated hereby, will (i) conflict with or result in a breach of the
articles of incorporation or by-laws, as currently in effect, of Hubbard, or
(ii) except for the filing of articles of merger, the amendment to the articles
of incorporation of Hubbard (as contemplated by Section 4.02), and for the
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"Hart-Scott-Rodino Act"), require any filing with, or consent or approval of any
governmental authority having jurisdiction over any of the business or assets of
Hubbard, or (iii) violate any statute, regulation, injunction, judgment or order
to which Hubbard or any of its Subsidiaries is subject, or (iv) result in a
breach of, or constitute a default or an event which, with the passage of time
or the giving of notice or both would constitute a default, which would give
rise to a right of termination, cancellation or acceleration, create any
entitlement to any payment or benefit, require the consent of any third party or
result in the creation of any lien on the assets of Hubbard under any Material
Contract (as defined in Section 3.01(k)) or any certificate of occupancy,
license, permit, order or approval of any governmental authority of which
Hubbard is a beneficiary.
(e) Financial Statements. Hubbard has heretofore delivered to Buyer
its (i) Annual Report for each of the fiscal years ended April 30, 1994 through
April 30, 1996, inclusive (the "Annual Reports"), and (ii) unaudited monthly
financial statements for each of the months ended May 30, 1996, through
January 31, 1997 inclusive. Each of the consolidated financial statements
contained in the Annual Reports was prepared from the books and records of
Hubbard (which are accurate and complete in all material respects) in
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accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto) and each fairly presents, in all material respects, the consolidated
assets, liabilities and financial position of Hubbard and its Subsidiaries as at
the respective dates thereof and the consolidated results of operations and cash
flows of Hubbard and its Subsidiaries for the periods indicated. Each of such
unaudited monthly financial statements was prepared, and each unaudited monthly
statement to be delivered by Hubbard to Buyer pursuant to Section 4.11 will have
been prepared, by Hubbard from the books and records of Hubbard (which are
accurate and complete in all material respects) in accordance with generally
accepted accounting principles and consistent with the past practices of Hubbard
and each fairly presents, or when delivered will fairly present, in all material
respects, the consolidated assets, liabilities and financial position of Hubbard
and its Subsidiaries as at the respective dates thereof and the consolidated
results of operations for the periods indicated, except as reflected in the
notes accompanying the unaudited monthly financial statements for the month
ended December 31, 1996, and further except that all such unaudited monthly
financial statements are subject to normal year-end adjustments that are not
material in amount and do not contain all footnote disclosures required by
generally accepted accounting principles.
(f) Absence of Certain Changes or Events. Except as set forth in the
Disclosure Schedule or as expressly permitted by Section 4.01(d), since April
30, 1996 and to and including the date of this Agreement, (i) neither Hubbard
nor its Subsidiaries have incurred any obligations or liabilities other than in
the ordinary course of business and have not incurred any indebtedness for money
borrowed; made any loans (other than any feeder financing or dealer operating
loan in the ordinary course of business which is not in excess of $20,000) to or
guaranteed any indebtedness of others; prepaid any indebtedness; changed or
modified any existing accounting method, principle or practice; sold, leased,
encumbered, mortgaged or otherwise disposed of any tangible assets or properties
which are material to Hubbard or any of its Subsidiaries other than sales of
inventory and obsolete equipment in the ordinary course of business; sold,
assigned or transferred any patents, trademarks, trade names, or other
intangible assets; suffered any business interruption or disruption or labor
disputes, whether or not covered by insurance; entered into or modified any
agreement, contract or commitment outside the ordinary course of business or
involving payments or obligations in excess of $50,000 for each such agreement,
contract or commitment in any year or $500,000 for all such agreements in the
aggregate; purchased any capital assets in excess of $100,000 in the aggregate;
leased any assets as lessee or lessor; terminated or modified any lease to which
it is a party or by which it is bound, except for terminations of leases which
expired in accordance with their terms; suffered any material destruction of its
properties, whether or not covered by insurance; suffered any material and
adverse changes in its business, operations, properties or financial condition;
written down or written up any of its inventory other than in the ordinary
course of business; adopted, entered into or agreed to enter into, or amended or
agreed to amend any Employee Benefit Plans (as defined in Section 3.01(p)),
other than in the ordinary course of business and consistent with past practice;
made any changes in the customary methods used in operating Hubbard's business
(including its marketing, selling and pricing practices and policies); waived
any right
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of material value under any Material Contract (as defined in Section 3.01(k));
failed to perform any of its obligations, or suffered or permitted to exist and
be continuing any default by it under any Material Contract; or entered into any
other transaction other than in the ordinary course of business; (ii) except for
regular quarterly dividends of $0.625 on Hubbard 5% Preferred Stock and regular
quarterly dividends not in excess of $0.04 per share on Hubbard Class A Common
Stock and Hubbard Class B Common Stock, no dividends or other distributions have
been declared, set aside, made or paid; (iii) no shares of capital stock of
Hubbard or any of its Subsidiaries have been purchased, redeemed or otherwise
acquired, directly or indirectly, by Hubbard; (iv) no stocks, bonds or other
shares of capital stock of Hubbard or any of its Subsidiaries, or options or
other rights to purchase the same have been issued or authorized for issuance;
(v) Hubbard and its Subsidiaries have not increased or decreased the
compensation of any of their respective officers, directors or employees, except
pursuant to Hubbard's existing compensation plans and practices that are
referenced in the Disclosure Schedule, and no sums or other corporate assets
have been paid to or withdrawn by the directors or officers of Hubbard or its
Subsidiaries, except for ordinary compensation and fees, payments under
established compensation or incentive plans, and ordinary expense reimbursement
and similar payments; (vi) Hubbard has not changed its past practices with
respect to the maintenance and repair of its properties or deferred any such
maintenance or repair in a manner inconsistent with such past practices; and
(vii) neither Hubbard nor any of its Subsidiaries have entered into any
commitment to do any of the foregoing.
(g) No Undisclosed Liabilities. Other than as and to the extent
disclosed or reserved against in the balance sheet dated as of December 31, 1996
(the "Balance Sheet"), set forth in the Disclosure Schedule or incurred in the
ordinary course of business since the date of the Balance Sheet, Hubbard and its
Subsidiaries have no liabilities or obligations required to be disclosed or
reserved against on a balance sheet prepared in accordance with generally
accepted accounting principles. Except as set forth in the Disclosure Schedule,
neither Hubbard nor any Subsidiary has any other liability of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and, to the knowledge of Hubbard, there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than:
(i) liabilities or obligations to perform or pay under the
executory portion of any Material Contract, or under the executory
portion of any other agreement or commitment of any kind by which
Hubbard is bound and which was entered into in the ordinary course
of business, is on commercially reasonable terms, and is consistent
with Hubbard's past practices;
(ii) liabilities which are covered by any insurance policy
disclosed in the Disclosure Schedule;
(iii) any liability within the scope of the representations
and warranties of Sections 3.01(h), 3.01(i), 3.01(k), 3.01(1),
3.01(m), 3.01(n),
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3.01(p), 3.01(q), 3.01(s), 3.01(u), and 3.01(x), the existence of
which would not constitute a breach of such representations and
warranties; or
(iv) other undisclosed liabilities which, individually or in
the aggregate, are not material to Hubbard or any Subsidiary.
(h) Tax Matters.
(i) Hubbard and its Subsidiaries have timely filed all
Federal, state, local and foreign tax returns ("Tax Returns")
required to be filed by them with respect to income, withholding,
social security, unemployment, franchise, property, excise and sales
and use taxes (all such taxes, together with any interest or
penalties payable in respect thereof hereinafter collectively called
"Taxes"), and have paid, accrued or reserved for all Taxes.
(ii) All Tax Returns filed by Hubbard and its Subsidiaries for
any taxable period were complete and accurate in all material
respects. Except as set forth in the Disclosure Schedule, no Tax
Returns the due date of which was on or after December 31, 1987,
filed by Hubbard or any of its Subsidiaries have been audited and no
claims for additional Taxes for any taxable period have been made by
any taxing authority and are pending. Neither Hubbard nor any of its
Subsidiaries has received a notice of deficiency or assessment of
additional Taxes which notice or assessment remains unresolved.
Neither Hubbard and nor any of its Subsidiaries has extended the
period for assessment or payment of any Tax, which period has not
since expired.
(iii) Neither Hubbard nor any of its Subsidiaries has been a
member of an affiliated group (as such term is defined in Section
1504 of the Internal Revenue Code of 1986, as amended (the "Code"))
filing a consolidated federal income tax return for any tax year
other than a group the common parent of which was Hubbard.
(iv) There are no liens for Taxes (other than current Taxes
not yet due and payable) upon the assets of Hubbard or any of its
Subsidiaries.
(v) Neither Hubbard nor any of its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible
corporations.
(vi) Neither Hubbard nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning
of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii).
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<PAGE>
(vii) Neither Hubbard nor any of its Subsidiaries is a party
to any Tax allocation or sharing agreement.
(viii) Neither Hubbard nor any Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Code Sec. 280G, or
any other payment of compensation which would be nondeductible under
Code Sec. 162.
(ix) Except as set forth in the Disclosure Schedule, Hubbard
and each of its Subsidiaries has collected and/or paid all sales and
use tax due with respect to all prior periods, and there exists no
potential liability for unpaid sales or use tax assessments with
respect to events or transactions occurring before such date which
has not been reserved against on the books and records of Hubbard
and its Subsidiaries.
(x) Hubbard has delivered to the Buyer true and correct copies
of all requested Federal and state income tax returns with respect
to Hubbard and each of its Subsidiaries, together with true and
correct copies of all requested accountants' work papers relating to
the preparation thereof.
(i) Real Property.
(i) The Disclosure Schedule sets forth all of the real
property owned in fee simple (the "Fee Property") by Hubbard, each
lease by Hubbard as landlord of any of the Fee Property, each lease
by Hubbard of real property as tenant, and each sublease in which
Hubbard is either sublessor or sublessee (collectively the
"Leasehold Property"). No Subsidiary owns, leases or subleases any
real property.
(ii) Hubbard has good title to the Fee Property, free and
clear of all easements, restrictions, mortgages, pledges, liens,
encumbrances or security interests, except (A) liens which may arise
for current taxes and assessments not yet due and payable or which
are being contested in good faith and in respect of which adequate
reserves have been established, (B) imperfections in title,
encumbrances, easements, restrictions and other liens, claims and
encumbrances which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit and which
do not materially interfere with the present use of the properties
subject thereto or affected thereby, and (C) all matters which are
disclosed (whether or not ultimately deleted or insured over) in the
commitments for title insurance and surveys listed in the Disclosure
Schedule, copies of which have been delivered to Buyer
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<PAGE>
(the matters in clauses (A), (B) and (C), collectively, the
"Permitted Exceptions").
(iii) Hubbard has not within the twelve month period preceding
the date hereof received written notice from any governmental
authority that such governmental authority has initiated or intends
to initiate changes in the zoning ordinances or building codes
applicable to the facilities identified in the Disclosure Schedule
as principal manufacturing facilities under the captions "Fee
Property" or "Leasehold Property -- Hubbard Milling Company as
Tenant", which changes would materially interfere with the present
use of such facilities.
(iv) Hubbard has not received written notice from any
governmental authority requiring work to be done or improvements to
be made by Hubbard to the Fee Property and the Leasehold Property,
which work has not been completed.
(v) Except as set forth on the Disclosure Schedule, all leases
of Fee Property and Leasehold Property are in full force and effect.
(vi) Neither Hubbard nor, to the knowledge of Hubbard, any
other party thereto is in default under or in respect of any lease
of Leasehold Property, the result of which default could,
individually or in the aggregate together with all other such
defaults, materially interfere with the present use of the
properties subject thereto or affected thereby. Hubbard has not
exercised any purchase option under a lease of any of the Leasehold
Property or any option to renew any such lease for a term beyond the
current term of said lease.
(j) Personal Property. Hubbard and each Subsidiary owns or holds by
valid lease or license, all of its respective personal property reflected in the
Balance Sheet or acquired after December 31, 1996 (except for any assets sold in
accordance with Section 4.01 (d)(iii)), free and clear of all mortgages, claims,
liens, security interests, charges and encumbrances.
(k) Material Contracts. Except as set forth in the Disclosure
Schedule, neither Hubbard nor any of its Subsidiaries is a party to or bound by
any of the following, either written or oral:
(i) contract with any labor union or any collective bargaining
agreement;
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<PAGE>
(ii) bonus, pension, profit sharing, retirement, deferred
compensation, savings, stock purchase, stock option,
hospitalization, medical, dental, vision, vacation, sick pay,
disability, severance, insurance or other plan providing similar
employee benefits or compensation;
(iii) employment, agency, consulting or similar personal
service contract;
(iv) agreement (including brokerage, correspondent, sales
representative or distributorship agreement) for the payment of
fees, commissions, or other compensation by Hubbard or any of its
Subsidiaries in connection with the distribution or sale of
products;
(v) lease, whether as lessor or lessee, with respect to any
Fee Property, Leasehold Property or personal property (excluding any
lease of personal property as lessee providing for annual rentals
of $10,000 or less);
(vi) contract as licensor or licensee for the license of any
patent, know-how, trademark, trade name, service mark, copyright or
other intangible asset;
(vii) guaranty, suretyship, indemnification or contribution
agreement;
(viii) loan agreement, promissory note or other document
evidencing any indebtedness of or to Hubbard or any of its
Subsidiaries (other than any feeder financing or dealer operating
loan in the ordinary course of business which is not in excess of
$20,000, trade accounts payable or receivable and other indebtedness
incurred in the ordinary course and not for money borrowed);
(ix) mortgage, security agreement, sale-leaseback agreement or
other agreement which effectively creates (or could, in the future,
create) a lien on any assets of Hubbard or any of its Subsidiaries;
(x) contract for the purchase of capital assets or for
remodeling or construction which involves payment of $50,000 or
more;
(xi) contract for advertising or promotional services to be
rendered for Hubbard or any of its Subsidiaries which involves
payment of $50,000 or more;
(xii) contract concerning confidentiality or restricting
Hubbard or any of its Subsidiaries in any material respect from
engaging in business or from competing with any other parties or
providing that Hubbard or any of its Subsidiaries shall be
restricted in any way from selling, marketing or distributing any
product or other merchandise;
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<PAGE>
(xiii) purchase or sale order for merchandise or supplies
which (A) was not entered into in the ordinary course of business,
involves payments of $50,000 or more and is not terminable by
Hubbard or any of its Subsidiaries without cost or penalty upon
thirty (30) days' or less notice, or (B) is a standing or similar
order with a remaining term of more than one (1) year and is not
terminable by Hubbard or any of its Subsidiaries without cost or
penalty upon (30) days' or less notice;
(xiv) plan of reorganization;
(xv) contract involving the acquisition or disposition of
$50,000 or more in assets, other than contracts involving the sale
of inventory in the ordinary course of business;
(xvi) partnership, limited liability company or joint venture
agreement;
(xvii) contract or commitment to loan money to any person
(other than any feeder financing or dealer operating loan in the
ordinary course of business which is not in excess of $20,000), to
guarantee indebtedness of any person, or to make an equity
investment in any person;
(xviii) contract under which the consequences of a default or
termination could have a material adverse effect on the financial
condition, results of operations, assets, business or prospects of
Hubbard or any of its Subsidiaries;
(xix) any agreement which includes provisions regarding
minimum volumes or volume discounts with respect to the sale of any
product of Hubbard;
(xx) any agreement with persons other than employees pursuant
to which a rebate, discount, bonus, commission or other payment with
respect to the sale of any product of Hubbard will be payable or
required after the Closing;
(xxi) any contract or arrangement with any affiliate of
Hubbard; or
(xxii) any other contract (excluding purchase and sale orders
not required by the terms of the foregoing clauses (xiii) or (xv) to
be set forth in the Disclosure Schedule) not otherwise set forth in
the Disclosure Schedule which involves payments of $50,000 or more a
year and is not terminable by Hubbard or any of its Subsidiaries
without cost or penalty upon thirty (30) days' or less notice.
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<PAGE>
All of the foregoing are hereinafter collectively called "Material
Contracts." To the extent Material Contracts are evidenced by documents,
true and correct copies thereof have been delivered or made available to
the Buyer unless otherwise noted in the Disclosure Schedule and, if oral,
are summarized in the Disclosure Schedule.
Except as set forth on the Disclosure Schedule:
(w) all Material Contracts are in full force and effect and
are valid, binding and enforceable in accordance with their terms;
(x) Hubbard is not and, to the knowledge of Hubbard, no other
party to any Material Contract is, in breach of any material
provision of, in material violation of, or in material default under
the terms of any Material Contract;
(y) no event has occurred which, after the giving of notice or
passage of time or both, would constitute a material default under
or result in the material breach of any Material Contract by
Hubbard, or to the knowledge of Hubbard, by any other party; and
(z) Hubbard has not given or received any notice of
termination under the joint venture agreements listed in the
Disclosure Schedule under the caption "Other Ownership Interests of
Hubbard", nor has Hubbard exercised any option to purchase contained
in any such joint venture agreement.
(1) Intellectual Property. The Disclosure Schedule contains a
complete and correct list of all patents, registered trademarks, registered
trade names, and applications for any of the foregoing owned or used to any
material extent by Hubbard and its Subsidiaries ("Proprietary Rights"). All of
the Proprietary Rights are owned by Hubbard, free and clear of any liens,
charges, pledges, security interests or other similar encumbrances, are
enforceable, valid and subsisting, constitute all Proprietary Rights used for
the operation of Hubbard's business in the ordinary course, and, to the
knowledge of Hubbard, do not conflict with or infringe on the rights of others.
Except as set forth in the Disclosure Schedule, Hubbard has not granted any
licenses or other rights and Hubbard does not have any obligation to grant
licenses or other rights to any of the Proprietary Rights. Except as set forth
in the Disclosure Schedule, since January 1, 1992, neither Hubbard nor any
Subsidiary has received any charge, complaint, claim, demand, or notice alleging
that Hubbard or any Subsidiary has interfered, infringed upon, misappropriated
or otherwise come into conflict with the intellectual property rights of any
third party (including any claim that Hubbard or any Subsidiary must license or
refrain from using any intellectual property rights of any third party) and, to
the knowledge of Hubbard, in connection with the operation of Hubbard's
business, there are no current or past conditions upon which such charges or
claims reasonably could be based. To the knowledge of Hubbard, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with the Proprietary Rights. Except as set forth in the Disclosure
Schedule,
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<PAGE>
as of the date of this Agreement Hubbard does not use any unregistered trademark
for any product which generated more than $100,000 in gross sales during the
twelve-month period ended December 31, 1996.
(m) Litigation. Except as disclosed in the Disclosure Schedule, no
litigation, arbitration, or administrative proceeding or investigation is
pending or, to the knowledge of Hubbard, threatened against Hubbard or any
Subsidiary or any of their officers, employees or directors in connection with
(i) the business or affairs of Hubbard or such Subsidiary and (ii) the
transactions contemplated by this Agreement. Except as set forth on the
Disclosure Schedule, Hubbard is not currently, and has not been since 1990,
subject to any judgment (other than a monetary judgment heretofore discharged),
consent decree, binding arbitration or regulatory order not generally applicable
to similar businesses.
(n) Permits, Licenses, Authorizations; Compliance with Laws. Hubbard
and each Subsidiary has all licenses, franchises, permits and other governmental
authorizations which are material and necessary to conduct its respective
business, and neither Hubbard nor such Subsidiary is in violation in any
material respect of any such license, franchise, permit or other governmental
authorization, or any statute, law, ordinance, rule, regulation, judgment, order
or decree applicable to it or any of its properties.
(o) No Brokers or Finders. Except for Credit Suisse First Boston
("CSFB"), Hubbard has not engaged any investment banker, broker or finder in
connection with the transactions contemplated hereby.
(p) Retirement and Benefit Plans.
(i) The Disclosure Schedule lists each employee pension,
retirement, profit sharing, stock bonus, stock option, stock
purchase, bonus, incentive, deferred compensation, hospitalization,
medical, dental, vision, vacation, insurance, sick pay, disability,
severance, or other plans, funds, programs, policies, contracts or
arrangements, including without limitation any Employee Benefit Plan
(as hereinafter defined), that Hubbard or any ERISA Affiliate
maintains or to which Hubbard or any ERISA Affiliate contributes or
in which any current or former employee of Hubbard or any ERISA
Affiliate has accrued any benefits which they remain entitled to
receive.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all material respects with the applicable
requirements of ERISA (as hereinafter defined), the Code, and
other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's,
and Summary Plan
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<PAGE>
Descriptions) have been timely filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Section 4980B of the Code have been met with respect to
each Employee Welfare Benefit Plan (as hereinafter defined).
(C) All contributions which are due have been paid to
each Employee Pension Benefit Plan (as hereinafter defined)
and all contributions for any period ending on or before the
Closing Date which are not yet due will have been paid to each
such Employee Pension Benefit Plan or accrued in accordance
with the past custom and practice of Hubbard or any of its
Subsidiaries. All premiums or other payments for all periods
ending on or before the Closing Date have been paid with
respect to each Employee Welfare Benefit Plan.
(D) Each Employee Pension Benefit Plan which is intended
to be a "qualified plan" under Section 401(a) of the Code has
received, within the last two years, a favorable determination
letter from the Internal Revenue Service covering, without
limitation, the qualification requirements imposed under the
Tax Reform Act of 1986.
(E) Except as set forth in the Disclosure Schedule, the
market value of assets under each Employee Pension Benefit
Plan which is subject to Title IV of ERISA equals or exceeds
the present value of all vested and nonvested liabilities
thereunder determined in accordance with PBGC (as hereinafter
defined) methods, factors and assumptions applicable to an
Employee Pension Benefit Plan terminating on the Closing Date.
(F) Hubbard has delivered or otherwise made available to
Buyer correct and complete copies of each and every Employee
Benefit Plan document and summary plan description, the most
recent determination letter received from the Internal Revenue
Service, if any, the three most recent IRS Form 5500 Annual
Reports and actuarial valuation reports, if any, and all
related trust agreements, insurance contracts and other
funding agreements which implement each such Employee Benefit
Plan.
(ii) Except as set forth in the Disclosure Schedule, with
respect to each Employee Benefit Plan that Hubbard, each Subsidiary,
and/or an ERISA Affiliate (as hereinafter defined) maintains or ever
has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(A) No Employee Pension Benefit Plan has been completely
or partially terminated or been the subject of a Reportable
Event (as hereinafter
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<PAGE>
defined) as to which notices would be required to be filed
with the PBGC, except that consummation of the Merger may be a
Reportable Event under PBGC Regulation Section 4043.29. No
proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan has been instituted or, to the knowledge of the
Shareholder, Hubbard and its ERISA Affiliates, threatened.
(B) There has been no Prohibited Transaction (as
hereinafter defined) with respect to any Employee Benefit
Plan. Neither Hubbard nor any ERISA Affiliate has any
liability for breach of fiduciary duty or any other failure to
act or comply in connection with any Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with
respect to any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the knowledge of
Hubbard and its ERISA Affiliates, threatened.
(C) Neither Hubbard nor any of its ERISA Affiliates has
incurred or has any reason to believe that Hubbard or any of
its ERISA Affiliates will incur, any liability to the PBGC
(other than PBGC premium payments) or otherwise (including any
withdrawal liability) under Title IV of ERISA or under the
Code with respect to any Employee Pension Benefit Plan.
(D) Each Employee Pension Benefit Plan of Hubbard and
its ERISA Affiliates has fulfilled the obligations under the
minimum funding standards of ERISA and the Code.
(E) None of Hubbard, its Subsidiaries or any ERISA
Affiliate has entered into any transaction which could subject
such entity to liability under ERISA other than for the
ordinary course payment of benefits under an Employee Benefit
Plan
(F) Except as set forth in the Disclosure Schedule, none
of Hubbard, its Subsidiaries or any ERISA Affiliate maintains
any plan, arrangement or program which provides severance
benefits to current or former employees of Hubbard or its
Subsidiaries and neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated hereby will result in any liability for the
payment of severance benefits (other than liability resulting
from an actual termination of employment).
(G) Except as set forth in the Disclosure Schedule
neither the execution and delivery of this Agreement nor the
consummation of the
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<PAGE>
transactions contemplated hereby constitutes a change in
control or has or will accelerate the vesting in or payment of
benefits under any Employee Benefit Plan, and none of Hubbard,
its Subsidiaries or any ERISA Affiliate is a party to any
plan, program, arrangement or understanding that would result,
separately or in the aggregate, in the payment (whether in
connection with any termination of employment or otherwise) of
any "excess parachute payment" within the meaning of Section
280G of the Code with respect to a current or former employee
of Hubbard or its Subsidiaries.
(H) Except as set forth in Section 6.02 or in the
Disclosure Schedule under the caption "Retirement and Benefit
Plans--Right to Amend", each Employee Benefit Plan may be
amended, modified or terminated subject to compliance with
applicable law and provided that such amendment, modification
or termination does not impair earned, accrued or vested
rights under such plan. Except as set forth in the Disclosure
Schedule, no rights to continued benefits provided under any
Employee Welfare Benefit Plan, including without limitation,
retiree medical, dental or life insurance benefits, have
vested.
(iii) Except as set forth in the Disclosure Schedule, neither
Hubbard nor any ERISA Affiliate contributes to any Multiemployer
Plan or has any liability (including withdrawal liability) under any
Multiemployer Plan.
(iv) Except as set forth in the Disclosure Schedule, neither
Hubbard nor any of its Subsidiaries maintains and has never
maintained or contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing medical, health or
life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses or their dependents
(other than in accordance with Section 4980B of the Code). The
requirements of Section 4980B of the Code and Sections 601 through
608 of ERISA have been met for each Employee Welfare Benefit Plan
that is a group health plan. No such group health plan is a
"multiple employer welfare arrangement" within the meaning of
Section 3(40) of ERISA. None of Hubbard, its Subsidiaries nor any
ERISA Affiliate maintains or has any obligation to contribute to any
"voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code for the provision of welfare benefits.
(v) For purposes of this Section 3.01(p):
(A) "Fiduciary" has the meaning set forth in ERISA Sec.
3(21).
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<PAGE>
(B) "ERISA Affiliate" means any entity required to be
aggregated with Hubbard, Armour and/or their respective
subsidiaries, trades or businesses under Sections 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA.
(C) "Employee Benefit Plan" has the meaning set forth in
ERISA Sec. 3(3), including any such plan contributed to or
required to be contributed to by Hubbard, each Subsidiary
and/or each ERISA Affiliate.
(D) "Employee Pension Benefit Plan" has the meaning set
forth in ERISA Sec. 3(2), including any such plan contributed
to or required to be contributed to by Hubbard, each
Subsidiary and/or each ERISA Affiliate.
(E) "Employee Welfare Benefit Plan" has the meaning set
forth in ERISA Sec. 3(1), including any such plan contributed
to or required to be contributed to by Hubbard, each
Subsidiary and/or each ERISA Affiliate.
(F) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(G) "Multiemployer Plan" has the meaning set forth in
ERISA Sec. 3(37).
(H) "PBGC" means the Pension Benefit Guaranty
Corporation.
(I) "Prohibited Transaction" has the meaning set forth
in ERISA Sec. 406 and Code Sec. 4975.
(J) "Reportable Event" has the meaning set forth in
ERISA Sec. 4043.
(q) Environmental matters.
(i) For purposes of this Agreement,
(A) "Environmental Law" means the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. ss. 1201 et seq., the Clean
Water Act, 33 U.S.C. ss. 1321 et seq., the Clean Air Act, 42
U.S.C. ss. 7401 et seq., the Safe Drinking Water Act, the
Toxic Substance Control Act, the Emergency Planning and
Community Right-to-Know Act of 1986, the Hazardous Material
Transportation
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<PAGE>
Agreement, and the Occupational Safety and Health Act of 1976,
each as amended through the Closing Date, together with all
other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments
(and all agencies thereof) concerning pollution or protection
of the environment, public health and safety, or employee
health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic
materials (including petroleum products and asbestos) or
wastes into ambient air, surface water, ground water, or lands
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
(B) "Hazardous Substance" means any pollutant,
contaminant, hazardous substance or waste, solid waste,
petroleum or any fraction thereof, or any other chemical,
substance or material listed or identified in or regulated by
any Environmental Law.
(ii) Except as set forth in the Disclosure Schedule and the
environmental assessments performed since January 1, 1987 by it, at
its request or by any governmental agency with respect to the
current property, each of which is listed therein:
(A) Hubbard and each Subsidiary comply, and have at all
times since January 1, 1992 complied, in all material respects
with all Environmental Laws applicable to the ownership and
operations of their respective assets and the conduct of their
respective businesses, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or
notice has been filed or commenced against any of them and is
now pending or, to the knowledge of Hubbard, threatened,
alleging any such failure to comply;
(B) Hubbard and each Subsidiary possess (or have timely
filed applications pending for) all material licenses and
permits required by all Environmental Laws applicable to the
ownership and operations of their respective assets and the
conduct of their respective businesses, and Hubbard and each
Subsidiary comply in all material respects with the terms and
conditions of such licenses and permits;
(C) Hubbard has not spilled, discharged, emitted,
injected, disposed of, dumped or released any Hazardous
Substances and, to the
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<PAGE>
knowledge of Hubbard, there has been no spill, discharge, leak,
emission, injection, disposal, escape, dumping or release of any
Hazardous Substance by any other person, or any leaching or
migration of any Hazardous Substance of any kind, on, beneath, above
or into the environment from, onto, into or surrounding any of the
Fee Property or Leasehold Property (collectively, the "Current
Property"), or any of the real property formerly owned or leased by
Hubbard or any of the Subsidiaries (collectively, the "Former
Property");
(D) No underground storage tanks are located on the Current
Property which contain or, to the knowledge of Hubbard, heretofore
contained any Hazardous Substances;
(E) Hubbard has delivered to Buyer true and complete copies of
all environmental assessments performed since January 1, 1987 by it,
at its request or by any governmental agency with respect to the
Current Property each of which is listed on the Disclosure Schedule;
(F) Since January 1, 1987, Hubbard has not filed or received
any written notice of a release or threatened release of a Hazardous
Substance or been notified that it may be a potentially responsible
party at any waste disposal site or other location used for the
disposal of any Hazardous Substance, or any Former Property;
(G) Except as permitted by and in compliance with applicable
Environmental Laws, no Hazardous Substances, including, without
limitation, asbestos-containing materials and polychlorinated
biphenyls, are currently located at, on or within the Current
Property in such form or substance so as to create any material
liability on the part of Hubbard; and
(H) To the knowledge of Hubbard, no contaminated soil or
groundwater for which applicable Environmental Laws require a
response action or corrective action is located on or under the
Current Property or any Former Property or any real property
adjacent to such property.
(r) Suppliers and Customers. The Disclosure Schedule lists (i)
Hubbard's ten largest suppliers, and (ii) for each of the Feed Division and Pet
Food Division the ten largest customers, in each case by volume shipped for the
eight months ending December 31, 1996 together with the approximate dollar
volume by supplier and customer, as the case may be, and a general description
of the goods or services provided, and describes any substantial
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<PAGE>
change in the identity of, or the nature of the business conducted with, such
suppliers that has occurred since such date.
(s) Insurance. The Disclosure Schedule contains a complete and
correct list and summary description (including the name of the insurer,
coverage and expiration date) of all policies of insurance relating to Hubbard's
business which are in force, or which are still open for retroactive premium
adjustments, including the amounts thereof, maintained by Hubbard or in which
Hubbard is named insured or on which Hubbard is directly or indirectly paying
premiums. Hubbard has maintained and will continue to maintain through the
Closing Date a reasonable and customary program of casualty and property
insurance (which may include self-insurance) with respect to its business. The
Disclosure Schedule lists all property damage and personal injury claims against
Hubbard with respect to its business since 1990 involving any claim in excess of
$50,000. Between the date of this Agreement and the Closing Date, Hubbard shall
provide or make available to Buyer all information pertaining to its business as
reasonably requested by Buyer or Buyer's brokers or insurers to effect insurance
on Hubbard's business at the Closing Date.
(t) Motor Vehicles. All licensed motor vehicles used in Hubbard's
business, whether owned or leased, are listed on the Disclosure Schedule. All
licenses, permits, inspections and other authorizations necessary for the use of
such vehicles have been obtained and are in full force and effect.
(u) Adequacy of Hubbard's Assets/Related Party Transactions. Except
as described on the Disclosure Schedule:
(i) The assets owned, leased or licensed by Hubbard and its
Subsidiaries are all of the assets, properties, rights and claims
used in the conduct of Hubbard's business and which are necessary or
used to operate Hubbard's business in the same manner as it is
currently being operated by Hubbard and its Subsidiaries; and
(ii) There are no contracts or arrangements currently in
effect between Hubbard and any of its officers, directors,
shareholders and their immediate families (excluding (A) the
employment arrangements with persons in the employ of Hubbard, (B)
director fee arrangements with directors of Hubbard who are neither
employed by, nor serve as counsel to Hubbard, (C) officer and
director indemnification obligations under Hubbard's by-laws, and;
(D) agreements with certain employees holding shares of Hubbard
Class B Common Stock obligating Hubbard to repurchase shares held by
such employees upon termination of employment) in an amount,
individually or in the aggregate, greater than $100,000.
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(v) Notes and Accounts Receivable. Except as set forth on the
Disclosure Schedule, all notes and accounts receivable of Hubbard and its
Subsidiaries (a) are reflected properly on Hubbard's books and records, (b) are
valid receivables subject to no setoff or counterclaims, and (c) arose in the
ordinary course of business.
(w) Pet Food Packaging and Finished Goods Inventory. Hubbard has
established and implemented procedures for monitoring the level of excess or
obsolete pet food packaging and finished goods inventory. Pursuant to such
procedures, Hubbard periodically writes off such pet food packaging and finished
goods inventory as Hubbard, in the exercise of its reasonable business judgment,
deems excess or obsolete. At the date hereof, the quantity of excess or obsolete
pet food packaging and finished goods inventory do not exceed historical levels
as set forth in the Disclosure Schedule.
(x) Labor Matters. Hubbard (i) is in compliance in all material
respects with all laws, rules, regulations, ordinances, employment contracts,
and collective bargaining agreements respecting employment and employment
practices, terms and conditions of employment and wages and hours, (ii) is not
liable for any arrears of wages or penalties for failure to comply with any of
the foregoing, (iii) has not engaged in any unfair labor practice, breach of
contract, or discriminated on the basis of race, color religion, sex, national
origin, age or handicap in its employment practices, and except as set forth in
the Disclosure Schedule, no lawsuits, charges or complaints are pending or, to
the knowledge of Hubbard, threatened against Hubbard before any court, public or
governmental authority regarding any such unfair labor practice, breach of
contract or discrimination; (iv) except as set forth in the Disclosure Schedule,
has no grievance or arbitration regarding a dispute arising under a collective
bargaining agreement with any labor organization representing Hubbard's
employees pending or threatened against Hubbard; and (v) has not, in the
ten-year period next preceding the date of this Agreement, experienced a labor
strike or a threatened labor strike. Except as set forth in the Disclosure
Schedule, no employees of Hubbard are represented by any union, association,
labor organization or collective bargaining unit and, since January 1990,
Hubbard has not received written notice that the employees of Hubbard have any
intention to organize or join a union, association, labor organization or
collective bargaining unit. Without limiting the generality of the foregoing,
the restructuring by Hubbard of its Feed Division in the fiscal year ended April
30, 1996 and the fiscal year ending April 30, 1997 did not result in any
violation of the Worker Adjustment Retraining Notification Act (WARN).
(y) Full Disclosure. No representation or warranty contained in this
Agreement or in the Disclosure Schedule omits to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
3.02 Representations and Warranties of Buyer and Buyer Subsidiary.
Buyer and Buyer Subsidiary represent and warrant to Hubbard as follows:
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(a) Organization, Standing, Equity Ownership. Each of Buyer and
Buyer Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its state of incorporation. Buyer owns all of
the issued and outstanding capital stock of Buyer Subsidiary. Buyer Subsidiary
does not own capital stock of any corporation. Buyer has delivered to Hubbard a
certified copy of the respective articles or certificate or articles of
incorporation and by-laws of Buyer and Buyer Subsidiary. Each such copy is
complete and correct as of the date hereof.
(b) Authorization and Execution. Each of Buyer and Buyer Subsidiary
has the corporate power and authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Buyer and Buyer Subsidiary have been
duly and effectively authorized by the respective Boards of Directors and
shareholders of Buyer and Buyer Subsidiary, and no further corporate action is
necessary on the part of Buyer or Buyer Subsidiary to consummate the
transactions contemplated hereby. This Agreement constitutes a legal, valid and
binding obligation of each of Buyer and Buyer Subsidiary, enforceable against
each of them in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
(c) No Conflicts. Neither the execution and delivery of this
Agreement by Buyer and Buyer Subsidiary, nor the consummation of the
transactions contemplated hereby, will (i) conflict with or result in a breach
of the Articles of Incorporation or By-Laws, as currently in effect, of Buyer or
Buyer Subsidiary, or, (ii) except for the requirements under the
Hart-Scott-Rodino Act, require the consent or approval of any governmental
authority having jurisdiction over any of the business or assets of Buyer or
Buyer Subsidiary, or (iii) violate any statute, regulation, injunction, judgment
or order to which Buyer or Buyer Subsidiary is subject, or (iv) result in a
breach of, or constitute a default or an event which, with the passage of time
or the giving of notice, or both, would constitute a default, give rise to a
right of termination, cancellation or acceleration, create any entitlement to
any payment or benefit, require the consent of any third party or result in the
creation of any lien on the assets of Buyer or Buyer Subsidiary under any
material instrument, contract or agreement to which any of Buyer or Buyer
Subsidiary is a party or by which any of them is bound.
(d) Adequate Financing. Buyer has provided to Hubbard copies of the
following commitment letters for the financing contemplated by Buyer to finance
the transactions contemplated by this Agreement: commitment letter of The Chase
Manhattan Bank, Chase Securities, Inc. and Credit Suisse First Boston dated
March 21, 1997 for bridge and subordinated debt financing (insofar as such
commitment letter provides for bridge financing, the "Chase Bridge Financing
Commitment"); and commitment letter of Credit Suisse First Boston and The Chase
Manhattan Bank dated March 21, 1997 for senior debt
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financing (the "CSFB Senior Debt Financing Commitment"). Each such financing
commitment is in full force and effect at the date hereof and Buyer is not aware
of any fact or circumstance which could reasonably be expected to prevent Buyer
from consummating the transactions contemplated by this Agreement (including
receipt by Buyer of the financing). Buyer hereby covenants and agrees to deliver
to Hubbard on March 31, 1997, and each 14 days thereafter until Closing, written
confirmations from The Chase Manhattan Bank and Credit Suisse First Boston that
their respective commitments remain in full force and effect.
(e) No Brokers or Finders. Neither Buyer nor Buyer Subsidiary has
engaged any investment banker, broker or finder in connection with the
transactions contemplated hereby.
ARTICLE IV
CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME
4.01 Operation of Business of Hubbard Until Effective Time.
(a) Hubbard will exercise commercially reasonable efforts to
preserve intact its business organization and that of its Subsidiaries, keep
available the services of the present officers and key employees of Hubbard and
its Subsidiaries, and preserve the present relationships of Hubbard and its
Subsidiaries with entities and persons having significant business dealings with
Hubbard or any Subsidiary.
(b) Hubbard will, and will cause each Subsidiary to conduct its
business and operations only in the ordinary and usual course, except as
expressly provided in this Agreement or otherwise consented to in writing by
Buyer.
(c) Except as expressly provided in this Agreement, the Plan of
Merger or otherwise consented to in writing by Buyer, Hubbard will not (i) amend
its Articles of Incorporation or By-Laws; (ii) increase or decrease the number
of authorized shares of its capital stock; (iii) split, combine or reclassify
any shares of its capital stock or make any other changes in its equity capital
structure; (iv) purchase, redeem or cancel for value, directly or indirectly,
any shares of its capital stock; or (v) declare, set aside or pay any dividend
or other distribution or payment in cash, stock or property in respect of shares
of its capital stock, except for (A) Hubbard 5% Preferred Stock quarterly
dividends of $0.625 per share per quarter, and (B) Hubbard Class A Common Stock
and Hubbard Class B Common Stock quarterly dividends not to exceed $0.04 per
share per quarter.
(d) Hubbard will not, and will not permit any Subsidiary to, except
as otherwise consented to in writing by Buyer, (i) issue, grant, sell or pledge,
or agree or propose to issue, grant, sell or pledge, any shares of capital stock
of Hubbard or any Subsidiary or any
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options, rights or warrants to purchase any such capital stock or any securities
convertible into or exchangeable for such capital stock, or any stock
appreciation rights or performance shares based upon the value of any such
capital stock; (ii) purchase, lease or otherwise acquire (including without
limitation acquisition by merger, consolidation or stock or asset purchase) any
assets or properties, other than capital assets of substantially the nature
described in Hubbard's most recent capital improvements budget delivered to
Buyer, commitments for which (including the cost of capital assets acquired
between December 31, 1996 and the date of this Agreement) do not exceed $500,000
in the aggregate, inventory acquired in the ordinary course of business,
additional equity interests in D&D Partners LP IV not to exceed $300,000 in the
aggregate, and additional equity interests in other customers of the Feed
Division not to exceed $250,000 in the aggregate; (iii) sell, lease, encumber,
mortgage or otherwise dispose of any assets or properties which are material to
Hubbard or any of its Subsidiaries, other than (A) sales of inventory and
obsolete equipment in the ordinary course of business, (B) sales of facilities
at which Hubbard has discontinued operations prior to the date hereof and which
are sold other than as a going concern, (C) the sale of the Beechjet 400A
aircraft on contract terms (other than price) reasonably acceptable to Buyer,
(D) the sale of the "Country Pub" restaurant on contract terms (other than
price) reasonably acceptable to Buyer, and (E) the sale at cash surrender value
or surrender of the life insurance policies held by Hubbard on the lives of
Richard P. Confer and Ogden W. Confer; (iv) waive, release, grant or transfer
any rights of value or modify or change in any Material Contract, other than in
the ordinary course of business and in a manner that does not have a material
adverse effect on the business, operations, properties or financial condition,
of Hubbard and its Subsidiaries, taken as a whole; (v) incur any indebtedness
for money borrowed; (vi) incur any other liability or obligation, other than in
the ordinary course of business, or assume, guarantee, endorse (other than
endorsements of checks in the ordinary course of business) or otherwise as an
accommodation become responsible for the obligations of, or make any loans to
any other individual or entity other than in the ordinary course of business,
except for any feeder financing or dealer operating loan not in excess of
$20,000 per loan, loans to Vista Farms not to exceed $1,000,000 in the aggregate
and loans and financial accommodations to other customers of the Feed Division
not to exceed $20,000 per loan or financial accommodation; (vii) except as
otherwise required or permitted by this Agreement, enter into any new employee
benefit plan, program or arrangement, or any new employment, severance or
consulting agreement, amend any existing employee benefit plan, program or
arrangement, or any existing employment, severance or consulting agreement, or,
other than in the ordinary course of business, grant any increases in
compensation or benefits; (viii) adopt any new or amend any existing collective
bargaining agreement except in the ordinary course of business; (ix) enter into
any other transaction, other than in the ordinary course of business and
consistent with past practices; (x) make any tax election or settle or
compromise any material federal, state, local or foreign income tax liability;
(xi) fail to replace any of Hubbard's assets that are destroyed or become
inoperable as a result of any casualty, loss or damage and are required for the
continued operation of the business; (xii) permit any physical assets to be
removed from the Fee Property and Leasehold Property except in the ordinary
course of business; (xiii) fail to maintain the validity and enforceability of
the Proprietary Rights;
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(xiv) engage in the sale of Hubbard's products except in the ordinary course of
its business; (xv) make any changes in the customary methods used in operating
Hubbard's business (including its marketing, selling and pricing practices and
policies); (xvi) make any change in list pricing except in the ordinary course
of business; or (xvii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing; provided, however, that
nothing contained in this Section 4.01 shall prohibit Hubbard from contributing
to a museum, historical society or lineal descendant of Ruth Palmer Confer any
historical records, works of art depicting family members or other items of
personal property which may be of historical or family interest but are not
material to the conduct of the business.
4.02 Shareholders' Meeting; Proxy Material. Hubbard shall cause a
special meeting of its shareholders to be duly called and held as soon as
reasonably practicable after the execution of this Agreement for the purpose of
(i) voting on an amendment to the Articles of Incorporation of Hubbard in the
form of Exhibit C providing that Hubbard shall not be subject to Section
302A.671 of the MBCA governing control share acquisitions, and (ii) voting on
the approval of the Plan of Merger (such matters hereinafter called the "Agenda
Items"). Hubbard shall use reasonable efforts to solicit proxies in connection
with the meeting of shareholders called pursuant to this Section 4.02 and,
except to the extent otherwise required by the fiduciary obligations of the
Board of Directors under applicable law, Hubbard shall solicit such proxies in
favor of the Agenda Items. The Board of Directors of Hubbard shall, except to
the extent otherwise required by their fiduciary obligations under applicable
law, recommend approval of the Plan of Merger by the shareholders of Hubbard.
None of the information included in any statement furnished to the shareholders
of Hubbard in connection with the solicitation of proxies at the meeting of
shareholders referred to above (the "Statement") (excluding information
furnished by Buyer or its representatives about Buyer and its affiliates
expressly for inclusion therein) will, at the time the Statement is mailed, be
false or misleading with respect to any material fact, or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or, at the time of the meeting of shareholders to which
the Statement relates or at the Effective Time, as then amended or supplemented,
necessary to correct any statement that has become false or misleading in any
earlier communication with respect to the solicitation of any proxy for such
meeting.
4.03 No Shopping.
(a) From the date hereof until the Effective Time, Hubbard will not,
and will not permit any officer, director or other agent of Hubbard, directly or
indirectly, to (i) take any action to seek, initiate or encourage any offer from
any person, entity or group to acquire any shares of capital stock of Hubbard or
any Subsidiary, to merge or consolidate with Hubbard or any Subsidiary, or to
otherwise acquire, except as expressly permitted by Section 4.01 (d)(iii)
hereof, any significant portion of the assets of Hubbard or any Subsidiary, or
(ii) except to the extent otherwise required by their fiduciary obligations
under applicable law, engage in negotiations concerning, or disclose financial
information relating to, Hubbard
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or any Subsidiary, or any confidential or proprietary trade or business
information relating to the business of Hubbard or any Subsidiary, or afford
access to the properties, books or records of Hubbard or any Subsidiary, to any
third party that may be considering any merger or consolidation with Hubbard or
any Subsidiary or any acquisition of any shares of capital stock of Hubbard or
any Subsidiary or any significant portion of the assets of Hubbard or any
Subsidiary; provided, however, that if Hubbard shall become legally obligated,
or if the officers or directors of Hubbard shall be required by their fiduciary
obligations under applicable law to disclose any such information to any third
party, Hubbard may disclose such information to such third party only if Hubbard
has delivered to Buyer, at least 48 hours prior to such disclosure, a written
description, in reasonable detail, of the information Hubbard intends to
disclose and the identity of such third party.
(b) Hubbard will orally notify Buyer immediately, followed by prompt
written notice, of any offer from any person, entity or group or of any request
for information (other than from Buyer or Buyer Subsidiary), with respect to any
merger or consolidation with Hubbard or any Subsidiary or any acquisition of any
shares of capital stock of Hubbard or any Subsidiary or, except with respect to
sales of assets expressly permitted by Section 4.01(d)(iii), any significant
portion of the assets of Hubbard or any Subsidiary.
4.04 Access to Information. Hubbard will give (i) Buyer and Buyer
Subsidiary, and their respective counsel, financial advisors, auditors and other
authorized representatives, (ii) lenders and their counsel and other authorized
representatives, and (iii) prospective purchasers of Hubbard properties and
their counsel and other authorized representatives (collectively, "Authorized
Persons"), reasonable access to the offices, properties, books and records of
Hubbard and each Subsidiary, and will instruct the employees, counsel, financial
advisors and auditors of Hubbard and such Subsidiary to cooperate with
Authorized Persons in their investigation of the business of Hubbard and such
Subsidiary. Buyer and Buyer Subsidiary will, and will cause all other
Authorities Persons to conduct such investigation in a manner as not to
unreasonably interfere with the operations of Hubbard and will take all
necessary precautions (including, without limitation, obtaining the written
agreement of Authorized Persons other than Buyer and Buyer Subsidiary involved
in such investigation) to protect the confidentiality of any information of
Hubbard disclosed to such persons during such investigation.
4.05 Amendment of Hubbard's Employee Plans. Hubbard will cause any
Employee Benefit Plans which it may have to be amended, to the extent, if any,
requested by Buyer, for the purpose of permitting such Employee Benefit Plan to
continue to operate in conformity with ERISA and the Code following the Merger.
4.06 Hart-Scott-Rodino Act. Each of Hubbard, Buyer and Buyer
Subsidiary will file any Notification and Report Forms and related material that
it may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the Hart-Scott-Rodino
Act, will exercise reasonable
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efforts to obtain an early termination of the applicable waiting period, and
will make any further filings pursuant thereto that may be necessary or
advisable.
4.07 Supplements to Disclosure Schedule. Hubbard shall deliver to
Buyer a supplemental or amended Disclosure Schedule containing information that
supplements or amends the representations, warranties and/or disclosures in this
Agreement (including, without limitation, the Disclosure Schedule) in order to
make the information set forth therein timely, complete and accurate. Subject to
Section 7.01(f), any covenant, representation or warranty of Hubbard herein
which is affected by such supplemental or amended information shall be deemed to
have been amended accordingly.
4.08 Engagement of Auditors.
(a) Pursuant to an engagement letter dated March 18, 1997, Hubbard
has engaged the Minneapolis, Minnesota office of KPMG Peat Marwick LLP to
prepare an audit report (the "Interim Audit Report") including a consolidated
balance sheet of Hubbard and its Subsidiaries as of January 31, 1997, and
consolidated statements of earnings and cash flows for the eight months then
ended, prepared in accordance with generally accepted accounting principles,
consistent with Hubbard's past practices in preparing the financial statements
contained in the Annual Reports. Buyer has executed such engagement letter as an
additional party and has agreed to pay the fees of KPMG Peat Marwick LLP for
such Interim Audit Report. Hubbard shall instruct KPMG Peat Marwick to deliver a
copy of such Interim Audit Report to Buyer promptly upon completion thereof.
(b) Prior to Closing, Hubbard shall engage the Minneapolis,
Minnesota office of KPMG Peat Marwick LLP to prepare an audit report including a
consolidated balance sheet of Hubbard and its Subsidiaries as of the Closing
Date, prepared in accordance with generally accepted accounting principles,
consistent with Hubbard's past practices in preparing the financial statements
contained in the Annual Reports. Hubbard acknowledges that the San Francisco,
California office of KPMG Peat Marwick LLP provides certain accounting services
to Buyer and that a certified public accountant from such office will
participate in the preparation of the audit report required by this Section
4.08(b) at the expense of, and on behalf of Buyer. Hubbard shall instruct KPMG
Peat Marwick LLP to deliver a copy of such audit report to the Shareholder
Representative (as defined in Section 8.01), Buyer and the Disbursing Agent not
more than ninety (90) days after the Closing Date. Such audit report shall
reflect all transactions through the close of business on the Closing Date;
provided, however, that any extraordinary transactions not in the ordinary
course of business following the Effective Time shall not be taken into account
in preparing the audit report.
4.09 Employee Savings Plan Payments. Prior to Closing, Hubbard shall
(i) give written notice to each participant in the Hubbard Employee Savings Plan
that Hubbard elects to repay to each participant ten (10) days thereafter all
outstanding amounts theretofore remitted by such participant to Hubbard pursuant
to such plan, together with
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accrued interest thereon, and (ii) make such payments by cashier's check to the
participants in such plan, thereby discharging prior to Closing all liabilities
of Hubbard under the Employee Savings Plan.
4.10 Landlord Estoppels. Hubbard will request estoppel certificates
(in such form as Hubbard and Buyer shall mutually agree, both acting reasonably)
for delivery on or prior to the Closing Date from the lessors of the facilities
identified in the Disclosure Schedule as principal leased facilities under the
caption "Leasehold Property--Hubbard Milling Company as Tenant". The receipt of
such estoppel certificates shall not be a condition to Buyer's obligations under
this Agreement.
4.11 Monthly Financial Statements. Hubbard shall deliver to Buyer,
promptly upon the completion thereof, a copy of the unaudited monthly financial
statements of Hubbard prepared in the ordinary course of business for each month
ending after the date hereof and not less than twenty (20) days prior to the
Closing Date.
4.12 Payments to Eliminate or Limit Certain Title Exceptions.
Hubbard agrees to pay up to an aggregate maximum of $100,000 of costs and
expenses reasonably incurred by Buyer to eliminate or appropriately limit the
adverse effect of those special exceptions, if any, on Schedule B of the title
insurance commitments which would permit Buyer not to close the transactions
contemplated by this Agreement pursuant to Section 5.01(k) and which Buyer
notifies Hubbard prior to Closing qualify, in the opinion of Buyer, as such
special exceptions. Any such costs and expenses up to such aggregate maximum of
$100,000 which has not been paid by Hubbard prior to Closing (the "Indemnified
Title Costs and Expenses") are included within the matters for which Buyer is
indemnified by the Shareholders under Section 9.02(a). Payment of the foregoing
costs and expenses shall be limited to those included in reasonably detailed
invoices therefor submitted by Buyer to Hubbard, if prior to Closing, or to the
Shareholder Representative (as defined in Section 8.01) and the Disbursing
Agent, if submitted after Closing and within eighteen (18) months of the
Closing. Except with respect to any unpaid invoices theretofore submitted to the
Shareholder Representative, the payment and reimbursement obligation under this
Section 4.12 shall terminate eighteen (18) months after the Closing.
4.13 Confidentiality. Buyer will maintain in confidence and not
disclose to others prior to Closing any financial, customer or other
confidential information regarding Hubbard except for (i) disclosures required
by law or legal process, (ii) disclosures reasonably required in connection with
the financing for the transactions contemplated by this Agreement, including
without limitation disclosures to prospective lenders and institutional
investors, and (iii) subject to obtaining confidentiality agreements in form and
substance reasonably satisfactory to Hubbard, disclosure to prospective
purchasers of Hubbard properties.
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ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to the Obligations of Buyer and Buyer Subsidiary.
The obligations of Buyer and Buyer Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any one or more of which (except for the conditions set forth in
Section 5.01(b) and (c)) may be waived by Buyer and Buyer Subsidiary:
(a) The representations and warranties of Hubbard contained in
Section 3.01 shall be true and correct in all material respects with the same
effect as if such representations and warranties had been made on the Closing
Date; Hubbard shall have performed and complied in all material respects with
the agreements and obligations contained in this Agreement required to be
performed and complied with by it on or prior to the Closing Date; and Buyer and
Buyer Subsidiary shall have received a certificate signed by an executive
officer of Hubbard to the effects set forth in this Section 5.01(a) and in
Section 5.01(f).
(b) The amendment to the Articles of Incorporation of Hubbard set
forth in Exhibit D shall have been adopted at the meeting of the shareholders of
Hubbard referred to in Section 4.02 by the vote required by the MBCA and
Hubbard's Articles of Incorporation, and a Certificate of Amendment to the
Articles of Incorporation of Hubbard containing such amendment shall have been
duly executed, filed with the Minnesota Secretary of State and effective prior
to the vote of the shareholders of Hubbard at such meeting on the Plan of
Merger.
(c) The Plan of Merger shall have been approved at the meeting of
shareholders of Hubbard referred to in Section 4.02 by the vote required by the
MBCA and Hubbard's Articles of Incorporation and arrangements reasonably
satisfactory to Buyer and Buyer Subsidiary shall have been made for Articles of
Merger to be filed with the Minnesota Secretary of State on the Closing Date
immediately following the Closing.
(d) All other corporate action on the part of Hubbard necessary to
authorize the execution, delivery and consummation of this Agreement or any
agreement or instrument contemplated hereby to which Hubbard is or is to be a
party or the transactions contemplated hereby or thereby shall have been duly
and validly taken.
(e) There shall not be pending any suit, action, investigation,
inquiry or other proceeding by or before any court or governmental or other
regulatory or administrative agency or commission requesting or looking toward
an order, judgment or decree (except those in which Buyer or Buyer Subsidiary is
a plaintiff directly or derivatively) which, in the reasonable judgment of Buyer
could, if issued, restrain or prohibit the consummation of the
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transactions contemplated hereby or require rescission of this Agreement or such
transactions or result in damages to Buyer, Buyer Subsidiary or Hubbard, as the
surviving corporation of the Merger, if the transactions contemplated hereby are
consummated, nor shall there be in effect any injunction, writ, preliminary
restraining order or any order of any nature issued by a court or governmental
agency of competent jurisdiction directing that the transactions provided for
herein, or any of them, not be consummated as so provided.
(f) Since December 31, 1996, there shall not have been any material
damage, destruction or loss, whether covered by insurance or not, or other
change materially and adversely affecting the business, operations, properties
or financial condition of Hubbard and its Subsidiaries.
(g) Buyer shall have received from Faegre & Benson LLP, counsel to
Hubbard, an opinion, dated the Closing Date and reasonably satisfactory in form
and substance to Buyer and its counsel, as to the matters set forth in Exhibit
D. In rendering such opinion, such counsel may rely, to the extent such counsel
deems such reliance necessary or appropriate, as to matters of fact, upon
certificates of government officials and of any officer or officers of Hubbard.
(h) All applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated.
(i) Buyer and the Armour Shareholders shall have executed and
delivered the Armour Stock Purchase Agreement and such agreement shall not have
been terminated; all conditions precedent set forth in the Armour Stock Purchase
Agreement to the purchase and sale of the Armour Capital Stock thereunder shall
have been satisfied or waived; and the purchase and sale of the Armour Capital
Stock under the Armour Stock Purchase Agreement shall have been consummated
immediately prior to the Closing hereunder.
(j) On the Closing Date, Hubbard will have delivered to Buyer the
following:
(i) A good standing certificate for each of Hubbard and the
Active Subsidiaries from its state of organization and from each
other state it is qualified to do business as a foreign corporation,
dated not earlier than 15 days prior to the Closing Date;
(ii) Certified copies of the resolutions duly adopted by
Hubbard's board of directors authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated
hereby;
(iii) Certified resolutions duly adopted by the Hubbard
shareholders entitled to vote thereon approving the Agenda Items;
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(iv) The written resignations of the directors of Hubbard and
the written resignations of such officers of Hubbard and the Active
Subsidiaries as Buyer may request;
(v) The minute books, stock records and stock ledgers of
Hubbard and the Active Subsidiaries; and
(vi) Such other documents and instruments as Buyer may
reasonably request in connection with the transactions contemplated
hereby.
(k) Buyer, at its expense, shall obtain at the Closing owner title
insurance policies for each Fee Property and shall obtain on or before the
Closing such surveys of each Fee Property as it desires. It shall be a condition
to Buyer's obligation to close that the title insurance policies do not contain
as special exceptions under Schedule B easements, restrictions, mortgages,
pledges, liens, encumbrances, security interests or any other title exceptions
which do not constitute Permitted Exceptions under clauses (A) or (B) of Section
3.01(i)(ii), unless such special exceptions (i) are disclosed on the surveys
listed in the Disclosure Schedule except to the extent listed in the Disclosure
Schedule under the caption "Survey Matters As To Which Buyer Has Not Yet Made A
Determination", (ii) are matters contained in any title insurance commitment
listed in the Disclosure Schedule, provided that (x) Buyer has received as of
the date hereof copies of any instruments identified in such title commitment as
constituting such special exception (it being acknowledged that Buyer has not
received copies of those documents listed in the Disclosure Schedule under the
caption "Missing Documents") and (y) such matter does not require a survey
(other than the surveys in (i) above) to determine the effect thereof on the Fee
Property in question, or (iii) are matters listed in the Disclosure Schedule
under the caption "Title Exceptions As To Which Buyer Has Not Made a
Determination", but only if the same do not materially interfere with the
present use of the properties subject thereto. Buyer shall be obligated to close
notwithstanding any such matter if the title insurance company is willing to
insure over the exception or exceptions in question or against the effects
thereof on a basis generally consistent with accepted practice for such matters.
(l) Hubbard agrees to provide such affidavits, certificates and
other instruments as the title insurance company may reasonably require at the
Closing (i) for deletion of the standard exceptions on Schedule B of the title
policies to be obtained by Buyer, (ii) for affirmative insurance with respect
to, or to delete, special exceptions based on facts known to Hubbard, and (iii)
for limitation of the knowledge of the insured under said policies to the
knowledge of Buyer without imputation of the knowledge of Hubbard immediately
prior to Closing (i.e. to obtain the equivalent of a non-imputation endorsement
in a merger transaction), all of which instruments shall be for the sole benefit
of the title company, shall contain such disclaimers, exculpation and other
provisions as Hubbard's legal counsel shall reasonably determine are necessary
of appropriate to assure that no person or
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entity, including the person executing the instrument in question, any Armour
Shareholder or Hubbard, shall have any liability by reason of such instrument
(but without affecting the title insurer's rights of subrogation to Buyer's
rights under this Agreement), and shall otherwise be in form and substance
reasonably satisfactory to Hubbard's legal counsel. In addition, Hubbard will
(i) provide copies of tax bills, tax receipts and other documentary evidence in
the possession of Hubbard, and (ii) request such confirmations and other
informational statements and the like from third parties, in each case as from
time to time reasonably requested by Buyer in connection with the title policies
to be obtained by Buyer.
(m) Hubbard shall have prepared and delivered to Buyer the
environmental reports described on Exhibit E hereto.
(n) The number of shares of Hubbard Capital Stock in respect of
which a proper demand for payment of fair value pursuant to Section 302A.473 of
the MBCA shall have been made shall not exceed 5% of the outstanding shares of
Hubbard Capital Stock.
(o) The Disbursing Agreement shall have been executed and delivered
by the parties thereto other than Buyer.
5.02 Conditions to the Obligations of Hubbard. The obligations of
Hubbard to effect the Merger shall be subject to the fulfillment at or prior to
the Closing Date of the following conditions, any one or more of which (except
for the conditions set forth in Sections 5.02(b) and (c)) may be waived by
Hubbard:
(a) The representations and warranties of Buyer and Buyer Subsidiary
contained in Section 3.02 of this Agreement shall be true and correct in all
material respects on the Closing Date with the same effect as if such
representations and warranties had been made on the Closing Date; Buyer and
Buyer Subsidiary each shall have performed and complied in all material respects
with the agreements and obligations contained in this Agreement required to be
performed and complied with by them on or prior to the Closing Date; and Hubbard
shall have received a certificate signed by an executive officer of Buyer to the
effects set forth in this Section 5.02(a).
(b) The amendment to the Articles of Incorporation of Hubbard set
forth in Exhibit D shall have been adopted at the meeting of the shareholders of
Hubbard referred to in Section 4.02 by the vote required by the MBCA and
Hubbard's Articles of Incorporation, and a Certificate of Amendment to the
Articles of Incorporation of Hubbard containing such amendment shall have been
duly executed, filed with the Minnesota Secretary of State and effective prior
to the vote of the shareholders of Hubbard at such meeting on the Plan of
Merger.
(c) The Plan of Merger shall have been approved at the meeting of
shareholders of Hubbard referred to in Section 4.02 by the vote required by the
MBCA and
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Hubbard's Articles of Incorporation and arrangements reasonably satisfactory to
Hubbard shall have been made for Articles of Merger to be filed with the
Minnesota Secretary of State on the Closing Date immediately following the
Closing.
(d) All corporate action on the part of Buyer, and Buyer Subsidiary
necessary to authorize the execution, delivery and consummation of this
Agreement or any agreement or instrument contemplated hereby to which Buyer or
Buyer Subsidiary is or is to be a party or the transactions contemplated hereby
or thereby shall have been duly and validly taken.
(e) There shall not be pending any suit, action, investigation,
inquiry or other proceeding by or before any court or governmental or other
regulatory or administrative agency or commission requesting or looking toward
an order, judgment or decree (except those in which Armour, its shareholders or
Hubbard is a plaintiff directly or derivatively) which, in the reasonable
judgment of Hubbard, would, if issued, restrain or prohibit the consummation of
the transactions contemplated hereby or require rescission of this Agreement or
such transactions or result in damages to Hubbard if the transactions
contemplated hereby are consummated, nor shall there be in effect any
injunction, writ, preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein, or any of them, not be consummated as
so provided.
(f) Hubbard shall have received from Richards & O'Neil, LLP, counsel
to Buyer and Buyer Subsidiary, an opinion, dated the Closing Date and reasonably
satisfactory in form and substance to Hubbard and its counsel as to the matters
set forth in Exhibit F. In rendering such opinion, such counsel may rely, to the
extent such counsel deems such reliance necessary or appropriate, as to matters
of fact, upon certificates of government officials and of any officer or
officers of Buyer or Buyer Subsidiary.
(g) All applicable waiting periods (and any extension thereof) under
the Hart-Scott-Rodino Act shall have expired or otherwise been terminated.
(h) Buyer and the Armour Shareholders shall have executed and
delivered the Armour Stock Purchase Agreement and such agreement shall not have
been terminated; all conditions precedent set forth in the Armour Stock Purchase
Agreement to the purchase and sale of the Armour Capital Stock thereunder shall
have been satisfied or waived; and the purchase and sale of the Armour Capital
Stock under the Armour Stock Purchase Agreement shall have been consummated
immediately prior to the Closing hereunder.
(i) On the Closing Date, Buyer will have delivered to Hubbard the
following:
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(A) A good standing certificate for each of Buyer and Buyer
Subsidiary from its state of organization, dated not earlier than 15
days prior to the Closing Date;
(B) Certified copies of the resolutions duly adopted by the
board of directors of each of Buyer and Buyer Subsidiary authorizing
the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby; and
(C) Such other documents and instruments as Buyer may
reasonably request in connection with the transactions contemplated
hereby.
(j) The Disbursing Agreement shall have been executed and delivered
by the parties thereto other than Hubbard.
ARTICLE VI
CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME
6.01 Post-Closing Operations. Buyer agrees following the Effective
Time to conduct business operations at Hubbard's executive office building in
Mankato, Minnesota for at least six (6) months after the Closing Date.
6.02 Employee Benefit Plans.
(a) For a period of one year following the Closing Date: (i) Buyer
will not cause Hubbard to materially amend or modify any existing Employee
Benefit Plans (including vacation and holiday plans) or terminate any such plan,
(ii) Buyer will not cause Hubbard to merge any such plan other than with another
like plan of Hubbard, and (iii) Buyer will not cause Hubbard to extend coverage
under any Employee Pension Benefit Plan to the employees of any plant or
business operation not operated by Hubbard as of the date hereof; provided that
nothing contained herein shall prevent Buyer at any time following the Closing
Date from causing the spinoff or transfer of certain assets and liabilities of
any Employee Pension Benefit Plan to a like plan of a purchaser of a plant or
business operated by Hubbard with respect to the present and/or former employees
of such plant or business; and further provided that nothing contained herein
shall require Buyer to cause Hubbard to continue the Hubbard Milling Company
Deferred Compensation Plan except to the extent necessary to make the payments
required by Section 2.03. Nothing herein contained shall prohibit Buyer from
amending, modifying or terminating any existing Employee Benefit Plan following
the first anniversary of the Closing Date.
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(b) In the event that Buyer shall cause Hubbard to terminate an
Employee Pension Benefit Plan after the one year period described in Section
6.02(a) at a time when the assets of such plan exceed the termination
liabilities thereunder, Buyer agrees that it shall not cause such excess assets
to revert to Buyer, Hubbard or any affiliate of either of them.
6.03 Director and Officer Exculpation and Indemnification. Neither
Buyer nor Buyer Subsidiary will take, or cause or permit Hubbard to take, any
action to alter or impair any exculpation or indemnification now existing in the
Articles of Incorporation or By-Laws of Hubbard for the benefit of any
individual who served as a director or officer of Hubbard at any time prior to
the Effective Time; provided that indemnification owing from any Shareholder
under Section 9.02(a) of this Agreement or Section 8.02(a) of the Armour Stock
Purchase Agreement who is an officer or director of Hubbard shall not be deemed
for any purpose to be a claim covered by indemnification owing to such
Shareholder by Hubbard under any law, by-law or agreement whatsoever.
6.04 Filing of Tax Returns.
(a) Returns for Periods Prior to Closing. Required Tax Returns (and
all information required for inclusion in any consolidated or combined return)
which are due after Closing Date with respect to Taxes for Hubbard and its
Subsidiaries for the taxable periods of such companies ending on or before the
Closing will be prepared by Buyer and timely filed, including extensions. The
returns prepared and filed or to be prepared and filed by or for Hubbard and its
Subsidiaries are or will be true and correct, and will be prepared on a basis
upon which is consistent with the basis upon which similar Tax Returns for prior
periods have been prepared and filed, unless the relevant taxing authority will
not accept a Tax Return filed on that basis.
(b) Returns for Periods which Overlap Closing. Required Tax Returns
with respect to Taxes for Hubbard and its Subsidiaries for taxable periods
beginning before and ending after the Closing Date will be prepared by Buyer and
timely filed, including extensions. Such returns will be true and correct, and
will be prepared on a basis consistent with the basis upon which similar returns
for prior periods have been prepared. For purposes of determining such Taxes
attributable to Hubbard and its Subsidiaries through the Closing Date, it shall
be assumed that their taxable year will have ended at the close of business on
the Closing Date.
(c) Penalties and Interest. Any penalties and interest attributable
to any Tax Return prepared by Buyer, for any period ending on or before the
Closing Date, or including the Closing Date, shall be borne and paid by Buyer,
unless such returns are prepared on a basis consistent with the basis upon which
similar returns for prior periods have been prepared, in which case penalties
and interest will be proportionate to the Taxes allocated hereunder.
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6.05 Insurance Coverage. Buyer agrees from and after the Closing to
file all necessary claims under, and to exercise reasonable efforts to collect
the proceeds of any insurance maintained by Hubbard, Buyer or Buyer Subsidiary,
including without limitation the title insurance policies obtained by Buyer
pursuant to Section 5.01(k), with respect to any Damages (as defined in Section
9.02(a)) within the scope of the indemnification provisions of Section 9.02(a).
ARTICLE VII
TERMINATION AND ABANDONMENT
7.01 Generally. This Agreement may be terminated and abandoned at
any time prior to the purchase of the Armour Capital Stock from the Armour
Shareholders pursuant to Article I hereof, whether before or after approval of
the Plan of Merger by the shareholders of Hubbard:
(a) by mutual consent of the Boards of Directors of Buyer, Buyer
Subsidiary and Hubbard;
(b) by Buyer, Buyer Subsidiary or Hubbard if the transactions
contemplated hereby shall not have been consummated on or before June 30, 1997
(which date may be extended by mutual agreement of the Boards of Directors of
Buyer, Buyer Subsidiary and Hubbard), provided that such failure is not due
solely to the failure of the party seeking to terminate this Agreement to comply
with its obligations under this Agreement;
(c) by Buyer or Buyer Subsidiary if any of the conditions set forth
in Section 5.01 shall become impossible to fulfill other than for reasons within
the control of Buyer or Buyer Subsidiary, and such conditions shall not have
been waived pursuant to Section 9.05;
(d) by Hubbard if any of the conditions set forth in Section 5.02
shall become impossible to fulfill other than for reasons within the control of
the party seeking to terminate this Agreement, and such conditions shall not
have been waived pursuant to Section 9.05;
(e) by Buyer or Buyer Subsidiary, if the Board of Directors of
Hubbard fails to call or hold a special meeting as soon as reasonably
practicable or to conduct the vote on the Agenda Items at the special meeting or
any adjournment thereof, or if the Board of Directors of Hubbard fails to
recommend the Merger to shareholders of Hubbard, withdraws or qualifies such
recommendation once given or takes any position or action that is inconsistent
with such recommendation, whether or not as a result of the Board's exercise of
its fiduciary duties, in which event, if there has been no material breach by
Buyer or Buyer
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Subsidiary of any of their respective representations, warranties, covenants or
agreements contained in this Agreement, (i) Hubbard shall promptly reimburse
Buyer and Buyer Subsidiary upon written request for all fees and out-of-pocket
expenses reasonably incurred by them in connection with the transactions
contemplated by this Agreement, and (ii) if there shall occur within one year of
the date of termination a merger, consolidation or acquisition of all or a
material portion of the stock or assets, including the Feed Division or the Pet
Food Division, of Hubbard, or a recapitalization or restructuring of Hubbard
which results in the effective sale of the principal business and operations of
Hubbard by the current shareholders, then, and in any such event, Hubbard shall
pay to Buyer within ten (10) days of Buyer's written request upon consummation
of such transaction a fee equal to Three Million Nine Hundred Thousand Dollars
($3,900,000);
(f) by Buyer if Buyer shall have failed to receive the proceeds of
the bridge financing under the Chase Bridge Financing Commitment or the proceeds
of senior debt financing under the CSFB Senior Debt Financing Commitment, as the
case may be, as a result, in the case of the Chase Bridge Financing Commitment,
of any of the circumstances described in clauses (i) through (v) of the first
full paragraph on page 4 thereof, or as a result, in the case of the CSFB Senior
Debt Financing Commitment, of any of the circumstances described in the first
full paragraph of page 2 thereof; provided, however, that if Hubbard is not in
material default of any of its representations, warranties, covenants or
agreements contained in this Agreement and Buyer terminates this Agreement
pursuant to this clause (f), Buyer shall promptly reimburse Hubbard upon written
request for all fees and out-of-pocket expenses reasonably incurred by Hubbard
in connection with the auction conducted pursuant to the Credit Suisse First
Boston engagement letter dated September 29, 1996 (excluding any success fee
payable thereunder) and the preparation, negotiation, execution and delivery of
this Agreement; and
(g) in the event Buyer receives notice under Section 4.07 of a
supplement or amendment to the Disclosure Schedule which has disclosed, or which
together with any prior supplements or amendments pursuant to such Section
discloses, any change or effect which has had or could reasonably be expected to
have material adverse effect on Hubbard, then Buyer and Hubbard shall, for a
period of five (5) business days after the receipt by Buyer of any supplement or
amendment, negotiate in good faith as to adjustments, if any, to the terms of
this Agreement, and if Buyer and Hubbard do not agree to any such adjustments,
Buyer may, prior to the tenth business day after its receipt of the applicable
supplement or amendment, terminate this Agreement, in which event Hubbard shall
reimburse Buyer for all fees and out-of-pocket expenses reasonably incurred
prior to such termination date in connection with the transactions contemplated
by this Agreement.
7.02 Procedure and Effect of Termination and Abandonment. In the
event of termination of this Agreement by one or more of Hubbard, Buyer, or
Buyer Subsidiary pursuant to Section 7.01, written notice thereof shall
forthwith be given to the other parties hereto and this Agreement shall
terminate and the Merger shall be abandoned
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without further action by any of the parties hereto. If this Agreement is
terminated pursuant to Section 7.01, then except as otherwise expressly therein
provided no party hereto shall have any liability or further obligation to any
other party to this Agreement except to the extent the termination is a direct
result of a willful and material breach by a party to this Agreement of any
material representation, warranty or covenant contained in this Agreement.
ARTICLE VIII
SHAREHOLDER REPRESENTATIVE
8.01 Designation. Subject to the terms and conditions of this
Article VIII, Richard P. Confer is designated as the representative of the
Shareholders ("the Shareholder Representative") by Hubbard on behalf of each of
the shareholders (the "Shareholders") to serve, and the Buyer hereby
acknowledges that the Shareholder Representative shall serve, as the sole
representative of the Shareholders from and after the Effective Time with
respect to the matters set forth in this Agreement, such service to be without
compensation except for the reimbursement of out-of-pocket expenses and
indemnification specifically provided herein. The Shareholder Representative has
accepted such designation as of the date hereof. Notwithstanding anything to the
contrary contained in this Agreement, the Shareholder Representative shall have
no duties or responsibilities except those expressly set forth herein, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on behalf of any Shareholder shall otherwise exist against the
Shareholder Representative.
8.02 Authority. Each of the Shareholders, by voting in favor of this
Agreement at the meeting of Shareholders referred to in Section 4.02 and/or by
accepting any portion of the consideration to be paid pursuant to Section 1.03
will, effective as of the Effective Time, irrevocably appoint the Shareholder
Representative as the agent, proxy and attorney-in-fact for such Shareholder for
all purposes of this Agreement, including full power and authority on such
Shareholder's behalf (i) to take all actions which the Shareholder
Representative considers necessary or desirable in connection with the defense,
pursuit or settlement of any determinations relating to the payment of the
Escrow Amount and any claims for indemnification pursuant to Section 9.02,
including to sue, defend, negotiate, settle an compromise any such claims for
indemnification made by or against, and other disputes with, the Buyer pursuant
to this Agreement or any of the agreements or transactions contemplated hereby,
(ii) to engage and employ agents and representatives (including accountants,
legal counsel and other professionals) and to incur such other expenses as he
shall deem necessary or prudent in connection with the administration of the
foregoing, (iii) to provide for all expenses incurred in connection with the
administration of the foregoing to be paid by directing the Disbursing Agent to
reimburse the Shareholder Representative for such expenses, (iv) to disburse to
the Shareholders all indemnification payments received from the Buyer under
Section 9.02, (v) to accept and receive notices to the Shareholders pursuant to
this Agreement, and (vi) to take all other actions and exercise all other rights
which the
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Shareholder Representative (in his sole discretion) considers necessary or
appropriate in connection with this Agreement. Each of the Shareholders, by the
adoption of this Agreement at the meeting of Shareholders referred to in Section
4.02, agrees that such agency and proxy are coupled with an interest, and are
therefore irrevocable without the consent of the Shareholder Representative and
shall survive the death, incapacity, bankruptcy, dissolution or liquidation of
any Shareholder. All decisions and acts by the Shareholder Representative shall
be binding upon all of the Shareholders, and no Shareholder shall have the right
to object, dissent, protest or otherwise contest the same.
8.03 Resignation. In the event that the Shareholder Representative
shall die, become incapacitated, resign or otherwise fail to act on behalf of
the Shareholders for any reason, the Shareholder Representative shall be Ogden
W. Confer or, in the event of a similar situation involving Ogden W. Confer,
such other person as shall be selected by a majority of the persons serving as
directors of Hubbard immediately prior to the Closing, and such substituted
representative shall be deemed to be the Shareholder Representative for all
purposes of this Agreement.
8.04 Reliance by Third Parties on the Shareholder Representative's
Authority. The Shareholder Representative is authorized to act on the
Shareholders' behalf notwithstanding any dispute or disagreement among the
Shareholders and the other parties hereto shall be entitled to rely on any and
all action taken by the Shareholder Representative without any liability to, or
obligation to inquire of, any of the Shareholders even if such party shall be
aware of any actual or potential dispute or disagreement among the Shareholders.
Each of the other parties hereto is expressly authorized to rely on the
genuineness of the signature of the Shareholder Representative and, upon receipt
of any writing which reasonably appears to have been signed by the Shareholder
Representative, the other parties hereto may act upon the same without any
further duty of inquiry as to the genuineness of the writing.
8.05 Exculpation and Indemnification. Neither the Shareholder
Representative nor any agent employed by him shall be liable to any Shareholder
relating to the performance of his duties under this Agreement for any errors in
judgment, negligence, oversight, breach of duty or otherwise except to the
extent it is finally determined in a court of competent jurisdiction by clear
and convincing evidence that the actions taken or not taken by the Shareholder
Representative constituted fraud or were taken or not taken in bad faith. The
Shareholder Representative shall be indemnified and held harmless by the
Shareholders against all Damages (as defined in Section 9.02) paid or incurred
in connection with any action, suit, proceeding or claim to which the
Shareholder Representative is made a party by reason of the fact that he was
acting as the Shareholder Representative pursuant to this Agreement; provided,
however, that the Shareholder Representative shall not be entitled to
indemnification hereunder to the extent it is finally determined in a court of
competent jurisdiction by clear and convincing evidence that the actions taken
or not taken by the Shareholder Representative constituted fraud or were taken
or not taken in bad faith; and
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provided further, however, that the Shareholder Representative shall have
recourse only against the unpaid Escrow Amount (fully subordinated in right of
payment and otherwise to the Buyer's claims thereto, whether or not then
existing or known), with respect to such Damages as provided in the next two
sentences of this Section 8.05. Any amount owing to the Shareholder
Representative from the Shareholders pursuant to this Section 8.05 shall be
reduced on a pro rata basis from the next succeeding distribution(s) of the
Escrow Amount by the Disbursing Agent to the Shareholders, and shall be payable
solely from such source. The Shareholder Representative shall be protected in
acting upon any notice, statement or certificate believed by him to be genuine
and to have been furnished by the appropriate person and in acting or refusing
to act in good faith or any matter.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Limitations on Survival. Each of the representations and
warranties made by the parties in Article III and in the certificates delivered
pursuant to Sections 5.01(a) and 5.02(a) (and including the Disclosure Schedule
insofar as the Disclosure Schedule relates to such representations and
warranties) shall survive any examination made by or on behalf of any party
hereto, the execution and delivery of this Agreement, the Closing and the
consummation of the transactions called for by this Agreement to and until
eighteen (18) months after the Effective Time, whereupon such representations
and warranties shall terminate, provided that no such termination shall occur
with respect to any representation or warranty made in a manner involving fraud
or criminal misrepresentation. Notwithstanding the foregoing, the representation
and warranty contained in Section 3.01(i)(B) shall not survive Closing.
9.02 Indemnification. Subject to the limitations set forth in this
Section 9.02 the parties hereto agree as follows:
(a) Buyer, Buyer Subsidiary and their respective successors and
assigns shall be indemnified by Hubbard and its successors and assigns if the
Closing shall not occur, and by the Shareholders and their successors and
assigns if the Closing shall occur, against any loss, claim, liability, cost or
expense (including reasonable attorney's fees and expenses) or other damage of
any kind or nature (collectively, "Damages") incurred by Buyer (or Hubbard
following the Closing) which is caused by or arises out of (i) any breach of any
representation or warranty of Hubbard contained in this Agreement or any related
agreement or other document (the "Closing Documents") other than those breaches,
if any, of which Buyer has actual knowledge at the time of Closing, (ii) the
breach or other failure to perform any covenant, agreement or other obligation
of Hubbard contained in this Agreement or any other Closing Document, (iii) any
requirement of a local, state or federal administrative agency or court pursuant
to any Environmental Law that Hubbard investigate or remediate
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Hazardous Substances, other environmental condition or failure to comply with
Environmental Law (or pay any fines or penalties in connection therewith) at any
Current Property if such Hazardous Substances, other environmental condition or
failure to comply with Environmental Law was identified in the Disclosure
Schedule under the caption "Environmental Matters--Miscellaneous Matters" or in
an environmental report prepared pursuant to Section 5.01(m) (collectively the
"Indemnified Environmental Liabilities"), (iv) the litigation and claims
identified in the Disclosure Schedule under the caption "Litigation" as
litigation and claims for which limited indemnification is provided under this
Section 9.02 (the "Indemnified Litigation and Claims"), and (v) Indemnified
Title Costs and Expenses as provided in Section 4.12; provided, however, that in
connection with any claim for indemnification for Damages under this Section
9.02 (except in a case involving fraud or criminal misrepresentation), (A) Buyer
shall have no recourse against Hubbard's officers, directors or agents other
than in their capacities as Shareholders otherwise entitled to receive
distributions from the Escrow Amount under the Disbursing Agreement, (B) after
the Closing Buyer shall have recourse only against the unpaid Escrow Amount with
respect to such Damages, (C) indemnification owing from any Shareholder who is
or was an officer or director of Hubbard shall not be deemed for any purpose to
be a claim covered by indemnification owing to such by Hubbard under any law,
by-law or agreement whatsoever, (D) except as expressly provided in clauses (E)
and (F) below, Buyer's rights to indemnification under this Section 9.02 and
clauses (iii) and (iv) of Section 8.02(a) of the Armour Stock Purchase Agreement
shall not arise until Damages, in the aggregate, exceed $750,000 whereupon
indemnification shall arise with respect to the full amount of such Damages in
excess of the $750,000 recoverable under this Section 9.02 and clauses (iii) and
(iv) of Section 8.02(a) of the Armour Stock Purchase Agreement, (E) in the case
of indemnification for Indemnified Environmental Liabilities and Indemnified
Litigation and Claims, the indemnification under this Agreement and the Armour
Stock Purchase Agreement shall be limited to 50% of any Damages and shall not be
subject to the $750,000 deductible set forth in clause (D) above, and (F) in the
case of indemnification for Indemnified Title Costs and Expenses, the
indemnification under this Agreement and the Armour Stock Purchase Agreement
shall not be subject to the $750,000 deductible set forth in clause (D). Any
amount owing to the Buyer or the Surviving Corporation from the Shareholders
pursuant to this Section 9.02 shall be deducted from the distributions of the
Escrow Amount to the Shareholders under the Disbursing Agreement.
Notwithstanding the foregoing, Buyer shall not be indemnified for any Damages
for which it receives proceeds under any insurance policy maintained by Hubbard,
Buyer, or Buyer Subsidiary, including without limitation the title insurance
policies obtained by Buyer pursuant to Section 5.01(k), and no Damages for which
such proceeds are received shall be included in calculating the $750,000
threshold for indemnification set forth in this Section 9.02(a).
(b) Hubbard and its successors and assigns, if the Closing shall not
occur, or the Shareholders and their successors and assigns severally but solely
through the Shareholder Representative, if the Closing shall occur, shall be
indemnified by the Buyer against Damages incurred by them which are caused by or
arise out of (i) any breach of any
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representation or warranty of Buyer contained in this Agreement or any of the
other Closing Documents, other than those breaches, if any, of which Hubbard has
actual knowledge at the time of Closing, and (ii) the breach or other failure to
perform any covenant or agreement or other obligation of Buyer contained in this
Agreement or any other Closing Document; provided, however, that after the
Closing indemnification hereunder shall be limited in amount to each Shareholder
to the amount of any merger consideration remaining unpaid and owing to such
Shareholder.
(c) Whenever any claim shall arise for indemnification hereunder,
(i) the party entitled to indemnification (or the Shareholder Representative in
the case of indemnification owing to the Shareholders) (the "Indemnified Party")
shall provide written notice to the party from whom such indemnification is
owing (or the Shareholder Representative in the case of indemnification owing
from the Shareholders) (the "Indemnifying Party") within a reasonable period of
becoming aware of the right to indemnification and, as expeditiously as possible
thereafter, of the facts constituting the basis for such claim and (ii) the
Indemnifying Party and its agents shall be given access to all books and records
in the possession or control of the Indemnified Party which the Indemnifying
Party reasonably determines to be related to such claim; provided that any
failure of the Indemnified Party to so notify the Indemnifying Party within any
such time period shall not waive the Indemnified Party's indemnification rights
hereunder except to the extent that the Indemnifying Party has been damaged by
such a failure.
(d) If any legal proceedings are instituted or any claim or demand
is asserted by any person in respect of which the Indemnified Party determines
it may seek indemnification pursuant to the provisions of this Section 9.02, the
Indemnified Party shall promptly after such determination cause written notice
of the assertion of any such claim to be made to Indemnifying Party. The
Indemnifying Party shall have the right, at its option and expense and upon
written notice to the Indemnified Party, to defend against, negotiate and, with
the consent of the Indemnified Party (which consent shall not be unreasonably
withheld) settle any such claim, and in such case, the Indemnified Party shall
have the right to participate in such defense, negotiation or settlement at his
own expense. The Indemnified Party and the Indemnifying Party agree to cooperate
fully with each other in connection with the defense, negotiation or settlement
of any such legal proceeding, claim or demand. Upon the payment of any claim for
indemnity, the Indemnifying Party shall be subrogated to all rights and remedies
of the Indemnified Party against any third person. If the Indemnifying Party
does not so elect to defend any such third party claim, legal proceeding or
demand, the Indemnified Party may (but shall have no obligation to) defend any
such third party claim, legal proceeding or demand in such manner as he may deem
appropriate including, but not limited to, settling such claim, legal proceeding
or demand, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate and no action taken by the
Indemnified Party in accordance with such defense and settlement shall relieve
the Indemnifying Party of its indemnification obligations herein provided with
respect to any Damages resulting therefrom.
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(e) The parties desire that any indemnification claim against the
Shareholders under Section 9.02(a) be coordinated with any indemnification claim
against the Armour Shareholders under clauses (iii) through (vii) of Section
8.02(a) of the Armour Stock Purchase Agreement. Accordingly, notwithstanding
anything to the contrary contained in this Agreement or the Armour Stock
Purchase Agreement, Buyer and Hubbard agree that any claim asserted by Buyer
under Section 9.02(a) of this Agreement shall also constitute a corresponding
claim under clauses (iii) through (vii), as applicable, of Section 8.02(a) of
the Armour Stock Purchase Agreement, and that any claim by Buyer under clauses
(iii) through (vii) of Section 8.02(a) of the Armour Stock Purchase Agreement
shall also constitute a claim under Section 9.02(a) of this Agreement. The
Disbursing Agreement shall provide for any Damages recoverable in respect of any
such claims to be allocated between the Escrow Amount under this Agreement and
the Armour Escrow Amount (as defined in the Armour Stock Purchase Agreement)
under the Armour Stock Purchase Agreement.
9.03 Amendment and Modification. To the extent permitted by
applicable law, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto at any time prior to the Closing with
respect to any of the terms contained herein, except that after the meeting of
shareholders contemplated by Section 4.02, the cash price per share to be paid
pursuant to the Plan of Merger for Hubbard Capital Stock held by persons other
than Armour shall in no event be decreased except as expressly authorized by
Section 7.01(f) without the approval of such shareholders.
9.04 Alternative Dispute Resolution.
(a) Hubbard and Buyer recognize that a bona fide dispute as to
certain matters may from time to time arise after the Closing Date relating to
rights or obligations under this Agreement. In such instance, the Shareholder
Representative or Buyer, as the case may be, may by written notice to the other,
have such dispute referred to the Shareholder Representative and the
representative of Buyer designated below or his successor, for attempted
resolution by good faith negotiation within thirty (30) days after such notice
is received. The designated representative of Buyer is James B. Ardrey. Any
settlement reached by the Shareholder Representative and the representative of
Buyer under this Section 9.04(a) shall not be binding until reduced to writing
and signed by them. When reduced to writing, such settlement agreement shall
supersede all other agreements, written or oral, to the extent such agreements
specifically pertain to the matters so settled. If the Shareholder
Representative and the representative of Buyer are unable to resolve such
dispute within such 30-day period, either may demand arbitration pursuant to
Section 9.04(b).
(b) Except as provided below, any controversy or claim arising out
of or relating to this Agreement shall be settled by arbitration in Chicago,
Illinois, at a time and location designated by the arbitrator, but not exceeding
ninety (90) days after a demand for arbitration has been made. Arbitration shall
be conducted by the American Arbitration
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<PAGE>
Association in accordance with its Rules of Commercial Arbitration, and judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator shall be a retired state or federal judge
experienced in business litigation or any attorney who has practiced business
litigation for at least ten (10) years. Arbitration will be conducted pursuant
to the provisions of this Agreement and the Commercial Arbitration Rules of the
American Arbitration Association. Limited civil discovery shall be permitted for
the production of documents and taking of depositions. Unresolved discovery
disputes may be brought to the attention of, and may be decided by, the
arbitrator. The arbitrator shall assess the costs and expenses of the
arbitration against the parties in such proportion as may be fair and equitable.
Nothing herein contained shall bar either party from seeking equitable remedies
in a court of appropriate jurisdiction.
9.05 Waiver of Compliance; Consents. Any failure of Buyer or Buyer
Subsidiary, on the one hand, or Hubbard, on the other hand, to comply with any
obligation, covenant, agreement or condition herein (except the conditions in
Sections 5.01(b) and (c) and 5.02(b) and (c) of this Agreement) may be waived in
writing by Hubbard or by Buyer and Buyer Subsidiary, respectively, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 9.05.
9.06 Expenses. Except as otherwise expressly provided in this
Agreement, all expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such expenses.
9.07 Press Releases and Public Announcements. No party to this
Agreement shall issue any press release or make any public announcement relating
to the subject matter of this Agreement without prior written approval of the
other parties; provided, however, that each of Hubbard and Buyer may make any
public disclosure it believes in good faith is required by applicable law or, in
the case of Buyer, the disclosure documents prepared in connection with the
offering of its debt securities (in which case the disclosing party will advise
the other parties to this Agreement prior to making the disclosure).
9.08 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including without limitation the negotiation, execution and delivery of the
Disbursing Agreement. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each corporation which is a party to this
Agreement shall take all such necessary action.
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<PAGE>
9.09 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Buyer or Buyer Subsidiary, to or, in the case of
Buyer Subsidiary, in care of:
Windy Hill Pet Food Co., Inc.
c/o Dartford Partnership
456 Montgomery Street
Suite 2200
San Francisco, California 94104
Attention: Ray Chung
with a copy to:
Richards & O'Neil LLP
885 Third Avenue
New York, New York 10022-4802
Attention: Ann F. Chamberlain
(b) If to Hubbard:
Hubbard Milling Company
P.O. Box 8500
424 North Riverfront Drive
Mankato, Minnesota 56002-8500
Attention: Richard P. Confer, President
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: Thomas G. Morgan
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<PAGE>
9.10 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, personal representatives, successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties, nor is this Agreement intended to confer
upon any other person except the parties any rights or remedies hereunder.
Notwithstanding the foregoing, Buyer and Buyer Subsidiary may assign their
respective rights to indemnification hereunder to a lender or lenders providing
financing for the transactions contemplated hereby.
9.11 Governing Law. The Agreement shall be governed by the laws of
the State of Minnesota.
9.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.13 Knowledge. All references in this Agreement to knowledge of a
corporation shall be deemed to mean knowledge of one or more of its executive
officers.
9.14 Headings; Internal References. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, and are not
part of the agreement of the parties and shall not affect in any way the meaning
or interpretation of this Agreement. Any references in this Agreement to an
article, section, paragraph, clause, exhibit or schedule shall be deemed to be a
reference to the article, section, paragraph, clause, exhibit or schedule
contained in this Agreement unless expressly stated otherwise.
9.15 Entire Agreement. This Agreement, including the exhibits hereto
and the documents and instruments referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein, and there are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
9.16 Severability. If any term, provision, covenant, agreement or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, agreements and restrictions of this Agreement will continue in full
force and effect and will in no way be affected, impaired or invalidated.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto do execute and deliver this
Agreement as of the date first above written.
HUBBARD MILLING COMPANY
By /s/ Richard P. Confer
---------------------------------
Richard P. Confer
President
WINDY HILL PET FOOD CO., INC.
By /s/ Ray Chung
---------------------------------
Ray Chung
Executive Vice President
WINDY HILL PET FOOD ACQUISITION CO.
By /s/ Ray Chung
---------------------------------
Ray Chung
Executive Vice President
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<PAGE>
EXHIBIT A
ARMOUR STOCK PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and between
WINDY HILL PET FOOD CO., INC.
and
THE SHAREHOLDERS
OF
ARMOUR CORPORATION
Dated as of April ____, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of the Agreement)
Page
ARTICLE I PURCHASE OF ARMOUR CAPITAL STOCK .................................. 1
1.01 GENERALLY ..................................................... 1
1.02 ALLOCATION OF PURCHASE PRICE .................................. 2
1.03 SEPARATE AND SEVERAL OBLIGATIONS .............................. 2
ARTICLE II CLOSING, PAYMENT FOR SHARES AND RELATED MATTERS .................. 2
2.01 GENERALLY ..................................................... 2
2.02 PAYMENT FOR SHARES ............................................ 2
ARTICLE III REPRESENTATIONS AND WARRANTIES .................................. 5
3.01 REPRESENTATIONS AND WARRANTIES OF ARMOUR SHAREHOLDERS ......... 5
3.02 REPRESENTATIONS AND WARRANTIES OF BUYER ....................... 8
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO CLOSING ........................ 9
4.01 LIABILITIES ................................................... 9
4.02 DIVIDENDS ..................................................... 9
4.03 ARMOUR CLOSING DATE BALANCE SHEET ............................. 9
ARTICLE V CONDITIONS PRECEDENT .............................................. 9
5.01 CONDITIONS TO THE OBLIGATIONS OF BUYER ........................ 9
5.02 CONDITIONS TO THE OBLIGATIONS OF ARMOUR SHAREHOLDERS .......... 11
ARTICLE VI TERMINATION AND ABANDONMENT ...................................... 13
6.01 GENERALLY ..................................................... 13
6.02 PROCEDURE AND EFFECT OF TERMINATION AND ABANDONMENT ........... 14
ARTICLE VII ARMOUR SHAREHOLDER REPRESENTATIVE ............................... 14
7.01 DESIGNATION ................................................... 14
7.02 AUTHORITY ..................................................... 14
7.03 RESIGNATION ................................................... 15
7.04 RELIANCE BY THIRD PARTIES ON THE ARMOUR SHAREHOLDER
REPRESENTATIVE'S AUTHORITY .................................... 15
7.05 EXCULPATION AND INDEMNIFICATION ............................... 15
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ARTICLE VIII MISCELLANEOUS PROVISIONS ....................................... 16
8.01 LIMITATIONS ON SURVIVAL ................................................ 16
8.02 INDEMNIFICATION ............................................... 16
8.03 AMENDMENT AND MODIFICATION .................................... 19
8.04 ALTERNATIVE DISPUTE RESOLUTION ................................ 19
8.05 INSURANCE COVERAGE ............................................ 20
8.06 FILING OF TAX RETURNS ......................................... 20
8.07 WAIVER OF COMPLIANCE; CONSENTS ................................ 20
8.O8 EXPENSES ...................................................... 20
8.09 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS ....................... 20
8.10 ADDITIONAL AGREEMENTS ......................................... 21
8.11 NOTICES ....................................................... 21
8.12 ASSIGNMENT .................................................... 22
8.13 GOVERNING LAW ................................................. 22
8.14 COUNTERPARTS .................................................. 22
8.15 HEADINGS; INTERNAL REFERENCES ................................. 22
8.16 ENTIRE AGREEMENT .............................................. 22
8.17 SEVBRABILITY .................................................. 23
EXHIBITS
A Ownership of Armour Capital Stock
B Form of Opinion of Counsel to Armour Shareholders
C Form of Opinion of Counsel to Buyer
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<PAGE>
STOCK PURCHASE AGREEMENT ("Agreement") dated as of April _, 1997, by
and between WINDY HILL PET FOOD CO., INC., a Delaware corporation ("Buyer"), and
OGDEN W. CONFER, KAY C. LAMB, RICHARD P. CONFER, CAROL C. GREENWALD, Richard P.
Confer and First Bank National Association as Trustees of the ELIZABETH ANNA
CONFER TRUST NO.2, and Richard P. Confer and First Bank National Association as
Trustees of the OGDEN P. CONFER FAMILY TRUST CREATED UNDER THE OGDEN P. CONFER
TRUST AGREEMENT (collectively the "Armour Shareholders", and individually an
"Armour Shareholder").
WITNESSETH:
WHEREAS, the Armour Shareholders own beneficially and of record all
of the issued and outstanding shares of capital stock of Armour Corporation, a
Delaware corporation ("Armour");
WHEREAS, Buyer desires to purchase from the Armour Shareholders, and
the Armour Shareholders desire to sell to Buyer, all of the issued and
outstanding shares of capital stock of Armour;
WHEREAS, Armour owns and holds beneficially and of record 800,000
shares of Class A Common Stock of Hubbard Milling Company, a Minnesota
corporation ("Hubbard");
WHEREAS, Hubbard, Buyer and Windy Hill Pet Food Acquisition Co.
("Buyer Subsidiary") have entered into a Merger Agreement dated as of March 21,
1997 (the "Merger Agreement") providing for Buyer Subsidiary to be merged with
and into Hubbard; and
WHEREAS, execution and delivery of this Agreement and consummation
of the transactions contemplated hereby are conditions precedent to consummation
of the transactions contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE OF ARMOUR CAPITAL STOCK
1.01 Generally. Subject to the conditions precedent hereinafter
contained, on the Closing Date (as defined in Section 2.01), Buyer shall
purchase from each of the Armour Shareholders, and each of the Armour
Shareholders shall sell to Buyer, the number
<PAGE>
and class of shares of issued and outstanding capital stock of Armour specified
in Exhibit A (all such shares of issued and outstanding capital stock of Armour
being hereinafter called the "Armour Capital Stock"). The aggregate purchase
price (the "Purchase Price") for the Armour Capital Stock shall be an amount
equal to 800,000 (i.e. number of shares of Hubbard Class A Common Stock held by
Armour) multiplied by the Common Stock Merger Consideration Per Share (as
defined in the Merger Agreement) plus (i) the amount of any cash of Armour on
the Closing Date after giving effect to the payment of any dividends permitted
by Section 4.02 as reflected on the Armour Closing Date Balance Sheet (as
defined in Section 4.03), and less (ii) the amount of any accrued but unpaid tax
liability of Armour on the Closing Date as reflected in the Armour Closing Date
Balance Sheet.
1.02 Allocation of Purchase Price. The Purchase Price shall be
allocated to the 9% Cumulative Voting Preferred Stock of Armour (the "Armour
Preferred Stock") in an amount equal to Ten Dollars ($10.00) per share, plus
accrued but unpaid dividends thereon through the Closing Date, and the balance
of such Purchase Price shall be allocated ratably to the shares of Common Stock
of Armour (the "Armour Common Stock").
1.03 Separate and Several Obligations. The obligations of the Armour
Shareholders under this Article I shall be separate and several.
ARTICLE II
CLOSING, PAYMENT FOR SHARES AND RELATED MATTERS
2.01 Generally. The closing (the "Closing") of the purchase and sale
of Armour Capital Stock in accordance with Article I shall occur on the "Closing
Date" specified in or otherwise determined in accordance with Section 2.01 of
the Merger Agreement (the "Closing Date"). The Closing shall be held at the
offices of Richards & O'Neil LLP, 885 Third Avenue, New York, New York or such
other place as the Armour Shareholders and Buyer may mutually agree.
2.02 Payment for Shares. (a) On the Closing Date, the Armour
Shareholders shall cause the Armour Shareholder Representative (as defined in
Section 7.01) to deliver to Buyer a written estimate of the Purchase Price, such
estimate to be prepared upon consultation with Buyer (the "Estimated Purchase
Price"), which shall be an amount equal to 800,000 (i.e. the number of shares of
Hubbard Class A Common Stock held by Armour) multiplied by the estimate of the
Common Stock Merger Consideration Per Share delivered by Hubbard to Buyer
pursuant to Section 2.02(a) of the Merger Agreement, plus (i) the amount of any
cash of Armour on the Closing Date after giving effect of the payment of any
dividends permitted by Section 4.02 as reflected on the Armour Closing Date
Balance Sheet, and less (ii) the amount of any accrued but unpaid tax liability
of Armour on the Closing Date as reflected in the Armour Closing Date Balance
Sheet. Such written estimate of the Purchase Price shall reflect the allocation
between the Armour Preferred Stock and the Armour
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<PAGE>
Common Stock (the amount so allocated to the Armour Common Stock hereinafter
called the "Estimated Armour Common Stock Purchase Price").
(b) On the Closing Date, subject to the terms and conditions herein
contained, upon surrendering the certificates evidencing the Armour Capital
Stock, duly endorsed or accompanied by duly executed assignments separate from
certificate, Buyer shall remit the Estimated Purchase Price to or for the
benefit of the Armour Shareholders as follows:
(i) Buyer shall pay by cashier's check to each holder of Armour
Preferred Stock an amount equal to the number of shares of Armour
Preferred Stock held by such holder as specified in Exhibit A
multiplied by an amount equal to the sum of (A) Ten Dollars ($10.00)
per share, plus (B) accrued but unpaid dividends thereon through the
Closing Date, which payment shall be in full and final satisfaction
of the portion of the Purchase Price allocable to the Armour
Preferred Stock in accordance with Section 1.02;
(ii) Buyer shall remit to the Disbursing Agent under the Disbursing
Agreement (as such terms are defined in Section 2.02 of the Merger
Agreement) in immediately available funds, and the Disbursing Agent
shall hold in escrow pursuant to the escrow provisions of the
Disbursing Agreement, an amount (the "Armour Escrow Amount) equal to
Thirteen Million Dollars ($13,000,000) or, if the Escrow Amount (as
defined in Section 2.02(a) of the Merger Agreement) is calculated
based on Ten Million Dollars ($10,000,000) pursuant to Section
2.02(a) of the Merger Agreement, Ten Million Dollars ($10,000,000),
in either case multiplied by a fraction, the numerator of which is
800,000 and the denominator of which is the aggregate number of
shares of Hubbard Class A Common Stock and Hubbard Class B Common
Stock issued and outstanding on the Closing Date (including the
800,000 shares of Hubbard Class A Common Stock held by Armour);
(iii) Buyer shall remit to the Disbursing Agent under the Disbursing
Agreement in immediately available funds an amount (the "Reserve
Amount") equal to 5% of the Estimated Armour Common Stock Purchase
Price, such amount to be held by the Disbursing Agent pending a
final determination of the Common Stock Merger Consideration Per
Share under the Merger Agreement and a final determination of the
Purchase Price under this Agreement; and
(iv) Buyer shall remit the balance of the Estimated Purchase Price
remaining after the applications required by the foregoing clauses
(i), (ii) and (iii) by cashier's check to the holders of the Armour
Common Stock, pro rata based upon the number of shares of Armour
Common Stock held by each such holder as reflected in Exhibit A,
such application to constitute partial payment of the Purchase Price
allocable to the Armour Common Stock.
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<PAGE>
(c) If the Armour Escrow Amount shall have been calculated under Section
2.02(b)(ii) based upon Thirteen Million Dollars ($13,000,000) but pursuant to
Section 2.02(b) of the Merger Agreement the Escrow Amount under the Merger
Agreement is thereafter recalculated based on Ten Million Dollars ($10,000,000),
then the Armour Escrow Amount shall be recalculated based on Ten Million Dollars
($10,000,000), in which event the excess of the Armour Escrow Amount as
originally calculated pursuant to Section 2.02(b)(ii) over the Armour Escrow
Amount as recalculated pursuant to this Section 2.02(c) shall be released from
escrow and held by the Disbursing Agent for distribution in accordance with
Section 2.02(e).
(d) Upon delivery of the Closing Date Balance Sheet (as defined in Section
1.03 of the Merger Agreement) and final determination of the Common Stock Merger
Consideration Per Share in accordance with the Merger Agreement, the Armour
Shareholders shall cause the Armour Shareholder Representative to deliver to
Buyer and the Disbursing Agent a final written calculation of the Purchase Price
allocable to the Armour Common Stock (the "Armour Common Stock Purchase Price").
Within two (2) business days of delivery of such calculation to Buyer, Buyer
shall remit or cause to be remitted in immediately available funds to the
Disbursing Agent for application in accordance with the Disbursing Agreement an
amount equal to the excess (if any) of (i) the Armour Common Stock Purchase
Price over the Estimated Armour Common Stock Purchase Price. Alternatively, if
the Estimated Armour Common Stock Purchase Price exceeds the Armour Stock
Purchase Price, the Disbursing Agreement shall provide for the Disbursing Agent
to remit the amount of such excess to Buyer within two (2) days of receipt of a
written request from Buyer.
(e) The Disbursing Agreement shall further provide that following the
remittance to or by the Disbursing Agent in accordance with Section 2.02(d), the
Disbursing Agent shall pay by cashier's check to the holders of Armour Common
Stock an amount equal to the Reserve Amount plus or minus as the case may be,
the amount of any payment by or to the Disbursing Agent pursuant to Section
2.02(d), plus (if applicable) any amount released from escrow pursuant to
Section 2.02(c). Such payment shall be allocated among the holders of Armour
Stock pro rata based upon their ownership of Armour Common Stock as set forth in
Exhibit A.
(f) The Disbursing Agreement shall authorize the Disbursing Agent to
invest as therein provided any amounts from time to time held by the Disbursing
Agent under the Disbursing Agreement, and to apply as therein provided any net
profit resulting from, or interest or income produced by, such investments.
(g) The Disbursing Agreement shall provide that any remaining Armour
Escrow Amount held by the Disbursing Agent under the Disbursing Agreement
eighteen (18) months after the Closing Date (subject to the provisions of the
Disbursing Agreement providing for the retention of the Armour Escrow Amount in
respect of escrow claims then pending) shall
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<PAGE>
be paid by cashier's check to the holders of Armour Common Stock, such amount to
be allocated among the holders of Armour Common Stock pro rata based upon their
ownership of Armour Common Stock as set forth in Exhibit A, in final settlement
of the Armour Common Stock Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Armour Shareholders. Each
Armour Shareholder (separately and severally) represents and warrants to Buyer,
and its successors and assigns, as follows:
(a) Organization and Good Standing. Armour is a corporation duly
incorporated, validly existing, and in good standing under the laws of the State
of Delaware and has the requisite corporate power and authority to own its
assets and carry on its business as it is now being conducted.
(b) Certificate of Incorporation and By-Laws. The copy of the
certificate of incorporation and by-laws of Armour that has been delivered to
Buyer is complete and correct as of the date of this Agreement, and the minute
books of Armour that have been made available to Buyer are complete in all
material respects and accurately reflect all material action taken prior to the
date of this Agreement by the Board of Directors and the Armour Shareholders.
(c) Capitalization. The authorized capital stock of Armour at the
date hereof consists of 25,000 shares of 9% Cumulative Voting Preferred Stock,
$10 par value, and 10,000 shares of Common Stock, $1 par value, all of which are
currently issued and outstanding.
(d) Ownership of Stock. Such Armour Shareholder owns and holds of
record, free and clear of any lien, claim or encumbrance, the shares of Armour
Capital Stock set forth adjacent to its name on Exhibit A, and such shares are
validly issued, fully paid and nonassessable. There are no restrictions on such
Armour Shareholder's ability to transfer such shares.
(e) Power and Authority; Execution and Enforceability. Such Armour
Shareholder has the legal right, power and authority to enter into this
Agreement and has the legal right, power and authority to transfer, assign and
deliver such Armour Shareholder's shares as provided in this Agreement, and such
delivery will convey to Buyer good and marketable title to such shares, free and
clear of all liens, claims, agreements and encumbrances of any kind whatsoever.
This Agreement constitutes the legal, valid and
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<PAGE>
binding obligation of such Armour Shareholder enforceable in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a court of law or in
equity).
(f) Assets. Armour is a holding company which holds as its sole
assets 800,000 shares of Hubbard Class A Common Stock and cash from time to time
maintained in its corporate accounts. Armour has good and marketable title to
such shares of Hubbard free and clear of all liens, claims and encumbrances.
Since its incorporation, Armour has not operated or otherwise engaged in any
business activity other than (i) ownership of such shares of Hubbard Class A
Common Stock and the exercise of voting rights in respect thereof; (ii) the
payment of dividends, fees and disbursements of its counsel and independent
accountants, income taxes, franchise taxes and other fees necessary to maintain
in good standing its status as a corporation in the state of Delaware; and (iii)
other immaterial, incidental and administrative matters directly related to the
foregoing.
(g) Liabilities; Litigation. Armour has no debts or other
liabilities of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, except for (i) accrued and unpaid fees
and disbursements of its counsel and independent accountants, and (ii) accrued
and unpaid taxes. All dividends required to be paid on Armour 9% Cumulative
Voting Preferred Stock have been paid through December 31, 1996. No litigation,
arbitration, administrative proceeding, or investigation of any kind is pending
or, to the knowledge of such Armour Shareholder, threatened against Armour or
any of its officers or directors in connection with the business or affairs of
Armour. Armour is not currently, and has not been since 1990, subject to any
judgment, consent decree, binding arbitration or regulatory order not generally
applicable to similar businesses.
(h) Tax Matters.
(i) Armour has timely filed all Federal, state, local and
foreign tax returns ("Tax Returns") required to be filed by it with
respect to income, withholding, social security, unemployment,
franchise, property, excise and sales and use taxes (all such taxes,
together with any interest or penalties payable in respect thereof,
hereinafter collectively called "Taxes"), and has paid, reserved or
accrued for all Taxes.
(ii) All Tax Returns filed by Armour for any taxable period
were complete and accurate in all material respects. No Tax Returns
filed by Armour have ever been audited and no claims for additional
Taxes for any taxable period have ever been made by any taxing
authority. Armour has not received a notice of deficiency or
assessment of additional Taxes which notice or assessment remains
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<PAGE>
unresolved. Armour has not extended the period for assessment or
payment of any Tax, which period has not since expired.
(iii) Armour has not been a member of an affiliated group (as
such term is defined in Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code")) filing a consolidated federal income
tax return for any tax year.
(iv) There are no liens for Taxes (other than current Taxes
not yet due and payable) upon the assets of Armour.
(v) Armour has not filed a consent under Code Section 341(f)
concerning collapsible corporations.
(vi) Armour has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii).
(vii) Armour is not a party to any Tax allocation or sharing
agreement.
(viii) Armour is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of any "excess parachute payments"
within the meaning of Code Sec. 2809, or any other payment of
compensation which would be nondeductible under Code Sec. 162.
(i) No Undisclosed Liabilities. There are no liabilities of Armour
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such a
liability, other than liabilities provided for in the Armour Closing Date
Balance Sheet (as defined below) or disclosed in the notes thereto.
(j) No Brokers or Finders. Such Armour Shareholder has not engaged
any investment banker, broker or finder in connection with the transactions
contemplated hereby.
(k) Full Disclosure. No representation or warranty contained in this
Agreement, the Merger Agreement or any Disclosure Schedule hereto or thereto
omits to state a material fact necessary to make the statements contained herein
or therein, in light of the circumstances under which they were made, not
misleading.
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3.02 Representations and Warranties of Buyer. Buyer represents and
warrants to each Armour Shareholder, and their respective successors and
assigns, as follows:
(a) Organization, Standing, Equity Ownership. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of its
state of incorporation. Buyer has made available to each Armour Shareholder a
certified copy of the articles or certificate of incorporation and by-laws of
Buyer. Such copy is complete and correct as of the date hereof.
(b) Authorization and Execution. Buyer has the corporate power and
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Buyer have been duly and effectively authorized by all necessary corporate
action of Buyer, and no further corporate action is necessary on the part of
Buyer to consummate the transactions contemplated hereby. This Agreement
constitutes a legal, valid and binding obligation of Buyer, enforceable against
it in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally, and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a court of law or equity).
(c) No Conflicts. Neither the execution and delivery of this
Agreement by Buyer, nor the consummation of the transactions contemplated
hereby, will (i) conflict with or result in a breach of its articles or
certificate of incorporation or by-laws, as currently in effect, of Buyer, or
(ii) except for the requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Hart-Scott-Rodino Act"), require any filing with,
or any consent or approval of any governmental authority having jurisdiction
over any of the business or assets of Buyer, or (iii) violate any statute,
regulation, injunction, judgment or order to which Buyer is subject, or (iv)
result in a breach of or constitute a default or an event which, with the
passage of time or the giving of notice, or both, would constitute a default,
give rise to a right of termination, cancellation or acceleration, create any
entitlement to any payment or benefit, require the consent of any third party or
result in the creation of any lien on the assets of Buyer under any material
instrument, contract or agreement to which Buyer is a party or by which it is
bound.
(d) No Brokers or Finders. Buyer has not engaged any investment
banker, broker or finder in connection with the transactions contemplated
hereby.
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ARTICLE IV
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
4.01 Liabilities. The Armour Shareholders shall cause Armour (i) to
obtain from its counsel, Faegre & Benson LLP, and its accountants, Henry
Scholten & Company, final statements for all services and disbursements to and
including the Closing Date, and (ii) to pay the statements so obtained on or
prior to the Closing Date. If Armour shall have any other liabilities, other
than for payment of income taxes, outstanding on the Closing Date, the Armour
Shareholders shall cause Armour to pay such other liabilities on the Closing
Date.
4.02 Dividends. The Armour Shareholders will not cause or permit
Armour to declare or pay any dividends between the date hereof and the Closing
Date which would impair the ability of Armour (i) to pay the liabilities
required to be paid pursuant to Section 4.01, or (ii) to pay income taxes.
Subject to the foregoing, Armour may declare and pay a final dividend equal to
the cash remaining on the Closing Date after payment of the liabilities required
to be paid pursuant to Section 4.01.
4.03 Armour Closing Date Balance Sheet. The Armour Shareholders
shall cause Armour's independent accountants to compile and deliver to the
Armour Shareholders and to Buyer on the Closing Date a pro forma balance sheet
reflecting the financial condition of Armour as of the Closing Date, after
giving effect to payment of the liabilities required to be paid pursuant to
Section 4.01 and payment of dividends permitted to be paid pursuant to Section
4.02 (the "Armour Closing Date Balance Sheet"). The Armour Closing Date Balance
Sheet shall be prepared in accordance with generally accepted accounting
principles from the books and records of Armour (which are accurate and complete
in all material respects) and shall fairly represent, in all material respects,
the assets, liabilities and financial position of Armour as of the Closing Date.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to the Obligations of Buyer. The obligations of
Buyer to purchase the Armour Capital Stock pursuant to Article I shall be
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which (except for the conditions set forth in
Section 5.01(b), (c) and (d)) may be waived by Buyer:
(a) The representations and warranties of each Armour Shareholder
contained in Section 3.01 shall be true and correct in all material respects
with the same effect as if such representations and warranties had been made on
the Closing Date; each Armour Shareholder shall have performed and complied in
all material respects with the agreements
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and obligations contained in this Agreement required to be performed and
complied with by such Armour Shareholder on or prior to the Closing Date; and
Buyer shall have received a certificate signed by each Armour Shareholder to the
effects set forth in this Section 5.01(a) as it relates to such Armour
Shareholder.
(b) The Merger Agreement shall not have been terminated; all
conditions precedent set forth in the Merger Agreement to the merger of Buyer
Subsidiary with and into Hubbard thereunder (the "Merger") shall have been
satisfied or waived; and arrangements reasonably satisfactory to Buyer and Buyer
Subsidiary shall have been made for the Merger to be consummated immediately
after the Closing hereunder.
(c) The amendment ("Amendment") to the Articles of
Incorporation of Hubbard contemplated under the Merger Agreement shall have been
adopted at a Special Meeting of the Shareholders of Hubbard by the vote required
by the Minnesota Business Corporation Act ("MBCA") and Hubbard's Articles of
Incorporation, and a Certificate of Amendment to the Articles of Incorporation
of Hubbard containing such amendment shall have been duly executed, filed with
the Minnesota Secretary of State and effective prior to the vote of the
shareholders of Hubbard at such meeting on the Plan of Merger (as defined in the
Merger Agreement).
(d) The Plan of Merger shall have been approved at the Special
Meeting of the Shareholders of Hubbard referred to in Section 5.01(c) by the
vote required by the MBCA and Hubbard's Articles of Incorporation.
(e) There shall not be pending any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree (except those in which
Buyer is a plaintiff directly or derivatively) which, in the reasonable judgment
of Buyer could, if issued, restrain or prohibit the consummation of the
transactions contemplated hereby or require rescission of this Agreement or such
transactions or result in damages to Buyer, if the transactions contemplated
hereby are consummated, nor shall there be in effect any injunction, writ,
preliminary restraining order or any order of any nature issued by a court or
governmental agency of competent jurisdiction directing that the transactions
provided for herein, or any of them, not be consummated as so provided.
(f) Buyer shall have received from Faegre & Benson LLP,
counsel to the Armour Shareholders, an opinion, dated the Closing Date and
reasonably satisfactory in form and substance to Buyer and its counsel, as to
the matters set forth in Exhibit B. In rendering such opinion, such counsel may
rely, to the extent such counsel deems such reliance necessary or appropriate,
as to matters of fact, upon certificates of the Armour Shareholders.
(g) All applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated.
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(h) On the Closing Date, the Armour Shareholders will have
delivered to Buyer the following:
(i) A good standing certificate for Armour from the
state of Delaware, dated not earlier than 15 days prior to the
Closing Date;
(ii) The written resignations of the officers and
directors of Armour;
(iii) The minute books, stock records and stock ledgers
of Armour; and
(iv) Such other documents and instruments as Buyer may
reasonably request in connection with the transactions
contemplated hereby.
(i) The Disbursing Agreement shall have been executed and
delivered by the parties thereto other than Buyer.
5.02 Conditions to the Obligations of Armour Shareholders. The
obligation of each Armour Shareholder to sell its Armour Capital Stock shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any one or more of which (except for the conditions set forth in
Sections 5.02(b), (c) and (d)) may be waived by the Armour Shareholders:
(a) The representations and warranties of Buyer contained in
Section 3.02 of this Agreement shall be true and correct in all material
respects on the Closing Date with the same effect as if such representations and
warranties had been made on the Closing Date; Buyer shall have performed and
complied in all material respects with the agreements and obligations contained
in this Agreement required to be performed and complied with by it on or prior
to the Closing Date; and the Armour Shareholders shall have each received a
certificate signed by an executive officer of Buyer to the effects set forth in
this Section 5.02(a).
(b) The Merger Agreement shall not have been terminated; all
conditions precedent set forth in the Merger Agreement to the Merger shall have
been satisfied or waived; and arrangements reasonably satisfactory to the Armour
Shareholders shall have been made for the Merger to be consummated immediately
after the Closing hereunder.
(c) The Amendment shall have been adopted at the Special
Meeting of the Shareholders of Hubbard referred to in Section 5.01(c) by the
vote required by the MBCA and Hubbard's Articles of Incorporation, and a
Certificate of Amendment to the Articles of Incorporation of Hubbard containing
such amendment shall have been duly executed, filed
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with the Minnesota Secretary of State and effective prior to the vote of the
shareholders of Hubbard at such meeting on the Plan of Merger.
(d) The Plan of Merger shall have been approved at the Special
Meeting of the Shareholders of Hubbard referred to in Section 5.01(c) by the
vote required by the MBCA and Hubbard's Articles of Incorporation.
(e) All corporate action on the part of Buyer, necessary to
authorize the execution, delivery and consummation of this Agreement or any
agreement or instrument contemplated hereby to which Buyer is or is to be a
party or the transactions contemplated hereby or thereby shall have been duly
and validly taken.
(f) There shall not be pending any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree (except those in which
Armour or any Armour Shareholder is a plaintiff directly or derivatively) which,
in the reasonable judgment of the Armour Shareholders, would, if issued,
restrain or prohibit the consummation of the transactions contemplated hereby or
require rescission of this Agreement or such transactions or result in damages
to the Armour Shareholders if the transactions contemplated hereby are
consummated, nor shall there be in effect any injunction, writ, preliminary
restraining order or any order of any nature issued by a court or governmental
agency of competent jurisdiction directing that the transactions provided for
herein, or any of them, not be consummated as so provided.
(g) The Armour Shareholders shall have received from Richards
& O'Neil, LLP, counsel to Buyer, an opinion, dated the Closing Date and
reasonably satisfactory in form and substance to the Armour Shareholders and
their counsel, as to the matters set forth in Exhibit C. In rendering such
opinion, such counsel may rely, to the extent such counsel deems such reliance
necessary or appropriate, as to matters of fact, upon certificates of government
officials and of any officer or officers of Buyer.
(h) All applicable waiting periods (and any extension thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated.
(i) On the Closing Date, Buyer will have delivered to the
Armour Shareholders the following:
(i) A good standing certificate for Buyer from the state
of Delaware, dated not earlier than 15 days prior to the
Closing Date;
(ii) Certified copies of the resolutions duly adopted by
the board of directors of Buyer authorizing the execution,
delivery and performance of this Agreement and the other
agreements contemplated hereby; and
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(iii) Such other documents and instruments as the Armour
Shareholders may reasonably request in connection with the
transactions contemplated hereby.
(j) The Disbursing Agreement shall have been executed and
delivered by the parties thereto other than the Armour Shareholder
Representative (as defined in Section 7.01).
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Generally. This Agreement may be terminated and abandoned
at any time prior to Closing under the following circumstances:
(a) by mutual consent of the Board of Directors of Buyer and
the Armour Shareholders;
(b) by Buyer or the Armour Shareholders if the transactions
contemplated hereby shall not have been consummated on or before June 30, 1997
(which date may be extended by mutual agreement of the Board of Directors of
Buyer and the Armour Shareholders), provided that such failure is not due solely
to the failure of the party seeking to terminate this Agreement to comply with
its obligations under this Agreement;
(c) by Buyer if any of the conditions set forth in Section
5.01 shall become impossible to fulfill other than for reasons within the
control of Buyer, and such conditions shall not have been waived pursuant to
Section 8.07;
(d) by any Armour Shareholder if any of the conditions set
forth in Section 5.02 shall become impossible to fulfill other than for reasons
within the control of the Armour Shareholders, or any of them, and such
conditions shall not have been waived pursuant to Section 8.07; or
(e) by Buyer if Buyer shall have failed to receive the
proceeds of the bridge financing under the Chase Bridge Financing Commitment or
the proceeds of the senior debt financing under the CSFB Senior Debt Financing
Commitment (as such terms are defined in the Merger Agreement), as the case may
be, as a result, in the case of the Chase Bridge Financing Commitment, of any of
the circumstances described in clauses (i) through (v) of the first full
paragraph on page 4 thereof, or as a result, in the case of the CSFB Senior Debt
Financing Commitment, of any of the circumstances described in the first full
paragraph of page 2 thereof.
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6.02 Procedure and Effect of Termination and Abandonment. In
the event of termination of this Agreement by one or more of Buyer or the Armour
Shareholders pursuant to Section 6.01, written notice thereof shall forthwith be
given to the other parties hereto and this Agreement shall terminate without
further action by any of the parties hereto. If this Agreement is terminated as
provided herein, no party hereto shall have any liability or further obligation
to any other party to this Agreement except to the extent the termination is a
direct result of a willful and material breach by a party to this Agreement of
any material representation, warranty or covenant contained in this Agreement.
ARTICLE VII
ARMOUR SHAREHOLDER REPRESENTATIVE
7.01 Designation. Subject to the terms and conditions of this
Article VII, Richard P. Confer is designated as the representative of the Armour
Shareholders (the "Armour Shareholder Representative") by the Armour
Shareholders to serve, and the Buyer hereby acknowledges that the Armour
Shareholder Representative shall serve, as the sole representative of the Armour
Shareholders from and after the Closing Date with respect to the matters set
forth in this Agreement, such service to be without compensation except for the
reimbursement of out-of-pocket expenses and indemnification specifically
provided herein. The Armour Shareholder Representative has accepted such
designation as of the date hereof. Notwithstanding anything to the contrary
contained in this Agreement, the Armour Shareholder Representative shall have no
duties or responsibilities except those expressly set forth herein, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on behalf of any Armour Shareholder shall otherwise exist against
the Armour Shareholder Representative.
7.02 Authority. Each Armour Shareholder, by executing this
Agreement, irrevocably appoints the Armour Shareholder Representative as the
agent, proxy and attorney-in-fact for such Armour Shareholder for all purposes
of this Agreement, including full power and authority on such Armour
Shareholder's behalf (i) to take all actions which the Armour Shareholder
Representative considers necessary or desirable in connection with the defense,
pursuit or settlement of any determinations relating to the payment of the
Armour Escrow Amount and any claims for indemnification pursuant to Section
8.02, including to sue, defend, negotiate, settle and compromise any such claims
for indemnification made by or against, and other disputes with, the Buyer
pursuant to this Agreement or any of the agreements or transactions contemplated
hereby, (ii) to engage and employ agents and representatives (including
accountants, legal counsel and other professionals) and to incur such other
expenses as he shall deem necessary or prudent in connection with the
administration of the foregoing, (iii) to provide for all expenses incurred in
connection with the administration of the foregoing to be paid by directing the
Disbursing Agent to reimburse
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the Armour Shareholder Representative for such expenses, (iv) to disburse to the
Armour Shareholders all indemnification payments received from the Buyer under
Section 8.02, (v) to accept and receive notices to the Armour Shareholders
pursuant to this Agreement, and (vi) to take all other actions and exercise all
other rights which the Armour Shareholder Representative (in his sole
discretion) considers necessary or appropriate in connection with this
Agreement. Each of the Armour Shareholders agrees that such agency and proxy are
coupled with an interest, and are therefore irrevocable without the consent of
the Armour Shareholder Representative and shall survive the death, incapacity,
bankruptcy, dissolution or liquidation of any Armour Shareholder. All decisions
and acts by the Armour Shareholder Representative shall be binding upon all of
the Armour Shareholders, and no Armour Shareholder shall have the right to
object, dissent, protest or otherwise contest the same.
7.03 Resignation. In the event that the Armour Shareholder
Representative shall die, become incapacitated, resign or otherwise fail to act
on behalf of the Armour Shareholders for any reason, the Armour Shareholder
Representative shall be Ogden W. Confer or, in the event of a similar situation
involving Ogden W. Confer, such other person as shall be selected by a majority
of the persons serving as directors of Armour immediately prior to the Closing,
and such substituted representative shall be deemed to be the Armour Shareholder
Representative for all purposes of this Agreement. Notwithstanding anything to
the contrary herein contained, the Armour Shareholder Representative shall at
all times be the same person who serves as the Shareholder Representative (as
defined in Section 8.01 of the Merger Agreement).
7.04 Reliance by Third Parties on the Armour Shareholder
Representative's Authority. The Armour Shareholder Representative is authorized
to act on the Armour Shareholders' behalf notwithstanding any dispute or
disagreement among the Armour Shareholders and the other parties hereto shall be
entitled to rely on any and all action taken by the Armour Shareholder
Representative without any liability to, or obligation to inquire of, any of the
Armour Shareholders even if such party shall be aware of any actual or potential
dispute or disagreement among the Armour Shareholders. Each of the other parties
hereto and the Disbursing Agent is expressly authorized to rely on the
genuineness of the signature of the Armour Shareholder Representative and, upon
receipt of any writing which reasonably appears to have been signed by the
Armour Shareholder Representative, the other parties hereto and the Disbursing
Agent may act upon the same without any further duty of inquiry as to the
genuineness of the writing.
7.05 Exculpation and Indemnification. Neither the Armour
Shareholder Representative nor any agent employed by him shall be liable to any
Armour Shareholder relating to the performance of his duties under this
Agreement for any errors in judgment, negligence, oversight, breach of duty or
otherwise except to the extent it is finally determined in a court of competent
jurisdiction by clear and convincing evidence that the actions taken or not
taken by the Armour Shareholder Representative constituted fraud or were taken
or not taken in bad faith. The Armour Shareholder Representative shall be
indemnified and held
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harmless by the Armour Shareholders against all Damages (as defined in Section
8.02) paid or incurred in connection with any action, suit, proceeding or claim
to which the Armour Shareholder Representative is made a party by reason of the
fact that he was acting as the Armour Shareholder Representative pursuant to
this Agreement; provided, however, that the Armour Shareholder Representative
shall not be entitled to indemnification hereunder to the extent it is finally
determined in a court of competent jurisdiction by clear and convincing evidence
that the actions taken or not taken by the Armour Shareholder Representative
constituted fraud or were taken or not taken in bad faith; and provided further,
however, that the Armour Shareholder Representative shall have recourse only
against the unpaid Armour Escrow Amount (fully subordinated in right of payment
and otherwise to the Buyer's claims thereto, whether or not then existing or
known), with respect to such Damages as provided in the next two sentences of
this Section 7.05. Any amount owing to the Armour Shareholder Representative
from the Armour Shareholders pursuant to this Section 7.05 shall be reduced on a
pro rata basis from the next succeeding distribution(s) of the Armour Escrow
Amount by the Disbursing Agent to the holders of Armour Common Stock, and shall
be payable solely from such source. The Armour Shareholder Representative shall
be protected in acting upon any notice, statement or certificate believed by him
to be genuine and to have been furnished by the appropriate person and in acting
or refusing to act in good faith or any matter.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01 Limitations on Survival. Each of the representations and
warranties made by the parties in Article III, in Section 4.03 and in the
certificates delivered pursuant to Sections 5.01(a) and 5.02(a) shall survive
any examination made by or on behalf of any party hereto, the execution and
delivery of this Agreement, the Closing and the consummation of the transactions
contemplated by this Agreement to and until three (3) years after the Closing
Date, whereupon such representations and warranties shall terminate, provided
that no such termination shall occur with respect to any representation or
warranty made in a manner involving fraud or criminal misrepresentation.
8.02 Indemnification. Subject to the limitations set forth in
this Section 8.02 the parties hereto agree as follows:
(a) Buyer and its successors and assigns shall be indemnified
by the Armour Shareholders, jointly and severally (except as hereinafter
expressly provided), and their successors and assigns against any loss, claim,
liability, cost or expense (including reasonable attorney's fees and expenses)
or other damage of any kind or nature (collectively, "Damages") incurred by
Buyer which is caused by or arises out of (i) any breach of any representation
or warranty of the Armour Shareholders contained in this Agreement or any
related document executed and delivered by the Armour Shareholders (the "Armour
Closing
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Documents"), other than those breaches, if any, of which Buyer has actual
knowledge at the time of Closing, provided, that the indemnification obligation
of each Armour Shareholder with respect to the representations and warranties of
such Armour Shareholder in Sections 3.01(d) and (e) shall be several and not
joint and several, (ii) the breach or other failure to perform any covenant,
agreement or other obligation of the Armour Shareholders contained in this
Agreement or any other Armour Closing Documents, (iii) any breach of
representation or warranty by Hubbard contained in the Merger Agreement or the
Closing Documents (as defined in the Merger Agreement), other than those
breaches, if any, of which Buyer has actual knowledge at the time of Closing,
(iv) the breach or other failure to perform any covenant, agreement or other
obligation of Hubbard contained in the Merger Agreement or the Closing
Documents, (v) the Indemnified Environmental Liabilities (as defined in Section
9.02(a) of the Merger Agreement), (vi) the Indemnified Litigation and Claims (as
defined in Section 9.02(a) of the Merger Agreement), and (vii) the Indemnified
Title Costs and Expenses (as defined in Section 4.12 of the Merger Agreement);
provided, however, that in connection with any claim for indemnification for
Damages under this Section 8.02 (except in a case involving fraud or criminal
misrepresentation), (A) after the Closing Buyer shall have recourse only against
the Armour Escrow Amount with respect to Damages under clauses (iii) through
(vii), inclusive, of this Section 8.02(a), (B) indemnification owing from any
Armour Shareholder who is or was an officer or director of Armour shall not be
deemed for any purpose to be a claim covered by indemnification owing to such
Armour Shareholder by Armour under any law, by-law or agreement whatsoever, (C)
Buyer's rights to indemnification under clause (iii) and (iv) of this Section
8.02 shall not arise until Damages, in the aggregate, under clauses (iii) and
(iv) of this Section 8.02(a) and clauses (i) and (ii) of Section 9.02(a) of the
Merger Agreement exceed $750,000 whereupon indemnification shall arise with
respect to the full amount of such Damages in excess of $750,000, and (D) in the
case of indemnification for Indemnified Environmental Liabilities and
Indemnified Litigation and Claims, the indemnification under this Agreement and
the Merger Agreement shall be limited in the aggregate to 50% of any Damages.
Any amount owing to Buyer from the Armour Shareholders pursuant to clause (iii)
and (iv) of this Section 8.02(a) shall be deducted from the next distribution(s)
of the Armour Escrow Amount as provided in the Disbursing Agreement.
Notwithstanding the foregoing, Buyer shall not be indemnified for any Damages
for which it receives proceeds under any insurance policy maintained by Hubbard,
Buyer or Buyer Subsidiary, including without limitation the title insurance
policies obtained by Buyer pursuant to Section 5.01(k) of the Merger Agreement,
and no Damages for which such proceeds are received shall be included in
calculating the $750,000 threshold for indemnification set forth in this Section
8.02(a).
(b) The Armour Shareholders and their successors and assigns
severally but solely through the Armour Shareholder Representative shall be
indemnified by the Buyer against Damages incurred by them which are caused by or
arise out of (i) any breach of any representation or warranty of the Buyer
contained in this Agreement, other than those breaches, if any, of which the
Armour Shareholders have actual knowledge at the time of Closing and (ii) the
breach or other failure to perform any covenant or agreement or other
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obligation of the Buyer contained in this Agreement; provided, however, that
after the Closing indemnification hereunder shall be limited in amount to each
Armour Shareholder to the portion of the Purchase Price remaining unpaid and
owing to such Armour Shareholder.
(c) Whenever any claims shall arise for indemnification
hereunder, (i) the party entitled to indemnification (or the Armour Shareholder
Representative in the case of indemnification owing to the Armour Shareholders)
(the "Indemnified Party") shall provide written notice to the party from whom
such indemnification is owing (or the Armour Shareholder Representative in the
case of indemnification owing from the Armour Shareholders) (the "Indemnifying
Party") within a reasonable period of becoming aware of the right to
indemnification and, as expeditiously as possible thereafter, of the facts
constituting the basis for such claim and (ii) the Indemnifying Party and its
representatives shall be given access to all books and records in the possession
or control of the Indemnified Party which the Indemnifying Party reasonably
determines to be related to such claim, provided that any failure of the
Indemnified Party to so notify the Indemnifying Party within any such time
period shall not waive the Indemnified Party's indemnification rights hereunder
except to the extent that the Indemnifying Party has been damaged by such a
failure.
(d) If any legal proceedings are instituted or any claim or
demand is asserted by any person in respect of which the Indemnified Party
determines it may seek indemnification pursuant to the provisions of this
Section 8.02, the Indemnified Party shall promptly after such determination
cause written notice of the assertion of any such claim to be made to the
Indemnifying Party. The Indemnifying Party shall have the right, at its option
and expense and upon written notice to the Indemnified Party, to defend against,
negotiate and, with the consent of the Indemnified Party (which consent shall
not be unreasonably withheld) settle any such claim, and in such case, the
Indemnified Party shall have the right to participate in such defense,
negotiation or settlement at his own expense. The Indemnified Party and the
Indemnifying Party agree to cooperate fully with each other in connection with
the defense, negotiation or settlement of any such legal proceeding, claim or
demand. Upon the payment of any claim for indemnity, the Indemnifying Party
shall be subrogated to all rights and remedies of the Indemnified Party against
any third person. If the Indemnifying Party does not so elect to defend any such
third party claim, legal proceeding or demand, the Indemnified Party may (but
shall have no obligation to) defend any such third party claim, legal proceeding
or demand in such manner as he may deem appropriate including, but not limited
to, settling such claim, legal proceeding or demand, after giving notice of the
same to the Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate and no action taken by the Indemnified Party in accordance with such
defense and settlement shall relieve the Indemnifying Party of its
indemnification obligations herein provided with respect to any Damages
resulting therefrom.
(e) The parties desire that any indemnification claim against
the Armour Shareholders under clauses (iii) through (vii) of Section 8.02(a) be
coordinated with any indemnification claim against the Shareholders under
Section 9.02(a) of the Merger
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Agreement. Accordingly, notwithstanding anything to the contrary contained in
this Agreement or the Merger Agreement, Buyer and the Armour Shareholders agree
that any claim asserted by Buyer under clauses (iii) through (vii), as
applicable, of Section 8.02(a) of this Agreement shall also constitute a
corresponding claim under Section 9.02(a) of the Merger Agreement, and that any
claim by Buyer under Section 9.02(a) of the Merger Agreement shall also
constitute a corresponding claim under clauses (iii) through (vii) of Section
8.02(a) of this Agreement. The Disbursing Agreement shall provide for any
Damages recoverable in respect of any such claims to be allocated between the
Armour Escrow Amount under this Agreement and the Escrow Amount (as defined in
the Merger Agreement) under the Merger Agreement.
8.03 Amendment and Modification. To the extent permitted by
applicable law, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto at any time prior to the Closing with
respect to any of the terms contained herein.
8.04 Alternative Dispute Resolution.
(a) The Armour Shareholders and Buyer recognize that a bona
fide dispute as to certain matters may from time to time arise after the Closing
Date relating to rights or obligations under this Agreement. In such instance,
the Armour Shareholder Representative or Buyer, as the case may be, may by
written notice to the other, have such dispute referred to the Armour
Shareholder Representative and the representative of Buyer designated below or
his successor, for attempted resolution by good faith negotiation within thirty
(30) days after such notice is received. The designated representative of Buyer
is James B. Ardrey. Any settlement reached by the Armour Shareholder
Representative and the representative of Buyer under this Section 8.04(a) shall
not be binding until reduced to writing and signed by them. When reduced to
writing, such settlement agreement shall supersede all other agreements, written
or oral, to the extent such agreements specifically pertain to the matters so
settled. If the Armour Shareholder Representative and the representative of
Buyer are unable to resolve such dispute within such 30-day period, either may
demand arbitration pursuant to Section 8.04(b).
(b) Except as provided below, any controversy or claim arising
out of or relating to this Agreement shall be settled by arbitration in Chicago,
Illinois, at a time and location designated by the arbitrator, but not exceeding
ninety (90) days after a demand for arbitration has been made. Arbitration shall
be conducted by the American Arbitration Association in accordance with its
Rules of Commercial Arbitration, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator shall be a retired state or federal judge experienced in business
litigation or any attorney who has practiced business litigation for at least
ten (10) years. Arbitration will be conducted pursuant to the provisions of this
Agreement and the Commercial Arbitration Rules of the American Arbitration
Association. Limited civil discovery shall be permitted for the
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<PAGE>
production of documents and taking of depositions. Unresolved discovery disputes
may be brought to the attention of, and may be decided by, the arbitrator. The
arbitrator shall assess the costs and expenses of the arbitration against the
parties in such proportion as may be fair and equitable. Nothing herein
contained shall bar either party from seeking equitable remedies in a court of
appropriate jurisdiction.
8.05 Insurance Coverage. Buyer agrees from and after the
Closing to file all necessary claims under, and to exercise reasonable efforts
to collect the proceeds of any insurance maintained by Hubbard, Buyer or Buyer
Subsidiary, including without limitation the title insurance policies obtained
by Buyer pursuant to Section 5.01(k) of the Merger Agreement, with respect to
any Damages within the scope of the indemnification provisions of Section
8.02(a).
8.06 Filing of Tax Returns. Buyer agrees to cause Armour to
file all Tax Returns for any period including the Closing Date, or ending on or
before the Closing Date, on a basis consistent with prior filings by Armour,
unless the relevant taxing authority will not accept a Tax Return filed on that
basis.
8.07 Waiver of Compliance; Consents. Any failure of Buyer, on
the one hand, or the Armour Shareholders, on the other hand, to comply with any
obligation, covenant, agreement or condition herein (except the conditions in
Sections 5.01(b), (c) and (d) and 5.02(b), (c) and (d) of this Agreement) may be
waived in writing by the Armour Shareholders or by Buyer, respectively, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 8.07.
8.08 Expenses. All expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses.
8.09 Press Releases and Public Announcements. No party to this
Agreement shall issue any press release or make any public announcement relating
to the subject matter of this Agreement without prior written approval of the
other parties; provided, however, that each of the Armour Shareholders and Buyer
may make any public disclosure such person believes in good faith to be required
by applicable law or, in the case of Buyer, the disclosure documents prepared in
connection with the offering of its debt securities (in which case the
disclosing party will advise the other parties to this Agreement prior to making
the disclosure).
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<PAGE>
8.10 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agree to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including without limitation the negotiation,
execution and delivery of the Disbursing Agreement. In case at any time after
the Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of Buyer and each
Armour Shareholder shall take all such necessary action.
8.11 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Buyer:
Windy Hill Pet Food Co., Inc.
c/o Dartford Partnership
456 Montgomery Street
Suite 2200
San Francisco, California 94104
Attention: Ray Chung
with a copy to:
Richards & O'Neil LLP
885 Third Avenue
New York, New York 10022-4802
Attention: Ann F. Chamberlain
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<PAGE>
(b) If to any Armour Shareholder, in care of:
Richard P. Confer
c/o Hubbard Milling Company
424 North Riverfront Drive
Mankato, Minnesota 56001
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: Thomas G. Morgan
8.12 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties, nor is this Agreement intended to confer
upon any other person except the parties hereto any rights or remedies
hereunder. Notwithstanding the foregoing, Buyer may assign its rights to
indemnification hereunder to a lender or lenders providing financing for the
transaction contemplated hereby.
8.13 Governing Law. The Agreement shall be governed by the
laws of the state of Minnesota.
8.14 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.15 Headings; Internal References. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
and are not part of the agreement of the parties and shall not affect in any way
the meaning or interpretation of this Agreement. Any references in this
Agreement to an article, section, paragraph, clause, exhibit or schedule shall
be deemed to be a reference to the article, section, paragraph, clause, exhibit
or schedule contained in this Agreement unless expressly stated otherwise.
8.16 Entire Agreement. This Agreement, including the exhibits
hereto and the documents and instruments referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other
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<PAGE>
than those expressly set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
8.17 Severability. If any term, provision, covenant, agreement
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, agreements and restrictions of this Agreement will continue in full
force and effect and will in no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto do execute and deliver
this Agreement as of the date first above written.
BUYER: WINDY HILL PET FOOD CO., INC
By:
----------------------------
Its:
--------------------------
ARMOUR SHAREHOLDERS:
----------------------------
Ogden W. Confer
----------------------------
Kay C. Lamb
----------------------------
Richard P. Confer
----------------------------
Carol C. Greenwald
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<PAGE>
RICHARD P. CONFER AND FIRST BANK
NATIONAL ASSOCIATION AS
TRUSTEES OF THE ELIZABETH ANNA
CONFER TRUST NO. 2
------------------------------
Richard P. Confer
- and -
First Bank National Association,
By:
----------------------------
Vice President
Trustees
RICHARD P. CONFER AND FIRST BANK
NATIONAL ASSOCIATION AS
TRUSTEES OF THE OGDEN P. CONFER
FAMILY TRUST CREATED UNDER THE
OGDEN P. CONFER TRUST AGREEMENT
----------------------------
Richard P. Confer
- and -
First Bank National Association,
By:
----------------------------
Vice President
Trustees
-24-
<PAGE>
EXHIBIT A
Ownership of Armour Capital Stock
9% Cumulative Voting Preferred Stock
($10 par value, 25,000 authorized shares)
Shareholder No. of Shares Owned % of Outstanding Shares
----------- ------------------- -----------------------
Elizabeth Anna Confer Trust 25,000 100%
No. 2, created under
agreement of Ogden P.
Confer dated August 26,
1982, as amended*
Common Stock
($1 par value, 10,000 authorized shares)
Shareholder No. of Shares Owned % of Outstanding Shares
----------- ------------------- -----------------------
Ogden W. Confer 2,425 24.25%
Kay Confer Lamb 2,425 24.25%
Richard P. Confer 2,425 24.25%
Carol Confer Greenwald 2,425 24.25%
Ogden P. Confer Family Trust, 300 3%
created under agreement dated ------ ------
August 26, 1982, as amended*
Total 10,000 100%
* Shares are held by Var & Company, acting as nominee.
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL TO ARMOUR SHAREHOLDERS
1. Armour is a corporation validly existing and in good
standing under the laws of the state of Delaware.
2. The authorized capital stock of Armour at the date hereof
consists of 25,000 shares of 9% Cumulative Voting Preferred Stock, $10 par
value, and 10,000 shares of Common Stock, $1 par value, all of which are
currently issued and outstanding and are owned of record, and to such counsel's
knowledge, beneficially by the Armour Shareholders. All of such issued shares
have been duly authorized and validly issued and are fully paid and
nonassessable. To our knowledge, there are no outstanding subscriptions,
options, warrants, calls or other agreements or commitments by which Armour is
bound in respect of the capital stock of Armour, whether issued or unissued.
There are no outstanding securities convertible into or exchangeable for any
such capital stock.
3. Each Armour Shareholder has the legal right, power and
authority to enter into the Agreement and to consummate the transactions
contemplated thereby. Upon execution by such Armour Shareholder, the Agreement
shall constitute the legal, valid and binding obligation of such Armour
Shareholder and shall be enforceable against such Armour Shareholder in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally, and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a court of law or equity).
4. Neither the execution, delivery or performance by the
Armour Shareholders of the Agreement nor the consummation of any of the
transactions provided for in the Agreement or contemplated thereby, (i) will
violate the Articles of Incorporation or Bylaws or other organizational
documents of any Armour Shareholder that is an entity, (ii) is prohibited by any
federal, or state of Minnesota statute, law, ordinance, regulation or rule, or
(iii) to our knowledge, will violate any contractual obligations of any Armour
Shareholder.
5. No approval, consent, order or authorization of,
declaration by or filing with any federal or state of Minnesota regulatory,
administrative or governmental body or other person is necessary on the party of
any Armour Shareholder in connection with the execution, delivery or performance
by such Armour Shareholder of the Agreement or the consummation of the
transactions contemplated thereby except compliance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
6. To such counsel's knowledge, except as set forth in the
Agreement, no litigation, arbitration, administrative proceeding, or
investigation of any kind is pending or threatened against Armour.
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL TO BUYER
1. Buyer is a corporation validly existing and in good
standing under the laws of the state of Delaware.
2. Buyer has the requisite corporate power and corporate
authority to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby. The Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer and is enforceable against Buyer in accordance with its terms, except to
the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a court of law or equity).
3. Neither the execution, delivery or performance by Buyer of
the Agreement nor the consummation of any of the transactions provided for in
the Agreement or contemplated thereby, (i) will violate the Certificate of
Incorporation or Bylaws of Buyer; or (ii) is prohibited by any federal, or state
of New York statute, law, ordinance, regulation or rule.
4. No approval, consent, order or authorization of,
declaration by or filing with any federal or state of New York regulatory,
administrative or governmental body is necessary on the part of Buyer in
connection with the execution, delivery or performance by Buyer of the Agreement
or the consummation of the transactions contemplated thereby except compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
5. To such counsel's knowledge, no litigation, arbitration,
administrative proceeding, or investigation of any kind is pending or threatened
against Buyer in connection with this Agreement or the transactions contemplated
thereby.
<PAGE>
EXHIBIT B
PLAN OF MERGER
Merger of
WINDY HILL PET FOOD ACQUISITION CO.
with and into
HUBBARD MILLING COMPANY
WHEREAS, Windy Hill Pet Food Acquisition Co., a Minnesota corporation
("Buyer Subsidiary"), and Hubbard Milling Company, a Minnesota corporation
("Hubbard" and, together with Buyer Subsidiary, the "Constituent Corporations"),
have entered into that certain Merger Agreement (the "Merger Agreement") dated
as of March 21, 1997, by and among Hubbard, Windy Hill Pet Food Co., Inc., a
Delaware corporation, and Buyer Subsidiary; and
WHEREAS, the Merger Agreement provides for the merger of Buyer
Subsidiary with and into Hubbard pursuant to Section 302A.611 of the Minnesota
Business Corporation Act ("MBCA") and in accordance with the terms of this Plan
of Merger, with Hubbard being the surviving corporation of the merger;
NOW, THEREFORE, BE IT RESOLVED that at the Effective Time (as defined
below) and in accordance with this Plan of Merger and pursuant to Section
302A.611 of the MBCA, Buyer Subsidiary shall be merged with and into Hubbard on
the terms and conditions contained in these resolutions, with Hubbard being the
surviving corporation of such merger (the "Merger"), the name of which shall
continue to be Hubbard Milling Company.
FURTHER RESOLVED, that the Merger shall be effective (the "Effective
Time") at 12:01 a.m. on the day immediately following the date of filing of the
Articles of Merger with the Secretary of State of the State of Minnesota, all in
the manner required by law.
FURTHER RESOLVED, that each share of Common Stock of Buyer Subsidiary
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into one (1) share of Class A Voting Common Stock of Hubbard and each holder of
a stock certificate representing shares of Common Stock of Buyer Subsidiary
outstanding immediately prior to the Effective Time shall, upon surrender of
such certificate, be entitled to receive a stock certificate representing the
same number of shares of Class A Voting Common Stock of Hubbard and until so
surrendered, each such stock certificate representing Common Stock
<PAGE>
of Buyer Subsidiary shall, by virtue of the Merger, be deemed for all purposes
to evidence ownership of the same number of shares of Class A Voting Common
Stock of Hubbard.
FURTHER RESOLVED, that (i) each share (other than a "Dissenting Share"
as defined below) of 5 % Preferred Stock, $50 par value, of Hubbard outstanding
immediately prior to the Effective Time shall, by virtue of the Merger be
converted into the right to receive in cash an amount equal to Fifty Dollars
($50.00) per share, plus accrued but unpaid dividends thereon through the
Effective Time, (ii) each share (other than a Dissenting Share or a share owned
by Armour Corporation, a Delaware corporation) of Class A Voting Common Stock of
Hubbard, $.05 par value, and Class B Non-Voting Common Stock of Hubbard, $.05
par value, shall be converted into the right to receive in cash an amount equal
to the Common Stock Merger Consideration Per Share (as defined in Section 1.03
of the Merger Agreement), and (iii) each Dissenting Share shall be converted
into the right to receive in cash an amount equal to the fair value thereof
determined in accordance with Section 302A.473 of the MBCA. "Dissenting Share"
for purposes of this Plan of Merger means each share of capital stock of Hubbard
owned by a shareholder who becomes entitled, pursuant to the provisions of
Section 302A.473 of the MBCA, to receive payment of the fair value of such
share.
FURTHER RESOLVED, that the articles of incorporation and by-laws of
Hubbard shall be the articles of incorporation and by-laws of the surviving
corporation.
FURTHER RESOLVED, that no amendments to the Articles of Incorporation
of Hubbard shall be effected by the Merger.
FURTHER RESOLVED, at the Effective Time, Hubbard shall thereupon and
thereafter possess all the rights, privileges, immunities, powers and
franchises, of a public as well as of a private nature, of each of the
Constituent Corporations, and be subject to all the duties, liabilities and
obligations of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due to any of the Constituent Corporations on
whatever account, including subscriptions to shares, and all other choses in
action and every other interest of or belonging to or due to each of the
Constituent Corporations shall vest in Hubbard; and all and every other interest
shall be thereafter as effectually the property of Hubbard as they were of the
several and respective Constituent Corporations; and the title to any real
estate or any interest therein, vested by deed or otherwise, in any of the
Constituent Corporations, shall not revert or be in any way impaired by reason
of the Merger; and all rights of creditors and all liens upon any property of
any of the Constituent Corporations shall be preserved unimpaired; and all
debts, duties, liabilities and obligations of any of the Constituent
Corporations shall thenceforth attach to Hubbard, which shall assume all such
debts, duties, liabilities and obligations, and such debts, duties, liabilities
and obligations may be enforced against it to the same extent as if such debts,
duties, liabilities and obligations had been incurred or contracted by it.
2
<PAGE>
EXHIBIT C
ARTICLES OF AMENDMENT
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
HUBBARD MILLING COMPANY
The undersigned, Richard P. Confer, President, and Ogden W.
Confer, Secretary, of Hubbard Milling Company, a Minnesota corporation (the
"Corporation"), do hereby certify that the resolutions hereinafter set forth
were adopted pursuant to Section 302A.433 of the Minnesota Business Corporation
Act ("MBCA") at a special meeting of shareholders on April _, 1997 by a majority
of the holders of Class A Common Stock, in accordance with the MBCA:
RESOLVED, that the Amended and Restated Articles of
Incorporation of the Corporation, be and hereby are amended to add the following
Article XI:
"ARTICLE XI
The provisions of Section 302A.671 of the Minnesota Business
Corporation Act, as amended, shall not apply to this
corporation."
RESOLVED FURTHER, that the President or any Vice President and
the Secretary or any Assistant Secretary of the Corporation be and hereby are
authorized to execute and file with the Secretary of State of the State of
Minnesota Articles of Amendment embodying the foregoing resolution.
IN WITNESS WHEREOF, we, the undersigned, have subscribed our
names this _____ day of April, 1997.
-----------------------------
Richard P. Confer, President
-----------------------------
Ogden W. Confer, Secretary
<PAGE>
EXHIBIT D
FORM OF OPINION OF COUNSEL TO HUBBARD
1. Hubbard is a corporation validly existing and in good
standing under the laws of the state of Minnesota. Hubbard is qualified to do
business as a foreign corporation in the states of California, Georgia,
Illinois, Indiana, Iowa, Kansas, Michigan, Missouri, Montana, Nebraska, New
York, North Dakota, Ohio, Pennsylvania, South Dakota, Texas, Washington,
Wisconsin and Wyoming.
2. The authorized capital stock of Hubbard consists of 100,000
shares of 5% Preferred Stock, $50 par value ("Hubbard 5% Preferred Stock");
1,000,000 shares of Preferred Stock, $.05 par value, undesignated as to series;
2,500,000 shares of Class A Voting Common Stock, par value $.05 ("Hubbard Class
A Common Stock"); and 37,500,000 shares of Class B Non-Voting Common Stock, $.05
par value ("Hubbard Class B Common Stock"). The issued and outstanding capital
stock of Hubbard consists of **[18,329] shares of Hubbard 5% Preferred Stock,
**[1,145,000] shares of Hubbard Class A Common Stock, and **[14,511,823] shares
of Hubbard Class B Common Stock. All of such issued shares have been duly
authorized and validly issued and are fully paid and nonassessable. To our
knowledge, there are no outstanding subscriptions, options, warrants, calls or
other agreements or commitments by which Hubbard is bound in respect of the
capital stock of Hubbard, whether issued or unissued. There are no outstanding
securities convertible into or exchangeable for any such capital stock.
3. Hubbard has the requisite corporate power and corporate
authority to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby, including, without limitation, the Merger.
The execution, delivery and performance of the Agreement have been duly
authorized by all necessary corporate action on the part of Hubbard. The
Agreement has been duly executed and delivered by Hubbard and constitutes the
legal, valid and binding obligation of Hubbard and is enforceable against
Hubbard in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
4. Neither the execution, delivery or performance by Hubbard
of the Agreement nor the consummation of any of the transactions provided for in
the Agreement or contemplated thereby, including, without limitation, the
Merger, (i) will violate the Articles of Incorporation or Bylaws of Hubbard;
(ii) is prohibited by any federal or state of Minnesota statute, law, ordinance,
regulation or rule or (iii) will constitute a default by Hubbard under any joint
venture agreement listed in the Disclosure Schedule.
<PAGE>
5. Upon the filing of the articles of merger with the
Secretary of State of the State of Minnesota, the Merger will be effective in
accordance with the terms and provisions of the articles of merger, the Plan of
Merger, and the laws of the state of Minnesota.
6. No approval, consent, order or authorization of,
declaration by or filing with any federal or state of Minnesota regulatory,
administrative or governmental body is necessary on the part of Hubbard in
connection with the execution, delivery or performance by Hubbard of the
Agreement or the consummation of the transactions contemplated thereby, except
for (i) the filing of articles of merger and the amendment to the articles of
incorporation of Hubbard (as contemplated by Section 4.02 of the Agreement) with
the Secretary of State of the State of Minnesota, and (ii) compliance with the
Hart-Scott-Rodino Agreement Antitrust Improvements Act of 1976.
7. To our knowledge, except as set forth on the Disclosure
Schedule delivered by Hubbard to Buyer and Buyer Subsidiary, no litigation,
arbitration, administrative proceeding, or investigation of any kind is pending
or threatened against Hubbard.
<PAGE>
EXHIBIT E
ENVIRONMENTAL REPORTS TO BE DELIVERED
1. St. Joseph, MO - A comprehensive soil and groundwater investigation will
be performed to determine the current soil and groundwater condition with
respect to solvent use in the maintenance shop, the four underground
storage tanks at the site, the Amoco station across Mitchell Avenue and
the former Standard Oil Tank farm to the south.
2. Portland, IN - Two potential off-site sources of groundwater
contamination: an adjacent municipal landfill, and adjacent waste oil
dumping pits used by Teledyne Forge. USTs were removed from the site in
1989, although no soil sampling information was provided. A file review
will be conducted for the three concerns listed above. Based upon the file
review, soil and groundwater sampling may be necessary.
3. DeGraff; MN - A UST was removed from the site in 1989. No indication of
soil sampling. A soil and groundwater investigation will be conducted
around the former tank pit.
4. Butler, MO - Adjacent fertilizer plant could have impacted the
groundwater, depending upon the types of fertilizers produced. A file
review/further research will be conducted regarding the adjacent
fertilizer plant. Based upon the file review, soil and groundwater
sampling may be necessary.
5. Stockton, CA - The review of the historical information available
indicated that USTs and ASTs may have been located on site. A file
review/further research will be conducted for the former UST areas. Based
upon the file review, soil and groundwater sampling may be necessary.
6. Botkins, OH - Three USTs installed at the site in the 1960s remain
on-site. A file review/further research will be conducted for the UST
areas. Based upon the file review, soil and groundwater sampling may be
necessary.
7. Iowa City, IA - A UST was removed from the site in 1987. No indication of
soil sampling. A waste oil UST is located at the garage. The adjacent
Mesquackie Park is the location of a closed municipal landfill. The
landfill was closed before groundwater monitoring was required. A
comprehensive soil and groundwater investigation will be performed at the
site to determine the current soil and groundwater condition.
8. Rapid City, SD - The 1992 ESA on the southern parcel indicated that the
site had historically been used for automotive garages. A closed UST
(1984) is located on the
<PAGE>
northern parcel. A comprehensive Soil and groundwater investigation will
be performed at the site to determine the current soil and groundwater
condition.
9. A chain-of-title will be prepared or reviewed for twelve sites. The
chain-of-title is a method for determining historical uses for a property
and will research the ownership and easements for a piece of property for
a minimum of 50 years. These twelve sites as identified as follows, in no
particular order. Fremont, NE, Shipshewana, IN; Watertown, SD; Whitewood,
SD; Sioux City, IA; LeSueur, MN; Cartersville, GA; Inman, KS; Delavan, WI;
Storm Lake, IA; Allentown, PA; and Alexandria, MN.
10. Watertown, SD - Three adjacent properties of concern - a scrap metal
recovery facility (west), a leaking UST site (north), and a UST site
(east). Fuel oil UST closed in place 1985. No indication of soil sampling.
As of March 13, 1997, we have not received the Phase II report. A report
of damaged asbestos-containing materials will be provided.
11. Whitewood, SD - Phase I indicated possible contamination due to use as a
railroad facility. During the Phase II, soil samples did not indicate soil
contamination. No groundwater samples were collected although groundwater
was encountered. Based upon Phase I results (use of solvents on site),
groundwater samples should have been collected and analyzed. A
comprehensive groundwater investigation will be performed at the site to
determine the current groundwater condition.
12. Cartersville, GA - A report of damaged asbestos-containing materials will
be provided.
13. Delavan, WI - A report of damaged asbestos-containing materials will be
provided.
14. Storm Lake, IA - A report of damaged asbestos-containing materials will be
provided.
15. Alexandria, MN - Several potential on-site sources of contamination
identified. Sources include abandoned diesel UST, the removal of a diesel
UST in 1989 with no soil sampling, historical evidence of gasoline USTs in
the gas house area, and bulk petroleum storage facility on the southern
portion of the property. Phase II work in both areas indicated the
presence of soil contamination on site. Groundwater samples were not
collected at the site. A comprehensive soil and groundwater investigation
will be performed of the "Northern Area" to determine the current soil and
groundwater condition. These investigations may need to be performed as
Initial Assessments under the Minnesota Pollution Control Agency
guidelines.
2
<PAGE>
16. In addition to the above work related to the current environmental
conditions at the site, a comprehensive environmental compliance audit
will be performed at each site to ensure that the plants are all in
compliance with applicable environmental regulations, including NPDES and
air permitting, and hazardous waste disposal.
17. Phase I Environmental Site Assessments for thirteen properties
(St. Joseph, MO; Portland, IN; DeGraff, MN; Butler, MO; Hillburn, NY;
Mankato, MN (corporate); Stockton, CA; Worthington, MN; Mankato, MN;
Botkins, OH; Iowa City, IA; Rapid City, SD; and Bismark, ND) will be
updated to accurately determine the current environmental condition of
each of the sites. These assessments will include inspections for suspect
asbestos containing materials.
18. Phase II reports at each site at which the Phase I prepared in accordance
with this Exhibit G reasonably indicates a "recognized environmental
condition" (as defined in ASTM Standard El527) and additional
investigation of such condition is reasonably warranted.
<PAGE>
EXHIBIT F
FORM OF OPINION OF COUNSEL TO BUYER AND BUYER SUBSIDIARY
1. Buyer is a corporation validly existing and in good
standing under the laws of the state of Delaware.
2. Buyer Subsidiary is a corporation validly existing and in
good standing under the laws of the state of Minnesota.
3. Each of Buyer and Buyer Subsidiary has the requisite
corporate power and corporate authority to execute, deliver and perform the
Agreement and to consummate the transactions contemplated thereby, including,
without limitation, the Merger. The execution and filing of the articles of
merger to effectuate the Merger have been duly authorized by all requisite
corporate action on the part of Buyer and Buyer Subsidiary. The Agreement has
been duly executed and delivered by each of Buyer and Buyer Subsidiary and
constitutes the legal, valid and binding obligation of Buyer and Buyer
Subsidiary and is enforceable against Buyer and Buyer Subsidiary in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a court of
law or equity).
4. Neither the execution, delivery or performance by either
Buyer or Buyer Subsidiary of the Agreement nor the consummation of any of the
transactions provided for in the Agreement or contemplated thereby, including,
without limitation, the Merger, (i) will violate the Certificate of
Incorporation or Bylaws of Buyer or the Articles of Incorporation or Bylaws of
Buyer Subsidiary; or (ii) is prohibited by any federal, state of Minnesota or
state of New York statute, law, ordinance, regulation or rule.
5. Upon the filing of articles of merger with the Secretary of
State of the State of Minnesota, the Merger will be effective in accordance with
the terms and provisions of the articles of merger, the Plan of Merger, and the
laws of the state of Minnesota.
6. No approval, consent, order or authorization of,
declaration by or filing with any federal or state of Minnesota or state of New
York regulatory, administrative or governmental body is necessary on the part of
either Buyer or Buyer Subsidiary in connection with the execution, delivery or
performance by Buyer and Buyer Subsidiary of the Agreement or the consummation
of the transactions contemplated thereby, except for (i) the filing of articles
of merger with the Secretary of State of the State of Minnesota, and (ii)
compliance with the Hart-Scott-Rodino Agreement Antitrust Improvements Act of
1976.
7. To our knowledge, no litigation, arbitration,
administrative proceeding, or investigation of any kind is pending or threatened
against Buyer or Buyer Subsidiary in connection with the Agreement or the
transactions contemplated thereby.
<PAGE>
The following list briefly identifies the contents of the Schedules to
the Merger Agreement, dated as of March 21, 1997, by and among Hubbard Milling
Company, Windy Hill Pet Food Co., Inc. and Windy Hill Pet Food Acquisition Co.
(Terms used but not defined have the meanings assigned to them in the Merger
Agreement.) In accordance with Regulation S-K under the Securities Act of 1933
the actual Schedules have not been filed with the Securities and Exchange
Commission (the "Commission"). The Company hereby agrees to furnish
supplementally a copy of any omitted Schedule to the Commission upon request.
1. 3.01(a) Organization, Standing, Qualification -- List of the standing of
Hubbard and its active subsidiaries
2. 3.01(b) Capitalization -- List of Hubbard's shareholders for all classes
of stock
3. 3.01(d) No Conflicts -- List of contracts with which the execution and
delivery of the Merger Agreement will conflict
4. 3.01(e) Financial Statements -- Delivery of annual report for each of
the fiscal years ended April 30, 1994 through April 30, 1996 and the
unaudited monthly financial statements for each of the months ended May
30, 1996 through January 31, 1997
5. 3.01(f) Absence of Certain Changes or Events -- List of changes or
events (as defined in Section 3.01(f)) since April 30, 1996 through the
signing of the Merger Agreement
6. 3.01(g) No Undisclosed Liabilities -- List of liabilities or
obligations other than in the course of ordinary business since
December 31, 1996 required to be disclosed or reserved against on a
balance sheet prepared in accordance with GAAP
7. 3.01(h) Tax Matters -- List of income tax audits for last ten years and
sales tax audits for last ten years
8. 3.01(i) Real Property -- List of all the real property owned in fee
simple by Hubbard, each lease by Hubbard as landlord of any of the fee
property and each lease by Hubbard of real property as tenant
9. 3.01(j) Personal Property -- List of all mortgages, claims, liens,
security interests, charges and encumbrances against the personal
property of Hubbard
<PAGE>
10. 3.01(k) Material Contracts -- List of all material contracts (as defined in
Section 3.01(k))
11. 3.01(l) Intellectual Property -- List of all registered trademarks,
registered trade names and applications for trademarks or trade names used
or owned by Hubbard
12. 3.01(m) Litigation -- List of pending and threatened litigation,
arbitration or administration proceeding or investigation
13. 3.01(n) Permits, Licenses, Authorizations; Compliance with Laws -- NO
DISCLOSURE
14. 3.01(p) Retirement and Benefit Plans -- List of each employee pension,
retirement, profit sharing, stock bonus, stock option, stock purchase,
bonus, incentive, deferred compensation, hospitalization, medical, dental,
vision, vacation, insurance, sick pay, disability, severance or other
plans, funds, programs, policies, contracts or arrangements that Hubbard or
any ERISA Affiliate maintains or to which either contributes or in which
any current or former employee of Hubbard or any ERISA Affiliate has
accrued any benefits which they remain entitled to receive
15. 3.01(q) Environmental Matters -- List of environmental assessments by
location and miscellaneous environmental matters
16. 3.01(r) Suppliers and Customers -- List of Hubbard's ten largest suppliers
and, or each of the pet food and feed division, the ten largest customers
17. 3.01(s) Insurance -- List and summary description of all policies of
insurance relating to Hubbard's business
18. 3.01(t) Motor Vehicles -- List of all licensed motor vehicles used in
Hubbard's business
19. 3.01(u) Adequacy of Hubbard's Assets/Related Party Transactions --
Statement that aircraft owned by Hubbard is not part of the sale
20. 3.01(v) Notes and Accounts Receivable -- List of loans not in the ordinary
course of business
2
<PAGE>
21. 3.01(w) Pet Food Packaging and Finished Goods Inventory -- List of
write-offs that Hubbard formalized for obsolete Pet Food packaging and
finished goods inventory
22. 3.01(x) Labor Matters -- List of grievances and organizing drives
3
<PAGE>
EX-2.2
AMENDMENT TO MERGER AGREEMENT
This Amendment, dated as of March 31, 1997, is made by and among
HUBBARD MILLING COMPANY, a Minnesota corporation ("Hubbard"), WINDY HILL PET
FOOD COMPANY, INC., a Delaware corporation ("Buyer"), and WINDY HILL PET FOOD
ACQUISITION CO., a Minnesota corporation ("Buyer Subsidiary").
WITNESSETH
WHEREAS, Hubbard, Buyer and Buyer Subsidiary have entered into a
Merger Agreement (the "Merger Agreement") dated as of March 21, 1997; and
WHEREAS, Hubbard, Buyer and Buyer Subsidiary desire to amend
certain provisions of the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements contained herein, the parties hereto hereby agrees as
follows:
1. Name of Buyer. The name of Buyer is set forth in the Merger
Agreement as "Windy Hill Pet Food Co., Inc." The correct legal name of Buyer
as set forth in its Certificate of Incorporation is "Windy Hill Pet Food
Company, Inc." The parties agree that (i) all references to "Windy Hill Pet
Food Co., Inc." in the Merger Agreement and all exhibits thereto shall be
deemed to be references to "Windy Hill Pet Food Company, Inc." and (ii) at
the time of execution and delivery of the Armour Stock Purchase Agreement,
attached as Exhibit A to the Merger Agreement, the correct legal name of
Buyer shall be inserted in the final execution copies thereof.
2. Amendment to Section 9.03. The reference to "Section 7.01(f)"
in the last line of Section 9.03 of the Merger Agreement shall be amended to
read "Section 7.01(g)".
3. Amendment to Exhibit B. The Plan of Merger attached as Exhibit
B to the Merger Agreement shall be amended and restated in its entirety to
read as set forth in Exhibit B (Amended) attached to this Amendment.
4. Miscellaneous. Except as specifically set forth herein, all
terms and provisions of the Merger Agreement and all exhibits thereto shall
remain in full force and effect with no other modification or waiver. This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which taken together
<PAGE>
shall constitute one and the same instrument. This Amendment shall be
governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
HUBBARD MILLING COMPANY
By: /s/ Richard P. Confer
-------------------------------------
Richard P. Confer, President
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ Ray Chung
-------------------------------------
Ray Chung, Executive Vice President
WINDY HILL PET FOOD ACQUISITION CO.
By: /s/ Ray Chung
-------------------------------------
Ray Chung, Executive Vice President
-2-
<PAGE>
EXHIBIT B (AMENDED)
PLAN OF MERGER
Merger of
WINDY HILL PET FOOD ACQUISITION CO.
with and into
HUBBARD MILLING COMPANY
WHEREAS, Windy Hill Pet Food Acquisition Co., a Minnesota
corporation ("Buyer subsidiary"), and Hubbard Milling Company, a Minnesota
corporation ("Hubbard" and, together with Buyer Subsidiary, the "Constituent
Corporations"), have entered into that certain Merger Agreement (the "Merger
Agreement") dated as of March 21, 1997, as amended March 31, 1997 by and
among Hubbard, Windy Hill Pet Food Company, Inc., a Delaware corporation, and
Buyer Subsidiary; and
WHEREAS, the Merger Agreement provides for the merger of Buyer
Subsidiary with and into Hubbard pursuant to Section 302A.611 of the
Minnesota Business Corporation Act ("MBCA") and in accordance with the terms
of this Plan of Merger, with Hubbard being the surviving corporation of the
merger;
NOW, THEREFORE, BE IT RESOLVED that at the Effective Time (as
defined below) and in accordance with this Plan of Merger and pursuant to
Section 302A.611 of the MBCA, Buyer Subsidiary shall be merged with and into
Hubbard on the terms and conditions contained in these resolutions, with
Hubbard being the surviving corporation of such merger (the "Merger"), the
name of which shall continue to be Hubbard Milling Company.
FURTHER RESOLVED, that the Merger shall be effective (the
"Effective Time") immediately upon filing of the Articles of Merger with the
Secretary of State of the State of Minnesota, all in the manner required by
law.
FURTHER RESOLVED, that each share of Common Stock, par value
$.0l, of Buyer Subsidiary outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into one (1) share of Class A Voting Common
Stock, $.05 par value, of Hubbard and each holder of a stock certificate
representing shares of Common Stock of Buyer Subsidiary outstanding
immediately prior to the Effective Time shall, upon surrender of such
certificate, be entitled to receive a stock certificate representing the same
number of shares of Class A Voting Common Stock of Hubbard and until so
surrendered, each such stock certificate
<PAGE>
representing Common Stock of Buyer Subsidiary shall, by virtue of the Merger,
be deemed for all purposes to evidence ownership of the same number of shares
of Class A Voting Common Stock of Hubbard.
FURTHER RESOLVED, that (i) each share (other than a "Dissenting
Share" as defined below) of 5 % Preferred Stock, $50 par value, of Hubbard
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be canceled
and converted into the right to receive in cash an amount equal to Fifty
Dollars ($50.00) per share, plus accrued but unpaid dividends thereon through
the Effective Time, (ii) each share (other than a Dissenting Share or a share
owned by Armour Corporation, a Delaware corporation) of Class A Voting Common
Stock of Hubbard, $.05 par value, and Class B Non-Voting Common Stock of
Hubbard, $.05 par value, shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and converted into the
right to receive in cash an amount equal to the Common Stock Merger
Consideration Per Share (as defined in Section 1.03 of the Merger Agreement),
and (iii) each Dissenting Share shall, by virtue of the Merger and without
any action on the part of the holder thereof, be canceled and converted into
the right to receive in cash an amount equal to the fair value thereof
determined in accordance with Section 302A.473 of the MBCA. "Dissenting
Share" for purposes of this Plan of Merger means each share of capital stock
of Hubbard owned by a shareholder who becomes entitled, pursuant to the
provisions of Section 302A.473 of the MBCA, to receive payment of the fair
value of such share.
FURTHER RESOLVED, that the Articles of Incorporation and By-laws
of Hubbard shall be the Articles of Incorporation and By-Laws of the
surviving corporation.
FURTHER RESOLVED, that no amendments to the Articles of
Incorporation of Hubbard shall be effected by the Merger.
FURTHER RESOLVED, at the Effective Time, Hubbard shall thereupon
and thereafter possess all the rights, privileges, immunities, powers and
franchises, of a public as well as of a private nature, of each of the
Constituent Corporations, and be subject to all the duties, liabilities and
obligations of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due to any of the Constituent Corporations
on whatever account, including subscriptions to shares, and all other choses
in action and every other interest of or belonging to or due to each of the
Constituent Corporations shall vest in Hubbard; and all and every other
interest shall be thereafter as effectually the property of Hubbard as they
were of the several and respective Constituent Corporations; and the title to
any real estate or any interest therein, vested by deed or otherwise, in any
of the Constituent Corporations, shall not revert or be in any way impaired
by reason of the Merger; and all rights of creditors and all liens upon any
property of any of the Constituent Corporations shall be preserved
unimpaired; and all debts, duties, liabilities and obligations of any of the
Constituent Corporations shall thenceforth attach to Hubbard, which shall
assume all such debts, duties, liabilities and obligations, and such debts,
duties, liabilities
2
<PAGE>
and obligations may be enforced against it to the same extent as if such
debts, duties, liabilities and obligations had been incurred or contracted by
it.
<PAGE>
ARTICLES OF MERGER
OF
WINDY HILL PET FOOD ACQUISITION CO.
INTO
HUBBARD MILLING COMPANY
Those Articles of Merger relate to the merger of Windy Hill Pet Food
Acquisition Co., a Minnesota corporation ("Windy Hill"), with and into Hubbard
Milling Company, a Minnesota corporation ("Hubbard").
(A) The Plan of Merger is attached hereto as Exhibit A.
(B) The Plan of Merger has been approved by each of Windy Hill and
Hubbard pursuant to Chapter 302A of the Minnesota Statutes.
Dated: May 21, 1997
WINDY HILL PET FOOD ACQUISITION Co.
By /s/ Ray Chung
-----------------------------------
Ray Chung
Executive Vice President
HUBBARD MILLING COMPANY
By /s/ Richard P. Confer
-----------------------------------
Richard P. Confer
President
<PAGE>
Exhibit A
to
Articles of Merger
PLAN OF MERGER
Merger of
WINDY HILL PET FOOD ACQUISITION Co.
with and into
HUBBARD MILLING COMPANY
WHEREAS, Windy Hill Pet Food Acquisition Co., a Minnesota corporation
("Buyer Subsidiary"), and Hubbard Milling Company, a Minnesota corporation
("Hubbard" and, together with Buyer Subsidiary, the "Constituent Corporations"),
have entered into that certain Merger Agreement ("The Merger Agreement") dated
as of March 21, 1997, as amended March 31, 1997 by and among Hubbard, Windy Hill
Pet Food Company, Inc., a Delaware corporation, and Buyer Subsidiary; and
WHEREAS, the Merger Agreement provides for the merger of Buyer Subsidiary
with and into Hubbard pursuant to Section 302A.611 of the Minnesota Business
Corporation Act ("MBCA") and in accordance with the terms of this Plan of
Merger, with Hubbard being the surviving corporation of the merger;
NOW, THEREFORE, BE IT RESOLVED that at the Effective Time (as defined
below) and in accordance with this Plan of Merger and pursuant to Section
302A.611 of the MBCA, Buyer Subsidiary shall be merged with and into Hubbard on
the terms and conditions contained in these resolutions, with Hubbard being the
surviving corporation of such merger (the "Merger"), the name of which shall
continue to be Hubbard Milling Company.
FURTHER RESOLVED, that the Merger shall be effective (the "Effective
Time") immediately upon filing of the Articles of Merger with the Secretary of
State of the State of Minnesota, all in the manner required by law.
FURTHER RESOLVED, that each share of Common Stock, par value $.01, of
Buyer Subsidiary outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into one (1) share of Class A Voting Common Stock, $.05 par value,
of Hubbard and each holder of a stock certificate representing shares of Common
Stock of Buyer Subsidiary outstanding immediately prior to the Effective Time
shall, upon surrender of such certificate, be entitled
<PAGE>
to receive a stock certificate representing the same number of shares of Class A
Voting Common Stock of Hubbard and until so surrendered, each such stock
certificate representing Common Stock of Buyer Subsidiary shall, by virtue of
the Merger, be deemed for all purposes to evidence ownership of the same number
of shares or Class A Voting Common Stock of Hubbard.
FURTHER RESOLVED, that (i) each share (other than a "Dissenting Share" as
defined below) of 5% Preferred Stock, $50 par value, of Hubbard outstanding
immediately prior to the Effective Time shall by virtue of the Merger and
without any action on the part of the holder thereof, be canceled and converted
into the right to receive in cash an amount equal to Fifty Dollars ($50.00) per
share, plus accrued plus unpaid dividends thereon through the Effective time,
(ii) each share (other than a Dissenting Share or a share owned by Armour
Corporation, a Delaware corporation) of Class A Voting Common Stock of Hubbard,
$.05 par value, and Class B Non-Voting Common Stock of Hubbard, $.05 par value,
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be canceled and converted into the right to receive in cash an amount
equal to the Common Stock Merger Consideration Per Share (as defined in Section
1.03 of the Merger Agreement), and iii) each Dissenting Share shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
canceled and converted into the right to receive in cash an amount equal to the
fair value thereof determined in accordance with Section 302A.473 of the MBCA.
"Dissenting Share" for purposes of this Plan of Merger means each share of
capital stock of Hubbard owned by a shareholder who becomes entitled, pursuant
to the provisions of Section 3O2A.473 of the MBCA, to receive payment of the
fair value of such share.
FURTHER RESOLVED, that the Articles of Incorporation and By-laws of
Hubbard shall be the Articles of Incorporation and By-laws of the surviving
corporation.
FURTHER RESOLVED, that no amendments to the Articles of Incorporation of
Hubbard shall be effected by the Merger.
FURTHER RESOLVED, at the Effective Time, Hubbard shall thereupon and
thereafter possess all the rights, privileges, immunities, powers and
franchises, of a public as well as of a private nature, of each of the
Constituent Corporations, and be subject to all the duties, liabilities and
obligations of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due to any of the Constituent Corporations on
whatever account, including subscriptions to shares, and all other choses in
action and every other interest of or belonging to or due to each of the
Constituent Corporations shall vest in Hubbard; and all and every other interest
shall be thereafter as effectually the property of Hubbard as they were of the
several and respective Constituent Corporations; and the title to any real
estate or any interest therein, vested by deed or otherwise, in any of the
Constituent Corporations, shall not revert or be in any way impaired by reason
of the Merger; and all rights of creditors and all liens upon any property of
any of the Constituent Corporations shall be preserved unimpaired; and all
debts, duties, liabilities and obligations
2
<PAGE>
of any of the Constituent Corporations shall thenceforth attach to Hubbard,
which shall assume all such debts, duties, liabilities and obligations, and such
debts, duties, liabilities and obligations may be enforced against it to the
same extent as if such debts, duties, liabilities and obligations had been
incurred or contracted by it.
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
MAY 21 1997
[ILLEGIBLE]
Secretary of State
3
<PAGE>
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and between
WINDY HILL PET FOOD COMPANY, INC.
and
THE SHAREHOLDERS
OF
ARMOUR CORPORATION
Dated as of April 22, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of the Agreement)
Page
ARTICLE I PURCHASE OF ARMOUR CAPITAL STOCK ................................. 1
1.01 GENERALLY ........................................................ 1
1.02 ALLOCATION OF PURCHASE PRICE ..................................... 2
1.03 SEPARATE AND SEVERAL OBLIGATIONS ................................. 2
ARTICLE II CLOSING, PAYMENT FOR SHARES AND RELATED MATTERS ................. 2
2.01 GENERALLY ........................................................ 2
2.02 PAYMENT FOR SHARES ............................................... 2
ARTICLE III REPRESENTATIONS AND WARRANTIES ................................. 5
3.01 REPRESENTATIONS AND WARRANTIES OF ARMOUR SHAREHOLDERS ............ 5
3.02 REPRESENTATIONS AND WARRANTIES OF BUYER .......................... 8
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO CLOSING ....................... 9
4.01 LIABILITIES ...................................................... 9
4.02 DIVIDENDS ........................................................ 9
4.03 ARMOUR CLOSING DATE BALANCE SHEET ................................ 9
ARTICLE V CONDITIONS PRECEDENT ............................................. 9
5.01 CONDITIONS TO THE OBLIGATIONS OF BUYER ........................... 9
5.02 CONDITIONS TO THE OBLIGATIONS OF ARMOUR SHAREHOLDERS ............. 11
ARTICLE VI TERMINATION AND ABANDONMENT ..................................... 13
6.01 GENERALLY ........................................................ 13
6.02 PROCEDURE AND EFFECT OF TERMINATION AND ABANDONMENT .............. 14
ARTICLE VII ARMOUR SHAREHOLDER REPRESENTATIVE .............................. 14
7.01 DESIGNATION ...................................................... 14
7.02 AUTHORITY ........................................................ 14
7.03 RESIGNATION ...................................................... 15
7.04 RELIANCE BY THIRD PARTIES ON THE ARMOUR SHAREHOLDER
REPRESENTATIVE'S AUTHORITY ............................................ 15
7.05 EXCULPATION AND INDEMNIFICATION .................................. 15
-i-
<PAGE>
ARTICLE VIII MISCELLANEOUS PROVISIONS ...................................... 16
8.01 LIMITATIONS ON SURVIVAL .......................................... 16
8.02 INDEMNIFICATION .................................................. 16
8.03 AMENDMENT AND MODIFICATION ....................................... 19
8.04 ALTERNATIVE DISPUTE RESOLUTION ................................... 19
8.05 INSURANCE COVERAGE ............................................... 20
8.06 FILING OF TAX RETURNS ............................................ 20
8.07 WAIVER OF COMPLIANCE; CONSENTS ................................... 20
8.08 EXPENSES ......................................................... 20
8.09 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS .......................... 20
8.10 ADDITIONAL AGREEMENTS ............................................ 21
8.11 NOTICES .......................................................... 21
8.12 ASSIGNMENT ....................................................... 22
8.13 GOVERNING LAW .................................................... 22
8.14 COUNTERPARTS ..................................................... 22
8.15 HEADINGS; INTERNAL REFERENCES .................................... 22
8.16 ENTIRE AGREEMENT ................................................. 22
8.17 SEVERABILITY ..................................................... 23
EXHIBITS
A Ownership of Armour Capital Stock
B Form of Opinion of Counsel to Armour Shareholders
C Form of Opinion of Counsel to Buyer
-ii-
<PAGE>
STOCK PURCHASE AGREEMENT ("Agreement") dated as of April 22,
1997, by and between WINDY HILL PET FOOD COMPANY, INC., a Delaware
corporation ("Buyer"), and OGDEN W. CONFER, KAY C. LAMB, RICHARD P. CONFER,
CAROL C. GREENWALD, Richard P. Confer and First Bank National Association as
Trustees of the ELIZABETH ANNA CONFER TRUST NO.2, and Richard P. Confer and
First Bank National Association as Trustees of the OGDEN P. CONFER FAMILY
TRUST CREATED UNDER THE OGDEN P. CONFER TRUST AGREEMENT (collectively the
"Armour Shareholders", and individually an "Armour Shareholder").
WITNESSETH:
WHEREAS, the Armour Shareholders own beneficially and of record
all of the issued and outstanding shares of capital stock of Armour
Corporation, a Delaware corporation ("Armour");
WHEREAS, Buyer desires to purchase from the Armour Shareholders,
and the Armour Shareholders desire to sell to Buyer, all of the issued and
outstanding shares of capital stock of Armour;
WHEREAS, Armour owns and holds beneficially and of record 800,000
shares of Class A Common Stock of Hubbard Milling Company, a Minnesota
corporation ("Hubbard");
WHEREAS, Hubbard, Buyer and Windy Hill Pet Food Acquisition Co.
("Buyer Subsidiary") have entered into a Merger Agreement dated as of March
21, 1997 (the "Merger Agreement") providing for Buyer Subsidiary to be merged
with and into Hubbard; and
WHEREAS, execution and delivery of this Agreement and
consummation of the transactions contemplated hereby are conditions precedent
to consummation of the transactions contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE OF ARMOUR CAPITAL STOCK
1.01 Generally. Subject to the conditions precedent hereinafter
contained, on the Closing Date (as defined in Section 2.01), Buyer shall
purchase from each of the Armour Shareholders, and each of the Armour
Shareholders shall sell to Buyer, the number
<PAGE>
and class of shares of issued and outstanding capital stock of Armour
specified in Exhibit A (all such shares of issued and outstanding capital
stock of Armour being hereinafter called the "Armour Capital Stock"). The
aggregate purchase price (the "Purchase Price") for the Armour Capital Stock
shall be an amount equal to 800,000 (i.e. number of shares of Hubbard Class A
Common Stock held by Armour) multiplied by the Common Stock Merger
Consideration Per Share (as defined in the Merger Agreement) plus (i) the
amount of any cash of Armour on the Closing Date after giving effect to the
payment of any dividends permitted by Section 4.02 as reflected on the Armour
Closing Date Balance Sheet (as defined in Section 4.03), and less (ii) the
amount of any accrued but unpaid tax liability of Armour on the Closing Date
as reflected in the Armour Closing Date Balance Sheet.
1.02 Allocation of Purchase Price. The Purchase Price shall be
allocated to the 9% Cumulative Voting Preferred Stock of Armour (the "Armour
Preferred Stock") in an amount equal to Ten Dollars ($10.00) per share, plus
accrued but unpaid dividends thereon through the Closing Date, and the
balance of such Purchase Price shall be allocated ratably to the shares of
Common Stock of Armour (the "Armour Common Stock").
1.03 Separate and Several Obligations. The obligations of the
Armour Shareholders under this Article I shall be separate and several.
ARTICLE II
CLOSING, PAYMENT FOR SHARES AND RELATED MATTERS
2.01 Generally. The closing (the "Closing") of the purchase and
sale of Armour Capital Stock in accordance with Article I shall occur on the
"Closing Date" specified in or otherwise determined in accordance with
Section 2.01 of the Merger Agreement (the "Closing Date"). The Closing shall
be held at the offices of Richards & O'Neil LLP, 885 Third Avenue, New York,
New York or such other place as the Armour Shareholders and Buyer may
mutually agree.
2.02 Payment for Shares.(a) On the Closing Date, the Armour
Shareholders shall cause the Armour Shareholder Representative (as defined in
Section 7.01) to deliver to Buyer a written estimate of the Purchase Price,
such estimate to be prepared upon consultation with Buyer (the "Estimated
Purchase Price"), which shall be an amount equal to 800,000 (i.e. the number
of shares of Hubbard Class A Common Stock held by Armour) multiplied by the
estimate of the Common Stock Merger Consideration Per Share delivered by
Hubbard to Buyer pursuant to Section 2.02(a) of the Merger Agreement, plus
(i) the amount of any cash of Armour on the Closing Date after giving effect
of the payment of any dividends permitted by Section 4.02 as reflected on the
Armour Closing Date Balance Sheet, and less (ii) the amount of any accrued
but unpaid tax liability of Armour on the Closing Date as reflected in the
Armour Closing Date Balance Sheet. Such written estimate of the Purchase
Price shall reflect the allocation between the Armour Preferred Stock and the
Armour
-2-
<PAGE>
Common Stock (the amount so allocated to the Armour Common Stock hereinafter
called the "Estimated Armour Common Stock Purchase Price").
(b) On the Closing Date, subject to the terms and conditions herein
contained, upon surrendering the certificates evidencing the Armour Capital
Stock, duly endorsed or accompanied by duly executed assignments separate
from certificate, Buyer shall remit the Estimated Purchase Price to or for
the benefit of the Armour Shareholders as follows:
(i) Buyer shall pay by cashier's check to each holder of Armour
Preferred Stock an amount equal to the number of shares of Armour
Preferred Stock held by such holder as specified in Exhibit A
multiplied by an amount equal to the sum of (A) Ten Dollars ($10.00)
per share, plus (B) accrued but unpaid dividends thereon through the
Closing Date, which payment shall be in full and final satisfaction
of the portion of the Purchase Price allocable to the Armour
Preferred Stock in accordance with Section 1.02;
(ii) Buyer shall remit to the Disbursing Agent under the Disbursing
Agreement (as such terms are defined in Section 2.02 of the Merger
Agreement) in immediately available funds, and the Disbursing Agent
shall hold in escrow pursuant to the escrow provisions of the
Disbursing Agreement, an amount (the "Armour Escrow Amount) equal to
Thirteen Million Dollars ($13,000,000) or, if the Escrow Amount (as
defined in Section 2.02(a) of the Merger Agreement) is calculated
based on Ten Million Dollars ($10,000,000) pursuant to Section
2.02(a) of the Merger Agreement, Ten Million Dollars ($10,000,000),
in either case multiplied by a fraction, the numerator of which is
800,000 and the denominator of which is the aggregate number of
shares of Hubbard Class A Common Stock and Hubbard Class B Common
Stock issued and outstanding on the Closing Date (including the
800,000 shares of Hubbard Class A Common Stock held by Armour);
(iii) Buyer shall remit to the Disbursing Agent under the Disbursing
Agreement in immediately available funds an amount (the "Reserve
Amount") equal to 5% of the Estimated Armour Common Stock Purchase
Price, such amount to be held by the Disbursing Agent pending a
final determination of the Common Stock Merger Consideration Per
Share under the Merger Agreement and a final determination of the
Purchase Price under this Agreement; and
(iv) Buyer shall remit the balance of the Estimated Purchase Price
remaining after the applications required by the foregoing clauses
(i), (ii) and (iii) by cashier's check to the holders of the Armour
Common Stock, pro rata based upon the number of shares of Armour
Common Stock held by each such holder as reflected in Exhibit A,
such application to constitute partial payment of the Purchase Price
allocable to the Armour Common Stock.
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(c) If the Armour Escrow Amount shall have been calculated under
Section 2.02(b)(ii) based upon Thirteen Million Dollars ($13,000,000) but
pursuant to Section 2.02(b) of the Merger Agreement the Escrow Amount under
the Merger Agreement is thereafter recalculated based on Ten Million Dollars
($10,000,000), then the Armour Escrow Amount shall be recalculated based on
Ten Million Dollars ($10,000,000), in which event the excess of the Armour
Escrow Amount as originally calculated pursuant to Section 2.02(b)(ii) over
the Armour Escrow Amount as recalculated pursuant to this Section 2.02(c)
shall be released from escrow and held by the Disbursing Agent for
distribution in accordance with Section 2.02(e).
(d) Upon delivery of the Closing Date Balance Sheet (as defined in
Section 1.03 of the Merger Agreement) and final determination of the Common
Stock Merger Consideration Per Share in accordance with the Merger Agreement,
the Armour Shareholders shall cause the Armour Shareholder Representative to
deliver to Buyer and the Disbursing Agent a final written calculation of the
Purchase Price allocable to the Armour Common Stock (the "Armour Common Stock
Purchase Price"). Within two (2) business days of delivery of such
calculation to Buyer, Buyer shall remit or cause to be remitted in
immediately available funds to the Disbursing Agent for application in
accordance with the Disbursing Agreement an amount equal to the excess (if
any) of (i) the Armour Common Stock Purchase Price over the Estimated Armour
Common Stock Purchase Price. Alternatively, if the Estimated Armour Common
Stock Purchase Price exceeds the Armour Stock Purchase Price, the Disbursing
Agreement shall provide for the Disbursing Agent to remit the amount of such
excess to Buyer within two (2) days of receipt of a written request from
Buyer.
(e) The Disbursing Agreement shall further provide that following the
remittance to or by the Disbursing Agent in accordance with Section 2.02(d),
the Disbursing Agent shall pay by cashier's check to the holders of Armour
Common Stock an amount equal to the Reserve Amount plus or minus as the case
may be, the amount of any payment by or to the Disbursing Agent pursuant to
Section 2.02(d), plus (if applicable) any amount released from escrow
pursuant to Section 2.02(c). Such payment shall be allocated among the
holders of Armour Stock pro rata based upon their ownership of Armour Common
Stock as set forth in Exhibit A.
(f) The Disbursing Agreement shall authorize the Disbursing Agent to
invest as therein provided any amounts from time to time held by the
Disbursing Agent under the Disbursing Agreement, and to apply as therein
provided any net profit resulting from, or interest or income produced by,
such investments.
(g) The Disbursing Agreement shall provide that any remaining Armour
Escrow Amount held by the Disbursing Agent under the Disbursing Agreement
eighteen (18) months after the Closing Date (subject to the provisions of the
Disbursing Agreement providing for the retention of the Armour Escrow Amount
in respect of escrow claims then pending) shall
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be paid by cashier's check to the holders of Armour Common Stock, such amount
to be allocated among the holders of Armour Common Stock pro rata based upon
their ownership of Armour Common Stock as set forth in Exhibit A, in final
settlement of the Armour Common Stock Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Armour Shareholders. Each
Armour Shareholder (separately and severally) represents and warrants to
Buyer, and its successors and assigns, as follows:
(a) Organization and Good Standing. Armour is a corporation duly
incorporated, validly existing, and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own
its assets and carry on its business as it is now being conducted.
(b) Certificate of Incorporation and By-Laws. The copy of the
certificate of incorporation and by-laws of Armour that has been delivered to
Buyer is complete and correct as of the date of this Agreement, and the
minute books of Armour that have been made available to Buyer are complete in
all material respects and accurately reflect all material action taken prior
to the date of this Agreement by the Board of Directors and the Armour
Shareholders.
(c) Capitalization. The authorized capital stock of Armour at the
date hereof consists of 25,000 shares of 9% Cumulative Voting Preferred
Stock, $10 par value, and 10,000 shares of Common Stock, $1 par value, all of
which are currently issued and outstanding.
(d) Ownership of Stock Such. Armour Shareholder owns and holds of
record, free and clear of any lien, claim or encumbrance, the shares of
Armour Capital Stock set forth adjacent to its name on Exhibit A, and such
shares are validly issued, fully paid and nonassessable. There are no
restrictions on such Armour Shareholder's ability to transfer such shares.
(e) Power and Authority; Execution and Enforceability. Such
Armour Shareholder has the legal right, power and authority to enter into
this Agreement and has the legal right, power and authority to transfer,
assign and deliver such Armour Shareholder's shares as provided in this
Agreement, and such delivery will convey to Buyer good and marketable title
to such shares, free and clear of all liens, claims, agreements and
encumbrances of any kind whatsoever. This Agreement constitutes the legal,
valid and
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binding obligation of such Armour Shareholder enforceable in accordance with
its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a court
of law or in equity).
(f) Assets. Armour is a holding company which holds as its sole
assets 800,000 shares of Hubbard Class A Common Stock and cash from time to
time maintained in its corporate accounts. Armour has good and marketable
title to such shares of Hubbard free and clear of all liens, claims and
encumbrances. Since its incorporation, Armour has not operated or otherwise
engaged in any business activity other than (i) ownership of such shares of
Hubbard Class A Common Stock and the exercise of voting rights in respect
thereof; (ii) the payment of dividends, fees and disbursements of its counsel
and independent accountants, income taxes, franchise taxes and other fees
necessary to maintain in good standing its status as a corporation in the
state of Delaware; and (iii) other immaterial, incidental and administrative
matters directly related to the foregoing.
(g) Liabilities; Litigation. Armour has no debts or other
liabilities of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, except for (i) accrued and unpaid fees
and disbursements of its counsel and independent accountants, and (ii)
accrued and unpaid taxes. All dividends required to be paid on Armour 9%
Cumulative Voting Preferred Stock have been paid through December 31, 1996.
No litigation, arbitration, administrative proceeding, or investigation of
any kind is pending or, to the knowledge of such Armour Shareholder,
threatened against Armour or any of its officers or directors in connection
with the business or affairs of Armour. Armour is not currently, and has not
been since 1990, subject to any judgment, consent decree, binding arbitration
or regulatory order not generally applicable to similar businesses.
(h) Tax Matters.
(i) Armour has timely filed all Federal, state, local
and foreign tax returns ("Tax Returns") required to be filed by it
with respect to income, withholding, social security, unemployment,
franchise, property, excise and sales and use taxes (all such taxes,
together with any interest or penalties payable in respect thereof,
hereinafter collectively called "Taxes"), and has paid, reserved or
accrued for all Taxes.
(ii) All Tax Returns filed by Armour for any taxable
period were complete and accurate in all material respects. No Tax
Returns filed by Armour have ever been audited and no claims for
additional Taxes for any taxable period have ever been made by any
taxing authority. Armour has not received a notice of deficiency or
assessment of additional Taxes which notice or assessment remains
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unresolved. Armour has not extended the period for assessment or
payment of any Tax, which period has not since expired.
(iii) Armour has not been a member of an affiliated
group (as such term is defined in Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code")) filing a consolidated
federal income tax return for any tax year.
(iv) There are no liens for Taxes (other than current
Taxes not yet due and payable) upon the assets of Armour.
(v) Armour has not filed a consent under Code Section
341(f) concerning collapsible corporations.
(vi) Armour has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section
897(c)(1)(A)(ii).
(vii) Armour is not a party to any Tax allocation or
sharing agreement.
(viii) Armour is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of any "excess parachute payments"
within the meaning of Code Sec. 280G, or any other payment of
compensation which would be nondeductible under Code Sec. 162.
(i) No Undisclosed Liabilities. There are no liabilities of
Armour of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to
result in such a liability, other than liabilities provided for in the Armour
Closing Date Balance Sheet (as defined below) or disclosed in the notes
thereto.
(j) No Brokers or Finders. Such Armour Shareholder has not
engaged any investment banker, broker or finder in connection with the
transactions contemplated hereby.
(k) Full Disclosure. No representation or warranty contained in
this Agreement, the Merger Agreement or any Disclosure Schedule hereto or
thereto omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading.
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3.02 Representations and Warranties of Buyer. Buyer represents
and warrants to each Armour Shareholder, and their respective successors and
assigns, as follows:
(a) Organization, Standing, Equity Ownership. Buyer is a
corporation duly incorporated, validly existing and in good standing under
the laws of its state of incorporation. Buyer has made available to each
Armour Shareholder a certified copy of the articles or certificate of
incorporation and by-laws of Buyer. Such copy is complete and correct as of
the date hereof.
(b) Authorization and Execution. Buyer has the corporate power
and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Buyer have been duly and effectively authorized by all
necessary corporate action of Buyer, and no further corporate action is
necessary on the part of Buyer to consummate the transactions contemplated
hereby. This Agreement constitutes a legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a court of law or equity).
(c) No Conflicts. Neither the execution and delivery of this
Agreement by Buyer, nor the consummation of the transactions contemplated
hereby, will (i) conflict with or result in a breach of its articles or
certificate of incorporation or by-laws, as currently in effect, of Buyer, or
(ii) except for the requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Hart-Scott-Rodino Act"), require any filing
with, or any consent or approval of any governmental authority having
jurisdiction over any of the business or assets of Buyer, or (iii) violate
any statute, regulation, injunction, judgment or order to which Buyer is
subject, or (iv) result in a breach of or constitute a default or an event
which, with the passage of time or the giving of notice, or both, would
constitute a default, give rise to a right of termination, cancellation or
acceleration, create any entitlement to any payment or benefit, require the
consent of any third party or result in the creation of any lien on the
assets of Buyer under any material instrument, contract or agreement to which
Buyer is a party or by which it is bound.
(d) No Brokers or Finders. Buyer has not engaged any investment
banker, broker or finder in connection with the transactions contemplated
hereby.
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ARTICLE IV
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
4.01 Liabilities. The Armour Shareholders shall cause Armour (i)
to obtain from its counsel, Faegre & Benson LLP, and its accountants, Henry
Scholten & Company, final statements for all services and disbursements to
and including the Closing Date, and (ii) to pay the statements so obtained on
or prior to the Closing Date. If Armour shall have any other liabilities,
other than for payment of income taxes, outstanding on the Closing Date, the
Armour Shareholders shall cause Armour to pay such other liabilities on the
Closing Date.
4.02 Dividends. The Armour Shareholders will not cause or permit
Armour to declare or pay any dividends between the date hereof and the
Closing Date which would impair the ability of Armour (i) to pay the
liabilities required to be paid pursuant to Section 4.01, or (ii) to pay
income taxes. Subject to the foregoing, Armour may declare and pay a final
dividend equal to the cash remaining on the Closing Date after payment of the
liabilities required to be paid pursuant to Section 4.01.
4.03 Armour Closing Date Balance Sheet. The Armour Shareholders
shall cause Armour's independent accountants to compile and deliver to the
Armour Shareholders and to Buyer on the Closing Date a pro forma balance
sheet reflecting the financial condition of Armour as of the Closing Date,
after giving effect to payment of the liabilities required to be paid
pursuant to Section 4.01 and payment of dividends permitted to be paid
pursuant to Section 4.02 (the "Armour Closing Date Balance Sheet"). The
Armour Closing Date Balance Sheet shall be prepared in accordance with
generally accepted accounting principles from the books and records of Armour
(which are accurate and complete in all material respects) and shall fairly
represent, in all material respects, the assets, liabilities and financial
position of Armour as of the Closing Date.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to the Obligations of Buyer. The obligations of
Buyer to purchase the Armour Capital Stock pursuant to Article I shall be
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which (except for the conditions set forth in
Section 5.01(b), (c) and (d)) may be waived by Buyer:
(a) The representations and warranties of each Armour Shareholder
contained in Section 3.01 shall be true and correct in all material respects
with the same effect as if such representations and warranties had been made
on the Closing Date; each Armour Shareholder shall have performed and
complied in all material respects with the agreements
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and obligations contained in this Agreement required to be performed and
complied with by such Armour Shareholder on or prior to the Closing Date; and
Buyer shall have received a certificate signed by each Armour Shareholder to
the effects set forth in this Section 5.01(a) as it relates to such Armour
Shareholder.
(b) The Merger Agreement shall not have been terminated; all
conditions precedent set forth in the Merger Agreement to the merger of Buyer
Subsidiary with and into Hubbard thereunder (the "Merger") shall have been
satisfied or waived; and arrangements reasonably satisfactory to Buyer and
Buyer Subsidiary shall have been made for the Merger to be consummated
immediately after the Closing hereunder.
(c) The amendment ("Amendment") to the Articles of Incorporation
of Hubbard contemplated under the Merger Agreement shall have been adopted at
a Special Meeting of the Shareholders of Hubbard by the vote required by the
Minnesota Business Corporation Act ("MBCA") and Hubbard's Articles of
Incorporation, and a Certificate of Amendment to the Articles of
Incorporation of Hubbard containing such amendment shall have been duly
executed, filed with the Minnesota Secretary of State and effective prior to
the vote of the shareholders of Hubbard at such meeting on the Plan of Merger
(as defined in the Merger Agreement).
(d) The Plan of Merger shall have been approved at the Special
Meeting of the Shareholders of Hubbard referred to in Section 5.01(c) by the
vote required by the MBCA and Hubbard's Articles of Incorporation.
(e) There shall not be pending any suit, action, investigation,
inquiry or other proceeding by or before any court or governmental or other
regulatory or administrative agency or commission requesting or looking
toward an order, judgment or decree (except those in which Buyer is a
plaintiff directly or derivatively) which, in the reasonable judgment of
Buyer could, if issued, restrain or prohibit the consummation of the
transactions contemplated hereby or require rescission of this Agreement or
such transactions or result in damages to Buyer, if the transactions
contemplated hereby are consummated, nor shall there be in effect any
injunction, writ, preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein, or any of them, not be consummated
as so provided.
(f) Buyer shall have received from Faegre & Benson LLP, counsel
to the Armour Shareholders, an opinion, dated the Closing Date and reasonably
satisfactory in form and substance to Buyer and its counsel, as to the
matters set forth in Exhibit B. In rendering such opinion, such counsel may
rely, to the extent such counsel deems such reliance necessary or
appropriate, as to matters of fact, upon certificates of the Armour
Shareholders.
(g) All applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated.
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(h) On the Closing Date, the Armour Shareholders will have
delivered to Buyer the following:
(i) A good standing certificate for Armour from the
state of Delaware, dated not earlier than 15 days prior to the
Closing Date;
(ii) The written resignations of the officers and
directors of Armour;
(iii) The minute books, stock records and stock ledgers
of Armour; and
(iv) Such other documents and instruments as Buyer may
reasonably request in connection with the transactions contemplated
hereby.
(i) The Disbursing Agreement shall have been executed and
delivered by the parties thereto other than Buyer.
5.02 Conditions to the Obligations of Armour Shareholders. The
obligation of each Armour Shareholder to sell its Armour Capital Stock shall
be subject to the fulfillment at or prior to the Closing Date of the
following conditions, any one or more of which (except for the conditions set
forth in Sections 5.02(b), (c) and (d)) may be waived by the Armour
Shareholders:
(a) The representations and warranties of Buyer contained in
Section 3.02 of this Agreement shall be true and correct in all material
respects on the Closing Date with the same effect as if such representations
and warranties had been made on the Closing Date; Buyer shall have performed
and complied in all material respects with the agreements and obligations
contained in this Agreement required to be performed and complied with by it
on or prior to the Closing Date; and the Armour Shareholders shall have each
received a certificate signed by an executive officer of Buyer to the effects
set forth in this Section 5.02(a).
(b) The Merger Agreement shall not have been terminated; all
conditions precedent set forth in the Merger Agreement to the Merger shall
have been satisfied or waived; and arrangements reasonably satisfactory to
the Armour Shareholders shall have been made for the Merger to be consummated
immediately after the Closing hereunder.
(c) The Amendment shall have been adopted at the Special Meeting
of the Shareholders of Hubbard referred to in Section 5.01 (c) by the vote
required by the MBCA and Hubbard's Articles of Incorporation, and a
Certificate of Amendment to the Articles of Incorporation of Hubbard
containing such amendment shall have been duly executed, filed
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with the Minnesota Secretary of State and effective prior to the vote of the
shareholders of Hubbard at such meeting on the Plan of Merger.
(d) The Plan of Merger shall have been approved at the Special
Meeting of the Shareholders of Hubbard referred to in Section 5.01(c) by the
vote required by the MBCA and Hubbard's Articles of Incorporation.
(e) All corporate action on the part of Buyer, necessary to
authorize the execution, delivery and consummation of this Agreement or any
agreement or instrument contemplated hereby to which Buyer is or is to be a
party or the transactions contemplated hereby or thereby shall have been duly
and validly taken.
(f) There shall not be pending any suit, action, investigation,
inquiry or other proceeding by or before any court or governmental or other
regulatory or administrative agency or commission requesting or looking
toward an order, judgment or decree (except those in which Armour or any
Armour Shareholder is a plaintiff directly or derivatively) which, in the
reasonable judgment of the Armour Shareholders, would, if issued, restrain or
prohibit the consummation of the transactions contemplated hereby or require
rescission of this Agreement or such transactions or result in damages to the
Armour Shareholders if the transactions contemplated hereby are consummated,
nor shall there be in effect any injunction, writ, preliminary restraining
order or any order of any nature issued by a court or governmental agency of
competent jurisdiction directing that the transactions provided for herein,
or any of them, not be consummated as so provided.
(g) The Armour Shareholders shall have received from Richards &
O'Neil, LLP, counsel to Buyer, an opinion, dated the Closing Date and
reasonably satisfactory in form and substance to the Armour Shareholders and
their counsel, as to the matters set forth in Exhibit C. In rendering such
opinion, such counsel may rely, to the extent such counsel deems such
reliance necessary or appropriate, as to matters of fact, upon certificates
of government officials and of any officer or officers of Buyer.
(h) All applicable waiting periods (and any extension thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated.
(i) On the Closing Date, Buyer will have delivered to the Armour
Shareholders the following:
(i) A good standing certificate for Buyer from the state
of Delaware, dated not earlier than 15 days prior to the Closing
Date;
(ii) Certified copies of the resolutions duly adopted by
the board of directors of Buyer authorizing the execution, delivery
and performance of this Agreement and the other agreements
contemplated hereby; and
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(iii) Such other documents and instruments as the Armour
Shareholders may reasonably request in connection with the
transactions contemplated hereby.
(j) The Disbursing Agreement shall have been executed and
delivered by the parties thereto other than the Armour Shareholder
Representative (as defined in Section 7.01).
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Generally. This Agreement may be terminated and abandoned at
any time prior to Closing under the following circumstances:
(a) by mutual consent of the Board of Directors of Buyer and the
Armour Shareholders;
(b) by Buyer or the Armour Shareholders if the transactions
contemplated hereby shall not have been consummated on or before June 30,
1997 (which date may be extended by mutual agreement of the Board of
Directors of Buyer and the Armour Shareholders), provided that such failure
is not due solely to the failure of the party seeking to terminate this
Agreement to comply with its obligations under this Agreement;
(c) by Buyer if any of the conditions set forth in Section 5.01
shall become impossible to fulfill other than for reasons within the control
of Buyer, and such conditions shall not have been waived pursuant to Section
8.07;
(d) by any Armour Shareholder if any of the conditions set forth
in Section 5.02 shall become impossible to fulfill other than for reasons
within the control of the Armour Shareholders, or any of them, and such
conditions shall not have been waived pursuant to Section 8.07; or
(e) by Buyer if Buyer shall have failed to receive the proceeds
of the bridge financing under the Chase Bridge Financing Commitment or the
proceeds of the senior debt financing under the CSFB Senior Debt Financing
Commitment (as such terms are defined in the Merger Agreement), as the case
may be, as a result, in the case of the Chase Bridge Financing Commitment, of
any of the circumstances described in clauses (i) through (v) of the first
full paragraph on page 4 thereof, or as a result, in the case of the CSFB
Senior Debt Financing Commitment, of any of the circumstances described in
the first full paragraph of page 2 thereof.
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6.02 Procedure and Effect of Termination and Abandonment. In the
event of termination of this Agreement by one or more of Buyer or the Armour
Shareholders pursuant to Section 6.01, written notice thereof shall forthwith
be given to the other parties hereto and this Agreement shall terminate
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party to this Agreement except to the extent
the termination is a direct result of a willful and material breach by a
party to this Agreement of any material representation, warranty or covenant
contained in this Agreement.
ARTICLE VII
ARMOUR SHAREHOLDER REPRESENTATIVE
7.01 Designation. Subject to the terms and conditions of this
Article VII, Richard P. Confer is designated as the representative of the
Armour Shareholders (the "Armour Shareholder Representative") by the Armour
Shareholders to serve, and the Buyer hereby acknowledges that the Armour
Shareholder Representative shall serve, as the sole representative of the
Armour Shareholders from and after the Closing Date with respect to the
matters set forth in this Agreement, such service to be without compensation
except for the reimbursement of out-of-pocket expenses and indemnification
specifically provided herein. The Armour Shareholder Representative has
accepted such designation as of the date hereof. Notwithstanding anything to
the contrary contained in this Agreement, the Armour Shareholder
Representative shall have no duties or responsibilities except those
expressly set forth herein, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on behalf of any Armour
Shareholder shall otherwise exist against the Armour Shareholder
Representative.
7.02 Authority. Each Armour Shareholder, by executing this
Agreement, irrevocably appoints the Armour Shareholder Representative as the
agent, proxy and attorney-in-fact for such Armour Shareholder for all
purposes of this Agreement, including full power and authority on such Armour
Shareholder's behalf (i) to take all actions which the Armour Shareholder
Representative considers necessary or desirable in connection with the
defense, pursuit or settlement of any determinations relating to the payment
of the Armour Escrow Amount and any claims for indemnification pursuant to
Section 8.02, including to sue, defend, negotiate, settle and compromise any
such claims for indemnification made by or against, and other disputes with,
the Buyer pursuant to this Agreement or any of the agreements or transactions
contemplated hereby, (ii) to engage and employ agents and representatives
(including accountants, legal counsel and other professionals) and to incur
such other expenses as he shall deem necessary or prudent in connection with
the administration of the foregoing, (iii) to provide for all expenses
incurred in connection with the administration of the foregoing to be paid by
directing the Disbursing Agent to reimburse
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the Armour Shareholder Representative for such expenses, (iv) to disburse to
the Armour Shareholders all indemnification payments received from the Buyer
under Section 8.02, (v) to accept and receive notices to the Armour
Shareholders pursuant to this Agreement, and (vi) to take all other actions
and exercise all other rights which the Armour Shareholder Representative (in
his sole discretion) considers necessary or appropriate in connection with
this Agreement. Each of the Armour Shareholders agrees that such agency and
proxy are coupled with an interest, and are therefore irrevocable without the
consent of the Armour Shareholder Representative and shall survive the death,
incapacity, bankruptcy, dissolution or liquidation of any Armour Shareholder.
All decisions and acts by the Armour Shareholder Representative shall be
binding upon all of the Armour Shareholders, and no Armour Shareholder shall
have the right to object, dissent, protest or otherwise contest the same.
7.03 Resignation. In the event that the Armour Shareholder
Representative shall die, become incapacitated, resign or otherwise fail to
act on behalf of the Armour Shareholders for any reason, the Armour
Shareholder Representative shall be Ogden W. Confer or, in the event of a
similar situation involving Ogden W. Confer, such other person as shall be
selected by a majority of the persons serving as directors of Armour
immediately prior to the Closing, and such substituted representative shall
be deemed to be the Armour Shareholder Representative for all purposes of
this Agreement. Notwithstanding anything to the contrary herein contained,
the Armour Shareholder Representative shall at all times be the same person
who serves as the Shareholder Representative (as defined in Section 8.01 of
the Merger Agreement).
7.04 Reliance by Third Parties on the Armour Shareholder
Representative's Authority. The Armour Shareholder Representative is
authorized to act on the Armour Shareholders' behalf notwithstanding any
dispute or disagreement among the Armour Shareholders and the other parties
hereto shall be entitled to rely on any and all action taken by the Armour
Shareholder Representative without any liability to, or obligation to inquire
of, any of the Armour Shareholders even if such party shall be aware of any
actual or potential dispute or disagreement among the Armour Shareholders.
Each of the other parties hereto and the Disbursing Agent is expressly
authorized to rely on the genuineness of the signature of the Armour
Shareholder Representative and, upon receipt of any writing which reasonably
appears to have been signed by the Armour Shareholder Representative, the
other parties hereto and the Disbursing Agent may act upon the same without
any further duty of inquiry as to the genuineness of the writing.
7.05 Exculpation and Indemnification. Neither the Armour
Shareholder Representative nor any agent employed by him shall be liable to
any Armour Shareholder relating to the performance of his duties under this
Agreement for any errors in judgment, negligence, oversight, breach of duty
or otherwise except to the extent it is finally determined in a court of
competent jurisdiction by clear and convincing evidence that the actions
taken or not taken by the Armour Shareholder Representative constituted fraud
or were taken or not taken in bad faith. The Armour Shareholder
Representative shall be indemnified and held
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<PAGE>
harmless by the Armour Shareholders against all Damages (as defined in
Section 8.02) paid or incurred in connection with any action, suit,
proceeding or claim to which the Armour Shareholder Representative is made a
party by reason of the fact that he was acting as the Armour Shareholder
Representative pursuant to this Agreement; provided, however, that the Armour
Shareholder Representative shall not be entitled to indemnification hereunder
to the extent it is finally determined in a court of competent jurisdiction
by clear and convincing evidence that the actions taken or not taken by the
Armour Shareholder Representative constituted fraud or were taken or not
taken in bad faith; and provided further, however, that the Armour
Shareholder Representative shall have recourse only against the unpaid Armour
Escrow Amount (fully subordinated in right of payment and otherwise to the
Buyer's claims thereto, whether or not then existing or known), with respect
to such Damages as provided in the next two sentences of this Section 7.05.
Any amount owing to the Armour Shareholder Representative from the Armour
Shareholders pursuant to this Section 7.05 shall be reduced on a pro rata
basis from the next succeeding distribution(s) of the Armour Escrow Amount by
the Disbursing Agent to the holders of Armour Common Stock, and shall be
payable solely from such source. The Armour Shareholder Representative shall
be protected in acting upon any notice, statement or certificate believed by
him to be genuine and to have been furnished by the appropriate person and in
acting or refusing to act in good faith or any matter.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01 Limitations on Survival. Each of the representations and
warranties made by the parties in Article III, in Section 4.03 and in the
certificates delivered pursuant to Sections 5.01(a) and 5.02(a) shall survive
any examination made by or on behalf of any party hereto, the execution and
delivery of this Agreement, the Closing and the consummation of the
transactions contemplated by this Agreement to and until three (3) years
after the Closing Date, whereupon such representations and warranties shall
terminate, provided that no such termination shall occur with respect to any
representation or warranty made in a manner involving fraud or criminal
misrepresentation.
8.02 Indemnification. Subject to the limitations set forth in
this Section 8.02 the parties hereto agree as follows:
(a) Buyer and its successors and assigns shall be indemnified by
the Armour Shareholders, jointly and severally (except as hereinafter
expressly provided), and their successors and assigns against any loss,
claim, liability, cost or expense (including reasonable attorney's fees and
expenses) or other damage of any kind or nature (collectively, "Damages")
incurred by Buyer which is caused by or arises out of (i) any breach of any
representation or warranty of the Armour Shareholders contained in this
Agreement or any related document executed and delivered by the Armour
Shareholders (the "Armour Closing
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<PAGE>
Documents"), other than those breaches, if any, of which Buyer has actual
knowledge at the time of Closing, provided, that the indemnification
obligation of each Armour Shareholder with respect to the representations and
warranties of such Armour Shareholder in Sections 3.01(d) and (e) shall be
several and not joint and several, (ii) the breach or other failure to
perform any covenant, agreement or other obligation of the Armour
Shareholders contained in this Agreement or any other Armour Closing
Documents, (iii) any breach of representation or warranty by Hubbard
contained in the Merger Agreement or the Closing Documents (as defined in the
Merger Agreement), other than those breaches, if any, of which Buyer has
actual knowledge at the time of Closing, (iv) the breach or other failure to
perform any covenant, agreement or other obligation of Hubbard contained in
the Merger Agreement or the Closing Documents, (v) the Indemnified
Environmental Liabilities (as defined in Section 9.02(a) of the Merger
Agreement), (vi) the Indemnified Litigation and Claims (as defined in Section
9.02(a) of the Merger Agreement), and (vii) the Indemnified Title Costs and
Expenses (as defined in Section 4.12 of the Merger Agreement); provided,
however, that in connection with any claim for indemnification for Damages
under this Section 8.02 (except in a case involving fraud or criminal
misrepresentation), (A) after the Closing Buyer shall have recourse only
against the Armour Escrow Amount with respect to Damages under clauses (iii)
through (vii), inclusive, of this Section 8.02(a), (B) indemnification owing
from any Armour Shareholder who is or was an officer or director of Armour
shall not be deemed for any purpose to be a claim covered by indemnification
owing to such Armour Shareholder by Armour under any law, by-law or agreement
whatsoever, (C) Buyer's rights to indemnification under clause (iii) and (iv)
of this Section 8.02 shall not arise until Damages, in the aggregate, under
clauses (iii) and (iv) of this Section 8.02(a) and clauses (i) and (ii) of
Section 9.02(a) of the Merger Agreement exceed $750,000 whereupon
indemnification shall arise with respect to the full amount of such Damages
in excess of $750,000, and (D) in the case of indemnification for Indemnified
Environmental Liabilities and Indemnified Litigation and Claims, the
indemnification under this Agreement and the Merger Agreement shall be
limited in the aggregate to 50% of any Damages. Any amount owing to Buyer
from the Armour Shareholders pursuant to clause (iii) and (iv) of this
Section 8.02(a) shall be deducted from the next distribution(s) of the Armour
Escrow Amount as provided in the Disbursing Agreement. Notwithstanding the
foregoing, Buyer shall not be indemnified for any Damages for which it
receives proceeds under any insurance policy maintained by Hubbard, Buyer or
Buyer Subsidiary, including without limitation the title insurance policies
obtained by Buyer pursuant to Section 5.01(k) of the Merger Agreement, and no
Damages for which such proceds are received shall be included in calculating
the $750,000 threshold for indemnification set forth in this Section 8.02(a).
(b) The Armour Shareholders and their successors and assigns
severally but solely through the Armour Shareholder Representative shall be
indemnified by the Buyer against Damages incurred by them which are caused by
or arise out of (i) any breach of any representation or warranty of the Buyer
contained in this Agreement, other than those breaches, if any, of which the
Armour Shareholders have actual knowledge at the time of Closing and (ii) the
breach or other failure to perform any covenant or agreement or other
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<PAGE>
obligation of the Buyer contained in this Agreement; provided, however, that
after the Closing indemnification hereunder shall be limited in amount to
each Armour Shareholder to the portion of the Purchase Price remaining unpaid
and owing to such Armour Shareholder.
(c) Whenever any claims shall arise for indemnification
hereunder, (i) the party entitled to indemnification (or the Armour
Shareholder Representative in the case of indemnification owing to the Armour
Shareholders) (the "Indemnified Party") shall provide written notice to the
party from whom such indemnification is owing (or the Armour Shareholder
Representative in the case of indemnification owing from the Armour
Shareholders) (the "Indemnifying Party") within a reasonable period of
becoming aware of the right to indemnification and, as expeditiously as
possible thereafter, of the facts constituting the basis for such claim and
(ii) the Indemnifying Party and its representatives shall be given access to
all books and records in the possession or control of the Indemnified Party
which the Indemnifying Party reasonably determines to be related to such
claim, provided that any failure of the Indemnified Party to so notify the
Indemnifying Party within any such time period shall not waive the
Indemnified Party's indemnification rights hereunder except to the extent
that the Indemnifying Party has been damaged by such a failure.
(d) If any legal proceedings are instituted or any claim or
demand is asserted by any person in respect of which the Indemnified Party
determines it may seek indemnification pursuant to the provisions of this
Section 8.02, the Indemnified Party shall promptly after such determination
cause written notice of the assertion of any such claim to be made to the
Indemnifying Party. The Indemnifying Party shall have the right, at its
option and expense and upon written notice to the Indemnified Party, to
defend against, negotiate and, with the consent of the Indemnified Party
(which consent shall not be unreasonably withheld) settle any such claim, and
in such case, the Indemnified Party shall have the right to participate in
such defense, negotiation or settlement at his own expense. The Indemnified
Party and the Indemnifying Party agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any such legal
proceeding, claim or demand. Upon the payment of any claim for indemnity, the
Indemnifying Party shall be subrogated to all rights and remedies of the
Indemnified Party against any third person. If the Indemnifying Party does
not so elect to defend any such third party claim, legal proceeding or
demand, the Indemnified Party may (but shall have no obligation to) defend
any such third party claim, legal proceeding or demand in such manner as he
may deem appropriate including, but not limited to, settling such claim,
legal proceeding or demand, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate and no action taken by the Indemnified Party in accordance with
such defense and settlement shall relieve the Indemnifying Party of its
indemnification obligations herein provided with respect to any Damages
resulting therefrom.
(e) The parties desire that any indemnification claim against the
Armour Shareholders under clauses (iii) through (vii) of Section 8.02(a) be
coordinated with any indemnification claim against the Shareholders under
Section 9.02(a) of the Merger
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<PAGE>
Agreement. Accordingly, notwithstanding anything to the contrary contained in
this Agreement or the Merger Agreement, Buyer and the Armour Shareholders
agree that any claim asserted by Buyer under clauses (iii) through (vii), as
applicable, of Section 8.02(a) of this Agreement shall also constitute a
corresponding claim under Section 9.02(a) of the Merger Agreement, and that
any claim by Buyer under Section 9.02(a) of the Merger Agreement shall also
constitute a corresponding claim under clauses (iii) through (vii) of Section
8.02(a) of this Agreement. The Disbursing Agreement shall provide for any
Damages recoverable in respect of any such claims to be allocated between the
Armour Escrow Amount under this Agreement and the Escrow Amount (as defined
in the Merger Agreement) under the Merger Agreement.
8.03 Amendment and Modification. To the extent permitted by
applicable law, this Agreement may be amended, modified or supplemented only
by written agreement of the parties hereto at any time prior to the Closing
with respect to any of the terms contained herein.
8.04 Alternative Dispute Resolution.
(a) The Armour Shareholders and Buyer recognize that a bona fide
dispute as to certain matters may from time to time arise after the Closing
Date relating to rights or obligations under this Agreement. In such
instance, the Armour Shareholder Representative or Buyer, as the case may be,
may by written notice to the other, have such dispute referred to the Armour
Shareholder Representative and the representative of Buyer designated below
or his successor, for attempted resolution by good faith negotiation within
thirty (30) days after such notice is received. The designated representative
of Buyer is James B. Ardrey. Any settlement reached by the Armour Shareholder
Representative and the representative of Buyer under this Section 8.04(a)
shall not be binding until reduced to writing and signed by them. When
reduced to writing, such settlement agreement shall supersede all other
agreements, written or oral, to the extent such agreements specifically
pertain to the matters so settled. If the Armour Shareholder Representative
and the representative of Buyer are unable to resolve such dispute within
such 30-day period, either may demand arbitration pursuant to Section 8.04(b).
(b) Except as provided below, any controversy or claim arising
out of or relating to this Agreement shall be settled by arbitration in
Chicago, Illinois, at a time and location designated by the arbitrator, but
not exceeding ninety (90) days after a demand for arbitration has been made.
Arbitration shall be conducted by the American Arbitration Association in
accordance with its Rules of Commercial Arbitration, and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator shall be a retired state or federal
judge experienced in business litigation or any attorney who has practiced
business litigation for at least ten (10) years. Arbitration will be
conducted pursuant to the provisions of this Agreement and the Commercial
Arbitration Rules of the American Arbitration Association. Limited civil
discovery shall be permitted for the
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<PAGE>
production of documents and taking of depositions. Unresolved discovery
disputes may be brought to the attention of, and may be decided by, the
arbitrator. The arbitrator shall assess the costs and expenses of the
arbitration against the parties in such proportion as may be fair and
equitable. Nothing herein contained shall bar either party from seeking
equitable remedies in a court of appropriate jurisdiction.
8.05 Insurance Coverage. Buyer agrees from and after the Closing
to file all necessary claims under, and to exercise reasonable efforts to
collect the proceeds of any insurance maintained by Hubbard, Buyer or Buyer
Subsidiary, including without limitation the title insurance policies
obtained by Buyer pursuant to Section 5.01(k) of the Merger Agreement, with
respect to any Damages within the scope of the indemnification provisions of
Section 8.02(a).
8.06 Filing of Tax Returns. Buyer agrees to cause Armour to file
all Tax Returns for any period including the Closing Date, or ending on or
before the Closing Date, on a basis consistent with prior filings by Armour,
unless the relevant taxing authority will not accept a Tax Return filed on
that basis.
8.07 Waiver of Compliance; Consents. Any failure of Buyer, on the
one hand, or the Armour Shareholders, on the other hand, to comply with any
obligation, covenant, agreement or condition herein (except the conditions in
Sections 5.01(b), (c) and (d) and 5.02(b), (c) and (d) of this Agreement) may
be waived in writing by the Armour Shareholders or by Buyer, respectively,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure. Whenever
this Agreement requires or permits consent by or on behalf of any party
hereto, such consent shall be given in writing in a manner consistent with
the requirements for a waiver of compliance as set forth in this Section 8.07.
8.08 Expenses. All expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall
be paid by the party incurring such expenses.
8.09 Press Releases and Public Announcements. No party to this
Agreement shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without prior written
approval of the other parties; provided, however, that each of the Armour
Shareholders and Buyer may make any public disclosure such person believes in
good faith to be required by applicable law or, in the case of Buyer, the
disclosure documents prepared in connection with the offering of its debt
securities (in which case the disclosing party will advise the other parties
to this Agreement prior to making the disclosure).
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<PAGE>
8.10 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agree to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including without limitation the negotiation, execution and
delivery of the Disbursing Agreement. In case at any time after the Closing
Date any further action is necessary or desirable to carry out the purposes
of this Agreement, the proper officers and directors of Buyer and each Armour
Shareholder shall take all such necessary action.
8.11 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or
mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Buyer:
Windy Hill Pet Food Company, Inc.
c/o Dartford Partnership
456 Montgomery Street
Suite 2200
San Francisco, California 94104
Attention: Ray Chung
with a copy to:
Richards & O'Neil LLP
885 Third Avenue
New York, New York 10022-4802
Attention: Ann F. Chamberlain
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<PAGE>
(b) If to any Armour Shareholder, in care of:
Richard P. Confer
c/o Hubbard Milling Company
424 North Riverfront Drive
Mankato, Minnesota 56001
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: Thomas G. Morgan
8.12 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and
permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties, nor is this Agreement
intended to confer upon any other person except the parties hereto any rights
or remedies hereunder. Notwithstanding the foregoing, Buyer may assign its
rights to indemnification hereunder to a lender or lenders providing
financing for the transaction contemplated hereby.
8.13 Governing Law. The Agreement shall be governed by the laws
of the state of Minnesota.
8.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.15 Headings; Internal References. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
and are not part of the agreement of the parties and shall not affect in any
way the meaning or interpretation of this Agreement. Any references in this
Agreement to an article, section, paragraph, clause, exhibit or schedule
shall be deemed to be a reference to the article, section, paragraph, clause,
exhibit or schedule contained in this Agreement unless expressly stated
otherwise.
8.16 Entire Agreement. This Agreement, including the exhibits
hereto and the documents and instruments referred to herein, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other
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<PAGE>
than those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
8.17 Severability. If any term, provision, covenant, agreement or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, agreements and restrictions of this Agreement will continue in
full force and effect and will in no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto do execute and deliver
this Agreement as of the date first above written.
BUYER: WINDY HILL PET FOOD COMPANY, INC
By: /s/ Ray Chung
----------------------------
Its:
-----------------------
ARMOUR SHAREHOLDERS: /s/ Ogden W. Confer
----------------------------
Ogden W. Confer
/s/ Kay C. Lamb
----------------------------
Kay C. Lamb
/s/ Richard P. Confer
----------------------------
Richard P. Confer
/s/ Carol C. Greenwald
----------------------------
Carol C. Greenwald
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<PAGE>
RICHARD P. CONFER AND FIRST BANK
NATIONAL ASSOCIATION AS
TRUSTEES OF THE ELIZABETH ANNA
CONFER TRUST NO.2
/s/ Richard P. Confer
----------------------------
Richard P. Confer
- and -
First Bank National Association,
By: /s/ Lee C. Johnson
----------------------------
Vice President
Trustees
RICHARD P. CONFER AND FIRST BANK
NATIONAL ASSOCIATION AS
TRUSTEES OF THE OGDEN P. CONFER
FAMILY TRUST CREATED UNDER THE
OGDEN P. CONFER TRUST AGREEMENT
/s/ Richard P. Confer
----------------------------
Richard P. Confer
- and -
First Bank National Association,
By: /s/ Lee C. Johnson
----------------------------
Vice President
Trustees
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<PAGE>
EXHIBIT A
Ownership of Armour Capital Stock
9% Cumulative Voting Preferred Stock
($10 par value, 25,000 authorized shares)
Shareholder No. of Shares Owned % of Outstanding Shares
----------- ------------------- -----------------------
Elizabeth Anna Confer Trust 25,000 100%
No.2, created under
agreement of Ogden P.
Confer dated August 26,
1982, as amended*
Common Stock
($1 par value, 10,000 authorized shares)
Shareholder No. of Shares Owned % of Outstanding Shares
----------- ------------------- -----------------------
Ogden W. Confer 2,425 24.25%
Kay Confer Lamb 2,425 24.25%
Richard P. Confer 2,425 24.25%
Carol Confer Greenwald 2,425 24.25%
Ogden P. Confer Family Trust, 300 3%
created under agreement dated ------------ --------------
August 26, 1982, as amended*
Total 10,000 100%
* Shares are held by Var & Company, acting as nominee.
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL TO ARMOUR SHAREHOLDERS
1. Armour is a corporation validly existing and in good standing
under the laws of the state of Delaware.
2. The authorized capital stock of Armour at the date hereof
consists of 25,000 shares of 9% Cumulative Voting Preferred Stock, $10 par
value, and 10,000 shares of Common Stock, $1 par value, all of which are
currently issued and outstanding and are owned of record, and to such
counsel's knowledge, beneficially by the Armour Shareholders. All of such
issued shares have been duly authorized and validly issued and are fully paid
and nonassessable. To our knowledge, there are no outstanding subscriptions,
options, warrants, calls or other agreements or commitments by which Armour
is bound in respect of the capital stock of Armour, whether issued or
unissued. There are no outstanding securities convertible into or
exchangeable for any such capital stock.
3. Each Armour Shareholder has the legal right, power and
authority to enter into the Agreement and to consummate the transactions
contemplated thereby. Upon execution by such Armour Shareholder, the
Agreement shall constitute the legal, valid and binding obligation of such
Armour Shareholder and shall be enforceable against such Armour Shareholder
in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
4. Neither the execution, delivery or performance by the Armour
Shareholders of the Agreement nor the consummation of any of the transactions
provided for in the Agreement or contemplated thereby, (i) will violate the
Articles of Incorporation or Bylaws or other organizational documents of any
Armour Shareholder that is an entity, (ii) is prohibited by any federal, or
state of Minnesota statute, law, ordinance, regulation or rule, or (iii) to
our knowledge, will violate any contractual obligations of any Armour
Shareholder.
5. No approval, consent, order or authorization of, declaration
by or filing with any federal or state of Minnesota regulatory,
administrative or governmental body or other person is necessary on the party
of any Armour Shareholder in connection with the execution, delivery or
performance by such Armour Shareholder of the Agreement or the consummation
of the transactions contemplated thereby except compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
6. To such counsel's knowledge, except as set forth in the
Agreement, no litigation, arbitration, administrative proceeding, or
investigation of any kind is pending or threatened against Armour.
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL TO BUYER
1. Buyer is a corporation validly existing and in good
standing under the laws of the state of Delaware.
2. Buyer has the requisite corporate power and corporate
authority to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby. The Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer and is enforceable against Buyer in accordance with its terms, except
to the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a court of law or equity).
3. Neither the execution, delivery or performance by Buyer of the
Agreement nor the consummation of any of the transactions provided for in the
Agreement or contemplated thereby, (i) will violate the Certificate of
Incorporation or Bylaws of Buyer; or (ii) is prohibited by any federal, or
state of New York statute, law, ordinance, regulation or rule.
4. No approval, consent, order or authorization of, declaration
by or filing with any federal or state of New York regulatory, administrative
or governmental body is necessary on the part of Buyer in connection with the
execution, delivery or performance by Buyer of the Agreement or the
consummation of the transactions contemplated thereby except compliance with
the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
5. To such counsel's knowledge, no litigation, arbitration,
administrative proceeding, or investigation of any kind is pending or
threatened against Buyer in connection with this Agreement or the
transactions contemplated thereby.
<PAGE>
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
by and among
WINDY HILL PET FOOD COMPANY, INC.
WINDY HILL PET FOOD ACQUISITION CO.
and
FEED-RITE (US) ANIMAL FEEDS, INC.
April 25, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Definitions.................................................... 1
1.2 Additional Definitions......................................... 12
ARTICLE II
PURCHASE AND SALE OF THE ASSETS; PURCHASE PRICE
2.1 Purchase and Sale of the Assets................................ 12
2.2 Excluded Assets................................................ 14
2.3 Assumption of Liabilities...................................... 15
2.4 Excluded Liabilities........................................... 16
2.5 Purchase Price................................................. 17
2.6 Payment of the Purchase Price at Closing....................... 17
2.8 Allocation of the Purchase Price............................... 18
ARTICLE III
THE CLOSING
3.1 Time and Place of Closing...................................... 18
3.2 Payment of Purchase Price; Deliveries.......................... 19
3.3 Assignment of Contracts, Etc. ................................. 19
3.4 Further Assurances............................................. 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
4.1 Organization, Standing, Qualification.......................... 19
4.2 Authorization and Execution.................................... 20
4.3 No Conflicts................................................... 20
4.4 Financial Statements........................................... 20
4.5 Absence of Certain Changes or Events........................... 21
4.6 Real Property.................................................. 22
4.7 Personal Property.............................................. 23
4.8 Material Contracts............................................. 23
(i)
<PAGE>
4.9 Proprietary Rights............................................. 25
4.10 Litigation..................................................... 26
4.11 Permits, Licenses, Authorization; Compliance with Laws......... 26
4.12 Retirement and Benefit Plans................................... 26
4.13 Environmental Matters.......................................... 29
4.14 Suppliers and Customers........................................ 30
4.15 Insurance...................................................... 30
4.16 Motor Vehicles................................................. 30
4.17 Adequacy of Transferred Assets................................. 31
4.18 Labor Matters.................................................. 31
4.19 Sales and Use Tax.............................................. 31
4.20 No Undisclosed Liabilities..................................... 31
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 Organization, Standing, Equity Ownership....................... 32
5.2 Authorization and Execution.................................... 32
5.3 No Conflicts................................................... 33
5.4 No Brokers or Finders.......................................... 33
5.5 Adequate Financing............................................. 33
ARTICLE VI
CERTAIN OBLIGATIONS OF WINDY HILL
AND THE SELLER PRIOR TO THE CLOSING
6.1 Cooperation.................................................... 33
6.2 No Solicitation of Transaction................................. 34
6.3 Access to the Seller........................................... 34
6.4 Supplements to Disclosure Schedule............................. 34
6.5 Premerger Notification......................................... 35
6.6 Additional Monthly Financial Statements........................ 35
6.7 Business Financial Statements.................................. 35
6.8 Certain Covenants of Hubbard................................... 36
6.9 Landlord Estoppels............................................. 36
6.10 Environmental Reports.......................................... 36
6.11 Title Matters...................................................36
6.12 Payments to Eliminate or Limit Certain Title Exceptions........ 37
ARTICLE VII
CERTAIN OBLIGATIONS OF THE PURCHASER PRIOR TO THE CLOSING............ 38
(ii)
<PAGE>
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
8.1 Representations and Warranties True............................ 39
8.2 Performance.................................................... 39
8.3 No Adverse Change.............................................. 39
8.4 Approvals...................................................... 39
8.5 Deliveries..................................................... 39
8.6 Proceedings.................................................... 41
8.7 Absence of Litigation.......................................... 41
8.8 Title.......................................................... 42
8.9 Closing of Merger Agreement.................................... 42
ARTICLE IX
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE SELLER AND WINDY HILL
9.1 Representations and Warranties True............................ 42
9.2 Performance.................................................... 43
9.3 Approvals...................................................... 43
9.4 Deliveries..................................................... 43
9.5 Proceedings.................................................... 44
9.6 Absence of Litigation.......................................... 44
9.7 Closing of Merger Agreement.................................... 44
ARTICLE X
CERTAIN COVENANTS AND AGREEMENTS SUBSEQUENT TO THE CLOSING
10.1 Employment of Union Employees and Hourly Employees............. 44
10.2 Employment of Salaried Employees............................... 45
10.3 Benefits for All Employees..................................... 46
10.4 Books and Records; Access...................................... 47
10.5 Further Assurances............................................. 48
10.6 General Liability Endorsement.................................. 48
10.7 Purchaser Noncompetition....................................... 48
10.8 Seller Noncompetition.......................................... 48
10.9 Transition Services............................................ 49
10.10 Use of "Hubbard Milling Company" Name.......................... 49
(iii)
<PAGE>
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival....................................................... 49
11.2 Indemnification................................................ 49
11.3 Payment of Indemnification Claims Under Section 11.2(a)........ 55
11.4 Specific Obligations of the Seller for Accounts Receivable..... 55
11.5 Bulk Sales Law................................................. 56
11.6 Cooperation.................................................... 56
11.7 Security Interest...............................................56
11.8 St. Joseph, Missouri Facility...................................57
ARTICLE XII
TERMINATION
12.1 Termination.................................................... 57
12.2 Effect of Termination.......................................... 58
12.3 Employee Benefit Plans......................................... 58
ARTICLE XIII
MISCELLANEOUS
13.1 Public Announcements........................................... 59
13.2 Amendment; Waiver.............................................. 59
13.3 Fees and Expenses.............................................. 59
13.4 Notices........................................................ 60
13.5 Alternative Dispute Resolution................................. 62
13.6 Assignment..................................................... 63
13.7 Governing Law.................................................. 63
13.8 Headings....................................................... 63
13.9 Entire Agreement............................................... 63
13.10 Severability................................................... 64
13.11 No Third Party Beneficiaries................................... 64
13.12 References to Articles, Etc. .................................. 64
13.13 References to "Herein," Etc. .................................. 64
13.14 Counterparts................................................... 64
13.15 Injunctive Relief.............................................. 64
(iv)
<PAGE>
EXHIBITS
Exhibit A Assignment and Assumption Agreement
Exhibit B Bill of Sale
Exhibit C Distribution Agreement
Exhibit D License Agreement
Exhibit E Opinion of Counsel to Purchaser
Exhibit F Opinion of Counsel to Seller
Exhibit G Transition Services to be Provided by The Seller
SCHEDULES
Schedule 1.1(ad) Deeds
Schedule 2.1(k) Noncurrent Investments
Schedule 2.1(m) Certain Assets Not Being Transferred
Schedule 2.4(f) Actions
Schedule 6.10 Environmental Reports To Be Delivered
Schedule 8.4 Material Contracts To Be Assigned Prior to Closing
Schedule 10.1 Collective Bargaining Agreements
(v)
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of April 25, 1997, is
entered into by and among Feed-Rite (US) Animal Feeds, Inc., a Minnesota
corporation (the "Purchaser"), Windy Hill Pet Food Company, Inc., a Delaware
corporation ("Windy Hill"), Windy Hill Pet Food Acquisition Co., a Minnesota
corporation (the "Seller") and, with respect to Sections 10.7 and 13.15 hereof,
Feed-Rite, Ltd., a Manitoba corporation.
W I T N E S E T H:
WHEREAS, Windy Hill and the Seller have entered into a Merger
Agreement with Hubbard Milling Company, a Minnesota corporation ("Hubbard"),
dated as of March 21, 1997 (the "Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement, subject to the conditions
set forth therein, the Seller will merge with and into Hubbard (the "Merger");
and
WHEREAS, following the consummation of the Merger, the Seller
desires to transfer, sell, convey, assign and deliver to the Purchaser, and the
Purchaser desires to acquire from the Seller, all of the assets exclusively
relating to the Business (as defined below) and the Purchaser desires to assume
certain of the liabilities of the Business, as more specifically provided
herein, in accordance with the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used in this Agreement,
shall have the following meanings:
(a) "Accounts Payable" shall mean all accounts payable of Hubbard
exclusively relating to the Business to the extent reflected on the Closing Date
Balance Sheet.
(b) "Accounts Receivable" shall mean all accounts receivable of
Hubbard exclusively relating to the Business, all current notes receivable
entered into in the ordinary course of business by Hubbard in connection with
"feeder finance" arrangements, and the current portion of "feeder finance"
arrangements under contracts entered into in the ordinary course of business,
other than the D&D Notes.
<PAGE>
(c) "Accrued Liabilities" shall mean those Assumed Liabilities that
are of a type normally reflected on a balance sheet prepared in accordance with
GAAP as current liabilities, to the extent reflected on the Closing Date Balance
Sheet.
(d) "Acquisition Documents" shall mean, collectively, this
Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the
Distribution Agreement, the License Agreement and all agreements, instruments,
certificates and other documents executed and delivered in connection herewith
or contemplated hereby.
(e) "acquisition proposal" shall have the meaning ascribed to such
term in Section 6.2 hereof.
(f) "Action" shall mean any claim, dispute, action, arbitration,
litigation, proceeding, suit or investigation, and any appeal therefrom.
(g) "Affiliate" shall mean, with respect to any Person, any Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
(h) "Agreement" shall mean this Asset Purchase Agreement and shall
include all of the Schedules and Exhibits attached hereto.
(i) "Allocation" shall have the meaning ascribed to such term in
Section 2.8 hereof.
(j) "Approval" shall mean any approval, authorization, consent,
license, franchise, order or permit of or by, notice to, or filing or
registration with, a Person.
(k) "Arbitrator" shall mean a representative of a
nationally-recognized firm of independent certified public accountants other
than the Purchaser's Accountant or the Seller's Accountant, as agreed to by the
Purchaser and the Seller.
(l) "Assignment and Assumption Agreement" shall mean the instrument
of assignment and assumption of the Assumed Liabilities by the Purchaser,
substantially in the form attached hereto as Exhibit A.
(m) "Assumed Liabilities" shall have the meaning ascribed to such
term in Section 2.3 hereof.
(n) "Audit" shall have the meaning ascribed to such term in Section
2.7 hereof.
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(o) "Balance Sheet" shall mean the balance sheet of the Business as
at January 31, 1997.
(p) "Bill of Sale" shall mean the bill of sale transferring to the
Purchaser the Transferred Assets, substantially in the form attached hereto as
Exhibit B.
(q) "Books and Records" shall have the meaning ascribed to such term
in Section 2.1(h) hereof.
(r) "Business" shall mean Hubbard's business of (i) manufacturing,
distributing, marketing and selling animal feed for consumption by swine, dairy
cattle, beef cattle, pheasants, ducks, geese, horses, rabbits, poultry/turkey
and other species including animal feed products that are sold under the
"Hubbard", "Vigorena", "Protein Blenders", "Crystalyx", "Tradition" and
"OptiCARE" brand names and dog food pellets under the brand name "Bruno's Best"
and (ii) Hubbard's business of marketing and selling (A) fish food, (B) dog food
under the "Tradition" brand name and (C) pet food products as provided in the
Distribution Agreement.
(s) "Cap" shall mean $13,000,000 or, if the Interim Audit Report
delivered to the Seller pursuant to Section 4.08(a) of the Merger Agreement
reflects no material variance in financial condition or results of operations of
Hubbard for the 9-month period ended January 31, 1997, $10,000,000.
(t) "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601 et. seq., as amended.
(u) "Closing" shall mean the consummation of the transactions
contemplated by this Agreement.
(v) "Closing Date" shall mean May 20, 1997 or such other date as the
parties shall determine, if the conditions to Closing described in Article VIII
and Article IX hereof have been fully satisfied or waived by the appropriate
party or parties hereto on or prior to such date.
(w) "Closing Date Balance Sheet" shall mean the balance sheet of the
Business as of the Effective Time prepared by the Seller based on the Audit.
Except as otherwise specifically provided for in this Agreement, the Closing
Date Balance Sheet shall be prepared in accordance with GAAP applied on a
consistent basis with the same practice standards and procedures utilized by
Hubbard in preparing the Financial Statements. The Closing Date Balance Sheet
shall not include any Excluded Assets or Excluded Liabilities.
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(x) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
(y) "Contingent Financial Liabilities" shall mean any Liability of
Hubbard under guarantees or other accommodations pursuant to which it is
responsible for the obligation of a Person in connection with third party loans
to customers of the Business or dealer operating loans related to the Business.
(z) "Contract" shall mean (i) all Material Contracts and (ii) each
other instrument, contract and other agreement (including, without limitation,
all employment agreements, non-competition, confidentiality and secrecy
agreements, collective bargaining agreements, leases and all agreements relating
to the Real Property) to which Hubbard is a party or by which any of the
Transferred Assets is bound and which exclusively relates to the Business.
(aa) "D&D Notes" shall mean the notes receivable from D&D Partners
L.P. III and D&D Partners L.P. IV.
(ab) "Damages" shall mean any loss, claim, Liability, cost or
expense (including, without limitation, reasonable attorneys' fees and expenses)
or other damage of any kind or nature.
(ac) "Deeds" shall mean duly executed and acknowledged deeds, in
recordable form, and otherwise in the form set forth in Schedule 1.1(ad) with
respect to all Fee Properties.
(ad) "Disclosure Schedule" shall mean the disclosure schedule
delivered by the Seller and Windy Hill to the Purchaser immediately prior to the
execution and delivery of this Agreement, as it may be amended from time to time
pursuant to Section 6.4 hereof.
(ae) "Distribution Agreement" shall mean the distribution agreement
pursuant to which the Purchaser shall sell certain animal feed products to the
Seller and the Seller shall sell certain pet food products to the Purchaser
substantially in the form attached hereto as Exhibit C.
(af) "Effective Time" shall mean 12:01 a.m. Central Daylight Savings
Time on the Closing Date.
(ag) "Employee Benefit Plan" shall mean each plan, contract, program
and arrangement, including, but not limited to, pension, bonus, incentive
compensation, supplemental retirement, severance or termination pay, employment
contract, hospitalization, medical, life insurance, dental, disability, salary
continuation, vacation, supplemental
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unemployment benefits, profit-sharing, retirement and each other employee
benefit plan, program, policy or arrangement, maintained, contributed to, or
required to be contributed to, by Hubbard for the benefit of employees, former
employees and retired employees of the Business, including without limitation,
each Employee Pension Benefit Plan and each Employee Welfare Benefit Plan.
(ah) "Employee Pension Benefit Plan" shall mean a plan, fund or
program described in ERISA Section 3(2) which is maintained, contributed to, or
required to be contributed to by Hubbard for the benefit of employees of the
Business.
(ai) "Employee Welfare Benefit Plan" shall mean a plan, fund or
program described in ERISA Section 3(1) which is maintained, contributed to, or
required to be contributed to by Hubbard for the benefit of employees of the
Business.
(aj) "Environmental Laws" shall mean CERCLA, the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. ss. 1201 et seq., the Clean Water Act, 33
U.S.C. ss. 1321 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Safe
Drinking Water Act, the Toxic Substance Control Act, the Emergency Planning and
Community Right-to-Know Act of 1986, the Hazardous Material Transportation
Agreement and the Occupational Safety and Health Act of 1976, each as amended
through the Closing Date, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments orders, decrees, rulings and
charges thereunder) of any Governmental Authority (and all agencies thereof)
concerning pollution or protection of the environment, public health and safety
or employee health and safety, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants or chemical,
industrial, hazardous or toxic materials (including petroleum products and
asbestos) or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants or
chemical, industrial, hazardous or toxic materials, substances or wastes.
(ak) "Equipment" shall mean each item of machinery, equipment and
fixture owned by Hubbard (i) which is located on the Real Property on the date
hereof and used exclusively in connection with the Business or (ii) which is not
so located but is used by Hubbard exclusively in connection with the Business.
(al) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder.
(am) "ERISA Affiliate" means any entity required to be aggregated
with Hubbard, its subsidiaries, trades or businesses under Sections 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA.
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(an) "Excluded Assets" shall have the meaning ascribed to such term
in Section 2.2 hereof.
(ao) "Excluded Liabilities" shall have the meaning ascribed to such
term in Section 2.4 hereof.
(ap) "Extraordinary Expenditures" shall mean (A) cash payments for
capital assets purchased for the Business not included in Hubbard's most recent
capital expenditures budget delivered to the Seller but approved in writing by
the Purchaser, (B) the amount of cash payments made after March 21, 1997 and
prior to the Closing Date for equity interests in D&D Partners L.P. IV required
by the Limited Partnership Agreement, dated as of August 22, 1997, (C) equity
investments in other customers of the Business approved in writing by the
Purchaser made between the date hereof and the Closing Date, (D) loans to Vista
Farms in an amount not to exceed $1,000,000 after March 21, 1996 and prior to
the Closing Date and (E) long-term loans in excess of $20,000 to other customers
of the Business approved in writing by the Purchaser made between the date
hereof and the Closing Date.
(aq) "Fee Property" shall have the meaning ascribed to such term in
Section 4.6(a) hereof.
(ar) "Feed-Rite, Ltd." shall mean the Manitoba corporation that
indirectly owns all the capital stock of the Purchaser
(as) "Fiduciary" has the meaning set forth in ERISA Section 3(21).
(at) "Financial Statements" shall have the meaning ascribed to such
term in Section 4.4 hereof.
(au) "GAAP" shall mean generally accepted accounting principles in
the United States.
(av) "Governmental Authority" shall mean any foreign, federal,
state, local or other governmental, administrative or regulatory authority,
body, agency, court, tribunal or similar entity including any arbitrator or
arbitration panel.
(aw) "Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended.
(ax) "Hazardous Substances" shall mean any pollutant, contaminant,
hazardous material, substance or waste, solid waste, petroleum or any fraction
thereof, or any other chemical, substance or material listed or identified in or
regulated by any Environmental Law.
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(ay) "Hubbard" shall have the meaning ascribed to such term in the
preamble to this Agreement.
(az) "Indemnification Termination Date" shall mean the day that is
ten business days prior to the Merger Indemnification Termination Date.
(ba) "Indemnified Environmental Liabilities" shall have the meaning
ascribed to such term in Section 11.2(a) hereof.
(bb) "Indemnified Party" shall mean any party entitled to
indemnification pursuant to Section 11.2(c) hereof and shall include such
party's Affiliates, successors and assigns and the Representatives of each of
them.
(bc) "Indemnifying Party" shall mean any party liable for
indemnification pursuant to Section 11.2(c) hereof and shall include such
party's successors and assigns.
(bd) "Interim Audit Report" shall have the meaning ascribed to such
term in Section 4.08(a) of the Merger Agreement.
(be) "Inventory" shall mean all inventories owned by Hubbard
exclusively relating to the Business wherever located including without
limitation all packaging, finished goods, raw materials, work in process, parts
and other miscellaneous items of tangible property normally considered a part of
"inventory" under GAAP.
(bf) "IRS" shall mean the Internal Revenue Service.
(bg) "knowledge" shall mean (i) with respect to Windy Hill and the
Seller, the actual knowledge of James B. Ardrey, Ray Chung or Robert V. Dale and
(ii) with respect to Hubbard, the knowledge of one or more of its executive
officers.
(bh) "Law" shall mean any law, statute, rule, regulation, ordinance,
standard, requirement, administrative ruling, order, process, interpretations or
policies promulgated by any Governmental Authority as in effect from time to
time (including, without limitation, any zoning or land use law or ordinance,
building code, Environmental Law, securities, blue sky, civil rights law or
regulation and any court or arbitrator's order or process), as the same have
been or may hereafter be amended, modified or supplemented from time to time.
(bi) "Leasehold Property" shall have the meaning ascribed to such
term in Section 4.6(a) hereof.
(bj) "Liability" shall mean any debt, liability, commitment or
obligation of any kind, character or nature whatsoever, whether known or
unknown, secured or unsecured,
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<PAGE>
accrued, fixed, absolute, potential, contingent or otherwise, and whether due or
to become due.
(bk) "License Agreement" shall mean the license agreement between
the Seller and the Purchaser in the form attached to this Agreement as Exhibit D
pursuant to which the Seller shall license Purchaser certain registered
trademarks listed on Schedule I attached thereto.
(bl) "Licensed Marks" shall mean the trademarks and trade dress and
label designs utilized in connection therewith identified on Schedule A to the
License Agreement.
(bm) "Lien" shall mean any lien, statutory lien, mechanics' lien,
pledge, mortgage, deed of trust, security interest, charge, easement, right of
way, covenant, claim, restriction, right, option, conditional sale or other
title retention agreement, or any other defect in title, adverse claim or
encumbrance of any kind or nature.
(bn) "material" as it is used to modify or limit any representation
or warranty set forth in Article IV (other than Section 4.4) shall mean an
event, circumstance or occurrence which has economic consequences of $10,000 or
more in any instance.
(bo) "Material Contract" shall have the meaning ascribed to such
term in Section 4.8 hereof.
(bp) "Merger" shall have the meaning ascribed to such term in the
preamble to this Agreement.
(bq) "Merger Agreement" has the meaning ascribed to such term in the
preamble to this Agreement.
(br) "Merger Indemnification Termination Date" shall mean the day
that is 18 months after the effective date of the Merger.
(bs) "Monthly Financial Statements" shall have the meaning ascribed
to such term in Section 4.4 hereof.
(bt) "Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).
(bu) "Other Personalty" shall mean all personal property (including
office furniture, furnishings and supplies), other than Equipment, Proprietary
Rights and Inventory owned, held or leased by Hubbard and used by Hubbard
exclusively in connection with the Business.
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(bv) "PBGC" means the Pension Benefit Guaranty Corporation.
(bw) "Permitted Exceptions" shall have the meaning ascribed to such
term in Section 4.6(b) hereof.
(bx) "Person" shall mean any individual, general or limited
partnership, corporation, limited liability company, association, business
trust, joint venture, Governmental Authority, business entity or other entity of
any kind or nature.
(by) "Pet Food Business" shall mean Windy Hill, Hubbard and the
Seller's business of manufacturing, distributing, marketing and selling pet food
for consumption by dogs, cats, gerbils, ferrets, hamsters and fish and Hubbard's
business of marketing and selling food for consumption by rabbits, ducks,
pheasants, geese and horses.
(bz) "Prime Rate" shall mean the rate of interest announced from
time to time by the New York, New York office of The Chase Manhattan Bank as its
base, prime or reference rate, adjusted as of the first business day of each
calendar quarter.
(ca) "Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
(cb) "Proprietary Rights" shall mean all of the following (except to
the extent the same constitute Licensed Marks) irrespective of where any of the
same were issued, are pending or exist that are owned by, issued to or used by
Hubbard, to the extent used exclusively in the Business: United States (federal
and state) trademarks (and goodwill associated therewith) and other trade names,
labels, trade dress, advertising and package designs, and other trade rights,
whether or not registered and all applications therefor; United States
copyrights, whether or not registered and all applications therefor (including
copyrights in computer software and computer software documentation, source code
and systems documentation); know-how, trade secrets, business leads, research
and results thereof, technology, techniques, data, methods, processes,
instructions, drawings and specifications, inventions, discoveries,
improvements, designs, processes, formulae, whether patented or patentable or
not (whether or not such items have been reduced to written, computer-readable
or other tangible form); shop rights and license agreements and other agreements
of every kind and character relating to any of the foregoing; and all claims and
causes of action relating to any of the foregoing, including claims and causes
of action for past infringement.
(cc) "Purchase Price" shall have the meaning ascribed to such term
in Section 2.5 hereof.
(cd) "Purchaser" shall have the meaning ascribed to such term in the
preamble to this Agreement.
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(ce) "Purchaser's Accountants" shall mean Coopers & Lybrand.
(cf) "Purchaser's Indemnified Title Costs and Expenses" shall have
the meaning ascribed to such term in Section 6.12 hereof.
(cg) "Purchaser's Percentage" shall mean 46%.
(ch) "Purchaser Material Adverse Effect" shall mean any change or
effect that taken alone or together with other changes or effects has had or is
likely to have a material adverse effect on the Purchaser's ability to
consummate the transactions contemplated by this Agreement or the other
Acquisition Documents.
(ci) "Real Property" shall mean the real property owned by Hubbard
as more particularly described in the Disclosure Schedule, together with all
buildings and improvements thereon erected and all fixtures located thereon, and
all other real property, buildings, improvements and fixtures owned, in whole or
in part, by Hubbard or in respect of which Hubbard has the right or option to
acquire an ownership interest (excluding, however, any real property, buildings,
improvements and fixtures which constitute Excluded Assets), and which has been,
is now or is intended to be used or occupied by Hubbard in connection with the
Business or the Transferred Assets including, without limitation, all rights,
privileges, hereditaments, appurtenances, easements and rights-of-way in any
manner belonging or relating thereto, all strips and gores relating to or
affecting any such real property and all right, title and interest, if any, of
Hubbard in and to any land lying in the bed of any street, road or avenue,
opened or proposed, in front of or adjoining any such real property, to the
center line thereof, and all right, title and interest of Hubbard in and to any
award made or to be made in lieu thereof and in and to any unpaid award for
damages to any of such properties by reason of change of grade of any street,
together with all of Hubbard's right, title and interest in and to any real
property used exclusively in the Business that is leased by Hubbard as tenant or
subtenant.
(cj) "Registered Proprietary Rights" shall have the meaning ascribed
to it in Section 4.9 hereof.
(ck) "Reportable Event" has the meaning set forth in ERISA Section
4043.
(cl) "Representative" shall mean, with respect to a Person, any
employee, officer, director, stockholder, partner, accountant, attorney,
investment banker, broker, finder, investor, subcontractor, consultant or other
authorized agent or representative of such Person.
(cm) "Restricted Assets" shall have the meaning ascribed to it in
Section 3.3 hereof.
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(cn) "Seller" shall have the meaning ascribed to such term in the
preamble to this Agreement, and shall also mean Hubbard after the Merger.
(co) "Seller Material Adverse Effect" shall mean any change or
effect that taken alone or together with other changes or effect has had or is
likely to have a material adverse effect on the Business, the Transferred Assets
or Windy Hill and the Seller's ability to consummate the transactions
contemplated by this Agreement or the other Acquisition Documents.
(cp) "Seller's Accountants" shall mean KPMG Peat Marwick.
(cq) "Seller's Percentage" shall mean 54%.
(cr) "Sold Accounts Receivable" shall have the meaning ascribed to
such term in Section 11.4 hereof.
(cs) "Special Indemnity Cap" shall have the meaning ascribed to such
term in Section 11.2(i).
(ct) "Tax" shall mean any foreign, federal, state or local income,
gross receipts, franchise, license, severance, occupation, premium,
environmental (including taxes under Code Section 59A), customs, duties,
profits, disability, registration, alternative or add-on minimum, estimated,
withholding, payroll, employment, unemployment insurance, social security (or
similar), excise, sales, use, value-added, occupancy, franchise, real property,
personal property, business and occupation, mercantile, windfall profits,
capital stock, stamp, transfer (including any excise tax on the transfer of the
Real Property), workers' compensation or other tax, fee or imposition of any
kind whatsoever, including any interest, penalties, additions, assessments or
deferred liability with respect thereto, whether disputed or not.
(cu) "Tax Return" shall mean any return, report, declaration, claim
for refund, estimate, election, or information statement or return relating to
any Tax, including any schedule or attachment thereto, and any amendment
thereof.
(cv) "Threshold" shall have the meaning ascribed to such term in
Section 11.2(g).
(cw) "Transfer" shall mean any sale, transfer, conveyance,
assignment, delivery or other disposition, and "Transfer" or "Transferred," used
as a verb, shall each have a correlative meaning.
(cx) "Transferred Assets" shall have the meaning ascribed to such
term in Section 2.1 hereof.
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(cy) "Transferred Employees" shall mean those employees of Hubbard
who work exclusively in the Business immediately prior to the Closing Date and
who become employees of the Purchaser as of the Effective Time.
(cz) "Uncollected Accounts Receivable" shall have the meaning
ascribed to such term in Section 11.4 hereof.
(da) "WARN" shall mean the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. ss. 2101, et seq., as it may be amended from time to
time.
(db) "Windy Hill" shall have the meaning ascribed to such term in
the preamble to this Agreement.
(dc) "Working Capital" shall mean the amount equal to Accounts
Receivable plus Inventory minus Accounts Payable minus Accrued Liabilities as
shown on the Closing Date Balance Sheet plus the amount of retiree health
benefit obligation relating to Transferred Employees (to the extent included in
Accounts Payable or Accrued Liabilities). All items that make up Working Capital
shall be valued in accordance with GAAP applied on a consistent basis with the
same practice standards and procedures utilized by Hubbard in preparing the
financial statements contained in the Annual Reports.
(dd) "Working Capital Estimate" shall mean a statement of the Seller
to be delivered to the Purchaser at least two days prior to the Closing that
shall contain the Seller's good faith estimate as of the Effective Time of the
Working Capital.
1.2 Additional Definitions. In addition to the foregoing defined
terms, (i) other capitalized terms appearing in this Agreement shall have the
respective meanings ascribed to such terms where they first appear in the text
of this Agreement and (ii) all accounting terms not specifically defined in this
Agreement shall be construed in accordance with GAAP.
ARTICLE II
PURCHASE AND SALE OF THE ASSETS; PURCHASE PRICE
2.1 Purchase and Sale of the Assets. Subject to the terms and
conditions of this Agreement, and on the basis of the covenants, representations
and warranties set forth herein, at and as of the Effective Time, the Seller
shall Transfer to the Purchaser, and the Purchaser shall purchase and accept
from the Seller, all of the Seller's rights, title and interests in and to all
of the assets and properties that are used exclusively in the conduct and
operation of the Business, whether tangible, real, personal or mixed, wherever
located, free
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and clear of all Liens, excluding only the Excluded Assets, and including,
without limitation or duplication, the following, (collectively, the
"Transferred Assets"):
(a) all Equipment;
(b) all Proprietary Rights;
(c) all Inventory;
(d) all Fee Property;
(e) all Accounts Receivable;
(f) all of the Contracts, other than Contracts that are Restricted
Assets, that are validly assigned to the Purchaser;
(g) all Other Personalty;
(h) all books, financial and other records which have been reduced
to written, recorded or encoded form exclusively relating to the Business or the
Transferred Assets, including without limitation, to the extent exclusively
relating to the Business, customer lists and related sales histories, credit
policies and credit information with respect to existing customers, existing
cost and pricing data, equipment and inventory lists, employee records for
current employees of the Business, existing business plans, advertising and
promotion plans, product development plans, forecasts, market research reports,
competitor information, reference catalogs and all real and personal property,
records, plot plans, zoning records and plant plans and specifications
(collectively, the "Books and Records");
(i) all computer hardware, computer software, computer software
documentation, including source code, and systems documentation used exclusively
in the Business, to the extent transferable;
(j) all motor vehicles (owned or leased) used exclusively in the
Business;
(k) all noncurrent investments of Hubbard to the extent they are
exclusively related to the Business, including those listed on Schedule 2.1(k);
(l) all government licenses, permits and Approvals exclusively
related to the Business to the extent transfer is permitted by law;
(m) all causes of action, demands, judgments, claims (including
insurance claims), indemnity rights or other rights exclusively relating to the
Business, the Transferred
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Assets, or the Assumed Liabilities or arising under expressed or implied
warranties from suppliers with respect to the Transferred Assets other than as
set forth on Schedule 2.1(m) hereto;
(n) the D&D Notes;
(o) all rights of the Seller under warranties and guaranties,
express or implied, relating exclusively to the Transferred Assets; and
(p) all right, title and interest in those assets of any Employee
Pension Benefit Plan that are required to be transferred to like plans of the
Purchaser pursuant Sections 10.1(c), 10.2(c), 10.3(d) or 10.3(e) hereof.
2.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, including Section 2.1 above, the Seller shall retain all of
its right, title and interest in and to, and shall not Transfer to the
Purchaser, the assets set forth below (collectively, the "Excluded Assets"):
(a) any assets used in whole or in part in the Pet Food Business;
(b) all assets associated with the corporate headquarters of Hubbard
located in Mankato, Minnesota and the corporate staff working at such
headquarters, to the extent not exclusively related to the Business;
(c) all cash, cash equivalents, bank accounts and bank deposits;
(d) any proceeds paid or payable in connection with this Agreement;
(e) any minute books, stock books and similar corporate records and
any other documents which Hubbard is required by law to retain in its
possession;
(f) all of the Contracts that are not validly assigned to the
Purchaser;
(g) other than those assets of Employee Pension Benefit Plans of
Hubbard required to be transferred to like plans of Purchaser, pursuant to
Sections 10.1(c), 10.2(c), 10.3(d) or 10.3(e) hereof, all right, title and
interest in and to the assets held with respect to any Employee Benefit Plan;
(h) those assets listed on Schedule 2.1(m); and
(i) all refunds of Taxes.
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2.3 Assumption of Liabilities. Subject to the terms and conditions
of this Agreement, at and as of the Effective Time, the Purchaser shall assume
and agree to pay, perform, discharge and satisfy when due, only those
Liabilities that are specifically enumerated below and no others, and then only
to the extent that such enumerated Liabilities are exclusively attributable to
the Business and are not Excluded Liabilities set forth in Section 2.4 below
(collectively, the "Assumed Liabilities"):
(a) all Liabilities of Hubbard under the Contracts (other than
Contracts relating to plant facilities that are not being transferred to
Purchaser pursuant to this Agreement or relating to former employees at such
facilities who are not Transferred Employees) that are validly assigned to the
Purchaser as follows:
(i) if, such Liabilities are of a type normally reflected on a
balance sheet prepared in accordance with GAAP, only to the extent reflected on
the Closing Date Balance Sheet, and
(ii) all executory commitments under such Contracts;
(b) all Accounts Payable;
(c) all Accrued Liabilities;
(d) all Liabilities for Damages to persons or property arising out
of alleged defects in products of the Business for which claims are made
following the Effective Time;
(e) all Liabilities in respect of product warranties with respect to
products of the Business for which claims are made following the Effective Time;
(f) all Liabilities with respect to the Transferred Employees and
the dependents of such employees, for wages, salaries, sick days, vacation days
and retiree health benefits, to the extent reflected on the Closing Date Balance
Sheet;
(g) those Liabilities of Employee Pension Benefit Plans of Hubbard
required to be assumed by like plans of the Purchaser pursuant to Sections
10.1(c), 10.2(c), 10.3(d) or 10.3(e) hereof;
(h) all Liabilities under any Environmental Law to treat, remove,
remediate, dispose of or manage any Hazardous Materials that were released, as
such term is defined in CERCLA, on, in, under, about or from the Real Property;
and all Liabilities for claims (whether asserted in common law or under statute
and regardless of form, including strict liability and negligence) arising out
of or in respect of Hazardous Materials (i) that were present or stored on the
Real Property or which were shipped, transferred, removed, released,
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disposed of, arranged for disposal, or otherwise transported off the Real
Property or (ii) that were released on, in, under, about or from the Real
Property;
(i) all Contingent Financial Liabilities; and
(j) all accrued utility charges payable associated with the Real
Property and real estate, payroll and other Taxes related to the Business, to
the extent reflected on the Closing Date Balance Sheet.
2.4 Excluded Liabilities. Notwithstanding anything in Section 2.3
above to the contrary, except for the Assumed Liabilities, the Purchaser shall
not assume, and shall have no liability or obligation whatsoever, at any time,
for any Liabilities arising from the operation of, or any act or omission
occurring in respect of, the Business or the ownership of the Transferred Assets
prior to the Effective Time (collectively, the "Excluded Liabilities"). Without
limiting the foregoing, the following shall be Excluded Liabilities:
(a) all Liabilities of Hubbard under Contracts that are not validly
assigned to the Purchaser;
(b) all Liabilities relating to the Excluded Assets;
(c) all Liabilities of Hubbard, the Seller or Windy Hill for any
Taxes other than (i) real estate, payroll and other Taxes reflected on the
Closing Date Balance Sheet and (ii) as provided in Section 13.3 hereof;
(d) all Liabilities for expenses incurred by Hubbard, the Seller or
Windy Hill in connection with or resulting from or attributable to the
transactions contemplated by this Agreement, except as provided in Section 13.3
hereof;
(e) all Liabilities arising out of activities undertaken by, or
omissions of, the Seller subsequent to the Effective Time;
(f) all Liabilities for Damages to persons or property arising out
of the Actions shown on Schedule 2.4(f) hereto.
(g) all Liabilities associated with the corporate headquarters in
Mankato, Minnesota and the corporate staff working at such headquarters, except
those related exclusively to the Business; and
(h) all Liabilities not included in the Assumed Liabilities.
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2.5 Purchase Price. Subject to adjustment pursuant to Section 2.6
hereof, the aggregate purchase price to be paid by the Purchaser to the Seller
at the Closing for the Transferred Assets shall be the sum of (i) $54,360,000
plus (ii) the Working Capital as shown on the Closing Date Balance Sheet plus
(iii) Extraordinary Expenditures ((i) through (iii), collectively the "Purchase
Price"), plus (iv) the assumption of the Assumed Liabilities. The Purchase Price
shall be subject to adjustment after the Closing pursuant to Section 2.7 hereof.
2.6 Payment of the Purchase Price at Closing.
(a) The Seller and the Purchaser agree that a reasonable estimate of
the Working Capital as of the Effective Time shall be the Working Capital
Estimate.
(b) On the Closing Date, the Purchaser shall pay to the Seller by
wire transfer of immediately available funds to an account identified in writing
by the Seller to the Purchaser at least two days prior to the Closing Date an
amount equal to the Purchase Price; provided, however, that the amount of the
Purchase Price to be delivered by the Purchaser to the Seller at the Closing
shall include the amount equal to the Working Capital Estimate.
2.7 Post-Closing Purchase Price Adjustment.
(a) Within 90 days after the Closing Date, the Seller and the
Seller's Accountants shall conduct an audit of the operations and Books and
Records of the Business as of the Effective Time (the "Audit") and shall prepare
and deliver to the Purchaser the Closing Date Balance Sheet. The Audit may be
witnessed by the Purchaser and the Purchaser's Accountants, at the Purchaser's
expense. The Seller shall bear and pay the costs and expenses incurred in
connection with the preparation of the Closing Date Balance Sheet.
(b) Within 120 days after the Closing Date, the Purchaser shall
review the Closing Date Balance Sheet and shall deliver to the Seller a written
description (the "Objection Notice") of its objections, if any (the "Disputed
Item(s)"), to the Closing Date Balance Sheet. The Purchaser shall bear and pay
the costs and expenses incurred in connection with such review of the Closing
Date Balance Sheet.
(c) If the Seller and the Purchaser fail to resolve any of the
Disputed Items within 30 days after delivery of the Objection Notice to the
Seller, they shall together appoint the Arbitrator to arbitrate such dispute
with respect to the unresolved Disputed Item(s). The Seller and the Purchaser
shall present their positions with respect to such Disputed Item(s) to the
Arbitrator together with such other materials as the Arbitrator may deem
appropriate. The Arbitrator shall, within 20 days after the date of the hearing,
submit a written decision with respect to each such Disputed Item to the Seller
and the Purchaser, which determination shall be final and binding on all of the
parties hereto and shall have the legal effect of an arbitral
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award. The non-prevailing party shall pay the Arbitrator's fees and expenses
incurred in connection therewith.
(d) To the extent that the Working Capital as reflected on the
Closing Date Balance Sheet is less than or more than the amount set forth on the
Working Capital Estimate, the Purchase Price shall be adjusted downward or
upward, respectively, on a dollar-for-dollar basis by the amount of such
deficiency or excess (the "Post-Closing Purchase Price Adjustment").
(e) Within five business days following the date on which the Seller
and the Purchaser shall reach agreement on the Closing Date Balance Sheet or the
Arbitrator shall make its determination, as the case may be, the party owing the
Post-Closing Purchase Price Adjustment shall pay to the party entitled to the
Post-Closing Purchase Price Adjustment, by certified or cashier's check or wire
transfer of immediately available funds, to an account identified in writing by
the payee at least two days prior to such payment date the amount of the
Post-Closing Purchase Price Adjustment, together with interest thereon
calculated at the Prime Rate from the Closing Date to the date on which such
Post-Closing Purchase Price Adjustment is paid.
2.8 Allocation of the Purchase Price. The Seller and the Purchaser
agree that the Purchase Price and the Assumed Liabilities shall be allocated
among the Transferred Assets on the basis of an allocation (the "Allocation") to
be mutually agreed by the Purchaser and the Seller. The Allocation shall, upon
mutual agreement of the Purchaser and the Seller, become part of this Agreement
for all purposes. The Seller and the Purchaser agree to report, pursuant to
Section 1060 of the Code and the regulations promulgated thereunder, if and when
required, the Allocation of the Purchase Price, as adjusted, in a manner
entirely consistent with the Allocation in the preparation and filing of all Tax
Returns (including IRS form 8594). Neither the Seller nor the Purchaser will
take any action that would call into question the bona fides of the Allocation.
ARTICLE III
THE CLOSING
3.1 Time and Place of Closing. The Closing shall take place at 10:00
a.m., New York time, on the Closing Date at the offices of Richards & O'Neil,
LLP, 885 Third Avenue, New York, New York 10022, or at such other time or place
as may be mutually agreed upon by the parties hereto. The Closing, the Transfer
of the Transferred Assets, the effectiveness of the documents, agreements,
opinions and certificates delivered in accordance with this Agreement, and the
consummation of the transactions contemplated hereby shall be deemed to occur at
the Effective Time.
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3.2 Payment of Purchase Price; Deliveries. At the Closing, the
Purchaser shall pay the Purchase Price in accordance with Section 2.6(b) above,
and the parties hereto shall deliver such documents as required by Article VIII
and Article IX hereof.
3.3 Assignment of Contracts, Etc. Anything contained herein to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
Transfer any Contract or any claim or right, or any benefit arising thereunder
or resulting therefrom (collectively, "Restricted Assets"), if an attempted
Transfer thereof, without the consent of a third party thereto, would constitute
a breach thereof or in any way affect the rights of Hubbard or the Purchaser, as
the case may be, thereunder. If such consent is not obtained, the Seller will
cooperate with the Purchaser without further consideration in any reasonable
arrangement designed to provide for the Purchaser the benefits of or under any
such Restricted Asset, including without limitation enforcement for the benefit
of the Purchaser of any and all rights of Hubbard against a third party thereto
arising out of the breach or cancellation thereof by such third party. Any
Transfer to the Purchaser of any Restricted Asset which shall require the
consent or approval of any third party for such Transfer as aforesaid shall be
made subject to such consent or approval being obtained.
3.4 Further Assurances. In addition to the actions, documents and
instruments specifically required to be taken or delivered by this Agreement, at
the Closing or from time to time thereafter, and without further consideration,
each party hereto shall take such other actions, and execute and deliver such
other documents and instruments, as any other party hereto or its counsel may
reasonably request in order to effectuate and perfect the transactions
contemplated by the Acquisition Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Windy Hill and the Seller, jointly and severally, represent and
warrant to the Purchaser, subject to completion of the Merger, as follows:
4.1 Organization, Standing, Qualification. Each of Windy Hill, the
Seller and Hubbard is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation and has the
requisite power and authority to own, lease and operate all of its properties
and assets and to carry on its business as it is now being conducted. Each of
Windy Hill, the Seller and Hubbard is duly qualified as a foreign corporation to
do business and in good standing in each jurisdiction (which are listed on the
Disclosure Schedule) where the character of its properties owned, operated or
leased, or the nature of its activities, makes such qualification necessary,
except such jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Seller Material
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Adverse Effect. The copies of the articles or certificate of incorporation and
by-laws of each of Windy Hill, the Seller and Hubbard, which have been delivered
to the Purchaser, are complete and correct as of the date of this Agreement.
4.2 Authorization and Execution. Each of Windy Hill and the Seller
has the corporate power and authority to execute and deliver this Agreement and,
subject to the consummation of the Merger, to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
have been duly and effectively authorized by each of Windy Hill and the Seller.
This Agreement constitutes a legal, valid and binding obligation of each of
Windy Hill and the Seller, enforceable against it in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a court of law or
equity).
4.3 No Conflicts. Except as set forth in the Disclosure Schedule,
neither the execution and delivery of this Agreement by each of Windy Hill and
the Seller, nor the consummation by such party of the transactions contemplated
hereby, will conflict with or result in a breach of the articles or certificate
of incorporation or by-laws, as currently in effect, of Windy Hill, the Seller
or Hubbard, or require any filing with, or consent or approval of any
governmental authority having jurisdiction over any of the business or assets of
Windy Hill, the Seller, the Transferred Assets or the Business, or violate any
statute, regulation, injunction, judgment or order to which Windy Hill, the
Seller or Hubbard is subject, or result in a breach of, or constitute a default
or an event which, with the passage of time or the giving of notice or both
would constitute a default, which would give rise to a right of termination,
cancellation or acceleration, create any entitlement to any payment or benefit,
require the consent of any third party or result in the creation of any Lien on
the assets of the Seller, the Transferred Assets, under any Material Contract or
any certificate of occupancy, license, permit, order or Approval of any
Governmental Authority of which the Business is a beneficiary.
4.4 Financial Statements. Windy Hill has heretofore delivered to the
Purchaser Hubbard's (i) unaudited financial statements for the Business for each
of the fiscal years ended April 30, 1994 through April 30, 1996, inclusive and
the nine months ended January 31, 1997, inclusive (the "Financial Statements"),
and (ii) unaudited monthly financial statements for the Business for each of the
months ended February 28, 1997 and March 31, 1997 (the "Monthly Financial
Statements"). Each of the Financial Statements was prepared from the books and
records of Hubbard (which are accurate and complete in all material respects)
consistent with the past practices of Hubbard and each fairly presents, the
assets, liabilities and financial position of the Business as at the respective
dates thereof and the results of operations for the periods indicated, subject
to allocation of corporate expenses and certain corporate balance sheet items,
normal year-end adjustments that are not material in
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amount and the absence of all footnote disclosure required by GAAP. Each Monthly
Financial Statement was prepared, and each monthly statement to be delivered by
Windy Hill to the Purchaser pursuant to this Agreement will have been prepared,
from the books and records of Hubbard (which are accurate and complete in all
material respects) consistent with the past practices of Hubbard.
4.5 Absence of Certain Changes or Events. Except as set forth in the
Disclosure Schedule, since April 30, 1996 and to and including the date hereof
relating exclusively to the Business, (i) Hubbard has not incurred any
obligations or liabilities other than in the ordinary course of business nor any
indebtedness for money borrowed; made any loans (other than any feeder financing
or dealer operating loan in the ordinary course of business which is not in
excess of $20,000) to or guaranteed any indebtedness of others; prepaid any
indebtedness; changed or modified any existing accounting method, principle or
practice; sold, leased, encumbered, mortgaged or otherwise disposed of any
tangible assets or properties which are material to the Business other than
sales of Inventory and obsolete Equipment in the ordinary course of business;
sold, assigned or transferred any patents, trademarks, trade names, or other
intangible assets; suffered any business interruption or disruption or labor
disputes, whether or not covered by insurance; entered into or modified any
agreement, contract or commitment outside the ordinary course of business or
involving payments or obligations in excess of $50,000 for each such agreement,
contract or commitment in any year or $500,000 for all such agreements in the
aggregate; purchased any capital assets in excess of $100,000 in the aggregate;
leased any assets as lessee or lessor; terminated or modified any lease to which
it is a party or by which it is bound, except for terminations of leases which
expired in accordance with their terms; suffered any material destruction of its
properties, whether or not covered by insurance; suffered any material and
adverse changes in its business, operations, properties or financial condition;
written down or written up any of its inventory other than in the ordinary
course of business; adopted, entered into or agreed to enter into, or amended or
agreed to amend any Employee Benefit Plans, other than in the ordinary course of
business and consistent with past practice; made any changes in the customary
methods used in operating the Business (including its marketing, selling and
pricing practices and policies); waived any right of material value under any
Material Contract, failed to perform any of its obligations, or suffered or
permitted to exist and be continuing any default by it under any Material
Contract; or entered into any other transaction other than in the ordinary
course of business; (ii) Hubbard has not increased or decreased the compensation
of any of its officers, directors or employees, except pursuant to Hubbard's
existing compensation plans and practices that are referenced in the Disclosure
Schedule, (iii) Hubbard has not changed its past practices with respect to the
maintenance and repair of its properties or deferred any such maintenance or
repair in a manner inconsistent with such past practices; and (iv) Hubbard has
not entered into any commitment to do any of the foregoing.
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4.6 Real Property.
(a) The Disclosure Schedule sets forth all of the Real Property
owned in fee simple by Hubbard and used exclusively in the Business
(collectively, the "Fee Property"), each lease by Hubbard as landlord of any of
the Fee Property, each lease by Hubbard as tenant of real property used
exclusively in the Business, and each sublease by Hubbard as sublessee of real
property used exclusively in the Business (collectively, the "Leasehold
Property").
(b) Hubbard has good title to the Fee Property, free and clear of
all Liens, except (A) Liens which may arise for current real property taxes and
assessments not yet due and payable or which are being contested in good faith
and in respect of which adequate reserves have been established, (B) Liens which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially interfere with the present use of
the properties subject thereto or affected thereby, and (C) all matters which
are disclosed (whether or not ultimately deleted or insured over) in the title
insurance commitments and surveys listed in the Disclosure Schedule, copies of
which have been delivered to the Purchaser (the matters in clauses (A), (B) and
(C), collectively, the "Permitted Exceptions").
(c) Hubbard has not within the twelve month period preceding the
date hereof received written notice from any Governmental Authority that such
Governmental Authority has initiated or intends to initiate changes in the
zoning ordinances or building codes applicable to the facilities identified in
the Disclosure Schedule as principal manufacturing facilities under the captions
"Fee Property" or "Leasehold Property -- Hubbard Milling Company as Tenant",
which changes would materially interfere with the present use of such
facilities.
(d) Hubbard has not received written notice from any Governmental
Authority requiring work to be done or improvements to be made by Hubbard to the
Fee Property and the Leasehold Property, which work has not been completed.
(e) Except as set forth on the Disclosure Schedule, all leases of
Fee Property and Leasehold Property are in full force and effect.
(f) Neither Hubbard nor, to the knowledge of the Seller, any other
party thereto is in default under or in respect of any lease of Leasehold
Property, the result of which default could, individually or in the aggregate
together with all other such defaults, materially interfere with the present use
of the properties subject thereto or affected thereby. Hubbard has not exercised
any purchase option under a lease of any of the Leasehold Property or any option
to renew any such lease for a term beyond the current term of said lease.
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(g) Except as disclosed in the Disclosure Schedule, there is no
individual sewage treatment system (as such term is defined in Minnesota Statute
ss. 115.55) located on or serving any Fee Property situated in Minnesota.
(h) Except as disclosed in the Disclosure Schedule, to Hubbard's
knowledge, no wells are situated on any of the Fee Properties situated in
Minnesota.
4.7 Personal Property. Except as set forth in the Disclosure
Schedule, as of the Closing Date, Hubbard will own or hold by valid lease or
license the personal property used exclusively in the Business reflected in the
Balance Sheet or acquired after January 31, 1997 (except for any assets sold
since then in the ordinary course of business or as permitted pursuant to
Section 4.01(d) of the Merger Agreement) free and clear of all Liens.
4.8 Material Contracts. Except as set forth in the Disclosure
Schedule, Hubbard is not a party to or bound by any of the following, either
written or oral, relating to the Business:
(a) contract with any labor union or any collective bargaining
agreement;
(b) bonus, pension, profit sharing, retirement, savings,
hospitalization, medical, dental, vision, vacation, sick pay, disability,
severance, insurance or other plan providing similar employee benefits or
compensation;
(c) employment, agency, consulting or similar personal service
contract;
(d) agreement (including brokerage, correspondent, sales
representative or distributorship agreement) for the payment of fees,
commissions, or other compensation by Hubbard or in connection with the
distribution or sale of animal feed products;
(e) lease, whether as lessor or lessee, with respect to any Fee
Property, Leasehold Property or personal property used exclusively in the
Business (excluding any lease of personal property as lessee providing for
annual rentals of $10,000 or less);
(f) contract as licensor or licensee for the license of any know
how, trademark, trade name, service mark, copyright or other intangible asset
used exclusively in the Business;
(g) guaranty, suretyship, indemnification or contribution agreement
related exclusively to the Business;
(h) loan agreement, promissory note or other document evidencing any
indebtedness of or to Hubbard related to the Business (other than any feeder
financing or
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dealer operating loan in the ordinary course of business which is not in excess
of $20,000, trade accounts payable or receivable and other indebtedness incurred
in the ordinary course and not for money borrowed);
(i) mortgage, security agreement, sale-leaseback agreement or other
agreement which effectively creates (or could, in the future, create) a Lien on
any Transferred Asset;
(j) contract for the purchase of capital assets or for remodeling or
construction, in each case relating exclusively to the Business, which involves
payment of $50,000 or more;
(k) contract for advertising or promotional services to be rendered
for the Business which involves payment of $50,000 or more;
(l) contract concerning confidentiality or restricting Hubbard in
any material respect from engaging in the Business or from competing with any
other parties in the same business as the Business or providing that Hubbard
shall be restricted in any way from selling, marketing or distributing any
product or other merchandise manufactured by the Business;
(m) purchase or sale order for animal feed merchandise or supplies
which (A) was not entered into in the ordinary course of business of the
Business, involves payments of $50,000 or more and is not terminable by Hubbard
without cost or penalty upon 30 days' or less notice, or (B) is a standing or
similar order with a remaining term of more than one (1) year and is not
terminable by Hubbard without cost or penalty upon 30 days' or less notice;
(n) contract involving the acquisition or disposition of $50,000 or
more in assets related to the Business, other than contracts involving the sale
of Inventory in the ordinary course of business;
(o) partnership, limited liability company or joint venture
agreement related to the Business;
(p) contract or commitment to loan money to any person (other than
any feeder financing or dealer operating loan in the ordinary course of business
which is not in excess of $20,000), to guarantee indebtedness of any person, or
to make an equity investment in any person, in each case related to the
Business;
(q) contract under which the consequences of a default or
termination could have a Seller Material Adverse Effect;
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(r) any agreement which includes provisions regarding minimum
volumes or volume discounts with respect to the sale of any product of the
Business;
(s) any agreement with persons other than employees pursuant to
which a rebate, discount, bonus, commission or other payment with respect to the
sale of any animal feed product of the Business will be payable or required
after the Closing;
(t) any contract or arrangement related to the Business with any
Affiliate of Hubbard; or
(u) any other contract related to the Business (excluding purchase
and sale orders not required by the terms of the foregoing clauses (m) or (n) to
be set forth in the Disclosure Schedule) not otherwise set forth in the
Disclosure Schedule which involves payments of $50,000 or more a year and is not
terminable by Hubbard without cost or penalty upon 30 days' or less notice.
All of the foregoing are hereinafter collectively called "Material
Contracts." To the extent Material Contracts are evidenced by documents, true
and correct copies thereof have been delivered or made available to the
Purchaser unless otherwise noted in the Disclosure Schedule and, if oral, are
summarized in the Disclosure Schedule.
Except as set forth on the Disclosure Schedule:
(a) all Material Contracts are in full force and effect and are
valid, binding and enforceable in accordance with their terms;
(b) Hubbard is not and, to the knowledge of the Seller, no other
party to any Material Contract is, in breach of any material provision of, in
material violation of, or in material default under the terms of any Material
Contract;
(c) no event has occurred which, after the giving of notice or
passage of time or both, would constitute a material default under or result in
the material breach of any Material Contract by Hubbard, or to the knowledge of
the Seller, by any other party; and
(d) Hubbard has not given or received any notice of termination
under the joint venture agreements listed in the Disclosure Schedule under the
caption "Other Ownership Interests of Hubbard", nor has Hubbard exercised any
option to purchase contained in any such joint venture agreement.
4.9 Proprietary Rights. The Disclosure Schedule contains a complete
and correct list of all patents, registered trademarks, registered trade names
and applications for any of the foregoing used to any material extent
exclusively by the Business (the "Registered
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Proprietary Rights"). All of the Registered Proprietary Rights are owned by
Hubbard, free and clear of any Liens, are enforceable, valid and subsisting,
constitute all Registered Proprietary Rights used for the operation of the
Business in the ordinary course and, to the knowledge of the Seller, do not
conflict with or infringe on the rights of others. Except as set forth in the
Disclosure Schedule, Hubbard has not granted any licenses or other rights and
Hubbard does not have any obligation to grant licenses or other rights to any of
the Registered Proprietary Rights. Except as set forth in the Disclosure
Schedule, since January 1, 1992, Hubbard has not received any charge, complaint,
claim, demand or notice alleging that Hubbard in the conduct of the Business has
interfered, infringed upon, misappropriated or otherwise come into conflict with
the intellectual property rights of any third party (including any claim that
Hubbard must license or refrain from using any intellectual property rights of
any third party) and, to the knowledge of the Seller, in connection with the
operation of the Business, there are no current or past conditions upon which
such charges or claims reasonably could be based. To the knowledge of the
Seller, no third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with the Registered Proprietary Rights. Except as
set forth in the Disclosure Schedule, as of the date of this Agreement, Hubbard
does not use any unregistered trademark for any product of the Business which
generated more than $100,000 in gross sales during the 12-month period ended
December 31, 1996.
4.10 Litigation. Except as disclosed in the Disclosure Schedule, no
Action is pending or, to the knowledge of the Seller, threatened against Hubbard
in connection with (i) the Business or the Transferred Assets and (ii) the
transactions contemplated by this Agreement. Except as set forth on the
Disclosure Schedule, Hubbard is not currently, and has not been since 1990,
subject to any judgment (other than a monetary judgment heretofore discharged),
consent decree, binding arbitration or regulatory order with respect to the
Business or the Transferred Assets not generally applicable to similar
businesses.
4.11 Permits, Licenses, Authorization; Compliance with Laws. The
Business has all licenses, franchises, permits and other governmental
authorizations which are material and necessary to conduct the Business, and
Hubbard is not in violation in any material respect of any such license,
franchise, permit or other Approval, or any Law applicable to the Business or
any of the Transferred Assets.
4.12 Retirement and Benefit Plans.
(a) The Disclosure Schedule lists each Employee Benefit Plan that
Hubbard maintains or to which Hubbard contributes with respect to employees of
the Business.
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code and other
applicable laws.
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(ii) Each Employee Pension Benefit Plan which is intended to
be a "qualified plan" under Section 401(a) of the Code has received, within the
last two years, a favorable determination letter from the Internal Revenue
Service covering, without limitation, the qualification requirements imposed
under the Tax Reform Act of 1986.
(iii) The Seller has delivered to the Purchaser correct and
complete copies of each and every Employee Benefit Plan document and summary
plan description, the most recent determination letter received from the
Internal Revenue Service, if any, the three most recent IRS Form 5500 Annual
Reports and actuarial valuation reports, if any, and all related trust
agreements, insurance contracts and other funding agreements which implement
each such Employee Benefit Plan.
(iv) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s and Summary Plan
Descriptions) have been timely filed or distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of
Title 1 of ERISA and of Section 4980B of the Code have been met with respect to
each Employee Welfare Benefit Plan.
(v) All contributions which are due have been paid to each
Employee Pension Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due will have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of Hubbard. All premiums or other payments for all periods ending on or
before the Closing Date have been paid with respect to each Employee Welfare
Benefit Plan.
(vi) Except as set forth in the Disclosure Schedule, the
market value of assets under each Employee Pension Benefit Plan which is subject
to Title IV of ERISA equals or exceeds the present value of all vested and
nonvested liabilities thereunder determined in accordance with PBGC methods,
factors and assumptions applicable to an Employee Pension Benefit Plan
terminating on the Closing Date.
(b) Except as set forth in the Disclosure Schedule, with respect to
each Employee Benefit Plan listed in the Disclosure Schedule:
(i) There has been no Prohibited Transactions (as defined
herein) with respect to any Employee Benefit Plan. Hubbard has no liability for
breach of fiduciary duty or any other failure to act or comply in connection
with any Employee Benefit Plan. No action, suit, proceeding, hearing or
investigation with respect to any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the knowledge of Hubbard, threatened.
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(ii) Hubbard has not incurred or has no reason to believe that
it will incur, any liability to the PBGC (other than the PBGC premium payments)
or otherwise (including any withdrawal liability) under Title IV of ERISA or
under the Code with respect to any Employee Pension Benefit Plan.
(iii) Each Employee Pension Benefit Plan of Hubbard has
fulfilled the obligations under the minimum funding standards of ERISA and the
Code.
(iv) Hubbard has not entered into any transaction which could
subject it to liability under ERISA other than for the ordinary course of
payment of benefits under an Employee Benefit Plan.
(v) Except as set forth in the Disclosure Schedule, Hubbard
does not maintain any plan, arrangement or program which provides severance
benefits to current or former employees of Hubbard or its subsidiaries and
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in any liability for the payment of
severance benefits (other than liability resulting from an actual termination of
employment).
(vi) Except as set forth in the Disclosure Schedule, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby constitutes a change in control or has or will
accelerate the vesting in or payment of benefits under any Employee Benefit
Plan, and neither Hubbard nor its subsidiaries is a party to any plan, program,
arrangement or understanding that would result, separately or in the aggregate,
in the payment (whether in connection with any termination of employment or
otherwise) of any "excess parachute payment" within the meaning of Section 280G
of the Code with respect to a current or former employee of Hubbard or its
subsidiaries.
(vii) Except as set forth in Section 10.3(a) or in the
Disclosure Schedule under the caption "Right to Amend", each Employee Benefit
Plan may be amended, modified or terminated subject to compliance with
applicable law and provided that such amendment, modification or termination
does not impair earned, accrued or vested rights under such plan. Except as set
forth in the Disclosure Schedule, no rights to continued benefits provided under
any Employee Welfare Benefit Plan including, without limitation, retiree
medical, dental or life insurance benefits, have vested.
(c) Except as set forth in the Disclosure Schedule, neither Hubbard
nor any ERISA Affiliate contributes to any Multiemployer Plan or has any
liability (including withdrawal liability) under any Multiemployer Plan.
(d) Except as set forth in the Disclosure Schedule, neither Hubbard
nor any of its subsidiaries maintains and has never maintained or contributed,
or has ever been
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required to contribute to any Employee Welfare Benefit Plan providing medical,
health or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses or their dependents (other than
in accordance with Section 4980B of the Code). The requirements of Section 4980B
of the Code and Sections 601 through 608 of ERISA have been met for each
Employee Welfare Benefit Plan that is a group health plan. No such group health
plan is a "multiple employer welfare arrangement" within the meaning of Section
3(40) of ERISA. Neither Hubbard nor any of its subsidiaries maintains or has any
obligation to contribute to any "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code of the provision of welfare
benefits.
4.13 Environmental Matters.
(a) Except as set forth in the Disclosure Schedule and the
environmental assessments performed since January 1, 1987 by it, at its request
or by any governmental agency with respect to the Real Property, each of which
is listed therein, with respect to the Business and the Transferred Assets:
(i) Hubbard complies, and has at all times since January 1,
1992 complied in all material respects with all Environmental Laws applicable to
the ownership and operations of the Transferred Assets and the conduct of the
Business, and no Action, demand or notice has been filed or commenced against
any of them and is now pending or, to the knowledge of the Seller, threatened,
alleging any such failure to comply;
(ii) Hubbard possesses (or has timely filed applications
pending for) all material licenses and permits required by all Environmental
Laws applicable to the ownership and operations of the Transferred Assets and
the conduct of the Business and Hubbard complies in all material respects with
the terms and conditions of such licenses and permits;
(iii) Hubbard has not spilled, discharged, emitted, injected,
disposed of, dumped or released any Hazardous Substances and, or to the
knowledge of the Seller, there has been no spill, discharge, leak, emission,
injections, disposal, escape, dumping or release of any Hazardous Substance by
any other person, or any leaching or migration of any Hazardous Substance of any
kind on, beneath, above or into the environment from, onto, into or surrounding
any of the Real Property;
(iv) No underground storage tanks are located on the Real
Property which contain or, to the knowledge of the Seller, heretofore contained
any Hazardous Substances;
(v) The Seller has delivered to the Purchaser true and
complete copies of all environmental assessments performed since January 1, 1987
by Hubbard, at its request
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or by any governmental agency with respect to the Real Property, each of which
is listed on the Disclosure Schedule;
(vi) Since January 1, 1987, Hubbard has not filed or received
any written notice of a release or threatened release of a Hazardous Substance
or been notified that it may be a potentially responsible party at any waste
disposal site or other location used for the disposal of any Hazardous
Substance;
(vii) Except as permitted by and in compliance with applicable
Environmental Laws, no Hazardous Substances including, without limitation,
asbestos- containing materials and polychlorinated biphenyls, are currently
located at, on or within the Real Property in such form or substance so as to
create any material liability on the part of Hubbard; and
(viii) To the knowledge of the Seller, no contaminated soil or
groundwater for which applicable Environmental Laws require a response action or
corrective action is located on or under the Real Property or any real property
adjacent to such property.
4.14 Suppliers and Customers. The Disclosure Schedule lists the ten
largest (i) customers of the Business and (ii) suppliers of the Business by
volume shipped for the eight months ending December 31, 1996, together with the
approximate dollar volume by customer and supplier, as the case may be, and a
general description of the goods or services provided by such supplier and
describes any substantial change in the identity of, or the nature of the
business conducted with, such suppliers that has occurred since such date.
4.15 Insurance. The Disclosure Schedule contains a complete and
correct list and summary description (including the name of the insurer,
coverage and expiration date) of all policies of insurance which are in force,
maintained by Hubbard or in which Hubbard is named insured or on which Hubbard
is directly or indirectly paying premiums, with respect to the Business or the
Transferred Assets. Hubbard has maintained and will continue to maintain through
the Closing Date a reasonable and customary program of casualty and property
insurance (which may include self-insurance) with respect to its business. The
Disclosure Schedule lists all property damage and personal injury claims against
Hubbard with respect to its business since 1990 involving any claim in excess of
$50,000. Between the date of this Agreement and the Closing Date, the Seller
shall provide or make available to the Purchaser all information in its
possession or reasonably accessible pertaining to the Business as reasonably
requested by the Purchaser or its brokers or insurers to effect insurance on the
Business at the Closing Date.
4.16 Motor Vehicles. All licensed motor vehicles used exclusively in
the Business, whether owned or leased, are listed on the Disclosure Schedule.
All licenses,
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permits, inspections and other authorizations necessary for the use of such
vehicles have been obtained and are in full force and effect.
4.17 Adequacy of Transferred Assets. Except for the Excluded Assets
and as described on the Disclosure Schedule, the Transferred Assets, whether
owned or leased, are all of the assets, properties, rights and claims used in
the conduct of the Business and which are necessary or used to operate the
Business in the same manner as it is currently being operated by Hubbard.
4.18 Labor Matters. Hubbard, with respect to the Business and the
Transferred Assets (i) is in compliance in all material respects with all laws,
rules, regulations, ordinances, employment contracts and collective bargaining
agreements respecting employment and employment practices, terms and conditions
of employment and wages and hours, (ii) is not liable for any arrears of wages
or penalties for failure to comply with any of the foregoing, (iii) has not
engaged in any unfair labor practice, breach of contract, or discriminated on
the basis of race, color, religion, sex, national origin, age or handicap in its
employment practices and, except as set forth in the Disclosure Schedule, no
lawsuits, charges or complaints are pending or, to the knowledge of the Seller,
threatened against Hubbard before any court, public or governmental authority
regarding any such unfair labor practice, breach of contract or discrimination;
(iv) except as set forth in the Disclosure Schedule, has no grievance or
arbitration regarding a dispute arising under a collective bargaining agreement
with any labor organization representing the Business's employees pending or
threatened against Hubbard; and (v) has not, in the 10-year period next
preceding March 21, 1997, experienced a labor strike or threatened labor strike.
Except as set forth in the Disclosure Schedule, no employees of the Business are
represented by any union, association, labor organization or collective
bargaining unit and, since January 1990 Hubbard has not received written notice
that the employees of the Business have any intention to organize or join a
union, association, labor organization or collective bargaining unit. Without
limiting the generality of the foregoing, the restructuring by Hubbard of the
Business in the fiscal year ended April 30, 1996 and the fiscal year ended April
30, 1997 did not result in any violation of WARN.
4.19 Sales and Use Tax. Except as set forth in the Disclosure
Schedule, Hubbard has collected and/or paid all sales and use Tax due with
respect to all prior periods, and there exists no potential liability for unpaid
sales or use tax assessments with respect to events or transactions occurring
before such date which has not been reserved against on the books and records of
Hubbard.
4.20 No Undisclosed Liabilities. Other than as and to the extent
disclosed or reserved against in the Balance Sheet, set forth in the Disclosure
Schedule or incurred in the ordinary course of business since the date of the
Balance Sheet, Hubbard has no Liabilities or obligations pertaining exclusively
to the Business or the Transferred Assets required to be
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disclosed or reserved against on a balance sheet prepared in accordance with
GAAP. Except as set forth in the Disclosure Schedule, Hubbard does not have any
other Liability pertaining exclusively to the Business or the Transferred Assets
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise and, to the knowledge of Hubbard, there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a Liability, other than:
(a) Liabilities or obligations to perform or pay under the executory
portion of any Material Contract, or under the executory portion of any other
agreement or commitment of any kind by which the Business or the Transferred
Assets is bound and which was entered into in the ordinary course of business,
is on commercially reasonable terms, and is consistent with Hubbard's past
practices;
(b) Liabilities related exclusively to the Business or the
Transferred Assets which are covered by any insurance policy disclosed in the
Disclosure Schedule;
(c) any Liability related exclusively to the Business or the
Transferred Assets within the scope of the representations and warranties of
Sections 4.6, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.15, 4.17, 4,18 and 4.19 the
existence of which would not constitute a breach of such representations and
warranties; or
(d) other undisclosed Liabilities related exclusively to the
Business or the Transferred Assets which, individually or in the aggregate, are
not material to the Business or the Transferred Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 Organization, Standing, Equity Ownership. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of its state of incorporation. The Purchaser has delivered to Windy Hill or
the Seller a certified copy of its articles or certificate of incorporation and
by-laws. Each such copy is complete and correct as of the date hereof.
5.2 Authorization and Execution. The Purchaser has the corporate
power and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Purchaser has been duly and effectively authorized by the
Board of Directors of the Purchaser, and no further corporate action is
necessary on the part of the Purchaser to consummate the transaction
contemplated hereby. This Agreement constitutes a legal, valid and binding
obligation of the Purchaser, enforceable against it in accordance with its
terms,
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except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally, and subject, as to enforceability to general principles of
equity (regardless of whether enforcement is sought in a court of law or
equity).
5.3 No Conflicts. Neither the execution and delivery of this
Agreement by the Purchaser nor the consummation of the transactions contemplated
hereby, will (i) conflict with or result in a breach of the certificate of
incorporation or by-laws, as currently in effect, of the Purchaser, or (ii)
except for the requirements under the Hart-Scott-Rodino Act, require the consent
or approval of any governmental authority having jurisdiction over any of the
business or assets of the Purchaser, or (iii) violate any statute, regulation,
injunction, judgment or order to which the Purchaser is subject, or (iv) result
in a breach of, or constitute a default or an event which, with the passage of
time or the giving of notice, or both, would constitute a default, give rise to
a right of termination, cancellation or acceleration, create any entitlement to
any payment or benefit, require the consent of any third party or result in the
creation of any lien on the assets of the Purchaser under any material
instrument, contact or agreement to which the Purchaser is a party or by which
it is bound.
5.4 No Brokers or Finders. The Purchaser has not engaged any
investment banker, broker or finder in connection with the transactions
contemplated hereby.
5.5 Adequate Financing. The Purchaser has available on the date
hereof, and will have available on the Closing Date, sufficient funds available
for the consummation of the transactions contemplated by this Agreement and the
other Acquisition Documents.
ARTICLE VI
CERTAIN OBLIGATIONS OF WINDY HILL
AND THE SELLER PRIOR TO THE CLOSING
Each of Windy Hill and the Seller hereby covenants that, except as
otherwise consented to in writing by the Purchaser or as otherwise contemplated
by this Agreement, from and after the date hereof until the Closing:
6.1 Cooperation. Each of Windy Hill and the Seller shall use its
reasonable efforts (but without the need to incur any unreasonable or unusual
fees, costs or expenses) to cause the transactions contemplated by this
Agreement to be consummated, including, without limitation, (i) obtaining,
making and causing to become effective all Approvals of such Governmental
Authorities and other Persons as may be necessary in order to consummate the
transactions contemplated by this Agreement and (ii) giving prompt notice to the
Purchaser, after being informed by Hubbard or independently becoming aware of,
of (A) any notice of, or other communication relating to, any default, or any
event which, with the giving of notice
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or the lapse of time or both, would become a default, under any Material
Contract relating to the Transferred Assets or the Business, and (B) any notice
or other communication from any Person alleging that the consent of such Person
is or may be required in connection with the execution and delivery of this
Agreement or the other Acquisition Documents or the consummation of the
transactions contemplated hereby or thereby.
6.2 No Solicitation of Transaction. Neither Windy Hill nor the
Seller will, nor shall they permit any of their Representatives to, initiate,
solicit or encourage (including by way of furnishing information), any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any acquisition proposal (as defined below), or agree to or endorse
any acquisition proposal, or participate in any such discussions or negotiations
(other than to express the Seller's lack of interest in such discussions or
negotiations), or provide third parties with any information, relating to any
such inquiry or acquisition proposal. The Seller or Hubbard shall promptly
advise the Purchaser of any such inquiry or acquisition proposal and shall
immediately terminate any existing discussions or negotiations with respect
thereto. As used herein, "acquisition proposal" shall mean any proposal or offer
(i) to acquire from the Seller in any manner all or any portion of the
Transferred Assets (other than sales of Inventory in the ordinary course of
business) or the Business, or any equity or other interest in all or any portion
of the Transferred Assets or the Business, or (ii) for an acquisition of all or
any portion of the equity interests of, or debt interests in, the Seller or any
other extraordinary transaction involving the Seller to the extent such
transaction could impede, hinder or delay the transactions contemplated
hereunder.
6.3 Access to the Seller. The Seller shall endeavor to cause Hubbard
to afford the Purchaser and its Representatives reasonable access, upon
reasonable prior notice during normal business hours (but without any
substantial interference with the business operations of Hubbard), to the books,
records, properties, facilities and employees of Hubbard exclusively relating to
the Business, to the extent that the Seller can arrange such access with
Hubbard.
6.4 Supplements to Disclosure Schedule. The Seller or Windy Hill
shall deliver to the Purchaser a supplemental or amended Disclosure Schedule
containing information that supplements or amends the representations,
warranties and/or disclosures in this Agreement (including without limitation,
the Disclosure Schedule) in order to make the information set forth therein
timely, complete and accurate, to the extent it receives an amended Disclosure
Schedule in connection with the Merger Agreement or with respect to information
as to which it has independent knowledge. Subject to Section 12.1(c) any
representation or warranty of Windy Hill and the Seller herein which is affected
by such supplemental or amended information shall be deemed to have been amended
accordingly.
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6.5 Premerger Notification.
(a) Windy Hill shall promptly make all filings which are required of
it under the Hart-Scott-Rodino Act and request early termination thereunder.
Windy Hill shall promptly provide any additional information or documentation
requested by the Federal Trade Commission (the "FTC"), the Antitrust Division of
the United States Department of Justice (the "Antitrust Division") or any other
foreign, federal, state, county or local government or any other governmental,
regulatory or administrative agency or authority or members of their respective
staffs in connection with a second request or otherwise. Windy Hill shall
furnish to the Purchaser such necessary information and assistance as the
Purchaser may request in connection with its preparation of necessary filings or
submissions to the FTC, the Antitrust Division or any other foreign, federal,
state, county or local government or any other governmental, regulatory or
administrative agency or authority.
(b) The Purchaser shall promptly make all filings which are required
of it under the Hart-Scott-Rodino Act and request early termination thereunder.
The Purchaser shall promptly provide any additional information or documentation
requested by the FTC, the Antitrust Division or any other foreign, federal,
state, county or local government or any other governmental, regulatory or
administrative authority or members of their respective staffs in connection
with a second request or otherwise. The Purchaser shall furnish to Windy Hill
such necessary information and assistance as Windy Hill may request in
connection with its preparation of necessary filings or submissions to the FTC,
the Antitrust Division or any other foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority.
(c) The Purchaser will be responsible for any filing fees associated
with the premerger notification filings of the Seller, Windy Hill and the
Purchaser pursuant to this Section 6.5.
6.6 Additional Monthly Financial Statements. The Seller shall
deliver to the Purchaser promptly upon receipt thereof from Hubbard, a copy of
the unaudited monthly financial statements of the Business prepared in the
ordinary course of business for each month ending after the date hereof and not
less than 20 days prior to the Closing Date.
6.7 Business Financial Statements.
(a) Prior to Closing, the Seller and Windy Hill shall deliver to the
Purchaser an audit report prepared by KPMG Peat Marwick of the Business,
including a balance sheet of the Business as at January 31, 1997 and April 30,
1996 and 1995, and a statement of earnings and cash flows for the 9, 12 and
12-month periods then ended, prepared in accordance with GAAP consistently
applied (the "Business Financial Statements"). The Business Financial Statements
will be prepared from the books and records of Hubbard (which are accurate and
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complete in all material respects) in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and each will fairly present, in all material respects, the
assets, liabilities and financial position of the Business as at the respective
dates thereof and the results of operations and cash flows of the Business for
the periods indicated.
(b) The Purchaser agrees to pay $107,500 the fees of KPMG Peat
Marwick plus one-half of their reasonable expenses incurred in connection with
preparing the Business Financial Statements.
(c) Upon delivery of the Business Financial Statements, the
representations set forth in Section 4.4 pertaining to the Financial Statements
shall terminate and be of no further force and effect.
6.8 Certain Covenants of Hubbard. Pursuant to Section 4.01 of the
Merger Agreement, Hubbard has agreed with Windy Hill and the Seller to conduct
its business, during the period between March 21, 1997 and the consummation of
the Merger, in the manner described in such Section. Windy Hill and the Seller
hereby agree to use commercially reasonable efforts to enforce the agreements of
Hubbard contained in Section 4.01 of the Merger Agreement and to confer with and
obtain the written consent of, the Purchaser with respect to any consent
requested by Hubbard to take action otherwise prohibited by Section 4.01 insofar
as it relates to the Business or the Transferred Assets. The Seller will comply
with the covenants in Section 4.01 from and after the Effective Time of the
Merger (as defined in the Merger Agreement) until the Closing hereunder, insofar
as such covenants relate to the Business, the Transferred Assets or the Assumed
Liabilities.
6.9 Landlord Estoppels. The Seller will deliver on or prior to the
Closing Date copies of all estoppel certificates received by it pursuant to the
terms of the Merger Agreement. The receipt of such estoppel certificates shall
not be a condition to the Purchaser's obligations under this Agreement. The form
of the estoppel certificate to be submitted to the landlords shall be subject to
the reasonable approval of the Purchaser.
6.10 Environmental Reports. The Seller shall deliver to the
Purchaser the environmental reports listed on Schedule 6.10 hereto promptly upon
Seller's receipt of such reports.
6.11 Title Matters.
(a) The Purchaser, at its expense, shall obtain at the Closing owner
title insurance policies for each Fee Property. The Seller shall deliver to the
Purchaser prior to the Closing copies of all surveys of, and title insurance
commitments with respect to, the Fee Properties, it being agreed that (i) the
Purchaser will reimburse the Seller for all fees and
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expenses incurred by the Seller in obtaining such surveys and arranging for any
certifications requested by the Purchaser as provided in Section 13.3 hereof,
and (ii) the Seller will arrange for such surveys to be certified to the
Purchaser and the Purchaser's lenders, if any.
(b) The Seller agrees to provide such affidavits, certificates and
other instruments as the Purchaser's title insurance company may reasonably
require at the Closing (i) for deletion of the standard exceptions on Schedule B
of the title policies to be obtained by the Purchaser, and (ii) for affirmative
insurance with respect to, or to delete, special exceptions based on facts known
to the Seller, all of which instruments shall be for the sole benefit of the
title company, shall contain such disclaimers, exculpation and other provisions
as the Seller's legal counsel shall reasonably determine are necessary or
appropriate to assure that no person or entity, including the person executing
the instrument in question or Hubbard, shall have any liability by reason of
such instrument (but without affecting the title insurer's rights of subrogation
to the Purchaser's rights under this Agreement), and shall otherwise be in form
and substance reasonably satisfactory to the Seller's legal counsel. In
addition, the Seller will (i) provide copies of tax bills, tax receipts and
other documentary evidence in the possession of the Seller, and (ii) request
such confirmations and other informational statements and the like from third
parties, in each case as from time to time reasonably requested by the Purchaser
in connection with the title policies to be obtained by the Purchaser.
6.12 Payments to Eliminate or Limit Certain Title Exceptions.
(a) The Seller agrees to pay an amount calculated pursuant to
Section 6.12(b) of costs and expenses reasonably incurred by the Purchaser to
eliminate or appropriately limit the adverse effect of those special exceptions,
if any, on Schedule B of the title insurance commitments obtained by the
Purchaser which would permit the Purchaser not to close the transactions
contemplated by this Agreement pursuant to Section 8.8 and which the Purchaser
notifies the Seller prior to Closing would qualify, in the opinion of the
Purchaser, as such special exceptions (collectively, "Purchaser's Indemnified
Title Costs and Expenses"). Payment of the foregoing costs and expenses shall be
limited to those costs and expenses included in reasonably detailed invoices
therefor submitted by the Purchaser to the Seller on or before the
Indemnification Termination Date. Except with respect to any unpaid invoices
theretofore submitted, the payment and reimbursement obligation under this
Section 6.12 shall terminate on the Indemnification Termination Date.
(b) The amount of Purchaser's Indemnified Title Costs and Expenses
to be paid by the Seller to the Purchaser shall be the sum of:
(i) the lesser of (y) the amount of Purchaser's Indemnified
Title Costs and Expenses actually incurred by the Purchaser and timely submitted
to the Seller as provided in Section 6.12(a); and (z) $50,000; plus
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(ii) in the event (A) the amount of Purchaser's Indemnified
Title Costs and Expenses are more than $50,000, and (B) the Indemnified Title
Costs and Expenses, as defined in the Merger Agreement, for claims by Seller
with respect to matters not related to the Fee Property ("Seller's Indemnified
Title Costs and Expenses") are less than $50,000, the lesser of (y) such excess
and (z) $50,000 minus Seller's Indemnified Title Costs and Expenses).
For example, if the Purchaser's Indemnified Title Costs and Expenses
equal $80,000 and the Seller's Indemnified Title Costs and Expenses under the
Merger Agreement equal $40,000, the Seller would pay the Purchaser $60,000
determined as follows:
$50,000 pursuant to Section 6.12(b)(i)(z), plus
$10,000 pursuant to Section 6.12(b)(ii)(z).
(c) In the event the Purchaser makes valid claims for Purchaser's
Indemnified Title Costs and Expenses in accordance with Section 6.12, the Seller
shall promptly pay the Purchaser the full amount of such claims up to $100,000;
provided that if Seller has previously made any valid claims for Seller's
Indemnified Title Costs and Expenses under the Merger Agreement (the "Seller's
Claims"), the Seller shall pay the Purchaser an amount equal to the greater of
(i) $50,000 and (ii) $100,000 minus the amount of the Seller's Claims that have
previously been made.
(d) In the event the Purchaser has been paid an amount of
Purchaser's Indemnified Title Costs and Expenses that exceed $50,000, and the
Seller thereafter has Seller's Claims, the Purchaser shall promptly reimburse
the Seller in an amount equal to the lesser of (i) the amount of such subsequent
Seller's Claims, and (ii) $50,000 less the amount of any Seller's Claims for
which Seller has previously been paid pursuant to the Merger Agreement.
(e) All Indemnified Title Costs and Expenses are included within the
matters covered by Section 11.2(a).
ARTICLE VII
CERTAIN OBLIGATIONS OF THE PURCHASER PRIOR TO THE CLOSING
The Purchaser shall use its reasonable efforts (but without the need
to incur any unreasonable or unusual fees, costs or expenses) to cause the
transactions contemplated by this Agreement to be consummated, including,
without limitation, (i) obtaining, making and causing to become effective all
Approvals of such Governmental Authorities and other Persons as may be necessary
in order to consummate the transactions contemplated by this
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Agreement, and (ii) giving prompt notice to the Seller of any notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the execution and delivery of this Agreement or
the other Acquisition Documents or the consummation of the transactions
contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement to
be performed at or before the Closing shall be subject to the satisfaction, at
the Closing, of each of the following conditions, unless waived by the
Purchaser, in its sole and absolute discretion, at or prior to the Closing:
8.1 Representations and Warranties True. The representations and
warranties of Windy Hill and the Seller contained in this Agreement or in any of
the other Acquisition Documents shall have been true and correct in all material
respects when made and in addition shall be true and correct in all respects at
and as of the Closing and with the same effect as though made at and as of the
Closing (except as otherwise contemplated by this Agreement).
8.2 Performance. The Seller and Windy Hill shall have performed and
complied in all material respects with all agreements, covenants, obligations
and conditions required by this Agreement or any of the other Acquisition
Documents to be performed or complied with by the Seller at or prior to the
Closing.
8.3 No Adverse Change. No change or event that has had or could
reasonably be expected to have, individually or in the aggregate with other
changes or events, a Seller Material Adverse Effect.
8.4 Approvals. All Approvals from all Governmental Authorities and
other Persons required by applicable Law, including the Hart-Scott-Rodino Act
and assignments (and any required consents thereto) of the Material Contracts
set forth on Schedule 8.4 hereto for the consummation of the transactions
contemplated by this Agreement and the other Acquisition Documents or in order
for the Purchaser to be permitted to legally conduct the Business shall have
been given, made or obtained, as appropriate, and shall be in full force and
effect.
8.5 Deliveries. The Seller shall have tendered to the Purchaser, at
or prior to the Closing, and against the deliveries referred to in Section 9.4,
the following:
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(a) the executed Bill of Sale;
(b) the executed Assignment and Assumption Agreement;
(c) the Deeds;
(d) the executed License Agreement;
(e) the executed Distribution Agreement;
(f) executed trademark assignments, in proper form for filing with
the U.S. Patent and Trademark Office, for each of the Registered Proprietary
Rights;
(g) such UCC-1 financing statements as the Purchase shall reasonably
request to perfect the security interest granted to it in Section 11.7 of this
Agreement and the subordination agreement contemplated thereby;
(h) the certificate of incorporation of Windy Hill, as amended to
the Closing Date, certified by the appropriate Governmental Authority of its
jurisdiction of incorporation;
(i) the by-laws of Windy Hill, as amended to the Closing Date,
certified as of the Closing Date by its Secretary or Assistant Secretary;
(j) the articles of incorporation of Hubbard, as amended to the
Closing Date, certified by the appropriate Governmental Authority of its
jurisdiction of incorporation;
(k) the by-laws of Hubbard, as amended to the Closing Date,
certified as of the Closing Date by its Secretary or Assistant Secretary;
(l) a certificate of existence, dated not earlier than five days
prior to the Closing Date, of the appropriate Governmental Authority of
Hubbard's jurisdiction of incorporation and each jurisdiction listed on Schedule
4.1 attached hereto with respect to Hubbard, as to the good standing of Hubbard
in such jurisdiction;
(m) such certificates of the President of the Seller or Windy Hill
to evidence compliance with the conditions set forth in Sections 8.1 through
8.4, and Section 8.7 hereof, and any other certificates to evidence compliance
with the conditions set forth in this Article VIII as may be reasonably
requested by the Purchaser or its counsel;
(n) the opinion of Richards & O'Neil, LLP, counsel to the Seller,
dated the Closing Date and addressed to the Purchaser, substantially in the form
of Exhibit F hereto. In
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giving such opinion, Richards & O'Neil, LLP may rely upon the opinion of
Leonard, Street & Deinard LLP with respect to matters of Minnesota law;
(o) executed and completed assignment instruments, transfer Tax
returns, if any, and other transfer documents necessary to transfer title to the
Transferred Assets in the manner required hereunder, the Owner's Duplicate
Certificate of Title for each parcel of Fee Property located in Minnesota that
has been registered as torrens property, a Certificate of Real Estate Value for
each parcel of Fee Property located in Minnesota and a Well Disclosure Statement
for each parcel of Fee Property located in Minnesota if, to Hubbard's knowledge,
such parcel contains a well (and if, to Hubbard's knowledge, such parcel does
not contain a well, Seller will so certify on the face of the Deed therefor in
accordance with Minnesota practice);
(p) a certificate that meets the requirements of Section 1445(b)(2)
of the Code and Treas. Reg. ss. 1.1445-2(b)(2); and
(q) such bills of sale, assignments and instruments of transfer,
conveyance and assignment in form and substance satisfactory to the Purchaser,
as shall be sufficient to convey, transfer and assign to the Purchaser and to
vest in the Purchaser all of Hubbard's right, title and interest in, to and
under the Transferred Assets, including assignments of Hubbard's right, title
and interest in and to all leases and subleases by Hubbard as tenant or
subtenant of real property used exclusively in the Business, and such other
documents or certificates as shall be reasonably requested by the Purchaser or
its counsel including, without limitation, releases, satisfactions, statements
or other documents reasonably necessary to effect the release of any mortgage,
deed of trust, or other Liens affecting the Transferred Assets, and such
affidavits or other documents as may be necessary or appropriate for the
issuance of title insurance policies relating thereto.
8.6 Proceedings. All of Windy Hill's and the Seller's proceedings in
connection with the transactions contemplated by this Agreement and the other
Acquisition Documents, and all documents incident thereto, shall be in form and
substance reasonably satisfactory to the Purchaser and its counsel.
8.7 Absence of Litigation. There shall be no Action pending or
threatened before any court or other Governmental Authority which seeks to (i)
invalidate or set aside, in whole or in part, this Agreement or any of the other
Acquisition Documents, (ii) restrain, prohibit, invalidate or set aside, in
whole or in part, the consummation of the transactions contemplated hereby and
thereby or (iii) obtain substantial Damages in connection therewith or the
Business.
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8.8 Title. The title insurance policies obtained by the Purchaser at
the Closing shall not contain as special exceptions under Schedule B Liens which
do not constitute Permitted Exceptions under clauses (A) or (B) of Section
4.6(b), unless such special exceptions (i) are disclosed on the surveys listed
in the Disclosure Schedule except to the extent listed in the Disclosure
Schedule under the caption "Survey Matters As To Which The Purchaser Has Not Yet
Made A Determination", (ii) are matters contained in any title insurance
commitment listed in the Disclosure Schedule, provided that (x) the Purchaser
has received as of the date hereof copies of any instruments identified in such
title commitment as constituting such special exception and (y) such matter does
not require a survey (other than the surveys in (i) above) to determine the
effect thereof on the Fee Property in question, or (iii) are matters listed in
the Disclosure Schedule under the caption "Title Exceptions As To Which The
Purchaser Has Not Made a Determination", but only if the same do not materially
interfere with the present use of the properties subject thereto; provided,
however, that the Purchaser shall be obligated to close notwithstanding any such
matter if the Purchaser's title insurance company is willing to insure over the
exception or exceptions in question or against the effects thereof on a basis
generally consistent with accepted practice for such matters. Purchaser agrees
to employ either Chicago Title Insurance Company or another title insurance
company reasonably acceptable to the Seller in connection with the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, the Seller
shall cause the title insurance policies obtained by the Purchaser at the
Closing to not contain as special exceptions under Schedule B any mechanic's
lien, judgement lien or tax lien (to the extent that any of the foregoing are
not an Assumed Liability and/or otherwise reflected on the Closing Date Balance
Sheet), it being agreed that the Seller shall be deemed to have complied with
the foregoing obligation if the Seller shall cause the Purchaser's title
insurance company to insure over the exception or exceptions in question or
against the effects thereof on a basis generally consistent with accepted
practice for such matters.
8.9 Closing of Merger Agreement. The transactions contemplated by
the Merger Agreement shall have been consummated.
ARTICLE IX
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE SELLER AND WINDY HILL
Each and every obligation of the Seller and Windy Hill under this
Agreement to be performed at the Closing shall be subject to the satisfaction,
at the Closing, of each of the following conditions, unless waived by the
Seller, in its sole and absolute discretion, at or prior to the Closing:
9.1 Representations and Warranties True. The representations and
warranties of the Purchaser contained in this Agreement or in any of the other
Acquisition
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Documents shall be true and correct in all material respects when made and in
addition shall be true and correct in all respects at and as of the Closing and
with the same effect as though made at and as of the Closing (except as
otherwise contemplated by this Agreement).
9.2 Performance. The Purchaser shall have performed and complied in
all material respects with all agreements, covenants, obligations and conditions
required by this Agreement and the other Acquisition Documents to be performed
or complied with by it at or prior to the Closing.
9.3 Approvals. All Approvals from all Governmental Authorities
required by applicable Law, including the Hart-Scott-Rodino Act for the
consummation of the transactions contemplated by this Agreement and the other
Acquisition Documents shall have been made or obtained and shall be in full
force and effect.
9.4 Deliveries. The Purchaser shall have tendered to the Seller, at
or prior to the Closing, and against the deliveries referred to in Section 8.5,
the following:
(a) in accordance with Sections 2.6(b) hereof, the Purchase Price;
(b) the executed Assignment and Assumption Agreement;
(c) the executed Distribution Agreement;
(d) the executed License Agreement;
(e) the certificate of incorporation of the Purchaser, as amended to
the Closing Date, certified by the appropriate Governmental Authority of its
jurisdiction of incorporation;
(f) the by-laws of the Purchaser, as amended to the Closing Date,
certified as of the Closing Date by its Secretary or Assistant Secretary;
(g) a good standing certificate, dated not earlier than five days
prior to the Closing Date, of the appropriate Governmental Authority of the
Purchaser's jurisdiction of incorporation or organization, as to the good
standing of the Purchaser in such jurisdiction;
(h) such certificates of the President or Vice President of the
Purchaser to evidence compliance with the conditions set forth in Sections 9.1
through 9.3 and 9.6 hereof and any other certificates to evidence compliance
with the conditions set forth in this Article IX as may be reasonably requested
by the Seller or its counsel;
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(i) such other agreements, undertakings and instruments of
assumption, in form and substance reasonably satisfactory to the Seller, as
shall be effective to cause the Assumed Liabilities to be binding on the
Purchaser and such other documents or certificates as shall be reasonably
requested by the Seller or its counsel; and
(j) the opinion of Dorsey & Whitney LLP, counsel to the Purchaser,
dated the Closing Date, and addressed to the Seller, substantially in the form
of Exhibit E hereto.
9.5 Proceedings. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and the other Acquisition
Documents, and all documents incident thereto, shall be in form and substance
reasonably satisfactory to the Seller and its counsel.
9.6 Absence of Litigation. There shall be no Action pending or
threatened before any court or other Governmental Authority which seeks to (i)
invalidate or set aside, in whole or in part, this Agreement or any of the other
Acquisition Documents, (ii) restrain, prohibit, invalidate or set aside, in
whole or in part, the consummation of the transactions contemplated hereby or
thereby or (iii) obtain substantial Damages in connection therewith.
9.7 Closing of Merger Agreement. The transactions contemplated by
the Merger Agreement shall have been consummated.
ARTICLE X
CERTAIN COVENANTS AND AGREEMENTS SUBSEQUENT TO THE CLOSING
10.1 Employment of Union Employees and Hourly Employees.
(a) Effective as of the Closing, the Seller shall assign and
delegate, and the Purchaser shall accept and assume, all of Hubbard's rights and
obligations in all respects under the collective bargaining agreements set forth
in Schedule 10.1 ("CBAs"). On the Closing Date, the Purchaser shall extend
offers of employment to all employees covered by the CBAs ("Union Employees"),
consistent with the terms and conditions of employment established by the
respective CBAs, including, without limitation, the seniority rights of such
employees, and all employees of the Seller who work exclusively for the Business
and who are employed on an hourly basis ("Hourly Employees"). Union Employees
and Hourly Employees who accept employment with the Purchaser shall be and
become employees of the Purchaser effective as of the Closing Date.
(b) Not in derogation of the obligations set forth under Section
10.3(a), for a period of at least one year following the Closing Date, the
Purchaser shall adopt and maintain a defined benefit pension plan which shall be
intended to be qualified under Section
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401(a) of the Code and a trust which shall be intended to be tax exempt under
Section 501(a) of the Code (collectively, the "Hourly Pension Plan"). The Hourly
Pension Plan shall mirror the provisions of the Hubbard Milling Company Hourly
Pension Plan and Hubbard Milling Company Pension Trust for Hourly Wage Employees
and shall cover all Union Employees and Hourly Employees of the Seller who
become employees of the Purchaser pursuant to Section 10.1(a).
(c) Promptly following the Closing Date and the establishment of the
Hourly Pension Plan, the Seller shall, subject to applicable law, transfer or
cause to be transferred from the Hubbard Milling Company Pension Trust for
Hourly Wage Employees to the Hourly Pension Plan the "present value of accrued
benefit liability" of all employees of the Seller who become employees of the
Purchaser pursuant to Section 10.1(a) hereof, to the extent that such employees
participate in and have accrued benefits under the Hubbard Milling Company
Hourly Pension Plan, and assets equal to such "present value of accrued benefit
liability." If assets equal to present value of accrued benefit liability cannot
be transferred under applicable law, the difference between such amount and the
amount that can be so transferred shall, at the option of the Seller, either (A)
be transferred from the Hubbard Milling Company Salaried Retirement Trust to the
Salaried Pension Plan adopted by the Purchaser pursuant to Section 10.2(b), (B)
be paid in cash by Seller to Purchaser or (C) any combination of the above.
10.2 Employment of Salaried Employees.
(a) The Purchaser shall extend offers, effective as of the Closing
Date, of the same or similar jobs to all of the Business' salaried employees
("Salaried Employees") such that no loss of employment would occur if such
employees accepted such offers. Salaried Employees who accept employment with
the Purchaser shall be and become employees of the Purchaser effective as of the
Closing Date.
(b) Not in derogation of the obligations set forth under Section
10.3(a), for a period of at least one year following the Merger, the Purchaser
shall adopt and maintain a defined benefit pension plan which shall be intended
to be qualified under Section 401(a) of the Code and a trust which shall be
intended to be tax exempt under Section 501(a) of the Code (collectively, the
"Salaried Pension Plan"). The Salaried Pension Plan shall mirror the provisions
of the Hubbard Milling Company Salaried Retirement Plan and Hubbard Milling
Company Salaried Employees Retirement Trust and shall cover all Salaried
Employees of the Seller who become employees of the Purchaser pursuant to
Section 10.2(a).
(c) Promptly following the Closing Date and the establishment of the
Salaried Pension Plan, the Seller shall, subject to applicable law, transfer or
cause to be transferred from the Hubbard Milling Company Salaried Employees
Retirement Trust to the Salaried Pension Plan the "present value of accrued
benefit liability" of all employees of the
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Seller who become employees of the Purchaser pursuant to Section 10.2(a) hereof
to the extent that such employees participate in and have accrued benefits under
the Hubbard Milling Company Salaried Retirement Plan, and assets equal to such
"present value of accrued benefit liability." If assets equal to "present value
of accrued benefit liability" cannot be transferred under applicable law, the
difference between such amount and the amount that can be so transferred shall
be paid by the Seller to the Purchaser in cash.
10.3 Benefits for All Employees.
(a) For a period of at least one year following the Merger, the
Purchaser shall adopt and maintain for all employees of the Business who accept
the Purchaser's offer of employment pursuant to Sections 10.1(a) and 10.2(a),
employee benefit plans which provide benefits identical to those provided under
the Employee Benefit Plans maintained by the Seller. The Purchaser shall,
subject to the 1-year period above and the terms of any of the CBAs, have the
right to amend or terminate every plan required to be maintained for employees
of the Business under the terms of this Agreement.
(b) The Purchaser shall recognize all service with the Seller or
Hubbard (or a predecessor of the Seller or Hubbard to the extent such service is
recognized under any Employee Benefit Plan) of each of the Seller's employees
who accepts the Purchaser's offer of employment referred to in Sections 10.1(a)
and Section 10.2(a) for purposes of determining eligibility to participate in,
eligibility for benefit commencement under, benefit accrual and vesting purposes
of any employee benefit plan or program adopted and maintained by the Purchaser
in accordance with Section 10.3(a), provided, however, that no such service
recognition shall give rise to a duplication of benefits for any such employee.
The Purchaser shall give credit under its employee welfare benefit plans for any
deductibles and co-payments incurred under the Employee Welfare Benefit Plans of
the Seller for employees of the Business who accept the Purchaser's offer of
employment pursuant to Sections 10.1(a) and Section 10.2(a). Further, the
Purchaser shall waive any pre-existing condition exclusion under its employee
welfare benefit plans.
(c) Not in derogation of the obligations set forth under Section
10.3(a), for a period of at least one year following the Merger, the Purchaser
shall adopt and maintain a profit sharing plan which shall be intended to be
qualified under Section 401(a) of the Code and a trust which shall be intended
to be tax exempt under Section 501(a) of the Code (collectively, the "Profit
Sharing Plan") and a cash or deferred arrangement which shall be intended to be
qualified under Sections 401(a) and 401(k) of the Code and a trust which shall
be intended to be tax exempt under Section 501(a) of the Code (collectively, the
"Savings Plan"). The Profit Sharing Plan shall mirror the provisions of the
Hubbard Milling Company Profit Sharing Plan and Hubbard Milling Company Profit
Sharing Trust Agreement. The Savings Plan shall mirror the provisions of the
Hubbard Milling Company 401(k) Plan and the Hubbard Milling Company 401(k) Trust
Agreement. The Profit Sharing Plan and the
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Savings Plan shall cover all employees of the Seller who become employees of the
Purchaser pursuant to Sections 10.1(a) and 10.2(a) to the extent such employees
are eligible to participate in the Hubbard Milling Company Profit Sharing Plan
and the Hubbard Milling Company 401(k) Plan.
(d) Promptly following the Closing Date and the establishment of the
Profit Sharing Plan, the Seller shall transfer or cause to be transferred to
such plan any and all account balances (including loan balances, if any) under
the Hubbard Milling Company Profit Sharing Plan with respect to employees of the
Seller who become employees of the Purchaser pursuant to Sections 10.1(a) and
10.2(a) hereof.
(e) Promptly following the Closing Date and the establishment of the
Savings Plan, the Seller shall transfer or cause to be transferred to such plan
any and all account balances (including loan balances, if any) under the Hubbard
Milling Company 401(k) Plan with respect to employees of the Seller who become
employees of the Purchaser pursuant to Sections 10.1(a) and 10.2(a) hereof.
(f) For purposes of this Article X, the term "present value of
accrued benefit liability" shall mean the liability expressed in the form of a
single sum for all accrued benefits of Union Employees and Hourly Employees of
the Seller who are participants under the Hubbard Milling Company Hourly Pension
Plan and who become employees of the Purchaser pursuant to Section 10.01(a), and
for all Salaried Employees of the Seller who are participants under the Hubbard
Milling Company Salaried Retirement Plan and who become employees of the
Purchaser pursuant to Section 10.02(a). Such liability shall be calculated using
a 7% interest rate assumption and the mortality assumptions contained in the
Unisex Pension 1984 Mortality Table.
(g) The Purchaser shall have no obligations or Liabilities
(including COBRA obligations) with respect to any employee or former employee of
Hubbard other than the Transferred Employees.
10.4 Books and Records; Access.
(a) Unless otherwise consented to in writing by the Seller, the
Purchaser shall not destroy or otherwise dispose of any original Books and
Records in its possession as of the Closing Date relating to the Business prior
to the Closing or to the Transferred Assets or the Assumed Liabilities for a
period of five years commencing on the date such Books and Records were created
by the Seller or came into the Seller's possession, without first offering to
surrender such Books and Records to the Seller, and shall maintain such Books
and Records in good condition in a reasonably accessible location. Upon
reasonable prior notice, the Purchaser shall afford the Representatives of the
Seller reasonable access during normal
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business hours to examine and copy such Books and Records for any commercially
reasonable purpose.
(b) Unless otherwise consented to in writing by the Purchaser, the
Seller shall not destroy or otherwise dispose of any original Books and Records
in its possession after the Closing relating exclusively to the Business prior
to the Closing or to the Transferred Assets or the Assumed Liabilities for a
period of five years commencing on the date such Books and Records were created
or came into the Seller's possession, without first offering to surrender such
Books and Records to the Purchaser, and shall maintain such Books and Records in
good condition in a reasonably accessible location. Upon reasonable prior
notice, the Seller shall afford the Representatives of the Purchaser reasonable
access during normal business hours to examine and copy such Books and Records
for any commercially reasonable purpose.
10.5 Further Assurances. In addition to the actions, documents and
instruments specifically required to be taken or delivered by this Agreement, or
from time to time after the Closing, and without further consideration, each
party hereto shall take such other actions, and execute and deliver such other
documents and instruments, as the other party hereto or its counsel may
reasonably request in order to effectuate and perfect the transactions
contemplated by this Agreement and the other Acquisition Documents, including
without limitation such actions as may be necessary to Transfer to the Purchaser
and to place the Purchaser in possession or control of, all of the rights,
properties, assets and businesses intended to be sold, transferred, conveyed,
assigned and delivered hereunder, or to assist in the collection of any and all
such rights, properties and assets or to enable the Purchaser to exercise and
enjoy all rights and benefits of the Seller with respect thereto.
10.6 General Liability Endorsement. Until 18 months from the Closing
Date, the Purchaser shall cause the carrier of its general liability insurance
covering the Business to include the Seller as an additional insured and to
include a provision in such endorsement giving the Seller 30 days' prior notice
of the proposed cancellation of any such insurance.
10.7 Purchaser Noncompetition. For the period commencing on the
Closing Date and ending on the second anniversary of the Closing Date, none of
Feed-Rite, Ltd., the Purchaser or their respective Affiliates shall produce or
manufacture any food produced or manufactured by the Pet Food Business as of the
date of this Agreement, including, without limitation, dry pet food, semi-moist
pet food, and pet snacks and treats, or any component thereof, at any of the
manufacturing facilities included among the Transferred Assets.
10.8 Seller Noncompetition. For the period commencing on the Closing
Date and ending on the second anniversary of the Closing Date, none of Windy
Hill, the Seller or their respective Affiliates shall produce or manufacture any
food produced or manufactured by the Business as of the date of this Agreement
or any component thereof, at any of the manufacturing facilities owned by
Hubbard as of the date of this Agreement.
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10.9 Transition Services. For the period commencing on the Closing
Date and ending on November 30, 1997, the Seller shall provide, or cause its
Affiliates to provide, to the Purchaser the services set forth on Exhibit G
hereto, in the manner and a level of service generally consistent with that
provided by Hubbard to the Business as of the date of this Agreement. The
Purchaser may extend the period during which the Seller will provide transition
services upon written notice to the Seller given no later than October 15, 1997,
but in no event shall the Seller be required to provide transition services to
the Purchaser after May 31, 1998. In the event of such extension, the Purchaser
will pay the Seller on a monthly basis, a mutually agreeable fee for such
services.
10.10 Use of "Hubbard Milling Company" Name. The Seller agrees it
will not object to the Purchaser's use of the name "Hubbard Milling Company" as
an assumed name to facilitate the operation of the Business during a transition
period, not to extend beyond May 31, 1998. The Seller will not object to the
Purchaser's use of "Hubbard" in its corporate name; provided that the Purchaser
shall not use the name "Hubbard" in its corporate name in connection with a pet
food business other than as described in the definition "Business" in Section
1.1(r) of this Agreement. The Seller agrees that after the Closing Date the
Purchaser may use the supply of packaging and stationery with the name "Hubbard
Milling Company" included in the Inventory on hand on the Closing Date until
such supply is exhausted.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival. Each of the representations and warranties made by
the parties in Article IV and V and in the certificates delivered pursuant to
Sections 8.5(m) and 9.4(h) (including the Disclosure Schedule insofar as the
Disclosure Schedule relates to such representations and warranties) shall
survive any examination made by or on behalf of any party hereto, the execution
and delivery of this Agreement, the Closing and the consummation of the
transactions called for by this Agreement until the Indemnification Termination
Date, whereupon such representations and warranties shall terminate, provided
that no such termination shall occur with respect to any representation or
warranty made in a manner involving fraud or criminal misrepresentation.
Notwithstanding the foregoing, the representation and warranty contained in
Section 4.6(b) shall not survive the Closing.
11.2 Indemnification. Subject to the limitations set forth in this
Section 11.2 the parties hereto agree as follows:
(a) The Purchaser, its successors, assigns and Representatives shall
be indemnified by the Seller, its successors and assigns against any Damages
incurred by the Purchaser which is caused by or arises out of (i) any breach of
any representation or warranty
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of Windy Hill or the Seller contained in this Agreement or any Acquisition
Document other than those breaches, if any, of which the Purchaser has actual
knowledge at the time of Closing, (ii) the breach or other failure to perform
any covenant, agreement or other obligation of Windy Hill or the Seller
contained in this Agreement or any other Acquisition Document, (iii) any
requirement of a Governmental Authority or court pursuant to any Environmental
Law that the Purchaser or Hubbard investigate or remediate Hazardous Substances,
other environmental condition or failure to comply with Environmental Law (or
pay any fines or penalties in connection therewith) at any Real Property (other
than the St. Joseph, Missouri facility) if such Hazardous Substances, other
environmental condition or failure to comply with Environmental Laws was
identified in the Disclosure Schedule under the caption "Environmental Matters
- -- Miscellaneous Matters" or in an environmental report listed on Schedule 6.10
(the "Indemnified Environmental Liabilities"), (iv) Purchaser's Indemnified
Title Costs and Expenses as provided in Section 6.12; and (v) any claim the
Seller has for Damages arising out of the breach of the representation and
warranty contained in Section 3.01(y) of the Merger Agreement to the extent such
Damages relate exclusively to the Business, the Transferred Assets or the
Assumed Liabilities; provided, however, that in connection with any claim for
indemnification for Damages under this Section 11.2(a) (except in a case
involving fraud or criminal misrepresentation), (A) the Purchaser shall have no
recourse against Windy Hill's or the Sellers' officers, directors or
Representatives, (B) in the case of indemnification for Indemnified
Environmental Liabilities, the indemnification under this Agreement shall be
limited to 50% of any Damages and shall not be subject to the limitation set
forth in Section 11.2(g) below, (C) in the case of indemnification for
Purchaser's Indemnified Title Costs and Expenses, the indemnification under this
Agreement shall not be subject to the limitation set forth in Section 11.2(g)
below, but shall be subject to the provisions of Section 6.12 above and (D) the
Seller's aggregate liability for indemnification under this Section 11.2(a)
shall be subject to the limitation in Section 11.2(h) below. Notwithstanding the
foregoing, the Purchaser shall not be indemnified for any Damages for which it
receives proceeds under any insurance policy maintained by the Purchaser or with
respect to rights under insurance policies assigned to it by the Seller,
including without limitation, the title insurance policies obtained by the
Purchaser pursuant to Section 6.11, and no Damages for which such proceeds are
received shall be included in calculating the Threshold for indemnification set
forth in this Section 11.2.
(b) Windy Hill and the Seller, their successors, assigns and
Representatives shall be indemnified by the Purchaser against Damages incurred
by any of them which are caused by or arise out of (i) any breach of any
representation or warranty of the Purchaser contained in this Agreement or any
of the other Acquisition Documents, other than those breaches, if any, of which
Windy Hill or the Seller has actual knowledge at the time of Closing, (ii) the
breach or other failure to perform any covenant or agreement or other obligation
of the Purchaser contained in this Agreement or any other Acquisition Document,
(iii) any Assumed Liability, including the Purchaser's failure to pay or satisfy
any such liability.
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(c) Whenever any claim shall arise for indemnification hereunder (i)
the party entitled to indemnification (the "Indemnified Party") shall provide
written notice to the party from whom such indemnification is owing (the
"Indemnifying Party") within a reasonable period of becoming aware of the right
to indemnification and, as expeditiously as possible thereafter, of the factors
constituting the basis for such claim and (ii) the Indemnifying Party shall be
given access to all books and records in the possession or control of the
Indemnified Party which the Indemnifying Party reasonably determines to be
related to such claim; provided that any failure of the Indemnified Party to so
notify the Indemnifying Party within any such time period shall not waive the
Indemnified Party's indemnification rights hereunder except to the extent that
the Indemnifying Party has been damaged by such a failure.
(d) If any legal proceedings are instituted or any claim or demand
is asserted by any person in respect of which the Indemnified Party determines
it may seek indemnification pursuant to the provisions of this Section 11.2, the
Indemnified Party shall promptly after such determination cause written notice
of the assertion of any such claim to be made to Indemnifying Party. The
Indemnifying Party shall have the right, at its option and expense and upon
written notice to the Indemnified Party, to defend against, negotiate and, with
the consent of the Indemnified Party (which consent shall not be unreasonably
withheld) settle any such claim, and in such case, the Indemnified Party shall
have the right to participate in such defense, negotiation or settlement at his
own expense. The Indemnified Party and the Indemnifying Party agree to cooperate
fully with each other in connection with the defense, negotiation or settlement
of any such legal proceeding, claim or demand. Upon the payment of any claim for
indemnification, the Indemnifying Party shall be subrogated to all rights and
remedies of the Indemnified Party against any third person. The Indemnified
Party may (but shall have no obligation to) defend any such third party claim,
legal proceeding or demand in such manner as it may deem appropriate including,
but not limited to, settling such claim, legal proceeding or demand, after
giving notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate and no action taken by the Indemnified
Party in accordance with such defense and settlement shall relieve the
Indemnifying Party of its indemnification obligations herein provided with
respect to any Damages resulting therefrom.
(e) The exclusive remedy of the Purchaser, Windy Hill and the Seller
for breaches of representations and warranties in this Agreement (other than
breaches resulting from any fraudulent or criminal misrepresentation) and for
Damages related to the Excluded Liabilities is the indemnification provided for
in Section 11.2.
(f) Notwithstanding anything to the contrary contained herein, the
Seller shall have no obligation for and the Purchaser shall not be entitled to
any indemnification with respect to a claim made pursuant to Section 11.2(a) or
11.2(i) after the Indemnification
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Termination Date, other than with respect to a claim for indemnification in
connection with an Excluded Liability pursuant to Section 11.2(i)(C).
(g) Except for claims under clause (B) or (C) of Section 11.2(a),
the Purchaser shall not be entitled to indemnification pursuant to Section
11.2(a) of this Agreement until the aggregate Damages of the Purchaser under
this Agreement (other than with respect to claims described in clause (B) or (C)
of Section 11.2(a)) related to the Business or the Transferred Assets and the
Seller under the Merger Agreement related to matters other than the Business or
the Transferred Assets (other than with respect to claims described in Section
9.02(a)(E) or (F) of the Merger Agreement), exceed $750,000 (the "Threshold"),
and then only with respect to Damages determined in accordance with Section
11.2(h).
(h) The aggregate amount of claims for indemnification for which the
Seller shall be obligated to the Purchaser pursuant to Section 11.2(a) shall be
the sum of items (i) through (iv) below:
(i) the lesser of (y) the Purchaser's actual amount of claims
for indemnification for Damages in excess of the amount of such Damages included
in satisfying the Threshold pursuant to Section 11.2(g) and (z) the Purchaser's
Percentage of the Cap;
(ii) in the event the Purchaser's Damages exceed the amount
determined pursuant to subsection 11.2(h)(i)(z) above; the lesser of (y) such
excess and (z) the sum of (A) the Seller's Percentage of the Cap less the amount
of claims for which the Seller is entitled to be indemnified pursuant to the
Merger Agreement to the extent such claims are not the result of a claim by the
Purchaser for Damages pursuant to Section 11.2(a) of this Agreement and (B) the
Seller's Damages under the Merger Agreement included in satisfying the
Threshold; plus
(iii) in the event the amount described in subsection
11.2(h)(i)(y) is less than the amount described in subsection 11.2(h)(i)(z) and
any amount included in such subsection 11.2(h)(i)(y) is not required to be paid
until the Threshold has been satisfied, Purchaser's Damages included in
satisfying the Threshold; minus
(iv) in the event any amount included in subsection
11.2(h)(i)(y) is not required to be paid until the Threshold has been satisfied,
Purchaser's Percentage of the Threshold;
(v) for purposes of the calculation described above, Damages
shall be deemed to have been used in satisfying the Threshold in the order
claims for such Damages were made by the Purchaser under this Agreement and by
the Seller under the Merger Agreement with respect to matters not relating to
the Business or the Transferred
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Assets, but only to the extent such Damages are actually included in satisfying
the "deductible" in accordance with Section 11.2(a) of the Merger Agreement.
For example, if the Purchaser's Damages equal $10,000,000, the Cap
is $10,000,000, all of such Damages is payable without satisfaction of the
Threshold and the Seller's Damages equal $5,000,000, none of which is subject to
a deductible under the Merger Agreement, the Seller would pay $5,100,000 to the
Purchaser in full satisfaction of its indemnity claims under Section 11.2(a) as
follows:
$4,600,000 in accordance with subsection (i)(z) plus
$500,000 in accordance with subsection (ii)(z).
(Seller would be entitled to $4,900,000.)
If the Cap is $10,000,000, Purchaser's Damages equal $6,000,000 of
which $250,000 was used in satisfying the Threshold, and $800,000 is required to
be paid without satisfaction of the Threshold, the Seller's Damages are
$3,000,000, including $500,000 used to satisfy the Threshold and $2,000,000 is
payable without regard to any deductible under the Merger Agreement, the Seller
would pay $5,762,500 to the Purchaser in full satisfaction of its indemnity
claims under Section 11.2(a) as follow:
$4,600,000 in accordance with subsection (i)(z); plus
$1,500,000 in accordance with subsection (ii)(y); plus
$0 in accordance with subsection (iii); minus
$337,500 in accordance with subsection (iv).
(Seller would be entitled to $2,487,500.)
If the Cap is $10,000,000 Purchaser's Damages equal $1,500,000, of
which $600,000 was used in satisfying the Threshold, the Seller's Damages equal
$1,250,000, $150,000 of which was used to satisfy the Threshold and all such
Damages of the Purchaser are subject to the Threshold, the Seller would pay
$1,162,500 to the Purchaser in full satisfaction of its indemnity claims under
Section 11.2(a) as follows:
$900,000 in accordance with subsection (i)(y); plus
$0 in accordance with subsection (ii); plus
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$600,000 in accordance with subsection (iii); minus
$337,500 in accordance with subsection (iv).
(Seller would be entitled to $837,500.)
If the Cap is $10,000,000, Purchaser's Damages equal $3,000,000, of
which $250,000 was used in satisfying the Threshold and $800,000 is required to
be paid without satisfaction of the Threshold, the Seller's Damages are
$6,000,000, including $500,000 used to satisfy the Threshold and $2,000,000 is
payable without regard to any deductible under the Merger Agreement, the Seller
would pay $2,662,500 to the Purchaser in full satisfaction of its indemnity
claims under Section 11.2(a) as follows:
$2,750,000 in accordance with subsection (i)(y); plus
$0 in accordance with subsection (ii); plus
$250,000 in accordance with subsection (iii); minus
$337,500 in accordance with subsection (iv).
(Seller would be entitled to $5,587,500.)
(i) In addition to the indemnification provided in Section 11.2(a),
the Purchaser, its successors, assigns and Representatives shall be indemnified
by the Seller, its successors and assigns against any Damages incurred by the
Purchaser that is caused by or arises out of any Excluded Liability, including
the Seller's failure to pay or satisfy any such Liability; provided however,
that in connection with any claim for indemnification for Damages under this
Section 11.2(i) (except in a case involving fraud or criminal
misrepresentation), (A) the Purchaser shall have no recourse against Windy Hill
or the Seller's officers, directors or Representatives, (B) to the extent the
Damages incurred by the Purchaser that are related to an Excluded Liability may
also be the subject of a claim pursuant to Section 11.2(a) other than a claim
for a breach of the representations and warranties contained in Section 4.19 or
4.20, the Seller's indemnification obligation with respect to such Excluded
Liability shall be governed by Section 11.2(a), (C) if the Excluded Liability
does not relate to the Business or the Transferred Assets it is not subject to
the limitation in Sections 11.2(g) and 11.2(h) and (D) the Seller's aggregate
liability for indemnification under this Section 11.2(i) shall not exceed an
amount equal to the Purchaser's Percentage of the Cap (the "Special Indemnity
Cap"). Notwithstanding the foregoing, the Purchaser shall not be indemnified for
any Damages for which it receives proceeds under any insurance policy maintained
by the Purchaser or with respect to rights under insurance policies assigned to
it by the Seller, including without limitation, the title insurance policies
obtained by the
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Purchaser pursuant to Section 6.11, and no Damages for which such proceeds are
received shall be included in calculating the Threshold for indemnification set
forth in this Section 11.2.
11.3 Payment of Indemnification Claims Under Section 11.2(a).
(a) The Seller shall make payments to the Purchaser with respect to
claims for indemnification under Section 11.2(a) when it shall have received
payments with respect to such claims in accordance with the Merger Agreement.
(b) In the event (i) the Purchaser has made claims in excess of the
Purchaser's Percentage of the Cap with respect to which the Seller has received
payments under the Merger Agreement ("Excess Purchaser Claims") or (ii) Seller
has received payments with respect to claims for indemnification made under the
Merger Agreement which do not relate to the Business or the Transferred Assets
in excess of the Seller's Percentage of the Cap ("Excess Seller's Claims"), the
Seller agrees (except as provided in Section 6.12 with respect to Purchaser's
Indemnified Title Costs and Expenses) to place the amount of such Excess
Purchaser Claims and Excess Seller's Claims in an escrow account pursuant to an
escrow agreement mutually satisfactory to the Seller and the Purchaser, which
shall provide that such escrowed funds shall be disbursed in the amounts
determined in accordance with Section 11.2(h) upon final resolution of all
claims under the Merger Agreement and Section 11.2(a) of this Agreement. In no
event shall the Seller's indemnification obligations to the Purchaser, its
successors, assigns and Representatives pursuant to Section 11.2(a) of this
Agreement exceed amounts recovered by the Seller under the Merger Agreement.
11.4 Specific Obligations of the Seller for Accounts Receivable.
Notwithstanding any other provisions of this Article XI to the contrary, the
Seller shall have the following specific obligations with respect to certain
Accounts Receivable. With respect to Accounts Receivable reflected on the
Closing Date Balance Sheet that are due and payable on or prior to the 180th day
immediately following the Closing Date but have not been collected on or prior
to such date (the "Uncollected Accounts Receivable"), the Seller shall on or
before the seventh business day following notice from the Purchaser of the
Uncollected Accounts Receivables, and without regard to the notification
requirements in Section 11.2(c), the Cap or the Special Indemnity Cap and
without first satisfying the Threshold, pay to the Purchaser an amount equal to
the recorded amounts of the Uncollected Accounts Receivable on the Closing Date
Balance Sheet less the amount of the allowance for doubtful accounts on the
Closing Date Balance Sheet and the Purchaser shall turn over and sell such
Uncollected Accounts Receivable (the "Sold Accounts Receivable") to the Seller.
The Purchaser shall thereafter promptly remit to the Seller any amounts received
by the Purchaser with respect to the Sold Accounts Receivable. In the event the
Purchaser receives any unallocated payment from a customer after the Closing, it
shall require the customer to identify the invoice to
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which such unallocated payment relates and shall apply the payment to the
account receivable so identified.
11.5 Bulk Sales Law. The Purchaser hereby waives compliance by the
Seller with the provisions of the bulk sales law of any jurisdiction.
Nevertheless, in addition to any other indemnities herein provided, the Seller
shall indemnify and hold the Purchaser harmless against and from any and all
Damages to the Purchaser resulting from such non-compliance including any Liens
claimed against the Transferred Assets by any creditor arising from any credit
extended to Seller prior to the Closing Date, without first satisfying the
Threshold, and without regard to the Cap or the Special Indemnity Cap.
11.6 Cooperation.
(a) The Purchaser and Seller shall keep each other informed
regarding potential claims that could be brought under the indemnification
provisions of either this Agreement or the Merger Agreement. The Seller agrees
that if the Purchaser shall make a claim for indemnification against the Seller
pursuant to Section 11.2(a) with respect to a matter as to which the Seller
would have a claim under the Merger Agreement, the Seller shall make a claim for
indemnification pursuant to Section 9.02 of the Merger Agreement.
(b) In the event (i) Windy Hill has a claim or claims for Damages
under the Merger Agreement which, if brought would, in the reasonable judgment
of the Purchaser, cause the Threshold to be exceeded as described in Section
11.2(g) of this Agreement and (ii) Windy Hill, in its sole discretion,
determines not to make such claim or claims, Windy Hill shall pay to the
Purchaser the amount, calculated in accordance with Section 11.2(h), that the
Purchaser would have been entitled to had the Seller brought such claim or
claims under the Merger Agreement.
11.7 Security Interest. In order to secure the full and timely
payment and performance by the Seller of its indemnification obligations under
this Agreement, the Seller hereby grants to the Purchaser, subject to the
limitations set forth in this Section 11.7 and Section 11.2 of this Agreement, a
first priority security interest in the Seller's rights to payment from the
escrow accounts established pursuant to the Merger Agreement and the Armour
Stock Purchase Agreement (as defined in the Merger Agreement) for claims
relating to the Transferred Assets or the Business. The foregoing security
interest is expressly limited to rights to payment in respect of claims asserted
against the escrow accounts by the Sellers and shall not be deemed to grant to
the Purchaser any right to assert claims against such escrow accounts. The
Seller agrees with the Purchaser that (A) the Seller will not amend, waive or
terminate any portion of the Merger Agreement or the Escrow Agreement without
the prior written consent of the Purchaser unless such amendment, waiver or
termination would not adversely affect the Purchaser's rights under this
Agreement, and (B) the Seller will cause all persons having a security interest
in the Seller's indemnification rights under the
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Merger Agreement and the escrow account established under the Merger Agreement
to subordinate their security interests to the interests granted to the
Purchaser pursuant to this Section 11.7.
11.8 St. Joseph, Missouri Facility. If the Purchaser suffers or
incurs any Damages which are caused by or arise out of any environmental
condition at, or the failure to comply with any Environmental Law with respect
to, the St. Joseph, Missouri facility prior to the Closing Date, the Purchaser,
its successors, assigns and Representatives shall be indemnified by the Seller,
its successors and assigns against such Damages. This indemnification commitment
shall not be subject to the limitations set forth in Section 11.2(g) or 11.2(h),
but shall be subject to the provisions of Section 11.2(c) and 11.2(d).
ARTICLE XII
TERMINATION
12.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of the Purchaser and Windy Hill;
(b) by either the Purchaser or Windy Hill, upon at least 10 days
prior written notice, if there shall have been a material breach by the other
party of any of the representations, warranties, covenants or other obligations
under this Agreement which shall not have been waived by the non-breaching party
and which breach cannot be cured by the date set forth in Section 12.1(d) below;
(c) in the event the Purchaser receives notice under Section 6.4 of
a supplement or amendment to the Disclosure Schedule which has disclosed or,
which together with any prior supplements or amendments pursuant to such Section
discloses, any change or effect which has had or could reasonably be expected to
have a Seller Material Adverse Effect, then the Purchaser, Windy Hill and the
Seller shall, for a period of five business days after the receipt by the
Purchaser of any supplement or amendment, negotiate in good faith as to
adjustments, if any, to the terms of this Agreement, and if the Purchaser, Windy
Hill and the Seller do not agree to any such adjustments, the Purchaser may,
prior to the tenth business day after its receipt of the applicable supplement
or amendment, terminate this Agreement;
(d) by either the Purchaser or Windy Hill, upon written notice, if
the Closing shall not have occurred on or before August 31, 1997 for any reason
other than the failure or refusal of the party seeking to terminate to perform
any of its obligations hereunder;
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(e) by either the Purchaser or Windy Hill if any Governmental
Authority having competent jurisdiction shall have issued an order, decree or
ruling or taken any other action (other than a second request under the
Hart-Scott-Rodino Act) restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or the other Acquisition Documents,
and such order, decree, ruling or other action shall have become final and
non-appealable;
(f) by the Purchaser, if the Business Financial Statements for the
period ended January 31, 1997 are materially different from the Financial
Statements for the 9-month period then ended, other than as a result of the
allocation of costs and expenses related to bonus, profit sharing and corporate
administration, within nine business days of delivery of the Business Financial
Statements as provided in Section 6.7 of this Agreement; or
(g) by the Purchaser, if any of the environmental reports to be
delivered to the Purchaser pursuant to Section 6.10 of this Agreement (i)
disclose environmental matters not known or disclosed to the Purchaser prior to
the date hereof, or (ii) indicate that any environmental matters previously
disclosed to the Purchaser are more significantly extensive or costly to
remediate than the environmental reports delivered to the Purchaser on or prior
to the date of this Agreement have disclosed, within nine business days of
delivery of the last of such environmental reports to the Purchaser.
12.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.1 hereof, such termination shall be the sole
remedy, and, except with respect to Section 13.1 and Section 13.3 hereof, (i)
this Agreement shall forthwith become void and (ii) there shall be no liability
on the part of the Seller, Windy Hill, Hubbard, the Purchaser or any of their
Representatives; provided, however, that if such termination shall occur
pursuant to Section 12.1(b) of this Agreement, the breaching party shall be
fully liable for any and all Damages sustained or incurred by the other party
hereto or any of its Representatives as a result of or arising from such breach
and such other party shall be entitled to seek any remedies available to it at
law or in equity.
12.3 Employee Benefit Plans. For a period of one year following the
Merger: (i) the Purchaser will not materially amend, modify or terminate any
employee benefit plans (including vacation and holiday plans) adopted and
maintained pursuant to Section 10.3(a), and (ii) the Purchaser will not extend
coverage under any Employee Pension Benefit Plan adopted and maintained pursuant
to Section 10.3(a) other than to employees of the Business. Nothing herein
contained shall prohibit the Purchaser from amending, modifying or terminating
any employee benefit plan described in the preceding sentence following the
first anniversary of the Merger.
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ARTICLE XIII
MISCELLANEOUS
13.1 Public Announcements. Except as required by applicable Law or
any Governmental Authority with competent jurisdiction, prior to the Closing,
neither party hereto, nor their Representatives, shall issue any press release
or make any public announcement or disclosure with respect to this Agreement or
the transactions contemplated hereby without the prior written consent of the
other party hereto, which consent shall not be unreasonably withheld or delayed,
it being agreed that any disclosure or announcement required by applicable law
or any Governmental Authority shall be made only after prior written notice to
the other parties to this Agreement.
13.2 Amendment; Waiver. Neither this Agreement, nor any of the terms
or provisions hereof, may be amended, modified, supplemented or waived except by
a written instrument signed by all of the parties hereto (or, in the case of a
waiver, by the party granting such waiver). No waiver of any of the terms or
provisions of this Agreement shall be deemed to be or shall constitute a waiver
of any other term or provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver. No failure of a party hereto to insist
upon strict compliance by another party hereto with any obligation, covenant,
agreement or condition contained in this Agreement shall operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of a party hereto, such
consent shall be given in a manner consistent with the requirements for a waiver
of compliance as set forth in this Section 13.2.
13.3 Fees and Expenses.
(a) Except as otherwise expressly provided in this Agreement, each
of the parties hereto shall bear and pay all fees, costs and expenses incurred
by it or any of its Affiliates in connection with the origin, preparation,
negotiation, execution and delivery of this Agreement and the other Acquisition
Documents and the transactions contemplated hereby or thereby (whether or not
such transactions are consummated), including, without limitation, any fees,
expenses or commissions of any of its Representatives. Each party shall pay the
fees of American Appraisal Associates for any facility that shall be operated by
such party after the Closing Date at a rate of $10,000 per facility plus
reasonable expenses related to such facility.
(b) At the Closing, the Purchaser and the Seller shall each pay
one-half of the amount of all Liabilities for sales Taxes and transfer and
excise Taxes in connection with the transfer of assets herein provided
including, without limitation, the Real Property, and the Seller shall pay all
recording charges and filing fees in connection with the cancellation,
satisfaction or release of any recorded or filed document required to be
cancelled, satisfied or
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released in accordance with the terms and provisions of this Agreement. The
Purchaser and the Seller shall each pay one-half of all recording charges and
filing fees imposed in connection with recording the Deeds and Taxes imposed in
connection with the transfer of vehicles included in the Transferred Assets.
(c) At the Closing, the Purchaser shall pay $55,000 to the Seller to
reimburse the Seller for costs incurred in connection with the Surveys. At the
Closing, the Seller shall pay to the Purchaser one-half of the amount of all
"special assessments" levied against the Fee Property as of the Closing Date and
such "special assessments" shall not be accrued on the Closing Date Balance
Sheet.
(d) Upon receipt from the Purchaser of proper substantiating
documentation, the Seller shall reimburse the Purchaser for one-half (but not in
excess of $37,500 in total) of all legal, accounting and actuarial costs
incurred by the Seller in (i) establishing and qualifying the Hourly Pension
Plan and the Salaried Pension Plan, (ii) subsequently terminating the Hourly
Pension Plan and the Salaried Pension Plan and (iii) establishing and qualifying
defined contribution pension plans to replace the Hourly Pension Plan and the
Salaried Pension Plan.
13.4 Notices.
(a) All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and mailed or facsimiled
or delivered by hand or courier service:
(i) If to the Seller or Windy Hill, to:
Windy Hill Pet Food Acquisition Co.
c/o Dartford Partnership, L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ray Chung
Facsimile: 415-982-3023
Telephone: 415-982-3019
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With a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022-4873
Attention: Ann F. Chamberlain, Esq.
Facsimile: 212-750-9022
Telephone: 212-207-1200
(ii) If to the Purchaser, to:
Feed-Rite (US) Animal Feeds, Inc.
c/o Feed-Rite, Ltd.
17 Speers Road
Winnipeg, Manitoba
Canada R2J 1M1
Attention: M.E. Moloney
Facsimile: 204-235-1260
Telephone: 204-233-8418
With a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
Attention: Michael Trucano, Esq.
Facsimile: 612-340-2868
Telephone: 612-340-2600
(b) All notices and other communications required or permitted under
this Agreement which are addressed as provided in this Section 13.4 (i) if
delivered personally against proper receipt or by confirmed facsimile
transmission shall be effective upon delivery and (ii) if delivered (A) by
certified or registered mail with postage prepaid shall be effective five (5)
business days or (B) by Federal Express or similar courier service with courier
fees paid by the sender, shall be effective two (2) business days following the
date when mailed or couriered, as the case may be. Any party hereto may from
time to time change its address for the purpose of notices to such party by a
similar notice specifying a new address, but no such change shall be deemed to
have been given until it is actually received by the party sought to be charged
with its contents.
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13.5 Alternative Dispute Resolution.
(a) Windy Hill, the Seller and the Purchaser recognize that a bona
fide dispute as to certain matters may from time to time arise after the Closing
Date relating to rights or obligations under this Agreement. In such instance
(other than with respect to the Closing Date Balance Sheet), Windy Hill, the
Seller or the Purchaser, as the case may be, may by written notice to the other
have such dispute referred to the representative of Windy Hill and the Seller
and the representative of the Purchaser designated below or his successor, for
attempted resolution by good faith negotiation within 30 days after such notice
is received. The designated representative of Windy Hill and the Seller is James
B. Ardrey; the designated representative of the Purchaser is M.E. Moloney. Any
settlement reached by the representatives under this Section 13.5(a) shall not
be binding until reduced to writing and signed by them. When reduced to writing,
such settlement agreement shall supersede all other agreements, written or oral,
to the extent such agreements specifically pertain to the matters so settled. If
the representatives of the Purchaser and the Seller are unable to resolve such
dispute within such 30-day period, either may demand arbitration pursuant to
Section 13.5(b).
(b) Except as provided below, any controversy or claim arising out
of or relating to this Agreement shall be settled by arbitration in Chicago,
Illinois at a time and location designated by the arbitrator, but not exceeding
90 days after demand for arbitration has been made. Arbitration shall be
conducted by the American Arbitration Association in accordance with its Rules
of Commercial Arbitration, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator shall be a retired state or federal judge experienced in business
litigation or any attorney who has practiced business litigation for at least
ten years. Arbitration will be conducted pursuant to the provisions of this
Agreement and the Commercial Arbitration Rules of the American Arbitration
Association. Limited civil discovery shall be permitted for the production of
documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of and may be decided by the arbitrator. The arbitrator
shall assess the costs and expenses of the arbitration against the parties in
such proportion as may be fair and equitable. Nothing herein contained shall bar
either party from seeking equitable remedies in a court of appropriate
jurisdiction.
(c) In the event a dispute arises under this Agreement with respect
to a claim by the Purchaser for indemnification from the Seller in accordance
with Section 11.2(a) of this Agreement with respect to which the Seller has
asserted or intends to assert a claim pursuant to Section 9.2(a) of the Merger
Agreement against the Escrow Amount, as defined therein, and which is or becomes
subject to the alternative dispute resolution mechanism contained in Section
9.04 of the Merger Agreement, the Seller shall use commercially reasonable
efforts to have the Purchaser and its representative named in Section 13.5(a)
above participate in the alternative dispute resolution procedure described in
Section 9.04(a) or 9.04(b) of the Merger Agreement. In the event the Shareholder
Representative, as defined in
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<PAGE>
the Merger Agreement, permits the Purchaser's participation in the alternative
dispute resolution, Windy Hill, the Seller and the Purchaser shall be bound by
the outcome of such resolution as provided in Section 13.5(a) and (b) hereof. In
the event the Shareholder Representative does not permit the Purchaser's
participation in the alternative dispute resolution, the representative of Windy
Hill and the Seller agrees to act in accordance with the commercially reasonable
instructions of the Purchaser and its counsel and Windy Hill, the Seller and the
Purchaser shall be bound by the outcome of such resolution.
(d) In the event that Purchaser makes a claim for indemnification
against the Seller pursuant to Section 11.2(a) of this Agreement with respect to
a matter which Windy Hill or the Seller has already made a claim against the
Escrow Amount and such claim has been resolved in accordance with Sections
11.2(a) of the Merger Agreement, such previous resolution shall be binding upon
the Purchaser as if made in accordance with this Section 13.5 of this Agreement.
13.6 Assignment. This Agreement and all of the terms and provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder of the parties hereto
may be assigned by any of the parties hereto without the prior written consent
of the other parties. Notwithstanding the foregoing, the Purchaser may assign
its rights to indemnification hereunder to a lender or lenders providing
financing for the transactions contemplated hereby.
13.7 Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
internal laws of the State of Minnesota, without giving effect to the conflicts
of laws principles thereof.
13.8 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not constitute a part hereof or define,
limit or otherwise affect the meaning of any of the terms or provisions hereof.
13.9 Entire Agreement. This Agreement and the other Acquisition
Documents embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements, commitments, arrangements, negotiations or understandings, whether
oral or written, between the parties hereto, their respective Affiliates or any
of the Representatives of any of them with respect thereto, other than the
Confidentiality Agreement, dated March 27, 1997 between the Purchaser and Windy
Hill. There are no agreements, covenants or undertakings with respect to the
subject matter of this Agreement and the Acquisition Documents other than those
expressly set forth or referred to herein or therein and no representations or
warranties of any kind or nature whatsoever, express or implied including,
without limitation, with respect to the information contained in the Hubbard
Milling Company Confidential Information
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<PAGE>
Memorandum prepared by CS First Boston respecting Hubbard, are made or shall be
deemed to be made herein by the parties hereto except those expressly made in
this Agreement and the other Acquisition Documents.
13.10 Severability. Each term and provision of this Agreement
constitutes a separate and distinct undertaking, covenant, term and/or provision
hereof. In the event that any term or provision of this Agreement shall be
determined to be unenforceable, invalid or illegal in any respect, such
unenforceability, invalidity or illegality shall not affect any other term or
provision hereof, but this Agreement shall be construed as if such
unenforceable, invalid or illegal term or provision had never been contained
herein. Moreover, if any term or provision of this Agreement shall for any
reason be held to be excessively broad as to time, duration, activity, scope or
subject, the parties request that it be construed, by limiting and reducing it,
so as to be enforceable to the fullest extent permitted under applicable Law.
13.11 No Third Party Beneficiaries. Except as and to the extent
otherwise provided herein, nothing in this Agreement is intended, nor shall
anything herein be construed, to confer any rights, legal or equitable, in any
Person other than the parties hereto and their respective successors and
permitted assigns.
13.12 References to Articles, Etc. All references herein to
Articles, Sections, Exhibits and Schedules shall be to Articles and Sections of
and Exhibits and Schedules to this Agreement.
13.13 References to "Herein," Etc. As used in this Agreement, the
words "herein", "hereof", "hereby" and "hereunder" shall refer to this Agreement
as a whole, and not to any particular section, provision or subdivision of this
Agreement.
13.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute one and the same instrument.
13.15 Injunctive Relief. The Seller and Feed-Rite, Ltd. acknowledge
and agree that their agreements and covenants in Section 10.7 of this Agreement
relate to matters which are of a special, unique and extraordinary character and
are of vital concern to the Seller and Windy Hill; further, the Seller and
Feed-Rite, Ltd. acknowledge and agree that the Seller and Windy Hill have
entered into this Agreement in reliance upon their agreements and covenants
contained in Section 10.7 of this Agreement. The Seller and Feed-Rite, Ltd.
further acknowledge and agree that any violation, breach or threatened breach of
any of their agreements or covenants in Section 10.7 of this Agreement will
result in irreparable damage to the Seller and Windy Hill for which there is no
adequate remedy at law. Therefore, the Seller and Feed-Rite, Ltd. agree that the
Seller and Windy Hill shall have the right in addition to any other rights they
may have, to obtain injunctive and other equitable relief for any violation,
breach or threatened breach of Section 10.7 of this Agreement by the Seller or
Feed-Rite, Ltd.
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<PAGE>
[Page 65 intentionally omitted]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset
Purchase Agreement to be duly executed as of the day and year first above
written.
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Ray Chung
--------------------------------------
Name:
Title:
WINDY HILL PET ACQUISITION CO.
By /s/ Ray Chung
--------------------------------------
Name:
Title:
FEED-RITE (US) ANIMAL FEEDS, INC.
By /s/ M.E. Moloney
--------------------------------------
Name: Maurice E. Moloney
Title: President & CEO
With Respect to Sections 10.7 and 13.15
Only:
FEED-RITE, LTD.
By /s/ M.E. Moloney
--------------------------------------
Name: Maurice E. Moloney
Title: President & CEO
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<PAGE>
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT made this ___ day of May, 1997
between Feed-Rite (US) Animal Feeds, Inc., a Minnesota corporation
(the"Purchaser") and Windy Hill Pet Food Company, Inc., a Minnesota corporation
(the "Seller").
W I T N E S S E T H:
WHEREAS, pursuant to the Asset Purchase Agreement, dated April __,
1997 (the "Purchase Agreement"), by and among the Purchaser, Windy Hill Pet Food
Acquisition Co. ("Acq. Co.") and Windy Hill Pet Food Company, Inc., a Delaware
corporation, the Seller agrees to transfer, sell, convey, assign and deliver to
the Purchaser, and the Purchaser agrees to purchase and accept as of the Closing
Date, the Transferred Assets; and
WHEREAS, Acq. Co. was merged with and into the Seller, which was
formerly known as Hubbard Milling Company, on May [__], 1997 pursuant to the
provisions of the Minnesota Business Corporation Act; and
WHEREAS, the Purchase Agreement provides for the Seller's assignment
of certain contracts, agreements and commitments to the Purchaser; and
WHEREAS, the Purchase Agreement provides for the Purchaser's
assumption of the Assumed Liabilities.
NOW THEREFORE, in consideration of the premises and in accordance
with the provisions of the Purchase Agreement, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
Section 1. Definitions.
1.1. Unless otherwise herein defined all terms used herein shall
have the respective meanings ascribed to them in the Purchase Agreement.
1.2. Words importing singular number shall include the plural number
and vice versa. The words "herein," "herewith," "hereby," "hereof" and words of
similar import shall refer to this Agreement as a whole, and not any particular
section provision or subdivision of this Agreement.
<PAGE>
Section 2. Assignment and Assumption of Contracts and Commitments.
2.1. The Seller hereby transfers, sells, conveys, assigns and
delivers to the Purchaser, all of the Seller's right, title and interest in and
to all contracts, agreements, commitments, grants, sales orders, arrangements
and undertakings, whether oral or written, included in the Transferred Assets
(the "Assigned Contracts"). Such transfer, sale, conveyance, assignment and
delivery shall be effective as of the date hereof.
2.2. The Purchaser hereby absolutely and irrevocably accepts and
assumes to be solely liable and responsible for and to perform all rights,
liabilities and obligations of the Seller under or pursuant to the Assigned
Contracts, all subject to the terms and conditions of the Purchase Agreement.
Such acceptance, assumption and covenant shall be effective as of the date
hereof.
2.3. Notwithstanding the foregoing, to the extent that any of the
Assigned Contracts are not assignable without the consent of another party, the
assignment of the Seller's right, title and interest in such Assigned Contracts,
and the assumption by the Purchaser of any liability or obligation of the Seller
relating to any such Assigned Contracts, is subject to obtaining any such
consents to assignment.
2.4. It is understood and agreed that the Purchaser is not, by this
instrument, assuming any obligation or liability of Seller that is not an
Assumed Liability and that Seller continues to be liable for any and all
obligations and liabilities that are not Assumed Liabilities including, without
limitation, the Excluded Liabilities.
Section 3. Separate Agreement.
Notwithstanding any other provisions of this agreement to the
contrary, nothing contained herein shall in any way supersede, modify, replace,
amend, change, rescind, waive, exceed, expand, enlarge or in any way affect the
provisions, including the warranties, covenants, agreements, conditions,
representations or, in general any of the rights and remedies, and any of the
obligations and indemnifications of the Seller or the Purchaser set forth in the
Purchase Agreement nor shall this agreement expand or enlarge any remedies under
the Purchase Agreement including without limitation any limits on
indemnification specified therein. This agreement is intended only to effect the
assignment of certain contracts and commitments and the assumption of certain
liabilities pursuant to the Purchase Agreement and shall be governed entirely in
accordance with the terms and conditions of the Purchase Agreement.
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<PAGE>
Section 4. Non-Merger; Miscellaneous.
4.1. The agreements, obligations, assumptions and covenants of the
Purchaser and the Seller under the Purchase Agreement are not merged into this
agreement and shall, to the extent provided in the Purchase Agreement, survive
the execution and delivery of this agreement, and the performance of the
consummation of all transactions provided for in the Purchase Agreement.
4.2. This Assignment and Assumption Agreement shall be binding upon
and enforceable against the Purchaser, its assigns and successors.
4.3. This Assignment and Assumption Agreement shall be governed by
and construed with accordance with the internal laws of the State of Minnesota,
without giving effect to the conflicts of laws principles thereof.
4.4. This Assignment and Assumption Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original and all of
which, when taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FEED-RITE (US) ANIMAL FEEDS, INC.
By
------------------------------------------
Name:
Title:
WINDY HILL PET FOOD COMPANY, INC.
By
------------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT B
BILL OF SALE
KNOW ALL PEOPLE BY THESE PRESENTS, Windy Hill Pet Food Company,
Inc., a Minnesota corporation, formerly known as Hubbard Milling Company
("Seller"), in consideration of the Purchase Price set forth in Section 2.5 of
the Asset Purchase Agreement, dated April [___], 1997, by and among Feed-Rite
(US) Animal Feeds, Inc., a Minnesota corporation ("Purchaser"), Windy Hill Pet
Food Acquisition Co. (which was merged into the Seller) and WHPF II, Inc.,
formerly known as Windy Hill Pet Food Company, Inc., a Delaware corporation (the
"Purchase Agreement"), the receipt of which is hereby acknowledged by Seller,
hereby grants, bargains, sells, transfers, assigns, sets over, conveys, and
delivers to Purchaser, its successors and assigns, all of Seller's right, title
and interest in and to all of the Transferred Assets as defined and more
specifically described in the Purchase Agreement. All capitalized terms used
herein not otherwise defined herein shall have the meanings ascribed to them in
the Purchase Agreement.
Seller covenants and agrees that Seller shall, whenever and as often
as reasonably requested to do so by Purchaser or its successor and assigns,
promptly execute, acknowledge and deliver such other documents and instruments
of conveyance and transfer and take such other action as may reasonably be
required to more effectively convey, transfer and to vest in Purchaser, its
successor and assigns, and to put Purchaser and its successors and assigns in
possession of all and each of the Transferred Assets conveyed, transferred and
delivered under this Bill of Sale.
Notwithstanding any other provisions of this Bill of Sale to the
contrary, nothing contained in this Bill of Sale shall in any way supersede,
modify, replace, amend, change, rescind, waive, exceed, expand, enlarge or in
any way affect the provisions, including the warranties, covenants, agreements,
conditions, representations or, in general, any of the rights and remedies, and
any of the obligations and indemnifications of Seller or Purchaser set forth in
the Purchase Agreement nor shall this Bill of Sale expand or enlarge any
remedies under the Purchase Agreement including without limitation any limits on
indemnification specified therein. This Bill of Sale is intended only to effect
the transfer of certain property to be transferred pursuant to the Purchase
Agreement and shall be governed entirely in accordance with the terms and
conditions of the Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Bill of Sale
on this ___ day of May, 1997.
WINDY HILL PET FOOD COMPANY, INC.
By ____________________
Name:
Title:
<PAGE>
EXHIBIT C
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement"), made and entered into
this ____ day of May, 1997, by and between Windy Hill Pet Food Company, Inc., a
Minnesota corporation ("Windy Hill"), and Feed-Rite (US) Animal Feeds, Inc., a
Minnesota corporation ("Feed-Rite").
W I T N E S S E T H:
WHEREAS, Windy Hill is comprised of two main divisions, the Pet Food
Division ("Pet Division") and the Animal Feed Division ("Feed Division"); and
WHEREAS, the Pet Division manufactures certain Pet Products that the
Feed Division purchases as a distributor to sell to its customers and the Feed
Division manufactures certain Feed Products that are purchased by the Pet
Division to sell as a distributor to its customers (collectively, the "sales
arrangement"); and
WHEREAS, Windy Hill and Feed-Rite have entered into an Asset
Purchase Agreement, dated as of April 25, 1997, whereby Feed-Rite shall acquire
from Windy Hill substantially all the assets and certain liabilities comprising
the Feed Division; and
WHEREAS, Windy Hill and Feed-Rite desire to continue the sales
arrangement after the sale and purchase contemplated by the Asset Purchase
Agreement.
NOW THEREFORE, for and in consideration of the premises and of the
covenants and conditions hereinafter set forth, the parties agree as follows:
1. Definitions.
1.1. "Distributor" shall mean the distributor of the other party's
Products.
1.2. "Feed Products" shall mean only those products manufactured and
packaged by Feed-Rite and listed on Exhibit A attached hereto. Windy Hill
acknowledges that Feed-Rite may produce or have available for marketing other
products that it will not include on Exhibit A.
1.3. "Pet Products" shall mean only those products manufactured and
packaged by Windy Hill and listed on Exhibit B attached hereto. Feed-Rite
acknowledges that Windy Hill may produce or have available for marketing other
products that it will not include on Exhibit B.
<PAGE>
1.4. "Products" shall mean the Pet Products and the Feed Products.
1.5. "Proprietary Information" shall mean any and all confidential
information now or hereafter owned or used by the parties, including but not
limited to all processes, formulas, know-how techniques, technical plans, sales
plans, marketing plans, strategies, customer lists and supplier lists relating
to the manufacture, marketing and sale of the Products.
1.6. "Seller" shall mean the party selling the Products to the
Distributor as provided in Section 2 of this Agreement.
1.7. "Trademarks" shall mean the marks and other designations listed
on Exhibit C attached hereto and as the same may be amended, in writing, by the
parties to include such other trademarks, service marks, brand names and other
designations as may hereafter be used by Parties in conjunction with the
distribution of the Products.
1.8. "Designated Territory" shall mean the shaded area shown on the
map of the contiguous 48 United States attached hereto as Exhibit D.
2. Mutual Appointment as Distributors; Grant of License and
Exclusivity.
2.1. Subject to the terms and conditions of this Agreement, Windy
Hill hereby appoints Feed-Rite, and Feed-Rite hereby accepts such appointment,
as the exclusive independent distributor of the Pet Products in the Designated
Territory during the Term, as defined below. Feed-Rite hereby acknowledges that
Windy Hill may appoint other distributors or dealers outside the Designated
Territory and, except as provided in Section 2.4 below, may engage in the
distribution and sale of the Pet Products within or without the Designated
Territory.
2.2. Subject to the terms and conditions of this Agreement, during
the Term, Windy Hill hereby grants to Feed-Rite a nonexclusive license to use
the Trademarks listed in Section I of Exhibit C attached hereto (the "Windy Hill
Trademarks") only on and in connection with the distribution and sale of Pet
Products purchased by Feed-Rite from Windy Hill pursuant to this Agreement in
the Designated Territory during the Term.
2.3. In consideration of the appointment of Feed-Rite as the
exclusive distributor of the Pet Products in the Designated Territory, Feed-Rite
agrees that during the Term it will not buy any extruded pet food intended for
consumption by dogs, cats or fish from any manufacturer or producer of such
products other than Windy Hill.
2.4. Windy Hill agrees that during the Term it will not distribute
or sell any Pet Product under the names "Lassy" or "Hubbard" or any trademark,
trade dress format,
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<PAGE>
logo, trade name or other name which contains either "Lassy" or "Hubbard" or is
confusingly similar to such Trademarks to any customer other than customers to
which the Pet Division sold Pet Products prior to the date hereof within the
Designated Territory without the prior written consent of Feed-Rite, which
consent may not be unreasonably withheld or delayed.
2.5. Subject to the terms and conditions of this Agreement,
Feed-Rite hereby appoints Windy Hill, and Windy Hill hereby accepts such
appointment, as a non-exclusive independent distributor of the Feed Products
during the Term. Windy Hill hereby acknowledges that Feed-Rite may appoint other
distributors or dealers, and may otherwise engage in the distribution or sale of
the Feed Products.
2.6. Subject to the terms and conditions of this Agreement, during
the Term, Feed-Rite hereby grants to Windy Hill a nonexclusive license to use
the Trademarks listed in Section II of Exhibit C attached hereto (the "Feed-Rite
Trademarks") only on and in connection with the distribution and sale of Feed
Products purchased by Windy Hill from Feed-Rite pursuant to this Agreement.
2.7. In consideration of the covenant of Feed-Rite contained in
Section 2.4 of this Agreement, Windy Hill agrees that during the Term it will
not buy any animal feed products intended for consumption by ducks, geese,
pheasants, rabbits, chickens or horses from any manufacturer or producer of such
products other than Feed-Rite.
3. Trademark Ownership and Protection.
3.1. Each party acknowledges and agrees that, as between the
parties, Windy Hill is the sole and exclusive owner of the Windy Hill Trademarks
and Feed-Rite is the sole and exclusive owner of the Feed-Rite Trademarks.
Neither party shall acquire nor claim any ownership interest to the other
party's Trademarks by virtue of such party's license or use of such Trademarks
and all use by either party of the other party's Trademarks shall inure to the
benefit of the owner of such Trademarks. Furthermore, each party acknowledges
and agrees that (i) it shall have no rights to use the other party's Trademarks
in any manner whatsoever, except as expressly provided in this Agreement
including, but not limited to, in connection with any products other than the
Products purchased by such party from the other party pursuant to this
Agreement, and (ii) all rights, licenses and privileges not specifically granted
herein are excluded from this Agreement. Without limiting the foregoing, each
party acknowledges and agrees that the other party shall have the right to use,
license or otherwise exploit its Trademarks in any manner, in its sole
discretion, in connection with any products or services including, but not
limited to, the Products.
3.2. Neither party shall be permitted to repackage or otherwise
alter any Products bearing the other party's Trademarks it purchases from the
other party pursuant to this Agreement. Furthermore, each party shall cause to
appear on any other materials
- 3 -
<PAGE>
whatsoever on or in connection with which the other party's Trademarks are used,
such legends, markings and notices as such party may reasonably prescribe in
order to give appropriate and customary notices of any trademark or other
rights. To confirm compliance with the foregoing, each party shall submit to the
other copies of its sole use of the other party's Trademarks on promotional,
advertising or other materials for approval by such party prior to use.
3.3. Each party further acknowledges and agrees that it shall not
(i) use, register or attempt to register any trademark, trade dress format,
logo, trade name or other design which is confusingly similar to the other
party's Trademarks or (ii) contest or assist any other party in contesting the
validity of the other party's Trademarks or ownership thereof. In addition, each
party agrees to assist the other party, at the expense of the party seeking
assistance, in maintaining any registrations of such party's Trademarks and/or
in recording this Agreement with the appropriate governmental agencies.
Notwithstanding the foregoing, Windy Hill will not object to the use by
Feed-Rite of the name "Mother Hubbard" in connection with the distribution,
marketing and sale of dog food in Australia; provided, however, Windy Hill makes
no representation as to the availability of such name and shall have no
liability to Feed-Rite under Section 6 of this Agreement or otherwise arising
out of Feed-Rite's use of such name.
4. Sale of Products; Price; Payment.
4.1. The Distributor shall order the Products by telephone or by
delivery of a written purchase order to the Seller. Orders shall be binding upon
the Seller only upon its written acceptance of the order or upon shipment of the
Products. The Seller shall ship the Products to such locations of the
Distributor as the Distributor shall direct within the number of days after
placement of the order as has been the past practice of the Pet Division or Feed
Division, as applicable.
4.2. This Agreement sets forth the exclusive contract terms between
the parties relating to the Products and shall apply to all orders for the
Products. The Seller rejects any terms in any order forms submitted by the
Distributor or other documents of the Distributor that are different from or
additional to the provisions hereof and no such terms shall be binding upon the
Seller notwithstanding the Seller's acceptance and shipment of Products ordered
in the Distributor's orders containing such terms.
4.3. All Pet Products shall be sold F.O.B. such facility as Windy
Hill and Feed-Rite shall agree with respect to any purchase order, at a price
that is equal to the sum of (i) the market replacement cost to Windy Hill of
ingredients (including 6% shrinkage), the cost to Windy Hill of packaging
(including 1% shrinkage) and the actual cost to Windy Hill of baler and stretch
wrap charges, plus (ii) the toll rates per ton for such Pet Products shown on
Exhibit E attached hereto (the "Pet Product Price"). The toll rate shall
increase annually
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<PAGE>
on each April 1 during the term hereof by the Consumer Price Index for All Urban
Consumers published by The Bureau of Labor Statistics of the U.S. Department of
Labor, Minneapolis-St. Paul for the twelve month period preceding such April 1.
4.4. All Feed Products shall be sold F.O.B. such facility as
Feed-Rite and Windy Hill shall agree with respect to any purchase order, at a
price equal to (i) the Manufactured Cost to Feed-Rite of the Feed Products (as
defined below), plus (ii) one-half of the Profits, as defined in paragraph (b)
below, generated by the sale of the Feed Products by Windy Hill (the "Profits,"
(i) and (ii) together the "Price"), with the Price payable as follows:
(a) Feed-Rite shall invoice Windy Hill as provided in Section
4.5 for the portion of the Price described in 4.4(i) above, which invoiced
amounts shall be payable as provided in Section 4.5 of this Agreement.
(b) In addition, within 30 days of the end of each calendar
quarter, Windy Hill shall provide an accounting, in accordance with generally
accepted accounting principles, of the Profits for the preceding quarter (the
"accounting"), accompanied by payment of the Profits payable to Feed-Rite for
such calendar quarter in accordance with Section 4.4(ii) above.
(c) For purposes of this Section 4.4, "Profits" shall mean
sales price, net of all allowances, discounts and promotions, minus the
Manufactured Cost already payable by Windy Hill pursuant to Section 4.4(a).
"Manufactured Cost" shall mean the market replacement cost to Feed-Rite of
ingredients (including 1% shrinkage), the cost to Feed-Rite of packaging
(including 1% shrinkage) and manufacturing overhead. Manufacturing overhead
shall be determined with reference to the plant in which the product is produced
and shall be allocated on a per unit basis consistent with prior years.
(d) Upon reasonable prior notice to Windy Hill, Feed-Rite
shall have the right to review Windy Hill's books and records in connection with
the accounting and the Pet Product Price and Windy Hill shall have the right to
review Feed-Rite's books and records in connection with the determination of
Manufactured Cost.
4.5. All sales pursuant to purchase orders will be invoiced to the
Distributor and, except as provided in Section 4.4(b), the terms of payment
shall be net within 15 days of the date of invoice by the Seller.
4.6. In the event of a conflict in terms specified in a purchase
order and any confirmation thereof by the Seller, the latter shall prevail. In
the event of a conflict in the terms of this Agreement and the Seller's
confirmation, the former shall prevail.
- 5 -
<PAGE>
4.7. The Distributor shall develop, subject to review by Seller and
Section 3.2 of this Agreement, miscellaneous sales materials pertaining to the
Products from time to time, and Distributor shall maintain an adequate supply of
such sales materials for use in its marketing efforts hereunder.
5. Covenants of Distributor.
5.1. Distributor shall use its best efforts to develop acceptance
and sales of the Products by actively promoting the Products, filling orders
promptly, and providing prompt and adequate product service, all at
Distributor's own expense. Distributor agrees to cooperate fully with Seller in
regard to all sales activities related to the Products.
5.2. (a) Without limiting the generality of the foregoing, Feed-Rite
agrees to purchase from Windy Hill at least 7,500 tons of Pet Products in each
year, beginning April 1 and ending March 31, prorated for any partial year,
during the term of this Agreement (the "Quota"), such minimum requirement to be
reviewed and adjusted from time to time during the continuation of this
Agreement by Windy Hill after consultation with Feed- Rite. To meet this
obligation, Feed-Rite shall at all times during the term of this Agreement
maintain an inventory of the Pet Products adequate in quantity to satisfy the
demand for the Pet Products. Feed-Rite shall furnish to Windy Hill, upon Windy
Hill's reasonable requests from time to time, complete information relating to
promotional, sales and service activities with respect to the Pet Products,
including information on competitive products which may come to Feed-Rite's
attention during the continuance of this Agreement. Feed-Rite shall cooperate
fully with Windy Hill in dealing with customer complaints concerning any of the
Pet Products and shall take action to resolve such complaints as may be
reasonably requested by Windy Hill.
(b) Without limiting the generality of the foregoing, Windy
Hill agrees to purchase from Feed-Rite at least 3,500 tons of the Feed Products
in each year, beginning April 1 and ending March 31, prorated for any partial
year, during the term of this Agreement (the "Quota"), such minimum requirement
to be reviewed and adjusted from time to time during the continuation of this
Agreement by Feed-Rite after consultation with Windy Hill. To meet this
obligation, Windy Hill shall at all times during the term of this Agreement
maintain an inventory of the Feed Products adequate in quantity to satisfy the
demand for the Feed Products. Windy Hill shall furnish to Feed-Rite, upon
Feed-Rite's reasonable requests from time to time, complete information relating
to promotional, sales and service activities with respect to the Feed Products,
including information on competitive products which may come to Windy Hill's
attention during the continuance of this Agreement. Windy Hill shall cooperate
fully with Feed-Rite in dealing with customer complaints concerning any of the
Feed Products and shall take action to resolve such complaints as may be
reasonably requested by Feed-Rite.
- 6 -
<PAGE>
5.3. Distributor agrees to make and maintain in effect at all times
during the term of this Agreement the necessary registrations with any and all
federal, state and local governmental agencies, commercial registries, chambers
of commerce and other offices which may be required under law (including any
special registrations or notices particularly applicable to the sale of the
Products) in order for Distributor properly to conduct its commercial business
generally and in connection with this Agreement in particular.
5.4. Distributor shall refrain from doing any of the following
without the prior written consent of Seller:
(a) removing or altering, or permitting the removal or
alteration of, any patent numbers, trade names, trademarks, notices, serial
numbers, labels, tags or other identifying marks, symbols or legends of Seller
affixed to the Products or their packaging;
(b) using, or permitting the use of, the Trademarks, except as
contemplated by Sections 2 and 3 to the extent such use is necessary to effect
Distributor's obligations to promote and sell the Products;
(c) affixing, or permitting the affixing of, any of
Distributor's (or a subdistributor's, dealer's or representative's) own
trademarks, identifying marks, symbols or legends to the Products or their
packaging, or taking any other action which may be detrimental to Seller's
proprietary interests in the Products, the Trademarks or the Proprietary
Information or Seller's trademarks, service marks, trade names, corporate names,
patents, copyrights, or any other intellectual property rights used in
connection herewith, including, without limitation, disclosing to any third
party any Proprietary Information which Distributor may have gained as a result
of this contractual relationship with Seller;
(d) engaging in, or permitting any subdistributor, dealer or
representative to engage in, any trade practice which would create liability for
or otherwise injure the reputation of Seller or the Products (including, without
limitation, failing to use its best efforts to maintain the condition and
quality of the Products); or
(e) allowing the Products to be sold in such a manner so as to
permit or facilitate the distribution of the Products outside of Distributor's
existing dealer network in place as of the date hereof, or reasonable future
expansions thereon. Affiliation or other joint arrangements with networks of
other distributors or persons or companies related to Distributor shall not be
deemed to constitute reasonable future expansions of the existing dealer network
without prior consent of Seller.
5.5. Distributor shall make no warranties with respect to the
Products which exceed the warranty made by Seller to Distributor. Seller
reserves the right to change the warranty terms at its sole discretion from time
to time during the continuance of this
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<PAGE>
Agreement. Seller's sole warranties to Distributor are (i) that the Products
sold hereunder meet the guaranteed analysis printed on the product label used in
the packaging for such Products (the "Guaranteed Analysis"), which Seller may
change at its sole discretion form time to time, and (ii) that such Products are
fit to be fed to animals of the species referred in such product label, provided
such Products are fed to such animals in accordance with the instructions
included in such product label. EXCEPT AS EXPRESSLY SET FORTH ABOVE, SELLER
MAKES NO REPRESENTATION OR WARRANTY TO DISTRIBUTOR OF ANY KIND, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PRODUCTS, WHETHER AS TO MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OR
TRADE OR ANY OTHER MATTER. NO EMPLOYEE, REPRESENTATIVE OR AGENT OF SELLER HAS
ANY AUTHORITY TO BIND SELLER TO ANY AFFIRMATION, REPRESENTATION OR WARRANTY
EXCEPT AS STATED IN THIS WRITTEN WARRANTY POLICY.
5.6. If any lot of Product fails to meet the Guaranteed Analysis,
Distributor shall return such Product to Seller's plant, freight collect, and
Seller shall replace such Product at its expense. If any lot of Product returned
by Distributor is subsequently shown by independent laboratory analysis to meet
the Guaranteed Analysis, Distributor shall promptly reimburse Seller for any
freight or other charges incurred in the return of such Product.
5.7. Distributor shall make no false representation, or permit any
subdistributor, dealer or representative to make any false representation
regarding Seller or the Products in promoting the sales of the Products.
5.8. Distributor shall comply with, and ensure compliance of its
subdistributors, dealers and representatives with, all governmental regulations
applicable to Distributor's purchase, storage, recordkeeping and sale of the
Products. The purchase price of Products purchased by Distributor hereunder
shall be payable to Seller free and clear of and without deduction for, and
Distributor shall be solely responsible for and shall pay, any taxes assessed or
imposed upon the purchase of Products hereunder (other than taxes imposed upon
the income of Seller and feed tonnage taxes).
5.9. Neither Distributor nor any affiliate or subsidiary of
Distributor shall during the continuance of this Agreement or thereafter
disclose to any third party any Proprietary Information which Distributor may
have gained as a result of this contractual relationship with Seller. In
addition, Distributor agrees not to use or permit the use of, for any purpose
whatsoever during the continuance of this Agreement or thereafter, any and all
such Proprietary Information.
- 8 -
<PAGE>
6. Indemnification.
6.1. Seller shall indemnify, hold harmless, and defend Distributor
against any claim made or action brought against Distributor by any person
arising out of personal injury or property damage alleging or based on a theory
that any Product delivered to Distributor is in breach of the warranty of Seller
set forth in Section 4.7 above; provided that Seller receives prompt notice of
said claim or action and is afforded the opportunity to defend against it and
further provided that such indemnification shall specifically exclude any claim,
action or other liability attributable to Distributor's handling of Product
after delivery to Distributor or any other act or omission of Distributors or
others acting on its behalf, including, without limitation, any common carrier
with which Product has been placed for shipment.
6.2. Distributor shall indemnify, hold harmless and defend Seller
against any claim made or action brought against Seller by any person arising
out of personal injury or property damage attributable to Distributor's handling
of Product after delivery to Distributor or any other act or omission of
Distributor or others acting on its behalf, including, without limitation, any
common carrier with which Product has been placed for shipment, provided that
Distributor receives prompt notice of said claim or action and is afforded the
opportunity to defend against it.
7. Insurance. Each party will carry and maintain product liability
insurance with an insurer acceptable to the other party with limits of liability
of at least $1,000,000 combined single limit and shall, upon request, provide to
the other party a Certificate of Insurance evidencing such coverage.
8. Force Majeure. The consequences, direct or indirect, of labor
troubles, fire, wind, earthquake, war, flood, shortage of materials or
transportation, unavailability of ingredients, or any other causes beyond the
reasonable control of Seller, shall excuse performance by Seller under this
Agreement to the extent to which such performance has been prevented by such
occurrence, and, without limiting the generality of the foregoing, Seller shall
not be deemed to be in breach of this Agreement thereby. In the event Seller
shall be so unable to perform any of its obligations as undertaken, it shall
promptly advise Distributor in writing of its inability to perform any of its
obligations as undertaken and of the expected duration of any such inability. If
Seller is unable to perform under this Agreement for more than 30 days as a
result of a force majeure event with respect to one of its facilities, and
Seller and Distributor have not agreed within such 30-day period that Seller may
substitute Products manufactured at another facility during the Distributor's
period of inability at a facility, Distributor may thereafter buy the amount of
Products that Seller is unable to provide from any other producer, manufacturer
or distributor; provided, however, that all such Products must meet the quality
standards and trademark usage requirements set forth in Section 3 of this
Agreement. Distributor shall submit a representative sample of all such
- 9 -
<PAGE>
products to Seller in advance of sale in order to enable Seller to confirm
compliance with the foregoing. Seller shall have the right to allocate Products
between its various distributors and customers during a period of shortages
without incurring any liability whatsoever to Distributor.
9. Term and Termination.
9.1. Term. This Agreement shall continue in force and effect for a
term of three (3) years commencing on the date hereof; provided, however, that
this Agreement shall at all times be subject to early termination as herein
provided.
9.2. Early Termination.
(a) Seller and Distributor may terminate this Agreement in whole or
in part at any time by mutual written agreement.
(b) Either party may terminate this Agreement by written notice to
the other party and/or, subject to the provisions of Section 10.8 hereof, seek
any legal or equitable remedy available to it if the other party breaches in any
material respect any substantive provision of this Agreement, provided, however,
if the breach is curable such notice shall not be effective unless and until
such breach remains uncured for a period of ten days after delivery of such
notice.
(c) Either party may terminate this Agreement by written notice to
the other party if any of the following events occurs:
(1) All or any substantial part of the other party's property
shall be condemned, seized or otherwise appropriated, or the custody or control
of such property shall be assumed by any person or agency acting or purposing to
act under authority of any government (de jure or de facto) or the other party
shall be prevented from exercising normal managerial control over all or any
substantial part of its property by any such person or agency;
(2) The other party shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator, (ii) be unable, or admit in
writing its inability, to pay its debts as they mature, (iii) make a general
assignment for the benefit of creditors; (iv) be adjudicated as bankrupt or
insolvent, or (v) file a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors or seeking to
take advantage of any insolvency law, or file an answer admitting the material
allegations of a petition filed against in any bankruptcy, reorganization or
insolvency proceeding, or take corporation action for the purpose of effecting
any of the foregoing; or
- 10 -
<PAGE>
(3) An order, judgment or decree shall be entered without the
application, approval or consent of the other party by any court of competent
jurisdiction, approving a petition seeking reorganization of such party or
appointment of a receiver, trustee or liquidator of such party or of all of any
substantial part of its assets.
9.3. Effect of Expiration or Termination. Following the expiration
of this Agreement, or the date upon which any earlier termination of this
Agreement is effective, Distributor shall promptly remove from all of its
materials and all commercial registries of any kind any and all reference to
Seller and the Products and to its acting as a distributor with respect to the
Products or on behalf of Seller, and any and all rights of Distributor under
this Agreement shall immediately revert to and vest in Seller. Distributor may
sell, subject to the terms of this Agreement, any Products remaining in
inventories following termination. Distributor shall also promptly return to
Seller any confidential or Proprietary Information relating to Seller or the
Products which Distributor has in its possession at the time of termination of
this Agreement, and shall also execute any and all assignments which Seller may
request in order fully to vest in Seller its interest relating to the Products.
Nothing in this Agreement shall be deemed to relieve Distributor of its
obligation to pay any invoices for Products outstanding on the date of the
expiration of this Agreement or the date upon which any earlier termination of
this Agreement is effective. Seller shall not, by reason of the expiration or
earlier termination of this Agreement, be liable to Distributor for
compensation, reimbursement, or damages either on account of present or
prospective profits on sales or anticipated sales, or on account of
expenditures, investments or commitments made in connection therewith or in
connection with the establishment, development or maintenance of the business or
goodwill of Distributor.
10. Miscellaneous.
10.1. Waiver. The failure of either party to this Agreement to
enforce at any time any of its provisions shall not be construed as a waiver of
such provision or of the right of such party thereafter to enforce the same
provision or provisions.
10.2. Notices. Any notice required to be given hereunder shall be
delivered personally to an officer of the applicable party, or sent by telecopy
or registered or certified mail at its address set forth below, or at such other
address as such party may hereafter designate as to the appropriate address for
the receipt of such notice:
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<PAGE>
To Seller at:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, TN 37027-2487
Attention: Ray Chung
Telephone: 615-373-7774
Facsimile: 615-373-9152
To Distributor at:
Feed-Rite (US) Animal Feeds, Inc.
c/o Feed-Rite, Ltd.
17 Speers Road
Winnipeg, Manitoba
Canada R2J 1M1
Attention: M.E. Moloney
Telephone: 204-233-8418
Facsimile: 204-235-1260
10.3. Entire Agreement; Amendment. This Agreement, which may be
executed in duplicate originals, constitutes the entire agreement between the
parties with respect to the matters covered herein, and supersedes and is in
lieu of all existing agreements, arrangements or understandings among the
parties with respect to matters covered herein. This Agreement may be amended or
modified only by a written instrument executed by authorized representatives of
each of the parties.
10.4. Severability. If any part or provision of this Agreement is
judicially determined to be unenforceable, such part or provision shall be
considered severable, and the remaining parts and provisions shall continue in
full force and effect.
10.5. Assignment. Neither this Agreement nor any right, title,
interest or obligation hereunder may be assigned or otherwise transferred by
either party without the prior written consent of the other party. This
Agreement shall be binding upon and inure to the benefit of such permitted
assignees, transferees and other successors in interest of the parties, in the
event of an assignment or other transfer consistent with the provisions of this
Agreement.
10.6. Relationship; No Agency; Authorization. The relationship of
Seller and Distributor shall be that of seller and buyer, and this Agreement
shall in no way constitute or give rise to a partnership or joint venture
between the parties. Nothing herein shall be construed as granting either party
the power to act in the capacity as the other's agent.
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<PAGE>
Distributor covenants, represents and warrants that it has the requisite power
and authority to enter into this Agreement.
10.7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Minnesota.
10.8. Arbitration. Any dispute, claim or controversy arising out of
or in relation to this Agreement, or the interpretation or breach thereof, shall
be referred to in arbitration under the rules of the American Arbitration
Association. The place of arbitration shall be Minneapolis, Minnesota. Any
decision rendered pursuant to such arbitration shall be final and judgment may
be entered upon it by any court having jurisdiction. Nothing herein contained
shall bar either party from seeking equitable remedies or Seller from bringing
an action for collection of payments due under the terms of this Agreement, plus
any lost profits that arise from the failure to distribute the minimum
quantities as provided in Section 5.2, in a court of competent jurisdiction.
10.9. Limitation of Remedy. SELLER SHALL HAVE NO LIABILITY TO ANY
PERSON FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
DESCRIPTION, WHETHER ARISING OUT OF WARRANTY OR OTHER CONTRACT, NEGLIGENCE OR
OTHER TORT, OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
WINDY HILL PET FOOD COMPANY, INC.
By
-------------------------------------
Name:
Title:
FEED-RITE (US) ANIMAL FEEDS, INC.
By
-------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
FEED PRODUCTS
JV Sprout Duck & Goose Feed
JV Sprout Game Bird Breeder
JV Sprout Game Bird Starter/Grower
JV Sprout Rabbit Grower/Breeder
JV Sprout Broiler Ration
JV Sprout Layer Ration
JV Sprout Chicken Starter/Grower
Country Prime Rabbit Pellets
Country Prime III Fiber Rabbit
18% Sprout HiFiber Rabbit 25#
18% Sprout HiFiber Rabbit 50#
JV Sprout Horse Food 50#
Country Prime Complete Pellet Horse
25# Sprout Rabbit
25# Country Prime Rabbit
50# Country Prime Rabbit
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<PAGE>
EXHIBIT B
PET PRODUCTS
Hubbard Chunk Style
Hubbard Happy Hound
Hubbard Puppy
Hubbard High Performance
Hubbard Cat
Imperial Choice
Hubbard High Energy Dog
Hubbard Label Biscuits
Lassy 21% Protein
Purrfect
Royal Flush
Proclaim Dog
Proclaim Cat
Country Prime 26%
Sportsman Dog
Sportsman Cat
Hubbard Fish Food
Lassy Hi-Pro
Lassy Cat Food
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<PAGE>
EXHIBIT C
TRADEMARKS
Section I. Windy Hill Trademarks
HUBBARD HAPPY HOUND
HUBBARD CAT STARS
HUBBARD HIGH ENERGY DOG FOOD
LASSY SELECT DOG FOOD
LASSY DOG FOOD
HUBBARD CHUNKS
SPORTSMAN DOG FOOD
SPORTSMAN CAT FOOD
PURRFECT CAT FOOD
LASSY CAT FOOD
LASSY ACTIVE
HUBBARD PUPPY GRO
HUBBARD HIGH PERFORMANCE
PROCLAIM
IMPERIAL CHOICE
COUNTRY PRIME
ROYAL FLUSH
HUBBARD BISCUITS
HUBBARD FISH FOOD
and any trade dress formats or
logos related to any of the above.
Section II. Feed-Rite Trademarks
None
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<PAGE>
EXHIBIT D
================================================================================
UNITED STATES OF AMERICA
================================================================================
[Logo depicting map of the United States of America with shaded region]
================================================================================
<PAGE>
EXHIBIT E
PET PRODUCT TOLL RATES
Hubbard Chunk Style $75.50
Hubbard Happy Hound 84.00
Hubbard Puppy 84.00
Hubbard High Performance 136.00
Hubbard Cat 111.50
Imperial Choice 84.00
Hubbard High Energy Dog 136.00
Hubbard Label Biscuits 321.95
Lassy 21% Protein 75.50
Purrfect 111.50
Royal Flush 84.00
Proclaim Dog 131.00
Proclaim Cat 166.00
Country Prime 26% 84.00
Sportsman Dog 84.00
Sportsman Cat 111.50
Hubbard Fish Food 72.50
Lassy Hi-Pro 84.00
Lassy Cat Food 111.50
<PAGE>
EXHIBIT D
LICENSE AGREEMENT
AGREEMENT made as of this ____ day of May, 1997 by and between
FEED-RITE (US) ANIMAL FEEDS, INC., a Minnesota corporation (the "Licensee"), and
WINDY HILL PET FOOD COMPANY, INC., a Minnesota corporation ("Licensor").
W I T N E S S E T H:
WHEREAS, as of the date hereof, Licensee is purchasing certain
assets and properties of Licensor pursuant to that certain Asset Purchase
Agreement, dated April 25, 1997, by and among Licensee, Licensor and Windy Hill
Pet Food Acquisition Co. (the "Purchase Agreement");
WHEREAS, Licensor also desires to grant to Licensee and Licensee
desires to obtain the exclusive right and license to use certain of Licensor's
trademarks in connection with the manufacture and sale of livestock animal feed
and dietary supplements, subject in all respects to the terms and conditions set
forth below;
NOW, THEREFORE, in consideration of the rights and obligations set
forth herein and in the Purchase Agreement, the adequacy of which is hereby
acknowledged, the parties agree as follows:
1. Definitions.
(a) The term "Marks" shall refer to only the trademarks identified
on Schedule A, together with the trade dress and label designs utilized by
Licensor prior to the date of this agreement in connection therewith exclusively
in connection with Licensed Products.
(b) The term "Licensed Products" shall refer only to livestock and
equine animal feed and dietary supplements for livestock and equine animals.
(c) The term "Licensed Territory" shall refer only to the United
States and Canada.
2. License Grant.
(a) Subject to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee the exclusive, royalty-free, perpetual right and
license to use the Marks in the Licensed Territory only on and in connection
with the manufacture, distribution or sale of the Licensed Products, including,
but not limited to, on packaging, in trade materials, in print,
<PAGE>
television and video advertising and any and all other uses related to the
manufacture, distribution or sale of the Licensed Products.
(b) Licensee agrees that in the Licensed Territory it (i) will not
use, in any manner whatsoever, the Marks with any trademark owned by any entity
other than Licensor (except Licensee may use its name or its respective
successor's names on the packaging for and in connection with the marketing,
distribution, sale and promotion of the Licensed Products solely to identify
Licensee as the manufacturer or distributor of such Licensed Products) and (ii)
will not use, in any manner whatsoever, the Marks in connection with any
products other than the Licensed Products.
(c) Subject to the prior written approval of Licensor, such approval
not to be unreasonably withheld or delayed, Licensee may sublicense the right to
use the Marks in the Licensed Territory or utilize the services of third-party
manufacturers to produce Licensed Products to be sold by Licensee or its
approved sublicensees under the Marks; provided however, no consent of Licensor
is necessary to grant a sublicense to a parent or affiliate of Licensee or to
use a parent or affiliate of Licensee as a third-party manufacturer. Licensee
will assure that all sublicensees and third-party manufacturers comply with the
terms and provisions of this Agreement and, without limiting the foregoing, will
not use the Marks in any manner except as provided in this Agreement in
connection with the distribution of the Licensed Products in the Licensed
Territory. Furthermore, Licensee will not manufacture, sell or otherwise
distribute or permit any third party manufacturer or sublicensee to manufacture,
sell or otherwise distribute any products or other materials bearing the Marks
anywhere in the Licensed Territory which are not produced in compliance with the
standards and procedures set forth in Sections 3 and 4 below.
(d) The parties acknowledge that (i) Licensee shall have no rights
to the Marks in the Licensed Territory or to make, use or sell any products
utilizing the Marks in the Licensed Territory other than as expressly granted in
this Agreement and (ii) all rights, licenses and privileges not specifically
granted herein are excluded from this Agreement. Without limiting the foregoing
Licensee acknowledges and agrees that, as between Licensee (and its affiliates)
and Licensor, Licensor shall have the sole and exclusive right to use, license
and/or otherwise exploit the Marks throughout the Licensed Territory in
connection with any goods or services other than the Licensed Products.
3. Quality Standard; Inspections.
(a) It is acknowledged that the Marks indicate to the public that
products sold under the Marks are of a commercially consistent quality and
standard. To such end, Licensee shall maintain such quality standards for all
Licensed Products distributed under the Marks in the Licensed Territory and
materials associated therewith as the Licensor maintained for the Licensed
Products bearing the Marks (or products similar to such Licensed Products) prior
to the date of
- 2 -
<PAGE>
this Agreement. Subject to Sections 5 and 6 below, Licensee shall take such
action as is reasonably necessary to maintain the quality, value and integrity
of the Marks. Without limiting the foregoing, Licensee represents, warrants and
agrees that all Licensed Products bearing the Marks and materials associated
therewith, shall be manufactured, marketed and distributed in material
compliance with all applicable laws, rules regulations and statutes.
(b) Upon request, Licensee shall furnish to Licensor a reasonable
number of representative production samples of Licensed Products bearing the
Marks in order for Licensee to assure itself that the quality control provisions
of this Agreement are being observed. In addition, upon introduction of a new
Licensed Product bearing any of the Marks, Licensee agrees that, without
request, it shall furnish to Licensor a reasonable number of representative
production samples of such Licensed Products.
(c) Licensor or its respective designees, shall have the right to
conduct annual inspections of the relevant portions of Licensee's manufacturing
facilities for compliance with the foregoing quality standards. Inspections also
may be conducted at any time when Licensor has a reasonable belief that there
are or may be quality problems with respect to Licensed Products bearing the
Marks. Any or all plant inspections shall be conducted only during regular
business hours and upon at least twenty-four (24) hours prior notice.
Notwithstanding such right of inspection, nothing herein shall relieve Licensee
from any liability or shift any liability to Licensor as a result of Licensee's
non-conformance with federal, state or local laws or regulations. Approval or
acquiescence by Licensor in connection with any examination, testing, or
inspection pursuant to this Section 3 shall not, in any manner, waive or limit
the other party's responsibility to comply with all relevant terms and
conditions of this Agreement and with all laws and regulations applicable to
Licensee's exercise of the rights granted by this Agreement.
4. Display; Legends.
(a) Licensee shall use each Mark only in the form in which it is
registered and shall not make any material changes to the graphic representation
of such Mark or the font or type face in which the Marks are portrayed without
Licensor's prior written consent, such consent not to be unreasonably withheld.
All approved new forms of display or other representations of any of the Marks
("Associated Marks") will be considered part of the Marks for purposes of this
Agreement. All Associated Marks shall be owned solely by Licensor and Licensor
may, or at the request of Licensee shall, apply to register the Associated Marks
in the Licensed Territory. Notwithstanding the foregoing, Licensee shall bear
all costs and expenses associated with the development, use and registration of
the Associated Marks, including but not limited to, determining such mark's
availability and registering such mark in the Licensed Territory.
(b) Licensee shall cause to appear on all Licensed Products and
other materials on or in connection with which the Marks are used, such legends,
markings and notices as
- 3 -
<PAGE>
Licensor may reasonably prescribe in order to give appropriate and customary
notices of any trademark or other rights.
(c) To confirm compliance with subsections (a) and (b) above,
Licensee shall submit copies of its use of the Marks, including any Associated
Marks, on packaging, labeling, promotional and advertising materials to Licensor
prior to use.
5. Trademark Ownership and Protection.
(a) Licensee acknowledges and agrees that Licensor is, and Licensor
or its successors or assigns shall remain, the owner of the Marks throughout the
Licensed Territory. Licensee shall acquire no ownership interest in the Marks in
the Licensed Territory or elsewhere through this Agreement or otherwise and all
use by Licensee of the Marks in the Licensed Territory shall inure to Licensor's
benefit. Licensee shall fully cooperate with Licensor, at Licensee's expense
except as otherwise provided in Section 6 below, in Licensor's efforts to
obtain, perfect and enforce its rights in the Marks. Licensee shall at any time
execute any documents reasonably required by Licensor to confirm Licensor's
ownership of all such rights in the Licensed Territory at Licensor's expense. In
the event that Licensee shall fail promptly to execute and return to Licensor
any documents reasonably required by Licensor to confirm Licensor's ownership of
such rights, Licensee hereby appoints Licensor as its attorney-in-fact for such
purpose (it being acknowledged that such appointment is irrevocable and coupled
with an interest) with full power of substitution and delegation. Licensor shall
supply Licensee with copies of any such documents promptly after execution.
(b) Licensee agrees that it shall not, in any country or
jurisdiction, register or attempt to register the Marks without the consent of
Licensor, such consent not to be unreasonably withheld or delayed, provided that
Licensee may register the Marks in connection with the Licensed Products in
Australia and New Zealand without such consent. Licensee further agrees that it
shall not (i) in any country or jurisdiction, use, register or attempt to
register any other trademark, trade dress format, logo, trade name or other
design which is confusingly similar to the Marks or (ii) in the Licensed
Territory, contest or assist any other party in contesting the validity of
Licensor's ownership of the Marks. Notwithstanding the foregoing, Licensor will
not object to the use by Licensee of the name "Mother Hubbard" in connection
with the distribution, marketing and sale of dog food in Australia; provided,
however, Licensor makes no representation as to the availability of such name
and shall have no liability to Licensee under Section 8 of this Agreement or
otherwise arising out of Licensee's use of such name.
6. Infringement Proceedings.
(a) During the term of this Agreement, Licensee shall notify
Licensor of any unauthorized uses of the Marks by any third party as promptly as
such matters come to Licensee's attention. Either Licensee or Licensor shall
have the right and discretion to bring
- 4 -
<PAGE>
infringement or unfair competition proceedings involving the Marks in the manner
more specifically described below; provided, however, that each party covenants
and agrees to cooperate with and furnish full assistance to one another in
connection with the procurement, protection and maintenance of the Marks and
their rights associated therewith.
(b) Licensor shall have the initial right to determine whether or
not any demand, suit or other action shall be taken on account of or with
reference to any infringement or unfair competition in connection with the Marks
and shall have the right to take such action as it may determine. Licensee shall
not institute any suit or take any action on account of any such infringement or
unfair competition without first obtaining the express written consent of
Licensor to do so. Licensor's consent shall not be unreasonably withheld or
delayed. The parties agree to cooperate with each other in any manner which the
litigating party may reasonably request in connection with any such litigation;
provided, however, that the non-litigating party will be entitled to
reimbursement of its reasonable pre-approved expenses directly related to such
cooperation in excess of $ 5000.00. In all instances, the party commencing the
litigation shall have the right to employ counsel of its choosing and to direct
the handling of the litigation and the settlement thereof. Notwithstanding the
foregoing, no action may be settled by Licensee without the prior consent of
Licensor, which consent shall not be unreasonably withheld or delayed. All
amounts awarded as damages, profits or otherwise in connection with such
litigation shall be divided among the parties as their interests may appear.
Nothing herein shall be construed as imposing any duty or obligation upon
Licensor to take any action against any alleged infringer.
7. Termination.
(a) Notwithstanding anything herein to the contrary, Licensor shall
have the right to terminate this Agreement effective upon ninety (90) days
written notice to Licensee in the event Licensee commits a material breach of
this Agreement which is not cured to the reasonable satisfaction of Licensor
within such ninety (90) day notice period. In addition, Licensee's license with
respect to any particular Mark automatically shall be terminated in the event
Licensee ceases to use any Mark in connection with the manufacture, distribution
or sale of the Licensed Products in the ordinary course of business for a period
in excess of twenty-four (24) months. Immediately upon termination of this
Agreement, Licensee agrees to (i) destroy any molds, plates, packaging or
finished product bearing the Marks which are in its possession or control and
(ii) cease any and all use of the Marks.
(b) Licensee acknowledges that its failure to cease the manufacture,
sale, marketing, distribution or other use of the Marks upon the termination of
this Agreement or portion thereof will result in immediate and irreparable
damage to Licensor and the rights of any subsequent licensee of Licensor.
Licensee acknowledges and admits that there is no adequate remedy at law for
failure to cease such activities and Licensee agrees that in the event of such
- 5 -
<PAGE>
failure, Licensor shall be entitled to injunctive relief and such other relief
as any court with jurisdiction may deem just and proper.
8. Indemnification. Licensee shall indemnify and agrees to defend
Licensor from any and all damages, including reasonable attorney's fees,
settlement costs but excluding any incidental or consequential damages or claims
for lost profits (collectively, "Damages") resulting from or arising out of the
manufacture, packaging, distribution, selling, handling, consumption or
marketing of Licensed Products by Licensee except to the extent such damages are
the result of or caused by the negligence of Licensor or its agents or
employees, the result of instructions or standards dictated by Licensor with
respect to the Licensed Products or the result of any of the Marks' infringing
the rights of a third party in the country in which the Mark at issue is
registered when used in accordance with this Agreement. Furthermore, each party
shall indemnify and agrees to defend the other party from any and all Damages
resulting from or arising out of any breach of any covenant or provision of this
Agreement. To facilitate the foregoing, each party shall provide the other with
reasonable notice of any such claims. The provisions of this Section 8 shall
survive the termination of this Agreement.
9. Insurance. Licensee shall maintain at its sole cost and expense,
at all times during the term of the Agreement a reasonably adequate products
liability insurance policy initially with limits of no less than One Million
Dollars ($1,000,000.00) per claim in the aggregate for personal injury with a
financially responsible insurance carrier naming Licensor as an additional
insured and providing Licensor with thirty (30) days notice of cancellation or
alteration. The existence of product liability insurance, however, shall not
mitigate, alter or waive the indemnity provisions of Section 8.
10. Confidentiality.
(a) During the term of this Agreement, the parties shall be
exchanging proprietary and/or confidential information relating to each of their
respective businesses and/or the manufacture and sale of their respective
products ("Confidential Information") with one another. For purposes of this
Agreement, Confidential Information shall not apply to information which: (i)
was publicly available at the time of the disclosure to the receiving party;
(ii) subsequently becomes publicly available through no fault of the receiving
party; (iii) is rightfully acquired by the receiving party, subsequent to
disclosure by the other party, from a third party who to the receiving party's
knowledge is not in breach of a confidential relationship with regard to such
information; or (iv) is independently developed by the receiving party solely
through the efforts of individuals who did not have access to the confidential
information.
(b) Unless otherwise provided, each party agrees not to disclose any
of the other parties' Confidential Information and not to use the Confidential
Information, except as provided for in this Agreement. Access to Confidential
Information disclosed under this Agreement shall be restricted to those
employees of the parties who have a need to know the
- 6 -
<PAGE>
Confidential Information and have signed written nondisclosure and
confidentiality agreements.
11. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
permitted assigns. Notwithstanding the foregoing, except as specifically
provided in Section 2(c) hereof, neither party shall assign, transfer or
delegate any of its rights or obligations under this Agreement to any entity
which is not a parent or affiliate of the assigning party without the other
party's prior written approval and any such assignment, transfer or delegation
made without approval shall be void ab initio; provided, however, (i) Licensor
and Licensee shall be permitted to assign, transfer or delegate any of its
rights and/or obligations under this Agreement in connection with the sale of
all or part of its business to any third party without the consent of the other
party provided such third party expressly agrees to be bound by the terms and
conditions of this Agreement and (ii) Licensee shall be permitted to assign,
transfer or delegate any of its rights under this Agreement to any lender
providing financing to Licensee provided such assignment, transfer or delegation
is expressly subject to the terms and conditions of this Agreement.
12. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given upon receipt if it
is sent by facsimile or reputable express courier, and addressed or otherwise
sent to the intended recipient as set forth below:
To Licensor:
Windy Hill Pet Food Acquisition Co.
c/o Dartford Partnership, L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ray Chung
Facsimile: 415-982-3023
Telephone: 415-982-3019
With a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022-4873
Attention: Ann F. Chamberlain, Esq.
Facsimile: 212-750-9022
Telephone: 212-207-1200
- 7 -
<PAGE>
To Licensee:
Feed-Rite, Ltd.
17 Speers Road
Winnipeg, Manitoba
Canada R2J 1M1
Attention: M.E. Moloney
Facsimile: 204-235-1260
Telephone: 204-233-8418
With a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
Attention: Michael Trucano, Esq.
Facsimile: 612-340-8827
Telephone: 612-340-2600
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address or facsimile number set forth
above by using any other means (including personal delivery, messenger service,
ordinary mail, or electronic mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any party may change the
address or facsimile number to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
13. No Joint Venture. Nothing herein contained shall be deemed to
create the relationship of partnership or joint venture between the parties.
Neither party shall have the right to incur any obligation to third parties
which shall be binding upon the other and neither party shall have any interest
whatever in the profits and liabilities of the other arising out of or resulting
from the subject matter of this Agreement.
14. Applicable Law. This Agreement shall be governed and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Minnesota.
The parties hereby irrevocably and unconditionally consent and submit to the in
personam jurisdiction of Minnesota courts over all matters relating to this
Agreement. Each party agrees that service of process in any action or proceeding
hereunder may be made upon such party by certified mail, return receipt
requested to the address for notice set forth herein. Each party irrevocably
waives any objection it may have to the venue
- 8 -
<PAGE>
of any action, suit or proceeding brought in such courts or to the convenience
of the forum and each party irrevocably waives the right to proceed in any other
jurisdiction. Final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment, a
certified or true copy of which shall be conclusive evidence of the fact and the
amount of any indebtedness or liability of any party therein described.
15. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Entire Agreement. This Agreement contains the entire agreements
of the parties in regard to the subject matter hereof and supersede all prior
discussions, agreements and understandings of every kind between the parties and
may be changed only by a written document signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought. The waiver of any breach of any provision of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given and shall not operate or be construed as a waiver of any subsequent breach
hereof.
17. Severability. Each term and provision of this Agreement shall
constitute a separate and distinct undertaking, covenant, term and/or provision
hereof. If any provision of this Agreement shall be prohibited by or invalid in
any respect under applicable law, or otherwise determined to be unenforceable,
such provision shall be ineffective to the extent of such prohibition,
invalidity or unenforceability without invalidating the remainder of such
provision or the remaining provisions of this Agreement. If any term or
provision of this Agreement shall for any reason be held to be excessively broad
as to time, duration, activity or subject it shall be construed, by limiting and
reducing such provision, so as to be enforceable to the extent permitted under
applicable law as it shall then exist.
18. Rights Cumulative. Except as expressly provided in this
Agreement, and to the extent permitted by law, any remedies described in this
Agreement are cumulative and not alternative to any other remedies available at
law or in equity.
[Remainder of page left blank intentionally]
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FEED-RITE (US) ANIMAL FEEDS, INC.
By
--------------------------------------
Name:
Title:
WINDY HILL PET FOOD COMPANY, INC.
By
--------------------------------------
Name:
Title:
- 10 -
<PAGE>
SCHEDULE A
MARK COUNTRY REG. NO.
HUBBARD United States 621,407
HUBBARD United States 641,332
HUBBARD Canada 431,913
H AND DESIGN United States 911,597
H AND DESIGN United States 914,461
HUBBARD SOW POWER United States 1,206,410
LASSY (STYLIZED) United States 525,450
SWEET LASSY United States 235,240
(BLOCK LETTERS)
- 11 -
<PAGE>
EXHIBIT E
[Form of Opinion of Dorsey & Whitney LLP]
May ___,1997
Windy Hill Pet Food Company, Inc.
CIO Dartford Partnership, L. L. C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ray Chung
Re: Sale of Certain Assets of Windy Hill Pet Food
Company, Inc. to Feed-Rite (US) Animal Feeds, Inc.
Dear Sir:
We have acted as counsel to Feed-Rite (US) Animal Feeds, Inc., a Minnesota
corporation (the "Purchaser"), in connection with the negotiation, execution and
delivery of the Asset Purchase Agreement, dated April ___, 1997 (the "Purchase
Agreement"), by and among the Purchaser, Windy Hill Pet Food Acquisition Co., a
Minnesota corporation that has been merged with and into Windy Hill Pet Food
Company, Inc., a Minnesota corporation formerly known as Hubbard Milling Company
(the "Seller"), and Windy Hill Pet Food Company, Inc., a Delaware corporation
now known as WHPF II, Inc. ("Windy Hill"), and related transactions.
This opinion is delivered to you pursuant to Section 9.4(j) of the
Purchase Agreement. All capitalized terms that are used but not defined herein
shall have the meanings assigned to them in the Purchase Agreement.
In rendering this opinion, we have examined executed originals
counterparts or copies of each of the following:
(i) the Purchase Agreement;
(ii) the Assignment and Assumption Agreement, dated today, between the
Purchaser and the Seller;
(iii) the License Agreement, dated today, between the Purchaser and the
Seller; and
(iv) the Distribution Agreement, dated today, between the Purchaser and
the Seller.
<PAGE>
The agreements and documents identified in clauses (i) through (iv) above
are hereinafter referred to as the "Agreements".
In connection with the opinions expressed herein, we have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records of the Purchaser, certificates of public officials and
officers and other representatives of the Purchaser and such other documents,
agreements and instruments, and have made such other investigations, as we have
deemed necessary or appropriate.
As to various questions of fact material to this opinion, we have relied
upon, without any independent investigation or verification of any kind, the
representations and warranties contained in the Agreements and upon certificates
and other documents of officers of the Purchaser and of public officials and
have made such other investigations as we have deemed necessary or appropriate.
In our examination of the documents referred to above, we have assumed (i) the
genuineness of all signatures; (ii) the incumbency, authority and legal right
and power under all applicable laws, statutes, rules and regulations of, all
persons executing the Agreements as or on behalf of the parties thereto other
than the Purchaser; (iii) the authenticity and completeness of all documents
submitted to us as original or certified documents; (iv) the conformity to
authentic original documents of all documents submitted to us as certified,
conformed, facsimiled or photostatic copies; and (v) that the certificates of
public officials dated prior to the date of this opinion remain accurate from
such earlier date through and including the date of this opinion.
To the extent that the obligations of the Purchaser under the Agreements
may be dependent upon such matters, we have assumed for purposes of this opinion
that. (i) each of the Seller and Windy Hill is duly organized and validly
existing under the laws of its jurisdiction of organization; (ii) each of the
Seller and Windy Hill has full corporate or other organizational power and
authority to execute and deliver and to perform its obligations under, the
Agreements and each of the other documents and agreements executed by it in
connection therewith; (iii) each Agreement executed by the Seller and Windy Hill
has been duly authorized, executed and delivered by the Seller or Windy Hill, as
the case may be, and constitutes the legal, valid and binding obligation of the
Seller or Windy Hill, as the case may be, enforceable against it in accordance
with its terms.
We are attorneys admitted to practice only in the State of Minnesota and
we opine herein only as to the effect of the laws, statutes, rules and
regulations of the State of Minnesota and the United States of America on the
subject transactions. We do not opine on, and we assume no responsibility as to,
the applicability of or the effect on any of the matters covered herein of, the
Laws of any other jurisdiction.
-2-
<PAGE>
The opinions set forth below that are rendered "to our knowledge" or with
similar qualification have been rendered based upon the present knowledge of the
lawyers currently in our employ who have devoted substantive attention to the
legal affairs of the Purchaser in connection with the Agreements, after having
made such investigations of such lawyers as we have deemed necessary to render
such opinions.
The opinions set forth below are subject to the following additional
limitations, qualifications and exceptions:
A. the legality, validity, binding effect and enforceability of the
Agreements may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, marshalling or other similar laws now or
hereafter in effect affecting creditors' rights and remedies generally;
B. the legality, validity, binding effect and enforceability of the
Agreements may be subject to (i) general principles of equity (regardless of
whether considered in a proceeding in equity or at law) and (ii) the discretion
of the court before which any proceeding may be brought;
C. no opinion is expressed with respect to the enforceability of
provisions which purport to establish consent to the jurisdiction of any court;
D. no opinion is expressed with respect to the enforceability of
provisions regarding indemnification against liabilities where such
indemnification is contrary to public policy; and
E. no opinion is expressed with respect to any noncompetitive covenant or
agreement.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Purchaser is a corporation duly incorporated and validly existing
under the laws of the State of Minnesota, with corporate power to own, operate
and lease its properties and assets and to conduct its business as they are now
being owned, operated, leased and conducted. The Purchaser is qualified as a
foreign corporation to do business in the jurisdictions listed on Schedule I
hereto.
2. The Purchaser has corporate power to execute and deliver each of the
Agreements, to perform its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by the Purchaser
of each of the Agreements and the performance by it of its obligations
thereunder have been duly and validly authorized by all necessary corporate
action.
3
<PAGE>
3. Each of the Agreements to which the Purchaser is a party constitutes
the valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms.
4. No approval or consent of, or any filing with or notice to, any
governmental agency or body (other than those contemplated by the Agreements,
all of which have been received or made) is required to be obtained or made by
the Purchaser in connection with the execution, delivery, consummation or
performance by the Purchaser of the Agreements.
5. The execution and delivery of, the consummation of the transactions
contemplated by, or the performance by the Purchaser of the Agreements will not
conflict with, or result in a breach or violation of, or give rise to any
acceleration or termination or constitute (or with notice or lapse of time or
both would constitute) a default under (i) any provision of the articles of
incorporation or by-laws of the Purchaser; (ii) any term of any instrument,
contract or other agreement known to us by or to which the Purchaser is a party
or by which the Purchaser is bound; or (iii) any law of the United States or the
State of Minnesota, any rule or regulation of any governmental authority or
regulatory body of the United States or the State of Minnesota, or any judgment,
order or decree known to us and applicable to the Purchaser of any court,
governmental authority or arbitrator.
6. To our knowledge, there is no pending or overtly threatened suit,
action or litigation, or administrative, arbitration or other proceeding or
governmental inquiry or investigation, questioning the validity of any of the
Agreements or any of the transactions contemplated thereby, or which
individually or in the aggregate would materially impair the Purchaser's ability
to perform its obligations under the Agreements.
The opinions set forth herein are as of the date of this letter and we do
not render any opinion as to the effect of any matter which may occur subsequent
to the date hereof.
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions contemplated by the Agreements. This opinion
may not be relied upon by you for any other purpose, nor may it be quoted,
circulated, referred or delivered to, or relied upon by any other person, firm
or entity for any purpose without our prior express written consent.
Very truly yours,
4
<PAGE>
SCHEDULE I
California
Indiana
Iowa
Missouri
Nebraska
Ohio
South Dakota
Wisconsin
Wyoming
-5-
<PAGE>
EXHIBIT F
[Form of Opinion of Richards & O'Neil, LLP]
May ____, 1997
Feed-Rite (US) Animal
Feeds, Inc.
c/o Feed-Rite Ltd.
17 Speers Road
Winnipeg, Manitoba
Canada R2J 1M1
Re: Sale of Certain Assets of Windy Hill Pet Food Company. Inc.
Dear Sir:
We have acted as counsel to Windy Hill Pet Food Acquisition Co., a
Minnesota corporation that has been merged with and into Windy Hill Pet Food
Company, Inc, a Minnesota corporation formerly known as Hubbard Milling Company
(the "Seller"), in connection with the negotiation, execution and delivery of
the Asset Purchase Agreement, dated April 22, 1997 (the "Purchase Agreement"),
by and among the Seller, Feed-Rite (US) Animal Feeds, Inc., a Minnesota
corporation (the "Purchaser"), and Windy Hill Pet Food Company, Inc., a Delaware
corporation now known as WHPF II, Inc. ("Windy Hill"), and related transactions.
<PAGE>
Feed-Rite (US) Animal
Feeds, Inc.
May ___, 1997
Page 2
This opinion is delivered to you pursuant to Section 8.5(n) of the
Purchase Agreement. All capitalized terms that are used but not defined herein
shall have the meanings assigned to them in the Purchase Agreement.
In rendering this opinion, we have examined executed originals,
counterparts or copies of each of the following:
(i) the Purchase Agreement;
(ii) the Assignment and Assumption Agreement, dated today, between
the Purchaser and the Seller;
(iii) the Bill of Sale, dated today, executed by the Seller.
(iv) the License Agreement, dated today, between the Purchaser and
the Seller;
(v) the Distribution Agreement, dated today, between the Purchaser
and the Seller; and
(vi) the Deeds.
The agreements and documents identified in clauses (i) through (vi)
above are hereinafter referred to as the "Agreements".
In connection with the opinions expressed herein, we have also
examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records of the Seller and Windy Hill,
certificates of public officials and officers and other representatives of the
Seller and Windy Hill and such other documents, agreements and instruments, and
have made such other investigations, as we have deemed necessary or appropriate.
As to various questions of fact material to this opinion, we have
relied upon, without any independent investigation or verification of any kind,
the representations and warranties contained in the Agreements and upon
certificates and other documents of officers of the Seller and Windy Hill and of
public officials and have made such other investigations as we have deemed
necessary or appropriate. In our examination of the documents referred
<PAGE>
Feed-Rite (US) Animal
Feeds, Inc.
May ___, 1997
Page 3
to above, we have assumed (i) the genuineness of all signatures; (ii) the
incumbency, authority and legal right and power under all applicable laws,
statutes, rules and regulations of, all persons executing the Agreements as or
on behalf of the parties thereto other than the Seller and Windy Hill; (iii) the
authenticity and completeness of all documents submitted to us as original or
certified documents; (iv) the conformity to authentic original documents of all
documents submitted to us as certified, conformed, facsimiled or photostatic
copies; and (v) that the certificates of public officials dated prior to the
date of this opinion remain accurate from such earlier date through and
including the date of this opinion.
To the extent that the obligations of the Seller and Windy Hill
under the Agreements may be dependent upon such matters, we have assumed for
purposes of this opinion that: (i) the Purchaser is duly organized and validly
existing under the laws of its jurisdiction of organization; (ii) the Purchaser
has full corporate or other organizational power and authority to execute and
deliver, and to perform its obligations under, the Agreements and each of the
other documents and agreements executed by it in connection therewith; and (iii)
each Agreement executed by the Purchaser has been duly authorized, executed and
delivered by the Purchaser, and constitutes the legal, valid and binding
obligation of the Purchaser enforceable against it in accordance with its terms.
We are attorneys admitted to practice only in the State of New York
and we opine herein only as to the effect of the laws, statutes, rules and
regulations of the State of New York, the State of Delaware (but only insofar as
set forth in the General Corporation Law of the State of Delaware) and the
United States of America on the subject transactions, other than with respect to
environmental or patent matters. Insofar as the opinions in paragraphs 1-5 below
relate to the Seller and the laws of the State of Minnesota, we have, with your
consent, and without any independent investigation, relied upon the opinion of
Messrs. Leonard, Street & Deinard, LLP, a copy of which is attached hereto as
Exhibit A. Our opinions is given in reliance on such opinion are subject to the
qualifications, limitations and exceptions contained therein. We do not opine
on, and we assume no responsibility as to, the applicability of, or the effect
on any of the matters covered herein of, the laws of any other jurisdiction.
The opinions set forth below that are rendered "to our knowledge" or
with similar qualification have been rendered based upon the present knowledge
of the lawyers currently in our employ who have devoted substantive attention to
the legal affairs of the Seller in connection with the Agreements, after having
made such investigations of such lawyers as we have deemed necessary to render
such opinions.
<PAGE>
Feed-Rite (US) Animal
Feeds, Inc.
May ___, 1997
Page 4
The opinions set forth below are subject to the following additional
limitations, qualifications and exceptions:
A. the legality, validity, binding effect and enforceability of the
Agreements may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, marshalling or other similar laws now or
hereafter in effect affecting creditors' rights and remedies generally;
B. the legality, validity, binding effect and enforceability of the
Agreements may be subject to (i) general principles of equity (regardless of
whether considered in a proceeding in equity or at law) and (ii) the discretion
of the court before which any proceeding may be brought;
C. no opinion is expressed with respect to the enforceability of
provisions which purport to establish consent to the jurisdiction of any court;
D. no opinion is expressed with respect to the enforceability of
provisions regarding indemnification against liabilities where such
indemnification is contrary to public policy;
E. no opinion is expressed with respect to compliance with bulk
sales laws of any state; and
F. no opinion is expressed with respect to any noncompetitive
covenant or agreement.
The opinions expressed below with respect to compliance with certain
laws, statutes, rules and regulations are based upon a review of those statutes,
laws, rules and regulations that, in our experience, are normally applicable to
transactions of the type contemplated by the Agreements.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of the Seller and Windy Hill is a corporation duly
incorporated and validly existing under the laws of its state of incorporation
and has all requisite corporate power and authority to own, operate and lease
its properties and assets and to conduct its business as they are now being
owned, operated, leased and conducted.
<PAGE>
Feed-Rite (US) Animal
Feeds, Inc.
May ___, 1997
Page 5
The Seller is qualified to do business as a foreign corporation in the
jurisdictions listed on Schedule I hereto.
2. Each of the Seller and Windy Hill has all requisite corporate
power and authority to execute and deliver each of the Agreements, to perform
its obligations thereunder and to consummate the transactions contemplated
thereby. The execution and delivery by the Seller and Windy Hill of each of the
Agreements to which it is a party and the performance by it of its
obligations thereunder have been duly and validly authorized by all necessary
corporate action.
3. Each of the Agreements to which the Seller or Windy Hill is a
party (other than the Deeds) constitutes the legal, valid and binding
obligations of the Seller and Windy Hill enforceable against the Seller and
Windy Hill in accordance with its terms.
4. No approval or consent of, or any filing with or notice to, any
governmental or regulatory body (other than those contemplated by the
Agreements, all of which have been received or made) is required in connection
with the execution, delivery, consummation or performance by the Seller or Windy
Hill of the Agreements to which it is a party.
5. Neither the execution and delivery of, the consummation of the
transactions contemplated by, or the performance by the Seller or Windy Hill of
the Agreements to which it is a party in accordance with their respective terms
and conditions will conflict with, or result in a breach or violation of, or
give rise to any acceleration or termination or constitute (or with notice or
lapse of time or both would constitute) a default under (i) any provision of the
certificate of incorporation or by-laws, as amended, of the Seller or Windy
Hill; (ii) any term of any instrument, contract or other agreement listed on
Schedule II hereto by or to which the Seller or Windy Hill is a party or by or
to which any of its properties or assets is bound or subject; or (iii) any
statute, law or regulation or, to the best of our knowledge, any order, writ,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory body against, or binding upon, the Seller or Windy Hill or any of
its properties or assets.
6. To our knowledge, there is no pending or threatened suit, action
or litigation, or administrative, arbitration or other proceeding or
governmental inquiry or investigation, questioning the validity of any of the
Agreements or any of the transactions
<PAGE>
Feed-Rite (US) Animal
Feeds, Inc.
May ___, 1997
Page 6
contemplated thereby or would materially impair the Seller or Windy Hill's
ability to perform its obligations under the Agreements.
The opinions set forth herein are as of the date of this letter and
we do not render any opinion as to the effect of any matter which may occur
subsequent to the date hereof.
This opinion is rendered only to you and is solely for your benefit
in connection with the transactions contemplated by the Agreements. This opinion
may not be relied upon by you for any other purpose, nor may it be quoted,
circulated, referred or delivered to, or relied upon by any other person, firm
or entity for any purpose without our prior express written consent.
Very truly yours,
<PAGE>
SCHEDULE I
<PAGE>
SCHEDULE II
<PAGE>
EXHIBIT G
TRANSITION SERVICES TO BE PROVIDED BY THE SELLER
A. Accounting Services
o General Ledger Operations - Provide ongoing support for Animal Feed
users of the General Ledger.
o General Accounting - Continued support of general accounting and
month-end close processes for the Animal Feed Division, including
preparation of general ledger journal entries, consolidation of
plant results and preparation of monthly financial reports
consistent with current monthly financial reports being prepared by
the corporate accounting group.
o Plant Income Statements - Continued preparation of plant income
statements and cost of sales information for the Animal Feed
Division.
o Cash Management - Record cash receipts and disbursements, manage
cash balances and consolidate Animal Feed cash balances.
o Disbursements - Provide cash disbursements and accounts payable
management for Animal Feed Division.
o Fixed Assets and Other Non-Current Assets - Maintain records of
fixed assets and other non-current assets and related depreciation
calculations for the Animal Feed Division.
o Plant Inventories - Assist Animal Feed plants in reporting and
maintain plant inventory records.
o Internal Audit and Financial Analysis Functions - Provide internal
audit and financial analysis functions as requested by Animal Feed
divisional management.
o Transition - Provide reasonable transition assistance to help the
Purchaser integrate the accounting activities with the Purchaser's
other accounting activities.
<PAGE>
B. Information Services
o Ongoing Services
- Regular mainframe support and other support related to running
current applications.
- Maintenance of the data center, including making equipment
repairs and providing software maintenance, as necessary.
- Ensure that computers at Mankato offices servicing the Animal
Feed plants maintain current service level, including support
for plant PC applications.
- Maintain Help Desk to support current applications and
reports.
- Maintain computer inventory, recordkeeping and update, as is
currently provided.
o Cut-Over Activities and Projects - Provide reasonable assistance to
support the transfer of information from current systems to the
Purchaser's systems.
C. Human Resources Services
o Provide administration and management of all benefits plans,
including pension, medical and dental, life insurance, disability,
severance, vacation, savings and sick pay plans.
o Provide wage and salary administration, including working with
outside payroll service bureau, in accordance with the Purchaser's
policies.
o Manage and negotiate collective bargaining activities with unions
and provide status reports to the Purchaser, provided that Bob
Galloway will be involved in such negotiations.
o Manage and negotiate workers' compensation claims and other types of
employee grievances.
o Continue preparing and filing employee-related reports to the
appropriate governmental agencies.
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<PAGE>
o Provide reasonable transition assistance in switching the Animal
Feed Division employees at Mankato corporate to the Purchaser's
payroll system.
D. Administrative and Legal Services
o Office Maintenance - Maintain administrative services at Mankato
corporate offices, as required by Animal Feed Division, including
building maintenance, yards upkeep and maintenance, office cleaning,
waste disposal and burglar alarm systems.
o Insurance - Provide ongoing support and follow-up of all general
insurance claims and any related litigation outstanding at the
Closing Date.
o Legal-
- Provide legal documentation and negotiation for loans, bank
guaranties and investments.
- Review and negotiate lease renewals of real and personal
property.
- Work with the Purchaser and outside counsel, if required, on
any existing litigation involving Animal Feed Division.
E. Funding Bank Account and Reconciliation
o The Seller will establish a separate bank account (the "Account") to
be used to pay all disbursements required to be paid by it in
connection with the transition services provided pursuant to this
Exhibit G. The Purchaser will wire transfer funds to the Account, no
more frequently than weekly, upon two days written notice (which may
be delivered by confirmed facsimile) from the Seller, which notice
shall contain, in addition to the amount of the funds to be wired, a
statement, in reasonable detail, of the disbursements to be paid
with such funds.
o Within 15 days of the end of each calendar month the Seller will
prepare a reconciliation (the "Reconciliation") with such supporting
documentation as the Purchaser may reasonably request, of payments,
if any, required to be made by the Seller and the Purchaser to each
other pursuant to this Exhibit G. The Seller shall make a
determination from the Reconciliation of the net payment (the "Net
Payment") and the appropriate payee pursuant to this Exhibit G
-3-
<PAGE>
(i.e., to the Seller or the Purchaser). Any Net Payment from either
party will be due within five days after the Seller's delivery of
the Reconciliation to the Purchaser. Within 10 days of the Seller's
delivery of the Reconciliation to the Purchaser, either party may
object to the Reconciliation. Unresolved objections shall be
resolved in accordance with Section 13.5 of the Purchase Agreement.
F. Additional Terms
o Indemnification - The Purchaser hereby agrees to indemnify, defend
and hold harmless the Seller from and against any and all claims,
losses, demands, costs, or liabilities, including reasonable
attorneys' fees, resulting from or in connection with third party
claims arising from the Seller's performance of the services
described on this Exhibit G unless such third party claims are
solely the result of the Seller's gross negligence or willful
misconduct in performing the transition services.
o Force Majeure. The Seller shall not be considered in default in the
performance of its obligations to provide transition services to the
extent that its performance is prevented or delayed by any cause
beyond its reasonable control, including but not limited to strikes,
labor disputes, civil disturbances, rebellion, invasion, epidemic,
hostilities, war, embargo, natural disaster, acts of God, fire,
sabotage, loss and destruction of property, changes in laws,
regulations or orders, other events or situations it is unable to
prevent or overcome despite the exercise of due diligence.
o Confidentiality. Any and all information disclosed by one party to
the other in connection with the performance of transition services,
whether disclosed in writing, orally or visually, is considered
confidential information, unless such information falls within the
exceptions set forth below (hereinafter any and all such information
shall be collectively referred to as "Confidential Information").
Each party agrees to disclose to the other party only such of its
Confidential Information as may be reasonably necessary to provide
the services contemplated hereunder. The recipient of Confidential
Information agrees that Confidential Information disclosed to it
hereunder shall be retained in confidence in the same manner used to
protect its own confidential information and shall not be disclosed
to others or used for purposes other than in connection with the
transition services. Confidential Information shall not include any
information which, in the form disclosed by the disclosing party,
(i) was publicly available at the time of disclosure by the
disclosing party; (ii) became publicly available after disclosure by
the disclosing party through no fault of the recipient; (iii) was in
the recipient's possession prior to disclosure by the disclosing
party, as evidenced by the recipient's written
-4-
<PAGE>
record, and was not the subject of an earlier confidential
relationship with the disclosing party; or (iv) was rightfully
acquired by the recipient after disclosure by the disclosing party
from a third party who was lawfully in possession of the information
and was under no obligation to the disclosing party to maintain its
confidentiality. After termination of the transition services, or at
any other time requested by the disclosing party, the recipient
shall return or destroy, at the disclosing party's direction, all
documents, samples or other materials embodying Confidential
Information, and shall retain no copies thereof.
o Independent Contractor. The Seller shall be an independent
contractor in providing services hereunder with the sole right to
supervise, manage, operate, control and direct the performance of
such services and the sole obligation to employ, compensate and
manage its employees and business affairs. Nothing contained herein
shall be deemed or construed to create a partnership or joint
venture, to create the relationships of employee/employer or
principal/agent, or otherwise create any liability whatsoever of
either party with respect to the indebtedness, liabilities,
obligations or actions of the other or any of their employees or
agents, or any other person or entity.
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<PAGE>
The following list briefly identifies the contents of the Schedules
to the Asset Purchase Agreement, dated as of April 25, 1997, by and among
Feed-Rite (US) Animal Fees, Inc. (the "Purchaser"), Windy Hill Pet Food Company,
Inc. ("Windy Hill") Windy Hill Pet Food Acquisition Co (the "Seller") and, with
respect to Section 10.7 and 13.15 thereof, Feed-Rite Ltd. In accordance with
Regulation S-K under the Securities Act of 1933 the actual Schedules have not
been filed with the Securities and Exchange Commission (the "Commission"). The
Company hereby agrees to furnish supplementally a copy of any omitted Schedule
to the Commission upon request.
SCHEDULES
1. Schedule 1.1(ad) Deeds - contains a list of deeds regarding the properties
acquired by the Purchaser.
2. Schedule 2.1(k) Noncurrent Investments - contains a list of nonrecurrent
events of Hubbard Milling Company.
3. Schedule 2.1(m) Certain Assets Not Being Transferred - contains a list of
assets not transferred.
4. Schedule 2.4(f) Actions - contains a list of actions.
5. Schedule 6.10 Environmental Reports To Be Delivered - contains a list of
environmental reports to be delivered to Purchaser.
6. Schedule 8.4 Material Contracts To Be Assigned Prior to Closing - contains a
list of material contracts assigned to Purchaser.
7. Schedule 10.1 Collective Bargaining Agreements - contains a list of
collective bargaining agreements assigned by Seller to Purchaser.
<PAGE>
ASSET PURCHASE AGREEMENT
AMONG
HEINZ PET PRODUCTS COMPANY,
a Division of Star-Kist Foods, Inc.
AND THE OTHER SELLERS AS DEFINED THEREIN
H. J. HEINZ COMPANY
and
WINDY HILL PET FOOD HOLDINGS, INC.
WINDY HILL PET FOOD COMPANY, INC.
APRIL 17, 1996
<PAGE>
TABLE OF CONTENTS
Article I - Definitions ........................................ 1
Definitions ........................................ 1
Article II - Sale and Purchase of Assets ........................ 6
2.1 Transfer of Assets ................................. 6
2.2 Assumption of Liabilities .......................... 10
2.3 Purchase Price and Other Consideration;
Payment ........................................... 12
2.4 Non-Cash Working Capital ........................... 12
2.5 Allocation of the Purchase Price ................... 14
2.6 Closing ............................................ 14
2.7 Nonassignable Contracts; Real Property Leases
and Permits ....................................... 17
Article III - Representations and Warranties of Sellers and
Heinz ............................................. 17
3.1 Incorporation; Qualification ....................... 18
3.2 Authority .......................................... 18
3.3 Execution and Binding Effect ....................... 18
3.4 No Contravention ................................... 18
3.5 Divisional Financial Statements .................... 19
3.6 Title to Acquired Assets;
Owned Real Property and Leased Real Property ...... 20
3.7 Contracts .......................................... 22
3.8 Employee Benefit Plans ............................. 22
3.9 Absence of Certain Changes ......................... 23
3.10 Litigation ......................................... 24
3.11 Compliance with Laws ............................... 24
3.12 Intellectual Property .............................. 25
3.13 Taxes .............................................. 26
3.14 Inventory .......................................... 26
3.15 Brokers and Finders ................................ 26
3.16 Insurance .......................................... 26
3.17 Labor Matters ...................................... 27
3.18 Sufficiency of Assets .............................. 27
3.19 Accounts Receivable ................................ 27
3.20 Suppliers and Customers ............................ 27
3.21 Products ........................................... 27
3.22 Environmental Matters .............................. 28
3.23 No Other Representatives or Warranties .............
<PAGE>
Article IV - Representations and Warranties of
Purchaser and Holdings ............................ 28
4.1 Incorporation ...................................... 28
4.2 Authority .......................................... 28
4.3 Execution and Binding Effect ....................... 28
4.4 No Contravention ................................... 29
4.5 Litigation ......................................... 29
4.6 Brokers and Finders ................................ 29
Article V - Covenants of the Sellers ........................... 30
5.1 Access; Confidential Information ................... 30
5.2 Conduct of Business ................................ 30
5.3 Reasonable Best Efforts; Notifications ............. 31
5.4 Trade Secret License; UPC .......................... 31
5.5 Preservation of Records ............................ 31
5.6 Capital Projects ................................... 32
5.7 Receivables ........................................ 32
Article VI - Covenants of the Purchaser and Holdings ............ 32
6.1 Preservation of Records ............................ 32
6.2 Reasonable Best Efforts; Notifications ............. 32
6.3 Uncollected Receivables ............................
Article VII - Employee Matters ................................... 33
7.1 Transferred Employees .............................. 33
7.2 Employee Benefit Transition ........................ 34
7.3 COBRA .............................................. 34
7.4 Vacation ........................................... 35
7.5 Qualified Plans .................................... 35
7.6 Disability and Workers' Compensation ............... 35
7.7 No Third Party Beneficiaries ....................... 35
7.8 Documents and Forms ................................ 36
7.9 WARN Requirements .................................. 36
<PAGE>
Article VIII - Conditions to Purchaser's and Holdings' Obligations . 37
8.1 Accuracy of Representations and Warranties;
Performance of Agreements; Certificates
and Opinion of Counsel ............................. 37
8.2 Consents ............................................ 37
8.3 No Injunction ....................................... 37
8.4 HSR Act ............................................. 38
8.5 Closing Deliveries .................................. 38
8.6 No Material Adverse Change .......................... 38
8.7 Title Insurance ..................................... 38
8.8 Survey and Additional Conditions Relating
to Real Property Matters ............................
8.9 Financing ........................................... 38
Article IX - Conditions to Sellers' Obligations .................. 39
9.1 Accuracy of Representations and Warranties;
Performance of Agreements; Certificates
and Opinion of Counsel ............................. 39
9.2 Consents ............................................ 39
9.3 No Injunction ....................................... 40
9.4 Promissory Note and Intercreditor Arrangements ...... 40
9.5 Closing Deliveries .................................. 40
Article X - Indemnification ..................................... 40
10.1 Survival of Representations and Warranties
and Obligations .................................... 40
10.2 Indemnification by Seller ........................... 41
10.3 Indemnification by Purchaser ........................ 41
10.4 Indemnification Procedures .......................... 42
10.5 Limits on Indemnification ........................... 43
10.6 Adjustment of Liability ............................. 43
10.7 Exclusive Remedy .................................... 43
Article XI - Miscellaneous ....................................... 44
11.1 Termination of Agreement ............................ 44
11.2 Expenses ............................................ 44
11.3 Waiver .............................................. 44
11.4 Consents ............................................ 44
11.5 Assignment; Parties in Interest ..................... 44
11.6 Further Assurances .................................. 44
11.7 Entire Agreement .................................... 44
11.8 Amendment ........................................... 44
<PAGE>
11.9 Limitations on Rights of Third Parties .............. 44
11.10 Captions ............................................ 45
11.11 Counterparts ........................................ 45
11.12 Notices ............................................. 46
11.13 Governing Law ....................................... 48
11.14 Bulk Sales Law ...................................... 48
11.15 Transfer Taxes; HSR Fees and Title Insurance ........ 48
11.16 Public Announcements ................................ 48
11.17 Schedules ........................................... 49
11.18 Heinz Guaranty ...................................... 49
11.19 No Offsets .......................................... 50
Article XII - Certain Environmental Costs .........................
<PAGE>
List of Exhibits
Exhibit A - Form of Promissory Note
Exhibit B - Limited Warranty Deed
Exhibit C - Assignment of Real Property Leases
Exhibit C-1 - Form of Lease to Replace BN Leases
Exhibit D - Assignment of Trademarks
Exhibit E - General Assignment
Exhibit F-1 - Bill of Sale (Windy Hill)
Exhibit F-2 - Bill of Sale (Holdings)
Exhibit G - Kozy Kitten License Agreement
Exhibit H - Vets' License Agreement
Exhibit I - Co-Pack Agreement
Exhibit J-1 - Transition Services Agreement
Exhibit J-2 - Transition Storage and Handling Agreement
Exhibit K - Assumption of Assumed Liabilities
Exhibit L - Tuffy's License Agreement
Exhibit M - Opinion of Counsel - Heinz
Exhibit N - Opinion of Counsel - Purchaser
<PAGE>
LIST OF SCHEDULES
Schedule Subject
1.0 Calculation of Non-Cash Working Capital
1.1 Kozy Kitten Products
1.2 Tuffy's Products
1.3 Vet's Dog Food Products
2.1(a) Owned Real Property
2.1(a-1) Real Property Leases
2.1(vi) Excluded Assets
2.3 Acquired Assets to be Transferred to Holdings
2.4(a) Exceptions in Connection with Closing Statement
2.5 Allocation of Purchase Price
2.7(b) Assumed Contracts, Real Property Leases and Permits Requiring
Consent
3.1 States Where Qualified to do Business as Foreign Corporation
3.4 No Contravention (Seller)
3.5 Divisional Financial Statements and Exceptions to Such
Statements
3.6(a) Exceptions to Title to Acquired Assets and to Working Order of
Physical Assets
3.6(b) Disclosures relating to Owned Real Property or Leased Real
Property
3.7(a) Contracts
<PAGE>
3.7(b) Exceptions to Validity, Force and Effect of Material Contracts
or Events of Default
3.8 Employee Benefit Plans
3.9 Absence of Certain Changes
3.10 Litigation
3.11(a) Compliance with Laws
3.12(a) Intellectual Property - Lists of Trademarks, Patents and
Copyrights
3.12(a)(i) Common Law Trademark/Variety Designators
3.12(b) Registered Trademarks - Exceptions to Title
3.12(c) Patents and Copyrights - Exceptions to Title
3.12(d) Intellectual Property - Licenses; Claims
3.13 Taxes
3.14 Inventory
3.17 Labor Matters
3.18 Assets and Properties Necessary to Produce the Products of
Acquired Businesses
3.19 Exceptions to Collectibility of Net Receivables
3.20 Suppliers and Customers
3.22 Environmental Matters
4.4 No Contravention (Purchaser)
<PAGE>
5.6 Capital Projects
7.1 Compensation and Benefits to be Provided
8.2 Consents
8.7 Form of Owners Affidavit
8.9 Debt Term Sheets
XII Certain Environmental Costs
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated April 17, 1996, among HEINZ PET
PRODUCTS COMPANY, a Division of Star-Kist Foods, Inc., a California
corporation ("Star-Kist"), PROMARK INTERNATIONAL, INC., an Idaho corporation
("ProMark"), PERK FOODS CO., INCORPORATED, a Delaware corporation ("Perk")
(Star-Kist, ProMark and Perk are hereinafter referred to as the "Sellers"),
H. J. HEINZ COMPANY, a Pennsylvania corporation and the direct or indirect
parent of each of the Sellers ("Heinz"), as to Sections 3.1, 3.2, 3.3, 3.4,
3.10, 3.15, 3.22 and 11.18 only, WINDY HILL PET FOOD HOLDINGS, INC., a
Delaware corporation ("Holdings"), and WINDY HILL PET FOOD COMPANY, INC., a
Delaware corporation and a wholly-owned subsidiary of Holdings ("Purchaser").
WITNESSETH:
WHEREAS, Sellers desire to sell and assign to Purchaser and Holdings,
and Purchaser and Holdings desire to purchase from Sellers, certain pet food
businesses owned and operated by Sellers, pursuant to the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, Star-Kist owns all of the assets used in such pet food
businesses, except ProMark is the owner of the "Kozy Kitten" and "Tuffy's"
trademarks in the United States and Perk is the owner of the "Vets'"
trademark; and
WHEREAS, the portion of such assets to be purchased by Holdings will be
limited to those assets described on Schedule 2.3 which immediately following
the closing of such purchase will be transferred by Holdings to Purchaser.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
"Acquired Assets" shall mean the property and assets to be conveyed by
Sellers to Purchaser as specified in Section 2.1.
"Acquired Businesses" is a collective reference to the Tuffy's Pet Food
<PAGE>
2
Business, the Kozy Kitten Pet Food Business and the Vets' Dog Food Business.
"Affiliate" means a person, firm or corporation, which directly or
indirectly, alone or through one or more intermediaries, controls, or is
controlled by, or is under common control with a specified person, firm or
corporation.
"Agreement" shall mean this Agreement among Star-Kist, ProMark, Perk,
Heinz, Holdings and Purchaser as originally executed and delivered, as the
same may be amended or supplemented in accordance with the provisions hereof,
together with all Exhibits and Schedules made a part hereof by the references
thereto.
"Applicable Environmental Laws" shall mean all federal, state, local
and foreign statutes, regulations, codes, licenses, orders, judgments,
decrees or injunctions from any governmental entity or agency (a) relating to
the protection of the environment (including air, water, soil and natural
resources) or (b) the use, storage, handling, release or disposal of
Hazardous Substances, including but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
ss.ss. 9601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. ss.ss. 6901 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. ss.ss. 1251 et seq.; the Clean Air Act, 42 U.S.C. ss.ss. 7401 et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 1471 et seq.;
the Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 through 2629; and the
Safe Drinking Water Act, 42 U.S.C. ss.ss. 300f through 300j; and any other
Federal environmental laws, rules and regulations; as have been amended from
time to time and in effect as of the date of this Agreement; and any similar
Minnesota statute or rules and regulations in effect as of the date of this
Agreement.
"Assumed Contracts" shall have the meaning specified in Section 2.1(k).
"Assumed Liabilities" shall have the meaning specified in Section 2.2(a).
"Base Amount" shall have the meaning specified in Section 2.4(c).
"Basket" shall have the meaning specified in Section 10.5.
"BN Leases" shall have the meaning specified in Section 2.6(b)(ii).
"Closing" and "Closing Date" shall have the respective meanings
specified in Section 2.6.
"Closing Statement" shall have the meaning specified in Section 2.4(a).
"Contract" shall mean any contract, agreement, commitment or other
binding arrangement (including purchase orders), whether oral or written, but
excluding Plans and Permits.
<PAGE>
3
"Co-Pack Agreement" shall have the meaning specified in Section
2.6(b)(xi).
"DOJ" shall mean the United States Department of Justice, including any
division thereof.
"Environmental Claim" shall mean any notice alleging (i) the Sellers'
non-compliance with, or failure to perform any duty under, any Applicable
Environment Laws or (ii) potential liability of the Sellers (including,
without limitation, potential liability for investigatory costs, cleanup
costs, natural resource damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from the presence, or
release into the environment, of any Hazardous Substance at any location,
whether or not owned by the Sellers.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"Ernst & Young" refers to Ernst & Young L.L.P.
"Excluded Assets" shall have the meaning specified in Section 2.1.
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles in the
United States as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by significant segments of the accounting profession in the United
States, which are applicable to the circumstances as of the date of
determination.
"Hazardous Substance" shall mean any substance, chemical, or waste that
is listed as hazardous, toxic, or dangerous under Applicable Environmental
Laws, and any petroleum or petroleum products.
"HSR Act" shall mean the Hart-Scoff-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnitee" and "Indemnitor" shall have the respective meanings
specified in Section 10.4(a).
"Intellectual Property" shall have the meaning specified in Section
3.12(a).
"Inventory" shall mean raw materials, ingredients, work-in-process,
finished goods and packaging materials.
<PAGE>
4
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Joint Use Trade Secrets" shall have the meaning specified in Section
2.1(I).
"Joint Use Orders" shall have the meaning specified in Section 3.7(a).
"Knowledge", "best of knowledge" or words of similar import shall mean
actual knowledge as of the date of this Agreement (unless otherwise specified
herein) after reasonable inquiry of the following officers with respect to
Sellers: W.R. Johnson, J. Runkel, S.D. Reyburn, E.S. Nielsen, M.J. Bertasso,
D. Binotto, and M. Milone, or the officers of Purchaser or Holdings as
applicable, and shall not include any facts or circumstances of which any
such person has constructive knowledge.
"Kozy Kitten License Agreement" shall have the meaning specified in
Section 2.1(i).
"Kozy Kitten Pet Food Business" means, and shall be limited to, the
business of manufacturing, distributing, marketing and/or selling the dry and
semi-moist Kozy Kitten Products as conducted by Star-Kist and ProMark on the
Closing Date, specifically excluding, without limitation, the manufacture,
distribution, marketing and/or sale of canned pet food products.
"Kozy Kitten Products" shall mean the various products set forth in
Schedule 1.1.
"Leased Real Property" shall mean the land, buildings and improvements
covered by the Real Property Leases.
"Liens" shall have the meaning specified in Section 3.6(a).
"Losses" shall have the meaning specified in Section 10.4(a).
"Material Adverse Effect" shall have the meaning specified in Section 3.1.
"Material Contracts" shall have the meaning specified in Section 3.7.
"Net Receivables" shall mean the Receivables net of applicable reserves
for bad debts, net of reserves for performance bill-backs at historic rates,
less a 2% cash discount off list price on prior month's sales and net of
reserves for returns and allowances for the 60 day period prior to the
Closing based upon applying Star-Kist's historic rate to net monthly sales.
<PAGE>
5
"Non-Cash Working Capital" shall mean the sum of the Net Receivables,
the Inventory described in Section 2.1(c) and prepaid accounts of the
Acquired Businesses less certain of the accrued expenses of the Acquired
Businesses all as described in Schedule 1.0.
"Non-Transferred Employees" shall have the meaning specified in Section
7.1.
"Notice of Claim" shall have the meaning specified in Section 10.4(b).
"Owned Real Property" shall have the meaning specified in Section 2.1(a).
"Perham Plant" shall mean the pet food processing plant owned and
operated by Star-Kist in connection with the Acquired Businesses and located
in Perham, Minnesota on the Owned Real Property and on a portion of the
Leased Real Property leased from the Burlington Northern Railroad, but shall
not include any of the Excluded Assets located at such facility.
"Permit" shall mean any certificate of occupancy, license, permit, order
or approval of any governmental authority.
"Permitted Liens" shall have the meaning specified in Section 3.6(a).
"Physical Assets" shall have the meaning specified in Section 2.1(b).
"Plans" shall have the meaning specified in Section 3.8(a).
"Products" is a collective reference to the Kozy Kitten Products, the
Tuffy's Products and the Vets' Dog Food Products.
"Purchase Price" shall have the meaning specified in Section 2.3.
"Purchase Price Reduction" shall have the meaning specified in Section
2.4(c).
"Purchaser's Defined Contribution Plan" shall have the meaning specified
in Section 7.5.
"Purchaser Loss" shall have the meaning specified in Section 10.2.
"Real Property" shall mean, collectively, the Owned Real Property and
Leased Real Property.
"Real Property Leases" shall have the meaning specified in Section 2.1(a).
"Reasonable best efforts" shall mean best efforts, provided that in
using such best efforts such party shall not be obligated to incur any
substantial financial
<PAGE>
6
obligations, waive any rights or incur any onerous obligations.
"Reasonable efforts" shall not require the party performing such
efforts to expend any funds other than the payment of de minimus
out-of-pocket expenses, waive any rights or incur any onerous obligations.
"Receivables" shall mean all accounts receivable of the Tuffy's Pet
Food Business (excluding sales in Canada) and the Vets' Dog Food Business as
of the Closing Date.
"Schedules" are the schedules furnished by Sellers to Purchaser
pursuant to this Agreement.
"Seller Loss" shall have the meaning specified in Section 10.3.
"Tax" or "Taxes" shall mean all federal, state, local or foreign
income, profits, gross receipts, capital, windfall profits, value added, ad
valorem, severance, property, production, sales, use, license, excise,
franchise, transfer, employment, payroll, withholding, social security,
disability, occupation and other similar taxes, duties and similar
governmental charges and assessments together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions
or penalties.
"Tax Returns" shall mean all reports and returns required by law to be
filed with respect to Taxes.
"Third Party Claims" shall have the meaning specified in Section 10.4(c).
"Trademarks" shall have the meaning specified in Section 3.12(a)(i).
"Trade Secrets" shall have the meaning specified in Section 2.1(h).
"Transferred Employees" shall have the meaning specified in Section 7.1.
"Tuffy's License Agreement" shall have the meaning specified in Section
2.1(vii).
"Tuffy's Pet Food Business" means, and shall be limited to, the
business of manufacturing, distributing, marketing and/or selling the Tuffy's
Products in the United States and Canada as conducted by Star-Kist and
ProMark on the Closing Date.
"Tuffy's Products" shall mean the various products set forth in
Schedule 1.2.
"Vets' Dog Food Business" means, and shall be limited to, the business
of manufacturing, distributing, marketing and/or selling the maintenance dry
Vets' Dog
<PAGE> 7
Food Products as conducted by Star-Kist and Perk on the Closing Date.
"Vets' Dog Food Products" shall mean the various products set forth in
Schedule 1.3.
"Vets' License Agreement" shall have the meaning specified in Section
2.1(j).
ARTICLE II
SALE AND PURCHASE OF ASSETS
SECTION 2.1. Transfer of Assets. On the terms and subject to the
conditions set forth in this Agreement, Star-Kist and, with respect to the
relevant trademarks, ProMark and Perk, shall sell, assign, transfer, convey
and deliver to Purchaser and Holdings, as applicable, and Purchaser and
Holdings, as applicable, shall purchase and accept from such parties, as
applicable, on the Closing Date, the following assets (the "Acquired Assets"):
(a) all right, title and interest of Star-Kist in and to the real
property owned by Star-Kist and described in Schedule 2.1(a) and the
buildings, structures, fixtures or other improvements located thereon
(collectively, the "Owned Real Property"), together with all right, title
and interest, if any, of Star-Kist in and to all appurtenances of any
nature whatsoever existing with respect to such Owned Real Property and,
subject to Section 2.7, all of the leasehold estates under and interests
in the leases, subleases, licenses and other agreements under which
Star-Kist uses or occupies or has the right to use or occupy any real
property described in Schedule 2.1(a-1) (collectively, the "Real Property
Leases");
(b) all right, title and interest of Star-Kist in and to all
machinery, equipment, motor vehicles, furniture, office supplies and other
tangible personal property, including MRO but excluding Inventory and the
property described in Schedule 2.1(vi) wherever located, located on the
Owned Real Property and the Leased Real Property and all such property at
any other locations that is related solely to the Acquired Businesses and
those items which are acquired by Star-Kist for use solely in the Acquired
Businesses between the date hereof and the Closing Date, but excluding any
such items disposed of or consumed by Star-Kist in the ordinary course of
business between the date hereof and the Closing Date (collectively, the
"Physical Assets");
(c) all right, title and interest of Sellers in and to all Inventory
owned by Sellers as of the Closing Date relating solely to the Acquired
Businesses plus all Inventory (other than finished goods) located on the
Owned Real Property or the Leased Real Property for use in the manufacture
of products under the Co-Pack Agreement referred to in Section 2.6(b)(xi);
(d) all right, title and interest of Sellers in and to the
Receivables;
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8
(e) all right, title and interest of Sellers in and to all of the
books and records of Sellers relating solely to the Acquired Businesses,
including without limitation, files and invoices, equipment maintenance
data, accounting records, audit reports, Inventory records, bills of
material, sales and sales promotional data, advertising materials,
customer lists, cost and pricing information, supplier lists, business
plans, engineering and environmental studies, personnel records (to the
extent the transfer of such records is permitted by law), machine readable
data, technical data, software, specifications, work standards and
manufacturing, assembling and process information, operating manuals,
operating data and plans, engineering drawings, working drawings,
schematics and blueprints, but excluding (i) any such items of Sellers
which incorporate or reflect information relating to any other business of
Sellers or their Affiliates and (ii) all original books of account, tax
returns, tax records, accounting records, medical records and personnel
records of Sellers not located at the Perham Plant, provided that Sellers
(to the extent permitted by law) shall provide Purchaser with access to
make copies of any of such records referred to in subclause (i) or (ii)
above, excluding any competitively sensitive information, reasonably
required by Purchaser pursuant to Section 5.5;
(f) all right, title and interest of Sellers in and to all Permits
held by or on behalf of Sellers and relating solely to the Acquired
Businesses or the operations of the Acquired Businesses at Perham,
Minnesota that are transferrable;
(g) all right, title and interest of Star-Kist and ProMark in and to
all Intellectual Property throughout the world (definition excludes Trade
Secrets, which are addressed in Sections 2.1(h) and 5.4) relating solely
to the Acquired Businesses, including without limitation the "Tuffy" and
"Tuffy's" trademarks but excluding: (i) the variety designators/common law
trademarks set forth in Schedule 3.12(a)(i) outside the United States and
Canada; (ii) the designator "Dinner Rounds"; (iii) the "Kozy Kitten" and
"Vets'") trademarks, (which are subject to the license arrangements set
forth in Sections 2.1(i) and 2.1(j); (iv) the "Vet's Choice" and Vet's
Choice Select Balance trademarks; (v) the "Meaty Meal" trademark outside
the United States and Canada; and (vi) the "Champion Valley Farms"
tradename and any other tradenames other than those listed on Schedule
3.12(a);
(h) all right, title and interest of Star-Kist in and to all trade
secrets, know-how, manufacturing processes, recipes, formulas, process
sheets, mixing instructions, specifications, drawings, technical
information and similar intangible property (collectively, "Trade
Secrets") owned by Star-Kist and relating solely to the Acquired
Businesses;
(i) an exclusive license from ProMark to use the "Kozy Kitten"
trademark, all word combinations incorporating the trademark "Kozy Kitten"
and trade dress and label designs associated with the "Kozy Kitten"
trademark on and in connection with the marketing, sale and distribution
of dry and semi-moist pet food products worldwide
<PAGE>
9
for a period of ten years with an irrevocable option to purchase such
trademark in the form referenced in Section 2.6(b)(viii) (the "Kozy Kitten
License Agreement"); provided that concurrent with the exercise of such
option ProMark shall receive an exclusive license from Purchaser to use
the "Kozy Kitten" trademark, all word combinations incorporating the
trademark "Kozy Kitten" and trade dress and label designs associated with
the "Kozy Kitten" trademark on and in connection with the marketing, sale
and distribution of canned pet food products in the form set forth in
Exhibit A to the Kozy Kitten License Agreement;
(j) a nonexclusive royalty-free license from Perk to use the "Vets'"
trademark in connection with the marketing, sale and distribution of
maintenance dry dog food products for a term of three years, plus a period
to exhaust inventory not to exceed 90 days, in the form referenced in
Section 2.6(b)(ix) (the "Vets' License Agreement");
(k) subject to Section 2.7, all of the rights and interests of
Sellers under the Contracts listed in Schedule 3.7(a) which are not
identified as an Excluded Asset or a Joint Use Order, plus any other
Contracts relating primarily to the Acquired Businesses or the Acquired
Assets not required to be disclosed in Schedule 3.7(a), including any such
Contracts that have been entered into by Sellers between the date hereof
and the Closing Date in the ordinary course of business without violating
the provisions of this Agreement (collectively the "Assumed Contracts");
(l) a license to use certain Trade Secrets shared by the Acquired
Businesses and other businesses of Star-Kist, but specifically excluding
all Trade Secrets used for the production of or relating to Sellers'
Dinner Rounds product (the "Joint Use Trade Secrets") as is set forth in
Section 5.4 hereof;
(m) the ability and non-exclusive right to use the designator Dinner
Rounds in the United States and Canada without objection by Sellers or any
Seller taking any steps to prevent any such ability or right; and
(n) the goodwill of the Acquired Businesses;
provided, however, the Acquired Assets shall not include and Sellers will
retain and neither Holdings nor Purchaser will acquire the following assets
and property (the "Excluded Assets"):
(l) all assets and property of Sellers not specifically included in the
definition of Acquired Assets;
(ii) cash, cash equivalents and bank deposits;
(iii) all accounts, notes and advances receivable of the Kozy Kitten
Pet Food Business and Tuffy's Pet Food Business in Canada;
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10
(iv) Tax refunds, Tax, insurance and other claims or rights to
recoveries and similar benefits of the Acquired Businesses
and any prepaid items with respect to the Acquired
Businesses except as prorated in accordance with Section
2.6(e);
(v) rights accruing to Sellers under this Agreement;
(vi) the assets described in Schedule 2.1(v);
(vii) subject to Sections 2.1(i), 2.1(j) and 2.1(m) the rights
excluded pursuant to Section 2.1(g)(i) through Section
2.1(g)(vi) and all word combinations incorporating the
trademarks related thereto; and
(viii) any and all assets used in or related to the manufacture,
distribution, marketing and/or sale of canned pet food
products.
SECTION 2.2. Assumption of Liabilities.
(a) Subject to Section 2.2(b), in partial consideration of the transfer
to Purchaser of the Acquired Assets, Purchaser, at the Closing, shall assume,
and thereafter pay, fulfill, perform or otherwise discharge when due, all of
the following liabilities and obligations of the Sellers relating to or
attributable to the Acquired Businesses or the Acquired Assets as of the
Closing Date, whether actual or contingent, liquidated or unliquidated, known
or unknown, and no others (collectively, the "Assumed Liabilities"):
(i) all liabilities and obligations relating to the period on and
after the Closing Date under the Assumed Contracts and the Real
Property Leases which are validly assigned to Purchaser whether or
not there are any written contracts or agreements with respect
thereto;
(ii) all liabilities and obligations relating to the period on and
after the Closing Date under the Permits held by or on behalf of
Sellers, which are validly assigned to Purchaser;
(iii) all liabilities and obligations relating to the period on and
after the Closing Date under or arising from the Permitted Liens;
(iv) those certain liabilities and obligations to or for the benefit of
the Transferred Employees provided in Article VII (including, to
the extent deducted in computing Non-Cash Working Capital, accrued
vacation);
(v) in respect of sales of Products on and after the Closing Date, all
obligations and liabilities with respect to billbacks, promotions,
coupons
<PAGE>
11
or other marketing programs or initiatives instituted by Sellers
that are in effect at Closing (collectively, "Promotions");
(vi) subject to Purchaser's rights under Article X with respect to
Section 3.14, all refunds, returns, replacement, deductions,
warranty claims, obligations and liabilities (A) relating to
Products sold or manufactured by the Acquired Businesses prior to
the Closing, including without limitation, any such liabilities or
obligations deducted in computing Non-Cash Working Capital or (B)
which arise from Inventory held on the Closing Date;
(vii) subject to Purchaser's rights under Article X with respect to
Section 3.14, any liability or obligation relating to, resulting
from or arising out of claims for personal injury of any kind or
death or property damage related to the use of or exposure to
Products manufactured by the Acquired Businesses prior to the
Closing Date, including without limitation, any such liabilities
or obligations deducted in computing Non-Cash Working Capital;
(viii) subject to Purchaser's rights under Article X with respect to
Section 3.11 and Section 3.22, any liability or obligation
relating to, resulting from or arising out of claims (A) that the
Acquired Businesses were operated prior to the Closing in
violation of, or that the use, operation or condition of any of
the Acquired Assets failed to comply with, any statute, law, rule,
regulation, ordinance, decree or order applicable thereto or (B)
that are within the scope of the representations and warranties
set forth in Section 3.22; and
(ix) the accrued expenses described in Schedule 1.0 to the extent such
expenses are included in the computation of Non-Cash Working
Capital.
(b) Notwithstanding anything to the contrary in Section 2.2(a), neither
Purchaser nor Holdings shall assume, or in any way be liable or responsible
for, any of the following liabilities and obligations of Sellers, whether
actual or contingent, liquidated or unliquidated, known or unknown (the
"Excluded Liabilities"):
(i) any profit or loss of Sellers derived from the sale provided for
by this Agreement;
(ii) any liabilities or obligations of Sellers other than those
relating to the Acquired Businesses;
(iii) any liability or obligation under Contracts or Permits of Sellers
or Real Property Leases that are not validly assigned to
Purchaser;
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12
(iv) except to the extent deducted in computing Non-Cash Working
Capital as contemplated by Sections 2.2(a) (iv), (vi) and (vii),
any accounts payable or accrued expenses of, or relating to, the
Acquired Businesses for any period prior to the Closing Date;
(v) any intercompany debt or other liability or obligation between the
Acquired Businesses and any of the Sellers or any Affiliate of
Sellers;
(vi) subject to Article VII, any liability or obligation of Star-Kist
to Transferred Employees arising prior to the Closing Date which
is not deducted in computing Non-Cash Working Capital;
(vii) in respect of sales of Products prior to and including the Closing
Date, all obligations and liabilities with respect to Promotions
instituted by Sellers not deducted in computing Non-Cash Working
Capital;
(viii) except as provided in Sections 2.6(e) and 11.15, any liability of
Sellers or Heinz (including any obligation to contribute to the
payment of a Tax determined on a consolidated, combined or unitary
tax basis with respect to a group of persons that includes or
included Sellers or Heinz), for any Taxes, whether incurred,
accrued or assessed prior to, on, or after the Closing Date;
(ix) any liability of Sellers arising out of activities undertaken by
Sellers or incurred by Sellers subsequent to the Closing Date;
(x) all liabilities and obligations relating to the Excluded Assets;
(xi) all liability with respect to any of the matters set forth on
Schedule 3.10;
(xii) any liability pertaining to an event which occurred on or before
the Closing Date to the extent of payments actually received by
Sellers from Seller's insurance net of costs and expenses incurred
by Sellers in connection therewith; or
(xiii) except as provided in Section 2.6(e) and 11.15, any tax liability
of Sellers or their Affiliates whether or not relating to the use
or ownership of the Acquired Assets or the operation of the
Acquired Businesses for periods ending on or prior to the Closing
Date.
(c) After the Closing, Purchaser shall be solely responsible for (i)
except as is otherwise set forth in Article VII, any liability or obligation
to Transferred Employees arising from Purchaser's hiring or termination of
such employees and (ii) any other liability or obligation arising from its or
Holding's use or operation of the Acquired Businesses or the Acquired Assets.
<PAGE>
13
SECTION 2.3. Purchase Price and Other Consideration; Payment. The
aggregate purchase price (the "Purchase Price") for the Acquired Assets is
fifty-two million five hundred thousand dollars ($52,500,000) subject to
possible adjustment after the Closing as provided in Section 2.4 and Section
2.6(e), and the execution and delivery of assumption agreement pursuant to
which Purchaser shall assume the Assumed Liabilities.
(a) On the Closing Date, Holdings shall acquire the tangible
personal property shown on Schedule 2.3 included among the Acquired
Assets from Star-Kist in consideration of the payment of $10,990,000
as follows: (i) delivery to Star-Kist of a promissory note in the
amount of $10,500,000 substantially in the form attached hereto as
Exhibit A (the "Promissory Note") and (ii) $490,000 by wire transfer
of immediately available U.S. funds to an account designated in
writing by Star-Kist to Holdings not less than three business days
prior to the Closing.
(b) On the Closing Date, Purchaser shall acquire all the
Acquired Assets, other than those Acquired Assets shown on Schedule
2.3, in consideration of the payment of $41,510,000 to the Sellers
as follows: (i) $37,010,000 to Star-Kist by wire transfer of
immediately available U.S. funds to an account designated in writing
by Star-Kist to Purchaser not less than three business days prior to
the Closing and (ii) $4,500,000 to ProMark by wire transfer of
immediately available U.S. funds to an account designated in writing
by ProMark to Purchaser not less than three business days prior to
the Closing.
SECTION 2.4. Non-Cash Working Capital.
(a) Within ninety (90) days after the Closing Date, Star-Kist shall
deliver to Purchaser a statement reviewed by Star-Kist's accountants,
Cooper's & Lybrand L.L.P. ("C&L"), showing the calculation of Non-Cash
Working Capital as of the Closing Date (the "Closing Statement"). The
Closing Statement shall be prepared in accordance with GAAP applied on the
same basis and in accordance with the same practice standards and
procedures utilized by Star-Kist for prior accounting periods except that
the value of all grain in the Inventory shall be valued at the average
actual cost for the month of April 1996 rather than standard costs and
except as set forth in Schedule 2.4(a). The procedures and methods used to
prepare the Closing Statement and the scope and conduct of the review of
the Closing Statement shall be mutually satisfactory to C & L and
Purchaser's accountants, KPMG Peat Marwick L.L.P. ("KPMG"). KPMG may
perform such procedures as it deems necessary in connection with
Star-Kist's preparation of the Closing Statement and C & L's review of the
Closing Statement including (i) observing the taking of the physical count
of the Inventory included in the computation of Non-Cash Working Capital
and (ii) a review of all work papers and procedures used to prepare the
Closing Statement. The fees charged by C & L in connection with the review
of the Closing Statement shall be paid by Star-Kist. All of
<PAGE>
14
KPMG's fees shall be paid by Purchaser. Each party shall bear its own
expenses incurred in connection with the above procedures.
(b) Unless Purchaser, within thirty (30) days after delivery to
Purchaser of the Closing Statement, notifies Star-Kist in writing that it
objects to the Closing Statement, and specifies the basis for such
objection, such Closing Statement shall become final, binding and
conclusive upon the parties for purposes of this Agreement. If Purchaser
and Star-Kist are unable to resolve any objections to the Closing
Statement within ten (10) days after any such notification has been given,
the dispute shall be referred to Ernst & Young. Ernst & Young will make a
determination as to each of the items in dispute, which determination
shall be final, conclusive and binding upon each of the parties hereto.
Purchaser and Star-Kist shall cooperate with each other and with each
other's authorized representatives in order to resolve any and all matters
in dispute under this Section 2.4(b) as soon as practicable and shall
share equally the fees and expenses of Ernst & Young.
(c) If the Non-Cash Working Capital as shown on the Closing
Statement is less than $2,710,000 (the "Base Amount"), then the Purchase
Price shall be decreased dollar for dollar by the difference (the
"Purchase Price Reduction") between the Base Amount and the Non-Cash
Working Capital as shown on the Closing Statement. Star-Kist shall remit
the amount of such Purchase Price Reduction to Purchaser, with interest
from the Closing Date to the date of payment, within five (5) days after
delivery to Purchaser of the Closing Statement as provided in Section
2.4(b) above; provided, however, that acceptance by Purchaser of such
payment shall not constitute a waiver of Purchaser's right to object to
the Closing Statement during the thirty (30) day period following its
delivery. If Purchaser does raise an objection and if resolution of such
objection results in a further Purchase Price Reduction, payment of such
additional amount, with interest, from the Closing Date to the date of
payment, shall be made to Purchaser within five (5) days following final
resolution of the objection.
(d) If the Non-Cash Working Capital as shown on the Closing
Statement exceeds the Base Amount, Purchaser shall no later than five (5)
days after the expiration of the thirty (30) day period referred to above,
remit to Star-Kist the amount of such excess, plus interest thereon from
the Closing Date to the date of payment. If Purchaser contests the Closing
Statement, the amount not in dispute shall be remitted to Star-Kist with
its notice of objection, plus interest thereon from the Closing to the
date of payment.
(e) Any amounts being contested shall be payable within five (5)
days of the date such amount is determined to be undisputed or resolved,
with interest from the Closing Date to the date of payment, even if other
amounts continue to be disputed and unresolved. Interest for purposes of
this Section 2.4 shall be at the rate of 8% per annum. All amounts payable
under this Section 2.4 shall be paid by wire transfer of immediately
available funds.
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15
SECTION 2.5. Allocation of the Purchase Price. Of the $4,500,000
payable to ProMark at Closing, $2,300,000 shall be allocated to the purchase
of the "Tuffy's" trademark and $2,200,000 shall be paid as a licensing fee
under the Kozy Kitten License Agreement. The balance of the Purchase Price
and the Assumed Liabilities shall be allocated among the Acquired Assets in
accordance with Schedule 2.5 and the Sellers, Holdings and Purchaser shall
make all appropriate tax filings on a basis consistent with such allocation.
SECTION 2.6. Closing.
(a) The sale and purchase of the Acquired Assets contemplated hereby
(the "Closing") shall take place at 10 a.m. on April 29, 1996 at the
offices of Cohen & Grigsby, P.C., Pittsburgh, Pennsylvania, or as soon
thereafter as practicable, but not later than April 30,1996. The day on
which the Closing actually takes place is referred to herein as the
"Closing Date".
The Closing shall be deemed to have occurred on the opening of business
on the Closing Date.
(b) At the Closing, the appropriate Seller(s) shall deliver to
Purchaser or Holdings, as applicable:
(i) a duly executed limited warranty deed to convey the Owned Real
Property to Purchaser in the form attached hereto as Exhibit
B, subject only to the Permitted Liens referenced in Section
3.6;
(ii) duly executed assignments transferring the leasehold estates
under and interests of Star-Kist in the Real Property Leases
in the form attached hereto as Exhibit C, subject to the
Permitted Liens referenced in Section 3.6, together with any
consents, with respect to certain of the Real Property Leases
to the extent such consents, are received prior to Closing;
provided however, that in the case of the five Real Property
Leases between Star-Kist (or its predecessors in interest) and
Burlington Northern Railroad (the "BN Leases") such
assignments shall not be required and in lieu thereof
Purchaser shall apply for and enter into a new lease replacing
and superseding all five of such leases in substantially the
form attached hereto as Exhibit C-1, whereupon the existing BN
Leases shall be terminated;
(iii) duly executed assignments of all trademarks that are included
in the Acquired Assets in the form attached hereto as Exhibit
D;
(iv) a duly executed assignment of all rights and interests under
Contracts, Permits, Trade Secrets, the Receivables and the
items of Intellectual Property (other than the Trademarks)
that are included in the Acquired
<PAGE>
16
Assets, in the form attached hereto as Exhibit E;
(v) duly executed bills of sale transferring to Purchaser and
Holdings all of the remaining Acquired Assets not transferred
pursuant to the instruments and documents referred to above in
the forms attached hereto as Exhibits Fl and F2, respectively;
(vi) the officer's certificate, the opinion of counsel and the
documents referred to in Sections 8.1(c) and 8.1(d);
(vii) subject to Section 2.7, all authorizations, waivers, consents
and approvals necessary to transfer to Purchaser the Assumed
Contracts and the Permits relating solely to the Acquired
Businesses;
(viii) a duly executed Kozy Kitten License Agreement in the form
attached hereto as Exhibit G;
(ix) a duly executed Vets' License Agreement in the form attached
hereto as Exhibit H;
(x) a duly executed counterpart of the Tuffy's License Agreement;
(xi) a duly executed co-pack agreement in the form attached hereto
as Exhibit I (the "Co-Pack Agreement") pursuant to which
Purchaser shall manufacture for Star-Kist at the Perham Plant
certain pet food products;
(xii) with respect to the Owned Real Property (A) a Certificate of
Real Estate Value, (B) a Well Certificate (or a sealed well
certificate) in the form required by Minn. Stat. 101 I.235 or
Minn. Stat. 101 I.325 and (C) an affidavit with respect to
storage tanks pursuant to Minn. Stat. 116.48;
(xiii) a duly executed Transition Services Agreement, and Transition
Storage and Handling Agreement in the forms attached hereto as
Exhibits J-1 and J-2;
(xiv) a duly executed agreement between ProMark and Star-Kist
pursuant to which Star-Kist has expressly waived any and all
rights to the Kozy Kitten trademark on dry and/or semi-moist
pet food products, and, upon exercise of the option provided
in the Kozy Kitten License Agreement, all rights to the Kozy
Kitten trademark with respect to any product, the Tuffy and
Tuffy's trademarks and the Meaty Meals trademark in the United
States and amended the same to provide that these marks are no
longer included in the intellectual property
<PAGE>
17
covered by the License Agreement, dated June 20,1995 between
ProMark and Star-Kist; and
(xv) a duly executed termination agreement between Star-Kist and
Star-Kist Canada pursuant to which any rights of Star-Kist
Canada under the registered user agreements relating to
Canadian Trademark Registration Nos. 205,343 and 183,128 are
terminated.
(c) At the Closing, Purchaser shall deliver to the appropriate
Seller(s):
(i) the cash portion of the Purchase Price referred to in Section
2.3(b) in the amount ($41,510,000) in the manner set forth
therein;
(ii) Intentionally Omitted.
(iii) a duly executed assumption of the Assumed Liabilities in the
form attached hereto as Exhibit K;
(iv) the officer's certificate, the opinion of counsel and the
documents referred to in Sections 9.1(c) and 9.1(d);
(v) a duly executed Tuffy's License Agreement in the forms
attached hereto as Exhibit L;
(vi) duly executed counterparts of the Kozy Kitten License
Agreement and the Vets' License Agreement;
(vii) a duly executed counterpart of the Co-Pack Agreement; and
(viii) duly executed counterparts of the Transition Services
Agreement and the Transition Storage and Handling Agreement.
(d) At the Closing, Holdings shall deliver to the appropriate
Seller(s):
(i) $490,000 of the Purchase Price referred to in Section
2.3(a) in the manner set forth therein;
(ii) the Promissory Note; and
(iii) the officer's certificate, the opinion of counsel and
the documents referred to in Sections 9.1(c) and 9.1(d).
<PAGE>
18
(e) All items listed below relating to the Acquired Businesses and
the Acquired Assets which are not reflected in the computation of Non-Cash
Working Capital will be prorated as of the Closing Date, with Sellers
liable to the extent such items relate to any time period up to and
including the day prior to the Closing Date, and Purchase liable to the
extent such items relate to the Closing Date and all periods subsequent
thereto other than any income tax liability arising as a result of the
sale of the Acquired Assets: personal property, real estate, occupancy and
water taxes and installments of special assessments, if any, which are due
and payable in the year of Closing on or with respect to the Acquired
Businesses or the Acquired Assets, it being agreed that Purchaser shall be
fully responsible for all such taxes and assessments which shall become
due and payable in all subsequent years, regardless of the date of levy of
such taxes or assessments; rents, taxes and other items due to Sellers or
payable by Sellers under any Contract or Real Property Lease to be
assigned to or assumed by Purchaser hereunder; the amount of any license
or registration fees with respect to any licenses or registrations which
are being assigned or transferred hereunder; the amount of sewer rents and
charges for water, telephone, electricity and other utilities and fuel;
and any other items which are normally prorated in connection with similar
transactions. Sellers' computation of such proration shall be delivered to
Purchaser simultaneously with the delivery of the Closing Statement
pursuant to Section 2.4 (a). Sellers agree to furnish Purchaser with such
documents and other records as Purchaser reasonably requests in order to
confirm all adjustment and proration calculations made pursuant to this
Section 2.6(e). The net aggregate amount of such prorations shall be
treated as an adjustment to the Purchase Price paid by Purchaser to
Sellers on the Closing Date pursuant to Section 2.3. If current payments
with respect to items to be prorated pursuant to this Section 2.6(e) are
not ascertainable within 90 days following the Closing Date, such payments
shall be prorated on the basis of the most recently ascertainable bill
therefor and shall be reprorated between Sellers and Purchaser when the
current bills with respect to such items have been issued and a cash
settlement shall be made promptly thereafter on an item by item basis.
SECTION 2.7. Nonassignable Contracts, Real Property Leases and Permits.
(a) To the extent that any Assumed Contract, Real Property Lease or
Permit to be assigned hereunder is not capable of being assigned or
transferred without the consent or waiver of the other party thereto or
any third party (including a government or governmental unit), or if such
assignment or transfer or attempted assignment or transfer would
constitute a breach thereof or a violation of any law, decree, order,
regulation or other governmental edict, this Agreement shall not
constitute an assignment or transfer thereof, or an attempted assignment
or transfer of any such Assumed Contract, Real Property Lease or Permit
until such time as such written consent or waiver has been obtained.
(b) Anything in this Agreement to the contrary notwithstanding,
Sellers are not obligated to transfer to Purchaser any of their rights and
obligations in and to any of
<PAGE>
19
the Assumed Contracts, Real Property Leases or Permits to be assigned
hereunder without first having obtained all necessary consents and
waivers. Prior to the Closing Date, Sellers shall use their reasonable
efforts to obtain consents and waivers to allow the assignment of those
Assumed Contracts, Real Property Leases and Permits listed in Schedule
2.7(b). For a reasonable period of time after the Closing Date, not to
exceed one hundred twenty (120) days, Sellers shall cooperate with
Purchaser to assist Purchaser in obtaining any such consents and waivers
not obtained as of the Closing and upon receipt thereof, the applicable
Assumed Contract, Real Property Lease or Permit shall be assigned or
transferred to Purchaser by appropriate instruments of transfer.
(c) To the extent that consents or waivers are not obtained by
Purchaser, Sellers and Purchaser shall cooperate with each other to
establish, to the extent practicable, arrangements that are reasonable and
lawful as to both Sellers and Purchaser, and which result in the benefits
and obligations under such Assumed Contracts, Real Property Leases and
Permits being apportioned in a manner that is in accordance with the
purpose and intention of this Agreement as if such consents or waivers had
been obtained.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND HEINZ
Sellers and Heinz (with respect to Sections 3.1, 3.2, 3.3, 3.4, 3.10,
3.15 and 3.22), as applicable, represent and warrant to Purchaser as follows:
SECTION 3.1. Incorporation; Qualification. Star-Kist, ProMark, Perk and
Heinz are corporations duly organized, validly existing and in good standing
under the laws of the State of California, the State of Idaho, the State of
Delaware and the Commonwealth of Pennsylvania, respectively. Each Seller has
the corporate power and authority to carry on the Acquired Businesses as
presently conducted by it and to own, operate and lease the Acquired Assets
that it owns, operates or leases. Heinz has the corporate power and authority
to carry on its business as presently conducted and to own or lease and to
operate the properties and assets it owns or leases. Each of the Sellers is
duly qualified to do business and is in good standing in each jurisdiction in
which its conduct of the Acquired Businesses or its ownership or operation of
the Acquired Assets requires such qualification, except where the failure to
be so qualified or in good standing would not be reasonably likely to have a
material adverse effect on the Acquired Businesses or the Acquired Assets,
each taken as a whole ("Material Adverse Effect"). The jurisdictions in which
each of Sellers is qualified to do business as a foreign corporation with
respect to Acquired Businesses are set forth in Schedule 3.1 hereto.
SECTION 3.2. Authority. Each of the Sellers and Heinz has all requisite
power and authority to execute, deliver and perform its obligations under
this Agreement and to
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20
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of each of the
Sellers and Heinz and the Special Committee appointed by the Board of
Directors of Heinz, and no other corporate act or proceeding on the part of
the Sellers or Heinz is necessary to approve the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
SECTION 3.3. Execution and Binding Effect. This Agreement has been duly
and validly executed and delivered by each of the Sellers and Heinz,
constitutes the legal, valid and binding obligation of each of them and will
be enforceable against each of them in accordance with its terms, except as
such enforceability may be limited by bankruptcy, moratorium, insolvency,
reorganization, liquidation or other laws relating to or affecting creditors'
rights or by equitable principles.
SECTION 3.4. No Contravention. Except as set forth in Schedule 3.4, the
execution, delivery and performance of this Agreement by Sellers and Heinz
and the consummation by Sellers and Heinz of the transactions contemplated
hereby and the fulfillment of and compliance with the terms and conditions
hereof, do not and will not:
(a) conflict with or violate any provisions of such parties'
Articles of Incorporation, Certificate of Incorporation or By-Laws as
applicable;
(b) require any consent, approval or notice under or conflict with,
result in a termination or breach of, or constitute (with or without
notice or lapse of time or both) a default under, or accelerate or permit
the acceleration of any performance required by, any Contract, Real
Property Lease, Permit or Plan to which any of the Sellers or Heinz is a
party or by which any of the Sellers or Heinz or any of the Acquired
Assets is bound or subject;
(c) violate any law, statute or ordinance or any rule, regulation,
order, writ, injunction or decree of any court or of any public,
governmental or regulatory body, agency or authority applicable to any of
the Sellers or Heinz in respect of the Acquired Businesses, or by which
any of the Acquired Assets may be bound or subject; or
(d) require any filing, declaration or registration with, or permit,
consent or approval of, or the giving of notice to, any public,
governmental or regulatory body, agency or authority; excluding from the
foregoing Sections 3.4(a) through (d):
(i) any consents or waivers required in connection with the
Assumed Contracts, the Real Property Leases, Plans or Permits
which in each case are not material,
(ii) any local filings or recordings that may be necessary to
transfer any of the Acquired Assets, and
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21
(iii) the filing required under the HSR Act and expiration of the
applicable waiting periods under the HSR Act.
SECTION 3.5. Divisional Financial Statements. Star-Kist has delivered
to Purchaser unaudited divisional statements of income and results of
operations for the Acquired Businesses, for the fiscal years of Star-Kist
ended 1992 through 1995 (the "Divisional Annual Financial Statements"), and
for the eight month period ended December 23, 1995 (the "Divisional Interim
Financials") The Divisional Annual Financials and the Divisional Interim
Financials, are referred to herein collectively as the "Divisional Financial
Statements". The Divisional Financial Statements were reviewed by C & L and
are attached to and made a part of Schedule 3.5. Except as set forth in
Schedule 3.5 and in the last four sentences of this Section 3.5, The
Divisional Financial Statements were prepared in all material respects in
accordance with the books, records and accounts of Sellers and on the same
basis, and consistent with the principles utilized by Star-Kist in the
preparation of such divisional accounts for inclusion in Star-Kist's
consolidated financial statements for such periods and present fairly the
financial information purported to be reflected thereby. Except as set forth
in Schedule 3.5, the entries for net sales, costs to arrive at gross return,
marketing expense, and fixed expenses were determined in accordance with GAAP
consistently applied throughout the periods covered thereby. The books,
records and accounts relating to the Acquired Businesses were accurate and
complete in all material respects, except for specific corporate allocations
that were excluded (general and administrative, trade bad debts, swells,
Tuffy's brokerage, depreciation of the Perham Plant allocated to the Tuffy's
Pet Food Business) and the exclusion of premiums related to the closure of
Star-Kist's Biloxi, Mississippi plant and/or acquisition of The Quaker Oats
pet food business.
Each of the Divisional Financial Statements were based on various
assumptions regarding the basis of presentation and include certain allocated
charges and credits, all of which are more fully set forth in such financial
statements. Such financial statements are qualified to the extent that the
Acquired Businesses were not operated as separate businesses. The allocated
charges and credits are not necessarily indicative of the amounts which would
have been incurred as a result of arms-length transactions.
SECTION 3.6. Title to Acquired Assets; Owned Real Property and Leased
Real Property.
(a) Star-Kist has fee simple title to the Owned Real Property, free
and clear of any liens, charges, pledges, mortgages, deeds of trust,
claims, security interests or other encumbrances (collectively, "Liens")
created, suffered or agreed to by Star-Kist other than Permitted Liens and
Star-Kist has (i) valid leasehold interests as to the Leased Real
Property; and (ii) good and valid title to all of the other tangible
assets and properties included in the Acquired Assets, other than the
Owned Real Property, free and clear of any Liens, other than in each case
Permitted Liens. For purposes of this Agreement, "Permitted Liens" shall
mean (i) liens securing taxes, assessments, governmental charges or
levies, or the claims of contractors, materialmen, carriers, landlords,
warehousemen, workmen, repairmen, customers, employees and similar
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22
persons, which are not yet due and payable or are being contested in good
faith, so long as such contest does not involve any substantial danger of
the sale, forfeiture or loss of such properties or assets which are
material to the Acquired Businesses taken as a whole, (ii) Liens and
imperfections of title which are not reasonably likely to, singly or in
the aggregate, have a Material Adverse Effect or materially interfere with
the use, occupancy or operation of the Perham Plant as currently used,
occupied or operated, (iii) those Liens and imperfections of title which
are described in Schedule 3.6(a), (iv) with respect to the other tangible
assets and properties referred to above, those items disposed of after the
date hereof in the ordinary course of business, (v) with respect to the
Leased Real Property, all underlying mortgages, deeds of trust, leases,
grants of term or other estates in or interests affecting the landlord's
or fee owner's interest in the applicable portion of such property which
are superior to the interests of Star-Kist as tenant under the applicable
Real Property Lease, and any imperfections of title which are not
reasonably likely to, singly or in the aggregate, materially interfere
with the use, occupancy, or operation of the applicable portion of such
property as currently used, occupied or operated, and (vi) with respect to
the Owned Real Property and the Leased Real Property all applicable
building and zoning ordinances, any Liens or imperfections of title which
are matters of record and any encroachments or other facts or conditions
that would be revealed by an accurate survey or careful physical
inspection thereof. Except as set forth in Schedule 3.6, all major and
material Physical Assets are in working order as of the date hereof and
are adequate for the uses to which they are being put in the ordinary
course of the Acquired Businesses, other than items currently under or
scheduled for repair or which will be replaced or repaired under the
construction programs described in such Schedule.
(b) Except as disclosed in Schedule 3.6(b):
(i) There are no adverse or other parties in possession of
the Owned Real Property or the property subject to the
BN Leases or any part thereof. Star-Kist has not granted
any license, right of first refusal, right of purchase
or other right relating to the ownership, use or
possession of any of the Owned Real Property or the
Leased Real Property or any part thereof;
(ii) There is direct access between the Perham Plant and
public streets and utilities necessary for the operation
of the Perham Plant as it is currently being operated
and, to the knowledge of Star-Kist, no fact or condition
exists that would result in the termination of such
access;
(iii) All utilities (including, without limitation, water,
gas, steam, sewer, electricity, trash removal and
telephone service) required by law or necessary for the
operation of the Perham Plant as it is currently being
operated are currently available to the Perham Plant in
sufficient quantities to adequately service its current
needs;
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23
(iv) Star-Kist has not received any notice from any
governmental authority (A) requiring it to correct any
condition with respect to the Owned Real Property or the
Leased Real Property, or any part thereof, by reason of
a violation of any applicable laws, codes, ordinances,
rules, regulations or orders of governmental authorities
that have not been corrected or (B) regarding a
condemnation action with respect to the Owned Real
Property or the Leased Real Property;
(v) Star-Kist has not received any notice from an insurance
company or board of fire underwriters requesting the
performance of any work or alteration with respect to
the Owned Real Property or the Leased Real Property that
has not been performed, or requiring an increase in the
current insurance rates applicable to the Owned Real
Property or the Leased Real Property;
(vi) Star-Kist has not claimed with respect to the Owned Real
Property the benefit of any law permitting a special use
valuation (such as an "agricultural", "clean and green"
or "open space") for the purpose of obtaining an ad
valorem tax rate lower than the normal rate;
(vii) Star-Kist is not a "foreign person" as that term is
defined in Section 1445 of the IRC, and any applicable
regulations promulgated thereunder;
(viii) to Star-Kist's knowledge, no portion of the Owned Real
Property or the Leased Real Property upon which the
Perham Plant is situated is located in a special flood
hazard area designated by any state or federal
governmental authority;
(ix) subject to proration in accordance with Section 2.6(e),
Star-Kist, with respect to the Owned Real Property, has
paid, and will continue to pay all taxes, assessments,
charges, fees, levies and impositions as the same became
due and payable prior to Closing;
(x) to Star-Kist's knowledge, all components of all
buildings and other improvements included within the
Owned Real Property arid the BN Leases, excluding roofs
but including the structural elements thereof and the
heating, ventilation, air conditioning, plumbing,
electrical, mechanical, sewer and waste water systems
and facilities included therein, are in working order as
of the date hereof;
(xi) all material certificates of occupancy, permits,
licenses, franchises, approvals and authorizations of
all governmental authorities having jurisdiction over
the Owned Real Property and the Leased Real Property,
and from all insurance companies and fire rating and
other
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24
similar boards and organizations, required to have been
issued to enable such properties to be lawfully occupied
and used for all of the purposes for which they are
currently occupied and used have been lawfully issued
and are in full force and effect; and
(xii) no portion of the Perham Plant has suffered any material
damage by fire or other casualty within the past 24
months which has not heretofore been repaired.
SECTION 3.7. Contracts.
(a) Schedule 3.7(a) discloses all written and oral Contracts
relating primarily to the Acquired Businesses or the Acquired Assets of
the following types: (i) Contracts which involve the payment or receipt by
any of Sellers of in excess of $50,000 during the remaining term thereof
or which have an unexpired remaining term of more than one year, (ii)
employment agreements, (iii) non-competition, confidentiality and secrecy
agreements, (iv) collective bargaining agreements, (v) loan agreements,
notes, mortgages, indentures, security agreements and other agreements and
instruments relating to the borrowing of money, (vi) franchise, broker or
license agreements, (vii) powers of attorney, or (viii) partnership or
joint venture agreements,; but excluding (i) purchase or supply orders
(other than orders for packaging materials, yellow corn, poultry meal and
corn gluten meal that relate solely to the Acquired Businesses all of
which shall be disclosed as Material Contracts) arising in the ordinary
course of business and (ii) Contracts required to be listed in another
Schedule (collectively, the "Material Contracts"). In addition, Schedule
3.7(a) discloses separately all outstanding purchase orders and
commitments for packaging materials, yellow corn, poultry meal and corn
gluten meal that are used in the Acquired Businesses or provide for the
delivery of all or a portion of the quantities subject thereto to the
Perham Plant that in each case relate to other businesses of Seller(s)
(the "Joint Use Orders"). Except as otherwise indicated in Schedule
3.7(a), true and complete copies of each written Material Contract, true
and complete written summaries of each oral Material Contract and true and
complete copies of each Joint Use Order (together with any and all
modifications, amendments or supplements thereto) have been delivered to
Purchaser prior to execution of this Agreement.
(b) Except as set forth in Schedule 3.7(b), all Material Contracts
are valid and in full force and effect. Except as set forth in Schedule
3.7(b), (i) no default exists by any Seller, and to the applicable
Seller's knowledge any other party, under any Material Contract and (ii)
with respect to any Seller, and to the applicable Seller's knowledge any
other party, there does not exist any event that, with notice or lapse of
time or both, would constitute an event of default or result in a right to
accelerate, or loss of rights under any Material Contract.
SECTION 3.8. Employee Benefit Plans.
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25
(a) Schedule 3.8 hereto contains a true and complete list of each
plan, contract, program and arrangement, including, but not limited to,
pension, bonus, deferred compensation, incentive compensation, stock
purchase, supplemental retirement, severance or termination pay,
employment contract, stock option, hospitalization, medical, life
insurance, dental, disability, salary continuation, vacation, supplemental
unemployment benefits, profit-sharing, retirement and each other employee
benefit plan, program, policy or arrangement, maintained, contributed to,
or required to be contributed to, by Star-Kist for the benefit of any
Transferred Employee described in Article VII (collectively, "Plans").
Star-Kist has delivered to Purchaser copies of the H.J. Heinz Company
Saver Plan and the H.J. Heinz Company Employees Retirement and Savings
Plan.
(b) All Plans which are "employee pension benefit plans" within the
meaning of Section 3(2) of ERISA are intended to be qualified under
Section 401(a) of the IRC and have received determination letters from the
IRS stating that such Plans are qualified with respect to the provisions
of law as in effect prior to the enactment of the Tax Reform Act of 1986,
copies of which letters have been delivered to Purchaser, and each trust
created under any such Plan is exempt from tax under Section 501(a) of the
IRC. Star-Kist has amended each such Plan to be in compliance with current
law and intends to submit such Plans to the IRS for a determination of
their qualified status as amended within the remedial amendment period
applicable to such Plans, and further intends to make any changes required
by the IRS necessary to maintain the qualified status of such Plans.
(c) None of the Plans is a "multiemployer plan" as defined in ERISA
Section 3(37).
SECTION 3.9. Absence of Certain Changes. Except as set forth in
Schedule 3.9, with respect to the Acquired Businesses and the Acquired
Assets, each of the Sellers has not since December 23,1995 and up to the date
of this Agreement:
(a) permitted or allowed any of the Acquired Assets to be mortgaged,
pledged or subjected to any Lien, other than Permitted Liens;
(b) materially written down or materially written up the value of
any of the Inventory other than in the ordinary course of business;
(c) sold, transferred or leased any of the Acquired Assets other
than sales of Inventory (including disposal of obsolete, damaged or
defective Inventory) or other Acquired Assets in the ordinary course of
business;
(d) granted increases in the compensation of any Transferred
Employee which increases singly or in the aggregate are material, other
than in the ordinary course of business and consistent with past practice;
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26
(e) adopted, entered into or agreed to enter into, or amended or
agreed to amend any Plan which singly or in the aggregate are material to
the Acquired Businesses taken as a whole, other than in the ordinary
course of business and 4 consistent with past practice;
(f) disposed of or permitted to lapse any rights to the use of any
Intellectual Property;
(g) otherwise operated the Acquired Businesses other than in the
ordinary course
(h) suffered any changes in the assets, liabilities, business or
financial condition which have resulted in a Material Adverse Effect; or
(i) agreed, whether in writing or otherwise, to take any of the
actions set forth in this Section 3.9.
SECTION 3.10. Litigation. Except as set forth in Schedule 3.10, (a)
there is no claim, action, suit, proceeding or investigation pending or, to
Sellers' knowledge, threatened by or against any of Sellers or Heinz with
respect to (i) the Acquired Businesses, (ii) the Acquired Assets or (iii) the
transactions contemplated hereby, at law or in equity or before or by any
Federal, state, municipal, foreign or other governmental department,
commission, board, agency, instrumentality or authority, and (b) there is no
order, decree or judgment pending or in effect against any of Sellers with
respect to (i) the Acquired Businesses, (ii) the Acquired Assets or (iii) the
transactions contemplated hereby.
SECTION 3.11. Compliance with Laws.
(a) Except as set forth in Schedule 3.11(a), each of the Sellers is
conducting the Acquired Businesses in compliance in all material respects
with all statutes, laws, rules, regulations, ordinances, decrees and
orders applicable to its use and operation or the condition of the
Acquired Assets and its operation of the Acquired Businesses which are in
effect as of the date hereof and as of the Closing and has not received
any notice that it is in noncompliance with any such statutes, laws,
rules, regulations, ordinances, decrees or orders.
(b) Schedule 3.11(a) hereto sets forth all material Permits required
by Sellers for the operation of the Acquired Businesses and the use and
ownership or leasing of the Acquired Assets as currently operated, used,
owned or leased, as applicable, and all of such Permits are valid and in
full force and effect. Except as set forth in Schedule 3.11(a), each of
the Sellers is in compliance in all material respects with such Permits,
as applicable, and there is no proceeding pending or threatened that
disputes the validity of any such Permit or that is likely to result in
the revocation, cancellation or suspension, or any adverse modification of
any such Permit.
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27
SECTION 3.12. Intellectual Property.
(a) Schedule 3.12(a) and 3.12(a)(i) sets forth a complete and
accurate list of:
(i) all fictitious business names, brand names, brand name
applications, trade names, trade name applications and
registrations, foreign trademark and service mark
applications, registrations and common law trademarks and
service marks and United States federal, state and common law
trademarks, service marks and variety designators, trademark
applications and registrations owned, licensed or otherwise
held or used by any of the Sellers that relate solely to the
Acquired Businesses but specifically excluding: (A) the
variety designators/common law trademarks set forth in
Schedule 3.12 (a)(i) outside the United States and Canada; (B)
the descriptor "Dinner Rounds"; (C) "Vets'", "Vet's Choice"
and "Vet's Choice Select Balance" trademarks; (D) the "Meaty
Meal" trademark outside the United States and Canada; and (E)
all trade names used by the Acquired Businesses except those
listed on Schedule 3.12[a] (collectively, the "Trademarks");
(ii) all United States and foreign patents, patent applications
provisionals, divisions, continuations and substitutes
thereof, and all other patent rights owned, licensed or
otherwise held by any of the Sellers that relate solely to the
Acquired Businesses (collectively, the "Patents"); and
(iii) all copyright registrations and pending applications for
copyright registrations filed by or on behalf of Sellers that
relate solely to the Acquired Businesses (collectively, the
"Copyrights").
The foregoing, together with all rights, benefits and privileges
pertaining thereto, all goodwill associated therewith, and all rights to
causes of action or remedies related thereto (including the right to sue
for past infringement or violation of rights associated therewith), shall
be referred to herein as the "Intellectual Property".
(b) Except as set forth in Schedule 3.12(b), the applicable Seller
owns all of the Intellectual Property and Reg. No.730,530 for Kozy Kitten
free and clear of any Liens (except claims). Except as set forth in
Schedule 3.12(b), each of the applicable U.S. and Canadian registered
Trademarks (collectively, the "Registered Trademarks") and pending
application Serial No.75-045,257 for Tuffy's and Reg. No.730,530 for Kozy
Kitten are valid and subsisting and the applicable Seller has the
exclusive right to use, sell, license and dispose of or bring actions for
infringement of its rights. None of the Registered Trademarks and pending
application Serial No.75-045,257 for Tuffy's and Reg. No.730,530 for Kozy
Kitten are now involved in any opposition,
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28
invalidation or cancellation proceeding, nor to Sellers' knowledge, is any
such action threatened. Except as set forth in Schedule 3.12(d), Sellers
represent that the non-U.S. and Canadian Registrations (other than the
International Registration of the mark Tuffy (Reg. No.403,256)) and U.S.
applications for Canine Prime and Feline Prime, Serial No.74-580,337 and
No.74-580,336, respectively, are subsisting and Sellers have no knowledge
of infringement claims with respect thereto by any third parties. No other
representations are made by any of the Sellers or Heinz as to the
ownership, the validity or as to the exclusive rights to use foreign
registered or common law Trademarks or variety designators set forth in
3.12 (a)(i) including without limitation, the right to own, use, license,
dispose of or bring actions for infringement of rights to such Trademarks.
(c) Except as set forth in Schedule 3.12(c), Star-Kist owns free and
clear of any Liens and has the exclusive right to use, offer for sale,
sell, import, license and dispose of or bring actions for infringement of
its rights to the Patents and the Copyrights.
(d) Except as set forth in Schedule 3.12(d), none of the Registered
Trademarks or pending application Serial No.75-045,257 for Tuffy's and
Kozy Kitten Reg. No.730,530 is infringing on the rights of any third
party. Except as set forth in Schedule 3.12(d), none of the Sellers has
received written notice from any third party nor have any of the Sellers
any knowledge of any third party alleging that its use of any other item
of Intellectual Property is infringing on the rights of any third party.
Except as set forth in Schedule 3.12(d), none of the Sellers has granted
any licenses or other similar rights and none of the Sellers has any
obligation to grant licenses or other similar rights to any of the
Intellectual Property. No third party consent will be required for the use
of any of the Registered Trademarks or pending application No.75-045,257
for Tuffy's and Registration number 730,530 for Kozy Kitten as a
consequence of the consummation of the transactions contemplated hereby.
Except as set forth in Schedule 3.12(d), in the last five years, none of
the Sellers has made any claim of any violation or infringement by others
of its rights to any of the Intellectual Property and none of the Sellers
has knowledge of any basis for making any such claim.
SECTION 3.13. Taxes. Except as set forth in Schedule 3.13, there are no
pending or, to any Seller's knowledge, threatened claims, investigations,
actions or proceedings, assessments or collections of Taxes of any kind with
respect to the Acquired Businesses that could subject Purchaser to any
liability for such Taxes for the period prior to and including the Closing
Date or could impair any of the Acquired Assets.
SECTION 3.14. Inventory. Except as set forth in Schedule 3.14, the
Inventory to be sold to Purchaser hereunder shall on the Closing Date,
consist of items that are usable or salable in the normal and ordinary course
of the Acquired Businesses. The quantities of each type of Inventory to be
sold to Purchaser hereunder will be maintained at normal levels adequate for
the continuation of each of the Acquired Businesses as it is presently being
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29
conducted. The Inventory will not be, and no Products manufactured by the
Acquired Businesses prior to the Closing Date were, adulterated, misbranded,
mispackaged or mislabeled within the meaning of, or manufactured, processed
or packaged in violation of any applicable local, state or federal food and
drug laws or regulations. All Inventory will meet and all Products have met
all requirements of applicable statutes, rules and regulations of the United
States and any state or local government. All Products of the Acquired
Businesses sold prior to the Closing Date were products that may be lawfully
shipped and sold in interstate commerce and conform in all respects to the
requirements of such laws, and the rules and regulations promulgated
thereunder.
SECTION 3.15. Brokers and Finders. None of the Sellers nor Heinz has
employed any broker or finder or incurred any liability for any brokerage
fees or commissions or finders fees in connection with the transactions
contemplated by this Agreement.
SECTION 3.16. Insurance. Star-Kist has maintained a reasonable and
customary program of casualty insurance (which may include self-insurance by
Heinz) with respect to the Acquired Assets. Star-Kist has provided Purchaser
with a three-year loss history under the various casualty policies applicable
to the Acquired Businesses.
SECTION 3.17. Labor Matters. With respect to the operation of the
Acquired Businesses at the Perham Plant, except as set forth on Schedule
3.17, there (a) currently is no unfair labor practice complaint against
Star-Kist pending before the National Labor Relations Board, (b) currently
is, and during the last twenty-four months there has been, no labor strike,
slowdown or stoppage pending against, or involving the employees of,
Star-Kist, (c) is no labor union representing the employees of Star-Kist, and
(d) is no collective bargaining agreement currently being negotiated by
Star-Kist with respect to its employees.
SECTION 3.18. Sufficiency of Assets. Except as set forth in Schedule
3.18 hereto, the Acquired Assets constitute substantially all of the assets
and properties that are necessary to produce the products of the Acquired
Businesses substantially in the manner conducted by Sellers.
SECTION 3.19. Accounts Receivable. Except as set forth in Schedule 3.19
hereto, the Net Receivables will be collectible in the ordinary course of
business.
SECTION 3.20 Suppliers and Customers. Schedule 3.20 lists the ten
largest suppliers and customers to the Acquired Businesses by volume shipped
for the eight months ending December 23 , 1995 together with the approximate
dollar volume by supplier and customer and a general description of the goods
or services provided, and describes any substantial change in the identity
of, or the nature of the business conducted with, such suppliers that has
occurred since such date. Since December 23, 1995, there has not been any
material change in the relationship or course of dealing between Star-Kist or
its agents in respect of the Acquired Businesses and any suppliers to the
Acquired Businesses which, individually or in the aggregate, has had or would
have a Material Adverse Effect. Sellers have not, since December 23, 1995,
received written notice from any of the above listed
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customers that it will reduce the quantity of product purchased from Sellers
by any amount greater than two-thirds of that purchased from such customer
during the previous twelve-month period.
SECTION 3.21 Products. The Kozy Kitten Products set forth in Schedule
1.1 represent all of the dry and semi-moist cat food products bearing the
Kozy Kitten name which are currently manufactured, distributed, marketed
and/or sold by Star-Kist and ProMark. The Tuffy's Products set forth in
Schedule 1.2 represent all of the products bearing the Tuffy's name which are
currently manufactured, distributed, marketed and/or sold by Star-Kist and
ProMark in the United States and Canada. The Vets' Dog Products set forth in
Schedule 1.3 represent all of the maintenance dry dog food products bearing
the Vets' name which are currently manufactured, distributed, marketed and/or
sold by Star-Kist and Perk.
SECTION 3.22. Environmental Matters.
(a) Except as set forth in Schedule 3.22, with respect to Sellers' use,
operation or ownership of the Acquired Assets and their operation of the
Acquired Businesses, no Environmental Claim has been received by the Sellers
or, to the Sellers' knowledge, any person or entity whose liability for such
Environmental Claim the Sellers have or may have retained or assumed either
contractually or by operation of law, nor, to the knowledge of Sellers, is
any such Environmental Claim threatened.
(b) Except as set forth in Schedule 3.22 or except as otherwise
qualified in other subsections of this Section 3.22, there are no present or
past actions, activities, circumstances, conditions, events or incidents,
that would result in any Environmental Claim against the Sellers with respect
to Sellers' use, operation or ownership of the Acquired Assets and their
operation of the Acquired Businesses or against any person or entity whose
liability for such Environmental Claim the Sellers have or may have retained
or assumed either contractually or by operation of law.
(c) Except as set forth in Schedule 3.22, the business of the Sellers
at the Perham Plant complies in all material respects with all Applicable
Environmental Laws.
(d) Except as set forth in Schedule 3.22, none of the Sellers have
generated at or transported from the Perham Plant any Hazardous Substances
which have been transported to or disposed of in any offsite disposal or
other facility, except for any such transportation or disposal which would
not reasonably be expected to result in a liability to any of the Sellers.
(e) Except as set forth in Schedule 3.22, to the knowledge of the
Sellers, there are not present in, on or under the Owned Real Property or the
property subject to the BN Leases any Hazardous Substances in such quantities
as to create any liability or obligation under any Applicable Environment Law
or any other liability for either Purchaser or the Sellers.
(f) The Sellers have delivered to Purchaser all environmental reports
of which the Sellers are aware with respect to the Owned Real Property.
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(g) Except as set forth in Schedule 3.22, the Sellers have not, in
connection with the Perham Plant installed, used, generated, treated,
disposed of, or arranged for the disposal of any Hazardous Substances in any
matter so as to create any liability or obligation under any Applicable
Environmental Law for either Purchaser or the Sellers.
(h) Without in any way limiting the generality of the foregoing but
except as set forth on Schedule 3.22, (i) all underground storage tanks or
other containment facilities of any kind located or formerly located on the
Owned Real Property or the property subject to the BN Leases are identified
in Schedule 3.22, (ii) all wells or other borings on the Owned Real Property
or the property subject to the BN Leases (regardless of whether such wells or
borings are in use) are identified on Schedule 3.22, (iii) there is no
friable asbestos contained in or forming any part of any building, building
component, structure or office space constituting a part of the Owned Real
Property or the property subject to the BN Leases, and (iv) no
polychlorinated biphenyl are used or stored on the Owned Real Property or the
property subject to the BN Leases or contained in any of the tangible
personal property on such properties.
SECTION 3.23. No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, none of the
Sellers, Heinz nor any other person or entity makes any other express or
implied representation or warranty on behalf of Sellers, Heinz or their
Affiliates with respect to the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or the Acquired Assets
or the Acquired Businesses. Each of the Sellers and Heinz hereby disclaims
any such representation or warranty, notwithstanding the delivery or
disclosure to Purchaser, any of its officers, directors, employees, agents or
representatives of any documentation or other information by or on behalf of
any of the Sellers, Heinz or any Affiliate of Heinz, including without
limitation any projections or forecasts (the "Projections"). There can be no
assurance that the Projections provide an accurate forecast of future
results. Purchaser and Holdings each acknowledges that it has not relied upon
the Projections in any manner.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND HOLDINGS
Purchaser and Holdings, as applicable, represent and warrant to Sellers
as follows:
SECTION 4.1. Incorporation. Holdings and Purchaser each are
corporations duly organized, validly existing and in good standing under the
laws of Delaware.
SECTION 4.2. Authority. Each of Purchaser and Holdings has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this
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Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of each of Purchaser and
Holdings, and no other corporate act or proceeding on the part of either
Purchaser or Holdings is necessary to approve the execution and delivery of
this Agreement or the consummation by Purchaser and Holdings of the
transactions contemplated hereby.
SECTION 4.3 Execution and Binding Effect. This Agreement has been duly
and validly executed and delivered by each of Purchaser and Holdings and
constitutes the legal, valid and binding obligation of each of Purchaser and
Holdings and will be enforceable against each of Purchaser and Holdings in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, reorganization, liquidation or other laws
relating to or affecting creditors' rights or by equitable principles.
SECTION 4.4. No Contravention. Except as set forth in Schedule 4.4, the
execution, delivery and performance of this Agreement by each of Purchaser
and Holdings and the consummation by each of Purchaser and Holdings of the
transactions contemplated hereby and the fulfillment of and compliance with
the terms and conditions hereof, do not and will not:
(a) conflict with or violate any provisions of either of the
Purchaser's or Holdings' charter documents;
(b) require any consent, approval or notice under or conflict with,
result in a termination or breach of, or constitute (with or without
notice or lapse of time or both) a default under, or accelerate or permit
the acceleration of any performance required by, any note, bond, mortgage,
indenture, license, franchise, permit, contract, lease or other instrument
or obligation to which either Purchaser or Holdings is a party or by which
either Purchaser or Holdings or any of its assets or properties is bound
or subject;
(c) violate any law, statute or ordinance or any rule, regulation,
order, writ, injunction or decree of any court or of any public,
governmental or regulatory body, agency or authority applicable to either
Purchaser or Holdings or by which any of its assets or properties may be
bound or subject; or
(d) require any filing, declaration or registration with, or permit,
consent or approval of, or the giving of notice to, any public,
governmental or regulatory body, agency or authority; excluding from the
foregoing Sections 4.4(a) through (d):
(i) any local filings or recordings that may be necessary to
transfer any of the Acquired Assets; and
(ii) the filing required under the HSR Act and expiration of the
applicable waiting periods under the HSR Act.
SECTION 4.5. Litigation. There is no claim, action, suit, proceeding or
investigation pending or, to either Purchaser's or Holdings' knowledge,
threatened by or against either
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33
Purchaser or Holdings with respect to the transactions contemplated hereby,
at law or in equity or before or by any Federal, state, municipal, foreign or
other governmental department, commission, board, agency, instrumentality or
authority. There is no order, decree or judgment pending or in effect against
either Purchaser or Holdings with respect to the transactions contemplated
hereby.
SECTION 4.6. Brokers and Finders. Neither Holdings nor Purchaser has
employed any broker or finder or incurred any liability for any brokerage
fees or commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE SELLERS
Each of the Sellers, as applicable, covenants and agrees with Purchaser
as follows:
SECTION 5.1. Access; Confidential Information. From the date hereof
until the Closing Date, Sellers shall furnish to Purchaser and its
representatives all information relating solely to the Acquired Businesses
reasonably requested by Purchaser and provide access to any Acquired Assets
that Purchaser may reasonably request at such times as shall be mutually
agreed upon; provided, however, that nothing contained herein shall require
Sellers to furnish to Purchaser or provide Purchaser with access to any Trade
Secrets or, unless approved for release by counsel, any marketing, cost
and/or pricing information until Closing. Any confidential information
furnished to Purchaser or made available for visual inspection shall be
subject to the terms of the Confidentiality Agreement entered into between
Star-Kist and Purchaser dated August 10,1995. The provisions of such
Confidentiality Agreement shall survive any termination of this Agreement.
SECTION 5.2. Conduct of Business.
From the date hereof until the Closing Date, without the written
consent of Purchaser none of the Sellers shall:
(a) operate the Acquired Businesses other than in the ordinary
course of business or unreasonably defer any repairs or maintenance to the
Physical Assets, the Owned Real Property or the property subject to the
Perham Leases;
(b) make any sale, transfer, lease or other disposition of any
Acquired Assets other than in the ordinary course of business or mortgage,
pledge or otherwise create a security interest in any of the Acquired
Assets other than Permitted Liens;
(c) grant any increase in compensation to Transferred Employees or
any increase in the rate of commission, bonus or other variable
compensation or any increase in any other direct or indirect renumeration
(including benefits) payable or to
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34
become payable to any such employees, which increases singly or in the
aggregate
(d) fail to maintain the books, accounts and records of the Acquired
Businesses on a basis consistent with past practice;
(e) dispose of or permit to lapse any rights to the use of any
Intellectual Property;
(f) enter into, amend or cancel any Material Contract, Real Property
Lease, Plan or Permit in respect of the Acquired Assets or the Acquired
Businesses other than in the ordinary course of business; or
(g) perform, take any action or incur or permit to exist any of the
acts, transactions, events or occurrences of the type described in Section
3.9, other than Section 3.9(h).
SECTION 5.3. Reasonable Best Efforts: Notifications. Sellers shall use
their best reasonable efforts to fulfill their conditions to Closing and
otherwise to consummate the transactions contemplated by this Agreement.
Prior to the Closing Date, Sellers shall deliver to Purchaser in writing
information that it acquires knowledge of which arises from an event which
occurs on or after the date hereof, or from an event which occurred prior to
the date hereof but which was not and could not have been a matter of
Sellers' knowledge as of the date hereof supplementing or amending the
representations, warranties or disclosures (including the Schedules) made in
or delivered pursuant to Article Ill in order to make such information
therein accurate. This covenant shall expire on the date which is 18 months
following the Closing Date (except with respect to environmental matters such
expiration date shall be two years following the Closing Date) and any claim
by Purchaser for breach or failure to comply with such covenant shall be
subject to the Basket.
SECTION 5.4. Trade Secret License; UPC. To the extent not transferred
to Purchaser pursuant to Section 2.1(h), Star-Kist hereby grants to Purchaser
an irrevocable, perpetual, royalty-free license to use the Joint Use Trade
Secrets, but makes no representations as to the ownership, the right to use,
the right, to grant such license or bring actions for infringement with
respect to the Joint Use Trade Secrets. Purchaser shall have the right to
assign freely such license in connection with a sale of all or substantially
all of all or any of the Acquired Businesses. Star-Kist shall permit
Purchaser to use the uniform product codes currently assigned to the Products
but only to the extent and for so long as Star-Kist is permitted to do so.
SECTION 5.5. Preservation of Records. Sellers shall preserve and,
during regular business hours and upon reasonable notice, make available to
Purchaser and its representatives for inspection and copying all agreements,
records, books and other documents pertaining to the Acquired Businesses or
the Acquired Assets for periods prior to
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and including the Closing Date retained by Sellers pursuant to the provisions
of Section 2.1(e), wherever located for a period of six (6) years from the
Closing Date, for (a) the purposes of preparing tax returns and financial
statements and responding to tax audits, (b) the purposes of prosecuting or
defending any claim, litigation, proceeding or investigation which arises out
of or relates to the Acquired Businesses, the Acquired Assets or this
Agreement and (c) any other reasonable business purpose. Sellers may redact
from any such agreements, records, books or other documents any information
relating to any other business of Sellers or their Affiliates. If Purchaser
determines that it does not want Sellers to destroy such agreements, records,
books and other documents, Purchaser shall give written notice to the
applicable Seller ninety (90) days prior to the expiration of such retention
period that Purchaser desires to take possession of such agreements, records,
books and other documents. The applicable Seller shall deliver (subject to
any redactions) such agreements, records, books and other documents to
Purchaser within sixty (60) days after the date of Purchaser's notice to the
applicable Seller hereunder.
SECTION 5.6. Capital Projects. Star-Kist shall pay directly to the
vendor upon receipt of invoices and other appropriate documentation, all
amounts due for completion of the work described in Schedule 5.6 pursuant to
the purchase orders referenced in such Schedule not to exceed the amounts
designated for each order or $508,000 in the aggregate.
SECTION 5.7. Receivables. Except as set forth in Section 6.3, to the
extent any Seller receives payment in respect of the Receivables, such Seller
shall promptly forward such amount to Purchaser.
ARTICLE VI
COVENANTS OF THE PURCHASER AND HOLDINGS
Each of Purchaser and Holdings, as applicable, covenants and agrees
with Sellers as follows:
SECTION 6.1. Preservation of Records. Purchaser and Holdings shall
preserve and, during regular business hours and upon reasonable notice, make
available to Sellers and their representatives for inspection and copying all
agreements, records, books and other documents delivered to Purchaser and
Holdings by Sellers pursuant to this Agreement pertaining to the Acquired
Businesses or the Acquired Assets for periods prior to and including the
Closing Date, wherever located for a period of six (6) years from the Closing
Date, for (a) the purposes of preparing tax returns and financial statements
and responding to tax audits, (b) the purposes of prosecuting or defending
any claim, litigation, proceeding or investigation which arises out of or
relates to the Acquired Businesses, the Acquired Assets or this Agreement and
(c) any other reasonable business purpose. If the applicable Seller
determines that it does not want Purchaser or Holdings to destroy such
agreements, records,
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36
books and other documents, it shall give written notice to Purchaser or
Holdings, as applicable, ninety (90) days prior to the expiration of such
retention period that it desires to take possession of such agreements,
records, books and other documents. Purchaser or Holdings, as applicable
shall deliver such agreements, records, books and other documents to the
applicable Seller within sixty (60) days after the date of the Seller's
notice hereunder.
SECTION 6.2. Reasonable Best Efforts: Notifications. Purchaser and
Holdings each shall use best reasonable efforts to fulfill its conditions to
Closing and otherwise to consummate the transactions contemplated by this
Agreement. Prior to the Closing Date, Purchaser and Holdings shall deliver to
Sellers in writing information that it acquires knowledge of which arises
from an event which occurs on or after the date hereof, or from an event
which occurred prior to the date hereof but which was not and could not have
been a matter of Purchaser's or Holdings' knowledge as of the date hereof,
supplementing or amending the representations, warranties or disclosures
(including the Schedules hereto) made in or delivered pursuant to Article IV
in order to make such information therein accurate. This covenant shall
expire on the date which is 18 months following the Closing Date and any
claim by Sellers for breach or failure to comply with such covenant shall be
subject to the Basket.
SECTION 6.3 Uncollected Receivables. To the extent Sellers are required
to pay to Purchaser any amounts hereunder in respect of the Net Receivables,
Purchaser shall immediately upon receipt of such payment assign the
uncollected Net Receivables to Sellers and reasonably cooperate with Sellers
in the collection thereof for the account of Sellers. Any amount collected by
Purchaser in excess of the amount of the Net Receivables shall be promptly
remitted to Star-Kist.
ARTICLE VII
EMPLOYEE MATTERS
SECTION 7.1. Transferred Employees. Schedule 7.1 contains a true and
complete list of the names of all employees of the Acquired Businesses, the
annual wages or salaries, as the case may be, and other compensation of each
such employee, paid or payable for services rendered during calendar year
1995. Promptly following the Closing, Purchaser shall offer employment to all
employees of the Acquired Businesses who are in active employment on the
Closing Date. For purposes of this paragraph, an employee shall be considered
to be in "active employment" if he or she performs services or is on vacation
on the Closing Date or received vacation pay in the pay period which includes
the Closing Date. All such employees who accept such offer of employment of
the Purchaser shall become employees of the Purchaser as of the Closing Date
(the "Transferred Employees"). Employees of the Acquired Businesses who do
not become Transferred Employees are collectively referred to herein as the
"Non-transferred Employees." Sellers may retain as employees all Non-
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37
transferred Employees, or may terminate the employment of any or all such
employees. Purchaser shall have no liabilities or obligations with respect to
the Non-transferred Employees, which liabilities and obligations shall be
borne by Star-Kist.
Star-Kist will be responsible for and pay any and all severance claims
made by the Non-transferred Employees. Purchaser shall pay severance benefits
to all Transferred Employees who are terminated by Purchaser in accordance
with Purchaser's practices and policies. $308,266 shall be accrued as of the
opening of business on the Closing Date for severance benefits which will be
included as an accrued expense in the Non-Cash Working Capital calculation
referred to in Section 2.4.
SECTION 7.2. Employment Benefit Transition. With respect to each
Transferred Employee:
(a) Purchaser shall waive preexisting condition requirements,
evidence of insurability provisions, waiting period requirements or any
similar provisions under any group health or life insurance plan maintained
or sponsored by or contributed to by Purchaser for all Transferred Employees
as of the Closing Date. In the event that Purchaser shall within 60 days
following the Closing Date, identify (or cause its group health plan
administrator to identify) to Star-Kist in writing one or more Transferred
Employees or their eligible dependents whose group health claims relate to a
condition that existed prior to the Closing Date and are reasonably expected
to exceed $25,000 per individual, then Star-Kist shall be responsible for the
payment of up to $75,000 of such claims per Transferred Employee that are
filed during the one year period following the Closing and up to $300,000 of
such claims in the aggregate for all such Employees and their eligible
dependents. Star-Kist shall discharge such responsibility through
reimbursement of Purchaser or Purchaser's group health plan.
(b) Star-Kist shall be responsible for the payment of any health,
accident and other employee welfare benefit claims of the Transferred
Employees and their eligible dependents that are incurred before the Closing
Date, regardless of when any such claim is submitted for payment. Purchaser
shall be responsible for the payment of health, accident and other employee
welfare benefit claims of Transferred Employees and their eligible dependents
to the extent such claims are incurred on or after the Closing Date. For
purposes of this Section 7.2(b), a health or accident claim shall be deemed
to have been incurred when the services relating to the event or condition
that is the subject of the claims are performed or the supplies relating to
any such event are furnished.
(c) With regard to pension, savings, vacation, health and
welfare, disability benefits, executive compensation, incentive and bonus
arrangements, Purchaser shall recognize the service of any Transferred
Employee with Star-Kist for purposes of participation and vesting, but not
for purposes of benefit accrual.
SECTION 7.3 COBRA. Star-Kist shall be responsible for satisfying
obligations under Section 601 et seq. of ERISA and Section 4980B of the IRC,
to provide continuation coverage to or with respect to any Non-transferred
Employee and Purchaser shall be responsible for satisfying obligations under
Section 601 et seq. of ERISA and Section 4980B of the IRC to
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provide continuation coverage with respect to any Transferred Employee.
SECTION 7.4. Vacation. Purchaser shall not assume any obligations to
Transferred Employees for any vacation pay entitlements for periods prior to
the Closing Date, except to the extent that such obligations have been
accrued on the books of Star-Kist and are included as an accrued expense in
the calculation of Non-Cash Working Capital in accordance with Section 2.4 of
this Agreement. Except as provided in the preceding sentence, Star-Kist shall
pay Transferred Employees any vacation entitlement and/or vacation pay
entitlement that accrued prior to the Closing Date. Vacation benefits of
Transferred Employees for periods commencing on the Closing Date shall be
provided in accordance with the vacation policy of Purchaser.
SECTION 7.5. Qualified Plans. Prior to the Closing Date, Transferred
Employees are covered under one or more Pension Plans for salaried and hourly
employees consisting of defined benefit plans and defined contribution plans
("Star-Kist's Qualified Plans"). Purchaser maintains a defined contribution
plan ("Purchaser's Qualified Plan"). Purchaser agrees that Purchaser's
Qualified Plan will accept rollovers (including direct rollovers pursuant to
section 401(a)(31)) of the IRC) by any Transferred Employee who continues to
be employed by Purchaser of any "eligible rollover distribution" (within the
meaning of section 401 (a)(31)) of the IRC) from any of Star-Kist's Qualified
Plans at any time after the Closing, subject to Star-Kist providing Purchaser
with satisfactory evidence that the distributing plan meets the requirements
for qualification under Section 401(a) of the IRC. In the case of a direct
rollover, Purchaser shall provide the distributing plan with satisfactory
evidence that Purchaser's Qualified Plan meets the requirements for
qualification under Section 401(a) of the IRC. Except as provided above,
Purchaser and Purchaser's Qualified Plan shall assume no responsibility for
accrued benefits or accounts under Star-Kist's Qualified Plans.
SECTION 7.6. Disability and Workers' Compensation. Star-Kist shall
retain responsibility for all disability benefits payable on and after the
Closing Date with respect to all Non-transferred Employees. Purchaser shall
assume responsibility for all disability benefits payable on and after the
Closing Date with respect to Transferred Employees who subsequently qualify
for short-term or long-term disability benefits. Star-Kist shall be
responsible for all workers' compensation benefits, occupational diseases
claims and employer liability claims payable to Transferred Employees with
respect to claims incurred before the Closing Date, except Star-Kist shall
have no responsibility for cumulative trauma type claims (e.g., carpal tunnel
syndrome) that are unfiled as of the Closing. Purchaser shall be responsible
for all workers' compensation benefits, occupational diseases claims and
employer liability claims payable to Transferred Employees with respect to
claims incurred on or after the Closing Date and any cumulative trauma type
claims filed after the Closing.
SECTION 7.7. No Third Party Beneficiaries. Neither Purchaser nor any of
the Sellers intends this Article VII to create any rights or interest, except
as between Purchaser and Sellers and no present or future employees of either
party (or any dependents of such employees) will be treated as third party
beneficiaries in or under this Agreement.
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SECTION 7.8. Documents and Forms. Star-Kist and Purchaser agree to use
their reasonable efforts to execute all necessary documents, file all
required forms with any governmental agencies and to undertake all actions
that may be necessary or desirable to implement expeditiously any actions
contemplated herein.
SECTION 7.9. WARN Requirements. Star-Kist shall be liable for any
liability under WARN (or any similar state law) with respect to the
termination of the Non-Transferred Employees. If any such notices are
required, Star-Kist shall deliver to Purchaser a copy of the draft notices to
be issued in accordance with WARN (or any similar state law) for Purchaser's
review and comment. Purchaser shall be liable for any liability under WARN
(or any similar state law) with respect to Purchaser's termination of any
Transferred Employee after the Closing Date. For a period of not less than
sixty-one days following the Closing, Purchaser agrees not to cause any
"employment loss", as such term is defined in WARN affecting more than
thirty-two percent of the Transferred Employees.
ARTICLE VIII
CONDITIONS TO PURCHASER'S AND HOLDINGS' OBLIGATIONS
The obligations of Purchaser and Holdings under this Agreement are
subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions, any of which may be waived in whole or in part by
Purchaser or Holdings:
SECTION 8.1. Accuracy of Representations and Warranties; Performance of
Agreements: Certificates and Opinion of Counsel.
(a) The representations and warranties of Sellers and Heinz
contained in this Agreement shall be true and correct in all material
respects on the date hereof and as of the Closing Date with the same
effect as though such representations and warranties had been made or
given again at and as of the Closing Date (except for any representation
or warranty expressly stated to have been made or given as of a specified
date, which, at the Closing Date, shall be true and correct in all
material respects as of the date expressly stated).
(b) Each of Sellers and Heinz shall have performed and complied in
all material respects with all of its agreements, covenants and conditions
required by this Agreement to be performed or complied with by it prior to
or at the Closing Date.
(c) Star-Kist shall have delivered to Purchaser (i) certificates of
the Chairman, President or any Vice President of Star-Kist and Heinz dated
the Closing Date and certifying the fulfillment of the conditions
applicable to it as set forth in this Section 8.1 and (ii) an opinion of
the General Counsel or an Associate or Assistant General Counsel of Heinz
dated the Closing Date in the form attached hereto as
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Exhibit M.
(d) Star-Kist shall have delivered to Purchaser (i) an incumbency
certificate from the Secretary or an Assistant Secretary of each Seller
and Heinz and (ii) a copy of the Board of Directors' resolutions of each
Seller and Heinz and the resolution of the Special Committee appointed by
the Board of Directors of Heinz, each certified by the Secretary or an
Assistant Secretary, authorizing and approving the transaction
contemplated herein.
SECTION 8.2. Consents. Any notices to, and declarations, filings and
registrations with, and consents, approvals and waivers from governmental and
regulatory agencies necessary in order to consummate the transactions
contemplated hereby, other than those relating to the transfer of a Permit or
the obtaining of a new Permit in lieu thereof shall have been obtained. With
respect to the lease between Star-Kist (or its predecessors in interest) and
Burlington Northern Railroad dated March 30,1971, Purchaser shall have
received (a) a memorandum of lease for such leased property, in recordable
form and containing such information as shall be required to allow the
Purchaser's lender to obtain a valid first leasehold mortgage on such leased
property and (b) the written consent of the Burlington Northern Railroad to
the granting of a leasehold mortgage in favor of Purchaser's lender secured
by Purchaser's interest in such leased property. Agri-data shall have
executed and delivered to Purchaser a license agreement in the form delivered
to Star-Kist on April 11, 1996.
SECTION 8.3. No Injunction. No preliminary or permanent injunction or
other order shall have been issued by any court of competent jurisdiction, or
by any governmental or regulatory body, which prevents the consummation of
the transactions contemplated in this Agreement.
SECTION 8.4. HSR Act. [Intentionally Omitted]
SECTION 8.5. Closing Deliveries. Sellers shall have delivered to
Purchaser or Holdings, as applicable, all deliveries to be made to it
pursuant to Section 2.6(b).
SECTION 8.6. No Material Adverse Change. From the date hereof through
the Closing, Sellers shall not have suffered any changes in the assets,
liabilities, business or financial condition of the Acquired Businesses or
the Acquired Assets which have, or would be reasonably likely to have, a
Material Adverse Effect.
SECTION 8.7. Title Insurance. Purchaser shall have received a title
insurance policy or a marked-up title binder requiring the issuance of such
policy issued by Old Republic National Title Insurance Company (the "Title
Company") with respect to the Owned Real Property insuring the Purchaser's
ownership of fee title with respect to the Owned Real Property in an amount
reasonably requested by Purchaser subject only to the matters excepted by or
excluded from coverage as set forth in the title commitment attached to
Schedule 3.6(a), except Items 7(f), 7(g) and 9 listed on Schedule B, Section
2 all of which
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shall be removed as a condition of Purchaser's obligation to close hereunder.
Items 7(c), (e) and (h) listed on Schedule B Section 2 shall remain as an
exception, but as a condition of Purchaser's obligation to close hereunder,
the Title Company shall insure against forced removal of such encroachments.
Items 7(a), (b) and (d) on Schedule B Section 2 shall remain as exceptions,
but as a condition of Purchaser's obligation hereunder, the Title Company
shall insure against forced removal of such encroachments so long as the
property on which the encroachments are located is subject to a lease to be
entered into between Purchaser and Burlington Northern Railroad.
In addition, it is understood that requirements 1, 2, 3 and 5 as listed on
Schedule B, Section 1 shall be required to be complied with in order for each
such policy or binder to be issued in the form specified, and in connection
therewith, Star-Kist shall deliver to the Title Company (a) an owners
affidavit in the form attached hereto as Schedule 8.7, (b) if required by the
Title Company, an indemnity regarding settled and unsettled taxes which may
be assessed by the State of Minnesota against Star-Kist, and (c) if required
by the Title Company, a "gap" indemnity in customary form. If such policy or
a marked-up title binder requiring the issuance of such policy is not
delivered at the Closing in the amount or in the form specified above,
Star-Kist at its option may satisfy this condition by agreeing to indemnify
Purchaser against all losses incurred by Purchaser as a result of any such
exceptions which are required to be removed but are not removed or any
reduction of coverage to the same extent Purchaser would have been insured
against such losses by the Title Company had the policy or binder been issued
in the amount and in the form so specified. If Star-Kist indemnifies
Purchaser as aforesaid, the parties for a reasonable time after the Closing
shall use their reasonable efforts to remove such exceptions or provide such
coverage. Star-Kist's indemnity would be terminated or reduced as appropriate
upon removal of such exceptions or providing such coverages. The costs of the
policies, the binder and the required survey shall be borne by Purchaser.
SECTION 8.8. Survey and Additional Conditions Relating to Real Property
Matters.
(a) Purchaser shall have received an as built survey of the Owned
Real Property certified to the Purchaser and the Title Company; and any
party or parties providing financing to the Purchaser secured by the Owned
Real Property ("Lender") by an independent professional licensed land
surveyor, which survey shall be sufficient to delete any standard printed
survey exceptions contained in the applicable title policy being obtained
by Purchaser and/or Lender and shall be certified as having been made in
accordance with the Minimum Standard Detail Requirements for Land Title
Surveys Jointly Established and Adopted by the American Land Title
Association and The American Congress on Surveying and Mapping in 1992.
(b) Purchaser shall have received certification from a registered
engineer or land surveyor or other evidence reasonably acceptable to the
Purchaser and its Lender that no portion of the Perham Plant is located
within any area designated by
<PAGE>
42
the director of the Federal Emergency Management Agency as a "special
flood hazard" area.
(c) Purchaser shall have received a statement issued by the City
of Perham planning administrator or the Otter Tail County planning
administrator, as applicable, stating the zoning designation for the real
property upon which the Perham Plant is situated and the permitted uses
thereof under such zoning designation which shall be consistent with the
present use thereof.
(d) If the survey referred to in subsection (a) above is not
sufficient to delete the standard printed survey exceptions contained in
the title insurance policy or if a portion of the Perham Plant may be
located within a "special flood hazard" area, Star-Kist at its option may
satisfy the conditions of subsections (a) and/or (b) above by agreeing to
indemnify Purchaser against all losses incurred by Purchaser as a result
of such matter(s).
SECTION 8.9. Financing. Coincidentally with the closing of the purchase
and sale of the Acquired Businesses and the Acquired Assets, Purchaser shall
have received not less than [$60,700,000] in cash from the proceeds of debt
and equity financings on terms and conditions not materially less favorable
to Purchaser than those set forth in the term sheets attached hereto as
Schedule 8.9. Purchaser agrees to use its best efforts to obtain such debt
financing and equity contributions and shall provide Star-Kist with frequent
status reports concerning these matters.
ARTICLE IX
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in whole or in part by
Star-Kist:
SECTION 9.1. Accuracy of Representations and Warranties; Performance of
Agreements; Certificates and Opinion of Counsel.
(a) The representations and warranties of Purchaser and Holdings
contained in this Agreement shall be true and correct in all material
respects on the date hereof and as of the Closing Date with the same
effect as though such representations and warranties had been made or
given again at and as of the Closing Date (except for any representation
or warranty expressly stated to have been made or given as of a specified
date, which, at the Closing Date, shall be true and correct in all
material respects as of the date expressly stated).
(b) Purchaser and Holdings each shall have performed and complied in
all material respects with all of its agreements, covenants and conditions
required by this
<PAGE>
43
Agreement to be performed or complied with by it prior to or at the
Closing Date.
(c) Purchaser shall have delivered to Star-Kist (i) a certificate
of its President or any Vice President of each of Purchaser and Holdings
dated the Closing Date and certifying the fulfillment of the conditions
set forth in this Section 9.1 and (ii) an opinion of Richards & O'Neil,
LLP dated the Closing Date in the form attached hereto as Exhibit N.
(d) Purchaser shall have delivered to Star-Kist (i) an incumbency
certificate from the Secretary or an Assistant Secretary of each of
Purchaser and Holdings and (ii) a copy of the resolutions of the Board of
Directors of each of Purchaser and Holdings, each certified by the
Secretary or an Assistant Secretary, authorizing and approving the
transaction contemplated herein.
SECTION 9.2. Consents. Any notices to, and declarations, filings and
registrations with and consents, approvals and waivers from governmental and
regulatory agencies necessary in order to consummate the transactions
contemplated hereby shall have been obtained.
SECTION 9.3. No Injunction. No preliminary or permanent injunction or
other order shall have been issued by any court of competent jurisdiction, or
by any governmental or regulatory body, which prevents the consummation of
the transactions contemplated in this Agreement.
SECTION 9.4. Promissory Note and Intercreditor Arrangements. The final
terms and conditions of the Promissory Note and the agreements and other
documents relating to the intercreditor arrangements and subordination issues
among the creditors of Holdings and Purchaser shall be acceptable to
Star-Kist in its sole discretion.
SECTION 9.5. Closing Deliveries. Purchaser and Holdings shall have
delivered to Sellers all deliveries to be made to it pursuant to Section
2.6(c) and 2.6(d), respectively.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. Survival of Representations and Warranties and
Obligations. All representations, warranties, agreements, covenants and
obligations made or undertaken by the parties in this Agreement or in any
document or instrument executed and delivered pursuant hereto (including the
exceptions to any representations or warranties) shall survive the Closing
hereunder and shall not merge in the performance of any obligation by any
party hereto, and will remain in full force and effect unless, in respect of
any agreement or covenant, some specified period is set forth in this
Agreement or in any document or
<PAGE>
44
instrument executed and delivered pursuant hereto; provided that only with
respect to the representations and warranties (but not any agreement,
covenant or obligation) made by Sellers and/or Heinz and contained herein or
in any exhibit, schedule or certificate delivered under this Agreement , such
representations and warranties shall remain in effect only until the date
which is 18 months following the Closing Date, except for the representations
and warranties set forth in Section 3.11(b) as it relates to environmental
matters and Section 3.22, which shall remain in effect until the second
anniversary of the Closing Date. If written notice of a claim for breach of a
representation or warranty has been given by Purchaser prior to the
applicable cut-off date, then the relevant representation or warranty shall
survive as to such claim until the claim has been finally resolved.
Notwithstanding the foregoing, in the event that, prior to the Closing,
either party has knowledge (including material information delivered pursuant
to Sections 5.3 or 6.2, as applicable) that any representation or warranty
made by the other party is incorrect as of the date hereof or will be
incorrect as of the Closing, the party with such knowledge shall have as its
sole remedy hereunder the option (i) if such misrepresentation or breach of
warranty is material within the meaning of Section 8.1(a) or 9.1(a) as
applicable, to terminate this Agreement (on ten business days' notice during
which period the other party may cure such misrepresentation or breach of
warranty) or (ii) to proceed with the Closing and, upon the Closing, such
party shall be conclusively deemed to have waived all claims hereunder
relating to such misrepresentation or breach of warranty.
SECTION 10.2. Indemnification by Seller. Except as otherwise limited by
this Article X, Purchaser and Holdings and their officers, directors,
employees, shareholders, successors and assigns shall be indemnified and held
harmless by Star-Kist from any and all liabilities, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable legal costs and expenses), after taking into
account any tax benefit with respect thereto, actually suffered or incurred
by it (hereinafter a "Purchaser Loss"), actually arising out of or resulting
from:
(a) the breach of any representation or warranty by any of the
Sellers or Heinz contained herein;
(b) the breach of any covenant or agreement by any of the Sellers or
Heinz contained herein or in any document delivered hereunder at the
Closing; or
(c) the liens referred to in clause (i) of Permitted Liens; or
(d) the failure of Sellers to pay or otherwise discharge the
Excluded Liabilities.
SECTION 10.3. Indemnification by Purchaser. Except as otherwise limited
by this Article X, Sellers and their respective officers, directors,
employees, shareholders, successors and assigns shall be indemnified and held
harmless by Purchaser from any and all liabilities, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable legal costs and expenses), after taking into
account any tax benefit with respect thereto, actually suffered or incurred
by any of them (hereinafter a "Seller Loss") actually arising out of or
resulting from:
<PAGE>
45
(a) the breach of any representation or warranty by Purchaser or
Holdings contained herein;
(b) the breach of any covenant or agreement by Purchaser or Holdings
contained herein or in any document delivered hereunder at the Closing;
(c) any act, or failure to act, by Purchaser or Holdings after the
Closing with respect to the Inventory purchased hereunder; or
(d) the failure of Purchaser to pay or otherwise discharge the
Assumed Liabilities or any other liability or obligations asserted from
and after the Closing Date in connection with the Acquired Assets or
operation of the Acquired Businesses, except to the extent Star-Kist is
obligated to indemnify Purchaser pursuant to Section 10.2.
SECTION 10.4. Indemnification Procedures.
(a) For the purposes of this Section 10.4, the term "Indemnitee"
shall refer to the person indemnified, or entitled, or claiming to be
entitled to be indemnified, pursuant to the provisions of Section 10.2 or
10.3, as the case may be; the term "Indemnitor" shall refer to the person
having the obligation to indemnify pursuant to such provisions; and
"Losses" shall refer to the "Seller Losses" or the "Purchaser Losses", as
the case may be.
(b) An Indemnitee shall give written notice (a "Notice of Claim") to
the Indemnitor within ten (10) business days after the Indemnitee has
knowledge of any claim (including a Third Party Claim, as hereinafter
defined) which an Indemnitee has determined has given or could give rise
to a right of indemnification under this Agreement. No failure to give
such Notice of Claim within ten (10) business days as aforesaid shall
affect the indemnification obligations of the Indemnitor hereunder, except
to the extent Indemnitor can demonstrate such failure materially
prejudiced such Indemnitor's ability to successfully defend the matter
giving rise to the claim. The Notice of Claim shall state the nature of
the claim, the amount of the Loss, if known, and the method of computation
thereof, all with reasonable particularity and containing a reference to
the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises.
(c) The obligations and liabilities of an Indemnitor under this
Article X with respect to losses arising from claims of any third party
that are subject to the indemnification provisions provided for in this
Article X ("Third Party Claims") shall be governed by and contingent upon
the following additional terms and conditions: The Indemnitee at the time
it gives a Notice of Claim to the Indemnitor of the Third Party Claim
shall advise the Indemnitor that it shall be permitted, at its option, to
assume and control the defense of such Third Party Claim at its expense
and through counsel of its choice if it gives prompt notice of its
intention to do so to the Indemnitee and confirms
<PAGE>
46
that the Third Party Claim is one with respect to which the Indemnitor is
obligated to indemnify. In the event the Indemnitor exercises its right to
undertake the defense against any such Third Party Claim as provided
above, the Indemnitee shall cooperate with the Indemnitor in such defense
and make available to the Indemnitor all witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitor and the Indemnitee may
participate by its own counsel and at its own expense in defense of such
Third Party Claim. Similarly, in the event the Indemnitee is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Indemnitor shall cooperate with the Indemnitee in such defense and make
available to it all such witnesses, records, materials and information in
its possession or under its control relating thereto as is reasonably
required by the Indemnitee and the Indemnitor may participate by its own
counsel and at its own expense in the defense of such Third Party Action.
Except for the settlement of a Third Party Claim which involves the
payment of money only, no Third Party Claim may be settled by the
Indemnitor without the written consent of the Indemnitee, which consent
shall not be unreasonably withheld or delayed. No Third Party Claim may be
settled by the Indemnitee without the written consent of the Indemnitor,
which consent shall not be unreasonably withheld or delayed.
SECTION 10.5. Limits on Indemnification. No claim may be made against
the Sellers for indemnification hereunder unless and only to the extent the
aggregate of all Purchaser Losses incurred with respect to breaches of
representations and warranties exceed $350,000 (the "Basket") and then only
with respect to that portion of Purchaser Losses which exceed the Basket.
Sellers shall not be required to indemnify for Purchaser Losses for breaches
of representations and warranties which in the aggregate exceed $15,000,000.
SECTION 10.6. Adjustment of Liability. Any indemnifiable Seller Loss or
Purchaser Loss, as the case may be, shall be reduced by the amounts actually
recovered by the indemnified party from its insurance carriers in respect of
such loss and any amounts recovered by such party subsequent to the payment
by the indemnifying party hereunder with respect to the same claim shall be
remitted to such indemnifying party, except that such remittance shall not
exceed the amount of the indemnification payment made by such indemnifying
party.
SECTION 10.7. Exclusive Remedy. The indemnity remedies provided in this
Article X, subject to the limitations set forth herein, shall be a party's
exclusive remedy for the recovery of Losses resulting from, relating to, or
arising out of any misrepresentation or breach of any representation or
warranty made by or on behalf of another party in this Agreement, any
Schedule hereto, or in any certificate delivered by such party pursuant
hereto. In furtherance of the foregoing, each party hereto hereby waives, to
the fullest extent permitted under applicable law, any and all rights, claims
and causes of action (including rights of contribution, if any) with respect
to a breach of any representation or warranty such party may have against
another party arising under or based upon any federal, state or local
statute, law, ordinance, rule, regulation or judicial decision (including,
without limitation, any such relating to environmental matters or arising
under or based upon any securities law, common law or
<PAGE>
47
otherwise).
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written consent of Purchaser and Star-Kist; or
(b) by any party if the Closing shall not have occurred by April
30, 1996, provided however, that the right to terminate this Agreement
under this Section 11.1(b) shall not be available to any party whose
failure to perform any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before such
date;
(c) by either Purchaser or Star-Kist, as provided in Section 10.1;
or
(d) by any party upon the occurrence of any of the adverse events
described in Section 8.3 or Section 9.3.
In the event of termination of this Agreement by a party pursuant to
this Section 11.1, written notice thereof shall forthwith be given to the
other parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become void and there
shall be no liability on the part of the parties hereto (or their respective
officers, directors or affiliates) except (a) as set forth in Section 11.2
hereof and (b) nothing herein shall relieve any party from liability for any
willful breach hereof.
SECTION 11.2. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 11.3. Waiver. The accuracy of any representation or warranty,
the performance of any covenant or agreement or the fulfillment of any
condition of this Agreement by Purchaser and Holdings on the one hand or
Sellers and Heinz on the other, may be expressly waived in writing by
Purchaser and Holdings or Sellers and Heinz, as appropriate. Any waiver
hereunder shall be effective only in the specific instance and for the
purpose for which given. No failure or delay on the part of Purchaser or
Sellers and Heinz in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
<PAGE>
48
SECTION 11.4. Consents. Whenever this Agreement requires a permit or
consent by or on behalf of a party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of
compliance as set forth in Section 11.3.
SECTION 11.5. Assignment; Parties in Interest. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of,
and be enforceable by, the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations herein shall be assigned, including by operation of
law or otherwise, by any party hereto without the prior written consent of
the other parties; provided, that Sellers may freely assign the Promissory
Note and Purchaser may freely assign this Agreement (except the Promissory
Note which shall be nonassignable,) to an Affiliate of Purchaser on the
condition that Purchaser remain obligated to Sellers hereunder or grant a
security interest to its lenders if required.
SECTION 11.6. Further Assurances. Each of the parties hereto agrees
that, from and after the Closing, upon the reasonable request of any other
party hereto and without further consideration, such party will execute and
deliver to such other party such documents and further assurances and will
take such other actions (without cost to such party) as such other party may
reasonably request in order to carry out the purpose and intention of this
Agreement.
SECTION 11.7. Entire Agreement. This Agreement and the Schedules, the
Confidentiality Agreement referred to in Section 5.1 and the other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to the subject
matter hereof. This Agreement and the Confidentiality Agreement supersede all
prior agreements relating to the transactions contemplated hereunder.
SECTION 11.8. Amendment. This Agreement may be amended or modified in
whole or in part only by a duly authorized written agreement that refers to
this Agreement and is signed by the parties hereto or by their duly appointed
representatives or successors.
SECTION 11.9. Limitations on Rights of Third Parties. Nothing expressed
or implied in this Agreement is intended or shall be construed to confer upon
or give any person other than the parties hereto any rights or remedies under
or by reason of this Agreement or any transaction contemplated hereby,
including but not limited to the Transferred or Non-Transferred Employees
referred to herein.
SECTION 11.10. Captions. The captions in this Agreement are inserted
for convenience of reference only and shall not be considered a part of or
affect the construction or interpretation of any provision of this Agreement.
SECTION 11.11. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce
<PAGE>
49
or account for more than one such counterpart.
SECTION 11.12. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and will be
deemed to have been duly given if personally delivered or telecopied or on
the date of receipt indicated on the return receipt if delivered or mailed
(registered or certified mail, postage prepaid, return receipt requested) as
follows:
<PAGE>
50
(a) If to any of the Sellers:
Star-Kist Foods, Inc.
One Riverfront Place
Newport, Kentucky 41071
Telecopy Number: 606-655-5005
Attention: President
With copies to:
H. J. Heinz Company
600 Grant Street
Pittsburgh, Pennsylvania 15219
Telecopy Number: 412-456-6102
Attention: Senior Vice President and General Counsel
(b) if to Heinz:
H. J. Heinz Company
600 Grant Street
Pittsburgh, Pennsylvania 15219
Telecopy Number: 412-456-6102
Attention: Senior Vice President and General Counsel
<PAGE>
51
(c) If to Purchaser or Holdings:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, Tennessee 37027
Telecopy Number: 615-661-8888
Attn: President
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Telecopy Number: 212-750-9022
Attn: Craigh Leonard, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 11.13. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of New York without
regard to its provisions concerning conflicts or choice of law.
SECTION 11.14. Bulk Sales Law. Purchaser and Holding each waives
compliance by Sellers with the provision of any applicable bulk sales laws.
Star-Kist shall promptly pay and discharge when due or contest or litigate
all claims of creditors that are asserted against Purchaser or Holdings by
reason of non-compliance with such laws and shall indemnify and hold
Purchaser and Holdings harmless from and against any and all such claims,
except with respect to any such claims that relate to the Assumed Liabilities.
SECTION 11.15. Transfer Taxes; HSR Fees and Title Insurance. All
excise, sales, value added, use, registration, stamp, transfer and similar
taxes, levies, charges and fees incurred in connection with the transfer of
the Acquired Assets to Purchaser or Holdings pursuant to this Agreement and
the transactions contemplated hereby, together with the fees for the HSR
filing, shall be shared equally by Star-Kist and Purchaser, except that
Purchaser shall be solely responsible for the payment of any transfer or
similar taxes in connection with the transfer of any of the Acquired Assets
between Purchaser and Holdings, or to or among any other Affiliates of
Purchaser. Purchaser and Sellers shall cooperate in providing each other
appropriate resale exemption certificates and other appropriate tax
documentation. Purchaser shall be responsible for the costs of title
insurance.
SECTION 11.16. Public Announcements. All public announcements relating
to this
<PAGE>
52
Agreement or the transactions contemplated hereby shall be made at such time
and in such manner as the parties hereto shall mutually agree, except that
nothing in this Agreement shall prevent a party hereto from making any
disclosure in connection with the transactions contemplated by this Agreement
to the extent required by law or to the extent required by any securities
exchange on which a party has listed its securities provided that prior
notice of such disclosure is given to the other party.
SECTION 11.17. Schedules. Any item disclosed in the Schedules or in any
of the Exhibits attached hereto, under any specific Section or Schedule
number hereof, shall be deemed to have been disclosed for all purposes of
this Agreement in response to every Section of this Agreement in respect of
which such disclosure is permitted or required. In no event shall Sellers
have any liability by virtue of their failure to disclose in response to any
Section of this Agreement items which are disclosed herein in response to
another Section of this Agreement.
SECTION 11.18. Heinz Guaranty. Heinz hereby guarantees the prompt
performance by Sellers of their covenants and obligations hereunder. In the
event of nonperformance by any of the Sellers of any such covenants or
obligations, Heinz shall promptly perform or cause the applicable Seller to
promptly perform such covenants and obligations. Heinz shall be entitled to
the benefit of all defenses to and limitations on the guaranteed covenants
and obligations to the same extent the applicable Seller would have had such
benefit, except that in no event shall the validity of this guarantee or the
obligations of any of the Sellers be in any way terminated, affected or
impaired by its dissolution or the rejection of such obligations under any
bankruptcy, insolvency or similar laws, now or hereafter enacted.
SECTION 11.19. No Offsets. Under no circumstances whatsoever may
Purchaser, Holdings or Sellers be entitled to offset any amounts payable
pursuant to this Agreement against any amounts payable pursuant to, or with
respect to any claims of whatsoever nature between Purchaser, Holdings and
Sellers and any of their respective affiliates under, any agreement or
arrangement between Purchaser, Holdings and Sellers or any of their
respective affiliates, including, without limitation, the Kozy Kitten License
Agreement, the Promissory Note or the Co-Pack Agreement and any other
agreement contemplated by or executed in connection with this Agreement.
ARTICLE XII
CERTAIN ENVIRONMENTAL COSTS
Purchaser has caused to be conducted an investigation of certain areas
on or near the Perham Plant (the "Perham Site") by E. Roberts Alley &
Associates Incorporated, which prepared a letter describing the results of
such investigation, a copy of which is attached
<PAGE>
53
hereto as Schedule XII (the "Alley Report"). Purchaser shall be solely
responsible for the payment of any and all costs associated with any
additional investigation, monitoring, or other such activities, at the Perham
Site, as Purchaser desires or may be required, during the two year period
following the Closing.
Notwithstanding any other provision to the contrary in this Agreement
(including without limitation, in Article X hereof), Star-Kist and Purchaser
each shall pay one-half of any and all physical remediation costs and
expenses actually incurred by either party in connection with any demand,
claim, inquiry or request made by the Minnesota Pollution Control Agency,
and/or any other federal, state or local agency, related to the matters
described in the Alley Report. Seller and Purchaser further agree that any
request or requests for payment under the previous sentence must be made on
or before the second anniversary of the Closing Date. Thereafter, all costs
associated with any investigation, monitoring, and physical remediation of
the Perham Site shall be borne solely by Purchaser.
Seller and Purchaser agree to cooperate with each other with regard to
the investigation, monitoring and physical remediation activities
contemplated in this Article XII. Notwithstanding such agreement to
cooperate, Seller and Purchaser agree that Purchaser shall have exclusive
control over any and all such investigation, monitoring, and physical
remediation of the Perham Site. Seller and Purchaser further agree to
cooperate with each other with regard to any reimbursement applications filed
with applicable agencies by either party, and further agree to share pro rata
any costs attendant thereto or reimbursements received therefrom.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Star-Kist, ProMark, Perk, Heinz, Holdings
and Purchaser as of the date first above written.
HEINZ PET PRODUCTS H. J. HEINZ COMPANY, as to
Division of Star-Kist Foods, Inc. Sections 3.1, 3.2, 3.3, 3.4, 3.10
3.15, 3.22 and 11.18 only
By: /s/ Michael Jon Bertasso By:
---------------------------- ----------------------------
Name: Michael Jon Bertasso Name:
Title: Chief Cost Officer Title:
PROMARK INTERNATIONAL, INC. WINDY HILL PET FOOD
HOLDINGS, INC.
By: By: /s/ Robert V. Dale
---------------------------- ----------------------------
Name: Name: Robert V. Dale
Title: Title: President
PERK FOODS CO., INCORPORATED WINDY HILL PET FOOD
COMPANY, INC.
By: /s/ John Runkel By: /s/ Robert V. Dale
---------------------------- ----------------------------
Name: John Runkel Name: Robert V. Dale
Title: Vice President Title: President
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Star-Kist, ProMark, Perk, Heinz, Holdings
and Purchaser as of the date first above written.
HEINZ PET PRODUCTS H. J. HEINZ COMPANY, as to
Division of Star-Kist Foods, Inc. Sections 3.1, 3.2, 3.3, 3.4, 3.10
3.15, 3.22 and 11.18 only
By: By: /s/ David R. Williams
---------------------------- ----------------------------
Name: Name: David R. Williams
Title: Title: Senior Vice President-
Chief Financial Officer
PROMARK INTERNATIONAL, INC. WINDY HILL PET FOOD
HOLDINGS, INC.
By: /s/ Eric S. Nielsen By:
---------------------------- ----------------------------
Name: Eric S. Nielsen Name:
Title: President Title:
PERK FOODS CO., INCORPORATED WINDY HILL PET FOOD
COMPANY, INC.
By: By:
---------------------------- ----------------------------
Name: Name:
Title: Title:
<PAGE>
The following list briefly identifies the contents of the Schedules to
the Asset Purchase Agreement, dated as of April 17, 1996, among Heinz Pet
Products Company, a division of Star-Kist Foods, Inc., H.J. Heinz Company, Perk
Foods Co., Incorporated, ProMark International, Inc., Windy Hill Pet Food
Holdings, Inc. and Windy Hill Pet Food Company, Inc. (Terms used but not defined
have the meanings assigned to them in the Asset Purchase Agreement.) In
accordance with Regulation S-K under the Securities Act of 1933 the actual
Schedules have not been filed with the Securities and Exchange Commission (the
"Commission"). The Company hereby agrees to furnish supplementally a copy of
any omitted Schedule to the Commission upon request.
1. Schedule 1.0 Calculation of Non-Cash Working Capital
2. Schedule 1.1 Kozy Kitten Products -- List of Kozy Kitten products
3. Schedule 1.2 Tuffy's Products -- List of Tuffy's products
4. Schedule 1.3 Vet's Dog Food Products -- List of Vet's dog food products
5. Schedule 2.1(a) Owned Real Property -- Descriptions of owned real property
6. Schedule 2.1(a-1) Real Property Leases -- List of Real Property leases
7. Schedule 2.1(vi) Excluded Assets -- Description of excluded assets
8. Schedule 2.3 Acquired Assets to be Transferred to Holdings
9. Schedule 2.4(a) Exceptions in Connection with Closing Statement --
Indicates that no such exceptions were taken
10. Schedule 2.5 Allocation of Purchase Price -- Provides allocations of
purchase price
11. Schedule 2.7(b) Assumed Contracts, Real Property Leases and Permits
Requiring Consent
12. Schedule 3.1 States Where Qualified to do Business as Foreign Corporation
-- List of jurisdictions where Acquired Business is qualified to do
business as a foreign corporation
13. Schedule 3.4 No Contravention (Seller) -- List of items which require
consent of third parties
14. Schedule 3.5 Divisional Financial Statements and Exceptions to Such
Statements -- List of divisional financial statements
<PAGE>
15. Schedule 3.6(a) Exceptions to Title to Acquired Assets and to Working Order
of Physical Assets
16. Schedule 3.6(b) Disclosures relating to Owned Real Property or Leased Real
Property -- List of disclosures regarding status of real and leased
property
17. Schedule 3.7(a) Contracts -- List of all written and oral contracts
relating to the Acquired Business
18. Schedule 3.7(b) Exceptions to Validity, Force and Effect of Material
Contracts or Events of Default
19. Schedule 3.8 Employee Benefit Plans -- List of employee benefit plans
including pension, dental, bonus, etc.
20. Schedule 3.9 Absence of Certain Changes -- List of changes in the Acquired
Business since December 23, 1995
21. Schedule 3.10 Litigation -- List of pending litigation or claims,
threatened or possible litigation or claims and orders, decrees or
judgments in effect
22. Schedule 3.11(a) Compliance with Laws
23. Schedule 3.12(a) Intellectual Property -- List of Trademarks, Patents and
Copyrights
24. Schedule 3.12(a)(i) Common Law Trademark/Variety Designators
25. Schedule 3.12(b) Registered Trademarks -- Exceptions to Title
26. Schedule 3.12(c) Patents and Copyrights -- Exceptions to Title
27. Schedule 3.12(d) Intellectual Property -- Licenses; Claims
28. Schedule 3.13 Taxes -- List of pending, threatened claims, investigations,
actions or proceedings
29. Schedule 3.14 Inventory -- List of unusable or unsalable inventory
30. Schedule 3.17 Labor Matters -- List of unfair labor practices of which
there were none
2
<PAGE>
31. Schedule 3.18 Assets and Properties Necessary to Produce the Products of
Acquired Businesses
32. Schedule 3.19 Exceptions to Collectibility of Net Receivables
33. Schedule 3.20 Suppliers and Customers -- List of ten largest suppliers and
customers
34. Schedule 3.22 Environmental Matters -- List of information regarding
environmental matters
35. Schedule 4.4 No Contravention (Purchaser) -- List of consents needed by
Purchaser
36. Schedule 5.6 Capital Projects -- List of capital projects Star-Kist is
responsible for payment
37. Schedule 7.1 Compensation and Benefits to be Provided -- Lists names of all
employees of the Acquired Business the annual wages or salaries, and
compensation paid or payable for services rendered during calendar year
1995
38. Schedule 8.2 Consents -- Lists of consents necessary for completion of
transaction
39. Schedule 8.7 Form of Owners Affidavit
40. Schedule 8.9 Debt Term Sheets -- List of term sheets for Purchasers'
financing
41. Schedule XII Certain Environmental Costs -- Letter of E. Roberts
Alley & Associates Incorporated describing results of investigation
of certain areas on or near the Perham plant.
3
<PAGE>
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT, dated April 26, 1996 among
Heinz Pet Products Company, a Division of Star-Kist Foods, Inc., a California
corporation ("Star-Kist"), ProMark International, Inc., an Idaho corporation
("ProMark"), Perk Foods Co., Incorporated, a Delaware corporation ("Perk")
(Star-Kist, ProMark and Perk are hereinafter referred to as the "Sellers"),
H.J. Heinz Company, a Pennsylvania corporation and the direct or indirect parent
of each of the Sellers ("Heinz"), Windy Hill Pet Food Holdings, Inc., a Delaware
corporation ("Holdings"), and Windy Hill Pet Food Company, Inc., a Delaware
corporation and wholly-owned subsidiary of Holdings ("Purchaser").
WITNESSETH:
WHEREAS, Sellers, Heinz, Holdings and Purchaser are parties to that
certain Asset Purchase Agreement dated April 17, 1996 (the "Purchase
Agreement"); and
WHEREAS, Sellers, Heinz, Holdings and Purchaser desire to amend the
Purchase Agreement with respect to certain provisions contained therein,
pursuant to the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto, intending to be
legally bound, agree as follows:
1. Defined Terms. Capitalized terms used herein not otherwise defined
herein shall have the meanings ascribed to them in the Purchase Agreement.
2. Table of Contents. The Table of Contents to the Purchase Agreement
is hereby deleted in its entirety and replaced with the Table of Contents set
forth on Attachment A hereto.
3. Section 3.5. The phrase "income and results of operations" contained
in the first sentence of Section 3.5 of the Purchase Agreement is hereby deleted
and the following term shall be inserted in lieu thereof: "contribution".
4. Section 3.23. The term "Article III" contained in the first sentence
of Section 3.23 of the Purchase Agreement is hereby deleted and the following
phrase shall be inserted in lieu thereof: "Agreement and in certificates
delivered in accordance with Section 8.1(c)(i)".
5. Section 8.9. The brackets surrounding the term "$60,700,000"
contained in Section 8.9 of the Purchase Agreement are hereby deleted.
<PAGE>
6. Section 11.19. Section 11.19 of the Purchase Agreement is hereby
deleted in its entirety and the following new Section 11.19 shall be inserted in
lieu thereof:
"SECTION 11.19. No Offsets. Under no circumstances
whatsoever shall Purchaser, Holdings or Sellers be
entitled to offset any amounts payable pursuant to
this Agreement against any amounts payable pursuant
to, or with respect to, any claims of whatsoever
nature between Purchaser, Holdings and Sellers and
any of their respective affiliates under, any other
agreement or arrangement between Purchaser, Holdings
and Sellers or any of their respective affiliates,
including, without limitation, the Co-Pack
Agreement, the Kozy Kitten License Agreement, the
Promissory Note, or the Transition Services
Agreement and any other agreement contemplated by or
executed in connection with this Agreement.
Notwithstanding the foregoing, Purchaser, on the one
hand, and Sellers, on the other hand, shall be
entitled to set off or recoup against any amount
payable to any other party pursuant to this
Agreement any amount payable by such other party to
Purchaser or Sellers, as applicable, pursuant to
this Agreement, except with respect to the Purchase
Price adjustment, if any, pursuant to Section 2.4
which shall not be subject to any offset."
7. Schedules. The Schedules to the Purchase Agreement are hereby
modified to the extent set forth in Attachment B annexed hereto.
8. Other Provisions. Subject to the amendments set forth herein, all
other provisions of the Purchase Agreement shall remain in full force and effect
as they are currently set forth in the Purchase Agreement. All references to the
Purchase Agreement in any document, instrument or agreement described in,
referred to, annexed to, contemplated by or incorporated by reference in the
Purchase Agreement or this Amendment shall be deemed to mean the Purchase
Agreement as amended by this Amendment.
9. Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first above written.
HEINZ PET PRODUCTS COMPANY,
H.J. HEINZ COMPANY A Division of Star-Kist Foods, Inc.
By: By: /s/ Michael Jon Bertasso
------------------------------ ------------------------------
Name: Name: Michael Jon Bertasso
Title: Title: Chief Cost Officer
PROMARK INTERNATIONAL, INC. PERK FOODS CO., INCORPORATED
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
WINDY HILL PET FOOD WINDY HILL PET FOOD
HOLDINGS, INC. COMPANY, INC.
By: /s/ D. Gadd By: /s/ D. Gadd
------------------------------ ------------------------------
Name: D. Gadd Name: D. Gadd
Title: V.P. Finance Title: V.P. Finance
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first above written.
HEINZ PET PRODUCTS COMPANY,
H.J. HEINZ COMPANY A Division of Star-Kist Foods, Inc.
By: /s/ David R. Williams By:
------------------------------ ------------------------------
Name: David R. Williams Name:
Title: Senior Vice President Title:
PROMARK INTERNATIONAL, INC. PERK FOODS CO., INCORPORATED
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
WINDY HILL PET FOOD WINDY HILL PET FOOD
HOLDINGS, INC. COMPANY, INC.
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
-3-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first above written.
HEINZ PET PRODUCTS COMPANY,
H.J. HEINZ COMPANY A Division of Star-Kist Foods, Inc.
By: By: /s/ Michael Jon Bertasso
------------------------------ ------------------------------
Name: Name: Michael Jon Bertasso
Title: Title: Chief Cost Officer
PROMARK INTERNATIONAL, INC. PERK FOODS CO., INCORPORATED
By: /s/ Eric S. Nielson By: /s/ John Runkel
------------------------------ ------------------------------
Name: Eric S. Nielson Name: John Runkel
Title: President Title: Vice President
WINDY HILL PET FOOD WINDY HILL PET FOOD
HOLDINGS, INC. COMPANY, INC.
By: /s/ D. Gadd By: /s/ D. Gadd
------------------------------ ------------------------------
Name: D. Gadd Name: D. Gadd
Title: V.P. Finance Title: V.P. Finance
-3-
<PAGE>
ATTACHMENT A
TABLE OF CONTENTS
Article I - Definitions............................................ 1
Definitions............................................ 1
Article II - Sale and Purchase of Assets............................ 7
2.1 Transfer of Assets..................................... 7
2.2 Assumption of Liabilities.............................. 10
2.3 Purchase Price and Other Consideration;
Payment............................................. 13
2.4 Non-Cash Working Capital............................... 13
2.5 Allocation of the Purchase Price....................... 15
2.6 Closing................................................ 15
2.7 Nonassignable Contracts; Real Property Leases
and Permits......................................... 18
Article III - Representations and Warranties of Sellers and
Heinz............................................... 19
3.1 Incorporation; Qualification........................... 19
3.2 Authority.............................................. 19
3.3 Execution and Binding Effect........................... 20
3.4 No Contravention....................................... 20
3.5 Divisional Financial Statements........................ 21
3.6 Title to Acquired Assets;
Owned Real Property and Leased Real Property........ 21
3.7 Contracts.............................................. 24
3.8 Employee Benefit Plans................................. 24
3.9 Absence of Certain Changes............................. 25
3.10 Litigation............................................. 26
3.11 Compliance with Laws................................... 26
3.12 Intellectual Property.................................. 27
3.13 Taxes.................................................. 25
3.14 Inventory.............................................. 28
3.15 Brokers and Finders.................................... 29
3.16 Insurance.............................................. 29
3.17 Labor Matters.......................................... 29
3.18 Sufficiency of Assets.................................. 29
3.19 Accounts Receivable.................................... 29
3.20 Suppliers and Customers................................ 29
3.21 Products............................................... 30
3.22 Environmental Matters.................................. 30
3.23 No Other Representatives or Warranties................. 31
<PAGE>
Article IV - Representations and Warranties of
Purchaser and Holdings.............................. 31
4.1 Incorporation.......................................... 31
4.2 Authority.............................................. 31
4.3 Execution and Binding Effect........................... 32
4.4 No Contravention....................................... 32
4.5 Litigation............................................. 32
4.6 Brokers and Finders.................................... 33
Article V - Covenants of the Sellers............................... 33
5.1 Access; Confidential Information....................... 33
5.2 Conduct of Business.................................... 33
5.3 Reasonable Best Efforts; Notifications................. 34
5.4 Trade Secret License; UPC.............................. 34
5.5 Preservation of Records................................ 34
5.6 Capital Projects....................................... 35
5.7 Receivables............................................ 35
Article VI - Covenants of the Purchaser and Holdings................ 35
6.1 Preservation of Records................................ 35
6.2 Reasonable Best Efforts; Notifications................. 36
6.3 Uncollected Receivables................................ 36
Article VII - Employee Matters....................................... 36
7.1 Transferred Employees.................................. 36
7.2 Employmente Benefit Transition......................... 37
7.3 COBRA.................................................. 37
7.4 Vacation............................................... 38
7.5 Qualified Plans........................................ 38
7.6 Disability and Workers' Compensation................... 38
7.7 No Third Party Beneficiaries........................... 38
7.8 Documents and Forms.................................... 39
7.9 WARN Requirements...................................... 39
<PAGE>
Article VIII - Conditions to Purchaser's and Holdings' Obligations.... 39
8.1 Accuracy of Representations and Warranties;
Performance of Agreements; Certificates
and Opinion of Counsel.............................. 39
8.2 Consents............................................... 40
8.3 No Injunction.......................................... 40
8.4 HSR Act................................................ 40
8.5 Closing Deliveries..................................... 40
8.6 No Material Adverse Change............................. 40
8.7 Title Insurance........................................ 40
8.8 Survey and Additional Conditions Relating
to Real Property Matters............................ 41
8.9 Financing.............................................. 42
Article IX - Conditions to Sellers' Obligations..................... 42
9.1 Accuracy of Representations and Warranties;
Performance of Agreements; Certificates
and Opinion of Counsel.............................. 42
9.2 Consents............................................... 43
9.3 No Injunction.......................................... 43
9.4 Promissory Note and Intercreditor Arrangements......... 43
9.5 Closing Deliveries..................................... 43
Article X - Indemnification........................................ 43
10.1 Survival of Representations and Warranties
and Obligations..................................... 43
10.2 Indemnification by Seller.............................. 44
10.3 Indemnification by Purchaser........................... 44
10.4 Indemnification Procedures............................. 45
10.5 Limits on Indemnification.............................. 46
10.4 Adjustment of Liability................................ 48
10.7 Exclusive Remedy....................................... 46
Article XI - Miscellaneous.......................................... 47
11.1 Termination of Agreement............................... 47
11.2 Expenses............................................... 47
11.3 Waiver................................................. 47
11.4 Consents............................................... 48
11.5 Assignment; Parties in Interest........................ 48
11.6 Further Assurances..................................... 48
11.7 Entire Agreement....................................... 48
11.8 Amendment.............................................. 48
<PAGE>
11.9 Limitations on Rights of Third Parties................. 48
11.10 Captions............................................... 48
11.11 Counterparts........................................... 48
11.12 Notices................................................ 49
11.13 Governing Law.......................................... 51
11.14 Bulk Sales Law......................................... 51
11.15 Transfer Taxes; HSR Fees and Title Insurance........... 51
11.16 Public Announcements................................... 51
11.17 Schedules.............................................. 52
11.18 Heinz Guaranty......................................... 52
11.19 No offsets............................................. 52
Article XII - Certain Environmental Costs............................ 52
<PAGE>
CERTIFICATE
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
HUBBARD MILLING COMPANY
The undersigned, being the Executive Vice President and Assistant Secretary
of Hubbard Milling Company, a Minnesota corporation (the "Corporation"), do
hereby certify that the resolutions hereinafter set forth amending and restating
the Restated Articles of Incorporation of the Corporation were duly adopted
pursuant to and in accordance with the provisions of Sections 302A.135,
302A.137, 302A.139 and 302A.402 of the Minnesota Business Corporation Act (the
"MBCA") pursuant to actions by written consent executed by all of the directors
and shareholders of the Corporation in accordance with Sections 302A.239 and
302A.441 of the MBCA:
RESOLVED, that the Restated Articles of Incorporation, as amended from time
to time, of the Corporation be, and they hereby are, amended and restated in
their entirety as follows:
Article I
The name of this Corporation is Windy Hill Pet Food Company, Inc.
Article II
The Corporation has general business purposes.
Article III
The registered agent of this Corporation is CT Corporation System, Inc. and
the address of the registered agent is 405 Second Avenue S., Minneapolis,
Minnesota 55401.
Article IV
That upon the filing of these Amended and Restated Articles of
Incorporation of the Corporation with the Minnesota Secretary of State (the
"Restatement Effective Time"), the Corporation shall be authorized to issue
4,500 shares of capital stock, par value $.05 per share. Upon the Restatement
Effective Time Corporation shall effect a reverse split and redesignation of its
outstanding Class A Common Stock so that each share of Class A Common Stock then
outstanding shall without any action by the holder thereof be converted into
Stock then outstanding shall without any action by the holder thereof be
converted into .00079545454 shares of Common Stock of the Corporation;
provided, however, that the aggregate number of shares of Common Stock held by a
holder following such reverse split and designation shall be rounded up to the
next highest whole number. Each holder of a stock certificate representing
shares of Class A Common Stock of the Corporation immediately prior to
<PAGE>
the Restatement Effective Time shall, upon surrender of such certificate, be
entitled to receive a stock certificate for Common Stock representing the number
of shares of Class A Common Stock listed on the surrendered certificate
multiplied by .00079545454 and then rounded up to the next highest whole number.
Until surrendered each certificate representing shares of Class A Common Stock
of the Corporation immediately prior to the Restatement Effective Time shall, by
virtue of the aforementioned reverse split and redesignation, be deemed for all
purposes to represent shares of Common Stock in an amount equal to the number of
shares of Class A Common Stock listed on such certificate multiplied by
.00079545454 and then rounded up to the next highest whole number.
Article V
Shareholders of the Corporation shall have no preemptive rights.
Article VI
There shall be no cumulative voting by shareholders of the Corporation for
the election of directors.
Article VII
Subject to any further approvals which are required to by made by the
shareholders, any action required or permitted to be taken at a board meeting
may be taken by written action signed by the number of directors that would be
required to take the same action at a meeting of the board at which all
directors were present.
Article VIII
The government of this Corporation and the management of its affairs shall
be vested in a board of directors whose number shall be fixed by the Bylaws and
who shall be elected by the holders of outstanding shares.
Article IX
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director. The foregoing shall not be deemed to eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its shareholders, (ii) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
(iii) under Section 302A.559 or 80A.23 of Minnesota Statutes, (iv) for any
transaction from which the director derived any improper personal benefit, or
(v) for any act or omission occurring prior to the effective date of this
Article IX. Any repeal or modification of this paragraph by the shareholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
<PAGE>
Article X
The duration of this Corporation shall be perpetual.
Article XI
The amendments contained in these Amended and Restated Articles of
Incorporation of the Corporation (i) will not adversely affect the rights and
preferences of the holders of any outstanding shares of any class or series of
the Corporation's capital stock, and (ii) will not result in the percentage of
authorized shares of any class or series that remains unissued after the reverse
split of shares described in Article IV above exceeding the percentage of
authorized shares of such class or series that were unissued before such reverse
split.
RESOLVED FURTHER, that the President or any Vice President and the Secretary or
any Assistant Secretary of the Corporation be and hereby are authorized to
execute and file with the Secretary of State of Minnesota a certificate of the
Amended and Restated Articles of Incorporation embodied within the foregoing
resolution.
[The Remainder of This Page Has Been Left Intentionally Blank]
<PAGE>
IN WITNESS WHEREOF, this Certificate has bean executed this 21 day of May,
1997.
/s/ Ray Chung
------------------------------
Executive Vice President
/s/ Ann F. Chamberlain
------------------------------
Assistant Secretary
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
MAY 21, 1997
[ILLEGIBLE]
Secretary of State
<PAGE>
BYLAWS
OF
WINDY HILL PET FOOD COMPANY, INC.
ARTICLE I. NAME AND LOCATION
SECTION 1. The name of this Corporation is Windy Hill Pet Food Company,
Inc.
SECTION 2. Its principal office shall be located at Two Maryland Farms,
Suite 301, Brentwood, Tennessee 37027-2487.
SECTION 3. Other offices for the transaction of business shall be located
at such places as the Board of Directors may from time to time determine.
ARTICLE II. SHAREHOLDERS MEETINGS
SECTION 1. The Board of Directors shall cause a regular meeting of
shareholders to be called and held on notice within 90 days after the end of
every fiscal year of the corporation and as may be required by law. Each regular
meeting shall be held on the date and at the time and place determined by the
Board of Directors and set forth in the notice of the meeting. At each regular
meeting, the shareholders shall elect directors to serve until the next regular
meeting of shareholders.
SECTION 2. A special meeting of the shareholders may be called at any time
by any persons authorized by law to do so, and shall be held on the date and at
the time and place fixed by the person calling the meeting.
SECTION 3. Notice of the time and place of all regular and special meetings
shall be mailed by the secretary to each shareholder entitled to vote at the
last known address of said shareholder as the same appears on the books of the
Corporation at least 5 days before the date of all regular and special meetings.
SECTION 4. The president, or, in his/her absence, a vice president, if
any, shall preside at all such meetings.
SECTION 5. At every such meeting each shareholder shall be entitled to cast
one vote for each voting share held in his/her name, which vote may be cast by
him/her either in person or by proxy. All proxies shall be in writing and shall
be filed with the secretary and by him entered of record in the minutes of the
meeting.
SECTION 6. A quorum for the transaction of business at such meetings shall
consist of a number of shareholders representing a majority of the voting shares
issued and outstanding, but the shareholders present at any meeting, though less
than a
<PAGE>
quorum, may adjourn the meeting to a future time without notice other than an
announcement at the meeting.
SECTION 7. Any regular or special meeting of the shareholders may be held
in person, by any means of communication through which the shareholders may
simultaneously hear each other during the meeting, or by any other means
permitted under Minnesota law.
SECTION 8. A shareholder may participate in a regular or special meeting of
shareholders held in person, although the shareholder is not physically present
at the meeting, if the shareholder participates by any means of communication
through which the shareholder, other shareholders so participating, and all
shareholders physically present at the meeting may simultaneously hear each
other during the meeting. Participation in a meeting by such means or in person
constitutes presence at the meeting in person or by proxy if all of the other
requirements of Minnesota Statutes, Section 302A.449 are met.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. The business and property of the Corporation shall be managed by
a board of one or more directors who shall be elected by the shareholders at
each regular meeting and shall hold office until their successors are duly
elected and qualified. The number of directors to be elected at each regular
meeting shall be determined by the directors in advance of the meeting and set
forth in the notice thereof, subject to the right of the shareholders, by
majority vote taken at the meeting, to change the number of directors to be
elected.
SECTION 2. The regular meetings of the directors shall be held without
notice immediately after the adjournment of each regular shareholders meeting.
SECTION 3. Special meetings of the Board of Directors may be called by the
president, and in his/her absence by the vice president, if any, or by any
member of the Board of Directors.
SECTION 4. Notice of all special meetings shall be mailed or telegraphed to
each director by any director at least 5 days prior to the time fixed for the
meeting. All notices of special meetings shall state the purpose thereof.
SECTION 5. A quorum for the transaction of business at any regular or
special meeting of the directors shall consist of a majority of the members of
the Board.
SECTION 6. The directors shall elect the officers of the Corporation and
fix their salaries, such election to be held at the directors meeting following
each regular shareholders meeting.
2
<PAGE>
SECTION 7. Vacancies in the Board of Directors may be filled for the
unexpired terms by the vote of a majority of the remaining directors.
ARTICLE IV. OFFICERS
SECTION 1. The officers of this Corporation shall be a president, a
secretary, and a treasurer, and such additional officers as the Board of
Directors may from time to time determine, all of whom shall be elected for an
indefinite term and shall hold office until their successors are duly elected
and qualified. Any two offices, except for president and vice president, may be
held by the same person.
SECTION 2. The president shall be the chief executive officer of the
Corporation, shall preside at all directors and shareholders meetings, and shall
have general supervision over the affairs of the Corporation and over the other
officers. The president shall execute all bonds, mortgages, and other contracts
of the Corporation and shall perform all such other duties as are incident to
his/her office. In case of the absence or disability of the president, his/her
duties shall be performed by a vice president, if any.
SECTION 3. The secretary shall issue notices of directors and shareholders
meetings and shall attend and keep the minutes of the same. He/she shall have
charge of all corporate books, records and papers, shall attest with his/her
signature all share certificates, and shall perform all such other duties as are
incident to his/her office.
SECTION 4. The treasurer shall be the chief financial officer of the
Corporation, shall have the custody of all moneys and securities of the
Corporation, and shall give bond in such sum and with such sureties as the
directors may require, conditioned upon the faithful performance of the duties
of his/her office. He/she shall keep regular books of account, and shall submit
them, together with all his/her vouchers, receipts, records, and other papers,
to the directors for their examination and approval as often as they may require
and shall perform all such other duties as are incident to his/her office.
ARTICLE V. SHARES
SECTION 1. All share certificates shall be signed by the president and
secretary.
SECTION 2. Transfers of shares shall be made only on the books of the
Corporation, and the old certificate properly endorsed shall be surrendered and
cancelled before a new certificate is issued.
SECTION 3. In case of loss or destruction of a share certificate, no new
certificate shall be issued in lieu thereof except upon satisfactory proof to
the Board of Directors of such loss or destruction and upon the giving of
satisfactory security, by bond or otherwise, against loss to the Corporation.
3
<PAGE>
ARTICLE VI. FISCAL YEAR
The fiscal year of this Corporation shall be established by the Board of
Directors.
ARTICLE VII. AMENDMENTS
Amendments to these Bylaws may be made by a vote of the directors
representing a majority of the directors present at any directors meeting, or by
the vote of shareholders representing a majority of the shareholder present at
any shareholders meeting.
ARTICLE VIII. INDEMNIFICATION
The corporation shall indemnify any director, officer or employee of the
corporation made or threatened to be made a party to a proceeding by reason of
the former or present official capacity of the person as provided in and in
accordance with the Minnesota Business Corporation Act.
Approved and effective
as of
/s/ M. Laurie Cummings
- ---------------------------------
M. Laurie Cummings, Secretary
4
<PAGE>
EXECUTION COPY
================================================================================
WINDY HILL PET FOOD COMPANY, INC.
9-3/4% Senior Subordinated Notes due 2007
==========
INDENTURE
Dated as of May 21, 1997
==========
WILMINGTON TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1)........................................................ 7.10
(a)(2)........................................................ 7.10
(a)(3)........................................................ N.A.
(a)(4)........................................................ N.A.
(b)........................................................... 7.8; 7.10
(c)........................................................... N.A.
311(a)........................................................... 7.11
(b)........................................................... 7.11
(c)........................................................... N.A.
312(a)........................................................... 2.5
(b)........................................................... 11.3
(c)........................................................... 11.3
313(a)........................................................... 7.6
(b)(1)........................................................ N.A.
(b)(2)........................................................ 7.6
(c)........................................................... 7.6
(d)........................................................... 7.6
314(a)........................................................... 4.2
................................................................. 4.11; 12.2
(b)........................................................... N.A.
(c)(1)........................................................ 12.4
(c)(2)........................................................ 12.4
(c)(3)........................................................ N.A.
(d)........................................................... N.A.
(e)........................................................... 12.5
(f)........................................................... 4.10
315(a)........................................................... 7.1
(b)........................................................... 7.5; 12.2
(c)........................................................... 7.1
(d)........................................................... 7.1
(e)........................................................... 6.11
316(a)(last sentence)............................................ 12.6
(a)(1)(A)..................................................... 6.5
(a)(1)(B)..................................................... 6.4
(a)(2)........................................................ N.A.
(b)........................................................... 6.7
317(a)(1)........................................................ 6.8
(a)(2)........................................................ 6.9
(b)........................................................... 2.4
318(a)........................................................... 12.1
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.......................................... 1
SECTION 1.2. Other Definitions.................................... 17
SECTION 1.3. Incorporation by Reference of Trust Indenture Act.... 17
SECTION 1.4. Rules of Construction................................ 18
ARTICLE II
The Securities
SECTION 2.1. Form and Dating...................................... 19
SECTION 2.2. Execution and Authentication......................... 20
SECTION 2.3. Registrar and Paying Agent........................... 20
SECTION 2.4. Paying Agent To Hold Money in Trust.................. 21
SECTION 2.5. Securityholder Lists................................. 21
SECTION 2.6. Transfer and Exchange................................ 21
SECTION 2.7. Replacement Securities............................... 26
SECTION 2.8. Outstanding Securities............................... 27
SECTION 2.9. Temporary Securities................................. 27
SECTION 2.10. Cancellation......................................... 27
SECTION 2.11. Defaulted Interest................................... 28
SECTION 2.12. CUSIP Numbers........................................ 28
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee................................... 28
SECTION 3.2. Selection of Securities To Be Redeemed............... 29
SECTION 3.3. Notice of Redemption................................. 29
SECTION 3.4. Effect of Notice of Redemption....................... 30
SECTION 3.5. Deposit of Redemption Price.......................... 30
SECTION 3.6. Securities Redeemed in Part.......................... 30
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities................................ 30
SECTION 4.2. SEC Reports.......................................... 31
SECTION 4.3. Limitation on Indebtedness........................... 31
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SECTION 4.4. Limitation on Restricted Payments.................... 32
SECTION 4.5. Limitation on Restrictions on Distributions from
Subsidiaries ..................................... 34
SECTION 4.6. Limitation on Sales of Assets........................ 35
SECTION 4.7. Limitation on Affiliate Transactions................. 37
SECTION 4.8. Change of Control.................................... 38
SECTION 4.9. Limitation on Sale of Subsidiary Capital Stock....... 38
SECTION 4.10. Future Security Guarantors........................... 39
SECTION 4.11. Limitation on Lines of Business...................... 39
SECTION 4.12. Maintenance of Office or Agency for Registration of
Transfer, Exchange and Payment of Securities...... 39
SECTION 4.13. Appointment to Fill a Vacancy in the Office of
Trustee .......................................... 40
SECTION 4.14. Provision as to Paying Agent......................... 40
SECTION 4.15. Maintenance of Corporate Existence................... 41
SECTION 4.16. Compliance Certificate............................... 41
SECTION 4.17. Further Instruments and Acts......................... 41
ARTICLE V
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets............ 41
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default.................................... 42
SECTION 6.2. Acceleration......................................... 45
SECTION 6.3. Other Remedies....................................... 45
SECTION 6.4. Waiver of Past Defaults.............................. 45
SECTION 6.5. Control by Majority.................................. 45
SECTION 6.6. Limitation on Suits.................................. 46
SECTION 6.7. Rights of Holders to Receive Payment................. 46
SECTION 6.8. Collection Suit by Trustee........................... 46
SECTION 6.9. Trustee May File Proofs of Claim..................... 46
SECTION 6.10. Priorities........................................... 47
SECTION 6.11. Undertaking for Costs................................ 47
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee.................................... 47
SECTION 7.2. Rights of Trustee.................................... 48
SECTION 7.3. Individual Rights of Trustee......................... 50
SECTION 7.4. Trustee's Disclaimer................................. 50
SECTION 7.5. Notice of Defaults................................... 50
SECTION 7.6. Reports by Trustee to Holders........................ 50
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SECTION 7.7. Compensation and Indemnity........................... 50
SECTION 7.8. Replacement of Trustee............................... 51
SECTION 7.9. Successor Trustee by Merger.......................... 52
SECTION 7.10. Eligibility; Disqualification........................ 52
SECTION 7.11. Preferential Collection of Claims Against Company.... 52
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance..... 53
SECTION 8.2. Conditions to Defeasance............................. 54
SECTION 8.3. Application of Trust Money........................... 55
SECTION 8.4. Repayment to Company................................. 55
SECTION 8.5. Indemnity for U.S. Government Obligations............ 55
SECTION 8.6. Reinstatement........................................ 55
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders........................... 56
SECTION 9.2. With Consent of Holders.............................. 57
SECTION 9.3. Compliance with Trust Indenture Act.................. 58
SECTION 9.4. Revocation and Effect of Consents and Waivers........ 58
SECTION 9.5. Notation on or Exchange of Securities................ 58
SECTION 9.6. Trustee To Sign Amendments........................... 58
ARTICLE X
Subordination
SECTION 10.1. Agreement To Subordinate............................. 59
SECTION 10.2. Liquidation, Dissolution, Bankruptcy................. 59
SECTION 10.3. Default on Senior Indebtedness or Guarantor Senior
Indebtedness...................................... 60
SECTION 10.4. Acceleration of Payment of Securities................ 61
SECTION 10.5. When Distribution Must Be Paid Over.................. 61
SECTION 10.6. Subrogation.......................................... 61
SECTION 10.7. Relative Rights...................................... 61
SECTION 10.8. Subordination May Not Be Impaired by Company or the
Subsidiary Guarantors............................. 62
SECTION 10.9. Rights of Trustee and Paying Agent................... 62
SECTION 10.10. Distribution or Notice to Representative............. 63
SECTION 10.11. Article X Not To Prevent Events of Default or
Limit Right To Accelerate......................... 63
SECTION 10.12. Trust Moneys Not Subordinated........................ 63
SECTION 10.13. Trustee Entitled To Rely............................. 63
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SECTION 10.14. Trustee To Effectuate Subordination.................. 64
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness or Guarantor Senior Indebtedness..... 64
SECTION 10.16. Changes in Senior Indebtedness....................... 64
SECTION 10.17. Reliance by Holders of Senior Indebtedness and
Guarantor Senior Indebtedness on Subordination
Provisions........................................ 64
SECTION 10.18. Legend............................................... 65
ARTICLE XI
Subsidiary Guarantee
SECTION 11.1. Subsidiary Guarantee................................. 65
SECTION 11.2. Limitation on Liability.............................. 67
SECTION 11.3. Successors and Assigns............................... 67
SECTION 11.4. No Waiver............................................ 67
SECTION 11.5. Right of Contribution................................ 67
SECTION 11.6. No Subrogation....................................... 67
SECTION 11.7. Modification......................................... 68
ARTICLE XII
Miscellaneous
SECTION 12.1. Trust Indenture Act Controls......................... 68
SECTION 12.2. Notices.............................................. 68
SECTION 12.3. Communication by Holders with other Holders.......... 69
SECTION 12.4. Certificate and Opinion as to Conditions Precedent... 69
SECTION 12.5. Statements Required in Certificate or Opinion........ 70
SECTION 12.6. When Securities Disregarded.......................... 70
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar......... 70
SECTION 12.8. Legal Holidays....................................... 70
SECTION 12.9. Governing Law........................................ 70
SECTION 12.10. No Recourse Against Others........................... 70
SECTION 12.11. Successors........................................... 71
SECTION 12.12. Multiple Originals................................... 71
SECTION 12.13. Variable Provisions.................................. 71
SECTION 12.14. Qualification of Indenture........................... 71
SECTION 12.15. Table of Contents; Headings.......................... 71
EXHIBIT A Form of Initial Note
EXHIBIT B Form of Exchange Note
EXHIBIT C Form of Transferee Letter of Representation
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<PAGE>
INDENTURE dated as of May 21, 1997, between WINDY HILL PET FOOD
COMPANY, INC., a Minnesota corporation (the "Company") and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Company's 9 3/4%
Senior Subordinated Notes due 2007 (the "Initial Notes") and, if and when issued
in exchange for Initial Notes as provided in the Registration Rights Agreement
(as hereinafter defined), the Company's 9 3/4% Senior Subordinated Notes due
2007 (the "Exchange Notes" and, together with the Initial Notes, the
"Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Subsidiary in a
Related Business; (ii) the Capital Stock of a Person that becomes a Subsidiary
as a result of the acquisition of such Capital Stock by the Company or another
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Subsidiary of the Company; provided, however,
that, in the case of clauses (ii) and (iii) of this definition, such Subsidiary
is primarily engaged in a Related Business.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any Person who is a director
or officer (A) of such Person, (B) of any Subsidiary of such Person or (C) of
any Person described in clause (i) above. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described in Sections 4.4, 4.6 and 4.7 only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of
the Company or of rights or warrants to purchase such Voting Stock (whether or
not currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"AF Sale" means the sale of the animal food business of Hubbard
Milling pursuant to an asset purchase agreement dated as of April 25, 1997 among
the parties named therein.
<PAGE>
2
"AF Sale Proceeds" means the net proceeds received by the Company
from the sale of its animal feed business, less $5 million used to repay the
term loan facility under the Senior Credit Agreement.
"Applicable Premium" means, with respect to a Security at any
redemption date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such time of (1) the
redemption price of such Security at May 15, 2002 (such redemption price being
described in the Security) plus (2) all required interest payments due on such
Security through May 15, 2002, computed using a discount rate equal to the
Treasury Rate plus 50 basis points based on 360-day year of twelve 30-day
months, over (B) the principal amount of such Security.
"Armour" means Armour Corporation, a Delaware corporation and a
wholly owned subsidiary of Holdings.
"Asset Disposition" means any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or a Wholly-Owned Subsidiary or by the Company or a
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory or
Temporary Cash Investments in the ordinary course of business, (iii) a
disposition of obsolete equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Subsidiaries and that is disposed
of in each case in the ordinary course of business, (iv) the sale of other
assets so long as the fair market value of the assets disposed of pursuant to
this clause (iv) does not exceed $1.0 million in the aggregate in any fiscal
year and $5.0 million in the aggregate prior to May 15, 2007, (v) for the
purposes of the covenant described in Section 4.6 only, a disposition subject to
the covenant described in Section 4.4 and (vi) the disposition of all or
substantially all of the assets of the Company in the manner permitted pursuant
to Section 5.1 or any disposition that constitutes a Change of Control pursuant
to this Indenture.
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Securities, compounded annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
<PAGE>
3
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Senior Credit Documents and any Indebtedness that is incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) Indebtedness under such Senior Credit
Documents including Indebtedness that refinances such Indebtedness, as amended
from time to time, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for post filing
interest is allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees and all other amounts payable thereunder or in respect
thereof (including, without limitation, cash collateralization of letters of
credit).
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board of
Directors.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York City or Wilmington, Delaware are
authorized or required by law to close.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP, and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date such lease may be terminated without penalty.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (iii) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any domestic commercial bank the long-term debt of which is rated at the time
of acquisition thereof at least "A" or the equivalent thereof by Standard &
Poor's Ratings Group, or "A" or the equivalent thereof by Moody's Investors
Service, Inc., and having capital and surplus in excess of $500.0 million; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i), (ii) and (iii) entered into
with any bank meeting the qualifications specified in clause (iii) above; (v)
commercial paper rated at the time of acquisition thereof at least "A-2" or the
equivalent
<PAGE>
4
thereof by Standard & Poor's Ratings Group or "P-2" or the equivalent thereof by
Moody's Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of investments, and in either case maturing within 270
days after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses (i)
through (v) above.
"Change of Control" means the occurrence of any of the following
events: (i) prior to the first public offering of Voting Stock of the Company,
Holdings or WHPF, as the case may be, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of majority voting power of the Voting Stock of the
Company, whether as a result of issuance of securities of the Company, Holdings
or WHPF, as the case may be, any merger, consolidation, liquidation or
dissolution of the Company, Holdings or WHPF, as the case may be, any direct or
indirect transfer of securities by any Permitted Holder or otherwise (for
purposes of this clause (i) and clause (ii) below, the Permitted Holders will be
deemed to beneficially own any Voting Stock of a Person (the "specified
corporation") held by any other Person (the "parent corporation") so long as the
Permitted Holders beneficially own (as so defined), directly or indirectly, a
majority of the voting power of the Voting Stock of the parent corporation);
(ii) following the first public offering of Voting Stock of the
Company, Holdings or WHPF, as the case may be, any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in clause (i)
above, except that a Person shall be deemed to have "beneficial ownership" of
all shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock of
the Company, Holdings or WHPF, as the case may be; provided that the Permitted
Holders beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power of
the Voting Stock of the Company, Holdings or WHPF, as the case may be, than such
other person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of the Company, Holdings or WHPF, as the case may be, (for purposes of
this clause (ii), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if such
other person "beneficially owns" (as defined in this clause (ii)), directly or
indirectly, more than 35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders "beneficially own" (as defined in clause
(i) above), directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the board of directors of such parent corporation);
or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Company was approved by a vote of a
majority of the directors of the
<PAGE>
5
Company then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of Directors then in
office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Windy Hill Pet Food Company, Inc., a Minnesota
corporation.
"Consolidated Cash Flow" for any period means the Consolidated Net
Income for such period, plus the following to the extent deducted in calculating
such Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense (iii) depreciation expense, (iv) amortization expense, in each case for
such period and (v) other non-cash charges reducing Consolidated Net Income
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period), in each case for such period, and
minus, to the extent not already deducted in calculating Consolidated Net
Income, (i) the aggregate amount of "earnout" payments paid in cash during such
period in connection with acquisitions previously made by the Company and (ii)
non-cash items increasing Consolidated Net Income for such period.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of Consolidated Cash Flow for the period
of the most recent four consecutive fiscal quarters ending prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (A) if the Company or any of its Subsidiaries
has Incurred any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (B) if since the beginning of such
period the Company or any of its Subsidiaries shall have made any Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
attributable to any Indebtedness of the Company or any of its Subsidiaries
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Subsidiary of the
Company is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Subsidiary to the extent the Company
and its continuing Subsidiaries are no longer liable for such Indebtedness after
such sale), (C) if since the beginning of such period the Company or any of its
Subsidiaries (by merger or otherwise)
<PAGE>
6
shall have made an Investment in any Subsidiary of the Company (or any Person
which becomes a Subsidiary of the Company) or an acquisition of assets,
including any Investment in a Subsidiary of the Company or any acquisition of
assets occurring in connection with a transaction causing a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness and including the pro forma expenses and cost
reductions calculated on a basis consistent with Regulation S-X of the
Securities Act) as if such Investment or acquisition occurred on the first day
of such period and (D) if since the beginning of such period any Person (that
subsequently became a Subsidiary of the Company or was merged with or into the
Company or any Subsidiary of the Company since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of assets
that would have required an adjustment pursuant to clause (B) or (C) above if
made by the Company or a Subsidiary of the Company during such period,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Subsidiaries, plus, to the extent not
included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations and imputed interest with respect to Attributable
Indebtedness, (ii) amortization of debt discount and debt issuance cost (other
than those debt discounts and debt issuance costs incurred on the Acquisition
Closing Date and the Issue Date), (iii) capitalized interest, (iv) non-cash
interest expense, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi)
interest actually paid by the Company or any such Subsidiary under any Guarantee
of Indebtedness or other obligation of any other Person, (vii) net costs
associated with Currency Agreements and Interest Rate Agreements (including
amortization of fees), (viii) the product of (A) all Preferred Stock dividends
in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly-Owned Subsidiary multiplied by (B) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined Federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, determined on a consolidated basis in accordance with GAAP and (ix)
the cash contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
<PAGE>
7
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income: (i) any net income
(loss) of any Person if such Person is not a Subsidiary, except that (A) subject
to the limitations contained in clause (iv) below, the Company's equity in the
net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other distribution
to a Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income (loss)
of any person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income (loss) of any Subsidiary if such Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Subsidiary, directly or indirectly, to the Company, except
that (A) subject to the limitations contained in (iv) below, the Company's
equity in the net income of any such Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Subsidiary during such period to the Company
or another Subsidiary as a dividend (subject, in the case of a dividend that
could have been made to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain (but not loss) realized upon the sale or other disposition of any
assets of the Company or its consolidated Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) which are not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale or
other disposition of any Capital Stock of any Person; (v) any extraordinary gain
or loss; and (vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
<PAGE>
8
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and
(ii) any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $5.0
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable) or upon the happening
of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to 123 days after the Stated
Maturity of the Securities.
"Equity Investors" means the equity owners of Holdings on the Issue
Date.
"Equity Offering" means any public or private sales of equity
securities (excluding Disqualified Stock) of the Company, Holdings or WHPF.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted principles in the United States of
America as in effect on the Issue Date, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as are approved by a significant segment of the accounting
profession. All ratios and computations based on GAAP contained in this
Indenture shall be computed in conformity with GAAP.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of any other Person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
<PAGE>
9
"Guarantor Senior Indebtedness" means, with respect to a Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter issued, any
Guarantee of the Bank Indebtedness by such Subsidiary Guarantor, all other
Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the Company
and all Indebtedness of such Subsidiary Guarantor, including interest and fees
thereon, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that the obligations of such
Subsidiary Guarantor in respect of such Indebtedness are not superior in right
of payment to the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee; provided, however, that Guarantor Senior Indebtedness shall not
include (i) any obligations of such Subsidiary Guarantor to the Company or any
other Subsidiary of the Company, (ii) any liability for Federal, state, local or
other taxes owed or owing by such Subsidiary Guarantor, (iii) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including Guarantees thereof or instruments evidencing such
liabilities), (iv) any Indebtedness, Guarantee or obligation of such Subsidiary
Guarantor that is expressly subordinate or junior in right of payment to any
other Indebtedness, Guarantee or obligation of such Subsidiary Guarantor,
including any Guarantor Senior Subordinated Indebtedness and Guarantor
Subordinated Obligations of such Subsidiary Guarantor or (v) any Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means, with respect to
a Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee and any other Indebtedness of such Subsidiary Guarantor
that specifically provides that such Indebtedness is to rank pari passu in right
of payment with the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee and is not subordinated by its terms in right of payment to
any Indebtedness or other obligation of such Subsidiary Guarantor which is not
Guarantor Senior Indebtedness of such Subsidiary Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a
Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the obligations of such Subsidiary Guarantor under
the Subsidiary Guarantee pursuant to a written agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Holdings" means Windy Hill Pet Food Holdings, Inc., a Delaware
corporation.
"Hubbard Milling" means Hubbard Milling Company, a Minnesota
corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary.
<PAGE>
10
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (other than contingent or "earn-out" payment obligations
and Trade Payables and accrued expenses incurred in the ordinary course of
business), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons, (vii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, (viii) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends) and (ix) to the extent not otherwise included
in this definition, obligations of such Person under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above as such amount would be reflected on a balance sheet in
accordance with GAAP and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of such Person) or
other extension of credit (including by way of Guarantee or similar arrangement,
but excluding any debt or extension of credit represented by a bank deposit
other than a time deposit) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services for
the
<PAGE>
11
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person.
"Issue Date" means the date on which the Initial Notes are
originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Services Agreements" means (i) the Amended and Restated
Management Services Agreement dated as of May 2, 1997 between Windy Hill Pet
Food Company, Inc. and Dartford Partnership L.L.C. (and its permitted successors
and assigns thereunder) and (ii) the Management Services Agreement dated as of
April 29, 1996 between Windy Hill Pet Food Company, Inc. and Bruckman, Rosser,
Sherrill & Co., Inc. (and its permitted successors and assigns thereunder) in
each case without giving effect to any further amendment or other modification
thereto.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to any Person owning a beneficial interest in assets subject
to sale or minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition, (iv) the deduction of appropriate amounts to
be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained by the Company or any Subsidiary of the Company after such Asset
Disposition and (v) any portion of the purchase price from an Asset Disposition
placed in escrow (whether as a reserve for adjustment of the purchase price, for
satisfaction of indemnities in respect of such Asset Disposition or otherwise in
connection with such Asset Disposition) provided, however, that upon the
termination of such escrow, Net Available Cash shall be increased by any portion
of funds therein released to the Company or any Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock or Indebtedness, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
<PAGE>
12
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers
(in the case of the annual Officers' Certificate delivered pursuant to Section
4.16, at least one of such Officers shall be the principal executive officer,
principal financial officer or principal accounting officer of the Company) and
that complies with Sections 12.4 and 12.5 of this Indenture and is delivered to
the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee and that complies with Sections 12.4 and 12.5 of
this Indenture and delivered to the Trustee. The counsel may be an employee of
or counsel to the Company or the Trustee.
"Permitted Holders" means the Equity Investors and their respective
Affiliates.
"Permitted Investment" means (i) any Investment in a Subsidiary of
the Company or a Person which will, upon making such Investment, become a
Subsidiary; provided, however, that the primary business of such Subsidiary is a
Related Business; (ii) any Investment in another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Subsidiary of the Company; provided, however, that such Person's primary
business is a Related Business; (iii) any Investment in Temporary Cash
Investments; (iv) receivables owing to the Company or any of its Subsidiaries,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business of the Company or such Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Subsidiaries
or in satisfaction of judgments or claims; (viii) Investments the payment for
which consists exclusively of equity securities (exclusive of Disqualified
Stock) of the Company; (ix) any Investment existing on the Issue Date; (x) loans
or advances to employees and directors to purchase equity securities of the
Company, Holdings or WHPF; provided that the aggregate amount of such loans and
advances shall not exceed $2.0 million at any time outstanding; (xi) any
Investment in another Person to the extent such Investment is received by the
Company or any Subsidiary as consideration for Asset Disposition effected in
compliance with Section 4.6; (xii) prepayment and other credits to suppliers
made in the ordinary course of business consistent with the past practices of
the Company and its Subsidiaries; (xiii) Investments in connection with pledges,
deposits, payments or performance bonds made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations; and (xiv) any Investment in another Person provided that the
aggregate Investments made pursuant to this clause (xiv) shall not exceed $4.0
million at any one time outstanding (measured as of the date made and without
giving
<PAGE>
13
effect to subsequent changes in value), provided, further that such amount shall
be increased by an amount equal to any return of capital received from any
Investment.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the security which is due or overdue or is to
become due at the relevant time.
"QIB" means any "qualified institutional buyer" (as defined under
the Securities Act).
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness existing on the date of the
Indenture or Incurred in compliance with the Indenture (including Indebtedness
of the Company that refinances Indebtedness of any Subsidiary and Indebtedness
of any Subsidiary that refinances Indebtedness of another Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness, provided, however, that
(i) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced and (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced (plus the
amount of any premium required to be paid in connection therewith and plus
reasonable fees and expenses in connection therewith); provided further that
Refinancing Indebtedness shall not include Indebtedness of a Subsidiary which
refinances Indebtedness of the Company.
"Registered Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated as of May 21, 1997, between the Company, Chase
Securities Inc., and Credit Suisse First Boston Corporation.
<PAGE>
14
"Related Business" means the pet food business and such other
business activities which are incidental or related thereto.
"Representative" means any trustee, agent or representative (if any)
of an issue of Senior Indebtedness.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to the
Global Security (as appointed by the Depositary), or any successor Person
thereto and shall initially be the Trustee.
"Security Guarantee" means any guarantee pursuant to a supplemental
Indenture which may from time to time be executed and delivered by a Subsidiary
of the company pursuant to Section 4.10.
"Senior Credit Agreement" means the Credit Agreement dated as of May
21, 1997, among Windy Hill Pet Food Acquisition Co., and the lenders parties
thereto.
"Senior Credit Documents" means the collective reference to the
Senior Credit Agreement, the notes issued pursuant thereto and the Guarantee and
the Collateral Agreement and the Patent and Trademark Security Agreement (each
as defined in the Senior Credit Agreement) and each of the mortgages and other
security agreements, guarantees and other instruments and documents executed and
delivered pursuant to any of the foregoing or the Senior Credit Agreement, in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amounts of
available borrowing thereunder provided that such increase in borrowing is
permitted by Section 4.3 or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement whether by the same or
any other agent, lender or group of lenders.
"Senior Indebtedness" means the principal of, premium (if any), and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization of the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, the Bank Indebtedness and all other Indebtedness of
the Company, whether outstanding on the Issue Date or thereafter
<PAGE>
15
issued, unless, in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that the obligations in respect of
such Indebtedness are not superior in right of payment to the Securities;
provided, however, that Senior Indebtedness will not include (i) any obligation
of the Company to any Subsidiary, (ii) any liability for Federal, state,
foreign, local or other taxes owed or owing by the Company, (iii) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including Guarantees thereof or instruments evidencing such
liabilities), (iv) any Indebtedness, Guarantee or obligation of the Company that
is expressly subordinate or junior in right of payment to any other
Indebtedness, Guarantee or obligation of the Company, including any Senior
Subordinated Indebtedness and any Subordinated Obligations or (v) any Capital
Stock.
"Senior Subordinated Indebtedness" means the Securities and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
May 16, 1997.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person. Unless otherwise specified herein, each reference
to a Subsidiary shall refer to a Subsidiary of the Company.
"Subsidiary Guarantor" means any Subsidiary which is required to
guarantee the Securities pursuant to Section 4.10.
"Temporary Cash Investments" means any of the following: (i) any
Investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days
<PAGE>
16
of the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $250.0 million (or the
foreign currency equivalent thereof) and whose long-term debt, or whose parent
holding company's long-term debt, is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act), (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) Investments in commercial
paper, maturing not more than 180 days after the date of acquisition, issued by
a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's
Ratings Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.6(d) hereof.
"Treasury Rate" means, at the time of computation, the yield to
maturity of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the redemption date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the redemption date to May 15, 2002; provided, however, that if the
period from the redemption date to May 15, 2002 is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
<PAGE>
17
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock of
such Person then outstanding and normally entitled to vote in the election of
directors.
"Wholly-Owned Subsidiary" means a Subsidiary of the Company, all of
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly-Owned Subsidiary.
SECTION 1.2. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction".................................. 4.7
"Agent Member"........................................... 2.1(c)
"Authenticating Agent"................................... 2.2
"Bankruptcy Law"......................................... 6.1
"Blockage Notice"........................................ 10.3
"covenant defeasance option"............................. 8.1(b)
"Custodian".............................................. 6.1
"Definitive Securities".................................. 2.1
"Event of Default"....................................... 6.1
"Global Security"........................................ 2.1
"legal defeasance option"................................ 8.1(b)
"Legal Holiday".......................................... 12.8
"Obligations"............................................ 11.1
"Offer" ................................................. 4.6(b)
"Offer Amount"........................................... 4.6(c)(ii)
"Offer Period"........................................... 4.6(c)(ii)
"pay the Securities"..................................... 10.3
"Paying Agent"........................................... 2.3
"Payment Blockage Period"................................ 10.3
"Purchase Agreement"..................................... 2.1(b)
"Purchase Date".......................................... 4.6(c)(i)
"Registrar".............................................. 2.3
"Restricted Payment"..................................... 4.4(a)
"Successor Company"...................................... 5.1
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by
<PAGE>
18
reference in and made a part of this Indenture. The following TIA terms have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA by reference to another statute or defined by an SEC
rule have the meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular;
(vi) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(vii) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
(viii) the principal amount of any Preferred Stock shall be
(A) the maximum liquidation value of such Preferred Stock or (B) the
maximum mandatory redemption or mandatory repurchase price with respect to
such Preferred Stock, whichever is greater.
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19
ARTICLE II
The Securities
SECTION 2.1. Form and Dating. (a) The Initial Notes and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated by reference and expressly made a part
of this Indenture. The Exchange Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B, which is hereby
incorporated by reference and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage, in addition to those set forth on Exhibits A and B. The
Company and the Trustee shall approve the forms of the Securities and any
notation, endorsement or legend on them. Each Security shall be dated the date
of its authentication. The terms of the Securities set forth in Exhibit A and
Exhibit B are part of the terms of this Indenture and, to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to be bound by such terms.
(b) Global Securities. The Initial Notes are being offered and sold
by the Company pursuant to a Purchase Agreement, dated May 16, 1997, among Windy
Hill Pet Food Acquisition Co., Chase Securities Inc. and Credit Suisse First
Boston Corporation (the "Purchase Agreement").
Initial Notes shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the Global Securities Legend and Restricted Securities
Legend set forth in Exhibit A hereto (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Initial Notes represented thereby
with the Trustee, at its corporate trust office, as custodian for the
Depository, and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Securities
may from time to time be increased or decreased by endorsements made on such
Global Securities by the Trustee, the Securities Custodian or the Depository or
its nominee as hereinafter provided.
(c) Book-Entry Provisions. This Section 2.1(c) shall apply only to
Global Securities deposited with the Trustee, as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of the Depositary
<PAGE>
20
governing the exercise of the rights of an owner of a beneficial interest in any
Global Security.
(d) Certificated Securities. Except as provided in Section 2.6,
owners of beneficial interests in Global Securities will not be entitled to
receive Definitive Securities (as hereinafter defined). Definitive Securities
will bear the Restricted Securities Legend set forth on Exhibit A unless removed
in accordance with Section 2.6(f) hereof.
SECTION 2.2. Execution and Authentication. Two Officers shall sign
the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually authenticates the Security. The signature of the Trustee on a
Security shall be conclusive evidence that such Security has been duly and
validly authenticated and issued under this Indenture.
The Trustee shall authenticate and deliver: (i) Initial Notes for
original issue in an aggregate principal amount of $120.0 million and (ii)
Exchange Notes for issue only in a Registered Exchange Offer pursuant to the
Registration Rights Agreement, and only in exchange for Initial Notes of an
equal principal amount, in each case upon a written order of the Company signed
by two Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of the Company. Such order shall specify the amount of the
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated and whether the Securities are to be Initial
Notes or Exchange Notes. The aggregate principal amount of Securities
outstanding at any time may not exceed $120.0 million except as provided in
Section 2.7.
The Trustee may appoint an agent (the "Authenticating Agent")
reasonably acceptable to the Company to authenticate the Securities. Unless
limited by the terms of such appointment, any such Authenticating Agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent.
SECTION 2.3. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that
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21
relate to such agent. The Company shall notify the Trustee of the name and
address of each such agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such and shall be entitled to appropriate
compensation therefor pursuant to Section 7.7. The Company or any of its
domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent,
Registrar, co-registrar or transfer agent. The Paying Agent or the Registrar may
resign as such upon 30 days' prior written notice to the Company and the
Trustee; upon resignation of any Paying Agent or Registrar, the Company shall
appoint a successor Paying Agent or Registrar, as the case may be, no later than
30 days thereafter and shall provide notice to the Trustee of such successor
Paying Agent or Registrar.
The Company initially appoints the Trustee as Registrar and Paying
Agent for the Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. By at least 10:00
a.m. (New York City time) on the date on which any principal of or interest on
any Security is due and payable, the Company shall deposit with the Paying Agent
a sum sufficient to pay such principal or interest when due. The Company shall
require each Paying Agent (other than the Trustee) to agree in writing that such
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
money held by such Paying Agent for the payment of principal of or interest on
the Securities and shall notify the Trustee of any default by the Company in
making any such payment. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate the money held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent (other than the
Trustee) to pay all money held by it to the Trustee and to account for any funds
disbursed by such Paying Agent. Upon complying with this Section 2.4, the Paying
Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money delivered to the Trustee. Upon any bankruptcy,
reorganization or similar proceeding with respect to the Company, the Trustee
shall serve as Paying Agent for the Securities.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee, in writing at least seven Business Days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders.
SECTION 2.6. Transfer and Exchange.
(a) Restrictions on Transfer and Exchange of Global Securities. (i)
The transfer and exchange of Global Securities or beneficial interests therein
shall be effected through the Depositary or the Trustee, as the custodian for
the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(ii) A Global Security shall be exchangeable pursuant to this
Section 2.6(a) for Definitive Securities registered in the names of Persons
owning beneficial interests in such
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22
Global Security only if (A) such exchange is made in compliance with the
provisions of this Section 2.6 and (B) any of the following events shall have
occurred: (1) the Depositary for such Global Security notifies the Company that
it is unwilling or unable to continue as Depositary for such Global Security or
such Depositary ceases to be a clearing agency registered under the Exchange
Act, at a time when such Depositary is required to be so registered in order to
act as Depositary, and a successor depositary is not appointed by the Company
within 90 days thereafter, (2) the Company executes and delivers to the Trustee
an Officers' Certificate stating that such Global Security shall be so
exchangeable or (3) there shall have occurred and be continuing an Event of
Default with respect to the Securities and any of the Company, the Depositary or
the Trustee so requests. Upon exchange of a Global Security for one or more
Definitive Securities, such Definitive Securities shall not thereafter be
exchangeable for beneficial interests in a Global Security.
(iii) Any Global Security that is exchangeable for Definitive
Securities registered in the name of the owners of beneficial interests therein
pursuant to this Section 2.6 shall be surrendered by the Depositary to the
Trustee to be so exchanged, without charge, and the Company shall sign and the
Trustee shall authenticate and deliver, upon such exchange of such Global
Security, an equal aggregate principal amount of Definitive Securities of
authorized denominations. Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.6 shall be
registered in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee in writing. The Trustee shall deliver such Definitive
Securities to the Persons in whose names such Securities are so registered in
accordance with the instructions of the Depositary. All Definitive Securities
representing the Initial Notes delivered in exchange for a Global Security which
bore the Restricted Securities Legend set forth in Exhibit A shall, except as
otherwise provided in Section 2.6(d), bear the Restricted Securities Legend set
forth in Exhibit A hereto.
(iv) The registered Holder of a Global Security may grant proxies
and otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
(v) In the event of the occurrence of any of the events specified in
Section 2.6(a)(ii), the Company will promptly make available to the Trustee a
reasonable supply of Definitive Securities.
(vi) Notwithstanding any other provision of this Indenture, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
(b) Cancellation or Adjustment of Global Security. At such time as
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depositary for cancellation or retained and canceled by
the Trustee.
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23
(c) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented by a Holder to the Registrar or a co-registrar with a
request (i) to register the transfer of such Definitive Securities; or (ii) to
exchange such Definitive Securities for an equal principal amount of Definitive
Securities of other authorized denominations, the Registrar or co-registrar
shall register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however, that:
(i) such Definitive Securities shall be duly endorsed or
accompanied by a written instrument of transfer in form reasonably
satisfactory to the Company and the Registrar or co-registrar, duly
executed by such Holder or his attorney duly authorized in writing; and
(ii) if such Definitive Securities are Transfer Restricted
Securities, such Definitive Securities shall also be accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being delivered
to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (in the form set forth on the reverse of the Security); or
(B) if such Transfer Restricted Securities are being
transferred (x) to the Company or to a QIB in accordance with Rule
144A under the Securities Act or (y) pursuant to an effective
registration statement under the Securities Act, a certification
from such Holder to that effect (in the form set forth on the
reverse of the Security); or
(C) if such Transfer Restricted Securities are being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities Act;
or (x) an "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that is an
institutional investor and that is acquiring the Security for its
own account, or for the account of such an institutional accredited
investor, in each case in a minimum principal amount of the
Securities of $250,000 for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in
violation of the Securities Act; or (y) in reliance on another
exemption from the registration requirements of the Securities Act:
(i) a certification to that effect from such Holder (in the form set
forth on the reverse of the Security), (ii) if the Company or the
Trustee so requests, an Opinion of Counsel reasonably acceptable to
the Company and to the Trustee to the effect that such transfer is
in compliance with the Securities Act and (iii) in the case of
clause (x), a signed letter from the transferee substantially in the
form of Exhibit C hereto.
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24
(d) Legend.
(i) Except in the case of Exchange Notes or as permitted by
the following paragraph (ii), each Security certificate evidencing Global
Securities and Definitive Securities (and all Securities issued in
exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT,
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF
$250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
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25
TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE
FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUER AND THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE."
(ii) Upon any sale, exchange or transfer of a Transfer
Restricted Security (including any Transfer Restricted Security
represented by a Global Security) after the Resale Restriction Termination
Date (as defined in the legend set forth in paragraph (i) above) or
pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof
to exchange such Transfer Restricted Security for a Definitive
Security that does not bear the legend set forth in paragraph (i)
above and rescind any restriction on the transfer of such Security;
and
(B) in the case of any such Transfer Restricted Security
represented by a Global Security, such Transfer Restricted Security
shall not be required to bear the legend set forth in paragraph (i)
above, although it shall continue to be subject to the provisions of
Section 2.6(a) hereof.
(e) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Securities and Global Securities at the Registrar's or co-registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charges payable upon exchange or
transfer pursuant to Sections 4.6, 4.8 or 9.5 or pursuant to paragraph 5
of the Securities).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (A) any Definitive Security
selected for redemption in whole or in part pursuant to Article III,
except the unredeemed portion of any Definitive Security being redeemed in
part or (B) any Security for a period beginning (1) 15 Business
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26
Days before the mailing of a notice of an offer to repurchase or redeem
Securities and ending at the close of business on the day of such mailing
or (2) 15 Business Days before an interest payment date and ending on such
interest payment date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose name
a Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt and
shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(f) No Obligation of the Trustee. (i) The Trustee shall have no
responsibility or obligation to any owner of a beneficial interest in a Global
Security, a member of, or a participant in the Depositary or any other Person
with respect to the accuracy of the records of the Depositary or its nominee or
of any participant or member thereof, with respect to any ownership interest in
the Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depositary) of any notice
(including any notice of redemption) or the payment of any amount or delivery of
any Securities (or other security or property) under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders in respect of the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Security). The rights of
owners of beneficial interests in any Global Security shall be exercised only
through the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Depositary
participants, members or owners of beneficial interests in any Global Security);
provided that the Trustee shall have the right to require such certifications,
Opinions of Counsel or other documentation in respect of exchanges of beneficial
ownership interests in Global Securities for Definitive Securities as it may
reasonably request.
SECTION 2.7. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the Company
provides the Trustee with an Officer's Certificate stating that the
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27
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee. If required
by the Trustee or the Company, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from
any loss which any of them may suffer if a Security is replaced. The Company and
the Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section 2.8 as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.9. Temporary Securities. Until Definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities. After
the preparation of definitive Securities, the temporary Securities shall be
exchangeable for Definitive Securities upon surrender of the temporary
Securities at any office or agency maintained by the Company for that purpose
and such exchange shall be without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute,
and the Trustee shall authenticate and deliver in exchange therefor, one or more
Definitive Securities representing an equal principal amount of Securities.
Until so exchanged, the Holder of temporary Securities shall in all respects be
entitled to the same benefits under this Indenture as a holder of Definitive
Securities.
SECTION 2.10. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the
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28
Company unless the Company directs the Trustee to deliver canceled Securities to
the Company. The Company may not issue new Securities to replace Securities it
has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed (or upon the Company's failure to do so the Trustee shall fix
pursuant to a written instruction of Holders of at least a majority in principal
amount of the Securities) any such special record date and payment date to the
reasonable satisfaction of the Trustee which specified record date shall not be
less than 10 days prior to the payment date for such defaulted interest and
shall promptly mail or cause to be mailed to each Securityholder a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such defaulted interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when so deposited to be held in trust for the benefit of the Person
entitled to such defaulted interest as provided in this Section 2.11.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders,
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in
this Section 3.1 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and, if the Trustee so requests, an Opinion of Counsel to the effect
that such redemption will comply with the conditions herein. If fewer than all
the Securities are to be redeemed, the record date relating to such redemption
shall be selected by the Company and set forth in the related notice given to
the Trustee, which record date shall be not less than 15 days after the date of
such notice.
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29
SECTION 3.2. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(i) the redemption date;
(ii) the redemption price;
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(v) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to
be redeemed;
(vi) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(vii) the CUSIP number, if any, printed on the Securities being
redeemed; and
(viii) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on
the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section 3.3.
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30
SECTION 3.4. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date;
provided that if the redemption date is after a regular record date and on or
prior to the interest payment date, the accrued interest shall be payable to the
Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. By at least 10:00 a.m.
(New York City time) on the date on which any principal of or interest on any
Security is due and payable, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which are owned by the Company or a
Subsidiary and have been delivered by the Company or such Subsidiary to the
Trustee for cancellation.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in a principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
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31
SECTION 4.2. SEC Reports. Notwithstanding that the Company may not
be required to be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Company shall file with the Commission, and within 15
days after such reports are filed, provide the Trustee and the Holders (at their
addresses as set forth in the register of Securities) with the annual reports
and the information, documents and other reports which are otherwise required
pursuant to Section 13 and 15(d) of the Exchange Act. Such requirements may also
be satisfied, prior to July 20, 1997, with the filing with the Commission of a
registration statement under the Securities Act that contains the foregoing
information (including financial statements) and by providing copies thereof to
the Trustee and the Holders. In addition, following the registration of the
common stock of the Company pursuant to Section 12(b) or 12(g) of the Exchange
Act, the Company shall furnish to the Trustee and the Holders, promptly upon
their becoming available, copies of the Company's annual report to stockholders
and any other information provided by the Company to its public stockholders
generally.
SECTION 4.3. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any of its Subsidiaries to, Incur any Indebtedness;
provided, however, that the Company and any of its Subsidiaries may Incur
Indebtedness if on the date thereof the Consolidated Coverage Ratio would be
greater than 2.00:1.00.
(b) Notwithstanding Section 4.3(a), the Company and its Subsidiaries
may Incur the following Indebtedness: (i) Bank Indebtedness provided that the
aggregate principal amount of Indebtedness Incurred pursuant to this clause (i)
does not exceed an amount outstanding at any time equal to $80.0 million less
the aggregate amount of permanent reductions of commitments to extend credit
thereunder and repayments of principal thereof (without duplication of
repayments required as a result of such reductions of commitments); provided,
however, in the event that the AF Sale is not consummated on or prior to the
Issue Date, the application of the AF Sale Proceeds shall not be deemed a
permanent reduction of commitment thereunder; (ii) Indebtedness (A) of the
Company to any Wholly-Owned Subsidiary and (B) of any Subsidiary to the Company
or any Wholly-Owned Subsidiary; (iii) Indebtedness represented by the
Securities, any Indebtedness (other than the Indebtedness described in clauses
(i)-(ii) above) outstanding on the date hereof and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iii) or this
paragraph (b); (iv) Indebtedness represented by the Security Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause (i) above; (v)
Indebtedness under Currency Agreements and Interest Rate Agreements which are
entered into for bona fide hedging purposes of the Company or its Subsidiaries
(as determined in good faith by the Board of Directors or senior management of
the Company) and correspond in terms of notional amount, duration, currencies
and interest rates, as applicable, to Indebtedness of the Company or its
Subsidiaries Incurred without violation of the Indenture or to business
transactions of the Company or its Subsidiaries on customary terms entered into
in the ordinary course of business; and (vi) Indebtedness of the Company or any
of its Subsidiaries (which may comprise Bank Indebtedness) in an aggregate
principal amount at any time outstanding not in excess of $15.0 million.
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32
(c) Notwithstanding any other provision of this Section 4.3, the
Company shall not Incur any Indebtedness (i) pursuant to Section 4.3(b) if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations or (ii) pursuant to Section 4.3(a) or 4.3(b) if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness
or is expressly subordinated in right of payment to Senior Subordinated
Indebtedness.
(d) The Company shall not Incur any Secured Indebtedness which is
not Senior Indebtedness unless contemporaneously therewith effective provision
is made to secure the Securities equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
SECTION 4.4. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Subsidiary, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) except (A) dividends or distributions
payable in its Capital Stock (other than Disqualified Stock) and (B) dividends
or distributions payable to the Company or another Subsidiary (and, if such
Subsidiary is not a Wholly-Owned Subsidiary, to its other stockholders on a pro
rata basis), (ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company or any Subsidiary held by Persons other than the
Company or another Subsidiary, (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Obligations (other
than the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein referred to
as a "Restricted Payment"), if at the time the Company or such Subsidiary makes
such Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); or (2) the Company could not Incur at least an
additional $1.00 of Indebtedness pursuant to Section 4.3(a); or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution of the Board of Directors) or made subsequent to
the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from the Issue Date
to the end of the most recent fiscal quarter ending prior to the date of such
Restricted Payment as to which financial results are available (but in no event
more than 135 days prior to the date of such Restricted Payment) (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the issue or
sale of its Capital Stock (other than Disqualified Stock) or other cash
contributions to its capital subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company or an employee stock ownership
plan or other trust
<PAGE>
33
established by the Company or any of its Subsidiaries); (C) aggregate Net Cash
Proceeds from issue or sale of its Capital Stock to an employee stock ownership
plan or similar trust, provided, however, that if such plan or trust Incurs any
Indebtedness to or Guaranteed by the Company to finance the acquisition of such
Capital Stock, such aggregate amount shall be limited to any increase in the
Consolidated Net Worth of the Company resulting from principal repayments made
by such plan or trust with respect to Indebtedness Incurred by it to finance the
purchase of such Capital Stock; and (D) the amount by which Indebtedness of the
Company or its Subsidiaries is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date
of any Indebtedness of the Company or its Subsidiaries convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or other property, distributed by the Company or
any Subsidiary upon such conversion or exchange).
(b) The provisions of Section 4.4(a) shall not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries); provided, however, that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from clause Section 4.4(a)(3)(B);
(ii) any purchase or redemption of Subordinated Obligations of the Company made
by exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company; provided, however, that such purchase
or redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under Section 4.6; provided, however,
that such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments; (iv) dividends paid within 60 days after the date
of declaration if at such date of declaration such dividend would have complied
with this provision; provided, however, that such dividend shall be included in
the calculation of the amount of Restricted Payments; or (v) payment of
dividends or other distributions by the Company for the purposes set forth in
clauses (A) through (D) below; provided, however, that any such dividend or
distribution described in clauses (A) and (B) will be excluded in the
calculation of the amount of Restricted Payments and any such dividend or
distribution described in clauses (C) and (D) will be included in the
calculation of the amount of Restricted Payments: (A) in amounts equal to the
amounts required for Holdings, Armour and WHPF to pay franchise taxes and other
fees required to maintain its legal existence and provide for audit, accounting,
legal and other operating costs of up to $500,000 per fiscal year; (B) in
amounts equal to amounts required for Holdings, Armour and WHPF to pay Federal,
state and local income taxes to the extent such income taxes are attributable to
the income of the Company and its Subsidiaries; (C) in amounts equal to amounts
expended by the Company, Holdings or WHPF to repurchase Capital Stock of the
Company, Holdings or WHPF owned by employees (including former employees) of the
Company or its Subsidiaries or their assigns, estates and heirs; provided that
the aggregate amount paid, loaned or advanced pursuant to this clause (C) shall
not, in the aggregate, exceed the sum of $3.0 million plus any amounts
contributed by WHPF or Holdings to the Company as a result of
<PAGE>
34
resales of such repurchased shares of Capital Stock; and (D) distributions to
Holdings commencing in 2004 in amounts equal to the interest payments under the
Convertible Subordinated Promissory Note issued to Heinz Pet Products Company
and in 2006 up to $10.0 million to be applied toward the repayment of the
outstanding principal amount thereunder; provided, however, in the case of
clause (D), no Event of Default shall have occurred or be continuing at the time
of such payment or as a result thereof; or (vi) any repurchase of equity
interest deemed to occur upon exercise of stock options if such equity interests
represent a portion of the exercise price of such options.
SECTION 4.5. Limitation on Restrictions on Distributions from
Subsidiaries. The Company shall not, and shall not permit any of its
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Subsidiary to (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company; except: (A) any encumbrance or restriction pursuant to an agreement in
effect on the Issue Date, including those arising under the Senior Credit
Documents; (B) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Indebtedness Incurred by a Subsidiary
prior to the date on which such Subsidiary was acquired by the Company (other
than Indebtedness Incurred as consideration in, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Subsidiary was acquired by the
Company); (C) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement effecting a refinancing of Indebtedness Incurred
pursuant to an agreement referred to in clauses (A) or (B) or this clause (C) or
contained in any amendment, supplement or modification (including an amendment
and restatement) to an agreement referred to in clauses (A) or (B) or this
clause (C); provided, however, that the encumbrances and restrictions contained
in any such refinancing agreement or amendment taken as a whole are no less
favorable to the holders of the Securities in any material respect than
encumbrances and restrictions contained in such agreements; (D) in the case of
clause (iii), any encumbrance or restriction (1) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease, license, or similar contract, (2) by virtue of any transfer
of, agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Subsidiary not otherwise prohibited by
this Indenture, or (3) contained in security agreements securing Indebtedness of
a Subsidiary to the extent such encumbrance or restrictions restrict the
transfer of the property subject to such security agreements; (E) any such
restriction imposed by applicable law; (F) any restriction with respect to a
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Subsidiary pending the closing of such sale or disposition; and (G) purchase
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired.
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35
SECTION 4.6. Limitation on Sales of Assets. (a) The Company shall
not, and shall not permit any Subsidiary to, make any Asset Disposition unless
(i) the Company or such Subsidiary receives consideration (including by way of
relief from, or by any other Person assuming sole responsibility for, any
liabilities, contingent or otherwise) at the time of such Asset Disposition at
least equal to the fair market value, of the shares and assets subject to such
Asset Disposition, (ii) at least 85% of the consideration thereof received by
the Company or such Subsidiary is in the form of cash and (iii) an amount equal
to 100% of the Net Available Cash from such Asset Disposition is applied by the
Company (or such Subsidiary, as the case may be) (A) first, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness or
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary), to
prepay, repay or purchase Senior Indebtedness or such Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within one-year
after the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the Company or
such Subsidiary elects, to reinvest in Additional Assets (including by means of
an Investment in Additional Assets by a Subsidiary with Net Available Cash
received by the Company or another Subsidiary) within one year from the later of
the date of such Asset Disposition or the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to purchase
Securities pursuant and subject to the conditions of this Indenture to the
Holders at a purchase price of 100% of the principal amount thereof plus accrued
and unpaid interest to the purchase date, and (D) fourth, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A), (B) and (C), to (x) acquire Additional Assets (other than Indebtedness and
Capital Stock) or (y) prepay, repay or purchase Indebtedness of the Company
(other than Indebtedness owed to an Affiliate of the Company and other than
Disqualified Stock of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each case
described in this clause (D) within one year from the receipt of such Net
Available Cash or, if the Company has made an Offer pursuant to clause (C), six
months from the date such Offer is consummated; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A), (C) or (D) above, the Company or such Subsidiary shall retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased; provided, further, however that the foregoing proviso will
not apply to the AF Sale Proceeds in the event the AF Sale is not consummated on
or prior to the Issue Date. Notwithstanding the foregoing provisions, the
Company and its Subsidiaries shall not be required to apply any Net Available
Cash in accordance herewith except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this Section 4.6 at any time exceed $1.0 million. The Company shall not be
required to make an offer for Securities pursuant to this covenant if the Net
Available Cash available therefor (after application of the proceeds as provided
in clauses (A) and (B)) is less than $10.0 million for any particular Asset
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
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36
For the purposes of this Section 4.6, the following will be deemed
to be cash: (x) the assumption of Indebtedness (other than Disqualified Stock)
of the Company or any Subsidiary and the release of the Company or such
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Subsidiary of the
Company from the transferee that are promptly converted by the Company or such
Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.6(a)(iii)(C), the Company will be required
to purchase Securities tendered pursuant to an offer by the Company for the
Securities (the "Offer") at a purchase price of 100% of their principal amount
plus accrued interest to the purchase date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in Section
4.6(c). If the aggregate purchase price of the Securities tendered pursuant to
the Offer is less than the Net Available Cash allotted to the purchase of the
Securities, the Company will apply the remaining Net Available Cash in
accordance with Section 4.6(a)(iii)(D).
(c) (i) Promptly, and in any event within 10 days after the Company
is required to make an Offer, the Company shall deliver to the Trustee and send,
by first-class mail to each Holder, a written notice stating that the Holder may
elect to have his or her Securities purchased by the Company either in whole or
in part (subject to prorating as hereinafter described in the event the Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Purchase
Date").
(ii) Not later than the date upon which such written notice of
an Offer is delivered to the Trustee and the Holders, the Company shall deliver
to the Trustee an Officers' Certificate setting forth (A) the amount of the
Offer (the "Offer Amount"), (B) the allocation of the Net Available Cash from
the Asset Dispositions as a result of which such Offer is being made and (C) the
compliance of such allocation with the provisions of Section 4.6(a). Upon the
expiration of the period (the "Offer Period") for which the Offer remains open,
the Company shall deliver to the Trustee for cancellation the Securities or
portions thereof which have been properly tendered to and are to be accepted by
the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to
each tendering Holder in the amount of the purchase price of the Securities
tendered by such Holder to the extent such funds are available to the Trustee.
(iii) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice prior to the expiration of
the Offer Period. Each Holder will be entitled to withdraw its election if the
Trustee or the Company receives, not later than one Business Day prior to the
expiration of the Offer Period, a telegram, telex, facsimile transmission or
letter from such Holder setting forth the name of such Holder, the principal
amount of the Security or Securities which were delivered for purchase by such
Holder and a statement that such Holder is withdrawing its election to have such
Security or Securities
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37
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(d) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.6, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.7. Limitation on Affiliate Transactions. (a) The Company
will not, and will not permit any Subsidiary to, directly or indirectly, enter
into or conduct any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of the
Company (an "Affiliate Transaction") unless: (i) the terms of such Affiliate
Transaction are no less favorable to the Company or such Subsidiary, as the case
may be, than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate; (ii) in the
event such Affiliate Transaction involves an aggregate amount in excess of $1.0
million, the terms of such transaction have been approved by a majority of the
members of the Board of Directors of the Company and by a majority of the
disinterested members of such Board, if any (and such majority or majorities, as
the case may be, determines that such Affiliate Transaction satisfies the
criteria in (i) above); and (iii) in the event such Affiliate Transaction
involves an aggregate amount in excess of $5.0 million, the Company has received
a written opinion from an independent investment banking firm of nationally
recognized standing that such Affiliate Transaction is fair to the Company or
such Subsidiary, as the case may be, from a financial point of view.
(b) The provisions of Section 4.7(a) will not prohibit (i) any
Restricted Payment permitted to be made pursuant to Section 4.4 (and in the case
of Permitted Investments, only those described in clauses (v), (vi), (ix) and
(x) of the definition of Permitted Investments), (ii) the performance of the
Company's or Subsidiary's obligations under any employment contract, collective
bargaining agreement, employee benefit plan, related trust agreement or any
other similar arrangement heretofore or hereafter entered into in the ordinary
course of business, (iii) payment of compensation to, and indemnity provided on
behalf of, employees, officers, directors or consultants (excluding the
Management Services Agreements) in the ordinary course of business, (iv)
maintenance in the ordinary course of business of benefit programs or
arrangements for employees, officers or directors, including vacation plans,
health and life insurance plans, deferred compensation plans, and retirement or
savings plans and similar plans, (v) any transaction between the Company and a
Wholly-Owned Subsidiary or between Wholly-Owned Subsidiaries or (vi) the payment
of certain fees under the Management Services Agreements as in effect on the
Issue Date.
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SECTION 4.8. Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder shall have the right to require the Company to
repurchase all or any part of such Holder's Securities at a purchase price in
cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), such repurchase to be made in accordance with Section
4.8(b).
(b) Within 30 days following any Change of Control, unless the
Company has mailed a redemption notice with respect to all the outstanding
Securities in connection with such Change of Control, the Company shall mail a
notice to each Holder of record with a copy to the Trustee stating: (i) that a
Change of Control has occurred and that such Holder has the right to require the
Company to purchase such Holder's Securities at a purchase price in cash equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of Holders of record on a
record date to receive interest on the relevant interest payment date); (ii) the
circumstances and relevant facts and financial information concerning such
Change of Control; (iii) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and (iv) the
procedures determined by the Company, consistent with this Indenture, that a
Holder must follow in order to have its Securities purchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Each Holder will be entitled to withdraw its
election if the Company receives, not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter from such
Holder setting forth the name of such Holder, the principal amount of the
Security or Securities which were delivered for purchase by such Holder and a
statement that such Holder is withdrawing his election to have such Security or
Securities purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section 4.8 shall be delivered to the Trustee for cancellation, and
the Company shall pay the purchase price plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.8. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.8, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.9. Limitation on Sale of Subsidiary Capital Stock. The
Company (i) will not, and will not permit any Subsidiary to, transfer, convey,
sell, lease or otherwise dispose of any Capital Stock of any Subsidiary to any
Person (other than to the Company or a Wholly-Owned Subsidiary) and (ii) will
not permit any Subsidiary to issue any of its Capital Stock (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
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39
shares) to any Person other than to the Company or a Wholly-Owned Subsidiary;
provided, however, that this Section 4.9 shall not prohibit such conveyance,
sale, lease or other disposition of all the Capital Stock of a Subsidiary if the
net cash proceeds from such transfer, conveyance, sale, lease, other disposition
or issuance are applied in accordance with Section 4.6.
SECTION 4.10. Future Security Guarantors. The Company will cause
each Subsidiary which Incurs Indebtedness or which is a guarantor of
Indebtedness Incurred pursuant to Section 4.3(b)(i) to execute and deliver to
the Trustee a Security Guarantee pursuant to which such Subsidiary will
Guarantee, jointly and severally, to the Holders and the Trustee, subject to
subordination provisions in Article X, the full and prompt payment of the
Securities in the Indenture. Each Security Guarantee will be limited in amount
to an amount not to exceed the maximum amount that can be Guaranteed by that
Subsidiary without rendering the Security Guarantee, as it relates to such
Subsidiary, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
SECTION 4.11. Limitation on Lines of Business. The Company will not,
and will not permit any Subsidiary to, engage in any business, other than the
pet food business and such other business activities which are incidental or
related thereto and, in the event the AF Sale is not consummated simultaneously
with the Transaction, the animal feed business of Hubbard Milling.
SECTION 4.12. Maintenance of Office or Agency for Registration of
Transfer, Exchange and Payment of Securities. So long as any of the Securities
shall remain outstanding, the Company will maintain an office or agency in the
Borough of Manhattan, the City of New York, State of New York, where the
Securities may be surrendered for exchange or registration of transfer as in
this Indenture provided, and where notices and demands to or upon the Company in
respect to the Securities may be served, and where the Securities may be
presented or surrendered for payment. The Company may also from time to time
designate one or more other offices or agencies where Securities may be
presented or surrendered for any and all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, the City of New York, State of
New York for such purposes. The Company will give to the Trustee prompt written
notice of the location of any such office or agency and of any change of
location thereof. The Company initially appoints the Trustee c/o Harris Trust
Company of New York, 77 Water Street, New York, New York 10005 for each of said
purposes. In case the Company shall fail to maintain any such office or agency
or shall fail to give such notice of the location or of any change in the
location thereof, such surrenders, presentations and demands may be made and
notices may be served at the principal office of the Trustee in the City of
Wilmington, State of Delaware, and the Company hereby appoints the Trustee its
agent to receive at the aforesaid office all such surrenders, presentations,
notices and demands. The Trustee will give the Company prompt notice of any
change in location of the Trustee's principal office.
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SECTION 4.13. Appointment to Fill a Vacancy in the Office of
Trustee. The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 7.8, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 4.14. Provision as to Paying Agent. (a) If the Company shall
appoint a paying agent other than the Trustee, it will cause such Paying Agent
to execute and deliver to the Trustee an instrument in which such agent shall
undertake, subject to the provisions of this Section 4.14,
(i) that it will hold all sums held by it as such agent for
the payment of the principal of, premium, if any, or interest on the
Securities whether such sums have been paid to it by the Company (or by
any other obligor on the Securities) in trust for the benefit of the
holders of the Securities and will notify the Trustee of the receipt of
sums to be so held,
(ii) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Securities) to make any
payment of the principal of, premium, if any, or interest on the
Securities when the same shall be due and payable,
(iii) that it will at any time during the continuance of any
Event of Default specified in Section 6.1(i) or 6.1(ii), upon the written
request of the Trustee, deliver to the Trustee all sums so held in trust
by it, and
(iv) acknowledge, accept and agree to comply in all aspects
with the provisions of this Indenture relating to the duties, rights and
liabilities of such Paying Agent, including, without limitation, the
provision of Article X hereof.
(b) If the Company shall not act as its own Paying Agent, it will,
by 10:00 a.m. on the Business Day prior to each due date of the principal of or
premium, if any, or interest on any Securities, deposit with such Paying Agent a
sum in same day funds sufficient to pay the principal of, premium, if any, or
interest so becoming due, such sum to be held in trust for the benefit of the
holders of Securities entitled to such principal of or premium, if any, or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its failure so to act.
(c) If the Company shall act as its own Paying Agent, it will, on or
before each due date of the principal of or premium, if any, or interest on the
Securities, set aside, segregate and hold in trust for the benefit of the
persons entitled thereto, a sum sufficient to pay such principal or premium or
interest so becoming due and will notify the Trustee of any failure to take such
action.
(d) Anything in this Section 4.14 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in
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41
trust by it, or any Paying Agent hereunder, as required by this Section 4.14,
such sums to be held by the Trustee upon the trusts herein contained.
(e) Anything in this Section 4.14 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 4.14 is subject
to the provisions of Sections 8.4 and 8.6.
SECTION 4.15. Maintenance of Corporate Existence. So long as any of
the Securities shall remain outstanding, the Company will at all times (except
as otherwise provided or permitted in this Section 4.15 or elsewhere in this
Indenture) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and franchises and the corporate
existence and franchises of each Subsidiary; provided that nothing herein shall
require the Company to continue the corporate existence or franchises of any
Subsidiary if in the judgment of the Company it shall be necessary, advisable or
in the interest of the Company to discontinue the same.
SECTION 4.16. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default or Event of Default and whether or not the signers know
of any Default or Event of Default that occurred during such period. If they do,
the certificate shall describe the Default or Event of Default, its status and
what action the Company is taking or proposes to take with respect thereto.
The Company also shall comply with TIA ss. 314(a)(4).
SECTION 4.17. Further Instruments and Acts. The Company will execute
and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture or as may be reasonably requested by the Trustee.
ARTICLE V
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) expressly assumes
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture;
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(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary of the Successor Company as a result of such
transaction as having been Incurred by the Successor Company or such
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur at least an additional $1.00 of
Indebtedness pursuant to Section 4.3(a);
(iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor, the Company, in the case of a lease of all or substantially all its
assets shall not be released from the obligation to pay the principal of and
interest on the Securities.
Notwithstanding Section 5.1(ii) and 5.1(iii), (i) any Subsidiary of
the Company may consolidate with, merge into or transfer all or part of its
properties and assets to the Company or another wholly-owned Subsidiary of the
Company; and (ii) the Company may merge with an Affiliate incorporated solely
for the purpose of reincorporating the Company in another jurisdiction to
realize tax or other benefits.
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
(i) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article X, and such default continues for a
period of 30 days;
(ii) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon required repurchase, upon declaration or
otherwise, whether or not such payment shall be prohibited by Article X;
(iii) the Company fails to comply with Section 5.1;
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43
(iv) the Company fails to comply with Section 4.2, 4.3, 4.4,
4.5, 4.6, 4.7, 4.8, 4.9, 4.10 or 4.11 (in each case other than a failure
to repurchase Securities when required pursuant to Section 4.6 or 4.8
which failure shall constitute an Event of Default under Section 6.1(ii))
and such failure continues for 30 days after the notice specified below;
(v) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other than those referred to in (i),
(ii), (iii) or (iv) above) and such failure continues for 60 days after
the notice specified below;
(vi) Indebtedness of the Company or any Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
unpaid or accelerated Indebtedness exceeds $5.0 million or its foreign
currency equivalent at the time and such default shall not have been cured
or such acceleration rescinded within a 10-day period;
(vii) the Company or a Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order,
decree or relief remains unstayed and in effect for 60 days;
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44
(ix) any judgment or decree for the payment of money in excess
of $5.0 million or its foreign currency equivalent at the time (to the
extent not covered by insurance) is entered against the Company or any
Significant Subsidiary which is final and non-appealable and is not
discharged and either (A) an enforcement proceeding has been commenced by
any creditor upon such judgment or decree and is not promptly stayed or
(B) there is a period of 60 days following the entry of such judgment or
decree during which such judgment or decree is not discharged or the
execution thereof stayed; or
(x) the failure of any Security Guarantee to be in full force
and effect (except as contemplated by the terms thereof) or the denial or
disaffirmation by any Security Guarantor of its obligations hereunder or
any Security Guarantee if such default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
Notwithstanding the foregoing, a Default under Section 6.1(iv) or
Section 6.1(v) will not constitute an Event of Default until the Trustee or the
Holders of at least 25% in principal amount of the outstanding Securities notify
the Company of the Default and the Company does not cure such Default within the
time specified in said clause (iv) or (v) after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company shall deliver to the Trustee: (i) within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (vi) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (iv),
(v) or (ix), its status and what action the Company is taking or proposes to
take with respect thereto; and (ii) within 120 days after the end of each fiscal
year, written notice in the form of an Officer's Certificate indicating whether
the Officers signing such Officer's Certificate knew or were aware of any
Default that occurred during such previous fiscal year.
SECTION 6.2. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.1(vii) or (viii) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in outstanding principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
and unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(vii) or (viii) with respect to
the
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45
Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holders. The Holders of a majority in principal amount of the Securities by
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of acceleration. No such rescission
shall affect any subsequent Default or Event of Default or impair any right
consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
outstanding principal amount of the Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except (i) a
Default or Event of Default in the payment of the principal of or interest on a
Security or (ii) a Default or Event of Default in respect of a provision that
under Section 9.2 cannot be amended without the consent of each Holder affected.
When a Default or Event of Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any consequent right.
SECTION 6.5. Control by Majority. The Holders of a majority in
outstanding principal amount of the Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Holders (it being understood that, subject to Section 7.1, the
Trustee shall have no duty to ascertain whether or not such actions or
forebearances are unduly prejudicial to such Holders) or would involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.6. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium, (if any) or interests when due, a Holder
may not pursue any remedy with respect to this Indenture or the Securities
unless:
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46
(i) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(ii) the Holders of at least 25% in outstanding principal
amount of the Securities make a written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or indemnity;
and
(v) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction that, in the opinion of the
Trustee are inconsistent with the request during such 60-day period.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(i) or (ii) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Holders allowed in
any judicial proceedings relative to the Company, its Subsidiaries or their
respective creditors or properties and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel, and any other amounts due the Trustee under
Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
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47
FIRST: Costs and expenses of collection, including all sums paid or
advanced by the Trustee hereunder and the compensation, expenses and
disbursements of the Trustee, its agents, and counsel and all other
amounts due to the Trustee under Section 7.7;
SECOND: to holders of Senior Indebtedness to the extent required by
Article X;
THIRD: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section 6.10. At least 15 days before such record
date, the Company shall mail to each Holder and the Trustee a notice that states
the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in outstanding principal amount of the Securities.
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and (ii) in the absence
of bad faith on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this
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48
Indenture. However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that: (i) this paragraph does not limit the effect of Section 7.1(b);
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Trust Officer unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to Sections 7.1(a), 7.1(b) and 7.1(c).
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.1 and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed in
good faith.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
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49
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) Prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, Officer's Certificate, or other certificated statement, instrument,
opinion, report, notice, request, consent, order, approval, appraisal, bond,
debenture, note, coupon, security, or other paper or document unless requested
in writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Securities then outstanding; provided that, if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such examination shall be paid by
the Company or, if advanced by the Trustee, shall be repaid by the Company upon
demand.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its power and duties hereunder.
(h) The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions, or agreements on the
part of the Company, except as otherwise set forth herein, but the Trustee may
require of the Company full information and advice as to the performance of the
covenants, conditions and agreements contained herein and shall be entitled in
connection herewith to examine the books, records and premises of the Company.
(i) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or willful default.
(j) Except for (i) a default under Sections 6.1(i) or (ii) hereof,
or (ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have notice of any default or event unless specifically notified in
writing of such event by the Company or the Holders of not less than 25% in
aggregate principal amount of the Securities Outstanding; as used herein, the
term "actual knowledge" means the actual fact or statement of knowing, without
any duty to make any investigation with regard thereto.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee.
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Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, it shall not be responsible for the use
or application of any money received by any Paying Agent (other than itself as
Paying Agent), and it shall not be responsible for any statement of the Company
in this Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.5. Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if a Trust Officer has actual knowledge thereof,
the Trustee shall mail to each Holder notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of principal of, or interest on, any Security (including
payments pursuant to the optional redemption or required repurchase provisions
of such Security, if any), the Trustee may withhold the notice if and so long as
its board of directors, the Executive Committee of its board of directors or a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
practicable after each June 15 beginning with the June 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Holder a brief report dated as of such June 15 that complies
with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b). The
Trustee shall also transmit by mail all reports required by TIA ss. 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed by the Company with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time, and the Trustee shall be entitled to,
compensation for its services as set forth in a separate fee agreement between
the Trustee and the Company. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, costs of preparing and
reviewing reports, certificates and other documents, costs of preparation and
mailing of notices to Holders and reasonable costs of counsel retained by the
Trustee in connection with the delivery of an Opinion of Counsel or otherwise,
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Company shall indemnify
and hold harmless the Trustee against any and all loss, liability or expense
(including reasonable attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder,
including the costs
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51
and expenses of enforcing this Indenture (including this Section 7.7) and of
defending itself against any claims (whether asserted by any Holder, the Company
or otherwise). The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee may have separate counsel and the Company shall
pay the fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct or negligence.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section 7.7 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.1(vii) or (viii) with respect
to the Company, the expenses are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in outstanding
principal amount of the Securities may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the Trustee
is adjudged bankrupt or insolvent; (iii) a receiver or other public officer
takes charge of the Trustee or its property; or (iv) the Trustee otherwise
becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the
Holders of a majority in outstanding principal amount of the Securities and such
Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy
exists in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in outstanding principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
If at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and if at that time any of the Securities shall not have been
authenticated, any successor to the Trustee may authenticate such Securities
either in the name of any predecessor hereunder or in the name of the successor
to the Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture provided that
the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $400 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.7) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III hereof
and the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities (other than
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53
Securities replaced pursuant to Section 2.7), including interest thereon to
maturity or such redemption date, and if in either case the Company pays all
other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.1(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
(accompanied by an Officers' Certificate and an Opinion of Counsel stating that
all conditions precedent specified herein relating to the satisfaction and
discharge of this Indenture have been complied with) and at the cost and expense
of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture and
all obligations of the Subsidiary Guarantors under the Subsidiary Guarantee and
this Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.2 through 4.15, 5.1(iii) and 5.1(iv) and the operation of Sections
6.1(iv), 6.1(v), 6.1(vi), 6.1(vii) (but only with respect to a Subsidiary),
6.1(viii) (but only with respect to a Subsidiary) and 6.1(ix) ("covenant
defeasance option"); provided, however, no deposit under this Article VIII shall
be effective to terminate the obligations of the Company under the Securities or
this Indenture prior to 123 days following any such deposit. The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections 6.1(iv),
6.1(vi), 6.1(vii) (but only with respect to a Subsidiary), 6.1(viii) (but only
with respect to a Subsidiary), 6.1(ix) and 6.1(x) or because of the failure of
the Company to comply with Section 5.1(iii) and Section 5.1(iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding the provisions of Sections 8.1(a) and (b), the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5
and 8.6 shall survive until the Securities have been paid in full. Thereafter,
the Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
SECTION 8.2. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(i) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of and
interest on the Securities to maturity or redemption, as the case may be;
(ii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment of the deposited U.S. Government Obligations plus any
deposited money without reinvestment will provide
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54
cash at such times and in such amounts as will be sufficient to pay
principal and interest when due on all the Securities to maturity or
redemption, as the case may be;
(iii) (A) no Event of Default (excluding a Default or Event of
Default arising from breach of Section 4.3 as a result of the borrowing of
funds to be applied to such deposit) shall have occurred or be continuing
on the date of such deposit and (B) 123 days pass after the deposit is
made and during the 123-day period no Default specified in Section
6.1(vii) or 6.1(viii) with respect to the Company occurs which is
continuing at the end of such period;
(iv) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article X;
(v) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;
(vi) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (A)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (B) since the date hereof there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had not
occurred;
(vii) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred;
(viii) The Holders shall have a perfected security interest
under applicable law in the cash or U.S. Government Obligations deposited
pursuant to Section 8.2(i) above;
(ix) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably satisfactory to the
Trustee, to the effect that, after the passage of 123 days following the
deposit, the trust funds will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights
generally;
(x) such defeasance shall not cause the Trustee to have a
conflicting interest with respect to any securities of the Company; and
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55
(xi) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities and this
Indenture as contemplated by this Article VIII have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article X.
SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them upon payment of all the obligations under this
Indenture.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal of or interest on the Securities that remains
unclaimed for two years, and, thereafter, Holders entitled to the money must
look to the Company for payment as general creditors.
SECTION 8.5. Indemnity for U.S. Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the obligations of the Company and the
Subsidiary Guarantors under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article VIII
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article VIII;
provided, however, that, if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
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56
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Holder:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article V;
(iii) to provide for uncertificated Securities in addition to
or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(iv) to make any change in Article X that would limit or
terminate the benefits available to any holder of Senior Indebtedness (or
Representatives therefor) under Article X;
(v) to add Guarantees with respect to the Securities or to
secure the Securities;
(vi) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon the
Company;
(vii) to comply with any requirement of the SEC in connection
with qualifying this Indenture under the TIA;
(viii) to make any change that does not adversely affect the
rights of any Holder; or
(ix) to provide for the issuance of the Exchange Notes, which
will have terms substantially identical in all material respects to the
Initial Notes (except that the transfer restrictions contained in the
Initial Notes will be modified or eliminated, as appropriate), and which
will be treated, together with any outstanding Initial Notes, as a single
issue of securities.
An amendment under this Section 9.1 may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness or Guarantor Senior Indebtedness then outstanding unless the
holders of such Senior Indebtedness or Guarantor Senior Indebtedness (or any
group or representative thereof authorized to give a consent) consent to such
change.
After an amendment under this Section 9.1 becomes effective, the
Company shall mail to each Holder a notice briefly describing such amendment.
The failure to give
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such notice to all Holders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section 9.1.
SECTION 9.2. With Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Holder but with
the written consent of the Holders of at least a majority in principal amount of
the Securities. However, without the consent of each Holder affected, an
amendment may not:
(i) reduce the amount of Securities whose Holders must consent
to an amendment;
(ii) reduce the rate of or extend the time for payment of
interest on any Security;
(iii) reduce the principal of or extend the Stated Maturity of
any Security;
(iv) reduce the premium payable upon the redemption or
repurchase of any Security or change the time at which any Security may or
shall be redeemed or repurchased in accordance with this Indenture;
(v) make any Security payable in money other than that stated
in the Security;
(vi) modify or affect in any manner adverse to the Holders the
terms and conditions of the obligation of the Company for the due and
punctual payment of the principal of or interest on Securities; or
(vii) make any change in Section 6.4 or 6.7 or the second
sentence of this Section 9.2.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.2 may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section 9.2 becomes effective, the
Company shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.2.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
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SECTION 9.4. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Holder.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall become valid or effective more than 120
days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
ARTICLE X
Subordination
SECTION 10.1. Agreement To Subordinate. The Company and each
Subsidiary Guarantor agrees, and each Holder by accepting a Security and the
related Subsidiary Guarantee agrees, that the Indebtedness evidenced by the
Securities and the related Subsidiary Guarantee is subordinated in right of
payment, to the extent and in the manner provided in this Article X, to the
prior payment in full in cash or Cash Equivalents when due of (i) all Senior
Indebtedness in the case of the Securities and (ii) all Guarantor Senior
Indebtedness of such Subsidiary Guarantor in the case of its obligations under
the Subsidiary
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59
Guarantee and that the subordination is for the benefit of and enforceable by
the holders of Senior Indebtedness and such Guarantor Senior Indebtedness. The
Securities shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company, the related Subsidiary Guarantee of
each Subsidiary Guarantor shall in all respects rank pari passu with all
Guarantor Senior Subordinated Indebtedness of such Subsidiary Guarantor and only
Indebtedness of the Company which is Senior Indebtedness will rank senior to the
Securities and only Indebtedness of such Subsidiary Guarantor which is Guarantor
Senior Indebtedness of such Subsidiary Guarantor shall rank senior to the
obligations of such Subsidiary Guarantor under the Subsidiary Guarantee in
accordance with the provisions set forth herein. For purposes of these
subordination provisions, the Indebtedness evidenced by the Securities is deemed
to include the liquidated damages payable pursuant to the provisions set forth
in the Securities. All provisions of this Article X shall be subject to Section
10.12.
SECTION 10.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of the Company or any Subsidiary Guarantor to
creditors upon a total or partial liquidation or a total or partial dissolution
of the Company or such Subsidiary Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or such
Subsidiary Guarantor or their respective properties:
(i) holders of Senior Indebtedness in the case of the Company
or holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor
in the case of such Subsidiary Guarantor shall be entitled to receive
payment in full in cash or Cash Equivalents of all Senior Indebtedness in
the case of the Company or all such Guarantor Senior Indebtedness in the
case of such Subsidiary Guarantor before the Holders shall be entitled to
receive any payment of principal of or interest on or other amounts with
respect to the Securities from the Company or such Subsidiary Guarantor,
whether directly by the Company or pursuant to the Subsidiary Guarantee;
and
(ii) until the Senior Indebtedness in the case of the Company
or such Guarantor Senior Indebtedness in the case of such Subsidiary
Guarantor is paid in full in cash or Cash Equivalents, any payment or
distribution to which Securityholders would be entitled but for this
Article X shall be made to holders of Senior Indebtedness in the case of
payments or distributions made by the Company or the holders of such
Guarantor Senior Indebtedness in the case of payments or distributions
made by such Subsidiary Guarantor, in each case as their respective
interests may appear.
SECTION 10.3. Default on Senior Indebtedness or Guarantor Senior
Indebtedness. Neither the Company nor any Subsidiary Guarantor may pay the
principal of, premium (if any) or interest on or other amounts with respect to
the Securities or make any deposit pursuant to Section 8.1 or repurchase, redeem
or otherwise retire any Securities, whether directly by the Company or by such
Subsidiary Guarantor under the Subsidiary Guarantee (collectively, "pay the
Securities") if (i) any Senior Indebtedness in the case of the Company or any
Guarantor Senior Indebtedness of such Subsidiary Guarantor in the case of such
Subsidiary Guarantor is not paid when due or (ii) any other default on Senior
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Indebtedness in the case of the Company or such Guarantor Senior Indebtedness in
the case of such Subsidiary Guarantee occurs and the maturity of such Senior
Indebtedness in the case of the Company or such Guarantor Senior Indebtedness in
the case of such Subsidiary Guarantor is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded in writing or (y) such Senior Indebtedness
in the case of the Company or such Guarantor Senior Indebtedness in the case of
such Subsidiary Guarantor has been paid in full in cash or Cash Equivalents;
provided, however, that the Company or such Subsidiary Guarantor may pay the
Securities, whether directly or pursuant to the Subsidiary Guarantee, without
regard to the foregoing if the Company or such Subsidiary Guarantor and the
Trustee receive written notice approving such payment from the Representative of
the Designated Senior Indebtedness in the case of the Company or such Guarantor
Senior Indebtedness in the case of such Subsidiary Guarantor with respect to
which either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the preceding
sentence) with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, neither the Company (in the case of
Designated Senior Indebtedness of the Company) nor any Subsidiary Guarantor (in
the case of Designated Senior Indebtedness of such Subsidiary Guarantor) may pay
the Securities, either directly or pursuant to the Subsidiary Guarantee, for a
period (a "Payment Blockage Period") commencing upon the receipt by the Company
and the Trustee (with a copy to such Subsidiary Guarantor) of written notice (a
"Blockage Notice") of such default from the Representative of the holders of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Company or such Subsidiary Guarantor from the Person or Persons who gave such
Blockage Notice, (ii) because the default giving rise to such Blockage Notice is
no longer continuing or (iii) by repayment in full in cash or Cash Equivalents
of such Designated Senior Indebtedness). Notwithstanding the provisions of the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.3), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Designated Senior Indebtedness, the Company or such
Subsidiary Guarantor may resume payments on the Securities, either directly or
pursuant to the Subsidiary Guarantee, after such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period; provided, however, that if any Blockage Notice
within such 360-day period is given by or on behalf of any holders of Designated
Senior Indebtedness (other than the Bank Indebtedness), the Representative of
the Bank Indebtedness may give another Blockage Notice within such period;
provided further, however, that in no event may the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360 consecutive day period (unless the Designated Senior
Indebtedness in respect of which such default exists has been declared due and
payable in its entirety, in which case no payment may be made on the Securities
until such acceleration has been rescinded or annulled.
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SECTION 10.4. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company, the
Subsidiary Guarantors or the Trustee shall promptly notify the holders of the
Designated Senior Indebtedness and their Representatives of the acceleration. If
any Designated Senior Indebtedness is outstanding, neither the Company (in the
case of any Designated Senior Indebtedness of the Company) nor any Subsidiary
Guarantor (in the case of any Designated Senior Indebtedness of such Subsidiary
Guarantor) may pay the Securities, either directly or pursuant to the Subsidiary
Guarantee, until five Business days after the Representative of such Designated
Senior Indebtedness receives notice of such acceleration and, thereafter, the
Company (in the case of any Designated Senior Indebtedness of the Company) or
such Subsidiary Guarantor (in the case of any Designated Senior Indebtedness of
such Subsidiary Guarantor) may pay the Securities, either directly or pursuant
to the Subsidiary Guarantee, only if this Article X otherwise permits payments
at that time.
SECTION 10.5. When Distribution Must Be Paid Over. If a distribution
is made to the Trustee or the Securityholders that because of this Article X
should not have been made to them or which the Trustee or the Securityholders
are otherwise not entitled to retain under the provisions of this Article X, the
Trustee or the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness and Guarantor Senior Indebtedness and
promptly pay it over to them as their respective interests may appear.
SECTION 10.6. Subrogation. After all Senior Indebtedness and
Guarantor Senior Indebtedness is paid in full in cash or Cash Equivalents and
all commitments in respect of the Senior Indebtedness have expired or terminated
and until the Securities are paid in full, Securityholders shall be subrogated
(without any duty on the part of the holders of Senior Indebtedness to warrant,
create, effectuate, preserve or protect such subrogation) to the rights of
holders of Senior Indebtedness and Guarantor Senior Indebtedness to receive
distributions applicable to Senior Indebtedness and Guarantor Senior
Indebtedness. A distribution made under this Article X to holders of Senior
Indebtedness or Guarantor Senior Indebtedness which otherwise would have been
made to Securityholders is not, as between the Company and Securityholders, a
payment by the Company of Senior Indebtedness or, as between a Subsidiary
Guarantor and Securityholders, a payment by such Subsidiary Guarantor of
Guarantor Senior Indebtedness.
SECTION 10.7. Relative Rights. This Article X defines the relative
rights of Securityholders and holders of Senior Indebtedness and Guarantor
Senior Indebtedness. Nothing in this Indenture shall:
(i) impair, as between the Company or the Subsidiary
Guarantors, as the case may be, and Securityholders, the obligation of the
Company or the Subsidiary Guarantors, as the case may be, which is
absolute and unconditional, to pay principal of and interest on the
Securities in accordance with their terms; or
(ii) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness and
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62
Guarantor Senior Indebtedness to receive distributions otherwise payable
to Securityholders.
SECTION 10.8. Subordination May Not Be Impaired by Company or the
Subsidiary Guarantors. No right of any holder of Senior Indebtedness or
Guarantor Senior Indebtedness to enforce the subordination of the Indebtedness
evidenced by the Securities or the related Subsidiary Guarantee shall be
impaired by any act or failure to act by the Company or any Subsidiary Guarantor
or by failure of any of them to comply with this Indenture or by any act or
failure to act on the part of any such holder or any other holder of Senior
Indebtedness, regardless of any knowledge thereof which any such holder or any
other holder of Senior Indebtedness may have or otherwise be charged with.
SECTION 10.9. Rights of Trustee and Paying Agent. The Company shall
give prompt written notice to the Trustee of any fact known to the Company that
would prohibit the making of any payment to or by the Trustee in respect of the
Securities, but failure to give such notice shall not affect the subordination
of the Securities to the Senior Indebtedness provided in this Article X and
shall not result in any default or event of default under this Indenture or the
Securities. Notwithstanding Section 10.3, the Trustee or Paying Agent may
continue to pay the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of any such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that payments
may not be made under this Article X. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness or Guarantor Senior Indebtedness may give the notice; provided,
however, that, if an issue of Senior Indebtedness or Guarantor Senior
Indebtedness has a Representative, only the Representative may give the notice.
Nothing in this Section 10.9 is intended to or shall relieve any Securityholder
from the obligations imposed under this Article X with respect to monies or
other distributions received in violation of the provisions hereof. The Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Indebtedness (or a
Representative of such holder) to establish that such notice has been given by a
holder of such Senior Indebtedness or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness or Guarantor Senior Indebtedness with the same rights it would have
if it were not Trustee. The Registrar and co-registrar and the Paying Agent may
do the same with like rights. The Trustee shall be entitled to all the rights
set forth in this Article X with respect to any Senior Indebtedness or Guarantor
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness or Guarantor Senior Indebtedness; and
nothing in Article VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
or Guarantor
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63
Senior Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment in respect of the Securities,
whether directly or pursuant to the Subsidiary Guarantee, by reason of any
provision in this Article X shall not be construed as preventing the occurrence
of a Default or Event of Default. Nothing in this Article X shall have any
effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities, subject, however, to the rights under this Article X
of the holders of Senior Indebtedness to receive payments or other distributions
otherwise payable to or received by the Securityholders or the Trustee upon the
exercise of any remedy in connection with such acceleration.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or Guarantor Senior
Indebtedness or subject to the restrictions set forth in this Article X, and
none of the Securityholders shall be obligated to pay over any such amount to
the Company, any Subsidiary Guarantor, any holder of Senior Indebtedness of the
Company, any holder of Guarantor Senior Indebtedness or any other creditor of
the Company or any Subsidiary Guarantor.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness or Guarantor Senior Indebtedness for the purpose of ascertaining
the Persons entitled to participate in such payment or distribution, the holders
of Senior Indebtedness, Guarantor Senior Indebtedness and other Indebtedness of
the Company or the Subsidiary Guarantors, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article X. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness or Guarantor Senior Indebtedness to participate in
any payment or distribution pursuant to this Article X, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness or Guarantor Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article X, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The provisions of Sections 7.1 and 7.2
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article X.
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64
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness and Guarantor Senior Indebtedness as provided in this
Article X and appoints the Trustee as attorney-in-fact for any and all such
purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness or Guarantor Senior Indebtedness. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Senior Indebtedness or Guarantor
Senior Indebtedness and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Securityholders or the Company, the
Subsidiary Guarantors or any other Person, money or assets to which any holders
of Senior Indebtedness or Guarantor Senior Indebtedness shall be entitled by
virtue of this Article X or otherwise.
SECTION 10.16. Changes in Senior Indebtedness. Any holder of Senior
Indebtedness may at any time and from time to time without the consent of or
notice to any Securityholder or the Trustee: (i) extend, renew, modify, waive or
amend the terms of the Senior Indebtedness; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any guarantor or any other person (except the
Company) liable in any manner for the Senior Indebtedness or amend or waive the
terms of any guaranty of the Senior Indebtedness; (iv) exercise or refrain from
exercising any rights against the Company or any other person; (v) apply any
sums by whomever paid or however realized to Senior Indebtedness; and (vi) take
any other action which otherwise might be deemed to impair the rights of the
holders of the Senior Indebtedness. Any and all of such actions may be taken by
the holders of Senior Indebtedness without incurring responsibility to any
Securityholder or the Agent and, subject to the provisions of the definition of
Senior Indebtedness, without impairing or releasing the obligations of any
Securityholder or the Trustee under this Article X.
SECTION 10.17. Reliance by Holders of Senior Indebtedness and
Guarantor Senior Indebtedness on Subordination Provisions. Each Securityholder
by accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to
each holder of any Senior Indebtedness or Guarantor Senior Indebtedness, whether
such Senior Indebtedness or Guarantor Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness or Guarantor Senior
Indebtedness and such holder of Senior Indebtedness or Guarantor Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness or Guarantor Senior Indebtedness.
SECTION 10.18. Legend. The Notes shall be conspicuously legended
indicating that their payment is subordinated to Senior Indebtedness in
accordance with this Article X.
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65
ARTICLE XI
Subsidiary Guarantee
SECTION 11.1. Subsidiary Guarantee. Subject to the subordination
provisions contained in Article X, each Subsidiary Guarantor which becomes a
party hereto by executing and delivering a supplement to this Indenture pursuant
to Section 4.10 hereby, jointly and severally, unconditionally and irrevocably,
Guarantees to each Holder and to the Trustee and its successors and assigns (i)
the full and punctual payment of principal of, premium (if any) and interest on
the Securities when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations owing of the Company under this
Indenture (including obligations owing to the Trustee) and the Securities and
(ii) the full and punctual performance within applicable grace periods of all
other obligations of the Company under this Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Obligations"). The
Subsidiary Guarantors further agree that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from the
Subsidiary Guarantors, and that the Subsidiary Guarantors will remain bound
under this Article XI notwithstanding any extension or renewal of any
Obligation.
The Subsidiary Guarantors waive presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waive notice
of protest for nonpayment. The Subsidiary Guarantors waive notice of any default
under the Securities or the Obligations. The obligations of the Subsidiary
Guarantors hereunder shall not be affected by (i) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (ii) any extension or renewal of any
Obligation; (iii) any rescission, waiver, amendment, modification or supplement
of any of the terms or provisions of this Indenture (other than this Article
XI), the Securities or any other agreement; (iv) the release of any security
held by any Holder or the Trustee for the Obligations or any of them; (v) the
failure of any Holder or the Trustee to exercise any right or remedy against any
other guarantor of the Obligations; or (vi) any change in the ownership of the
Company.
The Subsidiary Guarantors further agree that their Guarantees herein
constitute a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waive any right to require that any resort be had
by any Holder or the Trustee to any security held for payment of the
Obligations.
The Guarantee of each Subsidiary Guarantor is, to the extent and in
the manner set forth in Article X, subordinated and subject in right of payment
to the prior payment in full of the principal of and premium, if any, and
interest on all Guarantor Senior Indebtedness of such Subsidiary Guarantor and
this Guarantee is made subject to such provisions of this Indenture.
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66
The obligations of the Subsidiary Guarantors hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense, setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Subsidiary Guarantors herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of the Subsidiary Guarantors or would
otherwise operate as a discharge of the Subsidiary Guarantors as a matter of law
or equity.
The Subsidiary Guarantors further agree that their Guarantees herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Subsidiary Guarantors by virtue hereof, upon the failure of the Company to pay
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, the Subsidiary Guarantors hereby promise to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
principal amount of such Obligations, (ii) accrued and unpaid interest on such
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary Obligations of the Company to the Holders and the Trustee.
The Subsidiary Guarantors agree that, as between the Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article VI for the purposes of the Guarantee herein, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Obligations as provided in Article VI, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantors for the purposes of this Section 11.1.
The Subsidiary Guarantors also agree to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section 11.1.
SECTION 11.2. Limitation on Liability. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum, aggregate liability of
each Subsidiary Guarantor hereunder shall not exceed the maximum amount that can
be guaranteed
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67
by such Subsidiary Guarantor under applicable federal and state laws relating to
insolvency of debtors.
SECTION 11.3. Successors and Assigns. (a) This Article XI shall be
binding upon the Subsidiary Guarantors and their successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
(b) Notwithstanding the foregoing, all obligations of a Subsidiary
Guarantor under this Article XI shall be automatically and unconditionally
released and discharged, without any further action required on the part of the
Trustee or any Holder, upon (i) the unconditional release of such Subsidiary
from its liability in respect of the Indebtedness in connection with which it
became a Subsidiary Guarantor hereunder pursuant to Section 4.10; or (ii) any
sale or other disposition (by merger or otherwise) to any Person which is not a
Subsidiary of the Company, of all of the Capital Stock in, or all or
substantially all of the assets of, such Subsidiary Guarantor; provided that (i)
such sale or disposition of such Capital Stock or assets is otherwise in
compliance with this Indenture and (ii) such Subsidiary Guarantor has been
unconditionally released from its liability in respect of the Indebtedness in
connection with which it became a Subsidiary Guarantor hereunder pursuant to
Section 4.10.
SECTION 11.4. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article XI shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XI at law,
in equity, by statute or otherwise.
SECTION 11.5. Right of Contribution. Each Subsidiary Guarantor
hereby agrees that to the extent that a Subsidiary Guarantor shall have paid
more than its proportionate share of any payment made hereunder, such Subsidiary
Guarantor shall be entitled to seek and receive contribution from and against
any other Subsidiary Guarantor hereunder who has not paid its proportionate
share of such payment. Each Subsidiary Guarantor's right of contribution shall
be subject to the terms and conditions of Section 11.6. The provisions of this
Section 11.5 shall in no respect limit the obligations and liabilities of any
Subsidiary Guarantor to the Trustee and the Holders and each Subsidiary
Guarantor shall remain liable to the Trustee and the Holders for the full amount
guaranteed by such Subsidiary Guarantor hereunder.
SECTION 11.6. No Subrogation. Notwithstanding any payment or
payments made by any of the Subsidiary Guarantors hereunder, no Subsidiary
Guarantor shall be entitled to be subrogated to any of the rights of the Trustee
or any Holder against the Company or any other Subsidiary Guarantor or any
collateral security or guarantee or right of offset held by the Trustee or any
Holder for the payment of the Obligations, nor shall any
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68
Subsidiary Guarantor seek or be entitled to seek any contribution or
reimbursement from the Company or any other Subsidiary Guarantor in respect of
payments made by such Subsidiary Guarantor hereunder, until all amounts owing to
the Trustee and the Holders by the Company on account of the Obligations are
paid in full. If any amount shall be paid to any Subsidiary Guarantor on account
of such subrogation rights at any time when all of the Obligations shall not
have been paid in full, such amount shall be held by such Subsidiary Guarantor
in trust for the Trustee and the Holders, segregated from other funds of such
Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary
Guarantor, be turned over to the Trustee in the exact form received by such
Subsidiary Guarantor (duly indorsed by such Subsidiary Guarantor to the Trustee,
if required), to be applied against the Obligations.
SECTION 11.7. Modification. No modification, amendment or waiver of
any provision of this Article XI, nor the consent to any departure by the
Subsidiary Guarantors therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the Subsidiary Guarantors in any case shall
entitle the Subsidiary Guarantors to any other or further notice or demand in
the same, similar or other circumstances.
ARTICLE XII
Miscellaneous
SECTION 12.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control.
SECTION 12.2. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, Tennessee 37027
Attention: Robert V. Dale
if to the Subsidiary Guarantors:
c/o Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, Tennessee 37027
Attention: Robert V. Dale
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69
if to the Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration.
The Company, any of the Subsidiary Guarantors, or the Trustee by
notice to the others may designate additional or different addresses for
subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to
the Holder at the Holder's address as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 12.3. Communication by Holders with other Holders. Holders
may communicate pursuant to TIA ss. 312(b) with other Holders with respect to
their rights under this Indenture or the Securities. The Company, the Trustee,
the Registrar and anyone else shall have the protection of TIA ss. 312(c).
SECTION 12.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall, if requested,
furnish to the Trustee: (i) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and (ii) an Opinion of
Counsel in form and substance reasonably satisfactory to the Trustee stating
that, in the opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 12.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include: (i) a statement that the
individual making such certificate or opinion has read such covenant or
condition; (ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; (iii) a statement that, in the opinion of such
individual, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (iv) a statement as to whether or not, in
the opinion of such individual, such covenant or condition has been complied
with.
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70
SECTION 12.6. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 12.7. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 12.8. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York or in the State of Delaware. If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.
SECTION 12.9. Governing Law. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 12.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Holder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Securities.
SECTION 12.11. Successors. All agreements of the Company and the
Subsidiary Guarantors in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 12.13. Variable Provisions. The Company initially appoints
the Trustee as Paying Agent and Registrar and custodian with respect to any
Global Securities.
SECTION 12.14. Qualification of Indenture. The Company shall qualify
this Indenture under the TIA in accordance with the terms and conditions of the
Registration
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71
Rights Agreement and shall pay all reasonable costs and expenses (including
attorneys' fees for the Company, the Trustee and the Holders) incurred in
connection therewith, including, but not limited to, costs and expenses of
qualification of the Indenture and the Securities and printing this Indenture
and the Securities. The Trustee shall be entitled to receive from the Company
any such Officers' Certificates, Opinions of Counsel or other documentation as
it may reasonably request in connection with any such qualification of this
Indenture under the TIA.
SECTION 12.15. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ Ray Chung
-------------------------------------
Name: Ray Chung
Title: Executive Vice President
WILMINGTON TRUST COMPANY, as Trustee
By: /s/ Donald G. MacKelcan
-------------------------------------
Name: Donald G. MacKelcan
Title: Assistant Vice President
<PAGE>
EXHIBIT A to
Indenture
[FORM OF FACE OF INITIAL NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR
ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED
<PAGE>
2
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
ACCREDITED INVESTOR (WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR,
IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUER AND THE TRUSTEE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBORDINATED TO SENIOR INDEBTEDNESS, AS DEFINED IN THE
INDENTURE (AS DEFINED HEREIN), AND THE OBLIGATIONS OF EACH SUBSIDIARY
GUARANTOR UNDER THE SUBSIDIARY GUARANTEE CONTAINED IN THE INDENTURE ARE
SUBORDINATED TO GUARANTOR SENIOR INDEBTEDNESS, AS DEFINED IN THE
INDENTURE, OF SUCH SUBSIDIARY GUARANTOR.
<PAGE>
No. 1 Principal Amount $120,000,000
CUSIP NO. 973818AA5
9 3/4% Senior Subordinated Note due 2007
Windy Hill Pet Food Company, Inc., a Minnesota corporation, promises
to pay to CEDE & CO., or registered assigns, the principal sum of One Hundred
Twenty Million Dollars on May 15, 2007.
Interest Payment Dates: May 15 and November 15 commencing November
15, 1997.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: WINDY HILL PET FOOD COMPANY, INC.
by
--------------------------------------
--------------------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
--------------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL NOTE]
9 3/4% Senior Subordinated Note due 2007
1. Interest
Windy Hill Pet Food Company, Inc., a Minnesota corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above.
The Company will pay interest semiannually on May 15 and November 15
of each year commencing November 15, 1997. Interest on the Securities will
accrue from the most recent date to which interest has been paid on the
Securities or, if no interest has been paid, from May 21, 1997. The Company
shall pay interest on overdue principal or premium, if any, at the rate borne by
the Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Security is due and payable, the Company shall
transfer by wire to the accounts specified by the Trustee or the Paying Agent
money sufficient to pay such principal, premium, if any, and/or interest. The
Company will pay interest (except defaulted interest) to the Persons who are
registered Holders of Securities at the close of business on the May 1 or
November 1 (whether or not a Business Day) next preceding the interest payment
date even if Securities are cancelled, repurchased or redeemed after the record
date and on or before the interest payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay principal and interest by check payable in such money. It may mail an
interest check to a Holder's registered address.
3. Paying Agent and Registrar
Initially, Wilmington Trust Company, a Delaware banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated Wholly-Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of May
21, 1997 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), between the Company and the Trustee.
The terms of the Securities
<PAGE>
2
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as
in effect on the date of the Indenture (the "Act"). Capitalized terms used
herein and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the Act for a statement of those terms.
The Securities are general unsecured senior subordinated obligations
of the Company limited to $120 million aggregate principal amount (subject to
Section 2.7 of the Indenture). This Security is one of the Initial Notes
referred to in the Indenture. The Securities include the Initial Notes and any
Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture and the Registration Rights Agreement. The Initial Notes and the
Exchange Notes are treated as a single class of securities under the Indenture.
The Indenture imposes certain limitations on the Incurrence of Indebtedness by
the Company and its Subsidiaries, the payment of dividends and other
distributions on the Capital Stock of the Company and its Subsidiaries, the
purchase or redemption of Capital Stock of the Company and Capital Stock of such
Subsidiaries, certain purchases or redemptions of Subordinated Obligations, the
sale or transfer of assets and Capital Stock of Subsidiaries, the issuance or
sale of Capital Stock of Subsidiaries, the business activities and investments
of the Company and its Subsidiaries and transactions with Affiliates. In
addition, the Indenture limits the ability of the Company and its Subsidiaries
to restrict distributions and dividends from Subsidiaries.
In addition, the Indenture requires Subsidiaries of the Company (in
the circumstances specified in Section 4.10 of the Indenture and on the terms
and conditions specified in Article XI of the Indenture), to enter into a
supplement to the Indenture providing for a guarantee by such Subsidiaries (on a
senior subordinated basis) of the due and punctual payment of the principal of,
premium (if any) and interest on the Securities and all other amounts payable by
the Company under the Indenture and the Securities when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according to
the terms of the Securities and the Indenture.
5. Optional Redemption
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to May 15, 2002. On and after such
date, the Securities will be redeemable, at the Company's option, in whole or in
part, upon not less than 30 nor more than 60 days' prior notice mailed by first
class mail to each Holder's registered address, at the following redemption
prices (expressed as percentages of principal amount) plus accrued and unpaid
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date):
If redeemed during the 12-month period commencing on May 15 of the years set
forth below:
<PAGE>
3
Year Redemption Price
---- ----------------
2002................................... 104.875%
2003................................... 103.250%
2004................................... 101.625%
2005 and thereafter.................... 100.000%
Notwithstanding the foregoing, at any time or from time to time
prior to May 15, 2000 the Company may redeem up to $42 million of the aggregate
original principal amount of the Securities with the cash proceeds of one or
more Equity Offerings received by or invested in, the Company at a redemption
price (expressed as a percentage of principal amount) of 109.750% plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that after giving effect to
such redemption, at least $78 million of the aggregate principal amount of the
Securities remain outstanding after each such redemption.
At any time on or prior to May 15, 2002, the Securities may also be
redeemed in whole, but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest, if any, to,
the date of redemption (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
principal amount larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, unless the Company shall have exercised
its right to redeem the Securities pursuant to paragraph 5 of the Securities in
connection with such Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to
<PAGE>
4
101% of the principal amount thereof plus accrued interest to the date of
repurchase as provided in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture, and the obligations of each Subsidiary Guarantor under the
Subsidiary Guarantee contained in Article XI of the Indenture are subordinated
to Guarantor Senior Indebtedness, as defined in the Indenture, of such
Subsidiary Guarantor. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid, and Guarantor
Senior Indebtedness of a Subsidiary Guarantor must be paid before such
Subsidiary Guarantor may make payments under the Subsidiary Guarantee. The
Company agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give them effect and appoints the Trustee as attorney-in-fact for such
purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
for a period beginning 15 days before a selection of Securities to be redeemed
and ending on the date of selection or (ii) any Securities for a period
beginning 15 days before an interest payment date and ending on such interest
payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
<PAGE>
5
12. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in outstanding principal amount of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in outstanding principal amount of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company, the Subsidiary
Guarantors and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants for the
benefit of the Holders or surrender rights and powers conferred on the Company,
or to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that does not adversely affect
the rights of any Securityholder, or to provide for the issuance of Exchange
Notes.
14. Defaults and Remedies
Under the Indenture, Events of Default include: (i) default for 30
days in payment of interest on the Securities when the same becomes due and
payable; (ii) default in payment of principal on the Securities when the same
becomes due and payable at maturity, upon redemption pursuant to paragraph 5 of
the Securities, upon required repurchase, upon declaration or otherwise; (iii)
failure by the Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company or its Subsidiaries if the amount
accelerated (or so unpaid) exceeds $5 million and such acceleration or failure
to pay is not rescinded or cured within a 10-day period; (v) certain events of
bankruptcy or insolvency with respect to the Company or any Significant
Subsidiary; (vi) certain final, non-appealable judgments or decrees for the
payment of money in excess of $5 million; and (vii) the failure of any
Subsidiary Guarantee to be in full force and effect or the denial or
disaffirmation by any Subsidiary Guarantor of its obligations under the
Indenture or the Securities in certain cases. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
<PAGE>
6
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of principal
or interest) if it determines that withholding notice is in their interest.
15. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Securities or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
<PAGE>
7
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. Governing Law
This Security shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to: Windy Hill
Pet Food Company, Inc., Two Maryland Farms, Suite 301, Brentwood, Tennessee
37027. Attention: President.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ____________________ Your Signature: ___________________
Signature Guarantee: ______________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is three years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
1 |_| acquired for the undersigned's own account, without transfer; or
2 |_| transferred to the Company; or
3 |_| transferred pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
4 |_| transferred pursuant to an effective registration statement under
the Securities Act; or
5 |_| transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
6 |_| transferred to an "accredited investor" (within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933)
that is an institutional investor and that has furnished to the
Trustee a signed
<PAGE>
2
letter containing certain representations and agreements (the form
of which letter appears as Exhibit C to the Indenture); or
7 |_| transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (5), (6) or
(7) is checked, the Trustee or the Company may require, prior to registering any
such transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
This certificate and the statements contained herein are made for the benefit of
the Company, the Guarantors, Wilmington Trust Company, as Trustee, and Chase
Securities Inc. and Credit Suisse First Boston Corporation, the Initial
Purchasers of such Notes being transferred and each of you are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding with
respect to the materials covered hereby.
------------------------------
Signature
Signature Guarantee:
- ------------------------- ------------------------------
Signature
(Signature must be guaranteed)
- ------------------------------------------------------------
<PAGE>
3
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following officer of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ___________________________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: ________________________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT B to
Indenture
[FORM OF FACE OF EXCHANGE NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY IS SUBORDINATED TO SENIOR INDEBTEDNESS, AS DEFINED IN
THE INDENTURE (AS DEFINED HEREIN), AND THE OBLIGATIONS OF EACH SUBSIDIARY
GUARANTOR UNDER THE SUBSIDIARY GUARANTEE CONTAINED IN THE INDENTURE ARE
SUBORDINATED TO GUARANTOR SENIOR INDEBTEDNESS, AS DEFINED IN THE INDENTURE, OF
SUCH SUBSIDIARY GUARANTOR.
<PAGE>
2
No. _____ Principal Amount $120,000,000
CUSIP NO.
9-3/4% Senior Subordinated Note due 2007
Windy Hill Pet Food Company, Inc., a Minnesota corporation, promises
to pay to CEDE & CO., or registered assigns, the principal sum of One Hundred
Twenty Million Dollars on May 15, 2007.
Interest Payment Dates: May 15 and November 15 commencing November
15, 1997.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: WINDY HILL PET FOOD COMPANY, INC.
by
------------------------------------------
by
------------------------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
------------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE NOTE]
9 3/4% Senior Subordinated Note due 2007
1. Interest
Windy Hill Pet Food Company, Inc., a Minnesota corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above.
The Company will pay interest semiannually on May 15 and November 15
of each year. Interest on the Securities will accrue from the most recent date
to which interest has been paid on the Securities or, if no interest has been
paid, from May 21, 1997. The Company shall pay interest on overdue principal or
premium, if any, at the rate borne by the Securities to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Security is due and payable, the Company shall
transfer by wire to the accounts specified by the Trustee or the Paying Agent
money sufficient to pay such principal, premium, if any, and/or interest. The
Company will pay interest (except defaulted interest) to the Persons who are
registered Holders of Securities at the close of business on the May 1 or
November 1 (whether or not a Business Day) next preceding the interest payment
date even if Securities are cancelled, repurchased or redeemed after the record
date and on or before the interest payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may pay principal and interest by check payable in such money. It may mail an
interest check to a Holder's registered address.
3. Paying Agent and Registrar
Initially, Wilmington Trust Company, a Delaware banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated Wholly-Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of May
21, 1997 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), between the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the
<PAGE>
2
Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the
date of the Indenture (the "Act"). Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.
The Securities are general unsecured senior subordinated obligations
of the Company limited to $120 million aggregate principal amount (subject to
Section 2.7 of the Indenture). This Security is one of the Exchange Notes
referred to in the Indenture. The Securities include the Initial Notes and any
Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture and the Registration Rights Agreement. The Initial Notes and the
Exchange Notes are treated as a single class of securities under the Indenture.
The Indenture imposes certain limitations on the Incurrence of Indebtedness by
the Company and its Subsidiaries, the payment of dividends and other
distributions on the Capital Stock of the Company and its Subsidiaries, the
purchase or redemption of Capital Stock of the Company and Capital Stock of such
Subsidiaries, certain purchases or redemptions of Subordinated Obligations, the
sale or transfer of assets and Capital Stock of Subsidiaries, the issuance or
sale of Capital Stock of Subsidiaries, the business activities and investments
of the Company and its Subsidiaries and transactions with Affiliates. In
addition, the Indenture limits the ability of the Company and its Subsidiaries
to restrict distributions and dividends from Subsidiaries.
In addition, the Indenture requires Subsidiaries of the Company (in
the circumstances specified in Section 4.10 of the Indenture and on the terms
and conditions specified in Article XI of the Indenture), to enter into a
supplement to the Indenture providing for a guarantee by such Subsidiaries (on a
senior subordinated basis) of the due and punctual payment of the principal of,
premium (if any) and interest on the Securities and all other amounts payable by
the Company under the Indenture and the Securities when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according to
the terms of the Securities and the Indenture.
5. Optional Redemption
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to May 15, 2002. On and after such
date, the Securities will be redeemable, at the Company's option, in whole or in
part, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
and unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12-month period commencing on May 15 of the years set
forth below:
<PAGE>
3
Year Redemption Price
---- ----------------
2002................................... 104.875 %
2003................................... 103.250 %
2004................................... 101.625 %
2005 and thereafter.................... 100.000 %
Notwithstanding the foregoing, at any time or from time to time
prior to May 15, 2000, the Company may redeem up to $42 million of the aggregate
original principal amount of the Securities with the cash proceeds of one or
more Equity Offerings received by or invested in, the Company at a redemption
price (expressed as a percentage of principal amount) of 109.750% plus accrued
and unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date); provided, however, that after giving effect to such
redemption, at least $78 million of the aggregate principal amount of Securities
remain outstanding after such redemption.
At any time on or prior to May 15, 2002, the Securities may also be
redeemed in whole, but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest, if any, to,
the date of redemption (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
principal amount larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, unless the Company shall have exercised
its right to redeem the Notes pursuant to paragraph 5 of the Securities in
connection with such Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount thereof
plus accrued interest to the date of repurchase as provided in, and subject to
the terms of, the Indenture.
<PAGE>
4
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture, and the obligations of each Subsidiary Guarantor under the
Subsidiary Guarantee contained in Article XI of the Indenture are subordinated
to Guarantor Senior Indebtedness, as defined in the Indenture, of such
Subsidiary Guarantor. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid, and Guarantor
Senior Indebtedness of a Subsidiary Guarantor must be paid before such
Subsidiary Guarantor may make payments under the Subsidiary Guarantee. The
Company agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give them effect and appoints the Trustee as attorney-in-fact for such
purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
for a period beginning 15 days before a selection of Securities to be redeemed
and ending on the date of selection or (ii) any Securities for a period
beginning 15 days before an interest payment date and ending on such interest
payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
<PAGE>
5
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in outstanding principal amount of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in outstanding principal amount of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company, the Subsidiary
Guarantors and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants for the
benefit of the Holders or surrender rights and powers conferred on the Company
or to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that does not adversely affect
the rights of any Securityholder, or to provide for the issuance of Exchange
Notes.
14. Defaults and Remedies
Under the Indenture, Events of Default include: (i) default for 30
days in payment of interest on the Securities when the same becomes due and
payable; (ii) default in payment of principal on the Securities when the same
becomes due and payable at maturity, upon redemption pursuant to paragraph 5 of
the Securities, upon required repurchase, upon declaration or otherwise; (iii)
failure by the Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company or its Subsidiaries if the amount
accelerated (or so unpaid) exceeds $5.0 million and such acceleration or failure
to pay is not rescinded or cured within a 10-day period; (v) certain events of
bankruptcy or insolvency with respect to the Company or any Significant
Subsidiary; (vi) certain final, non-appealable judgments or decrees for the
payment of money in excess of $5.0 million; and (vii) the failure of any
Subsidiary Guarantee to be in full force and effect or the denial or
disaffirmation by any Subsidiary Guarantor of its obligations under the
Indenture or the Securities in certain cases. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of principal
or interest) if it determines that withholding notice is in their interest.
<PAGE>
6
15. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Securities or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. Governing Law
This Security shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
<PAGE>
7
The Company will furnish to any Securityholder upon
written request and without charge to the Securityholder a
copy of the Indenture which has in it the text of this
Security in larger type. Requests may be made to: Windy
Hill Pet Food Company, Inc., Two Maryland Farms, Suite
301, Brentwood, Tennessee 37027. Attention: President.
- --------------------------------------------------------------------------------
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: _______________ Your Signature ____________________
Signature Guarantee: ____________________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: _______________ Your
Signature: _________________________
(Sign exactly as your name appears on the other side of the
Security)
Signature
Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT C to
Indenture
[FORM OF TRANSFEREE LETTER OF REPRESENTATION]
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, Tennessee 37027
Attn: President
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attn: Corporate Trust Administration
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the 9 3/4% Senior Subordinated Notes due 2007 (the "Notes")
of Windy Hill Pet Food Company, Inc.
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
Act")) that is an institutional accredited investor ("Institutional Accredited
Investor") purchasing for our own account or for the account of such an
institutional "accredited investor," at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risk of our investment in the Notes and invest in
or purchase securities similar to the Notes in the normal course of our
business. We and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
<PAGE>
2
2. We understand that the Notes have not been registered under the
Securities Act or any other applicable securities law, and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Notes to offer, sell or otherwise transfer such Notes prior to the
date which is three years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the owner of
such Notes (or any predecessor thereto) (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement which
has been declared effective under the Securities Act, (c) in a transaction
complying with the requirements of Rule 144A under the Securities Act, to a
person we reasonably believe is a qualified institutional buyer under Rule 144A
(a "QIB") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule 144A,
(d) pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an institutional
"accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or 7 under
the Securities Act) that is purchasing for its own account or for the account of
such an institutional "accredited investor", in each case in a minimum principal
amount of Notes of $250,000 or (f) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and in compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Company and the Trustee, which
shall provide, among other things, that the transferee is an institutional
"accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or 7 under
the Securities Act) that is acquiring such Notes for investment purposes and not
for distribution in violation of the Securities Act. Each purchaser acknowledges
that the Company and the Trustee reserve the right prior to any offer, sale or
other transfer prior to the Resale Termination Date of the Notes pursuant to
clauses (d), (e) or (f) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.
TRANSFEREE:_____________________
BY______________________________
<PAGE>
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
May 21, 1997
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
c/o Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Dear Sirs:
WINDY HILL PET FOODS COMPANY, INC., a Minnesota corporation (the
"Company"), proposes to issue and sell to you (the "Initial Purchasers"), upon
the terms set forth in a purchase agreement dated May 16, 1997 (the "Purchase
Agreement"), $120,000,000 principal amount of its 9-3/4% Senior Subordinated
Securities due 2007 (the "Securities") which Securities shall be unsecured and
will be subordinated to all existing and future Senior Indebtedness of the
Company and will be effectively subordinated to all obligations of each
subsidiary of the Company as may exist from time to time. Capitalized terms used
but not specifically defined herein have the respective meanings ascribed
thereto in the Purchase Agreement. As an inducement to the Initial Purchasers to
enter into the Purchase Agreement and in satisfaction of a condition to your
obligations thereunder, the Company agrees with you, for the benefit of the
holders of the Securities (including the Initial Purchasers) (the "Holders"), as
follows:
1. Registered Exchange Offer. The Company shall prepare and, not
later than 60 days following the Issue Date (as hereinafter defined), shall file
with the Commission a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with respect to a
proposed offer (the "Registered Exchange Offer") to the Holders to issue and
deliver to such Holders, in exchange for the Securities, a like aggregate
principal amount of debt securities of the Company (the "Exchange Securities")
identical in all material respects to the Securities, except for the transfer
restrictions relating to the Securities, shall use its reasonable best efforts
to cause the Exchange Offer Registration Statement to become effective under the
Securities Act no later than 150 days after the Issue Date and to be consummated
no later than 180 days after the Issue Date, and shall keep the Exchange Offer
Registration Statement effective for not less than 30 days (or longer, if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders (such period being called the "Exchange Offer Registration
Period"). The Exchange Securities will be issued under the Indenture or an
indenture (the "Exchange Securities Indenture") between the Company and the
Trustee or such other bank or trust company reasonably satisfactory to you, as
trustee (the "Exchange Securities Trustee"), such indenture
<PAGE>
2
to be identical in all material respects to the Indenture except for the
transfer restrictions relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not (i) an affiliate of the Company within the meaning of the Securities Act or
(ii) an Exchanging Dealer (as defined below) not complying with the requirements
of the next sentence, (b) acquires the Exchange Securities in the ordinary
course of such Holder's business and (c) has no arrangements or understandings
with any person to participate in the distribution of the Exchange Securities)
and to trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. The Company, the Initial Purchasers and each Exchanging Dealer (as
defined below) acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, (i) each Holder which is
a broker-dealer electing to exchange Securities, acquired for its own account as
a result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer and (ii) if the Initial Purchasers elect to sell Exchange
Securities acquired in exchange for Securities constituting any portion of an
unsold allotment it is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in connection with such a sale.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange offer open for not less than 30
days after the date notice of the Exchange Offer is mailed to the Holders
(or longer if required by applicable law);
(c) utilize the services of a Depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
<PAGE>
3
(e) otherwise comply in all respects with all laws applicable to the
Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder of
Securities, Exchange Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
The Company shall make available for a period of 90 days after the
consummation of the Registered Exchange Offer, a copy of the prospectus forming
part of the Exchange Offer Registration Statement to any broker-dealer for use
in connection with any resale of any Exchange Securities.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Securities surrendered in exchange therefor or, if no interest
has been paid on the Securities, from the date of original issue of the
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company
within the meaning of the Securities Act, or if it is an affiliate, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include, as of the consummation of the Registered
Exchange Offer, an untrue statement of
<PAGE>
4
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2. Shelf Registration. If (i) applicable interpretations of the
staff of the Commission do not permit the Company to effect the Registered
Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason
the Registered Exchange Offer is not consummated within 180 days after the Issue
Date or (iii) any Holder either (A) is not eligible to participate in the
Registered Exchange Offer or (B) participates in the Registered Exchange Offer
and does not receive freely transferrable Exchange Securities in exchange for
tendered Securities the following provisions shall apply:
(a) The Company shall use all reasonable efforts to as promptly as
practicable file with the Commission and thereafter shall use its reasonable
best efforts to cause to be declared effective a shelf registration statement on
an appropriate form under the Securities Act relating to the offer and sale of
the Transfer Restricted Securities (as defined below) by the Holders from time
to time in accordance with the methods of distribution set forth in such
registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement"); provided, however, that no Holder of Securities or Exchange
Securities (other than the Initial Purchasers) shall be entitled to have
Securities or Exchange Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be usable by Holders for a period of three
years from the Issue Date or such shorter period that will terminate when all
the Securities and Exchange Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement (in any
such case, such period being called the "Shelf Registration Period"). The
Company shall be deemed not to have used its reasonable best efforts to keep the
Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Securities or
Exchange Securities covered thereby not being able to offer and sell such
Securities or Exchange Securities during that period, unless such action is
required by applicable law; provided, however, that the foregoing shall not
apply to actions taken by the Company in good faith and for valid business
reasons (not including avoidance of its obligations hereunder), including,
without limitation, the acquisition or divestiture of assets, so long as the
Company within 120 days thereafter complies with the requirements of Section
4(i) hereof. Any such period during which the Company fails to keep the
registration statement effective and usable for offers and sales of Securities
and Exchange Securities is referred to as a "Suspension Period." A Suspension
Period shall commence on and include the date that the Company gives notice that
the Shelf Registration Statement is no longer effective or the prospectus
included therein is no longer usable for offers and sales of Securities and
Exchange Securities and shall end on the date when each Holder of Securities and
Exchange Securities covered by such registration statement either receives the
copies of the supplemented or amended prospectus contemplated by Section 4(i)
hereof or is advised in
<PAGE>
5
writing by the Company that use of the prospectus may be resumed. If one or more
Suspension Periods occur, the three-year time period referenced above shall be
extended by the number of days included in each such Suspension Period.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in
either case, other than with respect to information included therein in reliance
upon or in conformity with written information furnished to the Company by or on
behalf of any Holder specifically for use therein (the "Holders' Information"))
does not, when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (iii) any prospectus forming
part of any Shelf Registration Statement, and any supplement to such prospectus
(in either case, other than with respect to Holders' Information), does not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Securities will suffer damages if the Company fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would not
be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with the commission on or prior
to 60 days after the Issue Date, (ii) the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, is not declared
effective within 150 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's Staff, if later, within 45 days
after publication of the change in law or interpretation), (iii) the Registered
Exchange Offer is not consummated on or prior to 180 days after the Issue Date,
or (iv) the Shelf Registration Statement is filed and declared effective within
150 days after the Issue Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's Staff, if later, within 45 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 60 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will
generally be obligated to pay liquidated damages to each holder of Transfer
Restricted Securities (as defined below), during the period of such Registration
Default, in an amount equal to $0.192 per week per $1,000 principal amount of
the Securities constituting Transfer Restricted Securities held by such holder
until the applicable Registration Statement is filed or declared effective, the
Registered Exchange Offer is consummated or the Shelf Registration Statement
again becomes effective, as the case may be; provided, however, no liquidated
damages shall be payable for a Registration Default under clause (iii) above if
a Shelf Registration Statement covering resales of the Transfer Restricted
Securities for which the Exchange Offer was intended shall have been declared
effective. Following the cure of
<PAGE>
6
all Registration Defaults, the accrual of liquidated damages will cease.
"Transfer Restricted Securities" means each Security or Exchange Security until
(i) the date on which such Security or Exchange Security has been exchanged for
a freely transferrable Exchange Security in the Registered Exchange Offer, (ii)
the date on which such Security or Exchange Security has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) the date on which such Security or Exchange
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is salable pursuant to Rule 144(k) under the Securities Act.
Notwithstanding anything to the contrary in this Section 3(a), the Company shall
not be required to pay liquidated damages to the holder of Transfer Restricted
Securities if such holder: (a) failed to comply with its obligations to make the
representations in the second to last paragraph of Section 1; or (b) failed to
provide the information required to be provided by it, if any, pursuant to
Section 4(m).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on each
interest payment date specified by the Indenture to the record holder entitled
to receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Securities by reason of the failure of the Shelf Registration
Statement or the Exchange Offer Registration Statement, as the case may be, to
be filed, to be declared effective or to remain effective, or the Exchange Offer
to be consummated, as the case may be, to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing
thereof with the Commission, a copy of the Registration Statement and each
amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that the Initial Purchasers (with respect to any
portion of an unsold allotment from the original offering) is participating in
the Registered Exchange Offer or the Shelf Registration, shall use reasonable
efforts to reflect in each such document, when so filed with the Commission,
such comments as you reasonably may propose; (ii) if applicable, include the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement, and
<PAGE>
7
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and (iii) if requested by
the Initial Purchasers, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement.
(b) The Company shall advise you and, if requested by the Holders,
but only as to events set forth in clauses (i) and (ii) below, the Holders and,
if requested by you, confirm such advice in writing (which advice pursuant to
clauses (ii)-(iv) hereof shall be accompanied by an instruction to suspend the
use of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements
to any Registration Statement or the prospectus included therein or for
additional information;
(iii) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Securities or the Exchange
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(iv) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus so that, as of
such date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(c) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits (including those
incorporated by reference).
(d) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of the prospectus or
any amendment or supplement thereto by each of the selling Holders of Transfer
Restricted Securities in connection with the offering and sale of the Transfer
Restricted Securities covered by the prospectus or any amendment or supplement
thereto.
<PAGE>
8
(e) The Company will furnish to each Exchanging Dealer or the
Initial Purchasers, as applicable, which so requests, without charge, at least
one copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Exchanging Dealer or Initial Purchasers, as applicable, so requests in writing,
all exhibits (including those incorporated by reference).
(f) The Company will, during the Exchange Offer Registration Period,
promptly deliver to each Exchanging Dealer or the Initial Purchasers, as
applicable, without charge, as many copies of the prospectus included within the
coverage of Exchange Offer Registration Statement and any amendment or
supplement thereto as such Exchanging Dealer or the Initial Purchasers, as
applicable, may reasonably request for delivery by (i) such Exchanging Dealer in
connection with a sale of Exchange Securities received by it pursuant to the
Registered Exchange Offer or (ii) the Initial Purchasers in connection with a
sale of Exchange Securities received by it in exchange for Securities
constituting any portion of an unsold allotment; and the Company consents to the
use of the prospectus or any amendment or supplement thereto by any such
Exchanging Dealer or the Initial Purchasers, as applicable, as aforesaid.
(g) Prior to any public offering of Securities or Exchange
Securities pursuant to any Registration Statement, the Company will use its
reasonable best efforts to register or qualify or cooperate with the Holders of
Securities included therein and its counsel in connection with the registration
or qualification of such securities for offer and sale under the securities or
blue sky laws of such jurisdictions as any such Holder reasonably requests in
writing and do any and all other acts or things necessary or advisable to enable
the offer and sale in such jurisdictions of the Securities or Exchange
Securities covered by such Registration Statement; provided, however, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(h) The Company will cooperate with the Holders of Securities or
Exchange Securities to facilitate the timely preparation and delivery of
certificates representing Securities or Exchange Securities to be sold pursuant
to any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request in writing
prior to sales of Securities or Exchange Securities pursuant to such
Registration Statement.
(i) If (i) any event contemplated by paragraphs (b)(ii) through (iv)
above occurs during the period in which the Company is required to maintain an
effective Registration Statement or (ii) any Suspension Period remains in effect
more than 120 days after the occurrence thereof, the Company will promptly
prepare a post-effective amendment to the Registration Statement or a supplement
to the related prospectus or file any other required document so that, as
thereafter delivered to purchasers of the Securities or purchasers of Exchange
Securities from a Holder, the prospectus will not include an untrue statement of
<PAGE>
9
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(j) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities or
Exchange Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities or Exchange Securities, as the case may
be, in a form eligible for deposit with The Depository Trust Company.
(k) The Company will use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and will make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act; provided that in no event
shall such earnings statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of the applicable Registration Statement, which statements shall cover such
12-month period.
(l) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(m) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities as the Company may from time to time reasonably
require for inclusion in such Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any Holder
that unreasonably fails to furnish such information within a reasonable time
after receiving such request.
(n) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (iv) hereof, such
Holder will discontinue disposition of such Transfer Restricted Securities until
such Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(i) hereof, or until advised in writing (the "Advice")
by the Company that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Section 4(b)(ii) through (iv) during the
period that the Company is required to maintain an effective Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement shall have received
(x) the copies of the supplemental or amended prospectus contemplated by Section
4(i) (if an amended or supplemental prospectus is required) or (y) the Advice
(if no amended or supplemental prospectus is required).
<PAGE>
10
5. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 hereof and the Company will reimburse the Initial Purchasers and the
Holders for the reasonable fees and disbursements of one firm of attorneys
chosen by the Holders of a majority in aggregate principal amount of the
Securities and the Exchange Securities to be sold pursuant to each Registration
Statement (the "Special Counsel") acting for the Initial Purchasers or Holders
in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer or the Initial Purchasers,
as applicable, the Company shall indemnify and hold harmless each Holder, its
directors, officers, agents and employees and each person, if any, who controls
such Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and the directors, officers, agents and employees of such
controlling persons against any and all loss, liability, claim and damage, as
incurred, arising out of any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplements thereto or the omission
or alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and shall reimburse each Holder promptly upon demand for
any and all expense (including, subject to Section 6(c) hereof, the fees and
disbursements of counsel chosen by the indemnified party), reasonably incurred
as such expenses are incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any governmental or
regulatory agency or body, commenced or threatened, or any claim based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission; provided, however, that (i) this indemnity shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with Holders' Information and (ii) this
indemnity with respect to any untrue statement or alleged untrue statement or
omission or alleged omission in any related preliminary prospectus shall not
enure to the benefit of any indemnified party from whom the person asserting any
such loss, claim, damage or liability received Securities or Exchange Securities
if such persons did not receive a copy of the final prospectus at or prior to
the confirmation of the sale of such Securities or Exchange Securities to such
person in any case where such delivery is required by the Securities Act and the
untrue statement or omission of material fact contained in the related
preliminary prospectus was corrected in the final prospectus unless such failure
to deliver the final prospectus was a result of noncompliance by the Company
with Sections 4(c), 4(d), 4(e) or 4(f).
(b) In the event of a Shelf Registration Statement, each Holder,
severally and not jointly, agrees to indemnify and hold harmless the Company,
its directors, officers, agents and employees and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and the directors, officers, agents and employees
of such controlling persons against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 6(a) hereof, as
<PAGE>
11
incurred, arising out of or based upon any untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment or supplement thereto) in reliance on and in conformity with
Holders' Information furnished to the Company by such Holder; provided, however,
that no such Holder shall be liable for any indemnity claims hereunder in excess
of the amount of net proceeds received by such Holder from the sale of
Securities or Exchange Securities pursuant to the Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any claim or action
commenced against it in respect of which indemnity may be sought hereunder;
provided, however, that failure to so notify an indemnifying party shall not
relieve such indemnifying party from any obligation that it may have pursuant to
this Section except to the extent that it has been materially prejudiced
(through the forfeiture of substantive rights or defenses) by such failure;
provided further, however, that the failure to notify an indemnifying party
shall not relieve it from any liability that it may have to an indemnified party
otherwise than on account of this indemnity agreement. If any such claim or
action shall be brought against an indemnified party, the indemnified party
shall notify the indemnifying party thereof, and the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that an indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on the written advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on the written advice of counsel to the
indemnified party) between the indemnified party and indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel for the indemnified party will be at the expense of the indemnifying
party or parties. It is understood that the indemnifying party or parties shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm of attorneys (in addition to any local counsel)
at any one time for all such indemnified party or parties. Each indemnified
party, as a condition of the indemnity agreements contained in Sections 6(a) and
6(b), shall use all reasonable efforts to cooperate with the indemnifying party
in the defense of any such action or claim. No indemnifying party shall be
liable for any settlement of any such action effected without its written
consent, but if settled with its written consent or if there be a final judgment
of the
<PAGE>
12
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If a claim by an indemnified party for indemnification under
this Section 6 is unenforceable even though the express provisions hereof
provide for indemnification in such case, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions,
statements or omissions that resulted in such losses as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such indemnifying party
or indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any losses shall
be deemed to include, subject to the limitations set forth in Section 6(c)
herein, any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, an indemnifying party that is a
holder of Transfer Restricted Securities or Exchange Securities shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Transfer Restricted Securities or Exchange Securities sold by
such indemnifying party and distributed to the public were offered to the public
exceeds the amount of any damages that such indemnifying party would have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Securities Act)
shall be entitled to any contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority in aggregate principal
amount of the Securities and the Exchange Securities, taken as a single class.
Notwithstanding the foregoing, a waiver or
<PAGE>
13
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of the Holders of Securities or Exchange
Securities whose Securities or Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities or Exchange Securities being sold by such
Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 7(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to Chase Securities Inc.;
(2) if to you, initially at your address set forth in the Purchase
Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopies) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law; Submission to Jurisdiction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
<PAGE>
14
(g) No Inconsistent Agreements. The Company has not and shall not,
on or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its debt
securities to any person. Without limiting the generality of the foregoing,
without the written consent of the holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, the Company shall
not grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of the Agreement.
(h) No Piggyback on Registrations. Neither the Company, nor any of
its security holders (other than the holders of Transfer Restricted Securities
in such capacity) shall have the right to include any securities of the Company
in any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(i) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Remedies. In the event of a breach by the Company, or by any
holder of Transfer Restricted Securities, of any of their obligations under this
Agreement, each holder of Transfer Restricted Securities or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by
law, including recovery of damages (other than the recovery of damages for a
breach by the Company of its obligations under Sections 1 or 2 hereof for which
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. The Company
and each holder of Transfer Restricted Securities agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agree that,
in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
WINDY HILL PET FOODS COMPANY, INC.
By: /s/ Ray Chung
----------------------------------------
Name: Ray Chung
Title: Executive Vice President
Accepted in New York, New York
CHASE SECURITIES INC.
By: /s/ Joseph C. Purcell
---------------------------------
Name: Joseph C. Purcell
Title: Vice President
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Thomas W.S. Groves
---------------------------------
Name: Thomas W.S. Groves
Title: Attorney-in-Fact
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- ----------
(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name: _______________________________________
Address: ____________________________________
____________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED
INVESTOR (WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT
<PAGE>
2
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUER AND THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBORDINATED TO SENIOR INDEBTEDNESS, AS DEFINED
IN THE INDENTURE (AS DEFINED HEREIN), AND THE OBLIGATIONS OF EACH SUBSIDIARY
GUARANTOR UNDER THE SUBSIDIARY GUARANTEE CONTAINED IN THE INDENTURE ARE
SUBORDINATED TO GUARANTOR SENIOR INDEBTEDNESS, AS DEFINED IN THE INDENTURE,
OF SUCH SUBSIDIARY GUARANTOR.
<PAGE>
No.1 Principal Amount $120,000,000
CUSIP NO. 973818AA5
9 3/4% Senior Subordinated Note due 2007
Windy Hill Pet Food Company, Inc., a Minnesota corporation,
promises to pay to CEDE & CO., or registered assigns, the principal sum of
One Hundred Twenty Million Dollars on May 15, 2007.
Interest Payment Dates: May 15 and November 15 commencing
November 15, 1997.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: May 21, 1997 WINDY HILL PET FOOD COMPANY, INC.
by /s/ Ray Chung
--------------------------
/s/ M. Laurie Cummings
-----------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By /s/ Donald G. McKelcan
--------------------------
Authorized Signatory
<PAGE>
[REVERSE SIDE]
9 3/4% Senior Subordinated Note due 2007
1. Interest
Windy Hill Pet Food Company, Inc., a Minnesota corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on
the principal amount of this Security at the rate per annum shown above.
The Company will pay interest semiannually on May 15 and November
15 of each year commencing November 15, 1997. Interest on the Securities will
accrue from the most recent date to which interest has been paid on the
Securities or, if no interest has been paid, from May 21, 1997. The Company
shall pay interest on overdue principal or premium, if any, at the rate borne
by the Securities to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment
By at least 10:00 a.m. (New York City time) on the date on which
any principal of or interest on any Security is due and payable, the Company
shall transfer by wire to the accounts specified by the Trustee or the Paying
Agent money sufficient to pay such principal, premium, if any, and/or
interest. The Company will pay interest (except defaulted interest) to the
Persons who are registered Holders of Securities at the close of business on
the May 1 or November 1 (whether or not a Business Day) next preceding the
interest payment date even if Securities are cancelled, repurchased or
redeemed after the record date and on or before the interest payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. Paying Agent and Registrar
Initially, Wilmington Trust Company, a Delaware banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice to any Securityholder. The Company or any of its domestically
incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
May 21, 1997 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), between the Company and
the Trustee. The terms of the Securities include
<PAGE>
2
those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date of the Indenture (the "Act"). Capitalized terms used
herein and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Securityholders
are referred to the Indenture and the Act for a statement of those terms.
The Securities are general unsecured senior subordinated
obligations of the Company limited to $120 million aggregate principal amount
(subject to Section 2.7 of the Indenture). This Security is one of the
Initial Notes referred to in the Indenture. The Securities include the
Initial Notes and any Exchange Notes issued in exchange for the Initial Notes
pursuant to the Indenture and the Registration Rights Agreement. The Initial
Notes and the Exchange Notes are treated as a single class of securities
under the Indenture. The Indenture imposes certain limitations on the
Incurrence of Indebtedness by the Company and its Subsidiaries, the payment
of dividends and other distributions on the Capital Stock of the Company and
its Subsidiaries, the purchase or redemption of Capital Stock of the Company
and Capital Stock of such Subsidiaries, certain purchases or redemptions of
Subordinated Obligations, the sale or transfer of assets and Capital Stock of
Subsidiaries, the issuance or sale of Capital Stock of Subsidiaries, the
business activities and investments of the Company and its Subsidiaries and
transactions with Affiliates. In addition, the Indenture limits the ability
of the Company and its Subsidiaries to restrict distributions and dividends
from Subsidiaries.
In addition, the Indenture requires Subsidiaries of the Company
(in the circumstances specified in Section 4.10 of the Indenture and on the
terms and conditions specified in Article XI of the Indenture), to enter into
a supplement to the Indenture providing for a guarantee by such Subsidiaries
(on a senior subordinated basis) of the due and punctual payment of the
principal of, premium (if any) and interest on the Securities and all other
amounts payable by the Company under the Indenture and the Securities when
and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Securities and the
Indenture.
5. Optional Redemption
Except as set forth in this paragraph 5, the Securities will not
be redeemable at the option of the Company prior to May 15, 2002. On and
after such date, the Securities will be redeemable, at the Company's option,
in whole or in part, upon not less than 30 nor more than 60 days' prior
notice mailed by first class mail to each Holder's registered address, at the
following redemption prices (expressed as percentages of principal amount)
plus accrued and unpaid interest to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on
the relevant interest payment date):
<PAGE>
3
If redeemed during the 12-month period commencing on May 15 of the years set
forth below:
Year Redemption Price
---- ----------------
2002 .......................... 104.875%
2003 .......................... 103.250%
2004 .......................... 101.625%
2005 and thereafter ........... 100.000%
Notwithstanding the foregoing, at any time or from time to time
prior to May 15, 2000 the Company may redeem up to $42 million of the
aggregate original principal amount of the Securities with the cash proceeds
of one or more Equity Offerings received by or invested in, the Company at a
redemption price (expressed as a percentage of principal amount) of 109.750%
plus accrued and unpaid interest, if any, to the redemption date (subject to
the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided, however, that
after giving effect of such redemption, at least $78 million of the aggregate
principal amount of the Securities remain outstanding after each such
redemption.
At any time on or prior to May 15 2002, the Securities may also
be redeemed in whole, but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60
days' prior notice (but in no event more than 90 days after the occurrence of
such Change of Control) mailed by first-class mail to each Holder's
registered address, at a redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium as of, and accrued and unpaid
interest, if any, to, the date of redemption (subject to the right of holders
of record on the relevant record date to receive interest due on the relevant
interest payment date).
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
principal amount larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000. If money sufficient to pay the redemption price
of and accrued and unpaid interest in all Securities (or portions thereof) to
be redeemed on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Securities (or such
portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, unless the Company shall have exercised
its right to redeem the Securities pursuant to paragraph 5 of the Securities
in connection with such Change of Control, any Holder of Securities will have
the right to cause the Company to repurchase all or any part of the
Securities of such Holder at a repurchase price equal to 101% of the
principal
<PAGE>
4
amount thereof plus accrued interest to the date of repurchase as provided
in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as
defined in the Indenture, and the obligations of each Subsidiary Guarantor
under the Subsidiary Guarantee contained in Article XI of the Indenture are
subordinated to Guarantor Senior Indebtedness, as defined in the Indenture,
of such Subsidiary Guarantor. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid, and Guarantor
Senior Indebtedness of a Subsidiary Guarantor must be paid before such
Subsidiary Guarantor may make payments under the Subsidiary Guarantee. The
Company agrees, and each Securityholder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give them effect and appoints the Trustee as attorney-in-fact for
such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,OOO. A
Holder may transfer or exchange Securities in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange (i) any Securities selected for
redemption (except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) for a period beginning 15 days
before a selection of Securities to be redeemed and ending on the date of
selection or (ii) any Securities for a period beginning 15 days before an
interest payment date and ending on such interest payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the
owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must
look only to the Company and not to the Trustee for payment.
<PAGE>
5
12. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money
or U.S. Government Obligations for the payment of principal and interest on
the Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in outstanding principal amount of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in outstanding
principal amount of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Securityholder, the Company, the
Subsidiary Guarantors and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities or to
add additional covenants for the benefit of the Holders or surrender rights
and powers conferred on the Company, or to comply with any request of the SEC
in connection with qualifying the Indenture under the Act, or to make any
change that does not adversely affect the rights of any Securityholder, or to
provide for the issuance of Exchange Notes.
14. Defaults and Remedies
Under the Indenture, Events of Default include: (i) default for
30 days in payment of interest on the Securities when the same becomes due
and payable; (ii) default in payment of principal on the Securities when the
same becomes due and payable at maturity, upon redemption pursuant to
paragraph 5 of the Securities, upon required repurchase, upon declaration or
otherwise; (iii) failure by the Company to comply with other agreements in
the Indenture or the Securities, in certain cases subject to notice and lapse
of time; (iv) certain accelerations (including failure to pay within any
grace period after final maturity) of other Indebtedness of the Company or
its Subsidiaries if the amount accelerated (or so unpaid) exceeds $5 million
and such acceleration or failure to pay is not rescinded or cured within a
10-day period; (v) certain events of bankruptcy or insolvency with respect to
the Company or any Significant Subsidiary; (vi) certain final, non-appealable
judgments or decrees for the payment of money in excess of $5 million; and
(vii) the failure of any Subsidiary Guarantee to be in full force and effect
or the denial or disaffirmation by any Subsidiary Guarantor of its
obligations under the Indenture or the Securities in certain cases. If an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Securities may declare all the
Securities to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
<PAGE>
6
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Securityholders notice of any
continuing Default or Event of Default (except a Default or Event of Default
in payment of principal or interest) if it determines that withholding notice
is in their interest.
15. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its affiliates and may
otherwise deal with the Company or its affiliates with the same rights it
would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Securities
or the Indenture or for any claim based on, in respect of or by reason of
such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs
the certificate of authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entirety), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A
(=Uniform Gift to Minors Act).
<PAGE>
7
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as
printed on the Securities or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed
thereon.
20. Governing Law
This Security shall be governed by and construed in accordance
with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application
of the laws of another jurisdiction would be required thereby.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture
which has in it the text of this Security in larger type. Requests may be
made to: Windy Hill Pet Food Company, Inc., Two Maryland Farms, Suite 301,
Brentwood, Tennessee 37027. Attention: President.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ____________________________ Your Signature:_____________________
Signature Guarantee:___________________________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities
evidenced by this certificate occurring prior to the date that is three years
after the later of the date of original issuance of such Securities and the
last date, if any, on which such Securities were owned by the Company or any
Affiliate of the Company, the undersigned confirms that such Securities are
being:
CHECK ONE BOX BELOW:
1 |_| acquired for the undersigned's own account, without
transfer; or
2 |_| transferred to the Company; or
3 |_| transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
4 |_| transferred pursuant to an effective registration statement
under the Securities Act; or
5 |_| transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
6 |_| transferred to an "accredited investor" (within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
of 1933) that is an institutional investor and that has
furnished to the Trustee a signed letter
<PAGE>
2
containing certain representations and agreements (the form
of which letter appears as Exhibit C to the Indenture); or
7 |_| transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however, that if box (5),
(6) or (7) is checked, the Trustee or the Company may require, prior to
registering any such transfer of the Securities, in their sole discretion,
such legal opinions, certifications and other information as the Trustee or
the Company may reasonably request to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.
This certificate and the statements contained herein are made for the benefit
of the Company, the Guarantors, Wilmington Trust Company as Trustee, and
Chase Securities Inc. and Credit Suisse First Boston Corporation, the Initial
Purchasers of such Notes being transferred, and each of you are entitled to
rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding with respect to the materials covered hereby.
---------------------------------
Signature
Signature Guarantee:
- ---------------------------------- ---------------------------------
Signature
(Signature must be guaranteed)
- ------------------------------------------------------------------
<PAGE>
3
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease in Amount of increase in Principal Amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following officer of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the
amount in principal amount (must be integral multiple of $1,000): $
Date: ____________ Your Signature ___________________________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee:_________________________________________
(Signature must be guaranteed)
<PAGE>
EXECUTION VERSION
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement"), made and entered into
this 21st day of May, 1997, by and between Windy Hill Pet Food Company, Inc., a
Minnesota corporation ("Windy Hill"), and Feed-Rite (US) Animal Feeds, Inc., a
Minnesota corporation ("Feed-Rite").
W I T N E S S E T H:
WHEREAS, Windy Hill is comprised of two main divisions, the Pet Food
Division ("Pet Division") and the Animal Feed Division ("Feed Division"); and
WHEREAS, the Pet Division manufactures certain Pet Products that the
Feed Division purchases as a distributor to sell to its customers and the Feed
Division manufactures certain Feed Products that are purchased by the Pet
Division to sell as a distributor to its customers (collectively, the "sales
arrangement"); and
WHEREAS, Windy Hill and Feed-Rite have entered into an Asset
Purchase Agreement, dated as of April 25, 1997, whereby Feed-Rite shall acquire
from Windy Hill substantially all the assets and certain liabilities comprising
the Feed Division; and
WHEREAS, Windy Hill and Feed-Rite desire to continue the sales
arrangement after the sale and purchase contemplated by the Asset Purchase
Agreement.
NOW THEREFORE, for and in consideration of the premises and of the
covenants and conditions hereinafter set forth, the parties agree as follows:
1. Definitions.
1.1. "Distributor" shall mean the distributor of the other party's
Products.
1.2. "Feed Products" shall mean only those products manufactured and
packaged by Feed-Rite and listed on Exhibit A attached hereto. Windy Hill
acknowledges that Feed-Rite may produce or have available for marketing other
products that it will not include on Exhibit A.
1.3. "Pet Products" shall mean only those products manufactured and
packaged by Windy Hill and listed on Exhibit B attached hereto. Feed-Rite
acknowledges that Windy Hill may produce or have available for marketing other
products that it will not include on Exhibit B.
<PAGE>
1.4. "Products" shall mean the Pet Products and the Feed Products.
1.5. "Proprietary Information" shall mean any and all confidential
information now or hereafter owned or used by the parties, including but not
limited to all processes, formulas, know-how techniques, technical plans, sales
plans, marketing plans, strategies, customer lists and supplier lists relating
to the manufacture, marketing and sale of the Products.
1.6. "Seller" shall mean the party selling the Products to the
Distributor as provided in Section 2 of this Agreement.
1.7. "Trademarks" shall mean the marks and other designations listed
on Exhibit C attached hereto and as the same may be amended, in writing, by the
parties to include such other trademarks, service marks, brand names and other
designations as may hereafter be used by Parties in conjunction with the
distribution of the Products.
1.8. "Designated Territory" shall mean the shaded area shown on the
map of the contiguous 48 United States attached hereto as Exhibit D.
2. Mutual Appointment as Distributors; Grant of License and
Exclusivity.
2.1. Subject to the terms and conditions of this Agreement, Windy
Hill hereby appoints Feed-Rite, and Feed-Rite hereby accepts such appointment,
as the exclusive independent distributor of the Pet Products in the Designated
Territory during the Term, as defined below. Feed-Rite hereby acknowledges that
Windy Hill may appoint other distributors or dealers outside the Designated
Territory and, except as provided in Section 2.4 below, may engage in the
distribution and sale of the Pet Products within or without the Designated
Territory.
2.2. Subject to the terms and conditions of this Agreement, during
the Term, Windy Hill hereby grants to Feed-Rite a nonexclusive license to use
the Trademarks listed in Section I of Exhibit C attached hereto (the "Windy Hill
Trademarks") only on and in connection with the distribution and sale of Pet
Products purchased by Feed-Rite from Windy Hill pursuant to this Agreement in
the Designated Territory during the Term.
2.3. In consideration of the appointment of Feed-Rite as the
exclusive distributor of the Pet Products in the Designated Territory, Feed-Rite
agrees that during the Term it will not buy any extruded pet food intended for
consumption by dogs, cats or fish from any manufacturer or producer of such
products other than Windy Hill.
2.4. Windy Hill agrees that during the Term it will not distribute
or sell any Pet Product under the names "Lassy" or "Hubbard" or any trademark,
trade dress format,
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logo, trade name or other name which contains either "Lassy" or "Hubbard" or is
confusingly similar to such Trademarks to any customer other than customers to
which the Pet Division sold Pet Products prior to the date hereof within the
Designated Territory without the prior written consent of Feed-Rite, which
consent may not be unreasonably withheld or delayed.
2.5. Subject to the terms and conditions of this Agreement,
Feed-Rite hereby appoints Windy Hill, and Windy Hill hereby accepts such
appointment, as a non-exclusive independent distributor of the Feed Products
during the Term. Windy Hill hereby acknowledges that Feed-Rite may appoint other
distributors or dealers, and may otherwise engage in the distribution or sale of
the Feed Products.
2.6. Subject to the terms and conditions of this Agreement, during
the Term, Feed-Rite hereby grants to Windy Hill a nonexclusive license to use
the Trademarks listed in Section II of Exhibit C attached hereto (the "Feed-Rite
Trademarks") only on and in connection with the distribution and sale of Feed
Products purchased by Windy Hill from Feed-Rite pursuant to this Agreement.
2.7. In consideration of the covenant of Feed-Rite contained in
Section 2.4 of this Agreement, Windy Hill agrees that during the Term it will
not buy any animal feed products intended for consumption by ducks, geese,
pheasants, rabbits, chickens or horses from any manufacturer or producer of such
products other than Feed-Rite.
3. Trademark Ownership and Protection.
3.1. Each party acknowledges and agrees that, as between the
parties, Windy Hill is the sole and exclusive owner of the Windy Hill Trademarks
and Feed-Rite is the sole and exclusive owner of the Feed-Rite Trademarks.
Neither party shall acquire nor claim any ownership interest to the other
party's Trademarks by virtue of such party's license or use of such Trademarks
and all use by either party of the other party's Trademarks shall inure to the
benefit of the owner of such Trademarks. Furthermore, each party acknowledges
and agrees that (i) it shall have no rights to use the other party's Trademarks
in any manner whatsoever, except as expressly provided in this Agreement
including, but not limited to, in connection with any products other than the
Products purchased by such party from the other party pursuant to this
Agreement, and (ii) all rights, licenses and privileges not specifically granted
herein are excluded from this Agreement. Without limiting the foregoing, each
party acknowledges and agrees that the other party shall have the right to use,
license or otherwise exploit its Trademarks in any manner, in its sole
discretion, in connection with any products or services including, but not
limited to, the Products.
3.2. Neither party shall be permitted to repackage or otherwise
alter any Products bearing the other party's Trademarks it purchases from the
other party pursuant to this Agreement. Furthermore, each party shall cause to
appear on any other materials
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whatsoever on or in connection with which the other party's Trademarks are used,
such legends, markings and notices as such party may reasonably prescribe in
order to give appropriate and customary notices of any trademark or other
rights. To confirm compliance with the foregoing, each party shall submit to the
other copies of its sole use of the other party's Trademarks on promotional,
advertising or other materials for approval by such party prior to use.
3.3. Each party further acknowledges and agrees that it shall not
(i) use, register or attempt to register any trademark, trade dress format,
logo, trade name or other design which is confusingly similar to the other
party's Trademarks or (ii) contest or assist any other party in contesting the
validity of the other party's Trademarks or ownership thereof. In addition, each
party agrees to assist the other party, at the expense of the party seeking
assistance, in maintaining any registrations of such party's Trademarks and/or
in recording this Agreement with the appropriate governmental agencies.
Notwithstanding the foregoing, Windy Hill will not object to the use by
Feed-Rite of the name "Mother Hubbard" in connection with the distribution,
marketing and sale of dog food in Australia; provided, however, Windy Hill makes
no representation as to the availability of such name and shall have no
liability to Feed-Rite under Section 6 of this Agreement or otherwise arising
out of Feed-Rite's use of such name.
4. Sale of Products; Price;Payment.
4.1. The Distributor shall order the Products by telephone or by
delivery of a written purchase order to the Seller. Orders shall be binding upon
the Seller only upon its written acceptance of the order or upon shipment of the
Products. The Seller shall ship the Products to such locations of the
Distributor as the Distributor shall direct within the number of days after
placement of the order as has been the past practice of the Pet Division or Feed
Division, as applicable.
4.2. This Agreement sets forth the exclusive contract terms between
the parties relating to the Products and shall apply to all orders for the
Products. The Seller rejects any terms in any order forms submitted by the
Distributor or other documents of the Distributor that are different from or
additional to the provisions hereof and no such terms shall be binding upon the
Seller notwithstanding the Seller's acceptance and shipment of Products ordered
in the Distributor's orders containing such terms.
4.3. All Pet Products shall be sold F.O.B. such facility as Windy
Hill and Feed-Rite shall agree with respect to any purchase order, at a price
that is equal to the sum of (i) the market replacement cost to Windy Hill of
ingredients (including 6% shrinkage), the cost to Windy Hill of packaging
(including 1% shrinkage) and the actual cost to Windy Hill of baler and stretch
wrap charges, plus (ii) the toll rates per ton for such Pet Products shown on
Exhibit E attached hereto (the "Pet Product Price"). The toll rate shall
increase annually
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on each April 1 during the term hereof by the Consumer Price Index for All Urban
Consumers published by The Bureau of Labor Statistics of the U.S. Department of
Labor, Minneapolis-St. Paul for the twelve month period preceding such April 1.
4.4. All Feed Products shall be sold F.O.B. such facility as
Feed-Rite and Windy Hill shall agree with respect to any purchase order, at a
price equal to (i) the Manufactured Cost to Feed-Rite of the Feed Products (as
defined below), plus (ii) one-half of the Profits, as defined in paragraph (b)
below, generated by the sale of the Feed Products by Windy Hill (the "Profits,"
(i) and (ii) together the "Price"), with the Price payable as follows:
(a) Feed-Rite shall invoice Windy Hill as provided in Section
4.5 for the portion of the Price described in 4.4(i) above, which invoiced
amounts shall be payable as provided in Section 4.5 of this Agreement.
(b) In addition, within 30 days of the end of each calendar
quarter, Windy Hill shall provide an accounting, in accordance with generally
accepted accounting principles, of the Profits for the preceding quarter (the
"accounting"), accompanied by payment of the Profits payable to Feed-Rite for
such calendar quarter in accordance with Section 4.4(ii) above.
(c) For purposes of this Section 4.4, "Profits" shall mean
sales price, net of all allowances, discounts and promotions, minus the
Manufactured Cost already payable by Windy Hill pursuant to Section 4.4(a).
"Manufactured Cost" shall mean the market replacement cost to Feed-Rite of
ingredients (including 1% shrinkage), the cost to Feed-Rite of packaging
(including 1% shrinkage) and manufacturing overhead. Manufacturing overhead
shall be determined with reference to the plant in which the product is produced
and shall be allocated on a per unit basis consistent with prior years.
(d) Upon reasonable prior notice to Windy Hill, Feed-Rite
shall have the right to review Windy Hill's books and records in connection with
the accounting and the Pet Product Price and Windy Hill shall have the right to
review Feed-Rite's books and records in connection with the determination of
Manufactured Cost.
4.5. All sales pursuant to purchase orders will be invoiced to the
Distributor and, except as provided in Section 4.4(b), the terms of payment
shall be net within 15 days of the date of invoice by the Seller.
4.6. In the event of a conflict in terms specified in a purchase
order and any confirmation thereof by the Seller, the latter shall prevail. In
the event of a conflict in the terms of this Agreement and the Seller's
confirmation, the former shall prevail.
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4.7. The Distributor shall develop, subject to review by Seller and
Section 3.2 of this Agreement, miscellaneous sales materials pertaining to the
Products from time to time, and Distributor shall maintain an adequate supply of
such sales materials for use in its marketing efforts hereunder.
5. Covenants of Distributor.
5.1. Distributor shall use its best efforts to develop acceptance
and sales of the Products by actively promoting the Products, filling orders
promptly, and providing prompt and adequate product service, all at
Distributor's own expense. Distributor agrees to cooperate fully with Seller in
regard to all sales activities related to the Products.
5.2. (a) Without limiting the generality of the foregoing, Feed-Rite
agrees to purchase from Windy Hill at least 7,500 tons of Pet Products in each
year, beginning April 1 and ending March 31, prorated for any partial year,
during the term of this Agreement (the "Quota"), such minimum requirement to be
reviewed and adjusted from time to time during the continuation of this
Agreement by Windy Hill after consultation with Feed- Rite. To meet this
obligation, Feed-Rite shall at all times during the term of this Agreement
maintain an inventory of the Pet Products adequate in quantity to satisfy the
demand for the Pet Products. Feed-Rite shall furnish to Windy Hill, upon Windy
Hill's reasonable requests from time to time, complete information relating to
promotional, sales and service activities with respect to the Pet Products,
including information on competitive products which may come to Feed-Rite's
attention during the continuance of this Agreement. Feed-Rite shall cooperate
fully with Windy Hill in dealing with customer complaints concerning any of the
Pet Products and shall take action to resolve such complaints as may be
reasonably requested by Windy Hill.
(b) Without limiting the generality of the foregoing, Windy
Hill agrees to purchase from Feed-Rite at least 3,500 tons of the Feed Products
in each year, beginning April 1 and ending March 31, prorated for any partial
year, during the term of this Agreement (the "Quota"), such minimum requirement
to be reviewed and adjusted from time to time during the continuation of this
Agreement by Feed-Rite after consultation with Windy Hill. To meet this
obligation, Windy Hill shall at all times during the term of this Agreement
maintain an inventory of the Feed Products adequate in quantity to satisfy the
demand for the Feed Products. Windy Hill shall furnish to Feed-Rite, upon
Feed-Rite's reasonable requests from time to time, complete information relating
to promotional, sales and service activities with respect to the Feed Products,
including information on competitive products which may come to Windy Hill's
attention during the continuance of this Agreement. Windy Hill shall cooperate
fully with Feed-Rite in dealing with customer complaints concerning any of the
Feed Products and shall take action to resolve such complaints as may be
reasonably requested by Feed-Rite.
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<PAGE>
5.3. Distributor agrees to make and maintain in effect at all times
during the term of this Agreement the necessary registrations with any and all
federal, state and local governmental agencies, commercial registries, chambers
of commerce and other offices which may be required under law (including any
special registrations or notices particularly applicable to the sale of the
Products) in order for Distributor properly to conduct its commercial business
generally and in connection with this Agreement in particular.
5.4. Distributor shall refrain from doing any of the following
without the prior written consent of Seller:
(a) removing or altering, or permitting the removal or
alteration of, any patent numbers, trade names, trademarks, notices, serial
numbers, labels, tags or other identifying marks, symbols or legends of Seller
affixed to the Products or their packaging;
(b) using, or permitting the use of, the Trademarks, except as
contemplated by Sections 2 and 3 to the extent such use is necessary to effect
Distributor's obligations to promote and sell the Products;
(c) affixing, or permitting the affixing of, any of
Distributor's (or a subdistributor's, dealer's or representative's) own
trademarks, identifying marks, symbols or legends to the Products or their
packaging, or taking any other action which may be detrimental to Seller's
proprietary interests in the Products, the Trademarks or the Proprietary
Information or Seller's trademarks, service marks, trade names, corporate names,
patents, copyrights, or any other intellectual property rights used in
connection herewith, including, without limitation, disclosing to any third
party any Proprietary Information which Distributor may have gained as a result
of this contractual relationship with Seller;
(d) engaging in, or permitting any subdistributor, dealer or
representative to engage in, any trade practice which would create liability for
or otherwise injure the reputation of Seller or the Products (including, without
limitation, failing to use its best efforts to maintain the condition and
quality of the Products); or
(e) allowing the Products to be sold in such a manner so as to
permit or facilitate the distribution of the Products outside of Distributor's
existing dealer network in place as of the date hereof, or reasonable future
expansions thereon. Affiliation or other joint arrangements with networks of
other distributors or persons or companies related to Distributor shall not be
deemed to constitute reasonable future expansions of the existing dealer network
without prior consent of Seller.
5.5. Distributor shall make no warranties with respect to the
Products which exceed the warranty made by Seller to Distributor. Seller
reserves the right to change the warranty terms at its sole discretion from time
to time during the continuance of this
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<PAGE>
Agreement. Seller's sole warranties to Distributor are (i) that the Products
sold hereunder meet the guaranteed analysis printed on the product label used in
the packaging for such Products (the "Guaranteed Analysis"), which Seller may
change at its sole discretion form time to time, and (ii) that such Products are
fit to be fed to animals of the species referred in such product label, provided
such Products are fed to such animals in accordance with the instructions
included in such product label. EXCEPT AS EXPRESSLY SET FORTH ABOVE, SELLER
MAKES NO REPRESENTATION OR WARRANTY TO DISTRIBUTOR OF ANY KIND, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PRODUCTS, WHETHER AS TO MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OR
TRADE OR ANY OTHER MATTER. NO EMPLOYEE, REPRESENTATIVE OR AGENT OF SELLER HAS
ANY AUTHORITY TO BIND SELLER TO ANY AFFIRMATION, REPRESENTATION OR WARRANTY
EXCEPT AS STATED IN THIS WRITTEN WARRANTY POLICY.
5.6. If any lot of Product fails to meet the Guaranteed Analysis,
Distributor shall return such Product to Seller's plant, freight collect, and
Seller shall replace such Product at its expense. If any lot of Product returned
by Distributor is subsequently shown by independent laboratory analysis to meet
the Guaranteed Analysis, Distributor shall promptly reimburse Seller for any
freight or other charges incurred in the return of such Product.
5.7. Distributor shall make no false representation, or permit any
subdistributor, dealer or representative to make any false representation
regarding Seller or the Products in promoting the sales of the Products.
5.8. Distributor shall comply with, and ensure compliance of its
subdistributors, dealers and representatives with, all governmental regulations
applicable to Distributor's purchase, storage, recordkeeping and sale of the
Products. The purchase price of Products purchased by Distributor hereunder
shall be payable to Seller free and clear of and without deduction for, and
Distributor shall be solely responsible for and shall pay, any taxes assessed or
imposed upon the purchase of Products hereunder (other than taxes imposed upon
the income of Seller and feed tonnage taxes).
5.9. Neither Distributor nor any affiliate or subsidiary of
Distributor shall during the continuance of this Agreement or thereafter
disclose to any third party any Proprietary Information which Distributor may
have gained as a result of this contractual relationship with Seller. In
addition, Distributor agrees not to use or permit the use of, for any purpose
whatsoever during the continuance of this Agreement or thereafter, any and all
such Proprietary Information.
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<PAGE>
6. Indemnification.
6.1. Seller shall indemnify, hold harmless, and defend Distributor
against any claim made or action brought against Distributor by any person
arising out of personal injury or property damage alleging or based on a theory
that any Product delivered to Distributor is in breach of the warranty of Seller
set forth in Section 4.7 above; provided that Seller receives prompt notice of
said claim or action and is afforded the opportunity to defend against it and
further provided that such indemnification shall specifically exclude any claim,
action or other liability attributable to Distributor's handling of Product
after delivery to Distributor or any other act or omission of Distributors or
others acting on its behalf, including, without limitation, any common carrier
with which Product has been placed for shipment.
6.2. Distributor shall indemnify, hold harmless and defend Seller
against any claim made or action brought against Seller by any person arising
out of personal injury or property damage attributable to Distributor's handling
of Product after delivery to Distributor or any other act or omission of
Distributor or others acting on its behalf, including, without limitation, any
common carrier with which Product has been placed for shipment, provided that
Distributor receives prompt notice of said claim or action and is afforded the
opportunity to defend against it.
7. Insurance. Each party will carry and maintain product liability
insurance with an insurer acceptable to the other party with limits of liability
of at least $1,000,000 combined single limit and shall, upon request, provide to
the other party a Certificate of Insurance evidencing such coverage.
8. Force Majeure. The consequences, direct or indirect, of labor
troubles, fire, wind, earthquake, war, flood, shortage of materials or
transportation, unavailability of ingredients, or any other causes beyond the
reasonable control of Seller, shall excuse performance by Seller under this
Agreement to the extent to which such performance has been prevented by such
occurrence, and, without limiting the generality of the foregoing, Seller shall
not be deemed to be in breach of this Agreement thereby. In the event Seller
shall be so unable to perform any of its obligations as undertaken, it shall
promptly advise Distributor in writing of its inability to perform any of its
obligations as undertaken and of the expected duration of any such inability. If
Seller is unable to perform under this Agreement for more than 30 days as a
result of a force majeure event with respect to one of its facilities, and
Seller and Distributor have not agreed within such 30-day period that Seller may
substitute Products manufactured at another facility during the Distributor's
period of inability at a facility, Distributor may thereafter buy the amount of
Products that Seller is unable to provide from any other producer, manufacturer
or distributor; provided, however, that all such Products must meet the quality
standards and trademark usage requirements set forth in Section 3 of this
Agreement. Distributor shall submit a representative sample of all such
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products to Seller in advance of sale in order to enable Seller to confirm
compliance with the foregoing. Seller shall have the right to allocate Products
between its various distributors and customers during a period of shortages
without incurring any liability whatsoever to Distributor.
9. Term and Termination.
9.1. Term. This Agreement shall continue in force and effect for a
term of three (3) years commencing on the date hereof; provided, however, that
this Agreement shall at all times be subject to early termination as herein
provided.
9.2. Early Termination.
(a) Seller and Distributor may terminate this Agreement in whole or
in part at any time by mutual written agreement.
(b) Either party may terminate this Agreement by written notice to
the other party and/or, subject to the provisions of Section 10.8 hereof, seek
any legal or equitable remedy available to it if the other party breaches in any
material respect any substantive provision of this Agreement, provided, however,
if the breach is curable such notice shall not be effective unless and until
such breach remains uncured for a period of ten days after delivery of such
notice.
(c) Either party may terminate this Agreement by written notice to
the other party if any of the following events occurs:
(1) All or any substantial part of the other party's property
shall be condemned, seized or otherwise appropriated, or the custody or control
of such property shall be assumed by any person or agency acting or purposing to
act under authority of any government (de jure or de facto) or the other party
shall be prevented from exercising normal managerial control over all or any
substantial part of its property by any such person or agency;
(2) The other party shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator, (ii) be unable, or admit in
writing its inability, to pay its debts as they mature, (iii) make a general
assignment for the benefit of creditors; (iv) be adjudicated as bankrupt or
insolvent, or (v) file a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors or seeking to
take advantage of any insolvency law, or file an answer admitting the material
allegations of a petition filed against in any bankruptcy, reorganization or
insolvency proceeding, or take corporation action for the purpose of effecting
any of the foregoing; or
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(3) An order, judgment or decree shall be entered without the
application, approval or consent of the other party by any court of competent
jurisdiction, approving a petition seeking reorganization of such party or
appointment of a receiver, trustee or liquidator of such party or of all of any
substantial part of its assets.
9.3. Effect of Expiration or Termination. Following the expiration
of this Agreement, or the date upon which any earlier termination of this
Agreement is effective, Distributor shall promptly remove from all of its
materials and all commercial registries of any kind any and all reference to
Seller and the Products and to its acting as a distributor with respect to the
Products or on behalf of Seller, and any and all rights of Distributor under
this Agreement shall immediately revert to and vest in Seller. Distributor may
sell, subject to the terms of this Agreement, any Products remaining in
inventories following termination. Distributor shall also promptly return to
Seller any confidential or Proprietary Information relating to Seller or the
Products which Distributor has in its possession at the time of termination of
this Agreement, and shall also execute any and all assignments which Seller may
request in order fully to vest in Seller its interest relating to the Products.
Nothing in this Agreement shall be deemed to relieve Distributor of its
obligation to pay any invoices for Products outstanding on the date of the
expiration of this Agreement or the date upon which any earlier termination of
this Agreement is effective. Seller shall not, by reason of the expiration or
earlier termination of this Agreement, be liable to Distributor for
compensation, reimbursement, or damages either on account of present or
prospective profits on sales or anticipated sales, or on account of
expenditures, investments or commitments made in connection therewith or in
connection with the establishment, development or maintenance of the business or
goodwill of Distributor.
10. Miscellaneous.
10.1. Waiver. The failure of either party to this Agreement to
enforce at any time any of its provisions shall not be construed as a waiver of
such provision or of the right of such party thereafter to enforce the same
provision or provisions.
10.2. Notices. Any notice required to be given hereunder shall be
delivered personally to an officer of the applicable party, or sent by telecopy
or registered or certified mail at its address set forth below, or at such other
address as such party may hereafter designate as to the appropriate address for
the receipt of such notice:
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To Seller at:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, TN 37027-2487
Attention: Ray Chung
Telephone: 615-373-7774
Facsimile: 615-373-9152
To Distributor at:
Feed-Rite (US) Animal Feeds, Inc.
c/o Feed-Rite, Ltd.
17 Speers Road
Winnipeg, Manitoba
Canada R2J 1M1
Attention: M.E. Moloney
Telephone: 204-233-8418
Facsimile: 204-235-1260
10.3. Entire Agreement; Amendment. This Agreement, which may be
executed in duplicate originals, constitutes the entire agreement between the
parties with respect to the matters covered herein, and supersedes and is in
lieu of all existing agreements, arrangements or understandings among the
parties with respect to matters covered herein. This Agreement may be amended or
modified only by a written instrument executed by authorized representatives of
each of the parties.
10.4. Severability. If any part or provision of this Agreement is
judicially determined to be unenforceable, such part or provision shall be
considered severable, and the remaining parts and provisions shall continue in
full force and effect.
10.5. Assignment. Neither this Agreement nor any right, title,
interest or obligation hereunder may be assigned or otherwise transferred by
either party without the prior written consent of the other party. This
Agreement shall be binding upon and inure to the benefit of such permitted
assignees, transferees and other successors in interest of the parties, in the
event of an assignment or other transfer consistent with the provisions of this
Agreement.
10.6. Relationship; No Agency; Authorization. The relationship of
Seller and Distributor shall be that of seller and buyer, and this Agreement
shall in no way constitute or give rise to a partnership or joint venture
between the parties. Nothing herein shall be construed as granting either party
the power to act in the capacity as the other's agent.
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<PAGE>
Distributor covenants, represents and warrants that it has the requisite power
and authority to enter into this Agreement.
10.7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Minnesota.
10.8. Arbitration. Any dispute, claim or controversy arising out of
or in relation to this Agreement, or the interpretation or breach thereof, shall
be referred to in arbitration under the rules of the American Arbitration
Association. The place of arbitration shall be Minneapolis, Minnesota. Any
decision rendered pursuant to such arbitration shall be final and judgment may
be entered upon it by any court having jurisdiction. Nothing herein contained
shall bar either party from seeking equitable remedies or Seller from bringing
an action for collection of payments due under the terms of this Agreement, plus
any lost profits that arise from the failure to distribute the minimum
quantities as provided in Section 5.2, in a court of competent jurisdiction.
10.9. Limitation of Remedy. SELLER SHALL HAVE NO LIABILITY TO ANY
PERSON FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
DESCRIPTION, WHETHER ARISING OUT OF WARRANTY OR OTHER CONTRACT, NEGLIGENCE OR
OTHER TORT, OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Robert V. Dale
-------------------------------------
Name: Robert V. Dale
Title: President
FEED-RITE (US) ANIMAL FEEDS, INC.
By /s/ M.E. Moloney
-------------------------------------
Name: M.E. Moloney
Title: President
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EXHIBIT A
FEED PRODUCTS
JV Sprout Duck & Goose Feed
JV Sprout Game Bird Breeder
JV Sprout Game Bird Starter/Grower
JV Sprout Rabbit Grower/Breeder
JV Sprout Broiler Ration
JV Sprout Layer Ration
JV Sprout Chicken Starter/Grower
Country Prime Rabbit Pellets
Country Prime III Fiber Rabbit
18% Sprout HiFiber Rabbit 25#
18% Sprout HiFiber Rabbit 50#
JV Sprout Horse Food 50#
Country Prime Complete Pellet Horse
25# Sprout Rabbit
25# Country Prime Rabbit
50# Country Prime Rabbit
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EXHIBIT B
PET PRODUCTS
Hubbard Chunk Style
Hubbard Happy Hound
Hubbard Puppy
Hubbard High Performance
Hubbard Cat
Imperial Choice
Hubbard High Energy Dog
Hubbard Label Biscuits
Lassy 21% Protein
Purrfect
Royal Flush
Proclaim Dog
Proclaim Cat
Country Prime 26%
Sportsman Dog
Sportsman Cat
Hubbard Fish Food
Lassy Hi-Pro
Lassy Cat Food
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EXHIBIT C
TRADEMARKS
Section I. Windy Hill Trademarks
HUBBARD HAPPY HOUND
HUBBARD CAT STARS
HUBBARD HIGH ENERGY DOG FOOD
LASSY SELECT DOG FOOD
LASSY DOG FOOD
HUBBARD CHUNKS
SPORTSMAN DOG FOOD
SPORTSMAN CAT FOOD
PURRFECT CAT FOOD
LASSY CAT FOOD
LASSY ACTIVE
HUBBARD PUPPY GRO
HUBBARD HIGH PERFORMANCE
PROCLAIM
IMPERIAL CHOICE
COUNTRY PRIME
ROYAL FLUSH
HUBBARD BISCUITS
HUBBARD FISH FOOD
and any trade dress formats or
logos related to any of the above.
Section II. Feed-Rite Trademarks
None
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EXHIBIT D
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UNITED STATES OF AMERICA
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[Logo depicting map of the United States of America with shaded region]
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EXHIBIT E
PET PRODUCT TOLL RATES
Hubbard Chunk Style $75.50
Hubbard Happy Hound 84.00
Hubbard Puppy 84.00
Hubbard High Performance 136.00
Hubbard Cat 111.50
Imperial Choice 84.00
Hubbard High Energy Dog 136.00
Hubbard Label Biscuits 321.95
Lassy 21% Protein 75.50
Purrfect 111.50
Royal Flush 84.00
Proclaim Dog 131.00
Proclaim Cat 166.00
Country Prime 26% 84.00
Sportsman Dog 84.00
Sportsman Cat 111.50
Hubbard Fish Food 72.50
Lassy Hi-Pro 84.00
Lassy Cat Food 111.50
<PAGE>
EXECUTION VERSION
LICENSE AGREEMENT
AGREEMENT made as of this 21st day of May, 1997 by and between
FEED-RITE (US) ANIMAL FEEDS, INC., a Minnesota corporation (the "Licensee"), and
WINDY HILL PET FOOD COMPANY, INC., a Minnesota corporation ("Licensor").
W I T N E S S E T H:
WHEREAS, as of the date hereof, Licensee is purchasing certain
assets and properties of Licensor pursuant to that certain Asset Purchase
Agreement, dated April 25, 1997, by and among Licensee, Licensor and Windy Hill
Pet Food Acquisition Co. (the "Purchase Agreement");
WHEREAS, Licensor also desires to grant to Licensee and Licensee
desires to obtain the exclusive right and license to use certain of Licensor's
trademarks in connection with the manufacture and sale of livestock animal feed
and dietary supplements, subject in all respects to the terms and conditions set
forth below;
NOW, THEREFORE, in consideration of the rights and obligations set
forth herein and in the Purchase Agreement, the adequacy of which is hereby
acknowledged, the parties agree as follows:
1. Definitions.
(a) The term "Marks" shall refer to only the trademarks identified
on Schedule A, together with the trade dress and label designs utilized by
Licensor prior to the date of this agreement in connection therewith exclusively
in connection with Licensed Products.
(b) The term "Licensed Products" shall refer only to livestock and
equine animal feed and dietary supplements for livestock and equine animals.
(c) The term "Licensed Territory" shall refer only to the United
States and Canada.
2. License Grant.
(a) Subject to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee the exclusive, royalty-free, perpetual right and
license to use the Marks in the Licensed Territory only on and in connection
with the manufacture, distribution or sale of the Licensed Products, including,
but not limited to, on packaging, in trade materials, in print,
<PAGE>
television and video advertising and any and all other uses related to the
manufacture, distribution or sale of the Licensed Products.
(b) Licensee agrees that in the Licensed Territory it (i) will not
use, in any manner whatsoever, the Marks with any trademark owned by any entity
other than Licensor (except Licensee may use its name or its respective
successor's names on the packaging for and in connection with the marketing,
distribution, sale and promotion of the Licensed Products solely to identify
Licensee as the manufacturer or distributor of such Licensed Products) and (ii)
will not use, in any manner whatsoever, the Marks in connection with any
products other than the Licensed Products.
(c) Subject to the prior written approval of Licensor, such approval
not to be unreasonably withheld or delayed, Licensee may sublicense the right to
use the Marks in the Licensed Territory or utilize the services of third-party
manufacturers to produce Licensed Products to be sold by Licensee or its
approved sublicensees under the Marks; provided however, no consent of Licensor
is necessary to grant a sublicense to a parent or affiliate of Licensee or to
use a parent or affiliate of Licensee as a third-party manufacturer. Licensee
will assure that all sublicensees and third-party manufacturers comply with the
terms and provisions of this Agreement and, without limiting the foregoing, will
not use the Marks in any manner except as provided in this Agreement in
connection with the distribution of the Licensed Products in the Licensed
Territory. Furthermore, Licensee will not manufacture, sell or otherwise
distribute or permit any third party manufacturer or sublicensee to manufacture,
sell or otherwise distribute any products or other materials bearing the Marks
anywhere in the Licensed Territory which are not produced in compliance with the
standards and procedures set forth in Sections 3 and 4 below.
(d) The parties acknowledge that (i) Licensee shall have no rights
to the Marks in the Licensed Territory or to make, use or sell any products
utilizing the Marks in the Licensed Territory other than as expressly granted in
this Agreement and (ii) all rights, licenses and privileges not specifically
granted herein are excluded from this Agreement. Without limiting the foregoing
Licensee acknowledges and agrees that, as between Licensee (and its affiliates)
and Licensor, Licensor shall have the sole and exclusive right to use, license
and/or otherwise exploit the Marks throughout the Licensed Territory in
connection with any goods or services other than the Licensed Products.
3. Quality Standard; Inspections.
(a) It is acknowledged that the Marks indicate to the public that
products sold under the Marks are of a commercially consistent quality and
standard. To such end, Licensee shall maintain such quality standards for all
Licensed Products distributed under the Marks in the Licensed Territory and
materials associated therewith as the Licensor maintained for the Licensed
Products bearing the Marks (or products similar to such Licensed Products) prior
to the date of
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<PAGE>
this Agreement. Subject to Sections 5 and 6 below, Licensee shall take such
action as is reasonably necessary to maintain the quality, value and integrity
of the Marks. Without limiting the foregoing, Licensee represents, warrants and
agrees that all Licensed Products bearing the Marks and materials associated
therewith, shall be manufactured, marketed and distributed in material
compliance with all applicable laws, rules regulations and statutes.
(b) Upon request, Licensee shall furnish to Licensor a reasonable
number of representative production samples of Licensed Products bearing the
Marks in order for Licensee to assure itself that the quality control provisions
of this Agreement are being observed. In addition, upon introduction of a new
Licensed Product bearing any of the Marks, Licensee agrees that, without
request, it shall furnish to Licensor a reasonable number of representative
production samples of such Licensed Products.
(c) Licensor or its respective designees, shall have the right to
conduct annual inspections of the relevant portions of Licensee's manufacturing
facilities for compliance with the foregoing quality standards. Inspections also
may be conducted at any time when Licensor has a reasonable belief that there
are or may be quality problems with respect to Licensed Products bearing the
Marks. Any or all plant inspections shall be conducted only during regular
business hours and upon at least twenty-four (24) hours prior notice.
Notwithstanding such right of inspection, nothing herein shall relieve Licensee
from any liability or shift any liability to Licensor as a result of Licensee's
non-conformance with federal, state or local laws or regulations. Approval or
acquiescence by Licensor in connection with any examination, testing, or
inspection pursuant to this Section 3 shall not, in any manner, waive or limit
the other party's responsibility to comply with all relevant terms and
conditions of this Agreement and with all laws and regulations applicable to
Licensee's exercise of the rights granted by this Agreement.
4. Display; Legends.
(a) Licensee shall use each Mark only in the form in which it is
registered and shall not make any material changes to the graphic representation
of such Mark or the font or type face in which the Marks are portrayed without
Licensor's prior written consent, such consent not to be unreasonably withheld.
All approved new forms of display or other representations of any of the Marks
("Associated Marks") will be considered part of the Marks for purposes of this
Agreement. All Associated Marks shall be owned solely by Licensor and Licensor
may, or at the request of Licensee shall, apply to register the Associated Marks
in the Licensed Territory. Notwithstanding the foregoing, Licensee shall bear
all costs and expenses associated with the development, use and registration of
the Associated Marks, including but not limited to, determining such mark's
availability and registering such mark in the Licensed Territory.
(b) Licensee shall cause to appear on all Licensed Products and
other materials on or in connection with which the Marks are used, such legends,
markings and notices as
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Licensor may reasonably prescribe in order to give appropriate and customary
notices of any trademark or other rights.
(c) To confirm compliance with subsections (a) and (b) above,
Licensee shall submit copies of its use of the Marks, including any Associated
Marks, on packaging, labeling, promotional and advertising materials to Licensor
prior to use.
5. Trademark Ownership and Protection.
(a) Licensee acknowledges and agrees that Licensor is, and Licensor
or its successors or assigns shall remain, the owner of the Marks throughout the
Licensed Territory. Licensee shall acquire no ownership interest in the Marks in
the Licensed Territory or elsewhere through this Agreement or otherwise and all
use by Licensee of the Marks in the Licensed Territory shall inure to Licensor's
benefit. Licensee shall fully cooperate with Licensor, at Licensee's expense
except as otherwise provided in Section 6 below, in Licensor's efforts to
obtain, perfect and enforce its rights in the Marks. Licensee shall at any time
execute any documents reasonably required by Licensor to confirm Licensor's
ownership of all such rights in the Licensed Territory at Licensor's expense. In
the event that Licensee shall fail promptly to execute and return to Licensor
any documents reasonably required by Licensor to confirm Licensor's ownership of
such rights, Licensee hereby appoints Licensor as its attorney-in-fact for such
purpose (it being acknowledged that such appointment is irrevocable and coupled
with an interest) with full power of substitution and delegation. Licensor shall
supply Licensee with copies of any such documents promptly after execution.
(b) Licensee agrees that it shall not, in any country or
jurisdiction, register or attempt to register the Marks without the consent of
Licensor, such consent not to be unreasonably withheld or delayed, provided that
Licensee may register the Marks in connection with the Licensed Products in
Australia and New Zealand without such consent. Licensee further agrees that it
shall not (i) in any country or jurisdiction, use, register or attempt to
register any other trademark, trade dress format, logo, trade name or other
design which is confusingly similar to the Marks or (ii) in the Licensed
Territory, contest or assist any other party in contesting the validity of
Licensor's ownership of the Marks. Notwithstanding the foregoing, Licensor will
not object to the use by Licensee of the name "Mother Hubbard" in connection
with the distribution, marketing and sale of dog food in Australia; provided,
however, Licensor makes no representation as to the availability of such name
and shall have no liability to Licensee under Section 8 of this Agreement or
otherwise arising out of Licensee's use of such name.
6. Infringement Proceedings.
(a) During the term of this Agreement, Licensee shall notify
Licensor of any unauthorized uses of the Marks by any third party as promptly as
such matters come to Licensee's attention. Either Licensee or Licensor shall
have the right and discretion to bring
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<PAGE>
infringement or unfair competition proceedings involving the Marks in the manner
more specifically described below; provided, however, that each party covenants
and agrees to cooperate with and furnish full assistance to one another in
connection with the procurement, protection and maintenance of the Marks and
their rights associated therewith.
(b) Licensor shall have the initial right to determine whether or
not any demand, suit or other action shall be taken on account of or with
reference to any infringement or unfair competition in connection with the Marks
and shall have the right to take such action as it may determine. Licensee shall
not institute any suit or take any action on account of any such infringement or
unfair competition without first obtaining the express written consent of
Licensor to do so. Licensor's consent shall not be unreasonably withheld or
delayed. The parties agree to cooperate with each other in any manner which the
litigating party may reasonably request in connection with any such litigation;
provided, however, that the non-litigating party will be entitled to
reimbursement of its reasonable pre-approved expenses directly related to such
cooperation in excess of $ 5000.00. In all instances, the party commencing the
litigation shall have the right to employ counsel of its choosing and to direct
the handling of the litigation and the settlement thereof. Notwithstanding the
foregoing, no action may be settled by Licensee without the prior consent of
Licensor, which consent shall not be unreasonably withheld or delayed. All
amounts awarded as damages, profits or otherwise in connection with such
litigation shall be divided among the parties as their interests may appear.
Nothing herein shall be construed as imposing any duty or obligation upon
Licensor to take any action against any alleged infringer.
7. Termination.
(a) Notwithstanding anything herein to the contrary, Licensor shall
have the right to terminate this Agreement effective upon ninety (90) days
written notice to Licensee in the event Licensee commits a material breach of
this Agreement which is not cured to the reasonable satisfaction of Licensor
within such ninety (90) day notice period. In addition, Licensee's license with
respect to any particular Mark automatically shall be terminated in the event
Licensee ceases to use any Mark in connection with the manufacture, distribution
or sale of the Licensed Products in the ordinary course of business for a period
in excess of twenty-four (24) months. Immediately upon termination of this
Agreement, Licensee agrees to (i) destroy any molds, plates, packaging or
finished product bearing the Marks which are in its possession or control and
(ii) cease any and all use of the Marks.
(b) Licensee acknowledges that its failure to cease the manufacture,
sale, marketing, distribution or other use of the Marks upon the termination of
this Agreement or portion thereof will result in immediate and irreparable
damage to Licensor and the rights of any subsequent licensee of Licensor.
Licensee acknowledges and admits that there is no adequate remedy at law for
failure to cease such activities and Licensee agrees that in the event of such
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<PAGE>
failure, Licensor shall be entitled to injunctive relief and such other relief
as any court with jurisdiction may deem just and proper.
8. Indemnification. Licensee shall indemnify and agrees to defend
Licensor from any and all damages, including reasonable attorney's fees,
settlement costs but excluding any incidental or consequential damages or claims
for lost profits (collectively, "Damages") resulting from or arising out of the
manufacture, packaging, distribution, selling, handling, consumption or
marketing of Licensed Products by Licensee except to the extent such damages are
the result of or caused by the negligence of Licensor or its agents or
employees, the result of instructions or standards dictated by Licensor with
respect to the Licensed Products or the result of any of the Marks' infringing
the rights of a third party in the country in which the Mark at issue is
registered when used in accordance with this Agreement. Furthermore, each party
shall indemnify and agrees to defend the other party from any and all Damages
resulting from or arising out of any breach of any covenant or provision of this
Agreement. To facilitate the foregoing, each party shall provide the other with
reasonable notice of any such claims. The provisions of this Section 8 shall
survive the termination of this Agreement.
9. Insurance. Licensee shall maintain at its sole cost and expense,
at all times during the term of the Agreement a reasonably adequate products
liability insurance policy initially with limits of no less than One Million
Dollars ($1,000,000.00) per claim in the aggregate for personal injury with a
financially responsible insurance carrier naming Licensor as an additional
insured and providing Licensor with thirty (30) days notice of cancellation or
alteration. The existence of product liability insurance, however, shall not
mitigate, alter or waive the indemnity provisions of Section 8.
10. Confidentiality.
(a) During the term of this Agreement, the parties shall be
exchanging proprietary and/or confidential information relating to each of their
respective businesses and/or the manufacture and sale of their respective
products ("Confidential Information") with one another. For purposes of this
Agreement, Confidential Information shall not apply to information which: (i)
was publicly available at the time of the disclosure to the receiving party;
(ii) subsequently becomes publicly available through no fault of the receiving
party; (iii) is rightfully acquired by the receiving party, subsequent to
disclosure by the other party, from a third party who to the receiving party's
knowledge is not in breach of a confidential relationship with regard to such
information; or (iv) is independently developed by the receiving party solely
through the efforts of individuals who did not have access to the confidential
information.
(b) Unless otherwise provided, each party agrees not to disclose any
of the other parties' Confidential Information and not to use the Confidential
Information, except as provided for in this Agreement. Access to Confidential
Information disclosed under this Agreement shall be restricted to those
employees of the parties who have a need to know the
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<PAGE>
Confidential Information and have signed written nondisclosure and
confidentiality agreements.
11. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
permitted assigns. Notwithstanding the foregoing, except as specifically
provided in Section 2(c) hereof, neither party shall assign, transfer or
delegate any of its rights or obligations under this Agreement to any entity
which is not a parent or affiliate of the assigning party without the other
party's prior written approval and any such assignment, transfer or delegation
made without approval shall be void ab initio; provided, however, (i) Licensor
and Licensee shall be permitted to assign, transfer or delegate any of its
rights and/or obligations under this Agreement in connection with the sale of
all or part of its business to any third party without the consent of the other
party provided such third party expressly agrees to be bound by the terms and
conditions of this Agreement and (ii) Licensee shall be permitted to assign,
transfer or delegate any of its rights under this Agreement to any lender
providing financing to Licensee provided such assignment, transfer or delegation
is expressly subject to the terms and conditions of this Agreement.
12. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given upon receipt if it
is sent by facsimile or reputable express courier, and addressed or otherwise
sent to the intended recipient as set forth below:
To Licensor:
Windy Hill Pet Food Acquisition Co.
c/o Dartford Partnership, L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ray Chung
Facsimile: 415-982-3023
Telephone: 415-982-3019
With a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022-4873
Attention: Ann F. Chamberlain, Esq.
Facsimile: 212-750-9022
Telephone: 212-207-1200
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<PAGE>
To Licensee:
Feed-Rite, Ltd.
17 Speers Road
Winnipeg, Manitoba
Canada R2J 1M1
Attention: M.E. Moloney
Facsimile: 204-235-1260
Telephone: 204-233-8418
With a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
Attention: Michael Trucano, Esq.
Facsimile: 612-340-8827
Telephone: 612-340-2600
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address or facsimile number set forth
above by using any other means (including personal delivery, messenger service,
ordinary mail, or electronic mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any party may change the
address or facsimile number to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
13. No Joint Venture. Nothing herein contained shall be deemed to
create the relationship of partnership or joint venture between the parties.
Neither party shall have the right to incur any obligation to third parties
which shall be binding upon the other and neither party shall have any interest
whatever in the profits and liabilities of the other arising out of or resulting
from the subject matter of this Agreement.
14. Applicable Law. This Agreement shall be governed and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Minnesota.
The parties hereby irrevocably and unconditionally consent and submit to the in
personam jurisdiction of Minnesota courts over all matters relating to this
Agreement. Each party agrees that service of process in any action or proceeding
hereunder may be made upon such party by certified mail, return receipt
requested to the address for notice set forth herein. Each party irrevocably
waives any objection it may have to the venue
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<PAGE>
of any action, suit or proceeding brought in such courts or to the convenience
of the forum and each party irrevocably waives the right to proceed in any other
jurisdiction. Final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment, a
certified or true copy of which shall be conclusive evidence of the fact and the
amount of any indebtedness or liability of any party therein described.
15. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Entire Agreement. This Agreement contains the entire agreements
of the parties in regard to the subject matter hereof and supersede all prior
discussions, agreements and understandings of every kind between the parties and
may be changed only by a written document signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought. The waiver of any breach of any provision of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given and shall not operate or be construed as a waiver of any subsequent breach
hereof.
17. Severability. Each term and provision of this Agreement shall
constitute a separate and distinct undertaking, covenant, term and/or provision
hereof. If any provision of this Agreement shall be prohibited by or invalid in
any respect under applicable law, or otherwise determined to be unenforceable,
such provision shall be ineffective to the extent of such prohibition,
invalidity or unenforceability without invalidating the remainder of such
provision or the remaining provisions of this Agreement. If any term or
provision of this Agreement shall for any reason be held to be excessively broad
as to time, duration, activity or subject it shall be construed, by limiting and
reducing such provision, so as to be enforceable to the extent permitted under
applicable law as it shall then exist.
18. Rights Cumulative. Except as expressly provided in this
Agreement, and to the extent permitted by law, any remedies described in this
Agreement are cumulative and not alternative to any other remedies available at
law or in equity.
[Remainder of page left blank intentionally]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FEED-RITE (US) ANIMAL FEEDS, INC.
By /s/ M.E. Moloney
--------------------------------------
Name: M.E. Moloney
Title: President
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Robert V. Dale
--------------------------------------
Name: Robert V. Dale
Title: President
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<PAGE>
SCHEDULE A
MARK COUNTRY REG. NO.
HUBBARD United States 621,407
HUBBARD United States 641,332
HUBBARD Canada 431,913
H AND DESIGN United States 911,597
H AND DESIGN United States 914,461
HUBBARD SOW POWER United States 1,206,410
LASSY (STYLIZED) United States 525,450
SWEET LASSY United States 235,240
(BLOCK LETTERS)
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<PAGE>
GUARANTY AGREEMENT
Guaranty Agreement (the "Agreement") dated April 25, 1997, among
Feed-Rite Ltd., a Manitoba corporation (the "Guarantor"), Windy Hill Pet Food
Acquisition Co., a Minnesota corporation (the "Seller") and Windy Hill Pet
Food Company, Inc. a Delaware corporation ("Windy Hill").
W I T N E S S E T H:
WHEREAS, Feed-Rite (US) Animal Feeds, Inc., a Minnesota
corporation and wholly-owned indirect subsidiary of the Guarantor (the
"Purchaser"), the Seller and Windy Hill are contemporaneously with the
execution and delivery of this Agreement entering into an Asset Purchase
Agreement (the "Purchase Agreement") pursuant to which the Seller has agreed
to sell and the Purchaser has agreed to purchase, subject to the terms and
conditions of the Asset Purchase Agreement, the Business and the Transferred
Assets, as defined therein; and
WHEREAS, the Guarantor has agreed to guarantee performance by the
Purchaser of the Purchase Agreement in accordance with this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the Guarantor, the Seller and Windy Hill hereby
agree as follows:
1. Representations of the Guarantor. The Guarantor hereby
represents and warrants to the Seller and Windy Hill as follows:
1.1. The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the province of Manitoba and
has the corporate power and authority to own, lease and operate all of its
properties and assets and to carry on its business as it is now being
conducted.
1.2. The Guarantor has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement have been duly and
effectively authorized by the Guarantor. This Agreement constitutes the
legal, valid and binding obligation of the Guarantor, enforceable against it
in accordance with its terms.
1.3. Neither the execution and delivery of this Agreement by the
Guarantor, nor the performance by it of the obligations and covenants
contained herein, will conflict with or result in a breach of the articles or
certificate of incorporation or by-laws of the Guarantor, or require any
filing with, or consent or approval of any governmental authority having
<PAGE>
jurisdiction over any of the business or assets of the Guarantor, or violate
any statute, regulation, injunction, judgment or order to which the Guarantor
is subject, or result in a breach of, or constitute a default or an event
which, with the passage of time or the giving of notice or both would
constitute a default, which would give rise to a right of termination,
cancellation or acceleration, create any entitlement to any payment or
benefit, require the consent of any third party or result in the creation of
any lien on the assets of the Guarantor.
1.4. The Guarantor has received and reviewed a copy of the
Purchase Agreement.
2. Guaranty of Purchase Agreement.
2.1. The Guarantor hereby unconditionally and irrevocably
guarantees to the Seller and Windy Hill the prompt, full and complete
performance of all obligations and covenants of the Purchaser under the
Purchase Agreement (including payment of the amounts described in Section 2.5
of the Purchase Agreement), in accordance with the terms thereof.
2.2. If the Purchaser defaults in the performance of its
obligations or covenants under the Purchase Agreement according to their
terms, the Guarantor shall pay to the Seller, Windy Hill, their respective
successors, assigns and representatives (as defined in the Purchase
Agreement) all Damages (as defined in the Purchase Agreement) that such
persons are entitled to recover from the Purchaser by reason of such default.
2.3. The Guarantor agrees that this Agreement is and shall be an
open and continuing guaranty and all obligations and covenants to which it
applies or may apply shall be conclusively presumed to have been created in
reliance on this Agreement.
2.4. Except as provided in Section 2.7, until the obligations and
covenants of the Purchaser referred to in Sections 2.1 and 2.2 have been
satisfied and discharged, the occurrence of the following events shall not
discharge or impair the guaranty set forth herein.
(a) the waiver, compromise, settlement, release or termination of
any of the obligations or agreements of the Purchaser under the Purchase
Agreement;
(b) the extension of the time for performance of any of the
obligations or agreements of the Purchaser under the Purchase Agreement;
(c) the modification or amendment of any obligation or agreement
of the Purchaser set forth in the Purchase Agreement;
(d) the taking of, or the omission to take, any actions under or
referred to in the Purchase Agreement;
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<PAGE>
(e) any failure, omission or delay on the part of the Seller or
Windy Hill in enforcing, asserting or exercising any right, power or remedy,
whether or not conferred on the Seller or Windy Hill under the Purchase
Agreement; or
(f) any bankruptcy, insolvency, reorganization, liquidation or
similar proceeding affecting the Purchaser.
2.5. In the event of a default by the Purchaser in the
performance of any of its obligations or covenants under the Purchase
Agreement, the Seller or Windy Hill may proceed hereunder against the
Guarantor and the Seller and Windy Hill shall have, in their sole discretion,
the right to proceed first and directly against the Guarantor under this
Agreement without proceeding first or concurrently against the Purchaser or
exhausting any other remedies it may have. This is a guaranty of payment and
performance and not of collection.
2.6. The Guarantor shall have the full benefit of any defenses to
payment or performance that may be available to the Purchaser in respect of
the Purchaser's obligations to Windy Hill or the Seller under the Purchase
Agreement.
2.7. Notwithstanding any other provision of this Agreement, the
Guarantor's obligations under this Agreement shall automatically terminate
and this Agreement shall be null and void upon the closing of the purchase
and sale contemplated by the Purchase Agreement.
3. Miscellaneous.
3.1. The Guarantor hereby expressly waives notice in writing or
otherwise from Windy Hill and the Seller of their acceptance and reliance on
this Agreement. The Guarantor agrees to pay all reasonable costs, expenses
and fees, including all reasonable attorneys' fees, that may be incurred in
enforcing or attempting to enforce this Agreement following any default by
the Guarantor hereunder, whether the same may be enforced by suit or
otherwise.
3.2. This Agreement is entered into by the Guarantor for the
benefit of Windy Hill and the Seller, their successors and assigns.
3.3. This Agreement constitutes the entire agreement between the
parties hereto with respect to the matters provided for herein. No waiver,
change, amendment or discharge of any term or condition hereof and no consent
on the part of any party hereto shall be of any force or effect unless made
in writing and signed by a duly authorized agent of the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be
- 3 -
<PAGE>
deemed to or shall constitute a waiver of any other provisions hereof nor
shall such waiver constitute a continuing waiver.
3.4. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.
3.5. (a) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and mailed or
facsimiled or delivered by hand or courier service:
(i) If to the Seller or Windy Hill, to:
Windy Hill Pet Food Acquisition Co.
c/o Dartford Partnership, L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ray Chung
Facsimile: 415-982-3023
Telephone: 415-982-3019
With a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022-4873
Attention: Ann F. Chamberlain, Esq.
Facsimile: 212-750-9022
Telephone: 212-207-1200
(ii) If to the Guarantor, to:
Feed-Rite Ltd.
17 Speers Road
Winnipeg, Manitoba
Canada R2J 1M1
Attention: M.E. Moloney
Facsimile: 204-235-1260
Telephone: 204-233-8418
- 4 -
<PAGE>
With a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
Attention: Michael Trucano, Esq.
Facsimile: 612-340-2868
Telephone: 612-340-2600
(b) All notices and other communications required or permitted
under this Agreement which are addressed as provided in this Section 3.5 (i)
if delivered personally against proper receipt or by confirmed facsimile
transmission shall be effective upon delivery and (ii) if delivered (A) by
certified or registered mail with postage prepaid shall be effective five
business days or (B) by Federal Express or similar courier service with
courier fees paid by the sender, shall be effective two business days
following the date when mailed or couriered, as the case may be. Any party
hereto may from time to time change its address for the purpose of notices to
such party by a similar notice specifying a new address, but no such change
shall be deemed to have been given until it is actually received by the party
sought to be charged with its contents.
3.6. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute one and the same instrument.
3.7. The headings herein are for convenience reference only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed all as of the date first above written.
FEED-RITE LTD.
By /s/ M.E. Moloney
-------------------------------------
M.E. Moloney
President and Chief Executive Officer
- 5 -
<PAGE>
WINDY HILL PET FOOD ACQUISITION CO.
By /s/ Ray Chung
-------------------------------------
Ray Chung
Executive Vice President
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Ray Chung
-------------------------------------
Ray Chung
Executive Vice President
- 6 -
<PAGE>
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement, dated as of May 21, 1997, sets forth
the undertakings and commitments of Windy Hill Pet Food Company, Inc. ("Windy
Hill"), Windy Hill Pet Food Acquisition Co. ("Subsidiary") and Feed-Rite (US)
Animal Feeds, Inc. ("Feed-Rite") which have been made to facilitate the closing
of the transactions contemplated by the Asset Purchase Agreement, dated April
25, 1997, among Windy Hill, Subsidiary and Feed-Rite (the "Agreement").
For good and valuable consideration, Windy Hill and Feed-Rite agree
as follows:
1. California Sales Tax. Based on the parties' mutual determinations
that the purchase by Feed-Rite of the assets of Windy Hill's Stockton,
California animal feed facility (the "Assets") may be exempt from the imposition
of California sales tax by reason of the "occasional sale" exemption set forth
in the California Sales Tax Act, Feed-Rite and Windy Hill do not intend to file
a Sales Tax Report with the State of California relative to the sale of the
Assets. If it is subsequently determined that the sale of the Assets to
Feed-Rite is subject, in whole or in part, to sales tax imposed by the State of
California, or any subdivision thereof, Windy Hill and Feed-Rite will each pay
one-half of any such sales tax liability. This commitment shall continue in full
force and effect until such time as the collection of sales taxes is precluded
by the applicable statute of limitations and shall not be subject to any
indemnification limitations imposed by Article 11 of the Agreement.
2. Ohio Transportation Equipment. Windy Hill represents to Feed-Rite
that (i) the motor vehicles and other transportation equipment listed on the
attached exhibit are owned by PBH Transportation, Inc., a Minnesota corporation
("PBH"), (ii) all of the outstanding shares of capital stock of PBH are owned by
Hubbard Milling Company; (iii) no options, warrants or other rights to acquire
any equity interests in PBH are outstanding, and (iv) PBH has no liabilities or
other obligations of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability, other than liabilities that would be Assumed Liabilities, as defined
in the Agreement. At the Closing, Windy Hill will assign and transfer to
Feed-Rite all of the outstanding shares of capital stock of PBH and such shares
shall constitute Transferred Assets for all purposes of the Agreement.
Windy Hill shall indemnify Feed-Rite and its successors and assigns,
against any Damages incurred by Feed-Rite which are caused by or arise out of
any breach of any representation or warranty of Windy Hill set forth in this
Section 2. This indemnification commitment shall not be subject to any
indemnification limitations imposed by Article 11 of the Agreement.
For purposes of this Section 2, the terms "Damages" and
"Liabilities" shall have the meanings ascribed to them in the Agreement.
<PAGE>
3. Alexandria, Minnesota Leased Facilities. Feed-Rite hereby waives
its right under Section 8.4 of the Agreement to require Windy Hill to deliver to
Feed-Rite, prior to the Closing Date, assignments of (and Landlord's Consents
to) the two separate real estate leases (the "Leases") with the Soo Line
Railroad (the "Railroad") which constitute Material Contracts under the
Agreement, subject to the following terms and conditions:
(a) Windy Hill will make the properties and facilities subject to
the Leases (the "Properties") available to Feed-Rite for use in the operation of
the Business subsequent to the Closing Date without any lease payments (other
than reimbursement of lease payments owing by Windy Hill to the Railroad).
(b) Feed-Rite shall use commercially reasonable efforts to enter
into new lease agreements with the Railroad for the Properties prior to July 30,
1997, on substantially the same terms and conditions as are set forth in the
Leases. Windy Hill will cooperate with Feed-Rite in its efforts to obtain new
lease agreements for the Properties.
(c) In the event that (i) Feed-Rite is not able to enter into new
lease agreements for the Properties that are consistent with the Leases, and
(ii) the Railroad terminates the Leases and forces Feed-Rite to discontinue its
Business operations on the Properties, Windy Hill shall reimburse Feed-Rite for
the costs incurred by Feed-Rite in dismantling and moving the personal
properties used in the operation of the Business on the Properties to another
location and installing them at the new location.
4. ConAgra Feed Agreement. Windy Hill acknowledges that it has not
obtained and delivered to Feed-Rite (i) an assignment of its rights under a Feed
Agreement, dated March 28, 1994 (the "Feed Agreement") between ConAgra, Inc.
("ConAgra") and Hubbard Milling Company (the "Assignment"), or (ii) the consent
of ConAgra to such an assignment (the "Consent"). Feed-Rite hereby waives its
right under Section 8.4 of the Agreement to receive the Assignment and the
Consent from Windy Hill prior to the Closing, subject to the following terms and
conditions:
(a) Subsequent to the Closing, Feed-Rite shall use reasonable
efforts to attempt to secure the Consent from ConAgra, but shall not be required
to incur any out-of-pocket expenses in making such efforts.
(b) If Feed-Rite is successful in obtaining the Consent, Windy Hill
shall execute and deliver the Assignment to Feed-Rite.
(c) Pending receipt of the Consent and as contemplated by Section
3.3 of the Agreement, Windy Hill shall implement such arrangements for the
benefit of Feed-Rite as shall provide for Feed-Rite the benefits that would
otherwise be available to Feed-Rite under the Feed Agreement, and Feed-Rite
shall cooperate with Windy Hill in implementing such arrangements and in
otherwise enabling Windy Hill to satisfy its obligations under the Feed
Agreement.
- 2 -
<PAGE>
5. Shipshewana Storm Damage. Windy Hill and Feed-Rite acknowledge
that the Shipshewana, Indiana animal feed plant suffered storm damage to its
office and production facilities on May 18, 1997, and that the extent of that
damage and the costs of necessary repairs and replacement have not yet been
determined. To enable the parties to proceed with the closing on a timely basis,
Feed-Rite shall withhold $100,000 of the aggregate purchase price of the
Transferred Assets and shall make payment of such withheld amount to Windy Hill
after all repairs to the facility and/or replacement of damaged assets has been
completed. It is the intention of Windy Hill and Feed-Rite that the Shipshewana
facilities will be restored to the conditions they were in prior to suffering
such storm damage without cost to Feed-Rite and that any insurance claim
proceeds not used in repairing and/or replacing such facilities shall be
retained by Windy Hill. Feed-Rite and Windy Hill will cooperate in effecting the
repairs to such facilities and replacement of any damaged assets.
IN WITNESS WHEREOF, this Memorandum of Agreement has been executed
by Windy Hill, Feed-Rite and Subsidiary as of the date set forth in the first
paragraph.
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Ray Chung
----------------------------------------
Name: Ray Chung
Title: Executive Vice President
WINDY HILL PET FOOD ACQUISITION CO.
By /s/ Ray Chung
----------------------------------------
Name: Ray Chung
Title: Executive Vice President
FEED-RITE (US) ANIMAL FEEDS, INC.
By /s/ M.E. Maloney
----------------------------------------
Name: M.E. Maloney
Title: President
- 3 -
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
FA280 DATE 05/13/97 COMPANY 20 -- HUBBARD MILLING COMPANY
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- HUBBARD MILLING COMPANY
ASSET TYPE/SUBTYPE : AUTOS /
ASSET COMP ASSET- IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
<S> <C> <C> <C> <C> <C> <C> <C>
86090 -000 A QTY: 1
1986 CHEVY 3/4 TON PICKUP
*BOOK BASIS 03/02/92 48 0.0 STL 0.00 3000.00 0.00 0.00 0.00 3000.00
*** ASSET STATUS ACTIVE TOTALS
*BOOK BASIS 0.00 3000.00 0.00 0.00 0.00 3000.00
*** ASSET TYPE AUTOS TOTALS
*BOOK BASIS 0.00 3000.00 0.00 0.00 0.00 3000.00
ASSET TYPE/SUBTYPE : HNDLG /
140804 -000 A QTY: 1
#804701 1990 INTL TRACTOR
*BOOK BASIS 01/02/90 96 8.0 STL 0.00 62335.30 5194.61 0.00 7791.91 57140.69
140876 -000 A QTY: 1
#537 VAN TRAILER
*BOOK BASIS 06/01/94 72 37.0 STL 0.00 5500.00 2826.38 0.00 916.67 2673.62
140877 -000 A QTY: 1
#527 VAN TRAILER
*BOOK BASIS 06/01/94 72 37.0 STL 0.00 5500.00 2826.38 0.00 916.67 2673.62
140878 -000 A QTY: 1
#124 CONVERTIBLE HOPPER
*BOOK BASIS 06/01/94 60 25.0 STL 0.00 22900.00 9541.67 0.00 4580.00 13358.33
140887 -000 A QTY: 1
#159 1994 PACER B/B TRAILER
*BOOK BASIS 12/01/94 60 31.0 STL 0.00 50571.91 26128.83 0.00 10114.38 24443.08
140895 -000 A QTY: 1
1989 GMC 7000 YARD TRK 2 AXLE
*BOOK BASIS 03/15/97 60 34.0 STL 0.00 7936.00 4497.07 0.00 1587.20 3438.93
140910 -000 A QTY: 1
#163 1996 WARREN B/B TRAILER
*BOOK BASIS 02/09/96 60 45.0 STL 0.00 46317.00 34737.75 0.00 9263.40 11579.25
40035 -000 A QTY: 1
UNIT 35 1972 TRAILMOBLE VAN
*BOOK BASIS 03/02/92 48 0.0 STL 0.00 500.00 0.00 0.00 0.00 500.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FA280 DATE 05/13/97 COMPANY 20 -- HUBBARD MILLING COMPANY PAGE 2
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- HUBBARD MILLING COMPANY
ASSET TYPE/SUBTYPE : HNDLG /
ASSET COMP ASSET- IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
<S> <C> <C> <C> <C> <C> <C> <C>
40039 -000 A QTY: 1
UNIT 39 1984 HENDERSON TRAILER
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 9000.00 0.00 0.00 0.00 9000.00
40069 -000 A QTY: 1
UNIT 69 83 HENDERSON TRAILER
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 7500.00 0.00 0.00 0.00 7500.00
40120 -000 A QTY: 1
UNIT 120 1989 BROWN VAN
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 12000.00 0.00 0.00 0.00 12000.00
40121 -000 A QTY: 1
UNIT 120 1989 BROWN VAN
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 12000.00 0.00 0.00 0.00 12000.00
40122 -000 A QTY: 1
#122-1988 WILSON HOPPER TRLR
*BOOK BASIS 05/11/92 48 0.0 STL* 0.00 24500.00 0.00 0.00 0.00 24500.00
40123 -000 A QTY: 1
UNIT 123 1989 WILSON TRAILER
*BOOK BASIS 02/09/93 48 0.0 STL 0.00 23200.00 0.00 0.00 4350.00 23200.00
40127 -000 A QTY: 1
UNIT 127 1990 BROWN VAN
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 13000.00 0.00 0.00 0.00 13000.00
40128 -000 A QTY: 1
UNIT 128 1991 BROWN TRAILER
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 25000.00 0.00 0.00 0.00 25000.00
40156 -000 A QTY: 1
#156 1976 HENDERSON TRAILER
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40160 -000 A QTY: 1
#160 1984 HENDERSON TRAILER
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 10400.00 0.00 0.00 0.00 10400.00
40162 -000 A QTY: 1
#162 1980 HENDERSON TRAILER
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 7800.00 0.00 0.00 0.00 7800.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FA280 DATE 05/13/97 COMPANY 20 -- HUBBARD MILLING COMPANY PAGE 3
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- HUBBARD MILLING COMPANY
ASSET TYPE/SUBTYPE : HNDLG /
ASSET COMP ASSET- IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
<S> <C> <C> <C> <C> <C> <C> <C>
40816 -000 A QTY: 1
UNIT 816 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40892-1 -000 A QTY: 1
#892 UNLOADING EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 520.00 0.00 0.00 0.00 520.00
40949 -000 A QTY: 1
UNIT 949 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40949-1 -000 A QTY: 1
1988 FREIGHTLINER TRACTOR #269
*BOOK BASIS 03/16/92 48 0.0 STL* 0.00 23381.18 0.00 0.00 0.00 23381.18
40950 -000 A QTY: 1
UNIT 950 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40951 -000 A QTY: 1
UNIT 951 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40951-1 -000 A QTY: 1
1988 FREIGHTLINER TRACTOR #273
*BOOK BASIS 03/16/92 36 0.0 STL* 0.00 23381.18 0.00 0.00 0.00 23381.18
40952 -000 A QTY: 1
UNIT 952 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40953 -000 A QTY: 1
UNIT 953 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 500.00 0.00 0.00 0.00 500.00
40971 -000 A QTY: 1
1995 FREIGHTLINER TRACTOR #971
*BOOK BASIS 08/10/94 72 39.0 STL 0.00 68667.15 37194.74 0.00 11444.52 31472.32
*** ASSET STATUS ACTIVE TOTALS
*BOOK BASIS 0.00 471409.72 122947.40 0.00 50964.75 348462.32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FA280 DATE 05/13/97 COMPANY 20 -- HUBBARD MILLING COMPANY PAGE 4
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- HUBBARD MILLING COMPANY
ASSET TYPE/SUBTYPE : HNDLG /
ASSET COMP ASSET IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
<S> <C> <C> <C> <C> <C> <C> <C>
140310 -000 F QTY: 1
#593 79 DORSEY VAN
*BOOK BASIS 04/01/84 B4 0.0 STL 0.00 8525.80 0.00 0.00 0.00 8525.80
*** ASSET STATUS FULLY DEPR TOTALS
*BOOK BASIS 0.0 8525.80 0.00 0.00 0.00 8525.80
*** ASSET TYPE HNDLG TOTALS
*BOOK BASIS 0.0 479935.52 122947.40 0.00 50964.75 356988.12
*** PROCESS LEVEL 20177 TOTALS
*BOOK BASIS 0.0 482935.52 122947.40 0.00 50964.75 359988.12
*** COMPANY 20 TOTALS
*BOOK BASIS 0.0 482935.52 122947.40 0.00 50964.75 359988.12
</TABLE>
<PAGE>
ASSIGNMENT OF TRADEMARKS
WHEREAS, Windy Hill Pet Food Company, Inc., a Minnesota
corporation formerly known as Hubbard Milling Company, whose principal
address is Two Maryland Farms, Suite 301, Brentwood, Tennessee 37037
(hereinafter "Assignor") is the owner of and has adopted, used and is
licensing or otherwise using the names, tradenames and trademarks identified
on Schedule A, including any trade dress or label designs related thereto
(hereinafter, collectively referred to as the "Marks"); and
WHEREAS, Feed-Rite (US) Animal Feeds, Inc., a Minnesota
corporation, whose principal address is c/o Feed-Rite, Ltd., 17 Speers Road,
Winnipeg, Manitoba, Canada R2J 1M1 (hereinafter, "Assignee") desires to
acquire the Marks and any applications and registrations therefor, including
the registrations and/or pending applications identified on Schedule A and
all renewals and extensions thereof;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Assignor does hereby sell,
assign, transfer and convey unto Assignee all of Assignor's right, title and
interest in and to the Marks including, without limitation, any and all
registrations and/or pending applications therefor, including the
applications and registrations identified on Schedule A, together with that
part of the goodwill of the business associated with the Marks and which is
symbolized by the Marks.
Assignor further sells, assigns, transfers and conveys to
Assignee the entire right, title and interest in and to any and all causes of
action and rights of recovery for past infringement of the Marks.
Assignor agrees to execute and deliver, at the request of the
Assignee, such additional papers, instruments and assignments, as the
Assignee may reasonably require in order to vest Assignor's right, title and
interest in and to the Marks in the Assignee and/or to carry out the intent
of the Assignment.
The terms, covenants and provisions of this Agreement shall inure
to the benefit of Assignee, its successors, assigns and/or legal
representatives, and shall be binding upon Assignor, its successors, assigns
and/or other legal representatives.
<PAGE>
IN WITNESS WHEREOF, Assignor has executed this Assignment this
21st day of May, 1997.
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Ray Chung
------------------------------
Ray Chung
Executive Vice President
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 21st day of May, 1997, before me personally came RAY
CHUNG to me known, who being by me duly sworn did depose and say that he is
the Executive Vice President of Windy Hill Pet Food Company, Inc., the
corporation described in and which executed the foregoing Assignment of
Trademarks, and that he signed his name thereto by the consent of the order
the Board of Directors of said Corporation.
/s/ Thomas Kollar
--------------------------
NOTARY PUBLIC
[NOTARY SEAL]
- 2 -
<PAGE>
SCHEDULE A
1. U.S. Registered Marks
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
AMINO SCIENCE
United States 74/487,293 1,946,051 REGISTERED.
(02/07/94) (01/02/96)
APPETIZER
United States 74/404/977 1,885,534 REGISTERED.
(06/24/93) (03,21/95)
ASCEND
United States 74/621,757 1,937,684 REGISTERED.
(01/17/95) (07/16/96)
BACON BLEND
United States 74/078,670 1,647,586 REGISTERED.
(07/16/90) (06/11/91)
BEEF BRICKLE
United States 74/078,667 1,647,584 REGISTERED.
(07/16/90) (06/11/91)
BEEF-YX
United States 74/497,702 1,894,794 REGISTERED.
(03/07/94) (05/23/95)
BEEF SPARK
United States 73,484,235 1,356,178 REGISTERED.
(06/08/84) (08/27/85)
BEEF TECH
United States 73/707,356 1,505,543 REGISTERED.
(01/25/88) (09/27/88)
BIG H FEEDS and Design
United States 71/670,285 607,741 RENEWED.
(07/20/54) (06/21/55)
BLUE RIBBON
United States 74/078,665 1,707,720 REGISTERED.
(07/16/90) (08/18/92)
BP/TMR
United States 74,078,668 1,647,585 REGISTERED.
(07/16/90) (06/11/91)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
BRIGADE
United States 74/460,836 1,915,780 REGISTERED.
(10/18/93) (08/29/95)
BRUNO'S BEST
United States 74/149,974 1,686,624 REGISTERED.
(03/22/91) (05/12/92) Partial Section 2(f).
BUTCHER
United States 74/078,664 1,650,291 REGISTERED, Section 8 &
(07/16/90) (07/09/91) 15 accepted.
COMPLEMIX
United States 71/539,722 539,374 RENEWED.
(12/21/49) (03/13/51)
CREEP-N-WEAN
United States 73/616,414 1,474,385 REGISTERED, Section 8 &
(08/25/86) (01/26/88) 16 accepted.
CRYSTALYX
United States 73/133,190 1,089,036 REGISTERED.
(07/07/77) (04/11/78)
DAKOTA GOLD
United States 74/590,036 1,994,116 REGISTERED.
(10/24/94) (08/13/96)
DAIRY-LYX
United States 74,497,580 1,895,832 REGISTERED.
(03/07/94) (05/30/95)
EQUINE LMT
United States 74/540,574 1,942,236 REGISTERED.
(06/21/94) (12/19/95)
EQUI-STAR
United States 74/080,760 1,646,999 REGISTERED.
(07/23/90) (06/04/91)
FARM-LYX
United States 74/677,891 2,034,438 REGISTERED.
(05/22/95) (01/28/97)
FAST START
United States 73/806,632 1,623,232 REGISTERED.
(06/14/89) (11/20/90)
FEED BP and Design
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
United States 74/079,536 1,678,742 REGISTERED.
(07/16/90) (03/10/92)
FESCUE-LYX
United States 74/149,972 1,691,139 REGISTERED.
(03/22/91) (06/09/92)
FIRST COURSE
United States 74/557,659 2,006,747 REGISTERED.
(08/05/94) (10/08/96)
FORMULA 2000
United States 74/246,626 1,909,112 REGISTERED.
(02/18/92) (08/01/95)
GAIN XPRESS
United States 74/078,669 1,679,152 REGISTERED.
(07/16/90) (03/17/92)
GOLD METAL
United Slates 74/078,666 1,650,292 REGISTERED. Section 8 &
(07/16/90) (07/09/91) 15 accepted.
HEADS-UP
United States 73/283,568 1,178,395 REGISTERED.
(10/27/80) (11/17/81) Section 8 & 15 accepted
HI-LEAN
United States 74/389,048 1,824,872 REGISTERED.
(05/12/93) (03/08/94)
HI-WEIGH 45 and Design
United States 74/234,888 1,716,272 REGISTERED.
(01/03/92) (09/15/92)
IONO-LYX
United States 74/675,033 2,034,426 REGISTERED.
(05/17/95) (01/28/97)
LEAN BEEF
United States 72/357,363 936,864 RENEWED. Supplemental
(04/20/70) (06/27/72) Register.
LEAN CUT
United States 72/262,169 843,574 REGISTERED.
(01/09/67) (11/29/94)
LEAN ERA
United States 74/473,453 1,864,871 REGISTERED.
(12/27/93) (11/29/94)
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
LEAN EXPRESSION
United States 74/212,744 1,702,807 REGISTERED.
(10/15/91) (07/28/92)
LEAN START
United States 74/647,587 2,032,835 REGISTERED.
(03/16/95) (01/21/97)
LES
(Stylized)
United States 73/415,520 1,295,572 REGISTERED, Section 8 &
(03/02/83) (09/18/84) 15 accepted.
LITTER AID
United States 73/668,932 1,479,868 REGISTERED.
(06/29/87) (03/08/88)
LITTER BUILDER
United States 73/787,126 1,572,830 REGISTERED. Section 8 &
(03/17/89) (12/26/89) 15 accepted.
MAX-E-LAC
United States 74/391,448 1,959,164 REGISTERED.
(05/17/93) (02/27/96)
MILK FLAKES
United States 74/696,089 2,042,759 REGISTERED.
(07/03/94) (03/11/97)
MOR-LEAN
United States 74/212,743 1,765,505 REGISTERED.
(10/15/91) (04/20/93)
MULTUM
United States 74/377,816 1,855,075 REGISTERED.
(04/12/93) (09/20/94)
NU-TECH
United States 73/707,357 1,506,770 REGISTERED. Section 8 &
(01/25/88) (10/04/88) 15 accepted.
NUTRIBITS
United States 74/187,503 1,763,987 REGISTERED.
(07/22/91) (04/13/93)
NUTRI-LEAN
United States 73/668,975 1,478,930 REGISTERED. Section 8 &
(06/29/87) (03/01/88) 15 accepted.
NUTRI PREME
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
United States 73/703,724 1,501,554 REGISTERED. Section 8 &
(01/04/88) (08/23/88) 15 accepted.
OPTICARE
United States 73/740,556 1,544,073 REGISTERED. Partial
(07/18/88) (06/20/89) Section 8 accepted.
OPTI-PAK
United States 73/623,112 1,436,608 REGISTERED. Section 8 &
(09/30/86) (04/14/87) 15 accepted.
PEDI-BAC PACK
United States 74/216,326 1,706,222 REGISTERED.
(10/28/91) (08/11/92)
PHASE FEEDING
United States 73/094,433 1,069,998 REGISTERED.
(07/23/76) (07/19/77) Section 8 & 15 accepted.
PIG-NITION
United States 73/283,568 1,178,395 REGISTERED.
(10/27/80) (11/17/81) Section 8 & 15 accepted.
POPPER
United States 72/445,841 982,955 RENEWED.
(01/12/73) (04/30/74)
POWER CHAMP
United States 74/320,947 1,930,396 REGISTERED.
(10/08/92) (10/31/95)
POWER LINE
United States 75/002,470 2,013,554 REGISTERED.
(20/06/95) (11/05/96)
POWER PAX
United States 74/078,613 1,676,510 REGISTERED.
(07/16/90) (02/25/92)
PRO-GOLD
United States 74/590,034 2,013,056 REGISTERED.
(10/24/94) (11/05/96)
PROFIFIC SOW CONCENTRATE
United States 74/111,749 1,678,744 REGISTERED.
(11/02/90) (03/10/92)
PROTECTED PROTEIN
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
United States 73/299,413 1,196,562 REGISTERED.
(03/02/81) (05/25/82) Supplemental Register.
section 8 accepted.
PROVICO and Design
United States 71/456,742 400,885 RENEWED.
(11/11/42) (04/06/43)
PROVICO-BIG H
United States 74/300,204 1,764,016 REGISTERED.
(08/03/92) (04/13/93)
PROVICO BUTTERFAT BOOSTER
United States 73/288,293 1,184,428 REGISTERED, Section 8 &
(12/03/80) (01/05/82) 15 accepted.
READY-WEAN
United States 73/787,228 1,567,933 REGISTERED. Section 8 &
(03/17/89) (11/28/89) 15 accepted.
REAL MILK
United States 74/078,675 1,707,591 REGISTERED.
(07/16/90) (08/11/92) Supplemental Register.
RENOWN
United States 74/400,285 1,943,112 REGISTERED.
(06/11/93) (12/19/95)
ROASTIES
United States 74/078,763 1,652,125 REGISTERED. Section 8 &
(07/16/90) (07/30/91) 15 accepted.
RUMA-BLOX
United States 74/081,597 1,644,935 REGISTERED. Section 8 &
(07/16/90) (05/21/91) 15 accepted.
RUMA MIN
United States 74/078,662 1,643,331 REGISTERED. Section 8 &
(07/16/90) (05/07/91) 15 accepted.
SPRINT
United States 74/078,671 1,647,851 REGISTERED. Section 8 &
(07/16/90) (06/18/91) 15 accepted.
STABLE-LYX
United States 73/581,987 1,407,344 REGISTERED. Section 8 &
(02/10/86) (09/02/86) 15 accepted.
STAR MXR
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
United States 74/078,663 1,646,998 REGISTERED.
(07/16/90) (06/04/91)
STOCKMASTER
United States 72/139,107 744,657 RENEWED.
(03/05/62) (02/05/63)
SUMMIT PLUS and Design
United States 74/179,123 1,695,745 REGISTERED.
(06/24/91) (06/23/92)
SUMMIT +
United States 74/034,984 1,641,703 REGISTERED. Section 8 &
(03/05/90) (04/16/91) 15 accepted.
SUPREME PIG
United States 74/078,674 1,685,019 REGISTERED.
(07/16/90) (05/05/92)
THE POWER OF
CONTINUOUS NUTRIENT
DELIVERY
United States 75/044,149 2,015,863 REGISTERED.
(01/16/96) (11/12/96)
TRADITION
United States 74/340,926 1,785,741 REGISTERED.
(12/17/92) (08/03/93)
TRANSFORMER
United States 73/341,376 1,207,824 REGISTERED.
Section 8 & 15 accepted.
TRI MAX
United States 74/319,242 1,770,325 REGISTERED.
(09/30/92) (05/11/93)
TUNE-UP
United States 72/327,625 892,745 RENEWED.
(05/19/69) (06/11/70)
ULTRA
United States 74/078,672 1,644,934 REGISTERED. Section 8 &
(07/16/90) (05/21/91) 15 accepted.
VIG-A-LICKS
United States 73/458,292 1,317,576 REGISTERED.
(12/23/83) (02/05/85) Section 8 & 15 accepted.
WESTERN GOLD
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
United States 74/480,919 1,903,743 REGISTERED.
(01/21/94) (07/04/95)
WESTERN PLEASURE
United States 74/484,885 1,878,818 REGISTERED.
(01/31/94) (02/14/95)
WHEAT-LYX
United States 74/371,302 1,909,120 REGISTERED.
(03/24/93) (08/01/95)
YEAST XTRA
United States 74/215,942 1,726,971 REGISTERED.
(10/28/91) (10/27/92)
1/2 BARREL DESIGN
United States 73/691,463 1,632,463 REGISTERED. Section
(10/23/87) (01/29/91) 2(f). Section 8 & 15
accepted.
CONCENTRIC CIRCLE DESIGN
United States 71/275,880 254,717 RENEWED.
(10/27/28) (03/26/29)
BAG DESIGN ONLY
United States 72/047,007 694,376 RENEWED.
(03/03/56) (03/08/60) Supplemental Register.
2. U.S. Pending Applications
FEEDLOT Manager and Design
United States 74/609,703 N/A PENDING. ITU.
(12/12/94) Statement of Use filed.
Disclaimed "FEEDLOT
MANAGER."
MIN-TECH
United States 74/697,547 N/A PENDING. ITU. Notice of
(07/05/95) Allowance issued
04/15/97.
PRO-GOLD
United States 75/174,251 N/A PENDING. New
(09/30/96) application.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
MARK/ APPLICTN NO. REG. NO.
COUNTRY (DATE) (DATE) STATUS
------- ------------ -------- ------
<S> <C> <C> <C>
BEEF-LYX
Canada 650,297 379,803 REGISTERED.
(02/06/90) (02/08/91)
CRYSTALYX
Canada 573,543 357,521 REGISTERED.
(11/26/86) (06/23/89)
Mexico 149,659 445,383
DAIRY-LYX
Canada 677,842 394,364 REGISTERED.
(03/14/91) (02/14/92)
MINERAL-LYX
Canada 677,841 394,363 REGISTERED.
(03/14/91) (02/14/92)
STABLE-LYX
Canada 650,293 379,802 REGISTERED.
(02/06/90) (02/08/91)
</TABLE>
4. Fictitious Business Names/Trade Names/Common Law Trademarks
a. Feed Product Names
BEEF CHAMPION COMMANDER
DYNA-POP ENERGY MIX
FAST FINISH FRESH START
GRO LEAN SILO GUARD II
LEAN VALUE MILK BUSTER
MINERAL-LYX (U.S.) MORLAC
NUTRI-MX NUTRI-ONE STEP
PIG BUILDER PIG BUSTER
PIG DYNA-BITS PIG DYNAMITE
PIG SPARK PRECISION BLEND
PRIME CATTLE PROFIT BLEND
PROFIT PRO MX
MAKER SELECT
RANGER-N-GRO STRESS RELIEF
SHEEP LYX TRUSTY
SWEET BITS/SWEET SUPERBITS
HOG MAKER
b. Assumed Name Filings
Name Jurisdictions
- ---- -------------
Renata Nutrition California, Georgia, Illinois, Indiana, Iowa,
Missouri, Nebraska, Ohio, Pennsylvania, Texas,
Wisconsin
-9-
<PAGE>
EMPLOYEE BENEFITS AGREEMENT
THIS AGREEMENT, made this 21st day of May, 1997 by and between WINDY HILL
PET FOOD COMPANY, INC., a Minnesota corporation, formerly known as Hubbard
Milling Company ("Windy Hill"), and FEED-RITE (US) ANIMAL FEEDS, INC., a
Minnesota corporation ("Feed-Rite"),
WITNESSETH:
WHEREAS, Feed-Rite is acquiring from Windy Hill all of the assets relating
exclusively to the animal feeds business of Windy Hill under an Asset Purchase
Agreement dated April 25, 1997 (capitalized terms in this Agreement shall have
the same meaning given to such terms in the Asset Purchase Agreement);
WHEREAS, certain employees previously employed by Hubbard Milling Company
will be employed immediately after the acquisition by Feed-Rite (the
"Transferred Employees"),
NOW, THEREFORE, for the purpose of clarifying such Asset Purchase
Agreement, the parties hereto agree that, with respect to the Salaried Pension
Plan and the Hourly Pension Plan, for the purposes of calculating the "present
value of accrued benefit liability" for Transferred Employees, the accrued
benefits shall be determined as of the Closing Date and the present value of
such accrued benefits shall be determined as of the actual asset transfer date.
Such asset transfer shall be completed no later than September 30, 1997.
WINDY HILL PET FOOD
COMPANY, INC.
By /s/ Ray Chung
------------------------------------
Its Executive Vice President
FEED-RITE (US) ANIMAL FEEDS, INC.
By /s/ M.E. Maloney
------------------------------------
Its President
<PAGE>
- --------------------------------------------------------------------------------
DISBURSING AGREEMENT
by and among
HUBBARD MILLING COMPANY
RICHARD P. CONFER
WINDY HILL PET FOOD COMPANY, INC.
and
NORWEST BANK MINNESOTA, N.A.
Dated as of May 21, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. REFERENCES ............................................................. 2
2. REMITTANCE OF FUNDS TO DISBURSING AGENT ON CLOSING DATE ................ 3
(A) ARMOUR ESCROW .......................................................... 3
(B) ARMOUR RESERVE ......................................................... 3
(C) ESTIMATED MERGER CONSIDERATION ......................................... 3
3. CLOSING DATE BALANCE SHEET ADJUSTMENTS ................................. 4
(A) ARMOUR STOCK PURCHASE AGREEMENT CLOSING DATE BALANCE SHEET ADJUSTMENT .. 4
(B) MERGER AGREEMENT CLOSING DATE BALANCE SHEET ADJUSTMENT ................. 4
4. ESCROW ................................................................. 5
(A) ARMOUR ESCROW ACCOUNT .................................................. 5
(B) MERGER ESCROW ACCOUNT .................................................. 5
5. INVESTMENT OF .......................................................... 5
6. DISBURSEMENT OF ESTIMATED MERGER CONSIDERATION ......................... 6
(A) PROCEDURES FOR PAYMENT ................................................. 6
(B) REMITTANCE OF UNDISBURSED FUNDS TO THE COMPANY ......................... 8
7. DISBURSEMENT OF ARMOUR RESERVE ACCOUNT ................................. 8
8. DISBURSEMENT OF ESCROW FUND ACCOUNTS ................................... 8
(A) REMITTANCE OF ESCROW ACCOUNTS .......................................... 8
(B) INDEMNIFICATION DISBURSEMENTS .......................................... 9
(C) EXPENSE REIMBURSEMENT .................................................. 9
9. FEES, EXPENSES ......................................................... 11
10. RESIGNATION OR REMOVAL OF DISBURSING AGENT ............................. 11
(A) RESIGNATION AND REMOVAL ................................................ 11
(B) RELEASE OF DISBURSING AGENT ............................................ 11
11. RESPONSIBILITY OF DISBURSING AGENT ..................................... 11
12. NOTICES ................................................................ 11
13. TERM OF AGREEMENT ...................................................... 13
14. GOVERNING LAW .......................................................... 13
<PAGE>
15. MISCELLANEOUS .......................................................... 13
(A) BINDING EFFECT; NO LIEN ................................................ 13
(B) COUNTERPARTS ........................................................... 13
(C) AMENDMENTS ............................................................. 14
(D) RECEIPTS ............................................................... 14
(E) MERGER AGREEMENT ....................................................... 14
(F) ENTIRE AGREEMENT ....................................................... 14
(G) SEVERABILITY ........................................................... 14
16. THIRD PARTY BENEFICIARIES .............................................. 14
ii
<PAGE>
INDEX OF DEFINED TERMS
(Not Part of Agreement)
Section
-------
Agreement ..........................................................Introduction
Armour .................................................................Recitals
Armour Capital Stock ...................................................Recitals
Armour Common Stock .............................Armour Stock Purchase Agreement
Armour Common Stock Purchase Price ..............Armour Stock Purchase Agreement
Armour Escrow Account ......................................................2(a)
Armour Escrow Amount .......................................................2(a)
Armour Reserve Account .....................................................2(b)
Armour Reserve Amount ......................................................2(b)
Armour Shareholder Representative ..................................Introduction
Armour Shareholders ............................................Merger Agreement
Armour Stock Purchase Agreement ........................................Recitals
Armour Stock Purchase Indemnification Obligations ......................Recitals
Buyer ..............................................................Introduction
Buyer Subsidiary .......................................................Recitals
Closing Date ...................................................Merger Agreement
Closing Date Balance Sheet .....................................Merger Agreement
Common Stock Merger Consideration ..............................Merger Agreement
Common Stock Merger Consideration Per Share ....................Merger Agreement
Converted Shares .......................................................Recitals
Disbursing Agent ...................................................Introduction
Dissenting Holders .............................................Merger Agreement
Effective Time .................................................Merger Agreement
Estimated Armour Common Stock Purchase Price ....Armour Stock Purchase Agreement
Estimated Common Stock Merger Consideration ....................Merger Agreement
Estimated Merger Consolidation .............................................2(c)
Hubbard ............................................................Introduction
Hubbard Capital Stock ..................................................Recitals
Hubbard Class A Common Stock ...................................Merger Agreement
Hubbard Class B Common Stock ...................................Merger Agreement
Hubbard 5% Preferred Stock .....................................Merger Agreement
Indemnified Party ............................................ Merger Agreement;
................................................Armour Stock Purchase Agreement
Initial Common Stock Payment Account ...................................2(c)(iv)
Initial Common Stock Payment Amount ....................................2(c)(iv)
Letter of Transmittal ...................................................6(a)(i)
Merger .................................................................Recitals
Merger Agreement .......................................................Recitals
iii
<PAGE>
Merger Agreement Indemnification Obligations ...........................Recitals
Merger Escrow Account ..................................................2(c)(ii)
Merger Escrow Amount ...................................................2(c)(ii)
Merger Reserve Account ................................................2(c)(iii)
Merger Reserve Amount .................................................2(c)(iii)
Permitted Investments .........................................................5
Preferred Stock Account .................................................2(c)(i)
Preferred Stock Merger Consideration ...........................Merger Agreement
Shareholder Representative .........................................Introduction
iv
<PAGE>
THIS DISBURSING AGREEMENT ("Agreement") is made as of the 21st day
of May, 1997 by and among HUBBARD MILLING COMPANY, a Minnesota corporation
("Hubbard"), RICHARD P. CONFER, as the Armour Shareholder Representative under
the Armour Stock Purchase Agreement (as hereinafter defined) (together with any
successor representative appointed under the Armour Stock Purchase Agreement,
the "Armour Shareholder Representative"), RICHARD P. CONFER, as the Shareholder
Representative under the Merger Agreement (as hereinafter defined) (together
with any successor representative appointed under the Merger Agreement, the
"Shareholder Representative"), WINDY HILL PET FOOD COMPANY, INC., a Delaware
corporation ("Buyer"), and NORWEST BANK MINNESOTA, N.A., a national banking
association, as disbursing agent (the "Disbursing Agent"). Capitalized terms
used herein and not otherwise defined shall have the meaning set forth in the
Merger Agreement.
WITNESSETH:
WHEREAS, the issued and outstanding capital stock of Hubbard
consists of 18,329 shares of Hubbard 5% Preferred Stock, 1,145,050 shares of
Hubbard Class A Common Stock, and 14,511,823 shares of Hubbard Class B Common
Stock (hereinafter collectively called the "Hubbard Capital Stock");
WHEREAS, all of the issued and outstanding Hubbard Capital Stock is
owned by Armour Corporation, a Delaware corporation ("Armour"), and certain
other persons;
WHEREAS, Buyer is to acquire Hubbard by (i) purchasing all of the
issued and outstanding capital stock of Armour (the "Armour Capital Stock") from
the Armour Shareholders pursuant to that certain Stock Purchase Agreement dated
as of April 22, 1997, between Buyer and the Armour Shareholders (the "Armour
Stock Purchase Agreement"), and (ii) thereafter effecting the merger (the
"Merger") of Windy Hill Pet Food Acquisition Co., a wholly-owned subsidiary of
Buyer ("Buyer Subsidiary"), with and into Hubbard pursuant to that certain
Merger Agreement dated as of March 21, 1997, as amended March 31, 1997, among
Hubbard, Buyer, and Buyer Subsidiary (the "Merger Agreement");
WHEREAS, Section 2.02(b) of the Armour Stock Purchase Agreement
requires Buyer to remit to the Disbursing Agent on the Closing Date (i) funds to
be held in escrow to provide the sole source of funds and property to satisfy
the Armour Stock Purchase Indemnification Obligations (as hereinafter defined),
and (ii) funds to be held by the Disbursing Agent pending a final determination
of the Armour Common Stock Purchase Price (as defined in the Armour Stock
Purchase Agreement), such funds to be held and disbursed by the Disbursing Agent
pursuant to the terms and conditions set forth below;
WHEREAS, Section 8.02(a) of the Armour Stock Purchase Agreement sets
forth the indemnification obligations of the Armour Shareholders, which
indemnification obligations set forth in clauses (iii) through (vii) of said
Section 8.02 (a) are to be secured by
<PAGE>
an escrow (the indemnification obligations set forth in clauses (iii) through
(vii) of said Section 8.02(a) are hereinafter called the "Armour Stock Purchase
Indemnification Obligations");
WHEREAS, Section 2.02(a) of the Merger Agreement requires Buyer to
remit to the Disbursing Agent on the Closing Date (i) funds to be held and
disbursed by the Disbursing Agent to the holders of Converted Shares (as
hereinafter defined) prior to the final determination of the Common Stock Merger
Consideration Per Share, (ii) funds to be held by the Disbursing Agent pending a
final determination of the Common Stock Merger Consolidation Per Share, and
(iii) funds to be held in escrow to provide the sole source of funds and
property to satisfy the Merger Agreement Indemnification Obligations (as
hereinafter defined);
WHEREAS, the Merger Agreement provides that from and after the
Effective Time, the shareholders of Hubbard, other than Armour or a Dissenting
Holder, may surrender the certificate or certificates held by such persons
representing shares of Hubbard Capital Stock immediately prior to the Effective
Time (the shares held by persons other than Armour or a Dissenting Holder are
hereinafter called the "Converted Shares") to the Disbursing Agent and receive
in exchange an amount in cash calculated as set forth in Section 2.02 of the
Merger Agreement;
WHEREAS, none of the shareholders of Hubbard have elected to
exercise their dissenters' rights under Section 302A.473 of the Minnesota
Business Corporation Act and, accordingly, there are no Dissenting Holders;
WHEREAS, Section 9.02(a) of the Merger Agreement sets forth the
indemnification obligations of the shareholders of Hubbard, all of which
indemnification obligations are to be secured by an escrow (the "Merger
Agreement Indemnification Obligations"); and
WHEREAS, the Merger Agreement and the Armour Stock Purchase
Agreement require the execution of this Agreement to effect the foregoing
arrangements;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. References. This Agreement is the Disbursing Agreement referred
to in the Merger Agreement and the Armour Stock Purchase Agreement.
2
<PAGE>
2. Remittance of Funds to Disbursing Agent on Closing Date.
(a) Armour Escrow Account. Buyer hereby remits to the
Disbursing Agent, and the Disbursing Agent hereby acknowledges receipt thereof,
immediately available funds in the amount of Five Hundred Ten Thousand Nine
Hundred Sixty Dollars ($510,960) pursuant to Section 2.02(b)(ii) of the Armour
Stock Purchase Agreement (the "Armour Escrow Amount"). The Armour Escrow Amount
shall be held in a separate account (the "Armour Escrow Account") and shall be
applied in accordance with Section 8 of this Agreement.
(b) Armour Reserve Account. Buyer hereby remits to the
Disbursing Agent, and the Disbursing Agent hereby acknowledges receipt thereof,
immediately available funds in the amount of Three Hundred Eighty Four Thousand
Three Hundred Two and 47/100 Dollars ($384,302.47) pursuant to Section
2.02(b)(iii) of the Armour Stock Purchase Agreement (the "Armour Reserve
Amount"). The Armour Reserve Amount shall be held in a separate account (the
"Armour Reserve Account") pending final determination of the Armour Common Stock
Purchase Price as provided in Section 3(a) of this Agreement.
(c) Estimated Merger Consideration. Buyer hereby remits to the
Disbursing Agent, and the Disbursing Agent hereby acknowledges receipt thereof,
immediately available funds in the aggregate amount of One Hundred Forty Eight
Million Three Hundred Five Thousand Six Hundred Eleven and 41/100 Dollars
($148,305,611.41) pursuant to Section 2.02(a) of the Merger Agreement (the
"Estimated Merger Consideration"). The Estimated Merger Consideration shall be
applied as follows:
(i) the Disbursing Agent shall deposit the amount of Nine
Hundred Twenty Five Thousand Four Hundred Thirty One and 21/100 Dollars
($925,431.21), representing the Preferred Stock Merger Consideration in a
separate account (the "Preferred Stock Account") to be applied in
accordance with Section 6 of this Agreement;
(ii) the Disbursing Agent shall deposit the amount of Nine
Million Four Hundred Eighty-Nine Thousand Forty Dollars ($9,489,040) (the
"Merger Escrow Amount") in a separate account (the "Merger Escrow
Account") to be applied in accordance with Section 8 of this Agreement;
(iii) the Disbursing Agent shall deposit the amount of Six
Million Eight Hundred Fifty Three Thousand Five Hundred Twenty and 30/100
Dollars ($6,853,520.30) (the "Merger Reserve Amount") in a separate
account (the "Merger Reserve Account") to be held pending final
determination of the Common Stock Merger Consideration as provided in
Section 3(b) of this Agreement; and
3
<PAGE>
(iv) the Disbursing Agent shall deposit the amount of One
Hundred Thirty One Million Thirty Seven Thousand Six Hundred Nineteen and
90/100 Dollars ($131,037,619.90) (the "Initial Common Stock Payment
Amount") in a separate account (the "Initial Common Stock Payment
Account") to be applied in accordance with Section 6 of this Agreement.
3. Closing Date Balance Sheet Adjustments.
(a) Armour Stock Purchase Agreement Closing Date Balance Sheet
Adjustment. Within two (2) business days of the calculation of the Armour Common
Stock Purchase Price, Buyer and the Armour Shareholder Representative shall
deliver to the Disbursing Agent a statement signed by Buyer and the Armour
Shareholder Representative setting forth the Armour Common Stock Purchase Price
and the Estimated Armour Common Stock Purchase Price (as defined in the Armour
Stock Purchase Agreement). Buyer shall concurrently with the delivery of such
statement remit to the Disbursing Agent immediately available funds in an amount
equal to the excess (if any) of (i) the Armour Common Stock Purchase Price over
(ii) the Estimated Armour Common Stock Purchase Price, which excess shall be
held in the Armour Reserve Account and disbursed by the Disbursing Agent in
accordance with Section 7 of this Agreement. Alternatively, if the Estimated
Armour Common Stock Purchase Price exceeds the Armour Common Stock Purchase
Price, the Disbursing Agent shall, from funds in the Armour Reserve Account,
remit such excess to the Buyer within two (2) business days of receipt of such
statement and the balance of the funds in the Armour Reserve Account shall be
disbursed by the Disbursing Agent in accordance with Section 7 of this
Agreement.
(b) Merger Agreement Closing Date Balance Sheet Adjustment.
Within two (2) business days of the delivery of the Closing Date Balance Sheet,
Buyer and the Shareholder Representative shall deliver to the Disbursing Agent a
statement signed by Buyer and Shareholder Representative setting forth the
Common Stock Merger Consideration and the Estimated Common Stock Merger
Consideration. Buyer shall concurrently with the delivery of such statement
remit to the Disbursing Agent immediately available funds in an amount equal to
the excess (if any) of (i) the Common Stock Merger Consideration over (ii) the
Estimated Common Stock Merger Consideration, which excess shall be held in the
Merger Reserve Account and disbursed by the Disbursing Agent in accordance with
Section 6 of this Agreement. Alternatively, if the Estimated Common Stock Merger
Consideration exceeds the Common Stock Merger Consideration, the Disbursing
Agent shall from the funds in the Merger Reserve Account, remit such excess to
the Buyer within two (2) business days of such statement and the balance of the
funds in the Armour Reserve Account shall be disbursed by the Disbursing Agent
in accordance with Section 6 of this Agreement.
4
<PAGE>
4. Escrow Accounts.
(a) Armour Escrow Account. The Armour Escrow Account shall be held
by the Disbursing Agent for the account of the Armour Shareholders pursuant to
the terms and conditions of this Agreement solely for application in accordance
with the terms of this Agreement. All funds held in the Armour Escrow Account
shall only be released by the Disbursing Agent in accordance with Section 8 of
this Agreement.
(b) Merger Escrow Account. The Merger Escrow Account shall be held
by the Disbursing Agent for the account of the Shareholders pursuant to the
terms and conditions of this Agreement solely for application in accordance with
the terms of this Agreement. All funds held in the Merger Escrow Account shall
be released by the Disbursing Agent only in accordance with Section 8 of this
Agreement.
5. Investment of Funds. The Disbursing Agent is empowered and
directed, upon receipt of written instructions signed by (i) the Shareholder
Representative in the case of funds held in the Merger Escrow Account and the
Merger Reserve Account, and (ii) the Armour Shareholder Representative in the
case of funds held in the Armour Escrow Account and the Armour Reserve Account,
to invest said funds in the Norwest Advantage U.S. Government Fund and/or
Norwest Advantage Treasury Fund (collectively "Permitted Investments") as the
Shareholder Representative or the Armour Shareholder Representative, as the case
may be, shall direct. The Disbursing Agent is further authorized to sell or
redeem any or all Permitted Investments and to reinvest the proceeds of such
sales or redemptions in Permitted Investments, all upon written instructions
signed by the Shareholder Representative or the Armour Shareholder
Representative, as the case may be. The Disbursing Agent is further authorized
to sell or redeem any or all of said investments without further instructions as
may be necessary from time to time to pay in cash any Merger Agreement
Indemnification Obligations or Armour Stock Purchase Indemnification Obligations
in accordance with Section 8 hereof or to make payments from the Merger Reserve
Account in accordance with Section 6(a)(iii) hereof and payments from the Armour
Reserve Account in accordance with Section 7 hereof. In the absence of
instructions from the Armour Shareholder Representative or the Shareholder
Representative, as the case may be, funds held in the Merger Escrow Account, the
Merger Reserve Account, the Armour Escrow Account and the Armour Reserve Account
shall be invested and reinvested in Norwest Advantage U.S. Government Fund.
Notwithstanding any of the foregoing, no portion of the funds held in the Merger
Escrow Account, the Merger Reserve Account, the Armour Escrow Account or the
Armour Reserve Amount may be held in an investment which cannot be sold,
redeemed or otherwise liquidated at the holder's option in ninety (90) days or
less without loss of interest or discount. All amounts and investments (other
then bearer instruments) held in the Merger Escrow Account, the Merger Reserve
Account, the Armour Escrow Account or the Armour Reserve Account shall be
registered and held in the name of the Disbursing Agent, as Disbursing Agent
hereunder. All income earned on the Merger Escrow Account, the Merger Reserve
Account, the Armour Escrow Account or the Armour Reserve Account shall be
credited to
5
<PAGE>
such account and shall be distributed in accordance with the other provisions of
this Agreement.
6. Disbursement of Estimated Merger Consideration.
(a) Procedures for Payments to Shareholders. The following
procedures shall apply for payments by the Disbursing Agent to each holder of
Converted Shares:
(i) Upon the Disbursing Agent's receipt of (i) certificate(s)
which represent Converted Shares, and (ii) a duly executed letter of
transmittal with respect to such Converted Shares in the form attached as
Exhibit A hereto (the "Letter of Transmittal"), the Disbursing Agent is
hereby directed to deliver, or cause to be delivered, in accordance with
the instructions in the Letter of Transmittal, (A) a check in respect of
funds held in the Preferred Stock Account in an amount equal to $50.49
with respect to each share of Hubbard 5% Preferred Stock represented by
such surrendered certificate(s) and (B) a check in respect of funds held
in the Initial Common Stock Payment Account in an amount equal to $8.82
with respect to each share of Hubbard Class A Common Stock and/or Hubbard
Class B Common Stock represented by such surrendered certificate(s). If
any holder of Converted Shares is entitled to receive $500,000 or more
pursuant to clause (A) or (B) above, the Disbursing Agent shall make the
foregoing payments by wire transfer of immediately available funds to any
such holder who has provided wire payment instructions in the Letter of
Transmittal, and mail written notice thereof to such holder's address
listed in the Letter of Transmittal. Such check or wire transfer shall be
sent on the Closing Date with respect to any certificate duly delivered to
the Disbursing Agent at least two (2) business days prior to the Effective
Time and as soon as practicable following receipt thereof with respect to
any certificate thereafter duly delivered to the Disbursing Agent. No
interest will be paid to, or accrued for the benefit of, any registered
owner on the cash payable upon surrender of any certificate.
(ii) At least five (5) days prior to the Effective Time,
Hubbard shall deliver to the Disbursing Agent a list, certified by the
Secretary of Hubbard, of the registered owners of Converted Shares,
identifying the registered owners (and the amount of shares owned) of
Hubbard Capital Stock as of the Effective Time. The Disbursing Agent is
authorized and directed to cancel all certificates formerly representing
Converted Shares received by the Disbursing Agent after verification
against such list and upon making payment to the holders of Converted
Shares as provided in clause (i) of this Section 6(a). The Disbursing
Agent will thereafter return canceled certificates formerly representing
Converted Shares to the Secretary of Hubbard.
6
<PAGE>
(iii) Upon delivery to the Disbursing Agent of the statement
required by Section 3(b) hereof setting forth the Common Stock Merger
Consideration and after making any deposit to or disbursement of funds
from the Merger Reserve Account required by Section 3(b) hereof, and
subject to the receipt of the documents required by clause (i) of this
Section 6(a), the Disbursing Agent is hereby directed to deliver, or cause
to be delivered, in accordance with the instructions in the Letter of
Transmittal, a check or wire in respect of funds held in the Merger
Reserve Account in an amount with respect to each share of Hubbard Class A
Common Stock and/or Hubbard Class B Common Stock represented by the
surrendered certificate(s) equal to (A) the amount of funds held in the
Merger Reserve Account immediately after the deposits or disbursements
required by Section 3(b) hereof, divided by (B) 14,856,873. Such check or
wire shall be sent within two (2) business days following the receipt of
the statement required by Section 3(b) of the Common Stock Merger
Consideration with respect to any certificate duly delivered to the
Disbursing Agent pursuant to clause (i) of this Section 6(a) at least two
(2) business days prior to the delivery of such statement, and at the time
of delivery of the check required by clause (i) of this Section 6(a) with
respect to any certificate delivered to the Disbursing Agent after the
delivery to the Disbursing Agent of such statement.
(iv) The Disbursing Agent is authorized and directed to pass
upon the adequacy of the items received by the Disbursing Agent, including
compliance with the instructions contained in the Letter of Transmittal,
applying the same standards with respect to payment to someone other than
the registered owners as the Disbursing Agent would apply in its capacity
as a corporation's transfer agent for shares of its common stock, with
respect to transfer of common stock from one registered owner to another,
and when inadequacies exist as to any matter to take such action as the
Disbursing Agent may deem appropriate in seeking to cause such
inadequacies to be remedied.
(v) If a registered owner of Converted Shares reports the loss
or destruction of any certificate, upon the making of an affidavit of that
fact by the registered owner claiming such certificate to have been lost,
stolen or destroyed, the consideration to which such registered owner
would have been entitled hereof but for failure to deliver such
certificate to the Disbursing Agent shall nevertheless be paid to such
registered owner, provided that the Disbursing Agent and Hubbard shall as
a condition precedent to such payment, require such registered owner to
give the Disbursing Agent a surety bond in such sum as the Disbursing
Agent and Hubbard may direct as indemnity against any claim that may be
made against Hubbard or the Disbursing Agent with respect to the
certificate alleged to have been lost, stolen or destroyed.
7
<PAGE>
The Disbursing Agent will have no duty to arrange for the surety bond or
perform any other duties to locate lost, stolen or destroyed certificates.
(b) Remittance of Undisbursed Funds to the Company. On
November 26, 1997, (i) the Disbursing Agent shall furnish Hubbard with a final
report showing the disposition of cash delivered to the Disbursing Agent for
disbursement to the holders of the Converted Shares pursuant to this Section 6
and the amount of such cash not theretofore properly claimed and disbursed,
together with the names and addresses of all persons on the list referred to in
Section 6(a)(ii) of this Agreement who have not properly surrendered their
certificates representing Converted Shares, and (ii) the Disbursing Agent shall
remit to Hubbard, as the surviving corporation of the Merger, the remaining
balance of the Preferred Stock Account, Initial Common Stock Payment Account,
and Merger Reserve Account. Hubbard, by its acceptance of such remaining
balance, acknowledges and agrees that it shall be solely liable (and the
Disbursing Agent shall have no liability whatsoever) for any payments required
to be made thereafter under the Merger Agreement to any holder of Converted
Shares, except for payments required by Section 8(a) hereof.
7. Disbursement of Armour Reserve Account. Prior to the Effective
Time, the Armour Shareholder Representative shall deliver to the Disbursing
Agent a list, certified by the secretary of Armour, of the registered owners of
Armour Common Stock (as defined in the Armour Stock Purchase Agreement),
identifying the registered owners (and the number of shares of Armour Common
Stock owned) and the address to which payments are to be sent by the Disbursing
Agent. Following the calculation of the Armour Common Stock Purchase Price and
the receipt by the Disbursing Agent of additional funds from the Buyer or the
remittance of funds by the Disbursing Agent to the Buyer, as the case may be, as
provided in Section 3(a) of this Agreement, the Disbursing Agent is hereby
directed to deliver, or cause to be delivered, in accordance with the written
instructions provided by the Armour Shareholder Representative, a check in
respect of funds held in the Armour Reserve Account in an amount with respect to
each share of Armour Common Stock equal to (A) the amount of funds held in the
Armour Reserve Account immediately after the deposits or disbursements required
by Section 3(a) hereof, divided by (B) 10,000. Such checks shall be sent within
two (2) business days following receipt of the statement required by Section
3(a) of the Armour Common Stock Purchase Price.
8. Disbursement of Escrow Fund Accounts.
(a) Remittance of Escrow Accounts. Except as otherwise
provided in Section 8(b) of this Agreement, on the date which is eighteen (18)
months after the Effective Time, the Disbursing Agent shall (i) pay to the
Shareholder Representative from funds held in the Merger Escrow Account the
amount, if any, payable to the Shareholder representative pursuant to Section
8.05 of the Merger Agreement as set forth in a written statement signed by the
Shareholder Representative, and (ii) pay to the Armour Shareholder
Representative from funds held in the Armour Escrow Account the amount, if any,
payable to
8
<PAGE>
the Armour Shareholder Representative pursuant to Section 7.05 of the Armour
Stock Purchase Agreement as set forth in a written statement signed by the
Armour Shareholder Representative. Following such payments to the Shareholder
Representative and the Armour Shareholder Representative, the Disbursing Agent
shall remit (i) the then remaining balance in the Armour Escrow Account
including interest accrued thereon to the holders of Armour Common Stock pro
rata (based upon their ownership of Armour Common Stock as set forth in the list
referred to in Section 7 hereof) by delivery of checks in accordance with the
written instructions provided by the Armour Shareholder Representative; and (ii)
the then remaining balance in the Merger Escrow Account including interest
accrued thereon to the holders (other than Armour) of shares of Hubbard Class A
Common Stock and Hubbard Class B Common Stock on a pro rata basis based upon
their ownership of such shares by delivery of checks to such holders in
accordance with the instructions contained in the Letters of Transmittal
referred to in clause (i) of Section 6(a) hereof (or in accordance with written
instructions from the Shareholder Representative with respect to any Shareholder
who has not submitted a Letter of Transmittal to the Disbursing Agent).
(b) Indemnification Disbursements. If the Disbursing Agent
receives a written notice of a claim from an Indemnified Party seeking
indemnification for an Armour Stock Purchase Indemnification Obligation or a
Merger Agreement Indemnification Obligation, as the case may be, the Disbursing
Agent shall promptly provide a copy of such notice to the Shareholder
Representative and the Armour Shareholder Representative and thereafter shall
release and deliver to the Indemnified Party such amount in the Escrow Accounts
necessary to satisfy such claim unless the Shareholder Representative or the
Armour Shareholder Representative objects in writing to such release to the
Indemnified Party and the Disbursing Agent within thirty (30) days of the date
of receiving a copy of the Indemnified Party's notice to the Disbursing Agent.
If the Shareholder Representative or the Armour Shareholder Representative
objects in accordance with the preceding sentence, the Disbursing Agent shall
not release any funds from the Armour Escrow Account or the Merger Escrow
Account to the Indemnified Party, except for any undisputed amount of such claim
(which shall be released), until final settlement of such dispute between the
Indemnifying Party and the Indemnified Party in accordance with the terms of the
Merger Agreement and the Armour Stock Purchase Agreement and receipt of a joint
direction from the Buyer, the Shareholder Representative and the Armour
Shareholder Representative that the Disbursing Agent pay to Buyer the amount of
such claim in accordance with such final settlement. Any payment of any claim
shall be made 94.8904% from funds held in the Merger Escrow Account and 5. 1096%
from funds held in the Armour Escrow Account.
(c) Expense Reimbursement.
(i) If the Disbursing Agent receives a written statement from
the Shareholder Representative for reimbursement of expenses incurred by
the Shareholder Representative pursuant to Section 8.02 of the Merger
Agreement, subject to the limitations set forth below, the Disbursing
Agent shall reimburse the
9
<PAGE>
Shareholder Representative for the amount of such expenses from funds held
in the Merger Escrow Account. In the event that the amount of any
statement for reimbursement of expenses submitted by the Shareholder
Representative, together with the amount of all prior statements submitted
by the Shareholder Representative exceeds the aggregate amount of income
earned on funds held in the Merger Escrow Account from and after the date
of this Agreement, prior to reimbursing the Shareholder Representative for
such expenses the Disbursing Agent shall provide a copy of such statement
to the Buyer. The Disbursing Agent shall reimburse the Shareholder
Representative for the amount of such statement unless the Buyer objects
in writing to the Shareholder Representative and the Disbursing Agent to
such reimbursement within thirty (30) days of receiving a copy of such
statement on the grounds that the expenses listed therein were not
reasonably incurred. In the event that the Buyer objects in accordance
with the preceding sentence, the Disbursing Agent shall not pay such
statement, except for any undisputed amount (which shall be paid), until
final settlement of such dispute between Buyer and the Shareholder
Representative in accordance with the Merger Agreement, and receipt of a
joint direction from Buyer and the Shareholder Representative that the
Disbursing Agent pay to the Shareholder Representative the amount of such
statement in accordance with such final settlement.
(ii) If the Disbursing Agent receives a written statement from
the Armour Shareholder Representative for reimbursement of expenses
incurred by the Armour Shareholder Representative pursuant to Section 7.02
of the Armour Stock Purchase Agreement, subject to the limitations set
forth below, the Disbursing Agent shall reimburse the Armour Shareholder
Representative for the amount of such expenses from funds held in the
Armour Escrow Account. In the event that the amount of any statement for
reimbursement of expenses submitted by the Armour Shareholder
Representative, together with the amount of all prior statements submitted
by the Armour Shareholder Representative exceeds the aggregate amount of
income earned on funds held in the Armour Escrow Account from and after
the date of this Agreement, prior to reimbursing the Armour Shareholder
Representative for such expenses the Disbursing Agent shall provide a copy
of such statement to the Buyer. The Disbursing Agent shall reimburse the
Armour Shareholder Representative for the amount of such statement unless
the Buyer objects in writing to the Armour Shareholder Representative and
the Disbursing Agent to such reimbursement within thirty (30) days of
receiving a copy of such statement on the grounds that the expenses listed
therein were not reasonably incurred. In the event that the Buyer objects
in accordance with the preceding sentence, the Disbursing Agent shall not
pay such statement, except for any undisputed amount (which shall be
paid), until final settlement of such dispute between Buyer and the Armour
Shareholder Representative in accordance with the Armour Stock Purchase
Agreement, and receipt of a joint direction from Buyer and the Armour
Shareholder Representative that the Disbursing
10
<PAGE>
Agent pay to the Armour Shareholder Representative the amount of such
statement in accordance with such final settlement.
9. Fees, Expenses. Buyer agrees to pay the Disbursing Agent fees for
services hereunder or in connection herewith in accordance with Schedule I
hereto and to reimburse the Disbursing Agent for all expenses incurred by the
Disbursing Agent pursuant to or in connection with services hereunder or in
connection herewith.
10. Resignation or Removal of Disbursing Agent.
(a) Resignation and Removal. The Disbursing Agent may resign
following the giving of thirty (30) days' prior written notice to Buyer, the
Shareholder Representative and the Armour Shareholder Representative. Similarly,
the Disbursing Agent may be removed and replaced following the giving of thirty
(30) days' prior written notice to the Disbursing Agent by Buyer, the
Shareholder Representative and the Armour Shareholder Representative. In either
event, the duties of the Disbursing Agent shall terminate thirty (30) days after
the date of such notice (or at such earlier date as may be mutually agreeable),
and the Disbursing Agent shall then deliver the balance of the funds then in its
possession pursuant to this Agreement to a successor Disbursing Agent as shall
be appointed by mutual agreement of Buyer, the Shareholder Representative and
the Armour Shareholder Representative as evidenced by a written notice filed
with the Disbursing Agent.
(b) Release of Disbursing Agent. Upon acknowledgment by any
successor Disbursing Agent of the receipt of the funds transferred to such
successor Disbursing Agent pursuant to Section 10(a), the then acting Disbursing
Agent shall be fully released and relieved of all duties, responsibilities, and
obligations under this Agreement, other than liability for any action taken or
omitted by such Disbursing Agent under this Agreement that shall have
constituted gross negligence or willful misconduct.
11. Responsibility of Disbursing Agent. The Disbursing Agent agrees
to hold all funds delivered to it hereunder under the terms and conditions
hereof and to perform the acts and duties imposed upon it hereby. If at any time
in the performance of its duties hereunder it is necessary for the Disbursing
Agent to receive, accept or act upon any notices submitted to it hereunder, it
shall be entitled to deem the signatories thereof as being those purported to
sign such notices on behalf of the parties thereto and shall be entitled to rely
upon the genuiness of the signatures of such signatories without inquiry and
without requiring substantiating evidence of any kind. The Disbursing Agent may
act in reliance upon the advice of counsel in reference to any matter relating
hereto and shall not be liable for any acts or omissions of any kind unless
occasioned by its own negligence or willful misconduct.
12. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to be duly delivered on the day they are
delivered personally or, if mailed, three days after being deposited in the
mail, first class, postage prepaid, to the parties
11
<PAGE>
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to Buyer or Hubbard, to or, in the case of Hubbard, in
care of:
Windy Hill Pet Food Company, Inc.
c/o Dartford Partnership
456 Montgomery Street
Suite 2200
San Francisco, California 94104
Attention: Ray Chung
with a copy to:
Richards & O'Neil LLP
885 Third Avenue
New York, New York 10022-4802
Attention: Ann F. Chamberlain
(b) If to the Armour Shareholder Representative or the
Shareholder Representative, to:
Richard P. Confer
424 North Riverfront Drive
Mankato, Minnesota 56001
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: Thomas G. Morgan
12
<PAGE>
(c) If to the Disbursing Agent:
Norwest Bank Minnesota, N.A.
Master Trust & Custody Services
Norwest Center
6th and Marquette
Minneapolis, MN 55479-0065
Attention: Ms. Marni E. Johnson, Account Manager
Telephone: 612-667-4755
Facsimile: 612-667-6075
In the event notice is required to be delivered hereunder to any Indemnifying
Party or Indemnified Party (as such terms are defined in the Armour Stock
Purchase Agreement and the Merger Agreement), such notice shall be deemed duly
delivered if delivered in accordance with the notice provisions of the Armour
Stock Purchase Agreement or the Merger Agreement, as applicable.
13. Term of Agreement. This Agreement, and the Disbursing Agent's
duties hereunder, shall terminate at such time as the Disbursing Agent shall
have disbursed all of the funds held by the Disbursing Agent hereunder in
accordance with the provisions of this Agreement.
14. Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the internal laws of the
state of Minnesota without regard to principles of conflict of laws.
15. Miscellaneous.
(a) Binding Effect; No Lien. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. The Disbursing Agent shall not have a lien or adverse claim upon, or
any other right whatsoever to payment from, any funds in its possession pursuant
to this Agreement (or interest earned thereon) for or on account of any right to
payment or reimbursement hereunder or otherwise.
(b) Counterparts. This Agreement and any notice, demand or
instruction pursuant hereto may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
but one and the same instrument; provided, however, that the Disbursing Agent
shall not be bound by or act in accordance with any such counterpart until all
counterparts are received by it.
13
<PAGE>
(c) Amendments. This Agreement may be modified, amended or
canceled only by a written instrument signed by all parties hereto.
(d) Receipts. The Disbursing Agent shall provide receipts to
the Buyer for all funds deposited hereunder, with a copy thereof to the
Shareholder Representative and the Armour Shareholder Representative.
(e) Merger Agreement. A copy of the Armour Stock Purchase
Agreement and the Merger Agreement has been provided to the Disbursing Agent in
connection with the execution hereof and the Disbursing Agent understands the
terms of such agreements incorporated by reference herein.
(f) Entire Agreement. This Agreement, along with the Armour
Stock Purchase Agreement and the Merger Agreement, embodies the entire agreement
between the parties with respect to the subject matter herein and there are no
restrictions, provisions, representations, warranties, covenants or undertakings
relating to such subject matter other than those set forth or provided for
herein.
(g) Severability. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity shall not impair or otherwise
affect the validity or enforceability of any other provision of this Agreement.
16. Third Party Beneficiaries. This Agreement is for the benefit of
the registered owners of the Armour Common Stock and the Converted Shares, and
such owners are entitled to rely upon its provisions.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective duly authorized officers as of the date first
above written.
HUBBARD MILLING COMPANY
By /s/ Richard P. Confer
---------------------------------------
Its President
/s/ Richard P. Confer
------------------------------------------
Richard P. Confer, as Shareholder
Representative and Armour Shareholder
Representative
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Ray Chung
---------------------------------------
Its Executive Vice President
NORWEST BANK MINNESOTA, N.A.
By /s/ Brian P. Crevoiserat
---------------------------------------
Its Vice President
<PAGE>
Schedule I
NORWEST MASTER TRUST & CUSTODY SERVICES
FEE PROPOSAL FOR DISBURSING AGENT SERVICES
HUBBARD MILLING COMPANY
Initial Relationship Set-Up (One-Time)(1) $1,500.00
Annual Account Maintenance (Per Account)(1) $1,250.00
Transmittal Letter Processing/Certificate Receipt
(Per Letter/Certificate) $ 20.00
Wire Disbursement (Per Wire) $ 15.00
Check Disbursement (Per Check) $ 10.00
1099 Issuance (Per 1099) $ 10.00
Address Maintenance (Per Maintenance Request) $ 10.00
M1:0236796.12
- ----------
(1) Payable at closing ($9,OOO total)
<PAGE>
TERM NOTE
$1,505,882.35 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC., a
Minnesota corporation and successor by merger to Windy Hill Pet Food Acquisition
Co. (the "Borrower"), hereby unconditionally promises to pay to the order of
BANKBOSTON, N.A. (the "Lender") at the office of Credit Suisse First Boston,
located at 11 Madison Avenue, New York, New York 10010, in lawful money of the
United States of America and in immediately available funds, the principal
amount of ONE MILLION FIVE HUNDRED FIVE THOUSAND EIGHT HUNDRED EIGHTY-TWO
DOLLARS AND THIRTY-FIVE CENTS ($1,505,882.35), or, if less, the unpaid principal
amount of the Term Loan made by the Lender pursuant to subsection 2.1 of the
Credit Agreement, as hereinafter defined. The principal amount shall be paid in
the amounts and on the dates specified in subsection 2.3. The Borrower further
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of the Term
Loan and the date and amount of each payment or prepayment of principal with
respect thereto, each conversion of all or a portion thereof to another Type,
each continuation of all or a portion thereof as the same Type and, in the case
of Eurodollar Loans, the length of each Interest Period with respect thereto.
Each such endorsement shall constitute prima facie evidence of the accuracy of
the information endorsed. The failure to make any such endorsement shall not
affect the obligations of the Borrower in respect of such Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit Agreement
dated as of May 21, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Windy Hill Pet Food Acquisition
Co., the Lender, the other banks and financial institutions from time to time
parties thereto, Credit Suisse First Boston, as administrative agent, and The
Chase Manhattan Bank, as Documentation Agent (b) is subject to the provisions of
the Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Term Note
------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Unpaid Principal
Amount of ABR Converted to Principal of ABR Loans Converted to Balance of ABR Notation
Date Loans ABR Loans Loans Repaid Eurodollar Loans Loans Made By
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
to Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Unpaid
Interest Period Amount of Amount of Principal
Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Amount of to Eurodollar Rate with Eurodollar Converted to Eurodollar Notation
Date Eurodollar Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TERM NOTE
$1,505,882.35 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC.,
a Minnesota corporation and successor by merger to Windy Hill Pet Food
Acquisition Co. (the "Borrower"), hereby unconditionally promises to pay to
the order of SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION (the "Lender")
at the office of Credit Suisse First Boston, located at 11 Madison Avenue,
New York, New York 10010, in lawful money of the United States of America and
in immediately available funds, the principal amount of ONE MILLION FIVE
HUNDRED FIVE THOUSAND EIGHT HUNDRED EIGHTY-EIGHT DOLLARS AND THIRTY-FIVE
CENTS ($1,505,882.35), or, if less, the unpaid principal amount of the Term
Loan made by the Lender pursuant to subsection 2.1 of the Credit Agreement,
as hereinafter defined. The principal amount shall be paid in the amounts and
on the dates specified in subsection 2.3. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount hereof
from time to time outstanding at the rates and on the dates specified in
subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which
shall be attached hereto and made a part hereof the date, Type and amount of
the Term Loan and the date and amount of each payment or prepayment of
principal with respect thereto, each conversion of all or a portion thereof
to another Type, each continuation of all or a portion thereof as the same
Type and, in the case of Eurodollar Loans, the length of each Interest Period
with respect thereto. Each such endorsement shall constitute prima facie
evidence of the accuracy of the information endorsed. The failure to make any
such endorsement shall not affect the obligations of the Borrower in respect
of such Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit
Agreement dated as of May 21, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among Windy Hill Pet
Food Acquisition Co., the Lender, the other banks and financial institutions
from time to time parties thereto, Credit Suisse First Boston, as
administrative agent, and The Chase Manhattan Bank, as Documentation Agent
(b) is subject to the provisions of the Credit Agreement and (c) is subject
to optional and mandatory prepayment in whole or in part as provided in the
Credit Agreement. This Note is secured and guaranteed as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description
of the properties and assets in which a security interest has been granted,
the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted
and the rights of the holder of this Note in respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Term Note
------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Unpaid Principal
Amount of ABR Converted to Principal of ABR Loans Converted to Balance of ABR Notation
Date Loans ABR Loans Loans Repaid Eurodollar Loans Loans Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
to Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Unpaid
Interest Period Amount of Amount of Principal
Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Amount of to Eurodollar Rate with Eurodollar Converted to Eurodollar Notation
Date Eurodollar Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TERM NOTE
$1,505,882.35 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC., a
Minnesota corporation and successor by merger to Windy Hill Pet Food Acquisition
Co. (the "Borrower"), hereby unconditionally promises to pay to the order of
FIRST SOURCE FINANCIAL LLP, an Illinois registered limited liability company
(the "Lender") at the office of Credit Suisse First Boston, located at 11
Madison Avenue, New York, New York 10010, in lawful money of the United States
of America and in immediately available funds, the principal amount of ONE
MILLION FIVE HUNDRED FIVE THOUSAND EIGHT HUNDRED EIGHTY-TWO DOLLARS AND
THIRTY-FIVE CENTS ($1,505,882.35), or, if less, the unpaid principal amount of
the Term Loan made by the Lender pursuant to subsection 2.1 of the Credit
Agreement, as hereinafter defined. The principal amount shall be paid in the
amounts and on the dates specified in subsection 2.3. The Borrower further
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of the Term
Loan and the date and amount of each payment or prepayment of principal with
respect thereto, each conversion of all or a portion thereof to another Type,
each continuation of all or a portion thereof as the same Type and, in the case
of Eurodollar Loans, the length of each Interest Period with respect thereto.
Each such endorsement shall constitute prima facie evidence of the accuracy of
the information endorsed. The failure to make any such endorsement shall not
affect the obligations of the Borrower in respect of such Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit Agreement
dated as of May 21, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Windy Hill Pet Food Acquisition
Co., the Lender, the other banks and financial institutions from time to time
parties thereto, Credit Suisse First Boston, as administrative agent, and The
Chase Manhattan Bank, as Documentation Agent (b) is subject to the provisions of
the Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Term Note
------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Unpaid Principal
Amount of ABR Converted to Principal of ABR Loans Converted to Balance of ABR Notation
Date Loans ABR Loans Loans Repaid Eurodollar Loans Loans Made By
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
to Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Unpaid
Interest Period Amount of Amount of Principal
Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Amount of to Eurodollar Rate with Eurodollar Converted to Eurodollar Notation
Date Eurodollar Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TERM NOTE
$1,505,882.35 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC., a
Minnesota corporation and successor by merger to Windy Hill Pet Food Acquisition
Co. (the "Borrower"), hereby unconditionally promises to pay to the order of
NATIONSBANK OF TENNESSEE, N.A. (the "Lender") at the office of Credit Suisse
First Boston, located at 11 Madison Avenue, New York, New York 10010, in lawful
money of the United States of America and in immediately available funds, the
principal amount of ONE MILLION FIVE HUNDRED FIVE THOUSAND EIGHT HUNDRED
EIGHTY-TWO DOLLARS AND THIRTY-FIVE CENTS ($1,505,882.35), or, if less, the
unpaid principal amount of the Term Loan made by the Lender pursuant to
subsection 2.1 of the Credit Agreement, as hereinafter defined. The principal
amount shall be paid in the amounts and on the dates specified in subsection
2.3. The Borrower further agrees to pay interest in like money at such office on
the unpaid principal amount hereof from time to time outstanding at the rates
and on the dates specified in subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of the Term
Loan and the date and amount of each payment or prepayment of principal with
respect thereto, each conversion of all or a portion thereof to another Type,
each continuation of all or a portion thereof as the same Type and, in the case
of Eurodollar Loans, the length of each Interest Period with respect thereto.
Each such endorsement shall constitute prima facie evidence of the accuracy of
the information endorsed. The failure to make any such endorsement shall not
affect the obligations of the Borrower in respect of such Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit Agreement
dated as of May 21, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Windy Hill Pet Food Acquisition
Co., the Lender, the other banks and financial institutions from time to time
parties thereto, Credit Suisse First Boston, as administrative agent, and The
Chase Manhattan Bank, as Documentation Agent (b) is subject to the provisions of
the Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Term Note
------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Unpaid Principal
Amount of ABR Converted to Principal of ABR Loans Converted to Balance of ABR Notation
Date Loans ABR Loans Loans Repaid Eurodollar Loans Loans Made By
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
to Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Unpaid
Interest Period Amount of Amount of Principal
Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Amount of to Eurodollar Rate with Eurodollar Converted to Eurodollar Notation
Date Eurodollar Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ACQUISITION NOTE
$3,388,235.30 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC.,
a Minnesota corporation and successor by merger to Windy Hill Pet Food
Acquisition Co. (the "Borrower"), hereby unconditionally promises to pay to
the order of BANKBOSTON, N.A. (the "Lender") at the office of Credit Suisse
First Boston, located at 11 Madison Avenue, New York, New York 10010, in
lawful money of the United States of America and in immediately available
funds, on the Termination Date the principal amount of (a) THREE MILLION
THREE HUNDRED EIGHTY-EIGHT THOUSAND TWO HUNDRED THIRTY-FIVE DOLLARS AND
THIRTY CENTS ($3,388,235.30), or, if less, (b) the aggregate unpaid principal
amount of all Acquisition Loans made by the Lender to the Borrower pursuant
to subsection 3.1 of the Credit Agreement, as hereinafter defined. The
Borrower further agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rates and
on the dates specified in subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which
shall be attached hereto and made a part hereof the date, Type and amount of
each Acquisition Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in
the case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such
endorsement shall not affect the obligations of the Borrower in respect of
such Acquisition Loan.
This Note (a) is one of the Acquisition Loan Notes referred to in the
Credit Agreement dated as of May 21, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Windy Hill Pet Food Acquisition Co., the Lender, the other banks and
financial institutions from time to time parties thereto, Credit Suisse First
Boston, as administrative agent and The Chase Manhattan Bank, as
documentation agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part
as provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan
Documents for a description of the properties and assets in which a security
interest has been granted, the nature and extent of the security and the
guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in
respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Acquisition Loan Note
------------------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of ABR Loans
Converted to Amount of Principal of Converted to Unpaid Principal Balance Notation
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to Acquisition Loan Note
------------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Period Amount of Amount of
Amount of Amount and Eurodollar Principal of Eurodollar Unpaid Principal
Eurodollar Converted to Rate with Eurodollar Loans Loans Converted Balance of Eurodollar Notation
Date Loans Eurodollar Loans Respect Thereto Repaid to ABR Loans Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ACQUISITION NOTE
$3,388,235.30 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC.,
a Minnesota corporation and successor by merger to Windy Hill Pet Food
Acquisition Co. (the "Borrower"), hereby unconditionally promises to pay to
the order of FIRST SOURCE FINANCIAL LLP, an Illinois registered limited
liability partnership (the "Lender") at the office of Credit Suisse First
Boston, located at 11 Madison Avenue, New York, New York 10010, in lawful
money of the United States of America and in immediately available funds, on
the Termination Date the principal amount of (a) THREE MILLION THREE HUNDRED
EIGHTY-EIGHT THOUSAND TWO HUNDRED THIRTY-FIVE DOLLARS AND THIRTY CENTS
($3,388,235.30), or, if less, (b) the aggregate unpaid principal amount of
all Acquisition Loans made by the Lender to the Borrower pursuant to
subsection 3.1 of the Credit Agreement, as hereinafter defined. The Borrower
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which
shall be attached hereto and made a part hereof the date, Type and amount of
each Acquisition Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in
the case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such
endorsement shall not affect the obligations of the Borrower in respect of
such Acquisition Loan.
This Note (a) is one of the Acquisition Loan Notes referred to in the
Credit Agreement dated as of May 21, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Windy Hill Pet Food Acquisition Co., the Lender, the other banks and
financial institutions from time to time parties thereto, Credit Suisse First
Boston, as administrative agent and The Chase Manhattan Bank, as
documentation agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part
as provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan
Documents for a description of the properties and assets in which a security
interest has been granted, the nature and extent of the security and the
guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in
respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Acquisition Loan Note
------------------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of ABR Loans
Converted to Amount of Principal of Converted to Unpaid Principal Balance Notation
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to Acquisition Loan Note
------------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Period Amount of
Amount of Amount Converted and Eurodollar Principal of Amount of Eurodollar Unpaid Principal
Eurodollar to Eurodollar Rate with Eurodollar Loans Converted to Balance of Eurodollar Notation
Date Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ACQUISITION NOTE
$3,388,235.30 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC., a
Minnesota corporation and successor by merger to Windy Hill Pet Food Acquisition
Co. (the "Borrower"), hereby unconditionally promises to pay to the order of
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION (the "Lender") at the office of
Credit Suisse First Boston, located at 11 Madison Avenue, New York, New York
10010, in lawful money of the United States of America and in immediately
available funds, on the Termination Date the principal amount of (a) THREE
MILLION THREE HUNDRED EIGHTY-EIGHT THOUSAND TWO HUNDRED THIRTY-FIVE DOLLARS AND
THIRTY CENTS ($3,388,235.30), or, if less, (b) the aggregate unpaid principal
amount of all Acquisition Loans made by the Lender to the Borrower pursuant to
subsection 3.1 of the Credit Agreement, as hereinafter defined. The Borrower
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each
Acquisition Loan made pursuant to the Credit Agreement and the date and amount
of each payment or prepayment of principal thereof, each continuation thereof,
each conversion of all or a portion thereof to another Type and, in the case of
Eurodollar Loans, the length of each Interest Period with respect thereto. Each
such endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement shall not affect
the obligations of the Borrower in respect of such Acquisition Loan.
This Note (a) is one of the Acquisition Loan Notes referred to in the
Credit Agreement dated as of May 21, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Windy Hill Pet
Food Acquisition Co., the Lender, the other banks and financial institutions
from time to time parties thereto, Credit Suisse First Boston, as administrative
agent and The Chase Manhattan Bank, as documentation agent, (b) is subject to
the provisions of the Credit Agreement and (c) is subject to optional and
mandatory prepayment in whole or in part as provided in the Credit Agreement.
This Note is secured and guaranteed as provided in the Loan Documents. Reference
is hereby made to the Loan Documents for a description of the properties and
assets in which a security interest has been granted, the nature and extent of
the security and the guarantees, the terms and conditions upon which the
security interests and each guarantee were granted and the rights of the holder
of this Note in respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Acquisition Loan Note
------------------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
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Amount Amount of ABR Loans
Amount of Converted to Amount of Principal of Converted to Unpaid Principal Balance
Date ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Notation Made By
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<S> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
Schedule B
to Acquisition Loan Note
------------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Amount of
Amount of Amount Converted Interest Period and Principal of Eurodollar Loans Unpaid Principal
Eurodollar to Eurodollar Eurodollar Rate with Eurodollar Converted to Balance of Eurodollar Notation
Date Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
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<S> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
ACQUISITION NOTE
$3,388,235.30 New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC., a
Minnesota corporation and successor by merger to Windy Hill Pet Food Acquisition
Co. (the "Borrower"), hereby unconditionally promises to pay to the order of
NATIONSBANK OF TENNESSEE, N.A. (the "Lender") at the office of Credit Suisse
First Boston, located at 11 Madison Avenue, New York, New York 10010, in lawful
money of the United States of America and in immediately available funds, on the
Termination Date the principal amount of (a) THREE MILLION THREE HUNDRED
EIGHTY-EIGHT THOUSAND TWO HUNDRED THIRTY-FIVE DOLLARS AND THIRTY CENTS
($3,388,235.30), or, if less, (b) the aggregate unpaid principal amount of all
Acquisition Loans made by the Lender to the Borrower pursuant to subsection 3.1
of the Credit Agreement, as hereinafter defined. The Borrower further agrees to
pay interest in like money at such office on the unpaid principal amount hereof
from time to time outstanding at the rates and on the dates specified in
subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date, Type and amount of each
Acquisition Loan made pursuant to the Credit Agreement and the date and amount
of each payment or prepayment of principal thereof, each continuation thereof,
each conversion of all or a portion thereof to another Type and, in the case of
Eurodollar Loans, the length of each Interest Period with respect thereto. Each
such endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement shall not affect
the obligations of the Borrower in respect of such Acquisition Loan.
This Note (a) is one of the Acquisition Loan Notes referred to in the
Credit Agreement dated as of May 21, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Windy Hill Pet
Food Acquisition Co., the Lender, the other banks and financial institutions
from time to time parties thereto, Credit Suisse First Boston, as administrative
agent and The Chase Manhattan Bank, as documentation agent, (b) is subject to
the provisions of the Credit Agreement and (c) is subject to optional and
mandatory prepayment in whole or in part as provided in the Credit Agreement.
This Note is secured and guaranteed as provided in the Loan Documents. Reference
is hereby made to the Loan Documents for a description of the properties and
assets in which a security interest has been granted, the nature and extent of
the security and the guarantees, the terms and conditions upon which the
security interests and each guarantee were granted and the rights of the holder
of this Note in respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
----------------------------
Name: M. Laurie Cummings
Title: Vice President
<PAGE>
Schedule A
to Acquisition Loan Note
------------------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of ABR Loans
Converted to Amount of Principal of Converted to Unpaid Principal Balance Notation
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Made By
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<S> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
Schedule B
to Acquisition Loan Note
------------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
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Interest Period Amount of Amount of
Amount of Amount and Eurodollar Principal of Eurodollar Unpaid Principal
Eurodollar Converted to Rate with Eurodollar Loans Loans Converted Balance of Eurodollar Notation
Date Loans Eurodollar Loans Respect Thereto Repaid to ABR Loans Loans Made By
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<S> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
EXECUTION COPY
================================================================================
WINDY HILL PET FOOD ACQUISITION CO.
------------------------------------------------
$85,000,000
CREDIT AGREEMENT
dated as of May 21, 1997
------------------------------------------------
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
THE CHASE MANHATTAN BANK,
as Documentation Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................... 2
1.1 Defined Terms.................................................. 2
1.2 Other Definitional Provisions; Financial Calculations.......... 26
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS...................... 27
2.1 Term Loans..................................................... 27
2.2 Procedure for Term Loan Borrowing.............................. 27
2.3 Repayment of Term Loans........................................ 28
2.4 Evidence of Term Loan Debt..................................... 29
SECTION 3. AMOUNT AND TERMS OF ACQUISITION LOAN
COMMITMENTS......................................................... 30
3.1 Acquisition Loan Commitments................................... 30
3.2 Procedure for Acquisition Loan Borrowing....................... 30
3.3 Termination or Reduction of Commitments........................ 31
3.4 Repayment of Acquisition Loans; Evidence of Debt............... 31
3.5 Commitment and Other Fees...................................... 32
SECTION 4. AMOUNT AND TERMS OF WORKING CAPITAL COMMITMENTS................ 33
4.1 Working Capital Commitments.................................... 33
4.2 Procedure for Working Capital Borrowing........................ 33
4.3 Commitment and Other Fees...................................... 34
4.4 Termination or Reduction of Commitments........................ 34
4.5 Repayment of Working Capital Loans; Evidence of Debt........... 35
4.6 Swing Line Commitment.......................................... 36
4.7 Repayment of Swing Line Loans; Evidence of Debt................ 36
4.8 Procedure for Borrowing Swing Line Loans....................... 37
4.9 Swing Line Loan Participations................................. 38
4.10 L/C Commitment................................................ 39
4.11 Procedure for Issuance of Letters of Credit................... 40
4.12 Fees, Commissions and Other Charges........................... 40
4.13 L/C Participations............................................ 41
4.14 Reimbursement Obligation of the Borrower...................... 42
4.15 Obligations Absolute.......................................... 42
4.16 Letter of Credit Payments..................................... 43
4.17 Application................................................... 43
4.18 Quarterly Reports............................................. 43
SECTION 5. GENERAL PROVISIONS APPLICABLE TO EXTENSIONS OF
CREDIT.............................................................. 43
5.1 Optional and Mandatory Prepayments............................. 43
5.2 Conversion and Continuation Options............................ 45
<PAGE>
Page
5.3 Minimum Amounts and Maximum Number of Tranches................. 46
5.4 Interest Rates and Payment Dates............................... 46
5.5 Computation of Interest and Fees............................... 46
5.6 Inability to Determine Interest Rate........................... 47
5.7 Pro Rata Treatment and Payments................................ 47
5.8 Illegality..................................................... 48
5.9 Requirements of Law............................................ 49
5.10 Taxes......................................................... 50
5.11 Indemnity..................................................... 53
5.12 Change of Lending Office; Filing of Certificates or Documents. 53
5.13 Replacement Lenders........................................... 53
SECTION 6. REPRESENTATIONS AND WARRANTIES................................. 54
6.1 Financial Condition............................................ 54
6.2 No Change...................................................... 55
6.3 Existence; Compliance with Law................................. 56
6.4 Power; Authorization; Enforceable Obligations.................. 56
6.5 No Legal Bar................................................... 57
6.6 No Material Litigation......................................... 57
6.7 No Default..................................................... 57
6.8 Ownership of Property; Liens................................... 57
6.9 Intellectual Property.......................................... 57
6.10 No Burdensome Restrictions.................................... 58
6.11 Taxes......................................................... 58
6.12 Federal Regulations........................................... 58
6.13 ERISA......................................................... 58
6.14 Investment Company Act; Other Regulations..................... 59
6.15 Subsidiaries.................................................. 59
6.16 Purpose of Loans.............................................. 59
6.17 Environmental Matters......................................... 59
6.18 Regulation H.................................................. 60
6.19 Accuracy of Information....................................... 60
6.20 Solvency...................................................... 61
6.21 Merger Agreement.............................................. 61
6.22 Security Documents............................................ 61
SECTION 7. CONDITIONS PRECEDENT........................................... 61
7.1 Conditions to Initial Extension of Credit...................... 61
7.2 Conditions to Each Extension of Credit......................... 67
SECTION 8. AFFIRMATIVE COVENANTS.......................................... 67
8.1 Financial Statements........................................... 68
8.2 Certificates; Other Information................................ 69
8.3 Satisfaction and Payment of Obligations........................ 70
- ii -
<PAGE>
Page
8.4 Conduct of Business; Maintenance of Existence; Compliance
with Laws ....................................................70
8.5 Maintenance of Property; Insurance............................. 70
8.6 Inspection of Property; Books and Records; Discussions......... 70
8.7 Notices........................................................ 71
8.8 Environmental Laws............................................. 71
8.9 Maintenance of Liens of the Security Documents................. 72
8.10 Pledge of After Acquired Property; Additional Guarantors...... 72
8.11 Lockbox Agreements and Concentration Account.................. 73
8.12 Immaterial Subsidiaries....................................... 73
8.13 Further Assurances............................................ 73
SECTION 9. NEGATIVE COVENANTS............................................. 73
9.1 Financial Condition Covenants.................................. 73
9.2 Limitation on Indebtedness..................................... 75
9.3 Limitation on Liens............................................ 77
9.4 Limitation on Guarantee Obligations............................ 78
9.5 Limitation on Fundamental Changes.............................. 79
9.6 Limitation on Sale of Assets................................... 79
9.7 Limitation on Restricted Payments.............................. 80
9.8 Limitation on Capital Expenditures............................. 81
9.9 Limitation on Investments, Loans and Advances.................. 81
9.10 Limitation on Optional Payments and Modifications of
Debt Instruments and other Obligations...................... 83
9.11 Limitation on Transactions with Affiliates.................... 83
9.12 Limitation on Sales and Leasebacks............................ 83
9.13 Limitation on Changes in Fiscal Year.......................... 84
9.14 Limitation on Lines of Business............................... 84
9.15 Limitation on Negative Pledge Clauses......................... 84
SECTION 10. EVENTS OF DEFAULT............................................. 84
SECTION 11. THE AGENTS.................................................... 88
11.1 Appointment................................................... 88
11.2 Delegation of Duties.......................................... 88
11.3 Exculpatory Provisions........................................ 88
11.4 Reliance by Administrative Agent and Documentation Agent...... 89
11.5 Notice of Default............................................. 89
11.6 Non-Reliance on Administrative Agent, Documentation
Agent and Other Lenders..................................... 89
11.7 Indemnification............................................... 90
11.8 Administrative Agent and Documentation Agent in
Their Individual Capacities................................. 90
11.9 Successor Administrative Agent................................ 91
- iii -
<PAGE>
SECTION 12. MISCELLANEOUS................................................. 91
12.1 Amendments and Waivers........................................ 91
12.2 Notices....................................................... 92
12.3 No Waiver; Cumulative Remedies................................ 93
12.4 Survival of Representations and Warranties.................... 93
12.5 Payment of Expenses and Taxes................................. 93
12.6 Successors and Assigns; Participations and Assignments........ 94
12.7 Adjustments; Set-off.......................................... 97
12.8 Counterparts.................................................. 97
12.9 Severability.................................................. 97
12.10 Integration.................................................. 98
12.11 GOVERNING LAW................................................ 98
12.12 Submission To Jurisdiction; Waivers.......................... 98
12.13 Acknowledgements............................................. 99
12.14 WAIVERS OF JURY TRIAL........................................ 99
12.15 Confidentiality.............................................. 99
- iv -
<PAGE>
ANNEXES:
Annex A Pricing Grid
SCHEDULES:
1.1 Commitments, Addresses and Lending Offices
6.4 Consents
6.6 Litigation
6.8 Real Property
6.15 Subsidiaries of Holdings
6.17 Environmental Disclosure
6.22 Immaterial Subsidiaries
9.2(m) Permitted Indebtedness
9.3(e) Easements, Licenses, Etc.
9.3(g) Existing Liens
9.4(a) Guarantee Obligations
9.9(e) Securities Held by Borrower or any Subsidiary
9.11(ix) Affiliate Transactions
EXHIBITS:
A Form of Borrower Lockbox Agreement
B Form of Mortgage
[RESERVED]
D Form of Concentration Account Agreement
E Form of Guarantee and Collateral Agreement
[RESERVED]
G Form of Swing Line Loan Participation Certificate
H Form of Term Note
I Form of Acquisition Loan Note
J Form of Working Capital Note
K Form of Swing Line Note
L Form of Borrowing Certificate
M Form of Assignment and Acceptance
- v -
<PAGE>
CREDIT AGREEMENT, dated as of May 21, 1997, among WINDY HILL PET
FOOD ACQUISITION CO., a Minnesota corporation, ("Acquisition Co.") the
several banks and other financial institutions from time to time parties to
this Agreement (collectively, the "Lenders"; individually, a "Lender"),
CREDIT SUISSE FIRST BOSTON, a bank organized under the laws of Switzerland
acting through its New York branch, as administrative agent for the Lenders
hereunder (the "Administrative Agent") and THE CHASE MANHATTAN BANK, a New
York banking corporation, as documentation agent for the Lenders hereunder
(the "Documentation Agent", together with the Administrative Agent, the
"Agents").
W I T N E S S E T H :
WHEREAS, Acquisition Co. is a newly formed, wholly-owned subsidiary
of Windy Hill Pet Food Company, Inc., a Delaware corporation ("Old Windy
Hill");
WHEREAS, Old Windy Hill proposes to acquire Hubbard Milling Company,
a Minnesota corporation ("Hubbard Milling") and an affiliate of Armour
Corporation, a Delaware corporation ("Armour") by purchasing all of the
issued and outstanding shares of Capital Stock of Armour pursuant to the
terms of a stock purchase agreement, dated as of April 22, 1997 as amended,
supplemented or otherwise modified from time to time (the "Stock Purchase
Agreement") between Old Windy Hill and certain other parties thereto (the
"Acquisition");
WHEREAS, Acquisition Co. proposes to merge (the "Merger") with and
into Hubbard Milling pursuant to the terms of a Merger Agreement, dated as of
March 21, 1997, by and among Hubbard Milling, Old Windy Hill and Acquisition
Co. as amended, supplemented or otherwise modified from time to time (the
"Merger Agreement") pursuant to which Hubbard Milling will be the surviving
corporation and will thereupon be renamed Windy Hill Pet Food Company, Inc.
("Windy Hill") and shall be the Borrower hereunder;
WHEREAS, in connection with and immediately after the Acquisition
and the Merger, (i) the Borrower is to receive (a) a capital contribution
from Old Windy Hill and/or Armour, funded by a capital contribution from
Windy Hill Pet Food Holdings, Inc. ("Holdings") of at least $10,000,000 (the
"Equity Investment") and (b) net proceeds from the issuance of at least
$120,000,000 of either (X) Senior Subordinated Notes (as hereinafter defined)
or (Y) Senior Subordinated Credit Notes (as hereinafter defined), (ii) the
operating assets and liabilities of Old Windy Hill will be transferred,
directly or indirectly, to the Borrower, (iii) approximately $52,000,000 of
existing indebtedness of Old Windy Hill is to be refinanced (the
"Refinancing") following its transfer, directly or indirectly, to the
Borrower and (iv) Old Windy Hill will be renamed WHPF Inc.;
WHEREAS, pursuant to the Asset Purchase Agreement (the "Asset
Purchase Agreement"), dated as of April 25, 1997, as amended, supplemented or
otherwise modified from
<PAGE>
2
time to time, among Old Windy Hill, Acquisition Co. and Feed-Rite (US) Animal
Feeds, Inc., a subsidiary of The Ridley Group, the assets and liabilities
comprising the animal feed business of Hubbard Milling may be sold on or
after the Closing Date for net after tax proceeds of approximately
$50,000,000 (the "AF Sale");
WHEREAS, the Borrower has requested that the Agents and the Lenders
enter into this Agreement to provide a portion of the funds required to (i)
consummate the Acquisition, the Merger and the Refinancing, (ii) pay certain
fees, taxes and expenses related to the Acquisition, the Merger and the
Refinancing and (iii) provide for the working capital and other business
requirements of the Borrower and its subsidiaries after the Merger;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to
time by the Administrative Agent as its prime rate in effect at its
principal office in New York City (the Prime Rate not being intended to
be the lowest rate of interest charged by the Administrative Agent in
connection with extensions of credit to debtors) and "Federal Funds
Effective Rate" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it. Any change in the
ABR due to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.
"Accounts": as defined in the NYUCC.
"Acquisition": as defined in the recitals to this Agreement.
"Acquisition Co.": as defined in the preamble to this Agreement.
<PAGE>
3
"Acquisition Documents": the collective reference to the Stock
Purchase Agreement and each of the other instruments and documents
executed and delivered pursuant to the Acquisition, as the same may be
amended, supplemented waived or otherwise modified from time to time in
accordance with the terms of this Agreement.
"Acquisition Loan Commitment": with respect to any Lender, its
obligation to make Acquisition Loans in an amount not to exceed the
amount set forth opposite such Lender's name on Schedule 1.1 under the
heading "Acquisition Loan Commitment", as such amount may be reduced
from time to time pursuant to this Agreement or as such amount may be
adjusted from time to time pursuant to subsection 12.6; collectively,
as to all such Lenders, the "Acquisition Loan Commitments".
"Acquisition Loan Commitment Percentage": as to any Acquisition Loan
Lender at any time, the percentage which (i) the sum of (a) such
Acquisition Loan Lender's then unused Acquisition Loan Commitment plus
(b) such Acquisition Loan Lender's Acquisition Loans then outstanding
then constitutes of (ii) the sum of (a) the aggregate unused
Acquisition Loan Commitments of all the Acquisition Loan Lenders plus
(b) the aggregate principal amount of Acquisition Loans of all the
Acquisition Loan Lenders then outstanding.
"Acquisition Loan Commitment Period": the period from and including
the Closing Date to but not including the Termination Date or such
earlier date on which the Acquisition Loan Commitments shall terminate
as provided herein.
"Acquisition Loan Lender": any Lender with an unused Acquisition
Loan Commitment hereunder and/or any Acquisition Loans outstanding
hereunder; collectively, the "Acquisition Loan Lenders".
"Acquisition Loans": as defined in subsection 3.1(a).
"Acquisition Loan Note": as defined in subsection 3.4(e).
"Adjustment Date": the first Business Day following receipt by the
Administrative Agent of both (i) the financial statements required to
be delivered pursuant to subsection 8.1(b), as the case may be, for the
most recently completed fiscal period and (ii) the certificate required
to be delivered pursuant to subsection 8.2(b) with respect to such
fiscal period.
"Administrative Agent": CSFB, together with its affiliates, as the
administrative agent for the Lenders under this Agreement and the other
Loan Documents, and any successor thereto pursuant to subsection 11.9.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, "control" of a Person means the
<PAGE>
4
power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"AF Sale": as defined in the recitals to this Agreement.
"After-Acquired Mortgage Property": any parcel (or adjoining
parcels) of real property (including any leaseholds) acquired by any
Loan Party after the Closing Date.
"Agents": the collective reference to CSFB and Chase.
"Aggregate Acquisition Loan Outstandings": as to any Acquisition
Loan Lender at any time, an amount equal to the aggregate principal
amount of all Acquisition Loans made by such Acquisition Loan Lender
then outstanding.
"Aggregate Working Capital Outstandings": as to any Working Capital
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Working Capital Loans made by such Working
Capital Lender then outstanding, plus (b) such Working Capital Lender's
Working Capital Commitment Percentage of all Swing Line Loans made by
the Swing Line Lender then outstanding, provided that for purposes of
calculating Available Working Capital Commitments pursuant to Section
4.3 such amount shall be zero, plus (c) such Working Capital Lender's
Working Capital Commitment Percentage of the L/C Obligations then
outstanding.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Animal Feed Division": the animal feed business of Hubbard Milling.
"Applicable Margin": 1.50% if such Loans are ABR Loans and 2.50% if
such Loans are Eurodollar Loans, provided that, from and after the
quarter ending June 30, 1998, the Applicable Margin will be adjusted,
on each Adjustment Date based upon the Consolidated Interest Expense
Ratio and the ratio of Consolidated Total Indebtedness at the last day
of the 12-month period ended on the date of the financial statements
relating to such Adjustment Date to Consolidated EBITDA for such period
as determined from such financial statements, to the Applicable Margin
set forth on Annex A hereto opposite the level for which the
Consolidated Interest Expense Ratio as so determined satisfies the
criteria on Annex A under the heading "Consolidated Interest Expense
Ratio" and for which the ratio of Consolidated Total Indebtedness to
Consolidated EBITDA as so determined satisfies the corresponding
criteria set forth under the heading "Ratio of Consolidated Total
Indebtedness to Consolidated EBITDA", it being understood that if the
financial statements required to be delivered pursuant to subsection
8.1(a) indicate that the Consolidated Interest Expense Ratio is lower
and/or the ratio of Consolidated Total Indebtedness to Consolidated
EBITDA
<PAGE>
5
is higher than the corresponding figures provided in the financial
statements most recently delivered pursuant to subsection 8.1(b), then
the Applicable Margin shall be deemed to have been readjusted based on
the figures provided pursuant to subsection 8.1(a) retroactively from
the immediately preceding Adjustment Date and the Borrower shall pay
the difference in the interest or fees resulting from the discrepancy
on the next scheduled Interest Payment Date or fee payment date and
provided, further, that (a) in the event that the financial statements
required to be delivered pursuant to subsection 8.1(a) or 8.1(b), as
applicable, and the related certificate required pursuant to subsection
8.2(b), are not delivered when due, then if such financial statements
are not delivered prior to the date upon which the resultant Default
shall become an Event of Default, then, effective upon such Default
becoming an Event of Default, during the period from the date upon
which such financial statements were required to be delivered until one
Business Day following the date upon which they actually are delivered,
the Applicable Margin shall be 3.50%, if such Loans are ABR Loans, and
4.50%, if such Loans are Eurodollar Loans, and (b) if on any Adjustment
Date, the Consolidated Interest Expense Ratio and the ratio of
Consolidated Total Indebtedness to Consolidated EBITDA as so determined
would result in different Applicable Margins, the higher Applicable
Margin shall govern.
"Application": an application, in such form as the Issuing Lender
may specify from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"Armour": as defined in the recitals to this Agreement.
"Arrangers": CSFB and CSI.
"Asset Sale": as to any Person, any sale or other disposition
(including any Sale/Leaseback Transaction and any mortgage or lease of
real property other than any mortgage made by such Person in order to
finance the acquisition of additional real property) subsequent to the
Closing Date of any property of such Person resulting in Net Proceeds
in excess of $10,000.
"Assignee": as defined in subsection 12.6(c).
"Available Acquisition Loan Commitment": as to any Acquisition Loan
Lender at any time, an amount equal to the difference, if any, of (a)
the amount of such Acquisition Loan Lender's Acquisition Loan
Commitment at such time minus (b) such Acquisition Loan Lender's
Aggregate Acquisition Loan Outstandings at such time; collectively, as
to all the Acquisition Loan Lenders, the "Available Acquisition Loan
Commitments".
"Available Working Capital Commitment": as to any Working Capital
Lender at any time, an amount equal to the difference, if any, of (a)
the amount of such Working Capital Lender's Working Capital Commitment
at such time minus (b) such Working Capital Lender's Aggregate Working
Capital Outstandings at such time;
<PAGE>
6
collectively, as to all the Working Capital Lenders, the "Available
Working Capital Commitments".
"Benefitted Lender": as defined in subsection 12.7(a).
"Board of Governors": the Board of Governors of the Federal Reserve
System and any Governmental Authority which succeeds to the powers and
functions thereof.
"Borrower": as defined in the recitals to this Agreement.
"Borrower Lockbox Agreement": a Lockbox Agreement to be executed and
delivered by the Borrower, substantially in the form of Exhibit A or in
such other form as shall be reasonably acceptable to the Administrative
Agent, as the same may be amended, supplemented or otherwise modified
from time to time.
"Borrower Mortgage": each Mortgage to be executed and delivered by
the Borrower, substantially in the form of Exhibit B or in such other
form as the Administrative Agent shall reasonably require, with respect
to (i) each parcel of real property listed on Schedule 6.8 for which
the Administrative Agent requests a Mortgage and (ii) each parcel of
After-Acquired Mortgage Property for which a mortgage is granted to the
Administrative Agent pursuant to subsection 8.10, in each case as the
same may be amended, supplemented or otherwise modified from time to
time.
"Borrower Security Documents": collectively, the Borrower Lockbox
Agreements, the Borrower Mortgages, the Concentration Account Agreement
and the Guarantee and Collateral Agreement.
"Borrowing Certificate": the borrowing certificate to be executed
and delivered by the Borrower, substantially in the form of Exhibit L.
"Borrowing Date": any Business Day specified in a notice pursuant to
subsection 2.2, 3.2, 4.2 or 4.8 as a date on which the Borrower
requests the Lenders to make Loans hereunder.
"BRS": Bruckmann, Rosser, Sherrill & Co., L.P.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by
law to close; provided, however, that, with respect to matters relating
to Eurodollar Loans, any day on which commercial banks in London,
England are authorized or required by law to close also shall not
constitute a "Business Day".
"Capital Expenditures": as to any Person for any period, the
aggregate amount paid or accrued by such Person and its Subsidiaries
for the purchase (including by way of the acquisition of securities of
a Person), construction or use of any property
<PAGE>
7
during such period, the value or cost of which, in accordance with
GAAP, would appear on such Person's consolidated balance sheet in the
category of property, plant or equipment at the end of such period,
excluding any such expenditure made to restore such property to its
condition immediately prior to any such loss, condemnation, damage or
destruction, to the extent such expenditure is made with insurance
proceeds or awards relating to any such loss, condemnation, damage or
destruction; provided that Capital Expenditures shall not include
expenditures up to an aggregate amount equal to the purchase price for
any Permitted Acquisition.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year
from the date of acquisition; (b) marketable general obligations issued
by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at
the time of acquisition thereof, having a credit rating of "A" or
better from either Standard & Poor's Ratings Group or Moody's Investors
Service, Inc.; (c) certificates of deposit, time deposits, eurodollar
time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition
thereof of any Lender, or of any domestic commercial bank the long-term
indebtedness of which is rated at the time of acquisition thereof at
least A or the equivalent thereof by Standard & Poor's Ratings Group,
or A or the equivalent thereof by Moody's Investors Service, Inc., and
having capital and surplus in excess of $500,000,000; (d) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (a), (b) and (c) entered
into with any bank meeting the qualifications specified in clause (c)
above; (e) commercial paper rated at the time of acquisition thereof at
least A-2 or the equivalent thereof by Standard & Poor's Ratings Group
or P-2 or the equivalent thereof by Moody's Investors Service, Inc., or
carrying an equivalent rating by a nationally recognized rating agency,
if both of the two named rating agencies cease publishing ratings of
investments, and in either case maturing within 270 days after the date
of acquisition thereof; (f) interests in any investment company which
invests solely in instruments of the type specified in clauses (a)
through (e) above; and (g) other investment instruments approved in
writing by the Required Lenders and offered by any Lender or by any
financial institution which has a combined capital and surplus of not
less than $100,000,000.
"Chase": The Chase Manhattan Bank, a New York banking corporation.
"Clean-Up Amount": $5,000,000.
<PAGE>
8
"Closing Date": the date on which the conditions precedent set forth
in subsection 7.1 shall be satisfied or waived.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by
any Security Document.
"Commercial Letter of Credit": as defined in subsection
4.10(b)(i)(2).
"Commitment": with respect to any Lender, the collective reference
to such Lender's Term Loan Commitment and/or Revolving Credit
Commitment; collectively, as to all the Lenders, the "Commitments".
"Commitment Percentage": as to any Lender at any time, the
percentage which (i) the sum of (a) such Lender's then (I) Available
Acquisition Loan Commitment (II) Available Working Capital Commitment
and (III) other unused Commitments (other than Revolving Credit
Commitments) plus (b) such Lender's Loans (other than Swing Line Loans)
then outstanding plus (c) the product of such Lender's Working Capital
Commitment Percentage times the sum of (I) the Swing Line Loans then
outstanding and (II) the L/C Obligations then outstanding, then
constitutes of (ii) the sum of (x) the aggregate (I) Available
Acquisition Loan Commitments and (II) Available Working Capital
Commitments of the Revolving Credit Lenders and the other unused
Commitments of all the Lenders (other than Revolving Credit
Commitments) plus (y) the aggregate principal amount of Loans of all
the Lenders then outstanding plus (z) the aggregate L/C Obligations of
all the Lenders then outstanding.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of
determining liability under Section 412 of the Code, which is treated
as a single employer under Section 414 (b), (c), (m) or (o) of the
Code.
"Concentration Account Agreement": the Concentration Account
Agreement to be executed and delivered by the Borrower, substantially
in the form of Exhibit D, as the same may be amended, supplemented or
otherwise modified from time to time.
"Consolidated Cash Interest Expense": for any period, Consolidated
Interest Expense paid in cash during such period.
"Consolidated Current Assets": as to any Person at any time, the
current assets (other than cash and Cash Equivalents) of such Person
and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
<PAGE>
9
"Consolidated Current Liabilities": as to any Person at any time,
the current liabilities of such Person and its Subsidiaries determined
on a consolidated basis in accordance with GAAP, but excluding all
short-term Indebtedness for borrowed money and the current portion of
any long-term Indebtedness of such Person or its Subsidiaries, in each
case to the extent otherwise included therein, and any current taxes
payable and any current portion of deferred taxes.
"Consolidated EBITDA": for any period, the Consolidated Net Income
for such period, plus, to the extent deducted in determining such
Consolidated Net Income, (i) Consolidated Interest Expense, (ii)
depreciation, (iii) depletion, (iv) amortization, (v) all Federal,
state, local and foreign income and franchise taxes, (vi) all other
non-cash expenses and (vii) any extraordinary and unusual losses, and,
minus, to the extent added in determining such Consolidated Net Income,
(i) any non-cash income or non-cash gains and (ii) any extraordinary
and unusual gains, all as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Fixed Charges": for any period, the sum of (i)
Consolidated Cash Interest Expense, (ii) scheduled amortization of
Indebtedness of the Borrower and its Subsidiaries for such period and
discount or premium relating to any such Indebtedness for such period,
whether expensed or capitalized, (iii) cash taxes and (iv) Capital
Expenditures, in each case determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense": for any period, the net interest
expense of the Borrower and its Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense Ratio": for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Cash
Interest Expense for such period.
"Consolidated Net Income": for any period, the net income of the
Borrower and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, but excluding from the
determination of Consolidated Net Income (without duplication) (a) the
income (or loss) of any Person in which any other Person (other than
the Borrower or any of the Subsidiaries) has a joint interest, except
to the extent of the amount of dividends or other distributions
actually paid in cash by such Person to (or on the account of such
Person by) the Borrower or any of its Subsidiaries by such Person
during such period and (b) the income (or loss) of any Person accrued
prior to the date it becomes a Subsidiary of the Borrower or is merged
into or consolidated with the Borrower or any of its Subsidiaries or
the date such Person's assets are acquired by the Borrower or any of
its Subsidiaries.
"Consolidated Total Indebtedness": at any date of determination, all
Indebtedness of the Borrower and its Subsidiaries outstanding at such
date of determination as determined on a consolidated basis in
accordance with GAAP.
<PAGE>
10
"Consolidated Working Capital": the excess of Consolidated Current
Assets over Consolidated Current Liabilities.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of
its property is bound.
"CSI": Chase Securities Inc., a Delaware corporation.
"CSFB": Credit Suisse First Boston, a bank organized under the laws
of Switzerland acting through its New York branch.
"Currency Rate Protection Agreements": as to any Person, all foreign
exchange contracts, currency swap agreements or other similar
agreements or arrangements entered into in the ordinary course of
business by such Person designed to protect such Person against
fluctuations in currency values.
"Dartford": Dartford Partnership L.L.C., a Delaware limited
liability company.
"Default": any of the events specified in Section 10, whether or not
any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"Documentation Agent": Chase, together with its affiliates, as the
documentation agent for the Lenders under this Agreement and the other
Loan Documents.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Domestic Subsidiary": any Subsidiary organized under the laws of
any jurisdiction within the United States.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including common law) regulating, relating to or
imposing liability or standards of conduct concerning the protection of
the environment or the protection of human health as it relates to the
protection of the environment, as now or may at any time hereafter be
in effect.
"Environmental Permits": all permits, licenses, registrations,
notifications, exemptions, and other authorizations required under
Environmental Laws.
"Equity Interest": Capital Stock and all warrants, options or other
rights to acquire Capital Stock, (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Equity Investment": as defined in the recitals to this Agreement.
<PAGE>
11
"Equity Investment Documents": the collective reference to each
instrument and document executed and delivered pursuant to the Equity
Investment, as the same may be amended, supplemented, waived or
otherwise modified from time to time; individually as "Equity
Investment Document".
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
or other Governmental Authority having jurisdiction with respect
thereto) dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board of Governors) maintained by a member bank of
the Federal Reserve System.
"Eurodollar Base Rate": the rate per annum determined by the
Administrative Agent at approximately 11:00 a.m. (London time) on the
date which is two Business Days prior to the beginning of the relevant
Interest Period by reference to the "British Bankers' Association
Interest Settlement Rates" for deposits in Dollars (as set forth by any
service selected by the Administrative Agent which has been nominated
by the British Bankers' Association as an authorized information vendor
for the purpose of displaying such rates) for a period equal to such
Interest Period; provided that, to the extent that an interest rate is
not ascertainable pursuant to the foregoing provisions of this
definition, the "Eurodollar Base Rate" shall be the interest rate per
annum determined by the Administrative Agent to be the average of the
rates per annum at which deposits in Dollars are offered for such
relevant Interest Period to major banks in the London interbank market
in London, England by CSFB at approximately 11:00 a.m. (London time) on
the date which is two Business Days prior to the beginning of such
Interest Period.
"Eurodollar Loans": Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula:
Eurodollar Base Rate
--------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 10,
provided that all requirements for the giving of notice, the lapse of
time, or both, and any other conditions, have been satisfied.
<PAGE>
12
"Excess Cash Flow": for any fiscal year of the Borrower, the excess
of (a) the sum, without duplication, of (i) Consolidated EBITDA for
such fiscal year, (ii) the amount of any refund received by the
Borrower and its Subsidiaries during such fiscal year on taxes paid by
the Borrower and its Subsidiaries, (iii) cash dividends, cash interest
and other similar cash payments received by the Borrower during such
fiscal year in respect of investments to the extent not included in
Consolidated Net Income to determine Consolidated EBITDA for such
fiscal year, (iv) extraordinary and unusual cash gains to the extent
subtracted or otherwise not included in Consolidated EBITDA for such
fiscal year and (v) cash generated (if any) by the decrease (if any) in
Consolidated Working Capital of the Borrower for such fiscal year,
minus (b) the sum, without duplication, of (i) the aggregate amount of
cash Capital Expenditures made by the Borrower and its Subsidiaries
during such fiscal year and permitted hereunder, (ii) the aggregate
amount of all reductions of the Revolving Credit Commitments (to the
extent such reductions are accompanied by prepayment of Revolving
Credit Loans, Swing Line Loans and/or L/C Obligations) or payments or
prepayments of the Term Loans during such fiscal year other than
pursuant to subsection 5.1(b) or 5.1(c) (except to the extent, in the
case of a prepayment pursuant to subsection 5.1(c), the Net Proceeds
giving rise to such prepayment are included in clause (a)(iv) above),
(iii) the aggregate amount of payments of principal in respect of any
Indebtedness (other than under this Agreement) permitted hereunder
during such fiscal year, (iv) cash interest expense of the Borrower and
its Subsidiaries for such fiscal year, (v) taxes actually paid in such
fiscal year or to be paid in the subsequent fiscal year on account of
such fiscal year to the extent added to Consolidated Net Income to
determine Consolidated EBITDA for such fiscal year, (vi) extraordinary
and unusual cash losses to the extent added to Consolidated EBITDA for
such fiscal year, (vii) the aggregate amount of cash used for Permitted
Acquisitions and other Investments made by the Borrower and its
Subsidiaries during such fiscal year pursuant to subsections 9.9(h) and
9.9(i), (viii) dividends or other direct payments paid by the Borrower
to or for the benefit of Holdings, Old Windy Hill or Armour to the
extent permitted by subsection 9.7 and 9.9(f) to the extent not
subtracted in the determination of Consolidated Net Income of the
Borrower for such fiscal year, (ix) the increase (if any) in
Consolidated Working Capital of the Borrower for such fiscal year and
(x) non-recurring cash charges not to exceed $4,500,000 incurred in
connection with the Transactions and recorded to the balance sheet of
the Borrower from the Closing Date until June 30, 1998.
"Excess Cash Flow Percentage": 75%, provided that, commencing with
the Borrower's fiscal year ending December 31, 1998, so long as (i) the
Consolidated Interest Expense Ratio for the period of four consecutive
fiscal quarters ended the last day of the fiscal quarter immediately
preceding the date of such prepayment exceeds 2.25 to 1.00 and (ii) the
ratio of Consolidated Total Indebtedness at the last day of the fiscal
quarter immediately preceding the date of such prepayment to
Consolidated EBITDA for the period of four consecutive fiscal quarters
ending on such date is less than 4.00 to 1.00, the Excess Cash Flow
Percentage with respect to Term Loans and Revolving Credit Commitments
shall be 50%.
<PAGE>
13
"Extension of Credit": with respect to any Lender, (a) the making of
a Loan by such Lender and (b) if such Lender is a Working Capital
Lender, the issuance of or participation in a Letter of Credit; with
respect to all the Lenders, the "Extensions of Credit".
"FDIC": the Federal Deposit Insurance Corporation and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Federal Funds Effective Rate": as defined in the definition of ABR.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"Financing Lease Obligations": as to any Person, the obligations of
such Person to pay rent or other amounts under any Financing Lease; the
amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.
"Foreign Subsidiary": any Subsidiary organized under the laws of any
jurisdiction outside the United States of America.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time (subject to subsection
1.2(e)).
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee": the Guarantee and Collateral Agreement.
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by Holdings, Old Windy Hill, the
Borrower and each Subsidiary in favor of the Administrative Agent,
substantially in the form of Exhibit E, as the same may be amended,
supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "Guaranteeing
Person"), any obligation of (a) the Guaranteeing Person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the Guaranteeing Person has
issued a reimbursement, counter indemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
lease, dividend or other obligation (the "Primary Obligations") of any
other third Person (the "Primary Obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the Guaranteeing Person, whether or not contingent, (i) to purchase
any such Primary Obligation or any property
<PAGE>
14
constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such Primary
Obligation or (2) to maintain working capital or equity capital of the
Primary Obligor or otherwise to maintain the net worth or solvency of
the Primary Obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such Primary
Obligation of the ability of the Primary Obligor to make payment of
such Primary Obligation or (iv) otherwise to assure or hold harmless
the owner of any such Primary Obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall
not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Guarantee Obligation
of any Guaranteeing Person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the Primary
Obligation in respect of which such Guarantee Obligation is made and
(b) the maximum amount for which such Guaranteeing Person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such Primary Obligation and the maximum amount for
which such Guaranteeing Person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation
shall be such Guaranteeing Person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good
faith.
"Guarantors": Holdings, Old Windy Hill and each Subsidiary (other
than Foreign Subsidiaries) of the Borrower.
"Hazardous Materials": any petroleum (including crude oil or any
fraction thereof) or petroleum products, polychlorinated biphenyls,
urea-formaldehyde insulation, asbestos and asbestos-containing
materials, pollutants, contaminants, and all other materials and
substances including but not limited to radioactive materials regulated
pursuant to any Environmental Laws or that could result in liability
under any Environmental Law.
"Heinz Co-Packing Agreement": the agreement currently being
negotiated between the Borrower and Heinz Pet Products Company for the
production of 50,000 to 80,000 tons of certain products for
distribution and sale by Heinz, which agreement shall be executed on
terms and conditions reasonably satisfactory to the Borrower.
"Holdings": as defined in the recitals to this Agreement.
"Hubbard": means the pet food business of Hubbard Milling.
"Hubbard Milling": as defined in the recitals to this Agreement.
"Immaterial Subsidiaries": means those Subsidiaries of the Borrower
listed on Schedule 6.22.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred
purchase price
<PAGE>
15
of property or services (other than current trade liabilities incurred
in the ordinary course of business, payable in accordance with
customary practices and not more than 90 days past due, unless being
contested in good faith by appropriate proceedings), (b) any other
indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person
under Financing Leases, (d) all obligations of such Person under Rate
Protection Agreements, (e) all obligations of such Person in respect of
letters of credit (whether or not drawn), acceptances and similar
obligations issued or created for the account of such Person (other
than Letters of Credit), and (f) all indebtedness of others of the
types described in (a) through (e) above secured by any Lien on any
property owned by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof (the amount of such
indebtedness with respect to such Person being deemed to be the lesser
of the value of such property or the amount of indebtedness of others
so secured).
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 6.9.
"Interest Payment Date": (a) as to ABR Loans, the last Business Day
of each March, June, September and December, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of
such Interest Period, (c) as to any Eurodollar Loan having an Interest
Period longer than three months, each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and
the last day of such Interest Period and (d) any Business Day upon
which a conversion, prepayment or repayment occurs, except that in the
case of a Swing Line Loan such interest payment shall occur on the last
Business Day of March, June, September and December.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as
selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan
and ending one, two, three or six months thereafter, as selected by
the Borrower by irrevocable notice to the Administrative Agent not
less than three Business Days prior to the last day of the then
current Interest Period with respect thereto;
<PAGE>
16
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(2) no Interest Period that would otherwise extend beyond the
Termination Date or beyond the date final payment is due on the Term
Loans shall be selected by the Borrower;
(3) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Eurodollar Loan.
"Interest Rate Protection Agreements": as to any Person, all
interest rate swaps, caps or collar agreements or similar arrangements
entered into by such Person providing for protection against
fluctuations in interest rates or the exchange of nominal interest
obligations, either generally or under specific contingencies.
"Investment": as defined in subsection 9.9.
"Investors": the equity holders in the Borrower on the Closing Date,
including, Windy Hill Pet Food Company L.L.C., BRS and PNC Capital
Corp.
"Issuing Lender": CSFB or any of its Affiliates, in its capacity as
issuer of any Letter of Credit.
"Kozy Kitten Acquisition": refers to the acquisition by Old Windy
Hill on April 29, 1996 of substantially all of the assets and the
assumption of certain liabilities of the Kozy Kitten and Tuffy's dry
pet food brands from Heinz Pet Products.
"L/C Commitment": $5,000,000.
"L/C Fee Payment Date": the last Business Day of each March, June,
September and December.
"L/C Fee Percentage": as defined in subsection 4.12(b).
<PAGE>
17
"L/C Obligations": at any time, an amount equal to the sum of (a)
the aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under
Letters of Credit which have not been reimbursed pursuant to subsection
4.14.
"L/C Participants": collectively, all the Working Capital Lenders
other than the Issuing Lender.
"Lease Expense": for any period, the aggregate amount of fixed and
contingent rentals payable by the Borrower and its Subsidiaries for
such period, determined on a consolidated basis in accordance with
GAAP, with respect to leases (other than Financing Leases) of real and
personal property.
"Lenders": as defined in the preamble to this Agreement.
"Letters of Credit": collectively, Commercial Letters of Credit and
Standby Letters of Credit.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Loan": any Term Loan, Revolving Credit Loan or Swing Line Loan.
"Loan Documents": this Agreement, any Notes, the Guarantees, the
Applications and the Security Documents.
"Loan Participants": as defined in subsection 12.6(b).
"Loan Parties": the Borrower, Holdings, Old Windy Hill and each
Subsidiary of the Borrower which is a party to a Loan Document.
"Lockbox Agreements": collectively, the Borrower Lockbox Agreements
and any Subsidiary Lockbox Agreements.
"Maumee Acquisition": the exercise by the Borrower of its option to
purchase the 50% interest in its joint venture in Maumee, Ohio which it
does not own for approximately $1,800,000.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) of
the Borrower and its Subsidiaries taken as a whole or (b) the validity
or enforceability of this Agreement
<PAGE>
18
or any of the other Loan Documents or the rights or remedies of the
Agents or the Lenders hereunder or thereunder.
"Merger": as defined in the recitals to this Agreement.
"Merger Agreement": as defined in the recitals to this Agreement.
"Merger Documents": the collective reference to the Merger Agreement
and each of the other instruments and documents executed and delivered
pursuant to the Merger, as the same may be amended, supplemented waived
or otherwise modified from time to time in accordance with the terms of
this Agreement.
"Mortgaged Property": the real and leasehold properties of the Loan
Parties specified on Schedule 6.8 hereto.
"Mortgages": collectively, the Borrower Mortgages and the Subsidiary
Mortgages.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Proceeds": with respect to any Person, (a) with respect to any
Asset Sale by such Person, the cash proceeds (including any insurance
proceeds, if not reinvested in accordance with the terms of this
Agreement, any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase
price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale net of (i) attorneys' fees, accountants'
fees, investment banking fees, survey costs, title insurance premiums,
and related search and recording charges, transfer taxes, deed or
mortgage recording taxes, required debt payments (other than pursuant
hereto), other customary expenses, amounts required to be applied to
the repayment of Indebtedness secured by a Lien expressly permitted
hereunder on any asset which is the subject of such Asset Sale (other
than any Lien in favor of the Administrative Agent for the benefit of
the Lenders) and brokerage, consultant and other customary fees
actually incurred in connection therewith and (ii) taxes paid or
payable as a result thereof and (b) with respect to any issuance of
equity securities or the incurrence of any Indebtedness by such Person
subsequent to the Closing Date, the cash proceeds received from such
issuance or incurrence net of investment banking fees, attorneys' fees,
accountants' fees, underwriting discounts and commissions and other
customary fees and expenses and other reasonable costs and expenses
actually incurred in connection therewith.
"New Lending Office": as defined in subsection 5.10(b)(i)(A).
"Non-Excluded Taxes": as defined in subsection 5.10(a).
"Notes": collectively, the Swing Line Note, Revolving Credit Notes
and Term Notes, if any.
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19
"NYUCC": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Obligations": the unpaid principal of and interest on the Loans and
all other obligations and liabilities of the Borrower to the Agents and
the Lenders (including, without limitation, interest accruing at the
then applicable rate provided in this Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided in
this Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding,
relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct
or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, the other Loan Documents, any Rate
Protection Agreement entered into by the Borrower with any Lender or
any Affiliate of any Lender, any cash management services agreement
entered into by the Borrower with any Lender or any Affiliate of any
Lender or any other document made, delivered or given in connection
herewith or therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all reasonable fees and
disbursements of counsel to the Administrative Agent and the
Documentation Agent or to the Lenders that are required to be paid by
the Borrower pursuant to the terms of this Agreement, any other Loan
Document or any such Rate Protection Agreement or cash management
services agreement entered into by the Borrower with any Lender or any
Affiliate of any Lender).
"Obsolete Property": any property of the Borrower or any of its
Subsidiaries which is obsolete, outdated or worn out or the useful life
of which has ended, in each case in the good faith determination of the
Borrower.
"Offering Memorandum": the Offering Memorandum dated May 16, 1997,
with respect to the issuance of the Senior Subordinated Notes, a copy
of which has been furnished to each Lender.
"Old Windy Hill": as defined in the recitals to this Agreement.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any Governmental
Authority which succeeds to the powers and functions thereof.
"Permitted Acquisition": any acquisition of all or substantially all
the assets of, or shares or other Equity Interests in, a Person or
division or line of business of a Person or other significant assets of
a Person provided that (a) such acquisition is in a similar line of
business as that engaged in by the Borrower and its Subsidiaries (as
shall be reasonably agreed upon by the Borrower and the Administrative
Agent) and (b) such acquisition is consummated on a fully consensual
basis between the Borrower and the management of such Person, provided
further, that immediately after giving
<PAGE>
20
effect thereto: (i) no Default or Event of Default shall have occurred
and be continuing or would result therefrom, (ii) all transactions
related thereto shall be consummated in all material respects in
accordance with applicable laws, (iii) all actions required to be
taken, if any, with respect to such acquired or newly formed Subsidiary
under subsection 8.10 shall have been taken, (iv)(A) the Borrower shall
be in compliance, on a pro forma basis after giving effect to such
acquisition or formation, with the covenants contained in subsection
9.1 recomputed as at the last day of the most recently ended fiscal
quarter of the Borrower as if such acquisition and any borrowing
therefor had occurred on the first day of each relevant period for
testing such compliance and as if an additional $3,000,000 of
borrowings under the Working Capital Facility had occurred on such last
day, and the Borrower shall have delivered to the Administrative Agent
an officers' certificate to such effect, together with all relevant
financial information for such Subsidiary or assets (to the extent
reasonably available), and (B) after giving effect to such transaction,
any acquired or newly formed Subsidiary shall not be liable for any
Indebtedness (except for Indebtedness permitted by subsection 9.2) and
(v) the Borrower shall have an undrawn commitment under the Working
Capital Facility in an amount not less than $3,000,000.
"Person": an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Primary Obligations": as defined in the definition of "Guarantee
Obligation" contained in this subsection 1.1.
"Proceeds": as defined in the NYUCC.
"Properties": as defined in subsection 6.17(a).
"Rate Protection Agreements": collectively, any Currency Rate
Protection Agreements and Interest Rate Protection Agreements.
"Refinancing": as defined in the recitals to this Agreement.
"Refunded Swing Line Loans": as defined in subsection 4.8(b).
"Register": as defined in subsection 12.6(d).
"Regulation D": Regulation D of the Board of Governors as in effect
from time to time.
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21
"Regulation G": Regulation G of the Board of Governors as in effect
from time to time.
"Regulation H": Regulation H of the Board of Governors as in effect
from time to time.
"Regulation U": Regulation U of the Board of Governors as in effect
from time to time.
"Regulation X": Regulation X of the Board of Governors as in effect
from time to time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 4.14(a) for amounts
drawn under Letters of Credit.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Replacement Asset": any property acquired by the Borrower or any of
its Subsidiaries subsequent to the Closing Date which replaces Obsolete
Property of the same type and utility as the property acquired.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or
.35 of PBGC Reg. ss. 4043 or any successor regulation thereto.
"Required Lenders": at any time, Lenders the Commitment Percentages
of which aggregate more than 50%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": as to any Person, the chief executive officer
and the president of such Person or, with respect to financial matters,
the chief financial officer of such Person or, in either case, such
other executive officers as may be designated from time to time by such
Person in writing to the Administrative Agent, and in the case of the
Borrower, in addition to the officers mentioned above, any Executive
Vice President.
"Restricted Payments": as defined in subsection 9.7.
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22
"Revolving Credit Commitment": with respect to any Lender, its
aggregate Acquisition Loan Commitment and Working Capital Commitment.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to but not including the Termination Date or such
earlier date on which the Revolving Credit Commitments shall terminate
as provided herein.
"Revolving Credit Lenders": the collective reference to the
Acquisition Loan Lenders and the Working Capital Lenders; individually
a "Revolving Credit Lender".
"Revolving Credit Loans": the collective reference to the
Acquisition Loans and the Working Capital Loans; individually a
"Revolving Credit Loan".
"Revolving Credit Notes": the collective reference to the
Acquisition Loan Notes and the Working Capital Notes; individually, a
"Revolving Credit Note".
"Sale/Leaseback Transaction": as defined in subsection 9.12.
"SEC": the Securities and Exchange Commission or any Governmental
Authority which succeeds to the powers and functions thereof.
"Securities Act": the Securities Act of 1933, as amended from time
to time.
"Security Documents": collectively, the Concentration Account
Agreement, the Guarantee and Collateral Agreement, the Lockbox
Agreements, the Mortgages, and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any asset or
assets of any Person to secure the Obligations or to secure any
guarantee of any such Obligations and, including, without limitation,
any such document delivered pursuant to subsection 8.10.
"Senior Subordinated Credit Agreement": the Senior Subordinated
Credit Agreement, dated as of the date hereof, among the Borrower, the
lenders parties thereto and The Chase Manhattan Bank, as agent for the
lenders, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with subsection 9.10.
"Senior Subordinated Credit Notes": the notes issued pursuant to the
Senior Subordinated Credit Agreement.
"Senior Subordinated Exchange Notes": the Senior Subordinated
Exchange Notes issued to redeem the Senior Subordinated Credit Notes.
"Senior Subordinated Facility Documents": the collective reference
to the Senior Subordinated Credit Notes, the Senior Subordinated Credit
Agreement and each of the other instruments and documents executed and
delivered pursuant to any of the
<PAGE>
23
foregoing, as the same may be amended, supplemented, waived or
otherwise modified from time to time in accordance with subsection
9.10, individually a "Senior Subordinated Facility Document".
"Senior Subordinated Notes": the notes issued pursuant to the terms
of the Senior Subordinated Note Indenture.
"Senior Subordinated Notes Documents": the collective reference to
the Senior Subordinated Notes and the Senior Subordinated Notes
Indenture and each of the other instruments and documents executed and
delivered pursuant to any of the foregoing, as the same may be amended,
supplemented, waived or otherwise modified from time to time in
accordance with subsection 9.10 to the extent applicable; individually
a "Senior Subordinated Note Document".
"Senior Subordinated Note Indenture": the Indenture, dated as of May
21, 1997, 1997, between the Borrower and Wilmington Trust Company, as
trustee, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with subsection 9.10.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the
amount that will be required to pay all "liabilities of such Person,
contingent or otherwise", as of such date (as such quoted terms are
determined in accordance with applicable Federal and state laws
governing determinations of the insolvency of debtors) as such debts
become absolute and matured, (b) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (c) such Person will be able to pay its debts as they
mature, taking into account the timing of and amounts of cash to be
received by such Person and the timing of and amounts of cash to be
payable on or in respect of indebtedness of such Person; in each case
after giving effect to (A) as of the Closing Date the making of the
extensions of credit to be made on the Closing Date and the application
of the proceeds of such extensions of credit and (B) on any date after
the Closing Date, the making of any extension of credit to be made on
such date and the application of the proceeds of such extension of
credit. For purposes of this definition, (i) "debt" means liability on
a "claim", and (ii) "claim" means any (x) right to payment, whether or
not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal
equitable, secured or unsecured or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Standby Letter of Credit": as defined in subsection 4.10(b)(i)(1).
<PAGE>
24
"Stock Purchase Agreement": as defined in the recitals to this
Agreement.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Lockbox Agreement": each Lockbox Agreement executed and
delivered by a Subsidiary pursuant to the Guarantee and Collateral
Agreement, substantially in the form of the Borrower Lockbox Agreement
or in such other form as shall be reasonably acceptable to the
Administrative Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiary Mortgage": each Mortgage to be executed and delivered by
a Subsidiary, substantially in the form of Exhibit B, with such changes
as the Administrative Agent shall deem necessary or desirable in order
(i) to provide that such Subsidiary is the Mortgagor, (ii) to comply
with and/or provide for specific laws of the jurisdictions in which the
property to be encumbered is located, and (iii) to assure that the
Administrative Agent has a perfected Lien on the property to be
encumbered thereby securing such Subsidiary's Obligations (as such term
is defined in the Guarantee and Collateral Agreement), or in such other
form as the Administrative Agent shall reasonably require, with respect
to (i) each parcel of real property listed on Schedule 6.8 for which
the Administrative Agent requests a Mortgage and (ii) each parcel of
After-Acquired Mortgage Property for which a mortgage is granted to the
Administrative Agent pursuant to subsection 8.10, in each case as the
same may be amended, supplemented or otherwise modified from time to
time.
"Swing Line Commitment": the obligation of the Swing Line Lender to
make Swing Line Loans pursuant to subsection 4.6 in an aggregate amount
at any one time outstanding not to exceed $5,000,000.
"Swing Line Lender": as defined in subsection 4.6.
"Swing Line Loan Participation Certificate": a certificate
substantially in the form of Exhibit G.
"Swing Line Loans": as defined in subsection 4.6.
"Swing Line Note": as defined in subsection 4.7(e).
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25
"Swing Line Participation Amount": as defined in subsection 4.9(b).
"Term Loan": as defined in subsection 2.1; collectively, the "Term
Loans".
"Term Loan Commitment": as to any Lender, its obligation to make a
Term Loan to the Borrower in an amount equal to the amount set forth
opposite such Lender's name in Schedule 1.1 under the heading "Term
Loan Commitment", as such amount may be reduced from time to time
pursuant to this Agreement or as such amount may be adjusted from time
to time pursuant to subsection 12.6; collectively, as to all such
Lenders, the "Term Loan Commitments".
"Term Loan Commitment Percentage": as to any Term Loan Lender at any
time, the percentage of the aggregate Term Loan Commitments then
constituted by such Term Loan Lender's Term Loan Commitments (or, after
the Term Loans are made, the percentage of the aggregate Term Loans
then constituted by such Term Loan Lender's Term Loans).
"Term Loan Lender": any Lender with an unused Term Loan Commitment
hereunder and/or any Term Loans outstanding hereunder; collectively,
the "Term Loan Lenders".
"Term Note": as defined in subsection 2.4(d); collectively, the
"Term Notes".
"Termination Date": December 31, 2003.
"Title Insurance Company": as defined in subsection 7.1(o).
"Tranche": collectively, Eurodollar Loans the then current Interest
Periods with respect to all of which begin on the same date and end on
the same later date (whether or not such Loans shall originally have
been made on the same day); Tranches may be identified as "Eurodollar
Tranches".
"Transaction Documents": the collective reference to the Acquisition
Documents, the Merger Documents, the Equity Investment Document and
either the Senior Subordinated Notes Documents or the Senior
Subordinated Facility Documents.
"Transactions": the collective reference to the Acquisition, the
Merger, the Equity Investment, the Refinancing and the issuance of
either the Senior Subordinated Notes or the Senior Subordinated Credit
Notes.
"Transferee": as defined in subsection 12.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
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26
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication
No. 500, as the same may be amended from time to time.
"Windy Hill": as defined in the recitals to this Agreement.
"Working Capital Commitment": with respect to any Lender, its
obligation to make Working Capital Loans and/or issue or participate in
Letters of Credit issued on behalf of the Borrower and/or make or
participate in Swing Line Loans made to the Borrower in an amount not
to exceed the amount set forth opposite such Lender's name on Schedule
1.1 under the heading "Working Capital Commitment", as such amount may
be reduced from time to time pursuant to this Agreement or as such
amount may be adjusted from time to time pursuant to subsection 12.6;
collectively, as to all such Lenders, the "Working Capital
Commitments".
"Working Capital Commitment Percentage": as to any Working Capital
Lender at any time, the percentage which (i) the sum of (a) such
Working Capital Lender's then unused Working Capital Commitment plus
(b) such Working Capital Lender's Working Capital Loans then
outstanding plus (c) the product of the percentage of the Working
Capital Commitments of all the Working Capital Lenders then constituted
by such Working Capital Lender's Working Capital Commitment times the
sum of (I) the Swing Line Loans then outstanding and (II) the L/C
Obligations then outstanding then constitutes of (ii) the sum of (w)
the aggregate unused Working Capital Commitments of all the Working
Capital Lenders plus (x) the aggregate principal amount of Working
Capital Loans of all the Working Capital Lenders then outstanding plus
(y) the aggregate L/C Obligations then outstanding plus (z) the Swing
Line Loans then outstanding.
"Working Capital Commitment Period": the period from and including
the Closing Date to but not including the Termination Date or such
earlier date on which the Working Capital Commitments shall terminate
as provided herein.
"Working Capital Lender": any Lender with an unused Working Capital
Commitment hereunder and/or any Working Capital Loans outstanding
hereunder; collectively, the "Working Capital Lenders".
"Working Capital Loans": as defined in subsection 4.1(a).
"Working Capital Note": as defined in subsection 4.5(e).
1.2 Other Definitional Provisions; Financial Calculations. (a)
Unless otherwise specified therein, all terms defined in this Agreement shall
have the defined meanings when used in the other Loan Documents or any
certificate or other document made or delivered pursuant hereto or thereto.
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27
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting
terms partly defined in subsection 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) Notwithstanding anything to the contrary herein, for purposes of
making all calculations in connection with the covenants contained in Section
9, all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP consistently
applied as in effect on the date of this Agreement. In the event of any
material difference at any time between GAAP in effect on the date of this
Agreement and GAAP from time to time in effect, the certificate of a
Responsible Officer required pursuant to subsection 8.2(b)(ii) shall include
a reconciliation of the calculations required thereby with the financial
statements being delivered with such certificate. In addition, although the
Borrower uses thirteen week quarters and 52/53 week years and its fiscal year
ends on the last Saturday in December, the Borrower's year end and quarter
end for each year and quarter during the duration of this Agreement have been
designated December 31, March 31, June 30, or September 30, but refer to
quarters and years ending closest to such dates as applicable.
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
2.1 Term Loans. Subject to the terms and conditions hereof, each
Term Loan Lender severally agrees (a) to make a term loan (a "Term Loan") to
the Borrower on the Closing Date in an amount equal to the Term Loan
Commitment of such Term Loan Lender, provided that the aggregate Term Loan
Commitments of the all Term Loan Lenders shall not exceed $20,000,000. The
Term Loans may from time to time be (a) Eurodollar Loans, (b) ABR Loans or
(c) a combination thereof, as determined by the Borrower and notified to the
Administrative Agent in accordance with subsections 2.2 and 5.2.
2.2 Procedure for Term Loan Borrowing. The Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 P.M., New York City time, at least (a)
three Business Days prior to the Closing Date, if all or any part of the Term
Loans are to be initially Eurodollar Loans or (b) one Business Day prior to
the Closing Date otherwise requesting that the Term Loan Lenders make the
Term Loans on the Closing Date and specifying (i) the amount to be borrowed,
(ii) whether the Term Loans are to be initially Eurodollar Loans, ABR Loans
or a combination thereof, and (iii) if the Term Loans are to be entirely or
partly Eurodollar Loans, the respective amounts of each such Type of Loan and
the respective lengths of the initial Interest Periods therefor. Upon
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28
receipt of such notice the Administrative Agent shall promptly notify each
Term Loan Lender thereof. Each Term Loan Lender will make the amount of its
pro rata share of the Term Loans available to the Administrative Agent for
the account of the Borrower at the office of the Administrative Agent
specified in subsection 12.2 prior to 12:00 P.M., New York City time, on the
Closing Date in Dollars and in funds immediately available to the
Administrative Agent. The Administrative Agent shall on such date credit the
account of the Borrower pursuant to the terms of the Borrowing Certificate
submitted on such Borrowing Date with the aggregate of the amounts made
available to the Administrative Agent by the Term Loan Lenders and in like
funds as received by the Administrative Agent.
2.3 Repayment of Term Loans. The aggregate Term Loans of all the
Term Loan Lenders shall be payable in 25 consecutive, quarterly installments,
commencing on December 31, 1997, on the dates and in the principal amounts,
equal to the respective amounts set forth below opposite the applicable
installment dates (or, if less in any case, the aggregate amount of the Term
Loans then outstanding):
Installment Amount
----------- ------
December 31, 1997 $ 250,000
March 31, 1998 500,000
June 30, 1998 500,000
September 30, 1998 500,000
December 31, 1998 500,000
March 31, 1999 625,000
June 30, 1999 625,000
September 30, 1999 625,000
December 31, 1999 625,000
March 31, 2000 750,000
June 30, 2000 750,000
September 30, 2000 750,000
December 31, 2000 750,000
March 31, 2001 875,000
June 30, 2001 875,000
September 30, 2001 875,000
December 31, 2001 875,000
March 31, 2002 1,000,000
June 30, 2002 1,000,000
September 30, 2002 1,000,000
December 31, 2002 1,000,000
March 31, 2003 1,125,000
June 30, 2003 1,125,000
September 30, 2003 1,250,000
December 31, 2003 1,250,000
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29
The Borrower hereby further agrees to pay to the Administrative Agent for the
account of each Term Loan Lender interest on the unpaid principal amount of
the Term Loans from time to time outstanding from the date hereof until
payment in full thereof at the rates per annum, and on the dates, set forth
in subsection 5.4.
2.4 Evidence of Term Loan Debt. (a) Each Term Loan Lender shall
maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Term Loan Lender
resulting from the Term Loan made by such Term Loan Lender, including the
amounts of principal and interest payable and paid to such Term Loan Lender
from time to time under this Agreement.
(b) The Administrative Agent shall record in the Register, with
separate subaccounts therein for each Term Loan Lender, (i) the amount of
each Term Loan made hereunder, the Type thereof and, in the case of
Eurodollar Loans, each Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from
the Borrower to each Term Loan Lender hereunder and (iii) both the amount of
any sum received by the Administrative Agent hereunder from the Borrower and
each Term Loan Lender's share thereof, if any.
(c) The entries made in the Register pursuant to subsection 2.4(b)
shall, to the extent permitted by applicable law, be prima facie evidence of
the existence and amounts of the obligations of the Borrower therein
recorded; provided, however, that the failure of any Term Loan Lender to
maintain any account pursuant to subsection 2.4(a) or the Administrative
Agent to make recordings in the Register pursuant to subsection 2.4(b), or
any error therein, shall not in any manner affect the obligation of the
Borrower to repay (with applicable interest) the Term Loan made to the
Borrower by such Term Loan Lender in accordance with the terms of this
Agreement.
(d) The Borrower agrees that, upon the request to the Administrative
Agent by any Term Loan Lender, which request is communicated to the Borrower,
the Borrower will execute and deliver to such Term Loan Lender a promissory
note of the Borrower dated the Closing Date evidencing the Term Loans made by
such Term Loan Lender, substantially in the form of Exhibit H (a "Term
Note"), payable to the order of such Term Loan Lender and in a principal
amount equal to, in the case of Term Notes issued on the Closing Date, the
lesser of (A) the initial Term Loan Commitment of such Term Loan Lender or
(B) the unpaid principal amount of the Term Loan made by such Term Loan
Lender, and, in the case of Term Notes issued after the Closing Date, the
unpaid principal amount of the Term Loan made by such Term Loan Lender. Each
Term Loan Lender is hereby authorized to record the date, Type and amount of
each Term Loan made by such Term Loan Lender, the date and amount of each
payment or prepayment of principal thereof, each continuation thereof, each
conversion of all or a portion thereof to another Type and, in the case of
Eurodollar Loans, the length of each Interest Period and Eurodollar Rate with
respect thereto, on the schedule (or any continuation of the schedule)
annexed to and constituting a part of its Term Note, and any such recordation
shall, to the extent permitted by applicable law, constitute prima facie
evidence of the accuracy of the information so recorded, provided that the
failure to make any such recordation (or any error therein) shall not affect
the obligation of the Borrower to repay (with applicable interest) the Term
Loans made
<PAGE>
30
to the Borrower in accordance with the terms of this Agreement. A Term Note
and the Obligations evidenced thereby may be assigned or otherwise
transferred in whole or in part only by registration of such assignment or
transfer of such Term Note and the Obligations evidenced thereby in the
Register (and each Term Note shall expressly so provide). Any assignment or
transfer of all or part of the Obligations evidenced by a Term Note shall be
registered in the Register only upon surrender for registration of assignment
or transfer of the Term Note evidencing such Obligations, accompanied by an
Assignment and Acceptance substantially in the form of Exhibit M duly
executed by the Assignor thereof, and thereupon one or more new Term Notes
shall be issued to the designated Assignee and the old Term Note shall be
returned by the Administrative Agent to the Borrower marked "cancelled." No
assignment of a Term Note and the Obligations evidenced thereby shall be
effective unless it shall have been recorded in the Register by the
Administrative Agent as provided in this subsection 2.4.
SECTION 3. AMOUNT AND TERMS OF ACQUISITION LOAN COMMITMENTS
3.1 Acquisition Loan Commitments. (a) Subject to the terms and
conditions hereof, each Acquisition Loan Lender severally agrees to make
revolving credit loans ("Acquisition Loans") to the Borrower from time to
time during the Acquisition Loan Commitment Period in an aggregate principal
amount at any one time outstanding that does not exceed the amount of such
Acquisition Loan Lender's Acquisition Loan Commitment, provided that (i) the
aggregate Acquisition Loan Commitments of all the Acquisition Loan Lenders
shall not exceed $45,000,000 and (ii) after the consummation of the
Transactions, the Acquisition Loans will only be used to make Permitted
Acquisitions. During the Acquisition Loan Commitment Period, the Borrower may
use the Acquisition Loan Commitments by borrowing, prepaying the Acquisition
Loans in whole or in part, and reborrowing, all in accordance with the terms
and conditions hereof.
(b) The Acquisition Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 5.2, provided that no Acquisition Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Termination Date.
3.2 Procedure for Acquisition Loan Borrowing. The Borrower hereby
requests an Acquisition Loan borrowing on the Closing Date in the amount of
$45,000,000. The Borrower may borrow under the Acquisition Loan Commitments
during the Acquisition Loan Commitment Period on any Business Day, provided
that the Borrower shall give the Administrative Agent irrevocable notice
(which notice must be received by the Administrative Agent prior to 12:00
Noon, New York City time, (a) three Business Days prior to the requested
Borrowing Date, if all or any part of the requested Acquisition Loans are to
be initially Eurodollar Loans, or (b) one Business Day prior to the requested
Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii)
the requested Borrowing Date, (iii) whether the borrowing is to be of
Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the lengths of the initial Interest
Periods therefor. Each borrowing under the
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Acquisition Loan Commitments shall be in an amount equal to (x) in the case
of ABR Loans, $500,000 or a whole multiple of $100,000 in excess thereof (or,
if the then Available Acquisition Loan Commitments are less than $500,000,
such lesser amount) and (y) in the case of Eurodollar Loans, $2,000,000 or a
whole multiple of $500,000 in excess thereof. Upon receipt of any such notice
from the Borrower, the Administrative Agent shall promptly notify each
Acquisition Loan Lender thereof. Each Acquisition Loan Lender will make the
amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in subsection 12.2 prior to 12:00 P.M., New
York City time, on the Borrowing Date requested by the Borrower in funds
immediately available to the Administrative Agent. Such borrowing will then
be made available to the Borrower by the Administrative Agent crediting the
account of the Borrower pursuant to the terms of the Borrowing Certificate
submitted on such Borrowing Date prior to 3:00 P.M., New York City time, on
such Borrowing Date with the aggregate of the amounts made available to the
Administrative Agent by the Acquisition Loan Lenders and in like funds as
received by the Administrative Agent.
3.3 Termination or Reduction of Commitments. The Borrower shall have
the right, upon not less than one Business Day's prior notice to the
Administrative Agent, to terminate the Acquisition Loan Commitments or, from
time to time, to reduce the amount of the Acquisition Loan Commitments,
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Acquisition Loans made on
the effective date thereof, the aggregate principal amount of the Acquisition
Loans then outstanding would exceed the Acquisition Loan Commitments then in
effect. Any such reduction shall be in an amount equal to $2,000,000 or a
whole multiple of $500,000 in excess thereof and shall reduce permanently the
Acquisition Loan Commitments then in effect.
3.4 Repayment of Acquisition Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent
for the account of each Acquisition Loan Lender the then unpaid principal
amount of each Acquisition Loan of such Acquisition Loan Lender on the
Termination Date (or such earlier date on which the Acquisition Loans become
due and payable pursuant to Section 10). The Borrower hereby further agrees
to pay to the Administrative Agent for the account of each Acquisition Loan
Lender interest on the unpaid principal amount of the Acquisition Loans from
time to time outstanding from the date hereof until payment in full thereof
at the rates per annum, and on the dates, set forth in subsection 5.4.
(b) Each Acquisition Loan Lender shall maintain in accordance with
its usual practice an account or accounts evidencing indebtedness of the
Borrower to such Acquisition Loan Lender resulting from each Acquisition Loan
of such Acquisition Loan Lender from time to time, including the amounts of
principal and interest payable and paid to such Acquisition Loan Lender from
time to time under this Agreement.
(c) The Administrative Agent shall record in the Register, with
separate subaccounts for each Acquisition Loan Lender, (i) the amount and
Borrowing Date of each Acquisition Loan made hereunder, the Type thereof and
each Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to
each Acquisition Loan Lender hereunder and (iii) both the amount of any sum
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32
received by the Administrative Agent hereunder from the Borrower and each
Acquisition Loan Lender's share thereof.
(d) The entries made in the Register pursuant to subsection 3.4(c)
shall, to the extent permitted by applicable law, be prima facie evidence of
the existence and amounts of the obligations of the Borrower therein
recorded; provided, however, that the failure of any Acquisition Loan Lender
to maintain any account pursuant to subsection 3.4(b) or the Administrative
Agent to make recordings in the Register pursuant to subsection 3.4(c), or
any error therein, shall not in any manner affect the obligation of the
Borrower to repay (with applicable interest) the Acquisition Loans made to
such Borrower by such Acquisition Loan Lender in accordance with the terms of
this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Acquisition Loan Lender, which request is communicated to the
Borrower, the Borrower will execute and deliver to such Acquisition Loan
Lender a promissory note of the Borrower dated the Closing Date evidencing
the Acquisition Loan of such Acquisition Loan Lender, substantially in the
form of Exhibit I with appropriate insertions as to date and principal amount
(an "Acquisition Loan Note"). Each Acquisition Loan Lender is hereby
authorized to record the date, Type and amount of each Acquisition Loan made
by such Acquisition Loan Lender, the date and amount of each payment or
prepayment of principal thereof, each continuation thereof, each conversion
of all or a portion thereof to another Type and, in the case of Eurodollar
Loans, the length of each Interest Period and Eurodollar Rate with respect
thereto, on the schedule (or any continuation of the schedule) annexed to and
constituting a part of its Acquisition Loan Note, and any such recordation
shall, to the extent permitted by applicable law, constitute prima facie
evidence of the accuracy of the information so recorded, provided that the
failure to make any such recordation (or any error therein) shall not affect
the obligation of the Borrower to repay (with applicable interest) the
Acquisition Loans made to the Borrower in accordance with the terms of this
Agreement. An Acquisition Loan Note and the Obligations evidenced thereby may
be assigned or otherwise transferred in whole or in part only by registration
of such assignment or transfer of such Acquisition Loan Note and the
Obligations evidenced thereby in the Register (and each Acquisition Loan Note
shall expressly so provide). Any assignment or transfer of all or part of the
Obligations evidenced by an Acquisition Loan Note shall be registered in the
Register only upon surrender for registration of assignment or transfer of
the Acquisition Loan Note evidencing such Obligations, accompanied by an
Assignment and Acceptance substantially in the form of Exhibit M duly
executed by the Assignor thereof, and thereupon one or more new Acquisition
Loan Notes shall be issued to the designated Assignee and the old Acquisition
Loan Note shall be returned by the Administrative Agent to the Borrower
marked "cancelled." No assignment of an Acquisition Loan Note and the
Obligations evidenced thereby shall be effective unless it shall have been
recorded in the Register by the Administrative Agent as provided in this
subsection 3.4.
3.5 Commitment and Other Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Acquisition Loan Lender a
commitment fee for the period from and including the first day of the
Acquisition Loan Commitment Period to, but excluding, the Termination Date,
computed at the rate of 1/2 of 1% per annum on the average daily amount of
the Available Acquisition Loan Commitment of such Acquisition Loan Lender
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33
during the period from the Closing Date to the first Adjustment Date and
thereafter the commitment fee will be adjusted on each Adjustment Date to the
applicable rate per annum set forth under the heading "Commitment Fee" on
Annex A provided that if the financial statements required to be delivered
pursuant to subsection 8.1(a) or 8.1(b), as applicable, and the related
compliance certificate required to be delivered pursuant to subsection
8.2(b), are not delivered when due, then the Commitment Fee during any such
period will be 1/2 of 1% per annum until the delivery of such financial
statements and compliance certificate. The Commitment Fee will be payable
quarterly in arrears on the last Business Day of each March, June, September
and December and on the Termination Date or such earlier date as the
Acquisition Loan Commitments shall terminate as provided herein, commencing
on the first of such dates to occur after the date hereof.
SECTION 4. AMOUNT AND TERMS OF WORKING CAPITAL COMMITMENTS
4.1 Working Capital Commitments. (a) Subject to the terms and
conditions hereof, each Working Capital Lender severally agrees to make
revolving credit loans ("Working Capital Loans") to the Borrower from time to
time during the Working Capital Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Working Capital
Lender's Working Capital Commitment Percentage of (i) the then outstanding
Swing Line Loans and (ii) the then outstanding L/C Obligations, does not
exceed the amount of such Working Capital Lender's Working Capital
Commitment. During the Working Capital Commitment Period, the Borrower may
use the Working Capital Commitments by borrowing, prepaying the Working
Capital Loans in whole or in part, and reborrowing, all in accordance with
the terms and conditions hereof provided that (i) not more than $3,000,000 in
Working Capital Loans will be available for borrowing on the Closing Date,
(ii) the aggregate Working Capital Commitments of all the Working Capital
Lenders shall not exceed $20,000,000 and (iii) the Aggregate Working Capital
Outstanding (other than in respect of the undrawn portion of any Letters of
Credit) with respect to all Working Capital Lenders (including the Swing Line
Lender) at any time during one consecutive thirty day period during each
fiscal year of the Borrower may in no event exceed the Clean-Up Amount;
provided, that there shall be at least 45 days between each such 30 day
period.
(b) The Working Capital Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the Borrower and notified to the Administrative Agent in
accordance with subsections 4.2 and 5.2, provided that no Working Capital
Loan shall be made as a Eurodollar Loan after the day that is one month prior
to the Termination Date.
4.2 Procedure for Working Capital Borrowing. The Borrower may borrow
under the Working Capital Commitments during the Working Capital Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three
Business Days prior to the requested Borrowing Date, if all or any part of
the requested Working Capital Loans are to be initially Eurodollar Loans, or
(b) one Business Day prior to the requested Borrowing Date, otherwise),
specifying (i) the amount to be borrowed, (ii) the
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34
requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar
Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be
entirely or partly of Eurodollar Loans, the respective amounts of each such
Type of Loan and the lengths of the initial Interest Periods therefor. Each
borrowing under the Working Capital Commitments shall be in an amount equal
to (x) in the case of ABR Loans, $500,000 or a whole multiple of $100,000 in
excess thereof (or, if the then Available Working Capital Commitments are
less than $500,000, such lesser amount) and (y) in the case of Eurodollar
Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof. Upon
receipt of any such notice from the Borrower, the Administrative Agent shall
promptly notify each Working Capital Lender thereof. Each Working Capital
Lender will make the amount of its pro rata share of each borrowing available
to the Administrative Agent for the account of the Borrower at the office of
the Administrative Agent specified in subsection 12.2 prior to 12:00 P.M.,
New York City time, on the Borrowing Date requested by the Borrower in funds
immediately available to the Administrative Agent. Such borrowing will then
be made available to the Borrower by the Administrative Agent crediting the
account of the Borrower pursuant to the terms of the Borrowing Certificate
submitted on such Borrowing Date prior to 3:00 P.M., New York City time, on
such Borrowing Date with the aggregate of the amounts made available to the
Administrative Agent by the Working Capital Lenders and in like funds as
received by the Administrative Agent.
4.3 Commitment and Other Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Working Capital Lender a
commitment fee for the period from and including the first day of the Working
Capital Commitment Period to the Termination Date, computed at the rate of
1/2 of 1% per annum on the average daily amount of the Available Working
Capital Commitment of such Working Capital Lender during the period from the
Closing Date to the first Adjustment Date and thereafter the commitment fee
will be adjusted on each Adjustment Date to the applicable rate per annum set
forth under the heading "Commitment Fee" on Annex A provided that if the
financial statements required to be delivered pursuant to subsection 8.1(a)
or 8.1(b), as applicable, and the related compliance certificate required to
be delivered pursuant to subsection 8.2(b), are not delivered when due, then
the Commitment Fee during any such period will be 1/2 of 1% per annum until
the delivery of such financial statements and compliance certificate. The
Commitment Fee will be payable quarterly in arrears on the last Business Day
of each March, June, September and December and on the Termination Date or
such earlier date as the Working Capital Commitments shall terminate as
provided herein, commencing on the first of such dates to occur after the
date hereof.
4.4 Termination or Reduction of Commitments. The Borrower shall have
the right, upon not less than one Business Day's prior notice to the
Administrative Agent, to terminate the Working Capital Commitments or, from
time to time, to reduce the amount of the Working Capital Commitments,
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Working Capital Loans
made on the effective date thereof, the aggregate principal amount of the
Working Capital Loans then outstanding, when added to the then outstanding
L/C Obligations and Swing Line Loans, would exceed the Working Capital
Commitments then in effect. Any such reduction shall be in an amount equal to
$1,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce
permanently the Working Capital Commitments then in effect.
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35
4.5 Repayment of Working Capital Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent
for the account of each Working Capital Lender the then unpaid principal
amount of each Working Capital Loan of such Working Capital Lender on the
Termination Date (or such earlier date on which the Working Capital Loans
become due and payable pursuant to Section 10). The Borrower hereby further
agrees to pay to the Administrative Agent for the account of each Working
Capital Lender interest on the unpaid principal amount of the Working Capital
Loans from time to time outstanding from the date hereof until payment in
full thereof at the rates per annum, and on the dates, set forth in
subsection 5.4.
(b) Each Working Capital Lender shall maintain in accordance with
its usual practice an account or accounts evidencing indebtedness of the
Borrower to such Working Capital Lender resulting from each Working Capital
Loan of such Working Capital Lender from time to time, including the amounts
of principal and interest payable and paid to such Working Capital Lender
from time to time under this Agreement.
(c) The Administrative Agent shall record in the Register, with
separate subaccounts for each Working Capital Lender, (i) the amount and
Borrowing Date of each Working Capital Loan made hereunder, the Type thereof
and each Interest Period applicable thereto, (ii) the amount of any principal
or interest due and payable or to become due and payable from the Borrower to
each Working Capital Lender hereunder and (iii) both the amount of any sum
received by the Administrative Agent hereunder from the Borrower and each
Working Capital Lender's share thereof.
(d) The entries made in the Register pursuant to subsection 4.5(c)
shall, to the extent permitted by applicable law, be prima facie evidence of
the existence and amounts of the obligations of the Borrower therein
recorded; provided, however, that the failure of any Working Capital Lender
to maintain any account pursuant to subsection 4.5(b) or the Administrative
Agent to make recordings in the Register pursuant to subsection 4.5(c), or
any error therein, shall not in any manner affect the obligation of the
Borrower to repay (with applicable interest) the Working Capital Loans made
to such Borrower by such Working Capital Lender in accordance with the terms
of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Working Capital Lender, which request is communicated to the
Borrower, the Borrower will execute and deliver to such Working Capital
Lender a promissory note of the Borrower dated the Closing Date evidencing
the Working Capital Loans of such Working Capital Lender, substantially in
the form of Exhibit J with appropriate insertions as to date and principal
amount (a "Working Capital Note"). Each Working Capital Lender is hereby
authorized to record the date, Type and amount of each Working Capital Loan
made by such Working Capital Lender, the date and amount of each payment or
prepayment of principal thereof, each continuation thereof, each conversion
of all or a portion thereof to another Type and, in the case of Eurodollar
Loans, the length of each Interest Period and Eurodollar Rate with respect
thereto, on the schedule (or any continuation of the schedule) annexed to and
constituting a part of its Working Capital Note, and any such recordation
shall, to the extent permitted by applicable law, constitute prima facie
evidence of the accuracy of the information so recorded, provided that the
failure to
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36
make any such recordation (or any error therein) shall not affect the
obligation of the Borrower to repay (with applicable interest) the Working
Capital Loans made to the Borrower in accordance with the terms of this
Agreement. A Working Capital Note and the Obligations evidenced thereby may
be assigned or otherwise transferred in whole or in part only by registration
of such assignment or transfer of such Working Capital Note and the
Obligations evidenced thereby in the Register (and each Working Capital Note
shall expressly so provide). Any assignment or transfer of all or part of the
Obligations evidenced by a Working Capital Note shall be registered in the
Register only upon surrender for registration of assignment or transfer of
the Working Capital Note evidencing such Obligations, accompanied by an
Assignment and Acceptance substantially in the form of Exhibit M duly
executed by the Assignor thereof, and thereupon one or more new Working
Capital Notes shall be issued to the designated Assignee and the old Working
Capital Note shall be returned by the Administrative Agent to the Borrower
marked "cancelled." No assignment of a Working Capital Note and the
Obligations evidenced thereby shall be effective unless it shall have been
recorded in the Register by the Administrative Agent as provided in this
subsection 4.5.
4.6 Swing Line Commitment. Subject to the terms and conditions
hereof, CSFB (in such capacity, the "Swing Line Lender") agrees to make a
portion of the Working Capital Commitments available to the Borrower during
the Working Capital Commitment Period by making swing line loans ("Swing Line
Loans") to the Borrower in an aggregate principal amount not to exceed at any
one time outstanding the Swing Line Commitment; provided that (a) the
aggregate principal amount of Swing Line Loans outstanding at any time shall
not exceed the Swing Line Commitment then in effect and (b) the Borrower
shall not request, and the Swing Line Lender shall not make, any Swing Line
Loan if, after giving effect to the making of such Swing Line Loan, the
Aggregate Working Capital Outstandings of all the Working Capital Lenders
would exceed the Working Capital Commitments at such time. During the Working
Capital Commitment Period, the Borrower may use the Swing Line Commitment by
borrowing, repaying and reborrowing Swing Line Loans all in accordance with
the terms and conditions hereof. Swing Line Loans may be ABR Loans only.
4.7 Repayment of Swing Line Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent
for the account of the Swing Line Lender the then unpaid principal amount of
the Swing Line Loans on the Termination Date (or such earlier date on which
the Swing Line Loans become due and payable pursuant to Section 10). The
Borrower hereby further agrees to pay to the Administrative Agent for the
account of the Swingline Lender interest on the unpaid principal amount of
the Swing Line Loans from time to time outstanding from the date hereof until
payment in full thereof at the rates per annum, and on the dates, set forth
in subsection 5.4.
(b) The Swing Line Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of the Borrower
to the Swing Line Lender resulting from the Swing Line Loans made by the
Swing Line Lender from time to time, including the amounts of principal and
interest payable and paid to the Swing Line Lender from time to time under
this Agreement.
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(c) The Administrative Agent shall record in the Register (i) the
amount and Borrowing Date of each Swing Line Loan made hereunder, (ii) the
amount of any principal or interest due and payable or to become due and
payable from the Borrower to the Swing Line Lender hereunder and (iii) the
amount of any sum received by the Administrative Agent hereunder in respect
of Swing Line Loans.
(d) The entries made in the Register pursuant to subsection 4.7(c)
shall, to the extent permitted by applicable law, be prima facie evidence of
the existence and amounts of the obligations of the Borrower therein
recorded; provided, however, that the failure of the Swing Line Lender to
maintain any account pursuant to subsection 4.7(b) or the Administrative
Agent to make recordings in the Register pursuant to subsection 4.7(c), or
any error therein, shall not in any manner affect the obligation of the
Borrower to repay (with applicable interest) the Swing Line Loans made to the
Borrower by the Swing Line Lender in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by the Swing Line Lender, which request is communicated to the
Borrower, the Borrower will execute and deliver to the Swing Line Lender a
promissory note of the Borrower, dated the Closing Date, evidencing the Swing
Line Loans of the Swing Line Lender, substantially in the form of Exhibit K
with appropriate insertions as to date and principal amount (a "Swing Line
Note"). The Swing Line Lender is hereby authorized to record the date and
amount of each Swing Line Loan made by the Swing Line Lender and the date and
amount of each payment or prepayment of principal thereof on the schedule
annexed to and constituting a part of the Swing Line Note, and any such
recordation shall, to the extent permitted by applicable law, constitute
prima facie evidence of the accuracy of the information so recorded, provided
that the failure to make any such recordation (or any error therein) shall
not affect the obligation of the Borrower to repay (with applicable interest)
the Swing Line Loans made to the Borrower by the Swing Line Lender in
accordance with the terms of this Agreement. A Swing Line Note and the
Obligations evidenced thereby may be assigned or otherwise transferred in
whole or in part only by registration of such assignment or transfer of such
Swing Line Note and the Obligations evidenced thereby in the Register (and
each Swing Line Note shall expressly so provide). Any assignment or transfer
of all or part of the Obligations evidenced by a Swing Line Note shall be
registered in the Register only upon surrender for registration of assignment
or transfer of the Swing Line Note evidencing such Obligations, accompanied
by an Assignment and Acceptance substantially in the form of Exhibit M duly
executed by the Assignor thereof, and thereupon one or more new Swing Line
Notes shall be issued to the designated Assignee and the old Swing Line Note
shall be returned by the Administrative Agent to the Borrower marked
"cancelled." No assignment of a Swing Line Note and the Obligations evidenced
thereby shall be effective unless it shall have been recorded in the Register
by the Administrative Agent as provided in this subsection 4.7
4.8 Procedure for Borrowing Swing Line Loans. (a) Whenever the
Borrower desires that the Swing Line Lender make Swing Line Loans under
subsection 4.6, it shall give the Swing Line Lender irrevocable telephonic
notice confirmed promptly in writing (which telephonic notice must be
received by the Swing Line Lender not later than 12:00 Noon, New York City
time, on the proposed Borrowing Date), specifying (i) the amount to be
borrowed and (ii) the requested Borrowing Date (which shall be a Business Day
during the Working Capital Commitment
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38
Period). Each borrowing under the Swing Line Commitment shall be in a minimum
amount of $150,000 or a whole multiple of $50,000 in excess thereof. Not
later than 2:00 P.M., New York City time, on the Borrowing Date specified in
a notice in respect of Swing Line Loans, the Swing Line Lender shall make
available to the Administrative Agent for the account of the Borrower at the
office of the Administrative Agent specified in subsection 12.2 an amount in
immediately available funds equal to the amount of the Swing Line Loan to be
made by the Swing Line Lender. The Administrative Agent shall make the
proceeds of such Swing Line Loan available to the Borrower not later than
3:00 P.M., New York City time, on such Borrowing Date by crediting the
account of the Borrower, pursuant to the terms of the Borrowing Certificate
submitted on such Borrowing Date, with such proceeds in immediately available
funds.
(b) The Swing Line Lender, at any time in its sole and absolute
discretion may, on behalf of the Borrower (which hereby irrevocably directs
the Swing Line Lender to act on its behalf) request each Working Capital
Lender including the Swing Line Lender, to make a Working Capital Loan in an
amount equal to such Lender's Working Capital Commitment Percentage of the
amount of the Swing Line Loans outstanding on the date such notice is given
(the "Refunded Swing Line Loans"). Unless any of the events described in
Section 10(f) shall have occurred (in which event the procedures of
subsection 4.9(b) shall apply) each Working Capital Lender shall make the
proceeds of its Working Capital Loan available to the Administrative Agent
for the account of the Swing Line Lender at the office of the Administrative
Agent specified in subsection 12.2 prior to 12:00 Noon, New York City time,
in funds immediately available on the Business Day next succeeding the date
such notice is given. The proceeds of such Working Capital Loans shall be
immediately applied to repay the Refunded Swing Line Loans. Effective on the
day such Working Capital Loans are made, the portion of the Swing Line Loans
so paid shall no longer be outstanding as Swing Line Loans, shall no longer
be due under any Swing Line Note and shall be due under the respective
Working Capital Loans issued to the Working Capital Lenders in accordance
with their respective Working Capital Commitment Percentages. The Borrower
authorizes the Swing Line Lender to charge the Borrower's accounts with the
Administrative Agent (up to the amount available in each such account) in
order to immediately pay the amount of such Refunded Swing Line Loans to the
extent amounts received from the Working Capital Lenders are not sufficient
to repay in full such Refunded Swing Line Loans.
4.9 Swing Line Loan Participations. (a) Notwithstanding anything
herein to the contrary, the Swing Line Lender shall not be obligated to make
any Swing Line Loans if a Default under Section 10(a) or an Event of Default
shall have occurred and be continuing. The Swing Line Lender shall notify the
Borrower of such election not to make any Swing Line Loans unless the Event
of Default is of the type specified in Section 10(f).
(b) If prior to the repayment of any Swing Line Loan or the making
of Working Capital Loans pursuant to subsection 4.8(b), one of the events
described in Section 10(f) shall have occurred, each Working Capital Lender
shall on the date such Working Capital Loan was to have been made pursuant to
the notice in subsection 4.8(a) purchase an undivided participating interest
in the Refunded Swing Line Loans in an amount equal to such Working Capital
Lender's Working Capital Commitment Percentage of the aggregate principal
amount of Swing Line Loans then outstanding (the "Swing Line Participation
Amount"). On the date of such purchase, each
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39
Working Capital Lender shall transfer to the Swing Line Lender, in
immediately available funds, such Working Capital Lender's Swing Line
Participation Amount and upon receipt thereof the Swing Line Lender shall
deliver to such Working Capital Lender a Swing Line Loan Participation
Certificate dated the date of the Swing Line Lender's receipt of such funds
and in an amount equal to such Working Capital Lender's Swing Line
Participation Amount.
(c) Whenever, at any time after the Swing Line Lender has received
from any Working Capital Lender such Working Capital Lender's Swing Line
Participation Amount, the Swing Line Lender receives any payment on account
of the Swing Line Loans, the Swing Line Lender will distribute to such
Working Capital Lender its pro rata share of such payment (appropriately
adjusted, in the case of interest payments, to reflect the period of time
during which such Working Capital Lender's participating interest was
outstanding and funded); provided, however, that in the event that such
payment received by the Swing Line Lender is required to be returned, such
Working Capital Lender will return to the Swing Line Lender any portion
thereof previously distributed to it by the Swing Line Lender.
(d) Each Working Capital Lender's obligation to purchase
participating interests pursuant to subsection 4.9(b) shall be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense or
other right which such Working Capital Lender or the Borrower may have
against the Swing Line Lender, the Borrower or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a Default or an
Event of Default; (iii) any adverse change in the condition (financial or
otherwise) of the Borrower; (iv) any breach of this Agreement or any other
Loan Document by any of the Loan Parties or any other Lender; or (v) any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.
4.10 L/C Commitment. (a) Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Working
Capital Lenders set forth in subsection 4.13(a), agrees to issue Letters of
Credit for the account of the Borrower on any Business Day during the Working
Capital Commitment Period in such form as may be approved from time to time
by the Issuing Lender; provided that the Issuing Lender shall have no
obligation to, and shall not, issue any Letter of Credit if, after giving
effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) the Available Working Capital Commitments would be less
than zero.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either (1) a standby
letter of credit issued to support obligations of the Borrower,
contingent or otherwise, in connection with the working capital and
business needs of the Borrower in the ordinary course of business (a
"Standby Letter of Credit") or (2) a commercial letter of credit issued
in respect of the purchase of goods or services by the Borrower and its
Subsidiaries in the ordinary course of business (a "Commercial Letter
of Credit");
(ii) expire no later than the earlier of (A) five Business Days
prior to the Termination Date and (B) one year after the date of
issuance thereof, provided that,
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subject to clause (A) above, any such Letter of Credit may, at the
request of the Borrower as set forth in the applicable Application or
prior to expiration thereof, be automatically renewed on each
anniversary of the issuance thereof for an additional period of up to
one year unless the Issuing Lender shall have given at least 60 days'
prior written notice to the Borrower and the beneficiary of such Letter
of Credit that such Letter of Credit will not be renewed; and
(iii) have a face amount equal to at least $100,000.
(c) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(d) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
4.11 Procedure for Issuance of Letters of Credit. The Borrower may
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein
an Application therefor, completed to the satisfaction of the Issuing Lender,
and such other certificates, documents and other papers and information as
the Issuing Lender may request. The Issuing Lender shall notify the Working
Capital Lenders promptly of the receipt of any request pursuant to the
immediately preceding sentence. Upon receipt of any Application, the Issuing
Lender will process such Application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter
of Credit requested thereby (but in no event shall the Issuing Lender be
required to issue any Letter of Credit earlier than three Business Days after
its receipt of the Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise
may be agreed by the Issuing Lender and the Borrower. The Issuing Lender
shall furnish a copy of such Letter of Credit to the Administrative Agent and
the Borrower promptly following the issuance thereof.
4.12 Fees, Commissions and Other Charges. (a) The Borrower shall pay
to the Administrative Agent, for the account of the Issuing Lender, a
fronting fee with respect to each Letter of Credit, computed for the period
from the date of issuance of such Letter of Credit or the immediately
preceding L/C Fee Payment Date, as the case may be, to the next L/C Fee
Payment Date to occur thereafter at a rate per annum equal to 1/4 of 1%,
calculated on the basis of a 360-day year for actual days elapsed, of the
aggregate amount available to be drawn under such Letter of Credit during the
period for which such fee is calculated. Such fronting fee shall be payable
in arrears on each L/C Fee Payment Date to occur after the issuance of such
Letter of Credit and on the Termination Date and shall be nonrefundable.
(b) The Borrower shall pay to the Administrative Agent, for the
account of the L/C Participants and the Issuing Lender, a letter of credit
commission with respect to each Letter of Credit, computed for the period
from the date of issuance of such Letter of Credit or the immediately
preceding L/C Fee Payment Date, as the case may be, to the next L/C Fee
Payment
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41
Date to occur thereafter at a rate per annum equal to the Applicable Margin
for Working Capital Loans that are Eurodollar Loans in effect from time to
time (the "L/C Fee Percentage"), calculated on the basis of a 360-day year
for actual days elapsed, of the aggregate amount available to be drawn under
such Letter of Credit during the period for which such fee is calculated, to
be shared ratably among the L/C Participants in accordance with their
respective Working Capital Commitment Percentages. Such commissions shall be
payable in arrears on each L/C Fee Payment Date to occur after the issuance
of such Letter of Credit and shall be nonrefundable.
(c) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all fees
and commissions received by the Administrative Agent for their respective
accounts pursuant to this subsection.
4.13 L/C Participations. (a) The Issuing Lender irrevocably agrees
to grant and hereby grants to each L/C Participant, and, in order to induce
the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases
from the Issuing Lender, on the terms and conditions hereinafter stated, for
such L/C Participant's own account and risk an undivided interest equal to
such L/C Participant's Working Capital Commitment Percentage in the Issuing
Lender's obligations and rights under each Letter of Credit issued hereunder
and the amount of each draft paid by the Issuing Lender thereunder. Each L/C
Participant unconditionally and irrevocably agrees with the Issuing Lender
that, if a draft is paid under any Letter of Credit for which the Issuing
Lender is not reimbursed in full by the Borrower in accordance with the terms
of this Agreement, such L/C Participant shall pay to the Issuing Lender upon
demand at the Issuing Lender's address for notices specified herein an amount
equal to such L/C Participant's Working Capital Commitment Percentage of the
amount of such draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to subsection 4.13(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit
is paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on
demand an amount equal to the product of (i) such amount, times (ii) the
daily average Federal Funds Effective Rate, during the period from and
including the date such payment is required to the date on which such payment
is immediately available to the Issuing Lender, times (iii) a fraction the
numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If any such amount required to be paid by
any L/C Participant pursuant to subsection 4.13(a) is not in fact made
available to the Issuing Lender by such L/C Participant within three Business
Days after the date such payment is due, the Issuing Lender shall be entitled
to recover from such L/C Participant, on demand, such amount with interest
thereon calculated from such due date at the rate per annum applicable to ABR
Loans hereunder.
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42
A certificate of the Issuing Lender submitted to any L/C Participant with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 4.13(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise, including proceeds of collateral
applied thereto by the Issuing Lender), or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro
rata share thereof; provided, however, that in the event that any such
payment received by the Issuing Lender shall be required to be returned by
the Issuing Lender, such L/C Participant shall return to the Issuing Lender
the portion thereof previously distributed by the Issuing Lender to it.
4.14 Reimbursement Obligation of the Borrower. (a) The Issuing
Lender shall notify the Borrower promptly of each drawing under a Letter of
Credit. The Borrower agrees to reimburse the Issuing Lender on each date on
which the Issuing Lender notifies the Borrower of the date and amount of a
draft presented under any Letter of Credit and paid by the Issuing Lender for
the amount of (i) such draft so paid and (ii) any taxes, fees, charges or
other costs or expenses incurred by the Issuing Lender in connection with
such payment. Each such payment shall be made to the Issuing Lender at its
address for notices specified herein in lawful money of the United States of
America and in immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrower under this subsection 4.14, (i) from the date the
draft presented under the affected Letter of Credit is paid to the date on
which the Borrower is required to pay such amounts pursuant to paragraph (a)
of this subsection, at the rate which would then be payable on any Working
Capital Loans that are ABR Loans, and (ii) thereafter, until payment in full,
at the rate which would be payable on any outstanding Working Capital Loans
that are ABR Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall constitute a
request by the Borrower to the Administrative Agent for a borrowing pursuant
to subsection 4.2 of ABR Loans in the amount of such drawing (but without any
requirement for compliance with the prior notice or minimum borrowing amount
provisions of subsection 4.2 or the conditions set forth in subsection 7.2).
The Borrowing Date with respect to such borrowing shall be the date of such
drawing and each Working Capital Lender shall make its Working Capital
Commitment Percentage of such borrowing available to the Administrative Agent
on such date to be used to repay the Reimbursement Obligation created by such
drawing. The Issuing Lender shall notify the Working Capital Lenders promptly
of each drawing under a Letter of Credit to be reimbursed pursuant to this
subsection 4.14(c).
4.15 Obligations Absolute. (a) The Borrower's obligations under this
Section 4 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender, any Lender or any
beneficiary of a Letter of Credit.
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43
(b) The Borrower also agrees with the Issuing Lender and the Lenders
that, subject to subsection 4.15(d), neither the Issuing Lender nor any
Lender shall be responsible for, and the Borrower's Reimbursement Obligations
under subsection 4.14(a) shall not be affected by, among other things, (i)
the validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or
forged, or (ii) any dispute between or among the Borrower and any beneficiary
of any Letter of Credit or any other party to which such Letter of Credit may
be transferred or (iii) any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee.
(c) Neither the Issuing Lender nor any L/C Participant shall be
liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors, omissions,
interruptions or delays caused by the Issuing Lender's gross negligence or
willful misconduct.
(d) The Borrower agrees that any action taken or omitted to be taken
by the Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in
the Uniform Customs, and to the extent not inconsistent therewith, the
Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender or any
L/C Participant to the Borrower.
4.16 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Lender shall, within a
reasonable time after its receipt thereof, examine all documents purporting
to represent a demand for payment under such Letter of Credit to ascertain
that the same appear on their face to be in conformity with the terms and
conditions of such Letter of Credit. The Issuing Lender shall also promptly
notify the Borrower of the date and amount thereof. The responsibility of the
Issuing Lender to the Borrower in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment
obligation expressly provided for in such Letter of Credit, be limited to
determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with
such Letter of Credit.
4.17 Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the
provisions of this Section 4, the provisions of this Section 4 shall apply.
4.18 Quarterly Reports. The Issuing Lender shall furnish to each
Revolving Credit Lender a quarterly report with respect to Letters of Credit
issued or outstanding during such quarter and any drawings thereunder.
SECTION 5. GENERAL PROVISIONS APPLICABLE TO EXTENSIONS OF CREDIT
5.1 Optional and Mandatory Prepayments. (a) The Borrower may at any
time and from time to time prepay the Loans, in whole or in part, without
premium or penalty (except as provided in subsection 5.11), upon irrevocable
notice to the Administrative Agent prior to 12:00
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44
P.M., New York City time, provided that (i) the Borrower shall have given (x)
at least three Business Days' irrevocable notice to the Administrative Agent
in the case of Eurodollar Loans or (y) one Business Day's irrevocable notice
to the Administrative Agent in the case of ABR Loans (excluding Swing Line
Loans which shall be same day notice) prior to such prepayment and (ii) such
notice specifies the date and amount of prepayment and whether the prepayment
is of (x) Eurodollar Loans, (y) ABR Loans or (z) a combination thereof, and,
if of a combination thereof, the amount allocable to each. Upon receipt of
any such notice the Administrative Agent shall notify each affected Lender
thereof on the date of receipt of such notice. If any such notice is given,
the amount specified in such notice shall be due and payable on the date
specified therein, together with any amounts payable pursuant to subsection
5.11 and, accrued interest to such date on the amount prepaid. Partial
prepayments of the Term Loans pursuant to this subsection 5.1(a) shall be
applied to the remaining installments of principal thereof pro rata. Amounts
prepaid on account of the Term Loans may not be reborrowed. Partial
prepayments shall be in an aggregate principal amount of $500,000 or a whole
multiple of $100,000 in excess thereof.
(b) Unless the Required Lenders otherwise agree, if with respect to
any fiscal year of the Borrower, commencing with its fiscal year ending
December 31, 1997, the Borrower shall have Excess Cash Flow for such fiscal
year, then prepayments in an aggregate amount equal to the Excess Cash Flow
Percentage of such Excess Cash Flow shall be applied first to prepay the Term
Loans (applied pro rata to the then remaining installments thereof) then
outstanding, second to prepay the Acquisition Loans then outstanding and
third to prepay the Working Capital Loans, then outstanding. Any amounts
prepaid on account of outstanding Acquisition Loans or Working Capital Loans
pursuant to this subsection 5.1(b) shall not permanently reduce either the
Acquisition Loan Commitment or the Working Capital Commitment. Each such
prepayment shall be made on or before the date which is 95 days after the end
of such fiscal year.
(c) Unless the Required Lenders otherwise agree, the Term Loans
shall be prepaid and, after the Term Loans shall have been prepaid in full,
the Revolving Credit Commitments (pro rata (based on outstanding principal
amount) to the Acquisition Loan Commitments and Working Capital Commitments)
shall be permanently reduced with 100% of the Net Proceeds of (i) any
Indebtedness incurred by any Loan Party on or after the Closing Date (other
than (A) the Senior Subordinated Notes provided that (X) no Default or Event
of Default has occurred and is continuing, (Y) the Senior Subordinated Notes
contain terms and conditions no less favorable to the Lenders than the Senior
Subordinated Credit Agreement and (Z) such proceeds are used to repay the
Senior Subordinated Credit Notes, (B) any Indebtedness permitted pursuant to
subsection 9.2 (other than subsection 9.2(d)), (ii) the sale or issuance of
any Capital Stock by the Borrower on or after the Closing Date (except to the
extent that (X) no Default or Event of Default has occurred and is continuing
and (Y) such proceeds are used to repay the Senior Subordinated Credit
Agreement) and (iii) any Asset Sale by the Borrower or any of its
Subsidiaries, (other than any Asset Sale permitted pursuant to (x) subsection
9.6(a) to the extent the assets disposed of in such Asset Sale are replaced
with Replacement Assets within 120 days following the date of such Asset Sale
or (y) subsection 9.6(d)), provided that, if the Net Proceeds realized from
any such Asset Sale (or series of related Asset Sales) are less than
$500,000, such Net Proceeds shall not be applied to the prepayment of the
Term Loans and the permanent reduction of the Revolving Credit Commitments
(pro rata (based on outstanding principal
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45
amount) to the Acquisition Loan Commitments and Working Capital Commitments)
pursuant to this subsection until such time as the aggregate amount of such
Net Proceeds exceeds $1,000,000, and then the aggregate amount of such Net
Proceeds shall be applied to the prepayment of the Term Loans and the
permanent reduction of the Revolving Credit Commitments (pro rata (based on
outstanding principal amount) to the Acquisition Loan Commitments and Working
Capital Commitments) pursuant to this subsection and provided further that
any Net Proceeds from any Asset Sale of the Animal Feed Division shall be
applied (i) first to the repayment of Acquisition Loans, with such repayment
not reducing the Acquisition Loan Commitment and (ii) second to the repayment
of the Term Loans. Each such prepayment shall be made on or before the date
which is two Business Days after the date any Loan Party receives such Net
Proceeds.
(d) Prepayments of the Term Loans pursuant to subsection 5.1(b) and
5.1(c) shall be applied to the remaining installments thereof on a pro rata
basis. If, after giving effect to any permanent reduction in the Working
Capital Commitments pursuant to subsection 5.1(c), the aggregate principal
amount of the Working Capital Loans then outstanding, when added to the then
outstanding L/C Obligations and Swing Line Loans, would exceed the Working
Capital Commitments as so reduced, then the Working Capital Loans and Swing
Line Loans shall be prepaid and the Letters of Credit shall be cash
collateralized or replaced to the extent of such excess. Prepayments of
outstanding Acquisition Loans and Working Capital Loans pursuant to
subsection 5.1(c) shall be applied to such Acquisition Loans and Working
Capital Loans pro rata based on outstanding principal amounts. Amounts to be
applied pursuant to this subsection 5.1(d) to the prepayment of Term Loans,
Revolving Credit Loans and/or Swing Line Loans shall be applied, as
applicable, first to reduce outstanding Term Loans, Revolving Credit Loans
and/or Swing Line Loans which are ABR Loans and second to prepay Term Loans
and/or Revolving Credit Loans which are Eurodollar Loans, such Eurodollar
Loans being prepaid in the order of their maturity.
5.2 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least one Business Day's prior irrevocable notice of
such election by 12:00 P.M. New York City time, provided that any such
conversion of Eurodollar Loans may only be made on the last day of an
Interest Period with respect thereto (or on any other day if on the date of
such conversion the Borrower pays to the Administrative Agent for the account
of the applicable Lenders accrued interest on such Eurodollar Loans to the
date of such conversion together with all amounts payable under subsection
5.11). The Borrower may elect from time to time to convert ABR Loans to
Eurodollar Loans by giving the Administrative Agent at least three Business
Days' prior irrevocable notice of such election by 12:00 P.M., New York City
time. Any such notice of conversion to Eurodollar Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such notice the Administrative Agent shall promptly notify
each affected Lender thereof. All or any part of outstanding Eurodollar Loans
and ABR Loans may be converted as provided herein, provided that (i) no Loan
may be converted into a Eurodollar Loan when any Event of Default has
occurred and is continuing and the Administrative Agent has or the Required
Lenders have determined that such a conversion is not appropriate and (ii) no
Loan may be converted into a Eurodollar Loan after the date that is one month
prior to the Termination Date (in the case of conversions of Revolving Credit
Loans) or
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the date of the final installment of principal of the Term Loans (in the case
of conversions of Term Loans).
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection
1.1, of the length of the next Interest Period to be applicable to such
Loans, provided that no Eurodollar Loan may be continued as such (i) when any
Event of Default has occurred and is continuing and the Administrative Agent
has or the Required Lenders have determined that such a continuation is not
appropriate or (ii) after the date that is one month prior to the Termination
Date (in the case of continuations of Revolving Credit Loans) or the date of
the final installment of principal of the Term Loans (in the case of
continuations of Term Loans) and provided, further, that if the Borrower
shall fail to give such notice or if such continuation is not permitted such
Loans shall be automatically converted to ABR Loans on the last day of such
then expiring Interest Period.
5.3 Minimum Amounts and Maximum Number of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of
Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections so that, after giving effect thereto, the aggregate principal
amount of the Loans comprising each Eurodollar Tranche shall be equal to
$1,000,000 or a whole multiple of $500,000 in excess thereof. In no event
shall there be more than ten Eurodollar Tranches outstanding at any time.
5.4 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto
at a rate per annum equal to the Eurodollar Rate determined for such day plus
the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any Loan,
(ii) any interest payable thereon or (iii) any commitment fee or other amount
payable hereunder shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise, but taking into account any applicable grace
period under Section 10(a)), such overdue amount shall bear interest at a
rate per annum which is (x) in the case of overdue principal, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this subsection plus 2% or (y) in the case of overdue interest, commitment
fees or other amounts due and payable hereunder, the rate described in
subsection 5.4(b) plus 2%, in each case from the date of such non-payment
until such amount is paid in full (after as well as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date and the Termination Date, provided that interest accruing pursuant to
subsection 5.4(c) shall be payable from time to time on demand.
5.5 Computation of Interest and Fees. (a) Commitment fees and
interest shall be calculated on the basis of a 360-day year for the actual
days elapsed, except that whenever
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interest is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for
the actual days elapsed. The Administrative Agent shall as soon as
practicable, notify the Borrower and the affected Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirement
shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall, as soon as
practicable, notify the Borrower and the affected Lenders of the effective
date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent
in determining any interest rate pursuant to subsection 5.4(a).
5.6 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such
Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the affected Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans requested to be made on the
first day of such Interest Period shall be made as ABR Loans, (y) any Loans
that were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any
outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued
as such, nor shall the Borrower have the right to convert ABR Loans to
Eurodollar Loans.
5.7 Pro Rata Treatment and Payments. (a) All payments (including
prepayments) to be made by the Borrower hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 P.M., New York City time, on
the due date thereof to the Administrative Agent, for the account of the
Revolving Credit Lenders, the Acquisition Loan Lenders, the Working Capital
Lenders or the Term Loan Lenders, as the case may be, at the Administrative
Agent's office specified in subsection 12.2, in Dollars and in immediately
available funds. Payments received by the
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Administrative Agent after such time shall be deemed to have been received on
the next Business Day. The Administrative Agent shall distribute such
payments to the Lenders entitled to receive the same promptly upon receipt in
like funds as received. If any principal payment hereunder becomes due and
payable on a day other than a Business Day, such payment shall be made on the
immediately succeeding Business Day, and with respect to payments of
principal, interest thereon shall be payable at the then applicable rate
during such extension. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in
which event such payment shall be made on the immediately preceding Business
Day. If, and to the extent that, on any Business Day the Administrative Agent
receives any payment hereunder or under the other Loan Documents (including
any such payment representing a realization upon the Collateral), and such
payment is not sufficient to pay in full all principal, interest and fees
then due and payable hereunder, the Administrative Agent shall apply such
payment ratably to all such amounts then due and payable. (b) Unless
the Administrative Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make the amount that would
constitute its portion of such borrowing available to the Administrative
Agent, the Administrative Agent may assume that such Lender is making such
amount available to the Administrative Agent, and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount
with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative
Agent submitted to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Lender's portion of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum applicable to ABR
Loans hereunder, on demand, from the Borrower, without prejudice to any right
or claim the Borrower may have against such Lender.
(c) Each borrowing by the Borrower of Term Loans, Acquisition Loans,
Working Capital Loans and Revolving Credit Loans shall be made ratably from
the Term Loan Lenders, the Acquisition Loan Lenders, the Working Capital
Lenders and Revolving Credit Lenders, respectively, in accordance with their
respective Term Loan Commitment Percentages, Acquisition Loan Commitment
Percentages, Working Capital Commitment Percentages and Revolving Credit
Commitment Percentages. Any reduction of the Revolving Credit Commitments,
Acquisition Loan Commitments or Working Capital Commitments shall be made
ratably among the Revolving Credit Lenders, Acquisition Loan Lenders, or
Working Capital Lenders, in accordance with their respective Revolving Credit
Commitment Percentages, Acquisition Loan Commitment Percentages or Working
Capital Commitment Percentages.
5.8 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation
or application thereof shall make it unlawful for any Lender to make or
maintain Eurodollar Loans as contemplated by this
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49
Agreement, then such Lender shall give notice of such illegality to the
Administrative Agent and the Borrower. Upon such adoption or change, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be suspended until such time as it shall no longer be unlawful for
such Lender to make or maintain Eurodollar Loans as contemplated by this
Agreement and (b) such Lender's Loans then outstanding as Eurodollar Loans,
if any, shall be converted automatically to ABR Loans on the respective last
days of the then current Interest Periods with respect to such Loans or
within such earlier period as required by law. If any such conversion of a
Eurodollar Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender
such amounts, if any, as may be required pursuant to subsection 5.11. Any
Lender giving notice pursuant to the first sentence of this subsection shall
notify the Administrative Agent and the Borrower at such time as the
circumstances giving rise to the initial notice shall cease to exist.
5.9 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority, in
each case made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
taxes covered by subsection 5.10 and changes in the rate of tax on the
overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by,
any office of such Lender which is not otherwise included in the
determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or issuing or
participating in Letters of Credit or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall,
within 10 Business Days after receipt by the Borrower of such Lender's
written demand (with a copy to the Administrative Agent), pay such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable. If any Lender has demanded
compensation under this subsection 5.9(a) with respect to any Eurodollar
Loan, the Borrower shall have the option to convert immediately such
Eurodollar Loan into an ABR Loan until the circumstances giving rise to such
demand for compensation no longer apply; provided, that (i) no such
conversion shall affect the Borrower's obligation to pay compensation as
provided herein which is due with respect to the period prior to such
conversion and (ii) on the date of such conversion the Borrower shall pay to
the Administrative Agent for the benefit
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50
of the relevant Lender accrued interest on such Eurodollar Loan to the date
of conversion, together with any amounts payable pursuant to subsection 5.11.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any
Governmental Authority, in each case made subsequent to the date hereof,
shall have the effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder or under
any Letter of Credit to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be
material, then from time to time, within 10 Business Days after receipt by
the Borrower of such Lender's written demand (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to subsection 5.9(a) or (b), it shall promptly notify the Borrower
(with a copy to the Administrative Agent) of the event by reason of which it
has become so entitled. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender to the Borrower (with a
copy to the Administrative Agent) shall be conclusive in the absence of
manifest error. The Borrower shall not be obligated to compensate any Lender
pursuant to this subsection 5.9 for amounts accruing prior to the date which
is 180 days before such Lender notifies the Borrower of such event, provided
that such notice need not include a computation of amounts in respect
thereof. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
5.10 Taxes. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes, franchise
taxes (imposed in lieu of net income taxes) imposed on the Administrative
Agent or any Lender (or Transferee) as a result of any future, present or
former connection between the Administrative Agent or such Lender (or
Transferee) and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Administrative Agent
or such Lender (or Transferee) having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note or any other Loan Document). If any such non-excluded taxes, levies,
imposts, duties, charges, fees deductions or withholdings ("Non-Excluded
Taxes") are required to be withheld from any amounts payable to the
Administrative Agent or any Lender (or Transferee) hereunder or under any
Note, the amounts so payable to the Administrative Agent or such Lender (or
Transferee) shall be increased ("increased amounts") by the amounts necessary
so that after making all required deductions and withholdings (including,
without limitation, the payment of all Non-Excluded Taxes) the Administrative
Agent or such Lender (or Transferee) receives the amounts
<PAGE>
51
equal to the interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement. Whenever any
Non-Excluded Taxes are payable by the Borrower, the Borrower shall promptly
send to the Administrative Agent for its own account or for the account of
such Lender (or Transferee), as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof or
other evidence of remittance of Non-Excluded Taxes reasonably acceptable to
the Administrative Agent. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other reasonably acceptable
evidence, the Borrower shall indemnify the Administrative Agent and the
Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The Borrower will indemnify each Lender (or Transferee) and the
Administrative Agent for the amount of Non-Excluded Taxes paid by such Lender
(or Transferee) or the Administrative Agent, as the case may be, and (except
to the extent resulting from the gross negligence or willful misconduct or
bad faith of such Lender, such Transferee or the Administrative Agent), any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. The agreements in this subsection 5.10 shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
(b) Each Lender (and each Transferee) that is not incorporated or
organized under the laws of the United States of America or a state thereof
shall:
(i) in the case of a Lender or a Transferee that is a "bank" under
Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this Agreement
(or, in the case of a Loan Participant, on or before the date such
Loan Participant becomes a Loan Participant hereunder) and on or
before the date, if any, such Lender (or Transferee) changes its
applicable lending office by designating a different lending office
(a "New Lending Office"), deliver to the Borrower and the
Administrative Agent (y) two properly completed and duly executed
copies of United States Internal Revenue Service Form 1001 or 4224,
or successor applicable form, as the case may be, and (z) an
Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(B) deliver to the Borrower and the Administrative Agent two
further properly completed and duly executed copies of any such form
or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recent form previously
delivered by it to the Borrower or upon the request of the Borrower
or the Administrative Agent; and
(C) obtain such extensions of time for filing and completing such
forms or certifications as may reasonably be requested by the
Borrower;
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52
(ii) in the case of a Lender or a Transferee that is not a "bank"
under Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this Agreement
(or, in the case of a Loan Participant, on or the date such Loan
Participant becomes a Loan Participant hereunder) deliver to the
Borrower and the Administrative Agent (I) a statement under
penalties of perjury that such Lender (x) is not a "bank" under
Section 881(c)(3)(A) of the Code, is not subject to regulatory or
other legal requirements as a bank in any jurisdiction, and has not
been treated as a bank for purposes of any tax, securities law or
other filing or submission made to any Governmental Authority, any
application made to a rating agency or qualification for any
exemption from tax, securities law or other legal requirements, (y)
is not a 10-percent shareholder within the meaning of Section
881(c)(3)(B) of the Code and (z) is not a controlled foreign
corporation receiving interest from a related person within the
meaning of Section 881(c)(3)(C) of the Code and (II) a properly
completed and duly executed Internal Revenue Service Form W-8 or
applicable successor form;
(B) deliver to the Borrower and the Administrative Agent two
further properly completed and duly executed copies of said Form
W-8, or any successor applicable form on or before the date that any
such Form W-8 expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously
delivered by it to the Borrower or upon the request of the Borrower;
and
(C) obtain such extensions of time for filing and completing such
forms or certifications as may be reasonably requested by the
Borrower or the Administrative Agent;
unless in any such case any change in law or regulation has occurred
subsequent to the date such Lender (or Transferee) became a party to this
Agreement (or in the case of a Loan Participant, the date such Loan
Participant became a Loan Participant hereunder) which renders all such forms
inapplicable or which would prevent such Lender from properly completing and
executing any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent in writing no later than 15 calendar
days before any payment hereunder or under any Note is due. Each such Lender
(and each Transferee) shall certify (i) in the case of a Form 1001 or 4224,
that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii)
in the case of a Form W-8 or W-9 delivered pursuant to subsection 4.10(b)(i),
that it is entitled to an exemption from United States backup withholding tax.
(c) The Borrower shall not be required to indemnify any Lender (or
Transferee), or to pay any increased amounts to any Lender (or Transferee) in
respect of any Non-Excluded Tax, pursuant to this subsection 5.10 to the
extent that (i) any obligation to withhold or deduct amounts with respect to
tax existed on the date such Lender (or Transferee) became a party to this
Agreement (or, in the case of a Transferee that is a Loan Participant, on the
date such Loan
<PAGE>
53
Participant became a Loan Participant hereunder) or, with respect to payments
to a New Lending Office, the date such Lender (or Transferee) designated such
New Lending Office with respect to a Loan; provided, however, that this
clause (i) shall not apply to any Transferee or New Lending Office that
becomes a Transferee or New Lending Office as a result of an assignment,
participation, transfer or designation made at the written request of the
Borrower, or (ii) any Lender (or Transferee) fails to comply in full with the
provisions of subsection 5.10(b) hereof.
(d) If a Lender (or Transferee) or the Administrative Agent receives
a refund (including pursuant to a claim for refund made pursuant to the
preceding sentence) which in the good faith judgement of such Lender (or
Transferee) or Administrative Agent is payable in respect of any Non-Excluded
Tax as to which it has been indemnified by the Borrower, or with respect to
which the Borrower has paid increased amounts, pursuant to this subsection
5.10, it shall within 30 days from the date of such receipt pay over such
refund to the Borrower, net of all out-of-pocket third-party expenses of such
Lender (or Transferee) or the Administrative Agent.
5.11 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with
the provisions of this Agreement or (c) the making of a prepayment of
Eurodollar Loans or converting any Eurodollar Loans to ABR Loans on a day
which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day
of such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans
provided for herein over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
5.12 Change of Lending Office; Filing of Certificates or Documents.
Each Lender agrees that if it makes any demand for payment, or becomes
entitled to any increased amounts, under subsection 5.8 or 5.10 or if any
adoption or change of the type described in subsection 5.9 shall occur with
respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts
would not be disadvantageous to it, as determined in its sole discretion) to
designate a different lending office or file any certificate or document
reasonably requested in writing by the Borrower if such action would reduce
or obviate the need for the Borrower to make payments under subsection 5.8 or
5.10 or would eliminate or reduce the effect of any adoption or change
described in subsection 5.9.
5.13 Replacement Lenders. In the event that the Borrower becomes
obligated to pay additional amounts or increased amounts to, or receives
notice from, any Lender pursuant to
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54
subsection 5.8, 5.9 or 5.10 then, unless such Lender has theretofore removed
or cured the conditions which result in the obligation to pay such additional
amounts or increased amounts, the Borrower may, on 10 Business Days' prior
written notice to the Administrative Agent and such Lender, cause such Lender
to (and such Lender shall) assign pursuant to subsection 12.6(c) all of its
rights and obligations under this Agreement to another bank or financial
institution which is willing to become a Lender and is acceptable (which
acceptance shall not be unreasonably withheld) to the Administrative Agent,
for a purchase price equal to the outstanding principal amount of the Loans
payable to such Lender plus any accrued but unpaid interest on such Loans,
any accrued but unpaid commitment fees in respect of such Lender's Commitment
and any other amounts payable to such Lender under this Agreement (including,
without limitation, amounts payable under subsection 5.11).
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans and issue or participate in the Letters
of Credit, the Borrower hereby represents and warrants to the Administrative
Agent and each Lender that:
6.1 Financial Condition. (a)(i) The audited balance sheets of Old
Windy Hill as of December 30, 1995 and December 28, 1996 and the related
consolidated statements of operations and of cash flows for the period or
fiscal year ended on such dates, reported on by KPMG Peat Marwick LLP, copies
of which have heretofore been furnished to each Lender, are complete and
correct and present fairly the financial condition of Old Windy Hill as at
such dates, and the results of its operations and its cash flows for the
fiscal period or year then ended. The unaudited balance sheets of Old Windy
Hill and its Subsidiaries as at March 29, 1997 and the related unaudited
statement of operations for both the three-month and twelve-month periods
ended on such date, and the related unaudited statement of cash flows for the
three-month period ended on such date, certified by a Responsible Officer,
copies of which have heretofore been furnished to each Lender, are complete
and correct and present fairly the financial condition of Old Windy Hill as
at such date, and the results of its operations and its cash flows for the
three-month and twelve-month periods then ended (subject to normal year-end
audit adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved. Old Windy Hill did not
have, at the date of the most recent balance sheet referred to above, any
material Guarantee Obligation, contingent liability or liability for taxes,
or any long-term lease or other material agreement or unusual forward or
long-term commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not reflected in the
foregoing statements or in the notes thereto and was not disclosed in the
Offering Memorandum. During the period from December 28, 1996 to and
including the Closing Date, except as contemplated by the Transactions there
has been no sale, transfer or other disposition by Old Windy Hill of any
material part of its business or property and, except as contemplated by the
Transactions, no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
financial condition of Old Windy Hill at December 28, 1996.
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55
(ii) The audited consolidated balance sheets of Hubbard and its
consolidated Subsidiaries as of the end of the fiscal years ended April 30,
1994, April 30, 1995 and April 30, 1996 and of the nine-month period ended
January 31, 1997 and the related consolidated statements of earnings and of
cash flows for the fiscal years and nine-month period ended on such dates,
reported on by KPMG Peat Marwick LLP, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly the
consolidated financial condition of Hubbard Milling and its consolidated
Subsidiaries as at such dates, and the consolidated results of their
operations and their consolidated cash flows for the fiscal years and
nine-month period then ended. The unaudited consolidated statements of income
of Hubbard and its consolidated Subsidiaries for the twelve-month period
ended on January 31, 1997, certified by a Responsible Officer, a copy of
which has heretofore been furnished to each Lender, is complete and correct
and presents the consolidated results of operations of Hubbard and its
consolidated Subsidiaries for the twelve-month period then ended. All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved. To the knowledge of Holdings, Old Windy Hill, and the
Borrower, none of Hubbard nor any of its consolidated Subsidiaries had, at
the date of the most recent balance sheet referred to above, any material
Guarantee Obligation, contingent liability or liability for taxes, or any
long-term lease or other material agreement or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign
currency swap or exchange transaction, which is not reflected in the
foregoing statements or in the notes thereto and was not disclosed in the
Offering Memorandum. During the period from January 31, 1997 to and including
the Closing Date except as contemplated by the Transactions, there has been
no sale, transfer or other disposition by Hubbard or any of its consolidated
Subsidiaries of any material part of its business or property and, except as
contemplated by the Transactions, no purchase or other acquisition of any
business or property (including any capital stock of any other Person)
material in relation to the consolidated financial condition of Hubbard
Milling and its consolidated Subsidiaries at January 31, 1997.
(b) The pro forma combined balance sheets of the Borrower as at
March 31, 1997, certified by a Responsible Officer of the Borrower, copies of
which have been heretofore furnished to each Lender, adjusted to give effect
to (as if such events had occurred on such date) (i) the Acquisition, (ii)
the Merger, (iii) the Equity Investments, (iv) the issuance of the Senior
Subordinated Notes or the Senior Subordinated Credit Notes, as the case may
be, (v) the initial Extensions of Credit to the Borrower hereunder, (vi) the
Maumee and Kozy Kitten Acquisitions, (vii) the Refinancing and (viii) the
fees, expenses and financing costs related to the foregoing, together with
the notes thereto, were prepared based on good faith assumptions and on the
best information available to the Borrower as of the date of delivery thereof
and fairly present on a pro forma basis the combined financial position of
the Borrower as at March 31, 1997, as adjusted, as described above, assuming
such events had occurred at such date. Prior to the date hereof, the Borrower
did not engage in any business, own any assets or incur any liabilities
except (i) in connection with the Merger or the financing thereof or (ii) as
contemplated by this Agreement or the Merger Agreement.
6.2 No Change. (a) Since the preparation of the pro forma combined
balance sheets of the Borrower as at March 31, 1997, there has been no
development, event or circumstance which has had or could reasonably be
expected to have a Material Adverse Effect, and (b) during
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56
the period from the preparation of the pro forma combined balance sheets of
the Borrower as at March 31, 1997, to and including the date of this
Agreement no dividends or other distributions have been declared, paid or
made upon the Capital Stock of Hubbard Milling, Holdings, Old Windy Hill or
the Borrower nor has any of the Capital Stock of Hubbard Milling, Holdings,
Old Windy Hill or the Borrower been redeemed, retired, purchased or otherwise
acquired for value by the Borrower or any of its Subsidiaries, except as
contemplated by the Transactions.
6.3 Existence; Compliance with Law. Each Loan Party (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the power and authority to own and
operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified
or licensed to do business as a foreign entity and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires such qualification except where the
failure to be so qualified and/or in good standing, in the aggregate could
not reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure
to comply therewith could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations. Each Loan Party
has the power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and, in the case of the
Borrower, to borrow hereunder. Each Loan Party has taken all necessary action
to authorize the Extensions of Credit on the terms and conditions of this
Agreement and any Notes and to authorize the execution, delivery and
performance by it of the Loan Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or in respect of,
any Governmental Authority or any other Person is required to be obtained or
made by any Loan Party in connection with the Merger Agreement or the Merger
Documents, the Extensions of Credit hereunder, the execution, delivery or
performance by each applicable Loan Party or the validity or enforceability
with respect to or against any Loan Party of the Loan Documents to which it
is a party or with the continuing operations of the Borrower and its
Subsidiaries other than (i) consents, authorizations and filings in
connection with the Merger or the Merger Documents (x) which are required to
be obtained or made and are in full force and effect (each of which are
listed on Schedule 6.4) or (y) which are not required to be obtained or made
prior to consummation of the Merger and are listed on Schedule 6.4 or (z)
which, if not obtained or made, could not reasonably be expected to have a
Material Adverse Effect, (ii) the filing of Uniform Commercial Code financing
statements and filings with the United States Patent and Trademark Office and
the United States Copyright Office to perfect the security interest that can
be perfected by such filings, (iii) recordation of the Mortgages and (iv)
consents, authorizations and filings in connection with enforcement of the
Loan Documents. This Agreement has been, and each other Loan Document will
be, duly executed and delivered on behalf of each Loan Party that is a party
hereto or thereto. This Agreement constitutes, and each other Loan Document
when executed and delivered will constitute, a legal, valid and binding
obligation of each Loan Party that is a party hereto or thereto enforceable
against such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
<PAGE>
57
6.5 No Legal Bar. The execution, delivery and performance of the
Loan Documents, the Extensions of Credit hereunder and the use of the
proceeds thereof by each applicable Loan Party will not violate any
Requirement of Law or Contractual Obligation of any Loan Party which could
reasonably be expected to have a Material Adverse Effect and will not result
in, or require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation other than as contemplated in or permitted by the Loan
Documents.
6.6 No Material Litigation. Except as set forth in Schedule 6.6, no
litigation, investigation or proceeding of or before an arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
Holdings or Old Windy Hill, threatened by or against any Loan Party or
against any of their respective properties or revenues (a) with respect to
any of the Loan Documents or any of the transactions contemplated hereby or
thereby or (b) which has a reasonable possibility of an adverse
determination, and if adversely determined, could reasonably be expected to
have a Material Adverse Effect.
6.7 No Default. No Loan Party is in default under or with respect to
any of its Contractual Obligations in any respect which could reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default
has occurred and is continuing.
6.8 Ownership of Property; Liens. To the best of each Loan Party's
knowledge, after giving effect to the Merger, each Loan Party has or will
have good record and marketable title in fee simple to, or a valid leasehold
interest in, all its real property subject to those matters set forth in the
title policies delivered pursuant to subsection 7.1(p) except for such
matters as do not materially adversely affect the use of the property in the
conduct of the business as currently conducted, and good title to, or a valid
leasehold interest in, all its other material property, and none of such
property is subject to any Lien except as permitted by subsection 9.3.
Schedule 6.8 sets forth a true and complete list of all real property of the
Borrower and its Subsidiaries on the Closing Date.
6.9 Intellectual Property. (a) As of the Closing Date, after giving
effect to the Merger the Borrower has that which the Sellers have represented
is the ownership or the license to use all material patents, trademarks
(registered or unregistered), trade names, service marks, assumed names and
copyrights (such items, together with all applications therefor and all other
material intellectual property and proprietary rights, whether or not subject
to statutory registration or protection, of Hubbard, Armour or any of their
respective Subsidiaries that are used in or necessary for the conduct of
either of Hubbard or Armour as conducted on the closing date of the Merger
Agreement, being collectively referred to herein as the "Intellectual
Property") owned, filed or licensed by Hubbard, Armour or any of their
respective Subsidiaries or used in or necessary for the conduct of either of
the Businesses as conducted on the closing date of the Merger Agreement,
except where the failure to so acquire any such Intellectual Property could
not reasonably be expected to have a Material Adverse Effect.
(b) As of each subsequent Borrowing Date, (i) each Loan Party owns,
or is licensed to use, the Intellectual Property necessary for the conduct of
its business then conducted except for those the failure to own or license
which could not reasonably be expected to have a Material
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Adverse Effect and (ii) no claim of which Holdings, Old Windy Hill or the
Borrower has been given notice has been asserted and is pending by any Person
challenging or questioning the use by any Loan Party of any such Intellectual
Property or the validity or effectiveness of any such Intellectual Property,
nor does Holdings, Old Windy Hill or the Borrower know of any valid basis for
any such claim, except for such claims that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
6.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation not otherwise discussed herein or in the financial
statements referred to in subsection 6.1 applicable to any Loan Party could
reasonably be expected to have a Material Adverse Effect.
6.11 Taxes. Holdings, Old Windy Hill and the Borrower and its
Subsidiaries have filed or caused to be filed all tax returns which, to the
knowledge of Old Windy Hill, Holdings or the Borrower and its Subsidiaries,
are required to be filed in respect of periods subsequent to the Closing Date
and have paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property in respect of such periods
and all other material taxes imposed on it or any of its property by any
Governmental Authority (other than any taxes the amount or validity of which
are being contested in good faith by appropriate proceedings and with respect
to which reserves in conformity with GAAP have been provided on the books of
the applicable Loan Party and other than any taxes which in the aggregate
would not have a Material Adverse Effect as the case may be) in respect of
such periods.
6.12 Federal Regulations. No part of the proceeds of any Loans will
be used for "buying" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of
the Board of Governors as now and from time to time hereafter in effect. If
requested by any Lender or the Administrative Agent, the Borrower will
furnish to the Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form G-1 or FR
Form U-1 referred to in said Regulation G or Regulation U, as the case may be.
6.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which
this representation is made or deemed made with respect to any Plan, and each
Plan has complied in all material respects with the applicable provisions of
ERISA and the Code, except where, in connection with any such Reportable
Event or accumulated funding deficiency or noncompliance, the liability which
would be likely to result could not be reasonably expected to have a Material
Adverse Effect. No termination of a Single Employer Plan has occurred except
where, in connection with any such termination, the liability which would be
likely to result could not be reasonably expected to have a Material Adverse
Effect, and no Lien which remains unsatisfied in favor of the PBGC or a Plan
has arisen, during such five-year period. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to
fund such Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the value of
the assets of such Plan allocable to such accrued benefits by an amount in
excess of $5,000,000. Neither the Borrower nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan; neither
the Borrower nor any Commonly Controlled
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59
Entity would become subject to any liability under ERISA if the Borrower or
any such Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made; and no such
Multiemployer Plan is in Reorganization or Insolvent, except where, in any
such case, the liability which would be likely to result could not be
reasonably expected to have a Material Adverse Effect.
6.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company" within the meaning of the Investment Company Act of
1940, as amended. The Borrower is not subject to regulation under any Federal
or State statute or regulation (other than Regulation X of the Board of
Governors) which limits its ability to incur Indebtedness as contemplated
herein.
6.15 Subsidiaries. As of the Closing Date, Holdings has no
Subsidiaries other than as set forth on Schedule 6.15.
6.16 Purpose of Loans. The proceeds of the Term Loans and,
initially, the Acquisition Loans shall be used by the Borrower to (i) provide
a portion of the funds required to consummate the Merger and the Refinancing
and (ii) to pay related fees and expenses. After the consummation of the
Transactions, the proceeds of the Acquisition Loans shall be used solely for
Permitted Acquisitions. Except for $3,000,000 available to be used in
connection with the Transactions, the Working Capital Loans and/or Swing Line
Loans shall be used by the Borrower and its Subsidiaries for working capital
purposes in the ordinary course of business.
6.17 Environmental Matters. Except (i) as set forth on Schedule 6.17
and (ii) to the extent that the inaccuracy of any of the following (or the
circumstances giving rise to such inaccuracy), individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect:
(a) The facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not contain
any Hazardous Materials in amounts or concentrations which (i)
constitute a violation of, or (ii) could give rise to any liability
under, any Environmental Law or could interfere with the continued
operation of the Properties or could reasonably be expected to impair
the fair saleable value thereof.
(b) The Borrower and its Subsidiaries and the Properties are in
compliance with, and to the knowledge of the Borrower and its
Subsidiaries have in the last three years been in compliance with, all
applicable Environmental Laws and applicable Environmental Permits, and
the Borrower and its Subsidiaries reasonably believe that they will be
able to comply with all applicable Environmental Laws in the future and
renew or obtain all Environmental Permits necessary for their
operations in the future.
(c) Neither the Borrower nor any of its Subsidiaries has received
any written notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard
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60
to any of the Properties or the Businesses, nor to the knowledge of the
Borrower or any of its Subsidiaries is such notice being threatened.
(d) Hazardous Materials have not been transported, disposed of,
emitted, discharged, or otherwise released or threatened to be
released, nor has their disposal been arranged for, (i) by the Borrower
or any of its Subsidiaries in violation of, or (ii) in a manner or to a
location which could reasonably be expected to give rise to liability
under, any applicable Environmental Law; nor have any Hazardous
Materials been generated, treated, stored, emitted, discharged or
otherwise released or threatened to be released or disposed of at, on
or under any of the Properties in violation of, or in a manner that
could reasonably be expected to give rise to liability under, any
applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower or any of its
Subsidiaries, threatened, under any Environmental Law to which the
Borrower or any Subsidiary is or to the knowledge of the Borrower or
any of its Subsidiaries will be named as a party, nor are there any
consent decrees or other decrees, consent orders, administrative orders
or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Borrower or
any of its Subsidiaries, or the Properties or the Businesses.
6.18 Regulation H. To the extent available, the Borrower has
obtained for all Mortgaged Properties which are located in an area designated
as having special flood hazards pursuant to the National Flood Insurance Act
of 1968 and the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001-4128)
or any amendments or supplements thereto or substitutions therefor, flood
insurance in such total amount as the Administrative Agent has from time to
time reasonably required.
6.19 Accuracy of Information. The factual statements and information
contained in the Offering Memorandum relating to Holdings and its
Subsidiaries (as the same may be supplemented in writing through the Closing
Date) when taken as a whole, were, as of the date of such Offering Memorandum
or the dates otherwise specified therein or written supplements thereto,
accurate in all material respects and did not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading, provided that (a) with respect to trade
data which relates to a Person which is not a Loan Party or an Affiliate
thereof, the Borrower represents and warrants only that such information is
believed by it in good faith to be accurate in all material respects, (b) the
statements therein describing documents and agreements are summary only and
as such are qualified in their entirety by reference to such documents and
agreements, (c) to the extent any such information therein was based upon or
constitutes a forecast or projection or pro forma financial information, the
Borrower represents only that such forecasts or projections or pro forma
financial information were based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time made and
(d) as to the information which is specified as having been supplied by third
parties, the Borrower represents only that it is not aware of any material
misstatement or omission therein.
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61
6.20 Solvency. As of the Closing Date, after giving effect to the
Merger, the initial Extensions of Credit hereunder and the other transactions
contemplated to occur on the Closing Date each Loan Party is Solvent.
6.21 Merger Agreement. The Administrative Agent has received a
complete copy of each of the Merger Agreement (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto) and all amendments and waivers relating thereto and other side
letters or agreements affecting the terms thereof. As of the Closing Date,
none of such documents and agreements has been amended or supplemented, nor
have any of the provisions thereof been waived, in any material respect,
except pursuant to a written agreement or instrument which has heretofore
been consented to by the Administrative Agent. As of the Closing Date, to the
knowledge of the Borrower, the representations and warranties contained in
the Merger Agreement are true and correct in all material respects on the
Closing Date as if made on and as of the Closing Date.
6.22 Security Documents. (a) The Guarantee and Collateral Agreement
is effective to create in favor of the Administrative Agent, for the ratable
benefit of the Lenders, a legal, valid and enforceable security interest in
all the Collateral described therein and proceeds thereof and, upon
completion of the filings and other actions specified on Schedule 3 to the
Guarantee and Collateral Agreement, the Guarantee and Collateral Agreement
shall constitute fully perfected, first priority Liens on, and security
interests in, all right, title and interest of Old Windy Hill, Holdings, the
Borrower and its Subsidiaries (other than the Immaterial Subsidiaries) in the
Collateral described therein and in proceeds thereof superior in right to any
other Person other than Liens permitted hereby.
(b) The properties listed on Schedule 6.8 include all material real
properties owned by the Borrower or any of its Subsidiaries (including the
properties of the Animal Feed Division) as well as all leasehold interests of
the Borrower and its Subsidiaries in the State of Minnesota. The Mortgages
are each effective to create in favor of the Administrative Agent, for the
ratable benefit of the Lenders, a legal, valid and enforceable Lien on the
properties described therein and proceeds thereof, subject to obtaining
necessary consents (which consents shall be obtained on or prior to the
Closing Date) and when the Mortgages are filed in the offices for the filing
of mortgages for the properties specified on Schedule 6.8, the Mortgages
shall constitute a fully perfected, first priority Lien on, and security
interest in, all right, title and interest of the Loan Parties in the
properties described therein and the proceeds thereof, superior in right to
any other Person other than Liens permitted hereby.
SECTION 7. CONDITIONS PRECEDENT
7.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial Extension of Credit requested to be made by it is
subject to the satisfaction, immediately prior to or concurrently with the
making of such Extension of Credit on the Closing Date, of the following
conditions precedent:
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(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of
the Borrower with a counterpart for each Lender, (ii) for the account
of each Revolving Credit Lender which requests a Revolving Credit Note
on the Closing Date, a Revolving Credit Note conforming to the
requirements hereof and executed by a duly authorized officer of the
Borrower, (iii) for the account of each Term Loan Lender which requests
a Term Note on the Closing Date, a Term Note conforming to the
requirements hereof and executed by a duly authorized officer of the
Borrower, (iv) if requested by the Swing Line Lender on the Closing
Date, for the account of the Swing Line Lender, a Swing Line Note
conforming to the requirements hereof and executed by a duly authorized
officer of the Borrower, (v) the Guarantee and Collateral Agreement,
executed and delivered by a duly authorized officer of each Loan Party
party thereto, with a counterpart for the Administrative Agent and a
counterpart or a copy for each Lender and (vi) each of the Mortgages,
each executed and delivered by a duly authorized officer of each Loan
Party thereto, with a counterpart for the Administrative Agent and a
counterpart or a copy for each Lender.
(b) Transactions and Transaction Documents. (i) The terms,
conditions and structure of each of the (X) Transactions and (Y)
Transaction Documents shall be in form and substance reasonably
satisfactory to the Agents, (ii) the Borrower shall have received not
less than (X) $10,000,000 pursuant to the Equity Investment and (Y)
$120,000,000 from the issuance of Senior Subordinated Notes or
$120,000,000 from the Senior Subordinated Credit Notes, (iii) the
Borrower shall have repaid in full (or made provision therefor)
approximately $52,000,000 of existing Indebtedness pursuant to the
Refinancing to the reasonable satisfaction of the Agents and all
lending commitments under such Indebtedness shall have been terminated
to the reasonable satisfaction of the Agents, and all security
interests in favor of existing lenders unconditionally released, (iv)
each of the Transactions shall have been consummated in all material
respects in accordance with the terms hereof and the terms of the
Transaction Documents, (v) the Lenders shall be satisfied with all
legal, tax, and accounting matters relating to the Transactions, all
requisite third parties (including Governmental Authorities) shall have
approved or consented to the Transactions and the other transactions
contemplated hereby, and all applicable waiting periods shall have
expired or terminated and (vi) there shall be no governmental or
judicial action, actual or threatened, that has or would have, singly
or in the aggregate, a reasonable likelihood of restraining, preventing
or imposing burdensome conditions on any of the Transactions.
(c) Financial Statements; Business Plans. The Lenders shall have
received (i) (W) a reasonably satisfactory pro forma balance sheet of
Old Windy Hill, Hubbard and their Subsidiaries, as at March 31, 1997
and after giving effect to the Transactions and consistent in all
material respects with the sources and uses of cash for the Acquisition
as previously described to the Lenders and described in forecasts
previously provided to the Lenders; (X) audited financial statements of
Old Windy Hill for the ten months ended December 30, 1995 and the year
ended December 28, 1996 and audited consolidated financial statements
of Hubbard and its Subsidiaries,
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63
for the nine months ended January 31, 1997 and the three most recent
fiscal years for which such financial statements are available; (Y)
unaudited financial statements of Old Windy Hill for the three months
ended March 30, 1996 and March 29, 1997 and for the twelve months ended
March 29, 1997, and unaudited financial statements for Hubbard and its
Subsidiaries for nine months ended January 31, 1996 and the twelve
months ended January 31, 1997; and (Z) unaudited interim consolidated
financial statements of Old Windy Hill, Hubbard and their subsidiaries,
for each fiscal quarterly period ended subsequent to the date of the
latest applicable financial statements delivered pursuant to clause (X)
of this paragraph as to which such financial statements are available,
and such financial statements shall not, in the reasonable judgment of
the Lenders, reflect any material adverse change in the consolidated
financial condition of Old Windy Hill, Hubbard and their Subsidiaries,
as reflected in the financial statements or projections previously
furnished to the Lenders and (ii) a satisfactory business plan for
fiscal years 1997 and 1998.
(d) Litigation. There shall be no litigation or administrative
proceedings or other legal or regulatory developments, actual or
threatened, that, singly or in the aggregate, involve a reasonable
likelihood of a Material Adverse Effect on the condition (financial or
otherwise), operations, business, property, liabilities (contingent or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole or Hubbard and its Subsidiaries taken as a whole or the ability
of the Loan Parties to fully and timely perform each of their
obligations under the Loan Documents, or the ability of the parties to
consummate the financing or the other transactions contemplated hereby
or the validity or enforceability of any of the Loan Documents or the
rights, remedies and benefits available to the Administrative Agent and
the Lenders thereunder, or which would be materially inconsistent with
the stated assumptions underlying the projections provided to the
Lenders.
(e) Material Adverse Change. There shall not have occurred or become
known any material adverse change or any condition or event that could
reasonably be expected to have a Material Adverse Effect on the
business, property, liabilities (contingent or otherwise), operations,
condition (financial or otherwise) or solvency of Old Windy Hill and
its Subsidiaries, taken as a whole since December 28, 1996 or Hubbard
and its Subsidiaries taken as a whole since January 31, 1997.
(f) Borrowing Certificate. The Administrative Agent shall have
received, with a copy for each Lender, a certificate of the Borrower,
dated the Closing Date, with appropriate insertions and attachments,
satisfactory in form and substance to the Administrative Agent,
executed by the President or any Vice President and the Secretary or
any Assistant Secretary of the Borrower.
(g) Corporate Proceedings of the Loan Parties. The Administrative
Agent shall have received, with a copy for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of each of the Loan Parties
authorizing (i) the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party, (ii) in
the case of the
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64
Borrower, the borrowings contemplated hereunder and (iii) the granting
by it of the Liens created pursuant to the Security Documents,
certified by the Secretary or an Assistant Secretary of such Loan Party
as of the Closing Date, which certificate shall be in form and
substance satisfactory to the Administrative Agent and shall state that
the resolutions thereby certified have not been amended, modified,
revoked or rescinded.
(h) Incumbency Certificate of the Loan Parties. The Administrative
Agent shall have received, with a copy for each Lender, a certificate
of each of the Loan Parties, dated the Closing Date, as to the
incumbency and signature of the officers of such Loan Party executing
any Loan Document satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President
and the Secretary or any Assistant Secretary of such Loan Party.
(i) Corporate Documents. The Administrative Agent shall have
received, with a copy for each Lender, true and complete copies of the
certificate of incorporation and by-laws of each of the Loan Parties,
certified as of the Closing Date as complete and correct copies thereof
by the Secretary or an Assistant Secretary of such Loan Party.
(j) Consents, Licenses and Approvals. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of a
Responsible Officer of the Borrower (i) attaching copies of all
consents and authorizations of and filings with any Governmental
Authority or any other Person that are required to be obtained or made
by any Loan Party in connection with the Transactions or the
Transaction Documents, the Extensions of Credit hereunder, the
execution, delivery or performance by each applicable Loan Party or the
validity or enforceability with respect to or against any Loan Party of
the Loan Documents to which it is a party or with the continuing
operations of the Borrower and its Subsidiaries (other than those set
forth in clauses (i)(y), (i)(z), (ii), (iii) or (iv) of subsection 6.4)
as are reasonably requested by the Administrative Agent, and (ii)
stating that such consents, authorizations and filings are in full
force and effect and that all applicable waiting periods shall have
expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose material
adverse conditions on the Transactions or the financing thereof, and
each such consent, authorization and filing shall be in form and
substance reasonably satisfactory to the Administrative Agent.
(k) Fees. The Lenders, Agents and Arrangers shall have received all
fees required to be paid and all expenses for which invoices have been
presented, on or before the Closing Date, including the amounts and
fees set forth in the Bank Fee Letter dated March 21, 1997 among CSFB,
Chase and Old Windy Hill in the amounts and on the dates set forth
therein.
(l) Legal Opinions. The Administrative Agent shall have received,
with a counterpart for each Lender, the following executed legal
opinions:
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(i) the executed legal opinion of Richards & O'Neil, LLP,
special counsel to Holdings, Old Windy Hill and the Borrower, in
form and substance satisfactory to the Administrative Agent; and
(ii) the executed legal opinions of local counsel to the Borrower
(which counsel shall be in those states where the Loan Parties have
material real and/or personal property), in form and substance
satisfactory to the Administrative Agent.
(m) Pledged Stock; Stock Powers; Acknowledgment and Consents. The
Administrative Agent shall have received (i) the certificates
representing the shares pledged pursuant to the Guarantee and
Collateral Agreement, together with an undated stock power for each
such certificate executed in blank by a duly authorized officer of the
pledgor and (ii) acknowledgment and consents in the form attached to
the Guarantee and Collateral Agreement executed by a duly authorized
officer of each Loan Party whose Capital Stock is pledged pursuant to
the Guarantee and Collateral Agreement.
(n) Lien Searches; Actions to Perfect Liens. The Administrative
Agent shall have received (i) the results of a recent lien, tax and
judgment search in each of the jurisdictions and offices where assets
of the Borrower and its Subsidiaries are located or recorded, and such
search shall reveal no liens on any of the assets of the Borrower or
its Subsidiaries except for liens permitted by the Loan Documents and
(ii) evidence in form and substance reasonably satisfactory to it that
all filings, recordings, registrations and other actions, including,
without limitation, the filing of duly executed financing statements on
form UCC-1, necessary or, in the opinion of the Administrative Agent,
desirable to perfect the Liens created by the Security Documents shall
have been completed (or, to the extent that any such filings,
recordings, registrations and other actions shall not have been
completed, arrangements satisfactory to the Administrative Agent for
the completion thereof shall have been made).
(o) Surveys. The Administrative Agent shall have received, and the
title insurance company issuing the policy referred to in subsection
7.1(p) (the "Title Insurance Company") shall have received, maps or
plats of an as-built survey of the primary buildings, structures or
other improvements located on the sites of the property covered by each
Mortgage certified to the Administrative Agent and the Title Insurance
Company in a manner reasonably satisfactory to them, dated a date
reasonably satisfactory to the Administrative Agent and the Title
Insurance Company by an independent professional licensed land surveyor
reasonably satisfactory to the Administrative Agent and the Title
Insurance Company, which maps or plats and the surveys on which they
are based shall be made in accordance that certain proposal entitled
"Revised: Survey Proposal-Hubbard Milling Company Project" issued by
International Land Services, Inc. and dated April 10, 1997.
(p) Title Insurance Policy. The Administrative Agent shall have
received in respect of each parcel covered by each Mortgage a
mortgagee's title policy (or
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66
policies) or marked up unconditional binder for such insurance dated
the Closing Date. Each such policy shall (i) be in an amount reasonably
satisfactory to the Administrative Agent; (ii) be issued at ordinary
rates; (iii) insure that the Mortgage insured thereby creates a valid
first Lien on such parcel free and clear of all defects and
encumbrances, except such as may be approved by the Administrative
Agent or as otherwise permitted by this Agreement; (iv) name the
Administrative Agent for the benefit of the Lenders as the insured
thereunder; (v) be in the form of ALTA Loan Policy - 1970 if available
(provided, however, that any such policy may contain a creditor's
rights exception); (vi) contain such endorsements and affirmative
coverage as the Administrative Agent may reasonably request and are
customary in transactions of this nature and available without
excessive premium and (vii) be issued by Chicago Title Insurance
Company or such other title companies satisfactory to the
Administrative Agent (including any such title companies acting as
co-insurers or reinsurers, at the option of the Administrative Agent).
The Administrative Agent shall have received evidence satisfactory to
it that all premiums in respect of each such policy, and all charges
for mortgage recording tax, if any, have been paid.
(q) Flood Insurance. If requested by the Administrative Agent, the
Administrative Agent shall have received evidence reasonably
satisfactory to it that flood insurance complying with the requirements
of subsection 6.18 is in effect.
(r) Copies of Documents. The Administrative Agent shall have
received a copy of all recorded documents referred to, or listed as
exceptions to title in, the title policy or policies referred to in
subsection 7.1(p) and a copy, certified by such parties as the
Administrative Agent may deem appropriate, of all other documents
affecting the property covered by each Mortgage as are reasonably
requested by the Administrative Agent.
(s) Insurance. The Administrative Agent shall have received evidence
in form and substance satisfactory to it that all of the requirements
of subsection 8.5 and those Sections of the Security Documents
requiring the maintenance of insurance shall have been satisfied.
(t) Appraisals and Solvency. The Agents shall have received, with a
copy for each Lender (i) a certificate from a responsible officer of
the Borrower and (ii) an opinion (and related going-concern valuation)
satisfactory in all respects to the Lenders from American Appraisal
Associates, Inc. or another independent valuation firm reasonably
satisfactory to the Lenders, in each case to the effect that, after
giving effect to the Transactions, neither the Borrower nor any of its
Subsidiaries will be insolvent, will be rendered insolvent by the
indebtedness incurred in connection therewith, will be left with
unreasonably small capital with which to engage in their business or
will have incurred debts beyond their ability to pay such debts as they
mature.
(u) Fees and Expenses. The Administrative Agent shall have received
reasonably satisfactory evidence that the fees and expenses to be
incurred by Old Windy Hill,
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Holdings, the Borrower and its Subsidiaries in connection with the
Transactions will not exceed $13,000,000 in the aggregate.
(v) Environmental Audit. The Agents shall have received Phase I
environmental reports and any follow-up environmental reports with
respect to the properties of the Borrower, Hubbard and their respective
Subsidiaries and shall be satisfied with such reports.
7.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, its initial Extension of Credit), and the
agreement of the Issuing Lender to issue any Letter of Credit for which an
Application is presented, is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower and the other Loan Parties in or
pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date (and, in the case of the
representations and warranties made on the Closing Date, after giving
effect to the Transactions) as if made on and as of such date, except
to the extent such representations and warranties expressly relate to
an earlier date in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Extension
of Credit requested to be made on such date.
(c) Material Adverse Change. No material adverse change shall have
occurred with respect to the condition (financial or otherwise),
operations or assets of the Borrower and its Subsidiaries, taken as a
whole, or their respective abilities to perform their obligations under
the Loan Documents.
(d) Borrowing Requests and Applications. The Administrative Agent
shall have received a request or Application for such Loan or Letter of
Credit if and as required by subsection 3.2, 4.2, 4.8, 4.11 or 4.14, as
applicable.
Each borrowing by and Letter of Credit issued on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as
of the date thereof that the conditions contained in clauses (a), (b) and (c)
of this subsection have been satisfied.
SECTION 8. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain
in effect or any amount is owing to any Lender or Agent hereunder or under
any other Loan Document or any Letter of Credit remains outstanding, it shall
and (except in the case of delivery of financial
<PAGE>
68
information, reports and notices and subsection 8.1 and 8.2 which shall be
performed by the Borrower) shall cause each of its Subsidiaries to, unless
the Required Lenders shall otherwise consent in writing:
8.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited
consolidated and consolidating balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the related
audited consolidated and consolidating statements of operations and
stockholders' equity and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or
exception, or a qualification arising out of the scope of the audit, by
KPMG Peat Marwick LLP, or other independent certified public
accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the quarterly periods of each fiscal year of
the Borrower, the unaudited consolidated and consolidating balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated and
consolidating statements of operations and stockholders' equity and of
cash flows of the Borrower and its consolidated Subsidiaries for such
quarter and the portion of the fiscal year through the end of such
quarter, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer of the Borrower
as being fairly stated in all material respects (subject to normal
year-end audit adjustments);
(c) as soon as available, but in any event not later than (i) 45
days after the end of each of May, July and August, 1997 and (ii) 30
days after the end of each month (other than March, June, September and
December) thereafter, the unaudited consolidated and consolidating
statement of income (through the "Earnings Before Tax" line) of the
Borrower and its consolidated Subsidiaries for such month and the
portion of the fiscal year of the Borrower through the end of such
month, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer of the Borrower
as being fairly stated in all material respects (subject to normal
year-end audit adjustments); and
(d) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, an operating report of the Borrower and
its consolidated Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, which discusses and
provides figures in comparative form to the previous year regarding the
major product lines in terms of sales and product profitability
certified by a Responsible Officer of the Borrower as being fairly
stated in all material respects;
<PAGE>
69
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and, other than the
operating report referred to in subsection (c) above, in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or Responsible Officer, as
the case may be, and disclosed therein).
8.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default having occurred as of
the end of the fiscal year covered by such financial statements in
respect of subsection 9.1, 9.2, 9.3, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10,
9.11(i), 9.12 or 9.13, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a) and (b), a certificate of a
Responsible Officer (i) stating that, to the best of such Responsible
Officer's knowledge, the Borrower during such period has observed or
performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan
Documents to be observed, performed or satisfied by it during such
period, and that such Responsible Officer has obtained no knowledge of
any Default or Event of Default except as specified in such certificate
and (ii) setting forth in reasonable detail the calculations required
to determine compliance with subsections 9.1 and 9.8;
(c) not later than sixty days after the end of each fiscal year of
the Borrower, commencing with the fiscal year ending in December 31,
1997, a copy of the projections by the Borrower of the operating budget
and cash flow budget of the Borrower and its Subsidiaries for the
succeeding fiscal year, such projections to be accompanied by a
certificate of a Responsible Officer of the Borrower to the effect that
such projections have been prepared using assumptions believed in good
faith by management of the Borrower to be reasonable at the time made
and that such Responsible Officer has no reason to believe that such
projections are incorrect or misleading in any material respect;
(d) within five Business Days after the same are sent, copies of all
financial statements and reports which any Loan Party sends to the
holders of the Senior Subordinated Notes or the Senior Subordinated
Credit Notes, as the case may be, or to the holders of any securities
of the Loan Parties registered with the SEC, and within five Business
Days after the same are filed, copies of all financial statements and
reports which any Loan Party may make to, or file with, the SEC or any
successor or analogous Governmental Authority;
(e) promptly upon receipt thereof, copies of all reports submitted
to the Borrower by independent certified public accountants in
connection with each annual, interim
<PAGE>
70
or special audit of the books of the Borrower or any of its
Subsidiaries made by such accountants, including, without limitation,
any management letter commenting on the Borrower's internal controls
submitted by such accountants to management in connection with their
annual audit; and
(f) promptly, such additional financial and other information within
the possession of the Borrower or any of its Subsidiaries as any Lender
may from time to time reasonably request through the Administrative
Agent.
8.3 Satisfaction and Payment of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all its material obligations of whatever nature, including
without limitation taxes, except as contemplated by this Agreement or where
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or any of its
Subsidiaries, as the case may be.
8.4 Conduct of Business; Maintenance of Existence; Compliance with
Laws. Continue to engage in business of the same general type as now
conducted by the Borrower, Hubbard and their respective Subsidiaries and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as
otherwise permitted pursuant to subsection 9.5; comply in all material
respects with all Contractual Obligations and Requirements of Law (excluding,
for purposes of this subsection 8.4, Requirements of Law and Contractual
Obligations specifically addressed elsewhere in this Section 8) except where
(a) any such Contractual Obligation is being contested in good faith, a bona
fide dispute exists with respect to any such Contractual Obligation or
failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect and (b) the failure to comply with
any such Requirement of Law could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
8.5 Maintenance of Property; Insurance. Keep all property material
to the conduct of its business (including, without limitation, the Mortgaged
Property) in good working order and condition; maintain insurance with
financially sound and reputable insurance companies (or, to the extent
consistent with prudent business practice, a program of self-insurance) on
such of its property and in at least such amounts and against at least such
risks as are usually insured against in the same general area by companies
engaged in the same or a similar business (including, without limitation, the
insurance required pursuant to the Security Documents); and furnish to each
Lender, upon written request, full information as to the insurance carried.
8.6 Inspection of Property; Books and Records; Discussions. Keep
proper financial records in conformity with GAAP and, except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, all Requirements of Law; and permit (a) representatives of the
Administrative Agent (and, after the occurrence and during the continuance of
an Event of Default, any Lender) to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time during normal business hours, upon reasonable notice, and as
often as may reasonably be desired, and (b) upon
<PAGE>
71
reasonable notice during normal business hours, representatives of the
Administrative Agent or any Lender to discuss the business, operations,
properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants.
8.7 Notices. Promptly give notice to the Administrative Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default by the Borrower or any of
its Subsidiaries under any Contractual Obligation of the Borrower or
any of its Subsidiaries of which any Loan Party has (or should have)
knowledge or notice or (ii) litigation, investigation or proceeding
which may exist at any time between the Borrower or any of its
Subsidiaries and any Governmental Authority of which any Loan Party has
(or should have) knowledge or notice, which in either case, if not
cured or resolved or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of
its Subsidiaries, of which any Loan Party has (or should have)
knowledge or notice, in which the amount involved is not covered by
insurance or in which injunctive or similar relief is sought which, if
adversely determined, could reasonably be expected to have a Material
Adverse Effect;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or Insolvency of,
any Plan; and
(e) any development or event of which any Loan Party has (or should
have) knowledge or notice which could reasonably be expected to have a
Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
8.8 Environmental Laws. (a) Comply with, and use reasonable efforts
to ensure compliance by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply with and maintain, and
use reasonable efforts to ensure that all tenants and subtenants obtain and
comply with and maintain, any and all Environmental Permits required by
<PAGE>
72
applicable Environmental Laws, except where the failure to so comply or
obtain such permits could not reasonably be expected to have a Material
Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives
of all Governmental Authorities regarding Environmental Laws, except to the
extent that the pendency of such proceedings could not reasonably be expected
to have a Material Adverse Effect.
8.9 Maintenance of Liens of the Security Documents. Promptly, upon
the reasonable request of the Administrative Agent, at the Borrower's
expense, execute, acknowledge and deliver, or cause the execution,
acknowledgement and delivery of, and thereafter register, file or record, or
cause to be registered, filed or recorded, in an appropriate governmental
office, any document or instrument supplemental to or confirmatory of the
Security Documents or otherwise reasonably deemed by the Administrative Agent
necessary or desirable for the continued validity, perfection and priority of
the Liens on the Collateral covered thereby.
8.10 Pledge of After Acquired Property; Additional Guarantors. (a)
If at any time following the Closing Date the Borrower or any of its
Subsidiaries shall acquire property of any nature whatsoever having a value
in excess of $100,000 which is intended by the terms of the applicable
Security Document to be, but is not, subject to the Liens created by the
Security Documents, the Borrower shall, or shall cause the relevant
Subsidiaries to, as soon as possible and in no event later than 30 days after
the relevant acquisition date and, to the extent permitted by applicable law,
grant to the Administrative Agent for the ratable benefit of the Lenders a
first priority (subject to Liens permitted under subsection 9.3) Lien (to the
extent the applicable Loan Party is then permitted to grant such a Lien) on
such property as collateral security for the Obligations pursuant to
documentation reasonably satisfactory in form and substance to the
Administrative Agent. The Borrower, at its own expense, shall execute,
acknowledge and deliver, or cause the execution, acknowledgement and delivery
of, and thereafter register, file or record in an appropriate governmental
office, any document or instrument (including legal opinions, title
insurance, consents and corporate documents) and take all such actions
reasonably deemed by the Administrative Agent to be necessary or desirable to
ensure the creation, priority and perfection of such Lien.
(b) (i) The Borrower shall cause each new Subsidiary (other than a
Foreign Subsidiary) of the Borrower created or acquired after the date
hereof, promptly upon such creation or acquisition, to execute an instrument
in form and substance reasonably satisfactory to the Administrative Agent (it
being acknowledged and agreed that an instrument in the form attached to the
Guarantee and Collateral Agreement as Exhibit A thereto shall satisfy this
requirement) pursuant to which such new Subsidiary shall become a party to
the Guarantee and Collateral Agreement as a grantor and a guarantor
thereunder, and (ii) the Borrower shall, or shall cause the Subsidiary of the
Borrower which holds the Capital Stock of such new Subsidiary to, execute and
deliver an instrument in form and substance reasonably satisfactory to the
Administrative Agent (it being acknowledged and agreed that an instrument in
the form attached to the Guarantee and Collateral Agreement as Exhibit B
thereto shall satisfy this requirement) providing for the pledge of all of
the issued and outstanding Capital Stock held by the Borrower
<PAGE>
73
of each new Subsidiary (including a Foreign Subsidiary) of the Borrower
created or acquired after the date hereof (provided, that in no event shall
Capital Stock representing more than 65% of the voting power of the Capital
Stock of any such new Subsidiary which is a Foreign Subsidiary be so pledged)
to the Administrative Agent for the benefit of the Lenders, and the Borrower
shall deliver to the Administrative Agent the stock certificates evidencing
such Capital Stock together with undated stock powers for each such
certificate, duly executed in blank.
8.11 Lockbox Agreements and Concentration Account. Within 60 days of
the Closing Date, (i) execute and deliver Borrower Lockbox Agreements, by a
duly authorized officer of the Borrower and each other Person party thereto,
with a counterpart for the Administrative Agent and a counterpart or a copy
for each Lender, (ii) execute and deliver the Concentration Account
Agreement, by a duly authorized officer of the Borrower and each other Person
party thereto, with a counterpart for the Administrative Agent and a
counterpart or a copy for each Lender
8.12 Immaterial Subsidiaries. Within 60 days of the Closing Date
either (a) dissolve or merge out of existence, or cause to be dissolved or
merged out of existence, each of the Immaterial Subsidiaries or (b) cause
such Immaterial Subsidiaries to be party to the Guarantee and Collateral
Agreement.
8.13 Further Assurances. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute
or cause to be executed any and all documents (including, without limitation,
financing statements and continuation statements) for filing under the
provisions of the Uniform Commercial Code or any other Requirement of Law
which are necessary or advisable to maintain in favor of the Administrative
Agent, for the benefit of the Lenders, Liens on the Collateral that are duly
perfected in accordance with all applicable Requirements of Law.
SECTION 9. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document or any Letter of Credit remains
outstanding, the Borrower shall not, nor (except with respect to subsection
9.1) shall the Borrower permit any of its Subsidiaries to, directly or
indirectly, unless the Required Lenders shall otherwise agree in writing:
9.1 Financial Condition Covenants.
(a) Leverage Ratio. Permit the ratio of (i) Consolidated Total
Indebtedness at the last day of any fiscal quarter ending during any
"Test Period" set forth below to (ii) Consolidated EBITDA for the
period of four consecutive fiscal quarters ending on such date to be
greater than the amount set forth opposite such period below:
<PAGE>
74
<TABLE>
<CAPTION>
Test Period Leverage Ratio
----------- --------------
<S> <C>
7/1/97 - 12/31/97 5.80 to 1.00
1/1/98 - 12/31/98 5.25 to 1.00
1/1/99 - 12/31/99 4.75 to 1.00
1/1/00 - 12/31/00 4.25 to 1.00
1/1/01 - 12/31/01 4.00 to 1.00
1/1/02 - Maturity 3.75 to 1.00
</TABLE>
; provided, that, in calculating the Consolidated EBITDA for any period
of four consecutive fiscal quarters that includes any of the fiscal
quarters set forth below, Consolidated EBITDA for such fiscal quarter
shall be deemed to be the amount set forth opposite such fiscal quarter
below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Consolidated EBITDA
--------------------- -------------------
<S> <C>
12/31/96 $7,100,000
3/31/97 $6,100,000
6/30/97 $6,900,000
</TABLE>
(b) Fixed Charge Coverage Ratio. Permit for any period of four
consecutive fiscal quarters ending during any "Test Period" set forth
below the ratio of (i) Consolidated EBITDA for such period to (ii)
Consolidated Fixed Charges for such period to be less than the ratio
set forth opposite such period below:
<TABLE>
<CAPTION>
Test Period Fixed Charge Coverage Ratio
----------- ---------------------------
<S> <C>
7/1/97 - 12/31/97 1.00 to 1.00
1/1/98 - 12/31/98 1.05 to 1.00
1/1/99 - 12/31/99 1.10 to 1.00
1/1/00 - 12/31/00 1.10 to 1.00
1/1/01 - 12/31/01 1.10 to 1.00
1/1/02 - Maturity 1.10 to 1.00
</TABLE>
; provided, that, for the periods ending on September 30, 1997,
December 31, 1997 and March 31, 1998, the ratio of Consolidated EBITDA
to Consolidated Fixed Charges shall be calculated with respect to the
three-month, six-month and nine-month periods ended on such dates,
respectively.
(c) Interest Coverage Ratio. Permit for any period of four
consecutive fiscal quarters ending during any "Test Period" set forth
below the ratio of (i) Consolidated EBITDA for such period to (ii)
Consolidated Cash Interest Expense for such period to be less than the
ratio set forth opposite such period below:
<PAGE>
75
<TABLE>
<CAPTION>
Test Period Interest Coverage Ratio
----------- -----------------------
<S> <C>
7/1/97 - 12/31/97 1.60 to 1.00
1/1/98 - 12/31/98 1.75 to 1.00
1/1/99 - 12/31/99 1.90 to 1.00
1/1/00 - 12/31/00 2.10 to 1.00
1/1/01 - 12/31/01 2.40 to 1.00
1/1/02 - Maturity 2.50 to 1.00
</TABLE>
; provided, that, for the periods ending on September 30, 1997,
December 31, 1997 and March 31, 1998, the ratio of Consolidated EBITDA
to Consolidated Fixed Charges shall be calculated with respect to the
three-month, six-month and nine-month periods ended on such dates,
respectively.
9.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness or issue or sell any preferred stock, except:
(a) Indebtedness in respect of the Loans, any Notes, the Guarantees,
the Letters of Credit and the other obligations of the Loan Parties
under this Agreement and the other Loan Documents;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary as such Indebtedness
in permitted under subsection 9.9(d);
(c) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance the acquisition, construction or improvement of
fixed or capital assets (whether pursuant to a loan, a Financing Lease
or otherwise) in an aggregate principal amount, together with
outstanding Indebtedness permitted under subsection 9.2(d), not
exceeding as to the Borrower and its Subsidiaries $7,500,000 at any
time outstanding;
(d) Indebtedness in respect of Sale/Leaseback Transactions permitted
under subsection 9.12 in an aggregate principal amount incurred
subsequent to the Closing Date, together with outstanding Indebtedness
permitted under subsection 9.2(c), not to exceed $7,500,000 at any time
outstanding;
(e) (i) Indebtedness of the Borrower in an aggregate principal
amount not exceeding $120,000,000 in respect of the Senior Subordinated
Notes and any senior subordinated notes of the Borrower issued in
exchange therefor and having substantially identical terms as
contemplated by the Senior Subordinated Note Indenture or (ii)
Indebtedness of the Borrower in an aggregate principal amount not
exceeding $120,000,000 (A) in respect of the Senior Subordinated Credit
Notes, (B) upon maturity of Senior Subordinated Credit Notes, in
respect of the Senior Subordinated Exchange Notes or (C) in respect of
other subordinated notes or debentures incurred to refinance the Senior
Subordinated Credit Notes or the Senior Subordinated Exchange Notes, as
the case may be, having terms and conditions satisfactory to the
Administrative Agent;
<PAGE>
76
(f) Indebtedness not exceeding $5,000,000 in aggregate principal
amount at any one time outstanding, provided that such Indebtedness is
not secured by a Lien on any assets of the Loan Parties;
(g) Indebtedness consisting of Guarantee Obligations expressly
permitted pursuant to subsection 9.4;
(h) Indebtedness of the Borrower or any of its Subsidiaries which
represents the assumption of Indebtedness of a wholly-owned Subsidiary
of the Borrower in connection with the merger of such wholly-owned
Subsidiary with or into the assuming Person or the purchase of all or
substantially all the assets of such wholly-owned Subsidiary, in each
case pursuant to a transaction permitted under subsection 9.5(a) or
9.5(b), as the case may be; provided that the principal amount of such
Indebtedness is not increased and the maturity of such Indebtedness is
not shortened pursuant to any such assumption;
(i) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business, provided that
such Indebtedness is extinguished within five Business Days of notice
to the Borrower of its incurrence;
(j) Indebtedness of the Borrower or any of its Subsidiaries to Old
Windy Hill, provided that (i) such Indebtedness is subordinated to the
Obligations on terms and conditions satisfactory to the Administrative
Agent and (ii) such Indebtedness is funded by Old Windy Hill with
proceeds of Indebtedness of Old Windy Hill to Holdings (and such
Indebtedness is funded by Holdings with the proceeds of Indebtedness of
Holdings to any of the Investors or any of their respective
Affiliates);
(k) Indebtedness in respect of Rate Protection Agreements;
(l) Indebtedness of a Person which becomes a Subsidiary after the
Closing Date; provided that (i) such Indebtedness existed at the time
such Person became a Subsidiary and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such Person by the Borrower or any of its Subsidiaries no Default or
Event of Default shall have occurred and be continuing, nor shall there
have been any refinancings, refundings, renewals or extensions of such
Indebtedness; provided that the amount of such Indebtedness is not
increased at the time of any such refinancing, refunding, renewal or
extension;
(m) Indebtedness outstanding on the Closing Date and listed on
Schedule 9.2(m); and
(n) any renewals, extensions, refundings or refinancings of such
Indebtedness (other than the Indebtedness described in subsections
9.2(a) and 9.2(e) above),
<PAGE>
77
provided that the principal amount of such Indebtedness is not
increased pursuant to any such renewal, extension, refunding or
refinancing.
9.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) statutory landlords' liens and carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like Liens arising in
the ordinary course of business for sums which are not overdue for a
period of more than 90 days or which are being contested in good faith
by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) all easements, zoning restrictions, flowage rights,
rights-of-way, covenants, conditions, restrictions, reservations,
licenses, agreements and other similar matters, including the
unrecorded easements and similar agreements set forth in Schedule
9.3(e), which, in the aggregate, are not substantial in amount and
which do not in any case materially detract from the use of the
property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower or such Subsidiary;
(f) Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted by subsection 9.2(c) incurred to finance the acquisition,
construction or improvement of fixed or capital assets, provided that
(i) such Liens shall be created within 180 days after the acquisition,
construction or improvement of such fixed or capital assets, (ii) such
Liens do not at any time encumber any property other than the property
acquired, constructed or improved with the proceeds of such
Indebtedness, (iii) the amount of Indebtedness secured thereby shall
not subsequently be increased and (iv) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of
the original purchase price of such asset or the amount expended to
construct or improve such asset, as the case may be;
<PAGE>
78
(g) Liens in existence on the date hereof listed on Schedule 9.3(g),
provided that no such Lien is spread to cover any additional property
after the Closing Date and that the amount of Indebtedness secured
thereby shall not subsequently be increased;
(h) all building codes and zoning ordinances and other laws,
ordinances, regulations, rules, orders or determinations of any
Federal, state, county, municipal or other governmental authority now
or hereafter enacted;
(i) Liens created pursuant to the Security Documents;
(j) any Lien on any asset securing Indebtedness permitted to be
incurred under subsection 9.2(d) in connection with Sale/Leaseback
Transactions expressly permitted by subsection 9.12; provided that (i)
the proceeds of such Indebtedness shall be at least equal to 80% of the
fair market value (as determined in good faith by the Board of
Directors, or any duly authorized committee thereof, of the Borrower)
of such asset and (ii) at the time of incurrence of such Indebtedness,
no Event of Default shall have occurred and be continuing or would
result as a result thereof;
(k) judgment Liens created by or resulting from any litigation or
legal proceeding if released or bonded within 60 days of the date of
creation thereof, unless such litigation or legal proceeding could
reasonably be expected to have a Material Adverse Effect;
(l) Liens on the property or assets of a Person which becomes a
Subsidiary after the Closing Date securing Indebtedness permitted by
subsection 9.2(l); provided that (i) such Liens existed at the time
such Person became a Subsidiary and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any property or
assets of such Person after the time such corporation becomes a
Subsidiary, and (iii) the amount of Indebtedness secured thereby is not
increased; and.
(m) Liens on (i) any of the Borrower's rights to indemnification
against Hubbard Milling and its shareholders under the Merger Agreement
for claims relating to assets transferred pursuant to (X) the Merger
Agreement or (Y) the sale of the Animal Feed Division and (ii) the
Borrower's interest in the escrow accounts established pursuant to the
Merger Agreement, in each case, to the extent a security interest
therein is granted to secure the full and timely payment and
performance by the Borrower of its indemnification obligations under
the Asset Purchase Agreement for the sale of the Animal Feed Division.
9.4 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof and listed
on Schedule 9.4(a);
(b) the Guarantees and Letters of Credit;
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(c) guarantees made in the ordinary course of its business by the
Borrower of obligations of any Subsidiary, which obligations are
otherwise permitted under this Agreement;
(d) Guarantee Obligations in respect of Indebtedness of a Person or
Persons in connection with one or more joint ventures in an aggregate
amount not exceeding at any time outstanding, when aggregated with the
amount of any Investments in cash permitted by subsection 9.9(i) which
are outstanding at such time, an amount equal to the amount of
Investments in cash permitted by subsection 9.9(i) to be made in such a
Person or Persons; provided that no Default or Event of Default shall
have occurred and be continuing on the date of the incurrence of any
such Guarantee Obligations or would result therefrom;
(e) Guarantee Obligations in respect of Indebtedness permitted under
subsection 9.2(m); and.
(f) guarantees made in the ordinary course of its business by the
Borrower or any of its Subsidiaries of obligations of any of the
Borrower or its Subsidiaries, which obligations are otherwise permitted
under this Agreement.
9.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets, or, to the extent that a shareholder vote would be
required to authorize the same, make a material change in its present
business plans or practices, except:
(a) any Person may be merged or consolidated with or into the
Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any one or more wholly-owned
Subsidiaries of the Borrower (provided that the wholly-owned Subsidiary
or Subsidiaries shall be the continuing or surviving corporation), so
long as (in the case of a merger or consolidation involving as one of
the parties a Person that is not the Borrower or one of its
wholly-owned Subsidiaries) the Borrower is in compliance, on a pro
forma basis after giving effect to such merger or consolidation, with
the covenants contained in subsection 9.1 recomputed as at the last day
of the most recently ended fiscal quarter of the Borrower as if such
merger or consolidation and any borrowing therefor had occurred on the
first day of each relevant period for testing such compliance;
(b) any wholly-owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other wholly-owned
Subsidiary of the Borrower; and
(c) pursuant to any sale of assets expressly permitted by subsection
9.6.
9.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and
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leasehold interests), whether now owned or hereafter acquired, or, in the
case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital
Stock to any Person other than the Borrower or any wholly-owned Subsidiary,
except:
(a) the conveyance, sale, lease, assignment, transfer or other
disposition of Obsolete Property or surplus property in the ordinary
course of business;
(b) Asset Sales, not otherwise permitted by this subsection 9.6,
which shall not exceed (i) $15,000,000 during any twelve-month period
and (ii) $25,000,000 in the aggregate at any time;
(c) any Asset Sale pursuant to any Sale/Leaseback Transaction
permitted pursuant to subsection 9.12;
(d) the sale of inventory in the ordinary course of business;
(e) the sale or discount for fair value without recourse of accounts
receivable arising in the ordinary course of business in connection
with the compromise or collection thereof;
(f) as permitted by subsection 9.5(b);
(g) the license of Intellectual Property in the ordinary course of
business;
(h) leases or subleases not materially interfering with the ordinary
course of conduct of the business of the Borrower and its Subsidiaries;
(i) the sale of the Animal Feed Division; and
(j) (i) any sale of the assets of a joint venture (except for the
joint venture in Hereford, Texas) pursuant to the exercise of a
mandatory call right by a Loan Party's partner and (ii) the sale of the
Borrower's joint venture in Herford, Texas to the Borrower's joint
venture partner, Merrick Pet Food, for an amount not less than the
Borrower's total investment in the Herford, Texas joint venture.
9.7 Limitation on Restricted Payments. Declare or pay any dividend
(other than dividends payable solely in common stock of the Borrower) on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or
any warrants or options to purchase any such Capital Stock, whether now or
hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations
of the Borrower or any Subsidiary (such declarations, payments, setting
apart, purchases, redemptions, defeasances, retirements, acquisitions and
distributions being herein called "Restricted Payments"), except that,
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(a) the Borrower may pay cash dividends to Old Windy Hill and Armour
(i) to pay any taxes required to be paid by Old Windy Hill and Armour
in the ordinary course of business or (ii) to the extent necessary to
enable Old Windy Hill and Armour to pay cash dividends to Holdings to
pay any taxes required to be paid by Holdings in the ordinary course of
business, provided that, in each case, any such taxes are paid no later
than fifteen Business Days after the date on which the relevant
dividend is made; and
(b) the Borrower may pay cash dividends to Old Windy Hill to the
extent necessary to enable Old Windy Hill to pay fees, expenses and
other obligations incurred or required in connection with the
Acquisition, provided that Old Windy Hill shall pay each obligation in
respect of which such dividend is made no later than fifteen Business
Days after the date on which the relevant dividend is made.
9.8 Limitation on Capital Expenditures. Make or commit to make
Capital Expenditures in excess of $8,000,000 in the aggregate for the
Borrower and its Subsidiaries during any fiscal year of the Borrower;
provided that:
(a) Capital Expenditures with respect to the 1997 fiscal year beginning
on the Closing Date and ending December 31, 1997 (i) shall be limited
to $4,000,000 in the aggregate for the Borrower and its Subsidiaries,
(ii) shall not include expenditures up to an aggregate amount equal to
$6,000,000 made in connection with the Heinz Co-Packing Agreement, and
(iii) shall not include expenditures up to an aggregate amount equal to
$500,000, plus, the net proceeds received from the sale of office
furniture and equipment occurring as a result of the closure of
Hubbard's executive office in Mankato, Minnesota, made in connection
with the relocation and establishment of the executive offices of the
Borrower within Brentwood or Nashville, Tennessee and (b) Capital
Expenditures with respect to the 1998 fiscal year (i) shall be limited
to $6,000,000 in the aggregate for the Borrower and its Subsidiaries
and (ii) shall not include expenditures up to an aggregate amount equal
to $7,000,000 made in connection with the Heinz Co-Packing Agreement
less the Capital Expenditures made in connection therewith during the
1997 fiscal year of the Borrower pursuant to (a)(ii) above (it being
understood, that Capital Expenditures made pursuant to either (a)(ii)
or (b)(ii) shall only be permitted upon the execution of the Heinz
Co-Packing Agreement), however, to the extent that the Borrower does
not make any Capital Expenditures pursuant to either (a)(ii) or
(b)(ii), then the amount of Capital Expenditures for the 1998 fiscal
year shall not exceed $8,000,000.
Capital Expenditures not in excess of $2,500,000 permitted to be made during
any fiscal year (and not carried over from a prior fiscal year) and not made
during such fiscal year may be carried over and expended during the next
succeeding fiscal year, and Capital Expenditures made during any fiscal year
shall be first deemed made in respect of amounts carried over from the prior
fiscal year and then deemed made in respect of amounts permitted for such
fiscal year.
9.9 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or
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other securities of, or any assets constituting a business unit of, or make
any other investment in, any Person (an "Investment"), except:
(a) extensions of trade credit and endorsements of negotiable
instruments and other negotiable documents in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees and directors of Old Windy Hill,
the Borrower or any of its Subsidiaries for travel, entertainment and
relocation expenses in the ordinary course of business in an aggregate
amount for Old Windy Hill, the Borrower and its Subsidiaries not to
exceed an aggregate principal amount of $500,000 at any time
outstanding;
(d) Investments by the Borrower in its Subsidiaries and Investments
by such Subsidiaries in the Borrower and in other Subsidiaries,
provided that the aggregate amount of all such Investments (including
Investments in the nature of sales and transfers of assets (including,
pursuant to a transaction permitted under subsection 9.5(b)) for less
than fair market value) after the Closing Date in Foreign Subsidiaries
shall not exceed $1,000,000;
(e) securities held by the Borrower or any of its Subsidiaries prior
to the Closing Date and investments held by the Animal Feed Division on
the Closing Date, in each case listed on Schedule 9.9(e);
(f) advances by the Borrower to Old Windy Hill, in lieu of the
payment of cash dividends, to enable Old Windy Hill to make the
payments contemplated by subsection 9.7, provided that, such advances
are used to make such payments within fifteen Business Days after such
advances are made;
(g) promissory notes issued to the Borrower or any of its
Subsidiaries by the purchasers of assets sold in accordance with
subsection 9.6(a), 9.6(b) or 9.6(c), provided that (i) the principal
amount of all such promissory notes in connection with any sale of
assets shall not exceed 20% of the total sales price for such assets
and (ii) the aggregate principal amount of all such promissory notes at
any time outstanding shall not exceed $2,500,000;
(h) investments in Permitted Acquisitions;
(i) Investments in a Person or Persons in connection with one or
more joint ventures in an aggregate amount, when aggregated with the
amount of any Guarantee Obligations permitted by subsection 9.4(d)
which are outstanding at such time, not to exceed $7,500,000 at any one
time outstanding; provided that such amount shall be increased by an
amount equal to the aggregate amount of cash returned on or on account
of Investments permitted under this clause, whether through interest
payments, principal payments, dividends or other distributions or
payments; provided,
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further that no Investment shall be permitted under this clause (i) if
any Default or Event of Default shall have occurred and be continuing
on the date of any such Investment or would result therefrom; and
(j) advances by the Borrower to Old Windy Hill to enable Old Windy
Hill to effect the Acquisition.
9.10 Limitation on Optional Payments and Modifications of Debt
Instruments and other Obligations. (a) Make any optional payment or
prepayment on or redemption, defeasance or purchase of any Senior
Subordinated Notes, Senior Subordinated Credit Notes, Senior Subordinated
Exchange Notes or other Indebtedness permitted under subsection 9.2(e),
except that the Borrower shall, if Senior Subordinated Credit Notes are
outstanding, take such action as may be required of it to exchange the Senior
Subordinated Exchange Notes for such Senior Subordinated Credit Notes in
accordance with the terms thereof, (b) amend, modify or change, or consent or
agree to any amendment, modification or change to any of the terms of the
Senior Subordinated Note Indenture, the Senior Subordinated Credit Agreement
or any other agreement or indenture governing the terms and conditions of any
other Indebtedness permitted under subsection 9.2(e) (other than any such
amendment, modification or change which (i) would extend the maturity or
reduce the amount of any payment of principal thereof or would reduce the
rate or extend the date for payment of interest thereon or (ii) does not in
any way adversely affect the interests of the Administrative Agent or the
Lenders hereunder or under the other Loan Documents or (iii) is of a
technical or clarifying nature).
9.11 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate
unless such transaction is (a) otherwise permitted under this Agreement, (b)
in the ordinary course of the Borrower's or such Subsidiary's business and
(c) upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate, provided, that
the foregoing restriction shall not prohibit (i) payment of reasonable fees
and expenses to directors of Holdings, Old Windy Hill, the Borrower and its
Subsidiaries not in excess of $250,000 per fiscal year of the Borrower, (ii)
the transactions contemplated by the Acquisition Documents, (iii) any payment
or other transaction pursuant to any tax sharing agreement to the extent
permitted by subsection 9.7, (iv) payments permitted under subsection 9.7 or
subsection 9.9, (v) the Indebtedness permitted pursuant to subsection 9.2(b)
or 9.2(j), (vi) any employment agreement entered into by the Borrower or any
of its Subsidiaries in the ordinary course of business, (vii) any issuance of
securities in connection with employment arrangements, stock options and
stock ownership plans of the Borrower entered into in the ordinary course of
business, (viii) transactions between the Borrower and its Subsidiaries and
(ix) the transactions contemplated by the agreements listed on Schedule
9.11(ix).
9.12 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary
of real or personal property which has been or is to be sold or transferred
by the Borrower or such Subsidiary to such Person or to any other Person to
whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of the Borrower or such Subsidiary (a
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"Sale/Leaseback Transaction"), except for Sale/Leaseback Transactions
subsequent to the Closing Date the aggregate sales price of which does not
exceed $2,500,000 in any year.
9.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Borrower to end on a day other than the last Saturday of December.
9.14 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those food businesses
which are reasonably related to those businesses in which the Borrower and
its Subsidiaries are engaged on the date of this Agreement.
9.15 Limitation on Negative Pledge Clauses. Enter into with any
Person any agreement, which prohibits or limits the ability of the Borrower
or any of its Subsidiaries to create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, other than (a) this Agreement, (b) agreements in effect
on the Closing Date, including, without limitation, the Senior Subordinated
Notes Indenture or the Senior Subordinated Credit Agreement, as the case may
be, or any refinancing, refunding, renewal or extension thereof which is
permitted hereunder (containing restrictions no more onerous), (c) customary
non-assignment provisions under contracts to the extent such provisions
prohibit or limit the ability to grant a Lien on the rights under such
contracts, (d) agreements under which Indebtedness permitted hereunder is
incurred by Foreign Subsidiaries, to the extent such agreements prohibit or
limit Liens on assets of such Foreign Subsidiaries (including, in the case of
Foreign Subsidiaries which are not direct Subsidiaries of the Borrower or any
Domestic Subsidiary, the Capital Stock of such Foreign Subsidiaries), (e)
restrictions on granting Liens on assets under agreements to sell or
otherwise dispose of such assets, and (f) restrictions in Indebtedness
incurred to finance the acquisition of fixed or capital assets or Financing
Leases permitted hereunder with respect to Liens on the assets financed
thereunder.
SECTION 10. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Loan, or any
other amount payable hereunder, within five Business Days after any such
interest or other amount becomes due in accordance with the terms thereof
or hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
or any other Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
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(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 9, Section
6 or 7 of each of the Mortgages, or Section 5.8(b) of the Guarantee and
Collateral Agreement; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days; or
(e) The Borrower or any other Loan Party shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Loans) or in the payment of any Guarantee Obligation in respect of
Indebtedness or in any payments required under any Rate Protection
Agreement, beyond the period of grace (not to exceed 30 days), if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created or under such Rate Protection Agreement,
as the case may be, if the aggregate amount of the Indebtedness and/or
Guarantee Obligations and/or payments under Rate Protection Agreements in
respect of which such default or defaults shall have occurred is at least
$1,000,000; or (ii) default in the observance or performance of any other
agreement or condition to be observed or performed by such Loan Party
relating to any such Indebtedness or Guarantee Obligation or contained in
any instrument or agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries of such
Guarantee Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated
maturity or the full amount of such Guarantee Obligation to become
payable, provided, however, that a default, event or condition described
in this Section 10(e)(ii) shall not constitute an Event of Default under
this Section 10(e) unless, at the time of such default, event or
condition, defaults, events or conditions of the type described in this
Section 10(e)(ii) shall have occurred and are continuing with respect to
Indebtedness and Guarantee Obligations in respect to Indebtedness the
aggregate amount of which exceeds $1,000,000; or
(f) (i) The Borrower or any other Loan Party shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it
or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any other Loan Party
shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against the Borrower or any other Loan Party any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
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against the Borrower or any other Loan Party any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) the Borrower or any other Loan Party
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Borrower or any other Loan Party shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan, or (vi) any other similar event or condition shall occur or exist
with respect to a Plan that could result in a liability (other than in the
ordinary course), and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if
any, could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving individually a liability of
$1,000,000 or in the aggregate a liability of $2,000,000 or more (in each
case, net of any insurance or indemnity payments actually received in
respect thereof prior to or within 60 days from the entry thereof, or to
be received in respect thereof in the event that any appeal thereof shall
be unsuccessful), and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days from
the entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any reason, to
be in full force and effect, or the Borrower or any other Loan Party which
is a party to any of the Security Documents shall so assert in writing or
(ii) any Lien created by any of the Security Documents shall, by reason of
any breach by any Loan Party party thereto of any of its covenants or
other obligations contained in such Security Documents, cease to be
enforceable and of the same effect and priority, subject to Section 10(d),
purported to be created thereby (other than Liens with respect to property
not constituting a material portion of the Collateral); or
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(j) Any Guarantee shall cease, for any reason, to be in full force
and effect or any Guarantor shall so assert; or
(k) (i) The Investors shall cease to be beneficial owners, directly or
indirectly (A) prior to the first public offering of the voting stock
thereof, of a majority of the voting stock of Holdings or (B) thereafter,
of 35% of the voting stock of Holdings, (ii) during any period of two
consecutive years commencing on or after the Closing Date, individuals who
at the beginning of such period constituted the Board of Directors of
Holdings (together with any new directors approved by a majority of
directors who are such individuals or who were previously approved
pursuant to this parenthetical clause) cease for any reason to constitute
a majority of the Board of Directors of Holdings, (iii) Holdings shall
cease to own all of the Capital Stock directly or indirectly of the
Borrower or (iv) a Change of Control (as defined in the Senior
Subordinated Note Indenture or the Senior Subordinated Credit Agreement,
as the case may be) shall occur under the Senior Subordinated Note
Indenture or the Senior Subordinated Credit Agreement, as the case may be;
or
(l) The subordination provisions contained in Article X of the Senior
Subordinated Note Indenture or the corresponding provisions of the Senior
Subordinated Credit Agreement, as the case may be, shall cease to be
enforceable in accordance with their terms;
then, and in any such event, (A) if such event is an Event of Default
specified in clause (i), (ii) or (iii) of paragraph (f) of this Section with
respect to the Borrower, automatically the Commitments (including the Swing
Line Commitment) shall immediately terminate and the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all amounts of L/C Obligations, whether or
not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) shall immediately become due and
payable, and (B) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrower declare
the Commitments (including the Swing Line Commitment) to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii)
with the consent of the Required Lenders, the Administrative Agent may, or
upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts (including, without limitation, all amounts of
L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder)
owing under this Agreement to be due and payable forthwith, whereupon the
same shall immediately become due and payable. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of
any kind are hereby expressly waived.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit
in a cash collateral account opened by the Administrative
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Agent an amount equal to the aggregate then undrawn and unexpired amount of
such Letters of Credit. The Borrower hereby grants to the Administrative
Agent, for the benefit of the Issuing Lender and the L/C Participants, a
security interest in such cash collateral to secure all obligations of the
Borrower under this Agreement and the other Loan Documents. Amounts held in
such cash collateral account shall be applied by the Administrative Agent to
the payment of drafts drawn under such Letters of Credit, and the unused
portion thereof after all such Letters of Credit shall have expired or been
fully drawn upon, if any, shall be applied to repay other Obligations. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other Obligations
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower. The Borrower shall execute and
deliver to the Administrative Agent, for the account of the Issuing Lender
and the L/C Participants, such further documents and instruments as the
Administrative Agent may request to evidence the creation and perfection of
the security interest in such cash collateral account.
SECTION 11. THE AGENTS
11.1 Appointment. Each Lender hereby irrevocably designates and
appoints CSFB as the Administrative Agent of such Lender under this Agreement
and the other Loan Documents and Chase as Documentation Agent under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes CSFB as the Administrative Agent and Chase as the Documentation
Agent, in such capacities, to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent and the Documentation Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, neither the Administrative Agent nor
the Documentation Agent shall have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Loan Document or otherwise exist against either the Administrative Agent or
the Documentation Agent.
11.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
11.3 Exculpatory Provisions. Neither the Administrative Agent, the
Documentation Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for
any action lawfully taken or omitted to be taken by it or such Person under
or in connection with this Agreement or any other Loan Document (except for
its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Loan Document or in
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any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent or the Documentation Agent
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or for any failure
of the Borrower to perform its obligations hereunder or thereunder. Neither
the Administrative Agent nor the Documentation Agent shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower.
11.4 Reliance by Administrative Agent and Documentation Agent. Each
of the Administrative Agent and the Documentation Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex
or teletype message, statement, order or other document or conversation
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements
of legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by it. The Administrative
Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Loan Documents in accordance with
a request of the Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
11.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice of default". In
the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof, reasonably promptly thereof
to the Documentation Agent and to the Lenders. The Administrative Agent shall
take such action reasonably promptly with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided
that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders.
11.6 Non-Reliance on Administrative Agent, Documentation Agent and
Other Lenders. Each Lender expressly acknowledges that neither the
Administrative Agent, the Documentation Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative
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Agent or the Documentation Agent hereinafter taken, including any review of
the affairs of the Borrower or any other Loan Party, shall be deemed to
constitute any representation or warranty by the Administrative Agent or the
Documentation Agent to any Lender. Each Lender represents to the
Administrative Agent and the Documentation Agent that it has, independently
and without reliance upon the Administrative Agent or the Documentation Agent
or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent or the
Documentation Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of
the Borrower or any of the other Loan Parties and the other Loan Parties.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent and the Documentation Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower or any of the other
Loan Parties which may come into the possession of the Administrative Agent
or the Documentation Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
11.7 Indemnification. The Lenders agree to indemnify each of the
Administrative Agent and the Documentation Agent in their respective
capacities as such (to the extent not reimbursed by the Borrower or any of
the other Loan Parties and without limiting the obligation of the Borrower or
any of the other Loan Parties to do so), ratably according to their
respective Commitment Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Loans) be imposed on, incurred by or asserted against the Administrative
Agent or the Documentation Agent in any way relating to or arising out of,
the Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent or the Documentation Agent under or in connection
with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's or the Documentation Agent's gross
negligence or willful misconduct, as the case may be. The agreements in this
subsection shall survive the payment of the Loans and all other amounts
payable hereunder.
11.8 Administrative Agent and Documentation Agent in Their
Individual Capacities. The Administrative Agent, the Documentation Agent and
their respective Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower as if the
Administrative Agent and the Documentation Agent were not the Administrative
Agent
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or the Documentation Agent, as the case may be, hereunder and under the other
Loan Documents. With respect to the Loans made by it and with respect to any
Letter of Credit issued or participated in by it, each of the Administrative
Agent and the Documentation Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise
the same as though it were not the Administrative Agent or the Documentation
Agent, as the case may be, and the terms "Lender" and "Lenders" shall include
each of the Administrative Agent and the Documentation Agent in its
individual capacity.
11.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent (provided that it shall have been approved by the Borrower,
which approval shall not be unreasonably withheld), shall succeed to the
rights, powers and duties of the Administrative Agent hereunder. Effective
upon such appointment and approval, the term "Administrative Agent" shall
mean such successor agent, such former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 11 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was an Administrative Agent under this Agreement
and the other Loan Documents.
SECTION 12. MISCELLANEOUS
12.1 Amendments and Waivers. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders,
the Administrative Agent may, from time to time, (a) enter into with the
Borrower and each Loan Party which is a party to the relevant Loan Documents
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or
of the Borrower hereunder or thereunder, (b) release Collateral or (c) waive,
on such terms and conditions as the Required Lenders or the Administrative
Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall (i) reduce the amount
or extend the scheduled date of maturity of any Loan made by any Lender or of
any installment thereof, or reduce the stated rate of any interest thereon or
reduce the fee payable hereunder to any Lender or extend the scheduled date
of any payment thereof or increase the aggregate amount or extend the
expiration date of any Lender's Commitments, in each case without the written
consent of such Lender directly affected thereby, (ii) amend, modify or waive
any provision of this subsection or reduce the percentage specified in the
definition of Required Lenders or consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement and
the other Loan
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Documents or release all or substantially all of the Collateral, in each case
without the written consent of all the Lenders, (iii) amend, modify or waive
any provision of subsections 4.10 through 4.18 without the written consent of
the Issuing Lender, (iv) amend, modify or waive any provision of Section 11
without the written consent of the then Agents, (v) amend, modify or waive
any provision of the Swing Line Note (if any) or subsection 4.6 without the
written consent of the Swing Line Lender, or (vi) amend, modify or waive the
provisions of any Letter of Credit or any L/C Obligation without the written
consent of the Issuing Lender. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and
shall be binding upon the Borrower, the Lenders, the Administrative Agent and
all future holders of the Loans.
In the case of any waiver, the Borrower, the Lenders and the Administrative
Agent shall be restored to their former positions and rights hereunder and
under the other Loan Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereon. Notwithstanding anything to the contrary in this
subsection 12.1, no consent of any Lender or of the Required Lenders shall be
required to permit the release of a Lien in connection with any Asset Sale or
other transaction permitted by Section 9 of this Agreement; the
Administrative Agent shall execute such release and termination as may be
required by this Agreement.
12.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered, or three days
after being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when received, addressed as follows in the case of the
Borrower and the Administrative Agent, and as set forth in Schedule 1.1 in
the case of the other parties hereto, or to such other address as may be
hereafter notified by the respective parties hereto:
Holdings: Windy Hill Pet Food Holdings, Inc.
456 Montgomery Street, Suite 2200
San Francisco, California 94104
Attention: M. Laurie Cummings
Telecopy: 415-982-3023
The Borrower: Windy Hill Pet Food Company Inc.
Two Maryland Farms
Suite 301
Brentwood, Tennessee 37027
Attention: Robert V. Dale
Telecopy: 615-661-8688
with copies to: Dartford Partnership L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, California 94104
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Attention: M. Laurie Cummings
Telecopy: 415-982-3023
The Administrative
Agent: Credit Suisse First Boston
11 Madison Avenue
New York, NY 10010
Attention: Bruce MacKenzie
Telecopy: 212-325-8304
The Documentation
Agent: The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: Charles Smith
Telecopy: 212-270-1063
provided that any notice, request or demand to or upon the Administrative
Agent or the Lenders pursuant to subsection 2.2, 3.2, 3.3, 4.2, 4.4, 4.8,
4.11, 5.1, 5.2 or 5.7 shall not be effective until received.
12.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
12.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
making of the Loans hereunder.
12.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
or reimburse the Administrative Agent and the Documentation Agent for all
their respective out-of-pocket costs and expenses incurred in connection with
the preparation, execution and delivery of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation
and administration of the transactions contemplated hereby and thereby
(including the syndication of the Revolving Credit Commitments and Term Loans
(including the reasonable expenses of the Administrative Agent's due
diligence investigation)), including, without limitation, the reasonable fees
and disbursements of counsel to the Administrative Agent and the
Documentation Agent, (b) to pay or reimburse each Lender and the
Administrative Agent for all their respective costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
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Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to the respective Lenders
and the Administrative Agent, (c) to pay, indemnify, and hold each Lender and
the Administrative Agent harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under
or in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent and their respective directors, trustees, officers,
employees and agents harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to
the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents, the Transaction Documents or the use or
proposed use of the proceeds of the Loans in connection with the transactions
contemplated hereby and thereby and any such other documents regardless of
whether the Administrative Agent or any Lender is a party to the litigation
or other proceeding giving rise thereto and regardless of whether any such
litigation or other proceeding is brought by the Borrower or any other
Person, including, without limitation, any of the foregoing relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Borrower, any of its Subsidiaries or any
of the facilities and properties owed, leased or operated by the Borrower or
any of its Subsidiaries (all the foregoing in this clause (d), collectively,
the "indemnified liabilities"), provided that the Borrower shall have no
obligation hereunder to the Administrative Agent or any Lender or any other
Person with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of the party seeking indemnification. The
agreements in this subsection shall survive repayment of the Loans and all
other amounts payable hereunder.
12.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent, Documentation Agent and
their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender and any assignment or
transfer by any Lender of its rights or obligations under this Agreement or
any Loan Document must be made in compliance with this subsection 12.6 (and
any purported assignment in violation of this subsection shall be null and
void).
(b) Any Lender may, in the ordinary course of its lending or
investment business and in accordance with applicable law, at any time sell
to one or more financial institutions or other entities ("Loan Participants")
participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the
other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Loan Participant, (i) such Lender's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible for the
performance thereof, (iii) such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, (iv)
the Borrower and the Administrative
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Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents, and (v) no Loan Participant under any participation
shall have any right to approve any amendment or waiver of any provision of
any Loan Document, or any consent to any departure by any Loan Party
therefrom, except with respect to the matters described in clauses (i) and
(ii) of the proviso to the second sentence of subsection 12.1. The Borrower
agrees that, while an Event of Default shall have occurred and be continuing
if amounts outstanding under this Agreement are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, each Loan Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect
of its participating interest in amounts owing under this Agreement to the
same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, provided that, in purchasing
such participating interest, such Participant shall be deemed to have agreed
to share with the Lenders the proceeds thereof as provided in subsection
12.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees
that each Loan Participant shall be entitled to the benefits of subsections
5.9, 5.10 and 5.11 with respect to its participation in the Commitments and
the Loans outstanding from time to time as if it was a Lender; provided that,
in the case of subsection 5.10 such Loan Participant shall have complied with
the requirements of said subsection and provided, further, that no Loan
Participant shall be entitled to receive any greater amount pursuant to any
such subsection than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such
transferor Lender to such Loan Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its lending or
investment business and in accordance with applicable law, at any time and
from time to time assign, to any other Lender or any affiliate thereof or,
with the prior written consent of the Administrative Agent (which shall not
be unreasonably withheld), to an additional bank or financial institution (an
"Assignee") all or any part of its rights and obligations under this
Agreement and the other Loan Documents pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit M, executed by such Assignee
and such assigning Lender and delivered to the Administrative Agent for
recording in the Register, provided that, (i) in the case of any such
assignment to an Assignee that is an affiliate of the assigning Lender, the
consent of the Borrower shall only be required if, at the time of such
assignment, such Assignee would be entitled to require the Borrower to pay,
or the Borrower would be required to pay, greater amounts under subsection
5.9 or 5.10 than if no such assignment had occurred and (ii) in the case of
any such assignment to an additional bank or financial institution, if such
assignment is of less than all of the rights and obligations of the assigning
Lender, the sum of the aggregate principal amount of the Loans, the aggregate
amount of the L/C Obligations and the aggregate amount of the unused
Commitments (A) being assigned to such additional bank or financial
institution and (B) remaining with the assigning Lender are not, in each
case, less than $5,000,000 (or such lesser amount as may be agreed to by the
Borrower and the Administrative Agent). Upon such execution, delivery,
acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall
be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder with a
Commitment as set forth therein, and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this
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Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this paragraph (c) and paragraph (e) of this
subsection, the consent of the Borrower shall not be required, and, unless
requested by the Assignee and/or the assigning Lender, new Notes shall not be
required to be executed and delivered by the Borrower, for any assignment
which occurs when any of the events described in Section 10(f) shall have
occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
12.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amounts of the Loans owing to,
each Lender from time to time and the registered owners of the Obligation(s)
evidenced by the Note(s). Notes and the Obligations evidenced thereby may be
assigned or otherwise transferred in whole or in part only by registration of
such assignment or transfer on the Register (and each Note shall expressly so
provide). Any assignment or transfer of all or part of such Obligation(s) and
the Note(s) evidencing the same shall be registered on the Register only upon
surrender for registration of assignment or transfer of the Note(s)
evidencing such Obligation(s), duly endorsed by (or accompanied by a written
instrument of assignment or transfer duly executed by) the Noteholder
thereof, and thereupon one or more new Note(s) in the same aggregate
principal amount shall be issued to the designated Assignee(s) and the old
Note(s) shall be returned by the Administrative Agent to the Borrower marked
"cancelled". The entries in the Register shall be conclusive, in the absence
of manifest error, and the Borrower, the Administrative Agent and the Lenders
shall treat each Person whose name is recorded in the Register as the owner
of a Loan or other obligation hereunder as the owner thereof for all purposes
of this Agreement and the other Loan Documents, notwithstanding any notice to
the contrary. Any assignment of any Loan or other obligation hereunder
(whether or not evidenced by a Note) shall be effective only upon appropriate
entries with respect thereto being made in the Register. The Register shall
be available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee together with, except in the case of an
assignment pursuant to subsection 5.13, payment to the Administrative Agent
of a registration and processing fee of $3,500, the Administrative Agent
shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register and give notice of such recordation to the Lenders
and the Borrower.
(f) Subject to the provisions of subsection 12.15, the Borrower
authorizes each Lender to disclose to any Loan Participant or Assignee (each,
a "Transferee") and any prospective Transferee any and all financial
information in such Lender's possession concerning the Borrower and its
Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Borrower in connection with such Lender's
credit evaluation of the Borrower and its Affiliates prior to becoming a
party to this Agreement.
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(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions
do not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law, provided that no such
assignment, whether to a Federal Reserve Bank or other entity, shall release
a Lender from any of its obligations hereunder or substitute any such Federal
Reserve Bank or other entity for such Lender as a party hereto or permit an
absolute assignment to occur other than in accordance with such provisions of
this subsection.
12.7 Adjustments; Set-off. (a) If any Lender (a "Benefitted Lender")
shall at any time receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
Section 10(f), or otherwise), in a greater proportion than any such payment
to or collateral received by any other Lender, if any, in respect of such
other Lender's Loans or the Reimbursement Obligations owing to it, or
interest thereon, such Benefitted Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender's Loan or the Reimbursement Obligations owing to it, or shall provide
such other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such Benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each
of the Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon any amount becoming due and payable
by the Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and
all deposits (general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such set-off and application made by such Lender, provided that the failure
to give such notice shall not affect the validity of such set-off and
application.
12.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of
the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Administrative Agent.
12.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
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prohibition or unenforceability without, to the extent permitted by law,
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not, to the extent permitted by
law, invalidate or render unenforceable such provision in any other
jurisdiction.
12.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent, the
Documentation Agent and the Lenders with respect to the subject matter
hereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent, the Documentation Agent or any Lender
relative to the subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
12.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
12.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to
the Borrower at its address set forth in subsection 12.2 or at such
other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
<PAGE>
99
12.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) none of the Administrative Agent, the Documentation Agent or any
Lender has any fiduciary relationship with or duty to the Borrower
arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between Administrative Agent,
Documentation Agent and Lenders, on one hand, and the Borrower, on the
other hand, in connection herewith or therewith is solely that of
creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
12.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT,
THE DOCUMENTATION AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
12.15 Confidentiality. The Administrative Agent, the Documentation
Agent and each Lender agrees to keep confidential any information (a)
provided to it by or on behalf of the Borrower or any of its Subsidiaries
pursuant to or in connection with this Agreement or (b) obtained by such
Lender based on a review of the books and records of the Borrower or any of
its Subsidiaries; provided that nothing herein shall prevent any Lender from
disclosing any such information (i) to the Administrative Agent, the
Documentation Agent or any other Lender, (ii) to any Transferee or
prospective Transferee which agrees to comply with the provisions of this
subsection, (iii) to its affiliates and the employees, directors, agents,
attorneys, accountants and other professional advisors of it and its
affiliates, and (iv) to such other lenders and advisors who are directly
involved in evaluating the transaction, provided that such Lender shall
inform each such Person of the agreement under this subsection 12.15 and take
reasonable actions to cause compliance by any such Person referred to in this
clause (iii) with this agreement (including, where appropriate, to cause any
such Person to acknowledge its agreement to be bound by the agreement under
this subsection 12.15), (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender or to the extent required in
response to any order of any court or other Governmental Authority or as
shall otherwise be required pursuant to any Requirement of Law, provided that
such Lender shall, unless prohibited by any Requirement of Law, notify the
Borrower of any disclosure pursuant to this clause (iv) as far in advance as
is reasonably practicable under such circumstances, (v) which has been
publicly disclosed other than in breach of this Agreement, (vi) in connection
with the exercise of any remedy hereunder, (vii) in connection with periodic
regulatory examinations and reviews conducted by the National Association of
Insurance Commissioners (to the extent applicable), (viii) in connection with
any litigation to which such Lender may be a party, subject to the proviso in
clause (iv), and (ix) if, prior to such information having been so provided
or obtained, such information was already in
<PAGE>
100
the Administrative Agent's, Documentation Agent's or a Lender's possession on
a nonconfidential basis without a duty of confidentiality to the Borrower
being violated.
<PAGE>
101
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
WINDY HILL PET FOOD
ACQUISITION CO.
By: /s/ M. Laurie Cummings
---------------------------------------
Title: V.P.
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
CREDIT SUISSE FIRST BOSTON, as a Lender
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
THE CHASE MANHATTAN BANK, as
Documentation Agent and as a Lender
By:
---------------------------------------
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
WINDY HILL PET FOOD
ACQUISITION CO.
By:
---------------------------------------
Title:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By: /s/ PP Lubinsky
---------------------------------------
Title: V.P.
By: /s/ PP Wenger
---------------------------------------
Title: Associate
CREDIT SUISSE FIRST BOSTON, as a Lender
By: /s/ PP Wenger
---------------------------------------
Title: Associate
By: /s/ PP Barr
---------------------------------------
Title: Associate
THE CHASE MANHATTAN BANK, as
Documentation Agent and as a Lender
By:
---------------------------------------
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
WINDY HILL PET FOOD
ACQUISITION CO.
By:
---------------------------------------
Title:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
CREDIT SUISSE FIRST BOSTON, as a Lender
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
THE CHASE MANHATTAN BANK, as
Documentation Agent and as a Lender
By: /s/ [Illegible]
---------------------------------------
Title: Vice President
<PAGE>
102
BANKBOSTON, N.A.
as a Lender
By: /s/ Kimberley F. Harris
-----------------------------------
Name: Kimberley F. Harris
Title: Vice President
<PAGE>
BHF-BANK, AKTIENGESELLSCHAFT
as a Lender
By: /s/ Thomas J. Scifo John Sykes
-----------------------------------
Name: THOMAS J. SCIFO JOHN SYKES
Title: AVP AVP
<PAGE>
CAISSE NATIONALE DE CREDIT AGRICOLE,
as a Lender
By: /s/ Dean Balice
-----------------------------------
Name: DEAN BALICE
Title: SENIOR VICE PRESIDENT
BRANCH MANAGER
<PAGE>
FIRST SOURCE FINANCIAL LLP,
as a Lender
By: /s/ David C. Wagner
-----------------------------------
Name: David C. Wagner
Title: Vice President
<PAGE>
HELLER FINANCIAL, Inc.,
as a Lender
By: /s/ Linda W. Wolf
-----------------------------------
Name: Linda W. Wolf
Title: Senior Vice President
<PAGE>
MARINE MIDLAND BANK,
as a Lender
By: /s/ John Lyons
-----------------------------------
Name: John B. Lyons
Title: Senior Vice President
<PAGE>
NATIONSBANK OF TENNESEE, N.A.,
as a Lender
By: /s/ B. E. Dishman
-----------------------------------
Name: B. E. DISHMAN
Title: VICE PRESIDENT
<PAGE>
PNC BANK, KENTUCKY, INC.,
as a Lender
By: /s/ Ralph A. Phillips
-----------------------------------
Name: Ralph A. Phillips
Title: Vice President
<PAGE>
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION,
as a Lender
By: /s/ Steven W. Davis
-----------------------------------
Name: Steven W. Davis
Title: Vice President
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST, as a Lender
By: /s/ Kathleen A. Zarn
-----------------------------------
Name: KATHLEEN A. ZARN
Title: Vice President
<PAGE>
WELLS FARGO BANK, NATIONAL
ASSOCIATION,
as a Lender
By: /s/ Kathleen Weiss
-----------------------------------
Name: Kathleen Weiss
Title: Vice President
<PAGE>
Annex A
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Consolidated Ratio of Consolidated Eurodollar ABR
Interest Total Indebtedness to Commitment Applicable Applicable
Expense Ratio Consolidated EBITDA Fee Margin Margin
===========================================================================================================
<S> <C> <C> <C> <C>
- -greater than or equal to-2.25 -greater than or equal to-4.00
to 1.00 to 1.00 0.50% 2.50% 1.50%
- -----------------------------------------------------------------------------------------------------------
- -greater than or equal to-2.25 & -greater than or equal to-3.50 &
- -greater than or equal to-2.75 -greater than- 4.00 to 0.50% 2.25% 1.25%
to 1.00 1.00
- -----------------------------------------------------------------------------------------------------------
- -greater than-2.75 to 1.00 -lesser than-3.50 to 1.00 0.375% 2.00% 1.00%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DISCLOSURE SCHEDULES
to
CREDIT AGREEMENT
among
WINDY HILL PET FOOD ACQUISITION CO.
as Borrower
and
THE LENDERS IDENTIFIED HEREIN
and
CREDIT SUISSE FIRST BOSTON
as Administrative Agent
and
THE CHASE MANHATTAN BANK
as Documentation Agent
Dated as of May 21, 1997
<PAGE>
Credit Agreement
Schedule 6.4
Consents
1. Consents, Authorizations and Filings required under the Merger
o Hart-Scott-Rodino Approval
o Notice of name change under environmental and business permits
o Articles of Merger of Acquisition Co. with and into Hubbard Milling
Company
o Amendment to Hubbard Milling Company's Articles of Incorporation,
changing name to Windy Hill Pet Food Company, Inc.
2. Consents, Authorizations and Filings required under the corporate
restructuring
o Notice of transfer under environmental and business permits
o Amendment to Old Windy Hill's Certificate of Incorporation, changing
name to WHPF Inc.
o Qualification to do business in Tennessee filed by the Borrower
o Consents of the following Employees of Old Windy Hill to the transfer
of their employment agreements with Old Windy Hill to the Borrower:
a. Robert V. Dale
b. Ben W. McCrory
c. Donald L. Gadd
d. Donald Cowan, Jr.
e. Vaughn R. Oakley
f. Henry Hurd
o Consent of Star-Kist Foods, Inc., Tuffy's Pet Food Division
("Star-Kist") to (i) assignment of Co-Pack Agreement, dated April 29,
1996 between Old Windy Hill and Heinz Pet Products Company, a Division
of Star-Kist ("HPP"); and (ii) assignment of Asset Purchase
Agreement, dated April 17, 1996 among HPP, H.J. Heinz Company, Old
Windy Hill and Windy Hill Pet Food Holdings, Inc.
<PAGE>
o Consent of Burlington Northern Railroad Company ("Burlington") to
assignment of leases:
a. Term Lease No.547,092, dated April 29, 1996 between Burlington
and Old Windy Hill
b. Agreement, dated April 25, 1988 between Burlington and Star-Kist,
as amended April 29, 1996 by the Assignment between Burlington,
Star-Kist and Old Windy Hill
o Consent of the City of Perham to assignment of lease, dated July 25,
1977 between City of Perham and Star-Kist, as amended by the
Assignment, dated April 29, 1996 between Star-Kist and Old Windy Hill
o Consent of Robert Riestenberg to assignment of lease, dated January 1,
1994 between Robert Riestenberg and Star-Kist, as amended by the
Assignment, dated April 29, 1996 between Star-Kist and Old Windy Hill
o Consent of Eastpark L.P. to assignment of lease, dated February 24,
1995 between Eastpark L.P. and The P.F.B. Partnership L.P. ("PFB"), as
amended by the Assignment, dated April 29, 1996 among Windy Hill Pet
Food Company, L.C.C., Old Windy Hill and PFB
3. Consents required with respect to the sale of the Animal Feed division
o Hart-Scott-Rodino Approval
o Consent of Roek Properties Ltd., LP to assignment of lease, dated
September 9, 1994 between Roek Properties Ltd., LP and Hubbard Milling
Company
o Consent of J.W.R. Company to assignment of lease, dated August 30,
1994 between J.W.R. Company and Hubbard Milling Company
o Consent of Provico, Inc. to assignment of Truck Parking Area Lease,
dated March 2, 1992 between Provico, Inc. and Hubbard Milling Company
o Consent of Provico, Inc. to assignment of Employee Parking Area Lease,
dated March 2, 1992 between Provico, Inc. and Hubbard Milling Company
<PAGE>
o Consent of Soo Line Railroad Company to assignment of lease, dated
April 1, 1967 between Soo Line Railroad Company and Hubbard Milling
Company
o Consent of Soo Line Railroad Company to assignment of lease, dated
November 1, 1986 between Soo Line Railroad Company and Hubbard Milling
Company
o Consent of Western Railroad Properties Incorporated to assignment of
lease, dated June 15, 1985 between Western Railroad Properties
Incorporated and Hubbard Milling Company
o Consent of St. Joseph Properties LLC to assignment of lease, dated
April 15, 1996 between St. Joseph Properties LLC and Hubbard Milling
Company
o Consent of City of Rapid City to assignment of lease, dated September
5, 1989 between City of Rapid City and Hubbard Milling Company
<PAGE>
Credit Agreement
Schedule 6.6
Litigation
<TABLE>
<CAPTION>
Borrower Litigation:
\\
=========================================================================================================================
Accrued
Claimant Type of Claim Current Status Claim Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. Wussow Claims loss arising out of Settled for $21,000 per oral $21,000 $25,000
alleged bad dairy feed agreement in December, 1996.
Signed release received.
- -------------------------------------------------------------------------------------------------------------------------
Practical Pig* Pig feed claim alleging Suit was served on 9/19/96 Answer $137,000 $50,000
mycotoxins in feed due to returned. Plaintiff wants to join
contaminated wheat midds midds suppliers as parties. Initial
Discovery received and reviewed by
Jim Hedges. Trial scheduled for
3/16/98 through 3/20/98. Settlement
conference set for 2/13/98. Experts
must be identified by 10/1/97 for
Plaintiff and 12/1/97 for Defendants.
- -------------------------------------------------------------------------------------------------------------------------
John Heick* Sheep feed claim Fed lambs Hubbard cattle feeds and Pre-suit demand $30,000
claims many died. Suit received was $150,000
10/21/96. Hubbard represented by Complaint alleges
Attorney B. Koehn. Hubbard $750,000
appeared on 11/1/96. Plaintiff has
not responded to Hubbard's
discovery requests. Trial date set
for 1/1/98. Plaintiff's attorney has
contacted dealer and offered to
settle for $50,000.
- -------------------------------------------------------------------------------------------------------------------------
Lou Hoehn Collection/counterclaim Hubbard served interrogatories and over $50,000 $5,000
for damage to business are awaiting Hoehn's answer. Per
telephone conference with Hubbard's
counsel on 4/7/97, Hoehn has not
responded to his attorney's request
to produce discovery.
- -------------------------------------------------------------------------------------------------------------------------
Curtis Daye Horse feed claim Alleges hose died after feeding $4,500 $6,200
horse feed purchased at Mills Fleet
Farm and mfrd by HMC. Matter
settled for $2000.
- -------------------------------------------------------------------------------------------------------------------------
John Turner Disability Discrimination Fork truck driver at Butler. EEOC No monetary $25,000
has issued a determination finding demand made
disability discrimination. Hubbard
is engaged in conciliation.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Included in "Indemnified Litigation and Claims" under Section 9.02 (a) of
Merger Agreement
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
Accrued
Claimant Type of Claim Current Status Claim Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brenda Burk Disability Discrimination Applicant for a programmer No monetary $5,000
position was not offered a job. demand made.
Submitted response to EEOC in
April, 1996. EEOC dismissed her
claim on 1/31/97. She has 90 days
to sue.
- -------------------------------------------------------------------------------------------------------------------------
Graciella National origin and Former Delavan employee No monetary $5,000
Corpus disability discrimination discharged for excessive absences. demand made.
Material submitted to EEOC on
4/29/96. Dismissal issued on
3/20/97. She must start suit
within 90 days.
- -------------------------------------------------------------------------------------------------------------------------
John McAbee Disability Discrimination Catersville employee and work No monetary $5,000
comp claimant filed EEOC charge claim.
following an unfavorable performance
review. EEOC issued dismissal of
disability discrimination on
12/31/96. Note: Claimant also has
a workers' compensation claim
pending.
- -------------------------------------------------------------------------------------------------------------------------
Javier Perez Petition to increase w/c Stockton, CA employee claims Increase of w/c $5,000
award damages (uninsured) against HMC rate by 50%
alleging "serious and willful"
safety misconduct by HMC in
contributing accident.
- -------------------------------------------------------------------------------------------------------------------------
Chris Petition to increase w/c Complaint alleges termination was Reimburse for lost $5,000
Copeland award due to w/c claim rather than wages and penalty
excessive absenteeism. Settled for up to $10,000
$22,500 per letter of 3/7/97.
- -------------------------------------------------------------------------------------------------------------------------
Risk Arbitration HMC is contesting the amount $250,000 $250,000
Enterprise owed for premium on several
Mgmt retrospectively rated insurance
policies.
- -------------------------------------------------------------------------------------------------------------------------
P*I*E* Freight undercharge Bankrupt carrier seeking freight Complaints seek a $5,000
claims undercharge recoveries in 3 total of $21,000
separate actions. Activity stayed by
bankruptcy court since 1993.
- -------------------------------------------------------------------------------------------------------------------------
Denis Daly* Age Discrimination EEOC claim filed on March 3, Most recent $0
1997 by former VP of Business settlement offer
Development terminated due to seeks
Feed Division restructuring claims consideration
termination was result of age which Hubbard
discrimination. estimates has a
present value of
$650,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
*Included in "Indemnified Litigation and Claims" under Section 9.02 (a) of
Merger Agreement
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
Accrued
Claimant Type of Claim Current Status Claim Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Al Schmidt Employment Claim Claims termination was due to $75,000 $0
unsafe facility caused by Hubbard's
unwillingness to make needed
modifications, apparently alleging
protection under whistle blower
statute Hubbard is preparing a
response to his initial letter.
- -------------------------------------------------------------------------------------------------------------------------
Evans Paul Employment Current employee alleges No monetary
Discrimination Claim discrimination on the basis of demand made.
national origin in denying him a
promotion. Response filed on
1/24/97 with EEOC and awaiting
response.
- -------------------------------------------------------------------------------------------------------------------------
Tony Shaeffer Feed Product Claim Alleges cows died as a result of Unknown
poor dairy feed.
- -------------------------------------------------------------------------------------------------------------------------
McSoy, Inc.* Breach of Contract Dealer claims he is entitled to $216,000
commission on tons of feed sold to
various customers.
- -------------------------------------------------------------------------------------------------------------------------
Siegarter Lake Feed Products Claim Claimant alleges diary production $50,000
View Dairy, diminished due to mold in feed.
Inc.*
- -------------------------------------------------------------------------------------------------------------------------
Elkshadow Feed Product Claim Claimant alleges poor performance $25,228
Farms/Dennis of cattle due to feeding minerals
Baldwin* in Crystalyx(R)
- -------------------------------------------------------------------------------------------------------------------------
Bobby Slip and Fall Truck driver who slipped and fell $85,000
Chynoweth on a patch of ice making a delivery
at Delavan in Feb.1995. Died in
1996 from unrelated causes.
Estate has submitted a claim for
$85,000. Attorney has advised
adjuster that the action survives
the death of the claimant. I have
asked adjuster to refer to an
attorney for complete review.
- -------------------------------------------------------------------------------------------------------------------------
Tim Product Claim Dairy producer sued Big Gain and More than
Raiman/Big Dealer claiming that their advice $50,000
Gain et al* and feed caused harm to his herd.
3rd party complaint by Big Grain
Dealer v. HMC claiming that the
producers problems stem from HMC
feeds was served on HMC on
4/16/97. Tendered to Home/REM for
defense of claim on 4/17/97.
Answer due 5/6/97.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
Accrued
Claimant Type of Claim Current Status Claim Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ray Meduna* Product Claim Dickinson ND customer claims $5,000
$5,000 in damage to cattle from
eating HMC feed. HMC believes
no liability -- feed submitted was
not our feed.
- -------------------------------------------------------------------------------------------------------------------------
Total $421,200
=========================================================================================================================
</TABLE>
Litigation with respect to the Animal Feed Division which will be assumed by
the purchaser. in the AF Sale.
<PAGE>
Credit Agreement
Schedule 6.8
Real Property
Borrower
Fee property:
424 North Riverfront Drive, Mankato, Minnesota**
218 East Lincoln Street, Portland, Indiana**
1084 Arapaho Road, Inman, Kansas**
105 and 309 Atlantic Avenue, DeGraff, Minnesota**
1800 Hubbard Lane, LeSueur, Minnesota**
6821 Ruppsville Road, Allentown, Pennsylvania**
Route 59, Hillburn, New York**
Delavan, Wisconsin**
Old Highway 22, McKenzie, Tennessee**
145 First Avenue, North, Perham, Minnesota**
Leasehold property:
Mankato, Minnesota
Hillburn, New York
2 Maryland Farms, Brentwood, Tennessee
400 Block of 5th Street, N.W., Perham, Minnesota
136 9th Avenue, S.W., Perham, Minnesota
100 Block of 2nd Street, N.E., Perham, Minnesota
Property at or around the Perham, Minnesota facility located at 145 First
Avenue, North Perham, Minnesota**
- ----------
** to be mortgaged
<PAGE>
Animal Feed
Fee property:
2001 3rd Avenue, Mankato, Minnesota
County Road 35 East, Worthington, Minnesota
Whitewood, South Dakota
151 4th Street NE, Watertown, South Dakota
Fremont, Nebraska
4520 South York Street, Sioux City, Iowa
Highway 7 East, Storm Lake, Iowa
Shipshewana, Indiana
104 Oak Street, Botkins, Ohio
2420 Old Highway 218 South, Iowa City, Iowa
426 Omaha Street, Rapid City, South Dakota
Leasehold property:
Stockton, California
Botkins, Ohio
Alexandria, Minnesota
Lusk, Wyoming
St. Joseph, Missouri
Rapid City, South Dakota
<PAGE>
Credit Agreement
Schedule 6.15
Subsidiaries
Holdings owns 100% of Old Windy Hill
Old Windy Hill owns 100% of Armour
Old Windy Hill owns 61% of the Borrower
Armour owns 39% of the Borrower
Borrower owns 100% of PBH Transportation Company
<PAGE>
Credit Agreement
Schedule 6.17
Environmental
Borrower from Old Windy Hill:
1. The matters pertaining to the Perham, Minnesota facility set forth in:
(i) Environmental Assessment - Phase I dated December 13, 1990 prepared for
Heinz Pet Products by ERM-North Central (ii) the Property Evaluation Report
dated July 30, 1994 prepared by Huntingdon Engineering & Environmental,
Inc. and the August 10, 1994 memo from D. Weber of Ottertail Power Company
to Larry Marguard of Ottertail Power Company, (iii) the Phase I
Environmental Assessment of the Perham, Minnesota facility, dated January,
1996, prepared by ERM-North Central, Inc., (iv) March 4, 1996 letter from
ERM-North Central, Inc. clarifying certain issues identified in the Phase I
Environmental Assessment, (v) the report dated April 15, 1996 prepared by
Alley & Associates regarding the Phase II Environmental Site Assessment at
and around the Perham, Minnesota plant site, (vi) the Phase II
Environmental Site Assessment dated April, 1996 prepared for NationsBank by
Alley & Associates, Inc. of the Perham, Minnesota facility and (vii) the
Phase I Environmental Site Assessment Update dated May 1997 of the Perham
facility prepared for Old Windy Hill by E. Roberts Alley & Associates, Inc.
2. The matters pertaining to the McKenzie, Tennessee facility set forth in:
(i) the Environmental Audit Update of the McKenzie, Tennessee facility
dated February, 1995 prepared for Old Windy Hill and NationsBank by Metcalf
& Eddy, (ii) the Environmental Site Assessment - Phase I dated April 15,
1996 of the McKenzie, Tennessee facility and (iii) the Phase I
Environmental Site Assessment Update dated May 13, 1997 of the McKenzie,
Tennessee facility prepared by E. Roberts Alley & Associates, Inc.
Pet Food Division:
1. Portland, Indiana
Phase II was conducted; further work is necessary at the site. Groundwater
samples collected on the northeast side of the plant indicate the presence
of arsenic, cadium, chromium, lead and nickel groundwater contamination;
however, the levels of metal concentrations are not expected to be
significant. The groundwater samples collected from the south side of the
site indicate that there is groundwater contamination with volatile
organics (such as benzene) and heavy metals (such as arsenic, cadium,
chromium, copper, lead, mercury and zinc) found to be above the Remediation
Guidance Levels.
<PAGE>
2. Hillburn, New York
Phase II investigation into soil and ground water is necessary to determine
if any contamination exists on the property. To date, only organic
volatiles have been discovered.
Animal Feed Division
1. Rapid City, South Dakota
There are asbestos-containing materials at the site that E. Roberts Alley &
Associates recommends be managed in place and an operation and maintenance
program instituted.
2. Iowa City, Iowa
Analysis of groundwater samples indicates that lead is present in levels
above the Remediation Guidance Levels; however, the lead is not expected to
be a significant problem in the groundwater.
<PAGE>
Pet Food Division -- Environmental Permits not currently obtained
1. Hillburn, New York
Storm Water Permit or Notice of Intent
2. Portland, Indiana
Storm Water Permit or Notice of Exemption
Sanitary Sewer Permit or Notice of Exemption
Air Permit
Animal Feed -- Environmental Permits not currently obtained
1. Fremont, Nebraska
Air Permit Registration
Storm Water Permit or Notice of Intent
2. Sioux City, Iowa
Storm Water Permit or Notice of Intent
3. Storm Lake, Iowa
Storm Water Permit
Air Permit
4. Iowa City, Iowa
Storm Water Permit or Notice of Intent
Air Permit
5. Botkins, Ohio
Air Permit or Notice of Exemption (this facility does have an Air Permit;
however, no copy is available for review)
<PAGE>
Sewer Permit or Notice of Exemption from the City of Botkins Sewer
Department
Storm Water Permit or Storm Water Pollution Prevention
Letter from Dayton Power and Electric concerning PCB's in the transformers
6. Shipshewana, Indiana
Storm Water Permit
Air Permit
Sewer Permit
<PAGE>
Credit Agreement
Schedule 6.22
Immaterial Subsidiaries
PBH Transportation Company
<PAGE>
Credit Agreement
Schedule 9.2(m)
Existing Indebtedness
1. Amounts due under the following Noncompetition Agreements:
Feed Division
A. Acquisition of certain assets of Protein Blenders, Inc.
(1) Noncompetition Agreement, dated December 29, 1989 between Hubbard and
Charles U. Kelly
Amount Due: $90,000 per year through 1999
(2) Noncompetition Agreement, dated December 29, 1989 between Hubbard and
William J. Lee
Amount Due: $60,000 per year through 1999
(3) Noncompetition Agreement, dated December 29, 1989 between Hubbard and
Donald E. Boenker
Amount Due: $40,000 per year through 1999
(4) Noncompetition Agreement, dated December 29, 1989 between Hubbard and Wayne
E. Goode
Amount Due: $30,000 per year through 1999
(5) Noncompetition Agreement, dated December 29, 1989 between Hubbard and
Patricia J. Dickens
Amount Due: $30,000 per year through 1999
(6) Noncompetition Agreement, dated December 29, 1989 between Hubbard and Mark
Huston
Amount Due: $25,000 per year through 1999
<PAGE>
(7) Noncompetition Agreement, dated December 29, 1989 between Hubbard and Jack
J. Raitt
Amount Due: $15,000 per year through 1999
(8) Noncompetition Agreement, dated December 29, 1989 between Hubbard and Kevin
Kelly
Amount Due: $85,000 per year through 1999
(9) Noncompetition Agreement, dated December 29, 1989 between Hubbard and
Robert L.Whetstine
Amount Due: $15,000 per year through 1999
(10) Noncompetition Agreement, dated as of December 17, 1993, as amended,
between Hubbard and John L.W. Miller
Amount Due: 19 consecutive quarterly payments (6 left) of $10,775 and
$105,275 on December 17, 1998
B. Consulting and Noncompetition Agreement, dated April 24, 1997 between Paul
Holzhueter and Acquisition Co.
Amount Due: $250,000 per year, paid through payroll, through 2001
2. $500,000 owing to BRS under the terms of the agreement with BRS referred to
in Schedule 9.11(ix)
3. Loan Agreement between City of Mankato, Minnesota and Hubbard dated October
11, 1984
<PAGE>
4. Amounts due under the Capital Leases described in the following table:
\\
<TABLE>
<CAPTION>
================================================================================
Monthly Lease Cost Cost New Term of Lease
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Canon Copier $241.85 36 mo. as of 3-15-
(EBM) 95
(Sales area)
- --------------------------------------------------------------------------------
Minolta Copier $271.99 $21,708 36 mo. as of 7-12-
(Accounting area) 95
- --------------------------------------------------------------------------------
Xerox Fax Sales 14812 + 8.89= 36 mo. as of 5-20-
373-9152 $157.01 93
Purch. Opt. $400
- --------------------------------------------------------------------------------
Xerox Fax Cust. $95.87 $3,095 36 mo. as of 6-1-95
Serv. Purch. Opt. $200
377-9519
- --------------------------------------------------------------------------------
Xerox Fax $95.87 $3,095 36 mo. as of 6-1-95
Accounting Purch. Opt. $200
661-8688
- --------------------------------------------------------------------------------
Telephone System $917.80 Orig. term 60 mo.
(Finova) Remaining 43 mo.
as of 4-1-95
================================================================================
</TABLE>
<PAGE>
Credit Agreement
Schedule 9.3(e)
Unrecorded Easements
a) 218 East Lincoln Street, Portland, Indiana
Possible unrecorded easement based upon the surveyor's observations of trucks
crossing the subject property along the gravel drive of said property and
entering the adjacent dump fill of the City of Portland.
b) 424 N. Riverfront Drive, Mankato, Minnesota (Downtown Site)
Possible unrecorded easement for electrical utility lines which cross over
the subject property in numerous places.
c) 2001 3rd Avenue, Mankato, Minnesota (Plant Facility)
Possible unrecorded easements relating to (i) utility lines and (ii) a
permanent easement and right of way for use as a public street, road and
highway over North 24 of Block 21 and Block 8 between 1st and 3rd Avenues.
d) 105 & 309 Atlantic Avenue, DeGraff, Minnesota
Possible unrecorded easement relating to the rights that owners of Block 12
may have to the southwesterly one-half of vacated Minnesota Avenue and the
northwesterly one half of vacated First Street.
e) 104 Oak Street, Botkins, Ohio
Possible unrecorded egress and ingress easement affecting Parcel 4.
f) Whitewood, South Dakota
Possible unrecorded easement for a storm drainage pipe that runs under the
existing building on the subject property.
g) 1084 Arapaho Road, Inman, Kansas
Possible unrecorded easement for overhead utility easements existing on the
subject property.
<PAGE>
Credit Agreement
Schedule 9.3(g)
Existing Liens
All the liens listed on the attachment hereto, provided that those liens
listed as "To be terminated" in the Collateral Description column will
terminated on the Closing Date but UCC-3's will be filed after the Closing
Date.
Liens from the capital leases described on Schedule 9.2(m)
<PAGE>
As of May 21, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
1. WINDY HILL PET FOOD HOLDINGS, INC. (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NationsBank of Tennessee, Delaware SOS 5/6/96 9612084 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
California SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Ottertail County, Minnesota [ ]
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Weakly County, Tennessee clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Williamson County, Tennessee clear
(Fixture)
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
2. WINDY HILL PET FOOD COMPANY, INC. (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NationsBank of Tennessee, California SOS 5/2/96 9612460546 UCC-1 Blanket Lien. (To Be Terminated)
as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Los Angeles County, 5/6/96 96709131 UCC-1 Blanket Lien. (To Be Terminated)
N A., as Collateral Agent California
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, San Joaquin County, 5/3/96 96046904 UCC-l Blanket Lien. (To Be Terminated)
N A., as Collateral Agent California
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Colorado SOS 11/5/96 962083417 UCC-l Blanket Lien. (To Be Terminated)
N A., as Collateral Agent (continuation
to 962034619)
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Adams County, Colorado 5/3/96 C0171108 UCC-1 Blanket Lien. (To Be Terminated)
N. A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Florida SOS 5/3/96 960000090595 UCC-1 Blanket Lien. (To Be Terminated)
N A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
Lumberman's Underwriting Florida SOS 7/19/96 960000150018 UCC-1 $150,000 Certificate of Deposit
Alliance No. 2089475, issued by
NationsBank of Tennessee on
5/16/96.
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Illinois SOS 5/3/96 3537721 UCC-1 Blanket Lien. (To Be Terminated)
N.A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, DuPage County, Illinois 5/3/96 9601366 UCC-1 Blanket Lien. (To Be Terminated)
N.A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Kankakee County, Illinois 5/3/96 960676 UCC-l Blanket Lien. (To Be Terminated)
N.A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Iowa SOS 5/3/96 K733697 UCC-l Blanket Lien. (To Be Terminated)
N.A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Kansas SOS 5/6/96 2243830 UCC-1 Blanket Lien. (To Be Terminated)
N.A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Shawnee County, Kansass 5/3/96 439246 UCC-l Blanket Lien. (To Be Terminated)
N.A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
2. WINDY HILL PET FOOD COMPANY, INC. (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NationsBank of Tennessee, Minnesota SOS 5/3/96 1845674 UCC-1 Blanket Lien. (To Be Terminated)
N.A. as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Minnesota SOS 5/3/96 1845675 UCC-l Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Minnesota SOS 5/3/96 1845676 UCC-l Blanket Lien. (To Be Terminated)
N. A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Minnesota SOS 5/3/96 1845677 UCC-1 Blanket Lien. (To Be Terminated)
N. A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
Ottertail County, Minnesota [ ]
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, New Jersey SOS 5/3/96 1696071 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Somerset County, New Jersey 5/3/96 009611 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Oregon SOS 5/3/96 S98450 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Pennsylvania SOC 5/3/96 25420545 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Prothonotary of Columbia 5/3/96 39653 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent County, Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Tennessee SOS 5/3/96 962011280 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Tennessee SOS 5/3/96 962011281 UCC-1 Blanket Lien. (To Be Terminated)
N. A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Tennessee SOS 5/3/96 962011282 UCC-1 Blanket Lien. (To Be Terminated)
N.A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
Lumberman's Underwriting Tennessee SOS 6/28/86 961019477 UCC-l $150,000 Certificate of Deposit
Alliance No. 2089475 issued by
NationsBank of Tennessee on
5/16/96.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
2. WINDY HILL PET FOOD COMPANY, INC. (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Weakly County, Tennessee clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Williamson County, Tennessee clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Texas SOS 5/3/96 9600085759 UCC-l Blanket Lien. (To Be Terminated)
N A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Dallas County, Texas 5/3/96 002626 UCC-1 Blanket Lien. (To Be Terminated)
N A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
NationsBank of Tennessee, Tarrant County, Texas 6/6/96 1930 UCC-1 Blanket Lien. (To Be Terminated)
N A., as Collateral Agent
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
3. WINDY HILL PET FOOD ACQUISITION CO. (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tennessee SOS [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
4. TUFFY'S PET PRODUCTS [assumed name of Windy Hill Pet Food Company, Inc.] (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
California SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Florida SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Ottertail County, Minnesota clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania SOC clear
- ------------------------------------------------------------------------------------------------------------------------------------
Prothonotary of Columbia County, clear
Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Weakly County, Tennessee clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Williamson County, Tennessee clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Texas SOS clear
====================================================================================================================================
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
5. TUFFY'S PET PRODUCTS COMPANY [assumed name of Windy Hill Pet Food Company, Inc.] (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
California SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Florida SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Ottertail County, Minnesota [ ]
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Prothonotary of Columbia County, clear
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Weakly County, Tennessee clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Williamson County, Tennessee clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Texas SOS clear
====================================================================================================================================
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
6. HUBBARD MILLING COMPANY (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
San Joaquin County, California clear
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Lookout Leasing Co., Inc. Georgia Clerk of Superior 10/6/95 008-954-002725 UCC-1 Canon NP2120 Copier S/N VJB47149
Court in Bartow County
- ------------------------------------------------------------------------------------------------------------------------------------
Idaho SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
First United Leasing Indiana SOS 1/12/95 1960810 UCC-1 1/Factory Car 34 Walk Behind
Sweeper SN CK-3457
- ------------------------------------------------------------------------------------------------------------------------------------
NBD Equipment Finance, Inc. Indiana SOS 5/4/95 1985008 UCC-1 1 New Destroyer Model 3800
Shredder S/N 1495242
- ------------------------------------------------------------------------------------------------------------------------------------
Iowa SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Kansas SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland State Dept. of clear
Assessments and Taxation
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
First Bank National Minnesota SOS 5/9/94 1672799 UCC-1 see file
Association (continuation
to 775004)
- ------------------------------------------------------------------------------------------------------------------------------------
Blue Earth County, Minnesota [ ]
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas County, Minnesota [ ]
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
6. HUBBARD MILLING COMPANY (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
County Recorder of Deeds of [ ]
Buchanan County, Missouri
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
Montana SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Nebraska SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Jefferson Smurfit New York SOS 4/22/96 080656 UCC-1 Kliklok SR383 3FK68
Corporation Kliklok SR16 3FK30
- ------------------------------------------------------------------------------------------------------------------------------------
County Clerk of Rockland clear
County, New York
- ------------------------------------------------------------------------------------------------------------------------------------
Jefferson Smurfit County Clerk of Rockland 4/22/96 96-1157 UCC-1 Kliklok SR383 3FK68
Corporation County, New York (Fixture) Kliklok SR16 3FK30
- ------------------------------------------------------------------------------------------------------------------------------------
North Dakota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Register of Deeds in Burleigh clear
County, North Dakota
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Shelby clear
County, Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Shelby clear
County, Ohio (Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Lucas County, clear
Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Prothonotary of Lehigh County, clear
Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
South Dakota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Pennington County, South Dakota [ ]
(Fixture)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
6. HUBBARD MILLING COMPANY (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Texas SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Washington State Dept. of clear
Licensing
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Wyoming SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Niobrara County, Wyoming clear
(Fixture)
====================================================================================================================================
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
7. HUBBARD LEASING COMPANY (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Iowa SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
South Dakota SOS clear
====================================================================================================================================
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
8. PBH TRANSPORTATION COMPANY (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Michigan SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Shelby clear
County, Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Lucas County, clear
Ohio
====================================================================================================================================
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
9. RENATA NUTRITION [assumed name of Hubbard Milling Company] (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
California SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia Clerk of Superior clear
Court of Bartow County
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Iowa SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Deeds of clear
Bates County, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
Nebraska SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Shelby clear
County, Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Lucas County, clear
Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania SOC clear
- ------------------------------------------------------------------------------------------------------------------------------------
Prothonotary of Lehigh County, clear
Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
Texas SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin SOS clear
====================================================================================================================================
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
10. PROCLAIM PET PRODUCTS [assumed name of Hubbard Milling Company] (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Illinois SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Deeds of Bates clear
County, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
Nebraska SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
North Dakota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Register of Deeds in Burleigh clear
County, North Dakota
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Shelby clear
County, Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Lucas County, clear
Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin SOS clear
====================================================================================================================================
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
11. QUINCY NUTRITIONAL COMPANY [assumed name of Hubbard Milling Company] (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
South Dakota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Washington State Dept. of clear
Licensing
====================================================================================================================================
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
12. TRADITION FEED PRODUCTS COMPANY [(Pending)] [assumed name of Hubbard Milling Company] (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Illinois SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Iowa SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Kansas SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Deeds of clear
Bates County, Missouri
- ------------------------------------------------------------------------------------------------------------------------------------
Nebraska SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
North Dakota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Register of Deeds in Burleigh clear
County, North Dakota
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Shelby clear
County, Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
County Recorder of Lucas County, clear
Pennsylvania
- ------------------------------------------------------------------------------------------------------------------------------------
South Dakota SOS clear
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin clear
====================================================================================================================================
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILE DATE FILE NO. TYPE OF UCC COLLATERAL DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
13. W.J. JENNISON CO. [assumed name of Hubbard Milling Company] (debtor)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Minnesota SOS clear
====================================================================================================================================
</TABLE>
- ----------
[ ] indicates results pending
-17-
<PAGE>
Credit Agreement
Schedule 9.4(a)
Existing Guarantee Obligations
Guarantee Obligations which will be disposed of in the sale of the Animal
Feed Division.
<PAGE>
Credit Agreement
Schedule 9.9(e)
Securities Held or Animal Feed Investments
Investments which will be disposed of in the sale of the Animal Feed Division.
<PAGE>
Credit Agreement
Schedule 9.11(ix)
Transactions with Affiliates
Amended and Restated Management Services Agreement dated as of May 2, 1997
between Dartford Partnership L.L.C. and Old Windy Hill (as assumed by the
Borrower).
Letter Agreement dated April 29, 1996 from Old Windy Hill to and accepted by
and agreed to by BRS, as amended on or prior to the Closing Date (and as
assumed by the Borrower)
<PAGE>
EXHIBIT A TO
CREDIT AGREEMENT
FORM OF BORROWER LOCKBOX AGREEMENT
BORROWER LOCKBOX AGREEMENT, dated as of May __, 1997, among
_______________ (the "Lockbox Bank"), WINDY HILL PET FOOD COMPANY, INC., a
Minnesota corporation (the "Borrower"), CREDIT SUISSE FIRST BOSTON, as
administrative agent (the "Administrative Agent") for the banks and other
financial institutions (the "Lenders") from time to time parties to the
Credit Agreement, dated as of May 21, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
WINDY HILL PET FOOD ACQUISITION CO., the Lenders, the Administrative Agent
and THE CHASE MANHATTAN BANK, a New York banking corporation, as
documentation agent for the Lenders (the "Documentation Agent", together with
the Administrative Agent, the "Agents").
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms
and subject to the conditions set forth therein;
WHEREAS, pursuant to the terms of the Credit Agreement, the
Borrower has delivered to the Administrative Agent for the benefit of the
Lenders a Guarantee and Collateral Agreement, dated as of May 21, 1997 (as
amended, supplemented, waived or otherwise modified from time to time, the
"Guarantee and Collateral Agreement"), among each of the signatories hereto
(together with any other entity that may become a party hereto as provided
therein, the "Grantors"), in favor of Credit Suisse First Boston, as
Administrative Agent, pursuant to which the Grantors have granted a security
interest in all of the Collateral referred to therein, including, without
limitation, all Accounts of the Borrower and its subsidiaries; and
WHEREAS, as contemplated by subsection 7.1(s) of the Credit
Agreement and the Guarantee and Collateral Agreement, the Borrower has agreed
to establish within 60 days of the date of the Credit Agreement a lockbox and
depositary account system (the "Lockbox System"), and to establish the bank
accounts listed on Schedule 1 hereto with the Lockbox Bank to be maintained
by the Borrower in the name of the Administrative Agent (the "Lockbox
Accounts");
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement
and to induce the Lenders to make their respective extensions of credit to
the Borrower under the Credit Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used herein but not defined
herein shall have the meanings assigned to such terms as defined in the
Guarantee and Collateral Agreement or the Credit Agreement.
<PAGE>
2
2. Lockbox Accounts. (a) In order to secure the performance by
the Borrower of the Obligations, this Lockbox Agreement is intended to create
a security interest in, and the Borrower hereby pledges to, and grants and
creates a security interest in favor of, the Administrative Agent for the
benefit of the Lenders, all of its right, title and interest in and to the
Lockbox Accounts, and all cash, Cash Equivalents, instruments, investments
and other securities at any time on deposit in the Lockbox Accounts, and all
proceeds of any of the foregoing. All cash, Cash Equivalents, instruments,
investments and securities at any time on deposit in the Lockbox Accounts
shall constitute collateral security for the payment by the Borrower of the
Obligations and the performance and observance by the Borrower of all the
covenants and conditions contained herein with respect to the Lockbox
Accounts.
(b) The Administrative Agent shall possess all right, title and
interest in and to all of the items from time to time on deposit in, or
otherwise to the credit of, the Lockbox Accounts and their proceeds. The
Lockbox Bank shall be the Administrative Agent's agent for the purpose of
holding and collecting all of the items from time to time on deposit in the
Lockbox Accounts and their proceeds. The Lockbox Accounts shall be under the
sole dominion and control of the Administrative Agent. Neither the Borrower
nor any person or entity claiming by, through or under the Borrower (except
the Administrative Agent), shall have any right, title or interest in, any
control over the use of, or any right to withdraw any amount from, the
Lockbox Accounts. The Lockbox Bank shall be entitled to rely on, and shall
act in accordance with, all instructions given to it by the Administrative
Agent with respect to the Lockbox Accounts.
3. Duties of the Lockbox Bank. If instructed by the Borrower or
the Administrative Agent, the Lockbox Bank shall:
(a) Rent one or more post office boxes in the name of the Borrower
and the Administrative Agent relating to the Lockbox Accounts. The Lockbox
Bank shall have exclusive and unrestricted access, and shall collect the
mail delivered, to such post office box or boxes (even though addressed to
the Borrower or the Administrative Agent) on each business day on which
the Lockbox Bank is open in accordance with the Lockbox Bank's regular
collection schedule. The Lockbox Bank shall give the Administrative Agent
and the Borrower notice of the address or addresses of the post office box
or boxes and shall instruct the Administrative Agent and the Borrower how
mail intended for the Lockbox Accounts should be addressed.
(b) Open all mail (even though addressed to the Borrower or the
Administrative Agent) and promptly endorse all checks, remittances and
other appropriate instruments received in such post office box or boxes
and credit such items to the Lockbox Accounts. All such items shall be
endorsed in substantially the following form:
"Credited without prejudice to Account No.__________. Absence of
Endorsement Guaranteed - '[Name of Bank]'."
<PAGE>
3
(c) Maintain a record of each check, draft, note, bill of exchange,
money order, commercial paper or other security instrument or document
(collectively, the "checks"; individually, a "check"), included in the
Lockbox Accounts, in accordance with its customary procedures for acting
as a "lock box" or similar bank. This record shall be available for
inspection by the Administrative Agent and the Borrower.
(d) Checks returned unpaid because of uncollected or insufficient
funds shall be redeposited without advice; checks returned a second time
shall be charged to the appropriate Lockbox Account and mailed under
appropriate advice to the Borrower or, at any time after written notice by
the Administrative Agent of the occurrence and continuance of an Event of
Default, to the Administrative Agent. Undated checks may be dated by the
Lockbox Bank to agree with the postmark date and included in the regular
deposit. Checks incorrectly made out, where the amount specified in
figures and the written amount differ, are to be deposited for the written
amount only, except where the figure amount agrees with the total of the
remittance notice. Checks bearing no signature are to be deposited with
notification to the drawer bank requesting that the signature be obtained.
Third-party checks may be deposited into the appropriate Lockbox Account
if properly endorsed. Checks bearing the legend "Payment in Full" or words
of similar import, either typed or handwritten, shall be withheld from the
clearing system and sent to the Borrower or, at any time after written
notice by the Administrative Agent of the occurrence and continuance of an
Event of Default, to the Administrative Agent.
(e) Apply and credit to the appropriate Lockbox Account all wire
transfers directed to such Lockbox Account even though such wire transfers
may identify such Lockbox Account as an account of the Borrower.
4. Transfer of Funds. (a) On each day on which both a branch
office of the Lockbox Bank at which any Lockbox Account is being maintained
and the office of the Concentration Account bank in ___________, ______ are
open, the Lockbox Bank shall transfer all funds on deposit in such Lockbox
Account (after such funds become available to the Lockbox Bank, either
through the Federal Reserve System or other clearing mechanism used by the
Lockbox Bank) to the Concentration Account referred to in the Guarantee and
Collateral Agreement, maintained at such office of the Concentration Account
bank. Unless otherwise directed by the Administrative Agent, such funds shall
be transferred by the Lockbox Bank through the Automated Clearing House or
Fed Wire and shall be identified as follows:
[Concentration Account: For the account of
Name, [Windy Hill Pet Food
Account # Company Inc.]
and address] Account #
(b) Except as otherwise provided in the Guarantee and Collateral
Agreement, (i) neither the Borrower nor any person or entity claiming by,
through or under the Borrower shall have any right, title or interest in, any
control over the use of, or any right to withdraw from, the Concentration
Account and its proceeds; (ii) the Administrative Agent
<PAGE>
4
shall hold such funds in the Concentration Account and shall possess sole
dominion and control over and all right, title and interest in all of the
items in the Concentration Account and the proceeds thereof; and (iii) the
Administrative Agent shall possess the right to all interest earned on the
funds on deposit in the Concentration Account and the proceeds thereof, which
interest shall be held on deposit in the Concentration Account and shall
constitute collateral security for the payment by the Borrower of the
Obligations as described in Section 2(a) hereof.
(c) Notwithstanding the foregoing, the Borrower shall not deposit
any funds into any Lockbox Account or the Concentration Account other than
proceeds of Collateral.
5. Indemnity. The Borrower hereby agrees to pay, indemnify and
hold the Lockbox Bank harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including,
without limitation, reasonable legal fees) with respect to the performance of
this Lockbox Agreement, or any procedures agreement among the Lockbox Bank,
the Administrative Agent and the Borrower, by the Lockbox Bank or any of the
Lockbox Bank's directors, officers, agents or employees, unless arising from
its or their own gross negligence or willful misconduct. This Lockbox
Agreement shall not affect any limitation of liability afforded the Lockbox
Bank under any account agreement.
6. Fees and Expenses. The Borrower hereby agrees as follows:
(a) Fees and charges associated with the Lockbox Accounts shall from
time to time be mutually agreed upon by the Borrower and the Lockbox Bank
as set forth in Schedule 2 to this Agreement.
(b) Reasonable Lockbox Bank expenses in connection with the
establishment and maintenance of the post office boxes rented pursuant to
this Lockbox Agreement shall also be included on the analysis statement.
7. Limitations on Liability of the Lockbox Bank. The Lockbox Bank
undertakes to perform such duties as are expressly set forth herein and such
other processing requirements as may be covered in any procedures agreement
among the Lockbox Bank, the Administrative Agent and the Borrower.
Notwithstanding any other provision of this Lockbox Agreement, it is agreed
by the parties hereto that the Lockbox Bank shall not be liable for any
action taken by it or any of its directors, officers, agents or employees in
accordance with this Lockbox Agreement except for its or their own gross
negligence or willful misconduct. In no event shall the Lockbox Bank be
liable for losses or delays resulting from force majeure, computer
malfunctions, interruption of communication facilities, labor difficulties or
other causes beyond the Lockbox Bank's reasonable control or for indirect,
special or consequential damages.
8. Irrevocable Instructions. The Borrower acknowledges that the
agreements made by it and the authorizations granted in Sections 2, 3 and 4
are irrevocable unless
<PAGE>
5
otherwise agreed to in writing by the Administrative Agent and are powers
coupled with an interest.
9. Account Information. The Lockbox Bank shall provide monthly
statements summarizing the activity of the Lockbox Accounts to the Borrower
and, upon request, to the Administrative Agent. In addition, the Lockbox Bank
will provide to the Administrative Agent and the Borrower copies of all
information reasonably requested by either of them.
10. Waiver of Right of Set-Off. The Lockbox Bank waives, until
the payment in full of the Loans, Reimbursement Obligations and other
Obligations then due and owing, the termination of the Commitments and the
expiration of, termination of or return to the Issuing Lender of the Letters
of Credit, with respect to all of its existing and future claims against the
Borrower or any Affiliate thereof, all existing and future rights of set-off
and banker's liens against the Lockbox Accounts and all items (and proceeds
thereof) that come into its possession in connection with the Lockbox
Accounts other than as specifically granted under this Lockbox Agreement,
provided that the Lockbox Bank retains the right to charge any Lockbox
Account for (i) all items deposited in such Lockbox Account on or after the
date hereof and subsequently returned to the Lockbox Bank unpaid and (ii) for
all past due compensation and expenses with respect to the Lockbox Accounts
as provided in Section 6 hereof.
11. Representations and Warranties. The Lockbox Bank represents
and warrants that:
(a) Only employees of the Lockbox Bank or its affiliates have access
to the post office box or boxes provided for herein.
(b) The Lockbox Accounts are the only accounts that have been or
will be maintained by the Lockbox Bank with respect to receivables of the
Borrower.
12. Effectiveness; Integration; Amendments. This Lockbox
Agreement shall be effective as of the date first above written, and the
Lockbox Bank shall be in a position to process remittances as of that date.
To the extent that other agreements are inconsistent with this Lockbox
Agreement, this Lockbox Agreement shall supersede any other agreement
relating to the matters referred to herein, including any procedures
agreement and any other agreement between the Borrower and the Lockbox Bank
relating to the collection of receivables of the Borrower or its
predecessors. This Lockbox Agreement and the provisions hereof may not be
changed, amended, modified or waived orally, but only by an instrument in
writing signed by the parties hereto. Any provision of this Lockbox Agreement
which may prove unenforceable under any law or regulation shall not affect
the validity of any other provisions hereof.
13. Termination. (a) This Lockbox Agreement shall automatically
terminate on the date of the last to occur of the payment in full of the
Loans, Reimbursement Obligations and other Obligations then due and owing,
the termination of the Commitments and the expiration of, termination or
return to the Issuing Lender of the Letters of Credit.
<PAGE>
6
The Lockbox Bank shall be entitled to rely on a certificate of the
Administrative Agent to such effect. Upon such termination, all amounts on
deposit in any Lockbox Account shall be forwarded by the Lockbox Bank by wire
transfer of immediately available funds to an account specified in writing by
the Borrower.
(b) This Lockbox Agreement may be terminated by the Borrower
(with the consent of the Administrative Agent) or any other party hereto upon
60 days' advance written notice to the other parties hereto.
(c) All rights of the Lockbox Bank under Sections 5, 6 and 7
hereof shall survive termination of this Lockbox Agreement.
14. Notices. All notices, requests or other communications given
to the Borrower, the Administrative Agent or the Lockbox Bank shall be given
in writing (which may be by facsimile transmission or similar writing) at the
address or facsimile number specified below:
Administrative Agent: Credit Suisse First Boston
11 Madison Avenue
New York, New York 10011
Attention: ________________
Facsimile: (212)
Lockbox Bank: [Name of Bank]
[Address]
Attention:
Facsimile:
The Borrower: Windy Hill Pet Food Company, Inc.
[Address]
Attention: ________________
Facsimile:
Any party may change its address or facsimile number for notices hereunder by
giving notice to each other party hereunder. All notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (which may be by facsimile), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by
hand, or three days after being deposited in the mail, postage prepaid, or,
in the case of facsimile notice, when sent, confirmation of receipt received,
provided that any notice, request or demand to or upon the Administrative
Agent or the other Lenders shall not be effective until received.
15. Bankruptcy of the Borrower. In the event that a bankruptcy
case or receivership proceeding is commenced by or against the Borrower, the
Administrative Agent may pay the fees and charges of the Lockbox Bank payable
by the Borrower under this
<PAGE>
7
Lockbox Agreement from the date of commencement of such case or proceeding
until the earlier of the date of termination of this Lockbox Agreement or the
date of dismissal or termination of such case or proceeding to the extent
that such fees and charges are not being paid by the Borrower.
16. Relationship of the Parties. The relationship between the
Lockbox Bank and the Administrative Agent, as agent for the Lenders, is and
shall be construed to constitute the Lockbox Bank as an agent for the benefit
of the Administrative Agent and the other Lenders. The Lockbox Bank agrees,
for the benefit of the Administrative Agent and the other Lenders, to act as
custodian and bailee of the Administrative Agent and the other Lenders in
holding moneys and collections received pursuant hereto pending their
application in accordance herewith and acknowledges that such moneys and
collections are subject to the security interest granted to the
Administrative Agent by the Borrower under the Guarantee and Collateral
Agreement. It is intended that, by the Lockbox Bank's agreement pursuant to
this Section 16, the Administrative Agent, as secured party, shall be deemed
to have possession of such moneys and collections for purposes of Section
9-305 of the Uniform Commercial Code of the State of New York.
17. GOVERNING LAW. EXCEPT TO THE EXTENT THAT THE LAWS OF THE
STATE IN WHICH THE LOCKBOX BANK IS LOCATED GOVERN THE LOCKBOX ACCOUNT, THIS
LOCKBOX AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS THEREOF.
18. Counterparts. This Lockbox Agreement may be executed in any
number of counterparts which together shall constitute one and the same
instrument.
<PAGE>
8
IN WITNESS WHEREOF, each of the parties hereto has caused this
Lockbox Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
[NAME OF BANK],
as Lockbox Bank
By:______________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
By:______________________________
Name:
Title:
WINDY HILL PET FOOD COMPANY, INC.
By:______________________________
Name:
Title:
<PAGE>
SCHEDULE 1 to the
Lockbox Agreement
LOCKBOX ACCOUNTS
<PAGE>
EXHIBIT D TO
CREDIT AGREEMENT
FORM OF CONCENTRATION ACCOUNT AGREEMENT
CONCENTRATION ACCOUNT AGREEMENT dated as of May __, 1997, between WINDY
HILL PET FOOD COMPANY, INC., a Minnesota corporation (the "Borrower") and
CREDIT SUISSE FIRST BOSTON, as administrative agent (in such capacity, the
"Administrative Agent") for the banks and other financial institutions (the
"Lenders") from time to time parties to the Credit Agreement, dated as of May
21, 1997 (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among Windy Hill Pet Food Acquisition Co., the
Lenders, the Administrative Agent and The Chase Manhattan Bank, a New York
banking corporation, as documentation agent for the Lenders (in such
capacity, the "Documentation Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders severally have
agreed to make Loans to the Borrower upon the terms and subject to the
conditions set forth in the Credit Agreement, such loans to be evidenced by
the Notes issued by the Borrower thereunder; and
WHEREAS, as contemplated by Section 8.11 of the Credit Agreement and
the Guarantee and Collateral Agreement, dated as of May 21, 1997 (the
"Guarantee and Collateral Agreement"), the Borrower has agreed to establish
within 60 days from the date of the Credit Agreement a lockbox and depositary
account system and shall have executed and delivered to the Administrative
Agent this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, [to induce the Administrative Agent and the Lenders to
enter into the Credit Agreement and to induce the Lenders to make their
respective Loans to the Borrower,] the Borrower hereby agrees with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
Guarantee and Collateral Agreement or the Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Concentration Account Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
<PAGE>
2
"Borrower Lockbox Agreement": the Borrower Lockbox Agreement, dated as
of May __, 1997, among _______________ (the "Lockbox Bank"), the Borrower and
Credit Suisse First Boston, as Administrative Agent.
"Cash Collateral": the collective reference to:
(a) all cash, instruments, securities and funds deposited from time to
time in the Concentration Account, including, without limitation, all cash or
other money proceeds of any collateral subject to a security interest for the
benefit of the Administrative Agent under any Security Document;
(b) all investments of funds in the Concentration Account and all
instruments and securities evidencing such investments; and
(c) all interest, dividends, cash, instruments, securities and other
property received in respect of, or as proceeds of, or in substitution or
exchange for, any of the foregoing.
"Concentration Account": account no.__________________
established at the office of Credit Suisse First Boston at__________________
,___________________________, designated "Credit Suisse First Boston--Windy
Hill Concentration Account." or another account established by the Borrower
at an office of another financial institution reasonably acceptable to the
Administrative Agent so long as no Default or Event of Default has occurred
and is continuing.
"Code": the Uniform Commercial Code from time to time in effect in the
State of New York.
"Collateral": the collective reference to the Cash Collateral and the
Concentration Account.
"Lockbox Account": shall have the meaning set forth in the Borrower
Lockbox Agreement.
"Lockbox Bank": shall have the meaning set forth in the Borrower
Lockbox Agreement.
"Obligations": the collective reference to the unpaid principal of and
interest on the Notes and all other obligations and liabilities of the
Borrower to the Administrative Agent, the Documentation Agent and the Lenders
(including, without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and interest
accruing at the then applicable rate provided in the Credit Agreement after
the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower
whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding), whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in
<PAGE>
3
connection with, the Credit Agreement, the Notes, this Agreement, the other
Transaction Documents or any other document made, delivered or given in
connection therewith or herewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Administrative Agent, the Documentation Agent or to the Lenders that are
required to be paid by the Borrower pursuant to the terms of the Credit
Agreement or this Agreement or any other Loan Document).
"Permitted Investments": (a) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (b) marketable general obligations issued by any state
of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition thereof, having a
credit rating of "A" or better from either Standard & Poor's Ratings Group or
Moody's Investors Service, Inc.; (c) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances
having maturities of not more than one year from the date of acquisition
thereof of any Lender, or of any domestic commercial bank the long-term
indebtedness of which is rated at the time of acquisition thereof at least A
or the equivalent thereof by Standard & Poor's Ratings Group, or A or the
equivalent thereof by Moody's Investors Service, Inc., and having capital and
surplus in excess of $500,000,000; (d) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (a), (b) and (c) entered into with any bank meeting the
qualifications specified in clause (c) above; (e) commercial paper rated at
the time of acquisition thereof at least A-2 or the equivalent thereof by
Standard & Poor's Ratings Group or P-2 or the equivalent thereof by Moody's
Investors Service, Inc., or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease
publishing ratings of investments, and in either case maturing within 270
days after the date of acquisition thereof; (f) interests in any investment
company which invests solely in instruments of the type specified in clauses
(a) through (e) above; and (g) other investment instruments approved in
writing by the Required Lenders and offered by any Lender or by any financial
institution which has a combined capital and surplus of not less than
$100,000,000.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated
maturity, by acceleration or
<PAGE>
4
otherwise) of the Obligations, the Borrower hereby grants to the
Administrative Agent, for the ratable benefit of the Lenders, a security
interest in the Collateral.
3. Maintenance of Concentration Account. (a) The Concentration Account
shall be maintained until the Obligations have been paid and performed in
full.
(b) The Collateral shall be subject to the exclusive dominion and
control of the Administrative Agent, which shall hold the Cash Collateral and
administer the Concentration Account subject to the terms and conditions of
this Agreement. The Borrower shall have no right of withdrawal from the
Concentration Account nor any other right or power with respect to the
Collateral, except as expressly provided herein.
4. Deposit of Funds. On each day on which both a branch office of the
Lockbox Bank at which any Lockbox Account is being maintained and the office
of the Concentration Account bank in ___________, ______ are open, pursuant
to the Borrower Lockbox Agreement, the Lockbox Bank shall transfer all funds
on deposit in such Lockbox Account (after such funds become available to the
Lockbox Bank, either through the Federal Reserve System or other clearing
mechanism used by the Lockbox Bank) to the Concentration Account.
5. Representation and Warranty. The Borrower represents and warrants to
the Administrative Agent that this Agreement creates in favor of the
Administrative Agent a perfected, first priority security interest in the
Collateral, enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
6. Covenants. The Borrower covenants and agrees with the Administrative
Agent that:
(a) The Borrower will not (1) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the Collateral, or
(2) create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Collateral, or any interest
therein, except for the security interest created by this Agreement.
(b) The Borrower will maintain the security interest created by this
Agreement as a first, perfected security interest and defend the right, title
and interest of the Administrative Agent and the Lenders in and to the
Collateral against the claims and demands of all Persons whomsoever. At any
time and from time to time, upon the written request of the Administrative
Agent, and at the sole expense of the Borrower, the Borrower will promptly
and duly execute and deliver such further instruments and documents and take
such further actions as the Administrative Agent reasonably may request for
the purposes of obtaining or
<PAGE>
5
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, of financing statements under
the Uniform Commercial Code.
7. Investment of Cash Collateral. (a) Subject to the provisions of
paragraph , collected funds on deposit in the Concentration Account shall be
invested by the Administrative Agent from time to time in Permitted
Investments. All investments shall be made in the name of the Administrative
Agent or a nominee of the Administrative Agent and in a manner, determined by
the Administrative Agent in its sole discretion, that preserves the
Administrative Agent's perfected, first priority security interest in such
investments.
(b) The Administrative Agent shall have no obligation to invest
collected funds during the first night after their collection.
(c) The Administrative Agent shall have no responsibility to the
Borrower for any loss or liability arising in respect of such investments of
the Cash Collateral (including, without limitation, as a result of the
liquidation of any thereof before maturity), except to the extent that such
loss or liability arises from the Administrative Agent's gross negligence or
willful misconduct.
(d) The Borrower will pay or reimburse the Administrative Agent for any
and all costs, expenses and liabilities of the Administrative Agent incurred
in connection with this Agreement, the maintenance and operation of the
Concentration Account and the investment of the Cash Collateral, including,
without limitation, any investment, brokerage or placement commissions and
fees incurred by the Administrative Agent in connection with the investment
or reinvestment of Cash Collateral, and any investment charges or other fees
of ____________ in connection with maintenance of the Concentration Account.
8. Release of Cash Collateral. (a) On each Business Day, the
Administrative Agent shall apply Cash Collateral deposited in the
Concentration Account during the immediately preceding Business Day in the
following order of priority:
(1) first, to the payment of overdue fees and expenses of the
Administrative Agent and any other amounts payable to the Administrative
Agent, the Documentation Agent or any of the Lenders under the Loan
Documents; and
(2) second, to the Borrower with such funds being deposited into the
Borrower's account at an office of a financial institution previously
designated in writing to the Administrative Agent, unless an Event of
Default shall have occurred and be continuing, in which case the
Administrative Agent shall retain the Cash Collateral in the Concentration
Account.
(b) Notwithstanding any other provision of this paragraph, the
Administrative Agent shall have no obligation to release Cash Collateral unless
each of the following conditions is satisfied at the time of such release:
<PAGE>
6
(1) No Default or Event of Default shall have occurred and be
continuing; and
(2) Such release shall not require termination of any investment
prior to its maturity.
9. Remedies. (a) Upon the occurrence of an Event of Default, the
Administrative Agent may, without notice of any kind, except for notices
required by law which may not be waived, apply the Collateral, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or
in any way relating to the Collateral or the rights of the Administrative
Agent and the Lenders hereunder, including, without limitation, reasonable
attorneys' fees and disbursements of counsel to the Administrative Agent, to
the payment in whole or in part of the Obligations, in such order as the
Administrative Agent in its sole discretion may elect, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Administrative Agent account for
the surplus, if any, to the Borrower. In addition to the rights, powers and
remedies granted to it under this Agreement and in any other agreement
securing, evidencing or relating to the Obligations, the Administrative Agent
shall have all the rights, powers and remedies available at law, including,
without limitation, the rights and remedies of a secured party under the
Code. To the extent permitted by law, the Pledgor waives presentment, demand,
protest and all notices of any kind and all claims, damages and demands it
may acquire against the Administrative Agent or any Lender arising out of the
exercise by them of any rights hereunder.
(b) The Borrower shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay
the Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any Lender to collect such deficiency.
10. Administrative Agent's Appointment as Attorney-in-Fact. (a) The
Borrower hereby irrevocably constitutes and appoints the Administrative Agent
and any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Borrower and in the name of
the Borrower or in the Administrative Agent's own name, from time to time in
the Administrative Agent's discretion, for the purpose of carrying out the
terms of this Agreement. Without limiting the generality of the foregoing, at
any time when an Event of Default has occurred and is continuing (to the
extent permitted by applicable law) the Borrower hereby gives the
Administrative Agent the power and right on behalf of the Borrower, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, including, without limitation, any financing statements,
endorsements, assignments or other instruments of transfer.
<PAGE>
7
(b) The Borrower hereby ratifies all that said attorneys shall lawfully
do or cause to be done pursuant to the power of attorney granted in paragraph
. All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is
terminated and the security interests created hereby are released.
11. Duty of Administrative Agent. The Administrative Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to comply with the specific duties and responsibilities set forth
herein. The powers conferred on the Administrative Agent in this Agreement
are solely for the protection of the Administrative Agent's and the Lenders'
interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any Lender to exercise any such powers. Neither the
Administrative Agent nor any Lender nor its or their directors, officers,
employees or agents shall be liable for any action lawfully taken or omitted
to be taken by any of them under or in connection with the Collateral or this
Agreement, except for its or their gross negligence or willful misconduct.
12. Execution of Financing Statements. Pursuant to Section 9-402 of the
Code, the Borrower authorizes the Administrative Agent to file financing
statements with respect to the Collateral without the signature of the
Borrower in such form and in such filing offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A carbon, photographic,
photostatic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
13. Authority of Administrative Agent. The Borrower acknowledges that
the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting
or arising out of this Agreement shall, as between the Administrative Agent
and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them,
but, as between the Administrative Agent and the Borrower, the Administrative
Agent shall be conclusively presumed to be acting as agent for the Lenders
with full and valid authority so to act or refrain from acting, and the
Borrower shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
14. Notices. All notices, requests and demands to or upon the
Administrative Agent or the Borrower to be effective shall be in writing (or
by telex, fax or similar electronic transfer confirmed in writing) and shall
be deemed to have been duly given or made (1) when delivered by hand or (2)
if given by mail, when deposited in the mails by certified mail, return
receipt requested, or (3) if by telex, fax or similar electronic transfer,
when sent and receipt has been confirmed, addressed to the Administrative
Agent or the Borrower at its address or transmission number for notices
provided in subsection 12.2 of the Credit
<PAGE>
8
Agreement. The Administrative Agent and the Borrower may change their
addresses and transmission numbers for notices by notice in the manner
provided in this paragraph.
15. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Borrower and the Administrative Agent, provided that any provision of
this Agreement may be waived by the Administrative Agent and the Lenders in a
letter or agreement executed by the Administrative Agent or by telex or
facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by any act
(except by a written instrument pursuant to paragraph hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or
in any breach of any of the terms and conditions hereof. No failure to
exercise, nor any delay in exercising, on the part of the Administrative
Agent or any Lender, any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the
Administrative Agent or any Lender of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent or such Lender would otherwise have on any future
occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
17. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
18. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Borrower and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns.
19. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York without
regard to the conflicts of law principles thereof.
<PAGE>
9
IN WITNESS WHEREOF, the Borrower and the Administrative Agent have
caused this Concentration Account Agreement to be duly executed and delivered
as of the date first above written.
WINDY HILL PET FOOD COMPANY, INC.
By:_________________________________
Title:______________________________
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By:_________________________________
Title:______________________________
<PAGE>
EXHIBIT E TO
CREDIT AGREEMENT
================================================================================
FORM OF GUARANTEE AND COLLATERAL AGREEMENT
made by
each of the Grantors (as defined herein)
in favor of
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
Dated as of May 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS............................................ 1
1.1 Definitions............................................... 1
1.2 Other Definitional Provisions............................. 5
SECTION 2. GUARANTEE................................................ 5
2.1 Guarantee................................................. 5
2.2 Right of Contribution..................................... 6
2.3 No Subrogation............................................ 6
2.4 Amendments, etc. with respect to the Borrower Obligations. 6
2.5 Guarantee Absolute and Unconditional...................... 7
2.6 Reinstatement............................................. 7
2.7 Payments.................................................. 8
SECTION 3. GRANT OF SECURITY INTEREST............................... 8
SECTION 4. REPRESENTATIONS AND WARRANTIES........................... 8
4.1 Representations in Credit Agreement....................... 9
4.2 Title; No Other Liens..................................... 9
4.3 Perfected First Priority Liens............................ 9
4.4 Chief Executive Office.................................... 9
4.5 Inventory and Equipment................................... 9
4.6 Farm Products............................................. 9
4.7 Pledged Securities........................................ 9
4.8 Accounts.................................................. 10
4.9 Intellectual Property..................................... 10
SECTION 5. COVENANTS................................................ 10
5.1 Covenants in Credit Agreement............................. 10
5.2 Delivery of Instruments and Chattel Paper................. 11
5.3 Maintenance of Insurance.................................. 11
5.4 Payment of Obligations.................................... 11
5.5 Maintenance of Perfected Security Interest; Further
Documentation ........................................... 11
5.6 Changes in Locations, Name, etc........................... 12
5.7 Notices................................................... 12
5.8 Pledged Securities........................................ 12
5.9 Accounts.................................................. 13
5.10 Intellectual Property..................................... 13
5.11 Covenants of Holdings..................................... 15
5.12 Covenants of WHPF......................................... 15
5.13 Covenants of Armour....................................... 16
SECTION 6. REMEDIAL PROVISIONS...................................... 17
6.1 Certain Matters Relating to Accounts...................... 17
6.2 Communications with Obligors; Grantors Remain Liable...... 19
6.3 Pledged Stock............................................. 20
<PAGE>
6.4 Proceeds to be Turned Over To Administrative Agent........ 20
6.5 Application of Proceeds................................... 21
6.6 Code and Other Remedies................................... 21
6.7 Registration Rights....................................... 22
6.8 Waiver; Deficiency........................................ 22
SECTION 7. THE ADMINISTRATIVE AGENT................................. 23
7.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc ..................................................... 23
7.2 Duty of Administrative Agent.............................. 24
7.3 Execution of Financing Statements......................... 24
7.4 Authority of Administrative Agent......................... 25
SECTION 8. MISCELLANEOUS............................................ 25
8.1 Amendments in Writing..................................... 25
8.2 Notices................................................... 25
8.3 No Waiver by Course of Conduct; Cumulative Remedies....... 25
8.4 Enforcement Expenses; Indemnification..................... 25
8.5 Successors and Assigns.................................... 26
8.6 Set-Off................................................... 26
8.7 Counterparts.............................................. 26
8.8 Severability.............................................. 26
8.9 Section Headings.......................................... 26
8.10 Integration............................................... 27
8.11 GOVERNING LAW............................................. 27
8.12 Submission To Jurisdiction; Waivers....................... 27
8.13 Acknowledgements.......................................... 27
8.14 WAIVER OF JURY TRIAL...................................... 28
8.15 Additional Grantors....................................... 28
8.16 Releases.................................................. 28
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT, dated as of May 21, 1997,
made by Windy Hill Pet Food Holdings, Inc., a Delaware corporation
("Holdings"), WHPF Inc., a Delaware corporation formerly named Windy Hill Pet
Food Company, Inc. ("WHPF"), Armour Corporation, a Delaware corporation
("Armour"), Windy Hill Pet Food Company, Inc., a Minnesota corporation (the
"Borrower"), each of the signatories hereto (WHPF, Armour, the Borrower and
each of the signatories hereto, together with any other subsidiary of the
Borrower that becomes a party hereto from time to time after the date hereof,
the ("Grantors")), in favor of CREDIT SUISSE FIRST BOSTON, as administrative
agent (the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Credit
Agreement, dated as of May 21, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among Windy Hill Pet
Food Acquisition Co., a Minnesota corporation, ("Acquisition Co."), the
Lenders, the Administrative Agent and THE CHASE MANHATTAN BANK, a New York
banking corporation, as documentation agent for the Lenders.
W I T N E S S E T H:
WHEREAS, Acquisition Co. proposes to merge with and into Hubbard
Milling Company, a Minnesota corporation ("Hubbard"), pursuant to the terms
of a Merger Agreement, dated as of March 21, 1997 among Hubbard, Windy Hill
Pet Food Co. Inc., and Acquisition Co., pursuant to which Hubbard will be the
surviving corporation and will be the borrower (the "Borrower") under the
Credit Agreement;
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms
and subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Credit
Agreement; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under
the Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement
and to induce the Lenders to make their respective extensions of credit to
the Borrower thereunder, each Grantor hereby agrees with the Administrative
Agent, for the ratable benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement, and the following terms which are defined in
the Uniform Commercial Code in effect in the State of New
<PAGE>
2
York on the date hereof are used herein as so defined: Chattel Paper,
Documents, Equipment, Farm Products, Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Accounts": all accounts (as defined in the Code) of the Grantors,
including, without limitation all Accounts (as defined in the Credit
Agreement) of the Grantors.
"Agreement": this Guarantee and Collateral Agreement, as the same
may be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and
all other obligations and liabilities of the Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans and Reimbursement
Obligations and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to the Agents or any
Lender (or, in the case of any Hedge Agreement referred to below, any
Affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit
Agreement, this Agreement, the other Loan Documents, any Letter of Credit
or any Hedge Agreement entered into by the Borrower with the Issuing
Lender, any Lender (or any Affiliate of any Lender) or any other document
made, delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to
the Lenders that are required to be paid by the Borrower pursuant to the
terms of any of the foregoing agreements).
"Collateral": as defined in Section 3.
"Concentration Account": any concentration account established by
the Administrative Agent as provided in Section 6.1 or 6.4.
"Copyrights": (i) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof,
whether registered or unregistered and whether published or unpublished
(including, without limitation, those listed in Schedule 6), all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings
and applications in the United States Copyright Office, and (ii) the right
to obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"Excluded Property": means (i) any of the Borrower's rights to
indemnification against Hubbard Milling Company ("Hubbard Milling") and
its shareholders under the Merger
<PAGE>
3
Agreement, dated as of March 21, 1997, by and among Hubbard Milling, Windy
Hill Pet Food Company, Inc. and Windy Hill Pet Food Acquisition Co. (the
"Merger Agreement") for claims relating to assets transferred pursuant to
(X) the Merger Agreement or (Y) the sale of the Animal Feed Division and
(ii) the Borrower's interest in the escrow accounts established pursuant
to the Merger Agreement, in each case, to the extent a security interest
therein is granted to secure the full and timely payment and performance
by the Borrower of its indemnification obligations under the Asset
Purchase Agreement for the sale of the Animal Feed Division and (iii) all
property of the Animal Feed Division.
"General Intangibles": all "general intangibles" as such term is
defined in Section 9- 106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which
such Grantor is a party or under which such Grantor has any right, title
or interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture
without the consent of any other party thereto, would not give any other
party to such contract, agreement, instrument or indenture the right to
terminate its obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been obtained
from the other parties thereto (it being understood that the foregoing
shall not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit, restrict
or impair the grant by such Grantor of a security interest pursuant to
this Agreement in any Account or any money or other amounts due or to
become due under any such contract, agreement, instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Loan Document to which such
Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"Guarantors": the collective reference to Holdings and each Grantor
other than the Borrower.
"Hedge Agreements": as to any Person, all interest rate swaps, caps
or collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or
currency exchange rates or the exchange of nominal interest obligations,
either generally or under specific contingencies.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign
<PAGE>
4
laws or otherwise, including, without limitation, the Copyrights, the
Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and
the Trademark Licenses, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by
any Grantor to another Grantor or any of its Subsidiaries.
"Issuers": the collective reference to each issuer of a Pledged
Security.
"New York UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patents": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in
Schedule 6, and (iii) all rights to obtain any reissues or extensions of
the foregoing.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or
sell any invention covered in whole or in part by a Patent, including,
without limitation, any of the foregoing referred to in Schedule 6.
"Pledged Notes": all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business).
"Pledged Securities": the collective reference to the Pledged Notes
and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, shall include, without limitation,
all dividends or other income from the Pledged Securities, collections
thereon or distributions or payments with respect thereto.
"Securities Act": the Securities Act of 1933, as amended.
"Trademarks": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source
<PAGE>
5
or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith other
than any pending intent to use applications for which a statement of use
or an amendment to allege use have not been filed and accepted, whether in
the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof, or otherwise, and all common-law rights
related thereto, including, without limitation, any of the foregoing
referred to in Schedule 6, and (ii) the right to obtain all renewals
thereof.
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing referred to
in Schedule 6.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles and equipment covered by a certificate
of title of any state or of the United States of America and all tires and
other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and Schedule references
are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective
successors, indorsees, transferees and assigns, the prompt and complete
payment and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under
the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors (after giving effect to the right of
contribution established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section
2 or affecting the rights and remedies of the Administrative Agent or any
Lender hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until all the Borrower Obligations and the obligations
of each Guarantor under the guarantee contained in
<PAGE>
6
this Section 2 shall have been satisfied by payment in full, no Letter of
Credit shall be outstanding and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit
Agreement the Borrower may be free from any Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any
other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Borrower, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or proceeding
or any set-off or appropriation or application at any time or from time to
time in reduction of or in payment of the Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Borrower Obligations or
any payment received or collected from such Guarantor in respect of the
Borrower Obligations), remain liable for the Borrower Obligations up to the
maximum liability of such Guarantor hereunder until the Borrower Obligations
are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated.
2.2 Right of Contribution. Each Guarantor hereby agrees that to
the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3. The
provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the Lenders, and
each Guarantor shall remain liable to the Administrative Agent and the
Lenders for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor
by the Administrative Agent or any Lender, no Guarantor shall be entitled to
be subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender
for the payment of the Borrower Obligations, nor shall any Guarantor seek or
be entitled to seek any contribution or reimbursement from the Borrower or
any other Guarantor in respect of payments made by such Guarantor hereunder,
until all amounts owing to the Administrative Agent and the Lenders by the
Borrower on account of the Borrower Obligations are paid in full, no Letter
of Credit shall be outstanding and the Commitments are terminated. If any
amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all of the Borrower Obligations shall not have been paid in
full, such amount shall be held by such Guarantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned
over to the Administrative Agent in the exact form received by such Guarantor
(duly indorsed by such Guarantor to the Administrative Agent, if required),
to be applied against the Borrower Obligations, whether matured or unmatured,
in such order as the Administrative Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Borrower Obligations made by the Administrative Agent or any Lender may be
rescinded by the Administrative Agent or such Lender and any of the Borrower
Obligations continued, and the Borrower Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived,
<PAGE>
7
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent
(or the Required Lenders or all Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right
of offset at any time held by the Administrative Agent or any Lender for the
payment of the Borrower Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Lender
shall have any obligation to protect, secure, perfect or insure any Lien at
any time held by it as security for the Borrower Obligations or for the
guarantee contained in this Section 2 or any property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of
the Borrower Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon the guarantee contained in this
Section 2 or acceptance of the guarantee contained in this Section 2; the
Borrower Obligations, and any of them, shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon the guarantee contained in this Section 2; and all
dealings between the Borrower and any of the Guarantors, on the one hand, and
the Administrative Agent and the Lenders, on the other hand, likewise shall
be conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment
to or upon the Borrower or any of the Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees that the guarantee
contained in this Section 2 shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or
enforceability of the Credit Agreement or any other Loan Document, any of the
Borrower Obligations or any other collateral security therefor or guarantee
or right of offset with respect thereto at any time or from time to time held
by the Administrative Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at
any time be available to or be asserted by the Borrower or any other Person
against the Administrative Agent or any Lender, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Borrower or such
Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the Borrower Obligations, or
of such Guarantor under the guarantee contained in this Section 2, in
bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor,
the Administrative Agent or any Lender may, but shall be under no obligation
to, make a similar demand on or otherwise pursue such rights and remedies as
it may have against the Borrower, any other Guarantor or any other Person or
against any collateral security or guarantee for the Borrower Obligations or
any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to make any such demand, to pursue such
other rights or remedies or to collect any payments from the Borrower, any
other Guarantor or any other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release
of the Borrower, any other Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against any
Guarantor. For the purposes hereof "demand" shall include the commencement
and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at
any time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative
Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the
<PAGE>
8
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
the Borrower or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at
11 Madison Avenue, New York, New York 10010.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative
Agent, and hereby grants to the Administrative Agent, for the ratable benefit
of the Lenders, a security interest in, all of the following property now
owned or at any time hereafter acquired by such Grantor or in which such
Grantor now has or at any time in the future may acquire any right, title or
interest other than the Excluded Property (collectively, the "Collateral"),
as collateral security for the prompt and complete payment and performance
when due (whether at the stated maturity, by acceleration or otherwise) of
such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment (other than Vehicles);
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Securities;
(j) all books and records pertaining to the Collateral; and
(k) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
the Credit Agreement and to induce the Lenders to make their respective
extensions of credit to the Borrower thereunder, each Grantor hereby
represents and warrants to the Administrative Agent and each Lender that:
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9
4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in subsection 6 of
the Credit Agreement as they relate to such Guarantor or to the Loan
Documents to which such Guarantor is a party, each of which is hereby
incorporated herein by reference, are true and correct, and the
Administrative Agent and each Lender shall be entitled to rely on each of
them as if they were fully set forth herein, provided that each reference in
each such representation and warranty to the Borrower's knowledge shall, for
the purposes of this Section 4.1, be deemed to be a reference to such
Guarantor's knowledge.
4.2 Title; No Other Liens. Except for the security interest
granted to the Administrative Agent for the ratable benefit of the Lenders
pursuant to this Agreement and the other Liens permitted to exist on the
Collateral by the Credit Agreement, such Grantor owns each item of the
Collateral free and clear of any and all Liens or claims of others. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as
have been filed in favor of the Administrative Agent, for the ratable benefit
of the Lenders, pursuant to this Agreement or as are permitted by the Credit
Agreement and except in the case of public notice filings at the U.S. Patent
and Trademark Office which remain "on file" despite the filing of a
subsequent release.
4.3 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) upon completion of the filings and
other actions specified on Schedule 3 (which, in the case of all filings and
other documents referred to on said Schedule, have been delivered to the
Administrative Agent in completed and duly executed form) will constitute
valid perfected security interests in all of the Collateral in favor of the
Administrative Agent, for the ratable benefit of the Lenders, as collateral
security for such Grantor's Obligations, enforceable in accordance with the
terms hereof against all creditors of such Grantor and any Persons purporting
to purchase any Collateral from such Grantor and (b) are prior to all other
Liens on the Collateral in existence on the date hereof except for (i)
unrecorded Liens permitted by the Credit Agreement which have priority over
the Liens on the Collateral by operation of law and (ii) Liens described on
Schedule 8.
4.4 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief
executive office or sole place of business are specified on Schedule 4.
4.5 Inventory and Equipment. On the date hereof, the Inventory
and the Equipment (other than mobile goods) are kept at the locations listed
on Schedule 5.
4.6 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4.7 Pledged Securities. (a) The shares of Pledged Stock pledged
by such Grantor hereunder constitute all the issued and outstanding shares of
all classes of the Capital Stock of each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(c) To the best knowledge of such Grantor, each of the Pledged
Notes constitutes the legal, valid and binding obligation of the obligor with
respect thereto, enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable
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10
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Securities pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement.
4.8 Accounts. (a) No amount payable to such Grantor under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) The amounts represented by such Grantor to the Lenders from
time to time as owing to such Grantor in respect of the Accounts will at such
times be accurate.
(c) The places where such Grantor keeps its records concerning
such Grantor's Accounts are listed on Schedule 7 or such other location or
locations of which such Grantor shall have provided prior written notice to
the Administrative Agent pursuant to Section 5.6 hereof.
4.9 Intellectual Property. (a) Schedule 6 lists all registered
Intellectual Property owned and currently used by such Grantor in its own
name on the date hereof.
(b) On the date hereof, all material registered U.S. Intellectual
Property is valid, subsisting, unexpired and enforceable, has not been
abandoned and , to such Grantor's knowledge and as used in connection with
the business of such Grantor, and, except as set forth in Schedule 6, does
not infringe the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 6, on the date hereof, none
of the Intellectual Property is the subject of any licensing or franchise
agreement pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of,
or such Grantor's rights in, any Intellectual Property in any respect that
could reasonably be expected to have a Material Adverse Effect.
(e) Except as set forth in Schedule 6, No action or proceeding is
pending, or, to the knowledge of such Grantor, threatened, on the date hereof
(i) seeking to limit, cancel or question the validity of any Intellectual
Property or such Grantor's ownership interest therein, or (ii) which, if
adversely determined, would have a material adverse effect on the value of
any Intellectual Property.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Covenants in Credit Agreement. In the case of each Guarantor,
such Guarantor shall take, or shall refrain from taking, as the case may be,
each action that is necessary to be taken or
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11
not taken, as the case may be, so that no Default or Event of Default is
caused by the failure to take such action or to refrain from taking such
action by such Guarantor or any of its Subsidiaries.
5.2 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, such Instrument or Chattel
Paper shall be immediately delivered to the Administrative Agent, duly
indorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
5.3 Maintenance of Insurance. (a) Such Grantor will maintain,
with financially sound and reputable companies, insurance policies (i)
insuring the Inventory and Equipment against loss by fire, explosion, theft
and such other casualties as may be reasonably satisfactory to the
Administrative Agent and (ii) to the extent requested by the Administrative
Agent, insuring such Grantor, the Administrative Agent and the Lenders
against liability for personal injury and property damage relating to such
Inventory and Equipment, such policies to be in such form and amounts and
having such coverage as may be reasonably satisfactory to the Administrative
Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party
or loss payee, (iii) if reasonably requested by the Administrative Agent,
include a breach of warranty clause and (iv) be reasonably satisfactory in
all other respects to the Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent and
the Lenders a report of a reputable insurance broker with respect to such
insurance during the month of June in each calendar year beginning 1998 and
such supplemental reports with respect thereto as the Administrative Agent
may from time to time reasonably request.
5.4 Payment of Obligations. Such Grantor will pay and discharge
or otherwise satisfy at or before maturity or before they become delinquent,
as the case may be, all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of income or profits therefrom, as
well as all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the Collateral,
except that no such charge need be paid if the amount or validity thereof is
currently being contested in good faith by appropriate proceedings, reserves
in conformity with GAAP with respect thereto have been provided on the books
of such Grantor and such proceedings could not reasonably be expected to
result in the sale, forfeiture or loss of any material portion of the
Collateral or any interest therein.
5.5 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created
by this Agreement as a perfected security interest having at least the
priority described in Section 4.3 and shall defend such security interest
against the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
(c) At any time and from time to time, upon the written request
of the Administrative Agent, and at the sole expense of such Grantor, such
Grantor will promptly and duly execute and
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12
deliver, and have recorded, such further instruments and documents and take
such further actions as the Administrative Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted, including, without limitation,
the filing of any financing or continuation statements under the Uniform
Commercial Code (or other similar laws) in effect in any jurisdiction with
respect to the security interests created hereby.
5.6 Changes in Locations, Name, etc. Such Grantor will not,
except upon 15 days' prior written notice to the Administrative Agent and
delivery to the Administrative Agent of (a) all additional executed financing
statements and other documents reasonably requested by the Administrative
Agent to maintain the validity, perfection and priority of the security
interests provided for herein and (b) if applicable, a written supplement to
Schedule 5 showing any additional location at which Inventory or Equipment
shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a
location other than those listed on Schedule 5;
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
provided that, prior to taking any such action, or promptly after receiving a
written request therefor from the Administrative Agent, such Grantor shall
deliver to the Administrative Agent all additional executed financing
statements and other documents reasonably requested by the Administrative
Agent to maintain the validity, perfection and priority of the security
interests provided for herein.
5.7 Notices. Such Grantor will advise the Administrative Agent
and the Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of the Collateral which
would adversely affect the ability of the Administrative Agent to exercise
any of its remedies hereunder; and
(b) of the occurrence of any other event which could reasonably
be expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.8 Pledged Securities. (a) If such Grantor shall become entitled
to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution
in connection with any reclassification, increase or reduction of capital or
any certificate issued in connection with any reorganization), option or
rights in respect of the Capital Stock of any Issuer, whether in addition to,
in substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Administrative Agent and the Lenders, hold the same
in trust for the Administrative Agent and the Lenders and deliver the same
forthwith to the Administrative Agent in the exact form received, duly
indorsed by such Grantor to the Administrative Agent, if required, together
with an undated stock power covering such certificate duly executed in blank
by such Grantor and with, if the Administrative Agent so requests, signature
guaranteed, to be held by the Administrative Agent,
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13
subject to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Securities upon
the liquidation or dissolution of any Issuer shall be paid over to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall
be made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant
to the reorganization thereof, the property so distributed shall, unless
otherwise subject to a perfected security interest in favor of the
Administrative Agent, be delivered to the Administrative Agent to be held by
it hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of the Pledged
Securities shall be received by such Grantor, such Grantor shall, until such
money or property is paid or delivered to the Administrative Agent, hold such
money or property in trust for the Lenders, segregated from other funds of
such Grantor, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, such Grantor will not (i) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any
nature or to issue any other securities convertible into or granting the
right to purchase or exchange for any stock or other equity securities of any
nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Pledged Securities or
Proceeds thereof (except pursuant to a transaction expressly permitted by the
Credit Agreement), (iii) create, incur or permit to exist any Lien or option
in favor of, or any claim of any Person with respect to, any of the Pledged
Securities or Proceeds thereof, or any interest therein, except for the
security interests created by this Agreement or (iv) enter into any agreement
or undertaking restricting the right or ability of such Grantor or the
Administrative Agent to sell, assign or transfer any of the Pledged
Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to
the Pledged Securities issued by it and will comply with such terms insofar
as such terms are applicable to it, (ii) it will notify the Administrative
Agent promptly in writing of the occurrence of any of the events described in
Section 5.8(a) with respect to the Pledged Securities issued by it and (iii)
the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to Section
6.3(c) or 6.7 with respect to the Pledged Securities issued by it.
5.9 Accounts. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any
extension of the time of payment of any Account, (ii) compromise or settle
any Account for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Account, (iv) allow any
credit or discount whatsoever on any Account or (v) amend, supplement or
modify any Account in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy
of each material demand, notice or document received by it that questions or
calls into doubt the validity or enforceability of more than 10% of the
aggregate amount of the then outstanding Accounts.
5.10 Intellectual Property. (a) Such Grantor (either itself or
through licensees) will (i) subject to its reasonable business judgment,
continue to use each material registered Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain as in the past the quality of products and services
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14
offered under such Trademark, (iii) use such Trademark with the appropriate
notice of registration and all other notices and legends required by
applicable Requirements of Law, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this Agreement, and (v)
not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become invalidated or
impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do
any act, or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will
employ each material Copyright and (ii) will not (and will not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any
act whereby any portion of the material Copyrights may become invalidated or
otherwise impaired. Such Grantor will not (either itself or through
licensees) do any act whereby any portion of the material Copyrights may fall
into the public domain.
(d) Such Grantor (either itself or through licensees) will not do
any act that knowingly uses any material Intellectual Property to infringe
the intellectual property rights of any other Person.
(e) Notwithstanding anything to the contrary, any breach of
clauses (a) through (d) of this Section 5.10 by a licensee shall not be a
breach by any Grantor if the terms of the license granted to such licensee
prohibit or require the licensee to abide by the acts set forth therein and
such Grantor is diligently taking all reasonable action to cause such
licensee to comply with the terms of such licensee.
(f) Such Grantor will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any application
or registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright Office or any
court or tribunal in any country) regarding such Grantor's ownership of, or
the validity of, any material Intellectual Property or such Grantor's right
to register the same or to own and maintain the same.
(g) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, such
Grantor shall report such filing to the Administrative Agent within five
Business Days after the last day of the fiscal quarter in which such filing
occurs. Upon request of the Administrative Agent, such Grantor shall execute
and deliver, and have recorded, any and all agreements, instruments,
documents, and papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in any Copyright,
Patent or Trademark and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby.
(h) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the relevant
registration) and to
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15
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(i) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall
(i) take such actions as such Grantor shall reasonably deem appropriate under
the circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and
to recover any and all damages for such infringement, misappropriation or
dilution.
5.11 Covenants of Holdings. Holdings covenants and agrees with
the Administrative Agent and the other Secured Parties that, from and after
the date of this Agreement until the Loans, any Reimbursement Obligations,
and all other Obligations then due and owing have been paid in full, no
Letter of Credit shall be outstanding and the Commitments shall have
terminated:
5.12.1 Holdings shall not conduct or otherwise engage, in any
business or operations other than (i) transactions contemplated by the Loan
Documents or the provision of administrative, legal, accounting and
management services to or on behalf of the Borrower or any of its
Subsidiaries, (ii) the ownership of the Capital Stock of WHPF (or any
successor thereto), and the exercise of rights and performance of obligations
in connection therewith, (iii) the entry into, and exercise of rights and
performance of obligations in respect of, (A) the Transaction Documents to
which Holdings is a party, this Guarantee and Collateral Agreement and the
other Loan Documents to which Holdings is a party, and any other agreement to
which Holdings is a party on the date hereof, in each case as amended,
supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (B) contracts and
agreements with officers, directors and employees of the Holdings or a
Subsidiary thereof relating to their employment or directorships, (C)
insurance policies and related contracts and agreements, and (D) equity
subscription agreements, registration rights agreements, voting and other
stockholder agreements, engagement letters, underwriting agreements and other
agreements in respect of its equity securities or any offering, issuance or
sale thereof, (iv) the offering, issuance and sale of its equity securities,
(v) the filing of registration statements, and compliance with applicable
reporting and other obligations, under federal, state or other securities
laws, (vi) the listing of its equity securities and compliance with
applicable reporting and other obligations in connection therewith, (vii) the
retention of transfer agents, private placement agents, underwriters,
counsel, accountants and other advisors and consultants, (viii) the
performance of obligations under and compliance with its certificate of
incorporation and by-laws, or any applicable law, ordinance, regulation,
rule, order, judgment, decree or permit, including, without limitation, as a
result of or in connection with the activities of the Borrower and its
Subsidiaries, (ix) the incurrence and payment of its operating and business
expenses and any taxes for which it may be liable, and (x) other activities
incidental or related to the foregoing.
5.12.2 Holdings shall not own, lease, manage or otherwise operate
any properties or assets (other than in connection with the activities
described in Section 5.12.1 above), or incur, create, assume or suffer to
exist any Indebtedness or Guarantee Obligations of Holdings (other than such
as may be incurred, created or assumed or exist in connection with the
activities described in Section 5.12.1 above).
5.12 Covenants of WHPF. WHPF covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the
date of this Agreement until the Loans, any Reimbursement Obligations, and
all other Obligations then due and owing have been paid in full, no Letter of
Credit shall be outstanding and the Commitments shall have terminated:
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16
5.13.1 WHPF shall not conduct or otherwise engage, in any
business or operations other than (i) transactions contemplated by the Loan
Documents or the provision of administrative, legal, accounting and
management services to or on behalf of the Borrower or any of its
Subsidiaries, (ii) the ownership of the Capital Stock of the Borrower (or any
successor thereto) and Armour, and the exercise of rights and performance of
obligations in connection therewith, (iii) the entry into, and exercise of
rights and performance of obligations in respect of, (A) the Transaction
Documents to which WHPF is a party, this Guarantee and Collateral Agreement
and the other Loan Documents to which WHPF is a party, and any other
agreement to which WHPF is a party on the date hereof, in each case as
amended, supplemented, waived or otherwise modified from time to time, and
any refinancings, refundings, renewals or extensions thereof, (B) contracts
and agreements with officers, directors and employees of WHPF or a Subsidiary
thereof relating to their employment or directorships, (C) insurance policies
and related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect
of its equity securities or any offering, issuance or sale thereof, (iv) the
offering, issuance and sale of its equity securities, (v) the filing of
registration statements, and compliance with applicable reporting and other
obligations, under federal, state or other securities laws, (vi) the listing
of its equity securities and compliance with applicable reporting and other
obligations in connection therewith, (vii) the retention of transfer agents,
private placement agents, underwriters, counsel, accountants and other
advisors and consultants, (viii) the performance of obligations under and
compliance with its certificate of incorporation and by-laws, or any
applicable law, ordinance, regulation, rule, order, judgment, decree or
permit, including, without limitation, as a result of or in connection with
the activities of the Borrower and its Subsidiaries, (ix) the incurrence and
payment of its operating and business expenses and any taxes for which it may
be liable, and (x) other activities incidental or related to the foregoing.
5.13.2 WHPF shall not own, lease, manage or otherwise operate any
properties or assets (other than in connection with the activities described
in Section 5.13.1 above), or incur, create, assume or suffer to exist any
Indebtedness or Guarantee Obligations of WHPF (other than such as may be
incurred, created or assumed or exist in connection with the activities
described in Section 5.13.1 above).
5.13 Covenants of Armour. Armour covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the
date of this Agreement until the Loans, any Reimbursement Obligations, and
all other Obligations then due and owing have been paid in full, no Letter of
Credit shall be outstanding and the Commitments shall have terminated:
5.14.1 Armour shall not conduct or otherwise engage, in any
business or operations other than (i) transactions contemplated by the Loan
Documents or the provision of administrative, legal, accounting and
management services to or on behalf of the Borrower or any of its
Subsidiaries, (ii) the ownership of the Capital Stock of the Borrower (or any
successor thereto), and the exercise of rights and performance of obligations
in connection therewith, (iii) the entry into, and exercise of rights and
performance of obligations in respect of, (A) the Transaction Documents to
which Armour is a party, this Guarantee and Collateral Agreement and the
other Loan Documents to which Armour is a party, and any other agreement to
which Armour is a party on the date hereof, in each case as amended,
supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (B) contracts and
agreements with officers, directors and employees of Armour or a Subsidiary
thereof relating to their employment or directorships, (C) insurance policies
and related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect
of its equity securities or any offering,
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17
issuance or sale thereof, (iv) the offering, issuance and sale of its equity
securities, (v) the filing of registration statements, and compliance with
applicable reporting and other obligations, under federal, state or other
securities laws, (vi) the listing of its equity securities and compliance
with applicable reporting and other obligations in connection therewith,
(vii) the retention of transfer agents, private placement agents,
underwriters, counsel, accountants and other advisors and consultants, (viii)
the performance of obligations under and compliance with its certificate of
incorporation and by-laws, or any applicable law, ordinance, regulation,
rule, order, judgment, decree or permit, including, without limitation, as a
result of or in connection with the activities of the Borrower and its
Subsidiaries, (ix) the incurrence and payment of its operating and business
expenses and any taxes for which it may be liable, and (x) other activities
incidental or related to the foregoing.
5.14.2 Armour shall not own, lease, manage or otherwise operate
any properties or assets (other than in connection with the activities
described in Section 5.14.1 above), or incur, create, assume or suffer to
exist any Indebtedness or Guarantee Obligations of Armour (other than such as
may be incurred, created or assumed or exist in connection with the
activities described in Section 5.14.1 above).
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts. (a) At any time and
from time to time after the occurrence and during the continuance of an Event
of Default, the Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the relevant Grantor shall furnish all
such assistance and information as the Administrative Agent may require in
connection with such test verifications. At any time and from time to time
after the occurrence and during the continuance of an Event of Default, upon
the Administrative Agent's reasonable request and at the expense of the
relevant Grantor, such Grantor shall cause independent public accountants or
others reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Accounts and the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Administrative Agent
at any time after the occurrence and during the continuance of an Event of
Default, any Proceeds constituting collections of such Accounts, when
collected by such Grantor (excluding any such collections through the Lockbox
system), (i) shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such
Grantor to the Administrative Agent if required, in the Concentration Account
established by such Grantor maintained under the sole dominion and control of
the Administrative Agent, subject to withdrawal by the Administrative Agent
for the account of the Lenders only as provided in Section , and (ii) until
so turned over, shall be held by such Grantor in trust for the Administrative
Agent and the other Lenders, segregated from other funds of such Grantor.
Each such deposit of Proceeds of Accounts shall be accompanied by a report
identifying in reasonable detail the nature and source of the payments
included in the deposit. All Proceeds constituting collections of Accounts
while held by the Concentration Account bank (or by any Guarantor in trust
for the benefit of the Administrative Agent and the other Lenders) shall
continue to be collateral security for all of the Obligations and shall not
constitute payment thereof until applied as hereinafter provided. At any time
when an Event of Default has occurred and is continuing, at the
Administrative Agent's election, the Administrative Agent may apply all or
any part of the funds on deposit in the Concentration Account established by
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18
the relevant Grantor to the payment of the Obligations of such Grantor then
due and owing, such application to be made as set forth in Section 6.5
hereof. So long as no Event of Default has occurred and is continuing, the
funds on deposit in the Concentration Account shall be remitted as provided
in Section 6.1(e) hereof. At any time when an Event of Default has occurred
and is continuing, at the Administrative Agent's request, each Grantor shall
deliver to the Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise
to such Grantor's Accounts, including, without limitation, all statements
relating to such Grantor's Accounts.
(c) At any time and from time to time after the occurrence and
during the continuance of an Event of Default, at the Administrative Agent's
request, each Grantor shall deliver to the Administrative Agent all original
and other documents evidencing, and relating to, the agreements and
transactions which gave rise to such Grantor's Accounts, including, without
limitation, all original orders, invoices and shipping receipts.
(d) Lockbox System; Concentration Account. (i) Solely to the
extent required under Section 8.11 of the Credit Agreement, each Grantor
shall establish or cause to be established in the name of the Administrative
Agent, and subject to the control of the Administrative Agent pursuant to
such Grantor's Lockbox Agreements, for the benefit of the Administrative
Agent and the other Lenders, such Grantor's Lockbox system into which the
Proceeds of all such Grantor's Accounts shall be deposited and forwarded to
the Concentration Account bank in accordance with and to the extent and when
required under such Lockbox Agreements. On and after the date, if any, on
which any Grantor is required to establish any Lockbox system for so long as
such Grantor is required to maintain such system, (x) such Grantor shall
ensure that all account debtors in respect of such Grantor's Accounts payable
in Dollars shall have been given instructions reasonably satisfactory to the
Administrative Agent directing such account debtors to make all payments on
such Accounts by means of deposits into such Grantor's Lockbox system, (y)
without the prior consent of the Administrative Agent (which consent shall
not be unreasonably withheld), such Grantor shall not, in a manner materially
adverse to the Lenders, change the form of any such instructions given to
account debtors, and (z) unless and until the Administrative Agent shall have
advised such Grantor to the contrary, such Grantor shall, and the
Administrative Agent hereby authorizes such Grantor to, enforce and collect
all amounts owing on such Grantor's Accounts, for the benefit and on behalf
of the Administrative Agent and the other Lenders in accordance with and
subject to the provisions of such Grantor's Lockbox Agreements; provided,
however, that such privilege shall automatically be suspended upon the
occurrence and during the continuance of an Event of Default specified in
Section 10(f) of the Credit Agreement with respect to such Grantor and may at
the option of the Administrative Agent be terminated upon the occurrence and
during the continuance of any other Event of Default with respect to such
Grantor or any other Grantor.
(ii) All Proceeds of such Grantor's Accounts which have been received
on any Business Day through such Grantor's Lockbox system will be transferred
into such Grantor's Concentration Account on such Business Day to the extent
required by the applicable Lockbox Agreement. All of such Grantor's Proceeds
received on any Business Day by the Concentration Account bank pursuant to
paragraph (b) above will be transferred into such Grantor's Concentration
Account on such Business Day. Such Concentration Account is, and shall
remain, under the sole dominion and control of the Administrative Agent. Each
Grantor acknowledges and agrees that (A) such Grantor has no right of
withdrawal from its Concentration Account, (B) the funds on deposit in such
Grantor's Concentration Account shall be collateral security for all of such
Grantor's Obligations and (C) upon the occurrence and during the continuance
of an Event of Default, at the Administrative Agent's election, the funds on
deposit in such Grantor's Concentration Account may be applied by the
Administrative Agent to
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19
the payment of such Grantor's Obligations then due and owing, such
application to be made in the order of priority set forth in Section 6.5
hereof.
(e) Grantor's Account. So long as no Event of Default has
occurred and is continuing, and whether or not any Lockbox system shall have
been established or maintained, the Administrative Agent shall instruct the
Concentration Account bank to promptly remit any funds on deposit in each
Grantor's Concentration Account to such Grantor's Account. In the event that
an Event of Default has occurred and is continuing, the Administrative Agent
and the Grantors agree that the Administrative Agent, at its option, may
require that each Concentration Account be established at Credit Suisse First
Boston. Each Grantor shall have the right, at any time and from time to time,
to withdraw such of its own funds from its own Account, and to maintain such
balances in its Account, as it shall deem to be necessary or desirable.
(f) Restructuring of Deposit Accounts. If (a) any Concentration
Account is maintained at a Concentration Account bank located in a state
within the United States in which Article 9 of the Uniform Commercial Code in
effect in such state has been expressly made applicable to (and only for so
long as it is applicable to) demand deposit accounts and all filings have
been made in such state which are necessary to perfect the Lenders' security
interest in such Concentration Account or (b) after the Effective Date the
relevant Grantor demonstrates to the Administrative Agent, and the
Administrative Agent in its sole discretion agrees, that the costs associated
with maintaining both a Concentration Account and a Grantor's Account
outweigh any benefits to the Lenders in terms of any additional protection to
their rights in such Grantor's Collateral that could not be achieved with the
use of a single account, then upon the request of such Grantor, the
Administrative Agent may amend this Agreement to delete the requirement that
a separate Account be maintained and provide that such Grantor be entitled to
withdraw funds on deposit in such Concentration Account at any time so long
as no Event of Default has occurred and is continuing.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default,
communicate with obligors under the Accounts to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Accounts.
(b) Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on the Accounts that the Accounts have been
assigned to the Administrative Agent for the ratable benefit of the Lenders
and that payments in respect thereof shall be made directly to the
Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all
in accordance with the terms of any agreement giving rise thereto. Neither
the Administrative Agent nor any Lender shall have any obligation or
liability under any Account (or any agreement giving rise thereto) by reason
of or arising out of this Agreement or the receipt by the Administrative
Agent or any Lender of any payment relating thereto, nor shall the
Administrative Agent or any Lender be obligated in any manner to perform any
of the obligations of any Grantor under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file
any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
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20
6.3 Pledged Stock. (a) Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given
notice to the relevant Grantor of the Administrative Agent's intent to
exercise its corresponding rights pursuant to Section 6.3(b), each Grantor
shall be permitted to receive all cash dividends paid in respect of the
Pledged Stock and all payments made in respect of the Pledged Notes, in each
case paid in the normal course of business of the relevant Issuer and
consistent with past practice, to the extent permitted in the Credit
Agreement, and to exercise all voting and corporate rights with respect to
the Pledged Securities; provided, however, that no vote shall be cast or
corporate right exercised or other action taken which, in the Administrative
Agent's reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights
to the relevant Grantor or Grantors, (i) the Administrative Agent shall have
the right to receive any and all cash dividends, payments or other Proceeds
paid in respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Administrative Agent may determine, and (ii)
any or all of the Pledged Securities shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its
nominee may thereafter exercise (x) all voting, corporate and other rights
pertaining to such Pledged Securities at any meeting of shareholders of the
relevant Issuer or Issuers or otherwise and (y) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Securities as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental change
in the corporate structure of any Issuer, or upon the exercise by any Grantor
or the Administrative Agent of any right, privilege or option pertaining to
such Pledged Securities, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency upon such
terms and conditions as the Administrative Agent may determine), all without
liability except to account for property actually received by it, but the
Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of
any Pledged Securities pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Administrative Agent in writing that
(x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other
or further instructions from such Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect
to the Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the Lenders specified
in Section 6.1 with respect to payments of Accounts, if an Event of Default
shall occur and be continuing, all Proceeds received by any Grantor
consisting of cash, checks and other near-cash items shall be held by such
Grantor in trust for the Administrative Agent and the Lenders, segregated
from other funds of such Grantor, and shall, forthwith upon receipt by such
Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative Agent
hereunder shall be held by the Administrative Agent in a Concentration
Account maintained under its sole dominion and control. All Proceeds while
held by the Administrative Agent in a Concentration Account (or by such
Grantor in trust for the
<PAGE>
21
Administrative Agent and the Lenders) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof
until applied as provided in Section .
6.5 Application of Proceeds. At such intervals as may be agreed
upon by the Borrower and the Administrative Agent, or, if an Event of Default
shall have occurred and be continuing, at any time at the Administrative
Agent's election, the Administrative Agent may apply all or any part of
Proceeds held in any Concentration Account in payment of the Obligations in
such order as the Administrative Agent may elect, and any part of such funds
which the Administrative Agent elects not so to apply and deems not required
as collateral security for the Obligations shall be paid over from time to
time by the Administrative Agent to the Borrower or to whomsoever may be
lawfully entitled to receive the same. Any balance of such Proceeds remaining
after the Obligations shall have been paid in full, no Letters of Credit
shall be outstanding and the Commitments shall have terminated shall be paid
over to the Borrower or to whomsoever may be lawfully entitled to receive the
same.
6.6 Code and Other Remedies. If an Event of Default shall occur
and be continuing, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted to them in
this Agreement and in any other instrument or agreement securing, evidencing
or relating to the Obligations, all rights and remedies of a secured party
under the New York UCC or any other applicable law. Without limiting the
generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or
any part thereof, and/or may forthwith sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver the Collateral or
any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, at any exchange, broker's board
or office of the Administrative Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Administrative Agent or any Lender shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Grantor,
which right or equity is hereby waived and released. Each Grantor further
agrees, at the Administrative Agent's request, to assemble the Collateral and
make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor's
premises or elsewhere. The Administrative Agent shall apply the net proceeds
of any action taken by it pursuant to this Section 6.6, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith
or incidental to the care or safekeeping of any of the Collateral or in any
way relating to the Collateral or the rights of the Administrative Agent and
the Lenders hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Administrative Agent may elect, and only
after such application and after the payment by the Administrative Agent of
any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the New York UCC, need the Administrative
Agent account for the surplus, if any, to any Grantor. To the extent
permitted by applicable law, each Grantor waives all claims, damages and
demands it may acquire against the Administrative Agent or any Lender arising
out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition.
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22
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock
pursuant to Section 6.6, and if in the opinion of the Administrative Agent it
is necessary or advisable to have the Pledged Stock, or that portion thereof
to be sold, registered under the provisions of the Securities Act, the
relevant Grantor will cause the Issuer thereof to (i) execute and deliver,
and cause the directors and officers of such Issuer to execute and deliver,
all such instruments and documents, and do or cause to be done all such other
acts as may be, in the opinion of the Administrative Agent, necessary or
advisable to register the Pledged Stock, or that portion thereof to be sold,
under the provisions of the Securities Act, (ii) use its best efforts to
cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto.
Each Grantor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Administrative Agent shall be under no obligation to delay a sale
of any of the Pledged Stock for the period of time necessary to permit the
Issuer thereof to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if such
Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock pursuant to this Section 6.7 valid
and binding and in compliance with any and all other applicable Requirements
of Law. Each Grantor further agrees that a breach of any of the covenants
contained in this Section 6.7 will cause irreparable injury to the
Administrative Agent and the Lenders, that the Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 6.7 shall
be specifically enforceable against such Grantor, and such Grantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default
has occurred under the Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of
the New York UCC. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient
to pay its Obligations and the fees and disbursements of any attorneys
employed by the Administrative Agent or any Lender to collect such
deficiency.
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23
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc.
(a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the
generality of the foregoing, each Grantor hereby gives the Administrative
Agent the power and right, on behalf of such Grantor, without notice to or
assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Account or with respect
to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section
6.6 or 6.7, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) ask or demand for, collect, and receive payment
of and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(iii) sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with
any of the Collateral; (iv) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other
right in respect of any Collateral; (v) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral;
(vi) settle, compromise or adjust any such suit, action or proceeding and,
in connection therewith, give such discharges or releases as the
Administrative Agent may deem appropriate; (vii) assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which any
such Copyright, Patent or Trademark pertains), throughout the world for
such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and (viii)
generally, sell, transfer, pledge and make any agreement with respect to
or otherwise deal with
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24
any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent's option and such Grantor's expense, at any time, or
from time to time, all acts and things which the Administrative Agent
deems necessary to protect, preserve or realize upon the Collateral and
the Administrative Agent's and the Lenders' security interests therein and
to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the
power of attorney provided for in this Section 7.1(a) unless an Event of
Default shall have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at
which interest would then be payable on past due ABR Loans under the Credit
Agreement, from the date of payment by the Administrative Agent to the date
reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect
or realize upon any of the Collateral or for any delay in doing so or shall
be under any obligation to sell or otherwise dispose of any Collateral upon
the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely to
protect the Administrative Agent's and the Lenders' interests in the
Collateral and shall not impose any duty upon the Administrative Agent or any
Lender to exercise any such powers. The Administrative Agent and the Lenders
shall be accountable only for amounts that they actually receive as a result
of the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any
act or failure to act hereunder, except for their own gross negligence or
willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402
of the New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing
or recording documents or instruments with respect to the Collateral without
the signature of such Grantor in such form and in such offices as the
Administrative Agent reasonably determines appropriate to perfect the
security interests of the Administrative Agent under this Agreement. A
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
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25
7.4 Authority of Administrative Agent. Each Grantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and
by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting,
and no Grantor shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with subsection 12.1 of the Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 12.2 of the Credit Agreement; provided that any
such notice, request or demand to or upon any Guarantor shall be addressed to
such Guarantor at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither
the Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced
in any Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by the Administrative Agent or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which the Administrative Agent or such Lender would
otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
agrees to pay or reimburse each Lender and the Administrative Agent for all
its costs and expenses incurred in collecting against such Guarantor under
the guarantee contained in Section 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Loan Documents to which such
Guarantor is a party, including, without limitation, the fees and
disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and of counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable with respect to
any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
<PAGE>
26
(c) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement to
the extent the Borrower would be required to do so pursuant to subsection
12.5 of the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and assigns;
provided that no Grantor may assign, transfer or delegate any of its rights
or obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time while
an Event of Default pursuant to subsection 10(a) of the Credit Agreement
shall have occurred and be continuing, without notice to such Grantor or any
other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held
or owing by the Administrative Agent or such Lender to or for the credit or
the account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or
such Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan
Document or otherwise, as the Administrative Agent or such Lender may elect,
whether or not the Administrative Agent or any Lender has made any demand for
payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Administrative Agent and each Lender shall
notify such Grantor promptly of any such set-off and the application made by
the Administrative Agent or such Lender of the proceeds thereof, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Administrative Agent and each
Lender under this Section 8.6 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the
Administrative Agent or such Lender may have.
8.7 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
<PAGE>
27
8.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are
no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof and
thereof not expressly set forth or referred to herein or in the other Loan
Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts
of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential
damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Grantors and the Lenders.
<PAGE>
28
8.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
8.15 Additional Grantors. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to subsection 8.10 of
the Credit Agreement shall become a Grantor for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.
8.16 Releases. (a) At such time as the Loans, the Reimbursement
Obligations and the other Obligations shall have been paid in full, the
Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby,
and this Agreement and all obligations (other than those expressly stated to
survive such termination) of the Administrative Agent and each Grantor
hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party, and all rights to the Collateral shall
revert to the Grantors. At the request and sole expense of any Grantor
following any such termination, the Administrative Agent shall deliver to
such Grantor any Collateral held by the Administrative Agent hereunder, and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent, at the request and sole expense of
such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens
created hereby on such Collateral. At the request and sole expense of the
Borrower, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that all the Capital Stock of such Subsidiary
Guarantor shall be sold, transferred or otherwise disposed of in a
transaction permitted by the Credit Agreement; provided that the Borrower
shall have delivered to the Administrative Agent, at least ten Business Days
prior to the date of the proposed release, a written request for release
identifying the relevant Subsidiary Guarantor and the terms of the sale or
other disposition in reasonable detail, including the price thereof and any
expenses in connection therewith, together with a certification by the
Borrower stating that such transaction is in compliance with the Credit
Agreement and the other Loan Documents.
<PAGE>
29
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of
the date first above written.
WINDY HILL PET FOOD HOLDINGS, INC.
By:
-------------------------------
Title:
WHPF INC.
By:
-------------------------------
Title:
ARMOUR CORPORATION
By:
-------------------------------
Title:
WINDY HILL PET FOOD COMPANY, INC.
By:
-------------------------------
Title:
Acknowledged and Agreed to as
of the date hereof by:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By:
---------------------------
Title:
<PAGE>
Schedule 1
NOTICE ADDRESSES OF GUARANTORS
<PAGE>
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
Pledged Stock:
Issuer Class of Stock Stock Certificate No. No. of Shares
- ------ -------------- --------------------- -------------
Pledged Notes:
Issuer Payee Principal Amount
- ------ ----- ----------------
<PAGE>
Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
[List each office where a financing statement is to be filed]
Patent and Trademark Filings
Actions with respect to Pledged Stock
Other Actions
<PAGE>
Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Location
- ------- --------
<PAGE>
Schedule 5
LOCATION OF INVENTORY AND EQUIPMENT
Grantors Locations
- -------- ---------
<PAGE>
Schedule 6
COPYRIGHTS AND COPYRIGHT LICENSES
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
Schedule 7
ACCOUNTS
<PAGE>
Schedule 8
EXISTING PRIOR LIENS
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Guarantee
and Collateral Agreement dated as of May 21, 1997 (the "Agreement"), made by
the Grantors parties thereto for the benefit of Credit Suisse First Boston,
as Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.
[NAME OF ISSUER]
By _______________________________________
Title_____________________________________
Address for Notices:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
Fax:______________________________________
<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of CREDIT SUISSE FIRST BOSTON, as administrative agent
(in such capacity, the "Administrative Agent") for the banks and other
financial institutions (the "Lenders") parties to the Credit Agreement
referred to below. All capitalized terms not defined herein shall have the
meaning ascribed to them in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, Windy Hill Pet Food Acquisition Co., the Lenders, the
Administrative Agent and The Chase Manhattan Bank, as documentation agent for
the Lenders (the "Documentation Agent") have entered into a Credit Agreement,
dated as of May 21, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
(as defined therein) and certain of its Affiliates (other than the Additional
Grantor) have entered into the Guarantee and Collateral Agreement, dated as
of May 21, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Guarantee and Collateral Agreement") in favor of the
Administrative Agent for the benefit of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to
become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver
this Assumption Agreement in order to become a party to the Guarantee and
Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a
party to the Guarantee and Collateral Agreement as a Grantor thereunder with
the same force and effect as if originally named therein as a Grantor and,
without limiting the generality of the foregoing, hereby expressly assumes
all obligations and liabilities of a Grantor thereunder. The information set
forth in Annex 1-A hereto is hereby added to the information set forth in
Schedules ____________ to the Guarantee and Collateral Agreement. The
Additional Grantor hereby represents and warrants that each of the
representations and warranties contained in Section 4 of the Guarantee and
Collateral Agreement is true and correct on and as the date hereof (after
giving effect to this Assumption Agreement) as if made on and as of such date.
2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above
written.
[ADDITIONAL GRANTOR]
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT G TO
CREDIT AGREEMENT
FORM OF SWING LINE LOAN PARTICIPATION CERTIFICATE
________ __, 19__
[Name of Lender]
_______________________
_______________________
Ladies and Gentlemen:
Pursuant to subsection 4.9(b) of the Credit Agreement, dated as
of May 21, 1997 (as amended, supplemented, waived or otherwise modified from
time to time, the "Credit Agreement"), among Windy Hill Pet Food Acquisition
Co., the several banks and other financial institutions from time to time
parties thereto (the "Lenders"), Credit Suisse First Boston, as
administrative agent for the Lenders and The Chase Manhattan Bank, a New York
banking corporation, as documentation agent for the Lenders, the undersigned
hereby acknowledges receipt from you on the date hereof of _________ DOLLARS
($__________) as payment for a participating interest in the following Swing
Line Loan:
Date of Swing Line Loan:____________________________
Principal Amount of Swing Line Loan:________________
Very truly yours,
CREDIT SUISSE FIRST BOSTON,
as Swing Line Lender
By:
------------------------
Title:
<PAGE>
EXHIBIT H TO
CREDIT AGREEMENT
FORM OF TERM NOTE
$____________ New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY, INC.,
a Minnesota corporation and successor by merger to Windy Hill Pet Food
Acquisition Co. (the "Borrower"), hereby unconditionally promises to pay to
the order of (the "Lender") at the office of Credit Suisse First Boston,
located at 11 Madison Avenue, New York, New York 10010, in lawful money of
the United States of America and in immediately available funds, the
principal amount of DOLLARS ($ ), or, if less, the unpaid principal amount of
the Term Loan made by the Lender pursuant to subsection 2.1 of the Credit
Agreement, as hereinafter defined. The principal amount shall be paid in the
amounts and on the dates specified in subsection 2.3. The Borrower further
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which
shall be attached hereto and made a part hereof the date, Type and amount of
the Term Loan and the date and amount of each payment or prepayment of
principal with respect thereto, each conversion of all or a portion thereof
to another Type, each continuation of all or a portion thereof as the same
Type and, in the case of Eurodollar Loans, the length of each Interest Period
with respect thereto. Each such endorsement shall constitute prima facie
evidence of the accuracy of the information endorsed. The failure to make any
such endorsement shall not affect the obligations of the Borrower in respect
of such Term Loan.
This Note (a) is one of the Term Notes referred to in the Credit
Agreement dated as of May 21, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among WINDY HILL PET
FOOD ACQUISITION CO., the Lender, the other banks and financial institutions
from time to time parties thereto, Credit Suisse First Boston, as
administrative agent, and The Chase Manhattan Bank, as Documentation Agent
(b) is subject to the provisions of the Credit Agreement and (c) is subject
to optional and mandatory prepayment in whole or in part as provided in the
Credit Agreement. This Note is secured and guaranteed as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description
of the properties and assets in which a security interest has been granted,
the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted
and the rights of the holder of this Note in respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
Schedule A
to Term Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Unpaid Principal
Amount of ABR Converted to Principal of ABR Loans Converted to Balance of ABR Notation
Date Loans ABR Loans Loans Repaid Eurodollar Loans Loans Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
to Term Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Unpaid
Interest Period Amount of Amount of Principal
Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Amount of to Eurodollar Rate with Eurodollar Converted to Eurodollar Notation
Date Eurodollar Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT I TO
CREDIT AGREEMENT
FORM OF ACQUISITION NOTE
$___________ New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY,
INC., a Minnesota corporation and successor by merger to Windy Hill Pet Food
Acquisition Co. (the "Borrower"), hereby unconditionally promises to pay to
the order of (the "Lender") at the office of Credit Suisse First Boston,
located at 11 Madison Avenue, New York, New York 10010, in lawful money of
the United States of America and in immediately available funds, on the
Termination Date the principal amount of (a) DOLLARS ($ ), or, if less, (b)
the aggregate unpaid principal amount of all Acquisition Loans made by the
Lender to the Borrower pursuant to subsection 3.1 of the Credit Agreement, as
hereinafter defined. The Borrower further agrees to pay interest in like
money at such office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in subsections 5.2 and
5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which
shall be attached hereto and made a part hereof the date, Type and amount of
each Acquisition Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in
the case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such
endorsement shall not affect the obligations of the Borrower in respect of
such Acquisition Loan.
This Note (a) is one of the Acquisition Loan Notes referred to in
the Credit Agreement dated as of May 21, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Windy Hill Pet Food Acquisition Co., the Lender, the other banks and
financial institutions from time to time parties thereto, Credit Suisse First
Boston, as administrative agent and The Chase Manhattan Bank, as
documentation agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part
as provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan
Documents for a description of the properties and assets in which a security
interest has been granted, the nature and extent of the security and the
guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in
respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note may become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
Schedule A
to Acquisition Loan Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Unpaid Principal
Amount of ABR Converted to Principal of ABR Loans Converted to Balance of ABR Notation
Date Loans ABR Loans Loans Repaid Eurodollar Loans Loans Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to Acquisition Loan Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Unpaid
Interest Period Amount of Amount of Principal
Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Amount of to Eurodollar Rate with Eurodollar Converted to Eurodollar Notation
Date Eurodollar Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT J TO
CREDIT AGREEMENT
FORM OF WORKING CAPITAL NOTE
$____________ New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY,
INC., a Minnesota corporation and successor by merger to Windy Hill Pet Food
Acquisition Co. (the "Borrower"), hereby unconditionally promises to pay to
the order of (the "Lender") at the office of Credit Suisse First Boston,
located at 11 Madison Avenue, New York, New York 10010, in lawful money of
the United States of America and in immediately available funds, on the
Termination Date the principal amount of (a) DOLLARS ($ ), or, if less, (b)
the aggregate unpaid principal amount of all Working Capital Loans made by
the Lender to the Borrower pursuant to subsection 4.1 of the Credit
Agreement, as hereinafter defined. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount hereof
from time to time outstanding at the rates and on the dates specified in
subsections 5.2 and 5.4 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which
shall be attached hereto and made a part hereof the date, Type and amount of
each Working Capital Loan made pursuant to the Credit Agreement and the date
and amount of each payment or prepayment of principal thereof, each
continuation thereof, each conversion of all or a portion thereof to another
Type and, in the case of Eurodollar Loans, the length of each Interest Period
with respect thereto. Each such endorsement shall constitute prima facie
evidence of the accuracy of the information endorsed. The failure to make any
such endorsement shall not affect the obligations of the Borrower in respect
of such Working Capital Loan.
This Note (a) is one of the Working Capital Notes referred to in
the Credit Agreement dated as of May 21, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), WINDY HILL PET
FOOD ACQUISITION CO., the Lender, the other banks and financial institutions
from time to time parties thereto, Credit Suisse First Boston, as
administrative agent and The Chase Manhattan Bank, as documentation agent,
(b) is subject to the provisions of the Credit Agreement and (c) is subject
to optional and mandatory prepayment in whole or in part as provided in the
Credit Agreement. This Note is secured and guaranteed as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description
of the properties and assets in which a security interest has been granted,
the nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were granted
and the rights of the holder of this Note in respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default,
all amounts then remaining unpaid on this Note may become, or may be declared
to be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
Schedule A
to Working Capital Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Unpaid Principal
Amount of ABR Converted to Principal of ABR Loans Converted to Balance of ABR Notation
Date Loans ABR Loans Loans Repaid Eurodollar Loans Loans Made By
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to Working Capital Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Unpaid
Interest Period Amount of Amount of Principal
Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Amount of to Eurodollar Rate with Eurodollar Converted to Eurodollar Notation
Date Eurodollar Loans Loans Respect Thereto Loans Repaid ABR Loans Loans Made By
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT K TO
CREDIT AGREEMENT
FORM OF SWING LINE NOTE
$____________ New York, New York
May 21, 1997
FOR VALUE RECEIVED, the undersigned, WINDY HILL PET FOOD COMPANY,
INC., a Minnesota corporation and successor by merger to Windy Hill Pet Food
Acquisition Co. (the "Borrower"), hereby unconditionally promises to pay to
the order of CREDIT SUISSE FIRST BOSTON (the "Swing Line Lender") and its
successors and assigns, at the office of Credit Suisse First Boston, 11
Madison Avenue, New York, New York 10010, in lawful money of the United
States of America and in immediately available funds, the principal amount of
the lesser of (a) FIVE MILLION DOLLARS ($5,000,000) and (b) the aggregate
unpaid principal amount of all Swing Line Loans made by the Swing Line Lender
to the undersigned pursuant to subsection 4.6 of the Credit Agreement, which
sum shall be payable on the Termination Date.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 5.4 of
the Credit Agreement until paid in full (both before and after judgment).
The holder of this Note is authorized to endorse on the schedule
annexed hereto and made a part hereof the date and amount of each Swing Line
Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
The failure to make any such endorsement shall not affect the obligations of
the Borrower in respect of such Swing Line Loan.
This Note is (a) one of the Swing Line Notes referred to in the
Credit Agreement, dated as of May 21, 1997 (as amended, supplemented, waived
or otherwise modified from time to time, the "Credit Agreement"), among WINDY
HILL PET FOOD ACQUISITION CO., the several banks and other financial
institutions from time to time parties thereto (including the Swing Line
Lender, the "Lenders"), Credit Suisse First Boston, as administrative agent
for the Lenders and The Chase Manhattan Bank, a New York banking corporation,
as documentation agent for the Lenders, and is entitled to the benefits
thereof, (b) is subject to the provisions of the Credit Agreement and (c) is
subject to optional and mandatory prepayment in whole or in part as provided
in the Credit Agreement. This Note is secured and guaranteed as provided in
the Loan Documents. Reference is hereby made to the Loan Documents for a
description of the properties and assets in which a security interest has
been granted, the nature and extent of the security and the guarantees, the
terms and conditions upon which the security interests and each guarantee
were granted and the rights of the holder of this Note in respect thereof.
<PAGE>
2
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts remaining unpaid on this Swing
Line Note may become, or may be declared to be, immediately due and payable
all as provided therein.
All parties now and hereafter liable with respect to this Swing
Line Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all other notices of
any kind.
Terms used herein which are defined in the Credit Agreement shall
have such defined meanings unless otherwise defined herein or unless the
context otherwise requires.
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
WINDY HILL PET FOOD COMPANY, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
Schedule A
to Swing Line Note
LOANS AND REPAYMENT OF SWING LINE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Unpaid Principal Balance of
Date Amount of Swing Line Loans Amount of Principal Repaid Swing Line Loans Notation Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT L TO
CREDIT AGREEMENT
FORM OF BORROWING CERTIFICATE
WINDY HILL PET FOOD COMPANY, INC.
(a Minnesota corporation)
Pursuant to subsection 7.2(f) of the Credit Agreement, dated as
of May 21, 1997, among WINDY HILL PET FOOD ACQUISITION CO., a Minnesota
corporation, the several banks and other financial institutions from time to
time parties thereto (the "Lenders"), CREDIT SUISSE FIRST BOSTON, as
administrative agent for the Lenders hereunder and THE CHASE MANHATTAN BANK,
a New York banking corporation, as documentation agent for the Lenders, each
of the undersigned hereby certifies on behalf of WINDY HILL PET FOOD COMPANY,
INC. (the "Borrower") that:
1. Each of the representations and warranties made by the Borrower
and the other Loan Parties in or pursuant to the Loan Documents are true
and correct in all material respects on and as of the date hereof (and, in
the case of the representations and warranties made on the Closing Date,
after giving effect to the Transactions) as if made on and as of the date
hereof except to the extent that such representations and warranties
expressly relate to an earlier date in which case such representations and
warranties were true and correct in all material respects as of such
earlier date; and
2. No Default or Event of Default has occurred and is continuing as
of the date hereof or after giving effect to the Extension of Credit
requested to be made on the date hereof.
3. Attached hereto is the Borrower's Notice for [Drawing]
[Conversion][Continuation].
IN WITNESS WHEREOF, the undersigned have hereunto set our names as
of the date set forth below.
WINDY HILL PET FOOD
COMPANY, INC.
By:
--------------------------
Title:
Date: ________ __, ____
<PAGE>
ATTACHMENT 1 to
Borrowing Certificate
Form of
Notice of Borrowing (Drawings)
To: Credit Suisse First Boston,
as Administrative Agent
11 Madison Avenue
New York, New York 10011
This Notice of Borrowing is given pursuant to Section 3.2 and/or
Section 4.2 of the Credit Agreement, dated as of May 21, 1997, among WINDY
HILL PET FOOD ACQUISITION CO., a Minnesota corporation, the several banks and
other financial institutions from time to time parties thereto (the
"Lenders"), CREDIT SUISSE FIRST BOSTON, as administrative agent for the
Lenders hereunder and THE CHASE MANHATTAN BANK, a New York banking
corporation, as documentation agent for the Lenders. Any and all initially
capitalized terms used herein have the meanings ascribed thereto in the
Credit Agreement unless otherwise specifically defined herein.
The undersigned hereby (one checked as applicable):
[_] gives Administrative Agent irrevocable notice
[_] confirms its irrevocable telephonic notice to
Administrative Agent
that it requests the making of an Acquisition Loan and/or Working Capital
Loan under the Credit Agreement as follows:
1. Date of Loan. The requested date of the proposed Loan is
__________, 19__.
2. Amount of Loan. The requested aggregate principal amount of
the requested Acquisition Loans and/or Working Capital Loans is:
Acquisition Loans: $__________
Working Capital Loans: $__________
<PAGE>
3. Rate Option and Interest Period. The requested interest rate
option and (if applicable) Interest Period for the proposed Loan is ((a) or
(b) checked as applicable):
A. Acquisition Loans:
[_] (i) The Eurodollar Rate for an Interest Period of (check
and complete as applicable):
1 month for $_______[_]__
2 months for $_______[_]__
3 months for $_______[_]__
6 months for $_______[_]__
[_] (ii) ABR for $__________.
B. Working Capital Loans:
[_] (i) The Eurodollar Rate for an Interest Period of (check
and complete as applicable):
1 month for $_______[_]__
2 months for $_______[_]__
3 months for $_______[_]__
6 months for $_______[_]__
[_] (ii) ABR for $__________.
WINDY HILL PET FOOD COMPANY, INC.
Dated: __________, 19___ By _________________________
Its
<PAGE>
ATTACHMENT 2 to
Borrowing Certificate
Form of
Notice of Borrowing (Continuations)
To: Credit Suisse First Boston,
as Administrative Agent
11 Madison Avenue
New York, New York 10011
This Notice of Borrowing is given pursuant to Section 5.2 of the
Credit Agreement, dated as of May 21, 1997, among WINDY HILL PET FOOD
ACQUISITION CO., a Minnesota corporation, the several banks and other
financial institutions from time to time parties thereto (the "Lenders"),
CREDIT SUISSE FIRST BOSTON, as administrative agent for the Lenders hereunder
and THE CHASE MANHATTAN BANK, a New York banking corporation, as
documentation agent for the Lenders. Any and all initially capitalized terms
used herein have the meanings ascribed thereto in the Credit Agreement unless
otherwise specifically defined herein.
The undersigned hereby (one checked as applicable):
[_] gives Administrative Agent irrevocable notice
[_] confirms its irrevocable telephonic notice to
Administrative Agent
that it requests the continuation of a Eurodollar Loan under the Credit
Agreement as follows:
1. Type of Loan. The Type of Loan applicable to such Eurodollar
Loan is (one checked as applicable):
[_]Term Loan [_]Acquisition Loan [_]Working Capital Loan
2. Expiration. The expiration of the Interest Period presently
applicable to such Eurodollar Loan is __________, 19__.
3. Amount to be Continued. The requested aggregate amount of such
Eurodollar Loan to be continued is: $__________.
<PAGE>
2
4. Interest Period. The Interest Period for the proposed Loan is:
[_] 1 month for $__________
[_] 2 months for $__________
[_] 3 months for $__________
[_] 6 months for $__________
WINDY HILL PET FOOD COMPANY, INC.
Dated: __________, 19___ By _________________________
Its
<PAGE>
ATTACHMENT 3
Borrowing Certificate
Form of
Notice of Borrowing (Conversions)
To: Credit Suisse First Boston,
as Administrative Agent
11 Madison Avenue
New York, New York 10011
This Notice of Borrowing is given pursuant to Section 5.2 of the
Credit Agreement, dated as of May 21, 1997, among WINDY HILL PET FOOD
ACQUISITION CO., a Minnesota corporation, the several banks and other
financial institutions from time to time parties thereto (the "Lenders"),
CREDIT SUISSE FIRST BOSTON, as administrative agent for the Lenders hereunder
and THE CHASE MANHATTAN BANK, a New York banking corporation, as
documentation agent for the Lenders. Any and all initially capitalized terms
used herein have the meanings ascribed thereto in the Credit Agreement unless
otherwise specifically defined herein.
The undersigned hereby (one checked as applicable):
[_] gives Administrative Agent irrevocable notice
[_] confirms its irrevocable telephonic notice to
Administrative Agent
that it requests the continuation of a Eurodollar Loan under the Credit
Agreement as follows:(1)
A. Conversion for ABR Loan to Eurodollar Loan.
1. Type of Loan. The Type of Loan upon which such conversion is
to occur is (one checked as applicable):
[_] Term Loan
[_] Acquisition Loan
[_] Working Capital Loan
2. Date of Conversion. The date upon which such conversion is to
occur is __________, 19__.
3. Amount to be Converted. The requested aggregate amount of such
ABR Loan to be converted into a Eurodollar Loan is: $__________.
- ----------
(1) Insert Part A and/or B, as applicable.
<PAGE>
4. Interest Period. The Interest Period for the proposed
Eurodollar Loan is:
[_] 1 month for $__________
[_] 2 months for $__________
[_] 3 months for $__________
[_] 6 months for $__________
B. Conversion from Eurodollar Loan to ABR Loan.
1. Type of Loan. The Type of Loan upon which such conversion is
to occur is (one checked as applicable):
[_] Term Loan
[_] Acquisition Loan
[_] Working Capital Loan
2. Date of Conversion. The date upon which such conversion is to
occur is __________, 19__.
3. Expiration. The expiration of the Interest Period presently
applicable to such Eurodollar Loan is __________, 19__, and the Interest
Period presently applicable thereto is _____ months.
4. Amount to be Converted. The requested aggregate amount of such
Eurodollar Loan to be converted into an ABR Loan is: $__________.
WINDY HILL PET FOOD COMPANY, INC.
Dated: __________, 19___ By _________________________
Its
<PAGE>
EXHIBIT M TO
CREDIT AGREEMENT
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of May 21,
1997 (as amended, supplemented, waived or otherwise modified from time to
time, the "Credit Agreement"), among Windy Hill Pet Food Acquisition Co., the
several banks and other financial institutions from time to time parties
thereto (the "Lenders"), Credit Suisse First Boston, as administrative agent
for the Lenders and The Chase Manhattan Bank, a New York banking corporation,
as documentation agent for the Lenders. Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "Assignor") and
the Assignee identified on Schedule l hereto (the "Assignee") agree as
follows:
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby
irrevocably purchases and assumes from the Assignor without recourse to the
Assignor, as of the Effective Date (as defined below), the interest described
in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's
rights and obligations under the Credit Agreement with respect to those
credit facilities contained in the Credit Agreement as are set forth on
Schedule 1 hereto (individually, an "Assigned Facility"; collectively, the
"Assigned Facilities"), in a principal amount for each Assigned Facility as
set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or with
respect to the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto, other than that the
Assignor has not created any adverse claim upon the interest being assigned
by it hereunder and that such interest is free and clear of any such adverse
claim; (b) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower, any of its
Subsidiaries or any other obligor or the performance or observance by the
Borrower, any of its Subsidiaries or any other obligor of any of their
respective obligations under the Credit Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto or thereto; and
(c) attaches any Notes held by it evidencing the Assigned Facilities and (i)
requests that the Administrative Agent, upon request by the Assignee,
exchange the attached Notes for a new Note or Notes payable to the Assignee
and (ii) if the Assignor has retained any interest in the Assigned Facility,
requests that the Administrative Agent exchange the attached Notes for a new
Note or Notes payable to the Assignor, in each case in amounts which reflect
the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).
<PAGE>
2
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to subsection 6.1 thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance;
(c) agrees that it will, independently and without reliance upon the
Assignor, the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under the
Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (d) appoints and authorizes
the Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Credit Agreement, the other
Loan Documents or any other instrument or document furnished pursuant hereto
or thereto as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are incidental thereto; and (e) agrees that it
will be bound by the provisions of the Credit Agreement and will perform in
accordance with its terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender including, if
it is organized under the laws of a jurisdiction outside the United States,
its obligation pursuant to subsection 5.10(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be
the Effective Date of Assignment described in Schedule 1 hereto (the
"Effective Date"). Following the execution of this Assignment and Acceptance,
it will be delivered to the Administrative Agent for acceptance by it and
recording by the Administrative Agent pursuant to the Credit Agreement,
effective as of the Effective Date (which shall not, unless otherwise agreed
to by the Administrative Agent, be earlier than five Business Days after the
date of such acceptance and recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in respect
of the Assigned Interest (including payments of principal, interest, fees and
other amounts) to the Assignor for amounts which have accrued to the
Effective Date and to the Assignee for amounts which have accrued subsequent
to the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment
and Acceptance, have the rights and obligations of a Lender thereunder and
under the other Loan Documents and shall be bound by the provisions thereof
and (b) the Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its obligations under
the Credit Agreement.
7. This Assignment and Acceptance shall be governed by, and
construed and interpreted in accordance with, the law of the State of New
York without regard to the conflicts of law principles thereof.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date first above written
by their respective duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor:_______________________________________________________________
Name of Assignee:_______________________________________________________________
Effective Date of Assignment:___________________________________________________
Credit Principal Commitment Percentage
Facility Assigned Amount Assigned Assigned(1)
- --------------------- ------------------ ---------------------------------
$_________________ ____._________________%
[Name of Assignee] [Name of Assignor]
By: By:
---------------------------------- ----------------------------------
Title: Title:
[Consented To:
WINDY HILL PET FOOD
COMPANY, INC.
Accepted:
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
By:
----------------------------------
Title:
By:
----------------------------------
Title:
By:
----------------------------------
Title:
Dated:_______________________________
- ----------
(1) Calculate the Commitment Percentage that is assigned to at least 15
decimal places and show as a percentage of the aggregate commitments of
all Lenders.
<PAGE>
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
each of the Grantors (as defined herein)
in favor of
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
Dated as of May 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS............................................ 1
1.1 Definitions............................................... 1
1.2 Other Definitional Provisions............................. 5
SECTION 2. GUARANTEE................................................ 5
2.1 Guarantee................................................. 5
2.2 Right of Contribution..................................... 6
2.3 No Subrogation............................................ 6
2.4 Amendments, etc. with respect to the Borrower Obligations. 6
2.5 Guarantee Absolute and Unconditional...................... 7
2.6 Reinstatement............................................. 7
2.7 Payments.................................................. 8
SECTION 3. GRANT OF SECURITY INTEREST............................... 8
SECTION 4. REPRESENTATIONS AND WARRANTIES........................... 8
4.1 Representations in Credit Agreement....................... 9
4.2 Title; No Other Liens..................................... 9
4.3 Perfected First Priority Liens............................ 9
4.4 Chief Executive Office.................................... 9
4.5 Inventory and Equipment................................... 9
4.6 Farm Products............................................. 9
4.7 Pledged Securities........................................ 9
4.8 Accounts.................................................. 10
4.9 Intellectual Property..................................... 10
SECTION 5. COVENANTS................................................ 10
5.1 Covenants in Credit Agreement............................. 10
5.2 Delivery of Instruments and Chattel Paper................. 11
5.3 Maintenance of Insurance.................................. 11
5.4 Payment of Obligations.................................... 11
5.5 Maintenance of Perfected Security Interest; Further
Documentation ........................................... 11
5.6 Changes in Locations, Name, etc........................... 12
5.7 Notices................................................... 12
5.8 Pledged Securities........................................ 12
5.9 Accounts.................................................. 13
5.10 Intellectual Property..................................... 13
5.11 Covenants of Holdings..................................... 15
5.12 Covenants of WHPF......................................... 15
5.13 Covenants of Armour....................................... 16
SECTION 6. REMEDIAL PROVISIONS...................................... 17
6.1 Certain Matters Relating to Accounts...................... 17
6.2 Communications with Obligors; Grantors Remain Liable...... 19
6.3 Pledged Stock............................................. 20
<PAGE>
6.4 Proceeds to be Turned Over To Administrative Agent........ 20
6.5 Application of Proceeds................................... 21
6.6 Code and Other Remedies................................... 21
6.7 Registration Rights....................................... 22
6.8 Waiver; Deficiency........................................ 22
SECTION 7. THE ADMINISTRATIVE AGENT................................. 23
7.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc ..................................................... 23
7.2 Duty of Administrative Agent.............................. 24
7.3 Execution of Financing Statements......................... 24
7.4 Authority of Administrative Agent......................... 25
SECTION 8. MISCELLANEOUS............................................ 25
8.1 Amendments in Writing..................................... 25
8.2 Notices................................................... 25
8.3 No Waiver by Course of Conduct; Cumulative Remedies....... 25
8.4 Enforcement Expenses; Indemnification..................... 25
8.5 Successors and Assigns.................................... 26
8.6 Set-Off................................................... 26
8.7 Counterparts.............................................. 26
8.8 Severability.............................................. 26
8.9 Section Headings.......................................... 26
8.10 Integration............................................... 27
8.11 GOVERNING LAW............................................. 27
8.12 Submission To Jurisdiction; Waivers....................... 27
8.13 Acknowledgements.......................................... 27
8.14 WAIVER OF JURY TRIAL...................................... 28
8.15 Additional Grantors....................................... 28
8.16 Releases.................................................. 28
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of May 21, 1997, made
by Windy Hill Pet Food Holdings, Inc., a Delaware corporation ("Holdings"), WHPF
Inc., a Delaware corporation formerly named Windy Hill Pet Food Company, Inc.
("WHPF"), Armour Corporation, a Delaware corporation ("Armour"), Windy Hill Pet
Food Company, Inc., a Minnesota corporation (the "Borrower"), each of the
signatories hereto (WHPF, Armour, the Borrower and each of the signatories
hereto, together with any other subsidiary of the Borrower that becomes a party
hereto from time to time after the date hereof, the ("Grantors")), in favor of
CREDIT SUISSE FIRST BOSTON, as administrative agent (the "Administrative Agent")
for the banks and other financial institutions (the "Lenders") from time to time
parties to the Credit Agreement, dated as of May 21, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Windy Hill Pet Food Acquisition Co., a Minnesota corporation,
("Acquisition Co."), the Lenders, the Administrative Agent and THE CHASE
MANHATTAN BANK, a New York banking corporation, as documentation agent for the
Lenders.
W I T N E S S E T H:
WHEREAS, Acquisition Co. proposes to merge with and into Hubbard
Milling Company, a Minnesota corporation ("Hubbard"), pursuant to the terms of a
Merger Agreement, dated as of March 21, 1997 among Hubbard, Windy Hill Pet Food
Co. Inc., and Acquisition Co., pursuant to which Hubbard will be the surviving
corporation and will be the borrower (the "Borrower") under the Credit
Agreement;
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the Borrower and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New
<PAGE>
2
York on the date hereof are used herein as so defined: Chattel Paper, Documents,
Equipment, Farm Products, Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Accounts": all accounts (as defined in the Code) of the Grantors,
including, without limitation all Accounts (as defined in the Credit
Agreement) of the Grantors.
"Agreement": this Guarantee and Collateral Agreement, as the same
may be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and
all other obligations and liabilities of the Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans and Reimbursement
Obligations and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to the Agents or any
Lender (or, in the case of any Hedge Agreement referred to below, any
Affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit
Agreement, this Agreement, the other Loan Documents, any Letter of Credit
or any Hedge Agreement entered into by the Borrower with the Issuing
Lender, any Lender (or any Affiliate of any Lender) or any other document
made, delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to
the Lenders that are required to be paid by the Borrower pursuant to the
terms of any of the foregoing agreements).
"Collateral": as defined in Section 3.
"Concentration Account": any concentration account established by
the Administrative Agent as provided in Section 6.1 or 6.4.
"Copyrights": (i) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof,
whether registered or unregistered and whether published or unpublished
(including, without limitation, those listed in Schedule 6), all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings
and applications in the United States Copyright Office, and (ii) the right
to obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"Excluded Property": means (i) any of the Borrower's rights to
indemnification against Hubbard Milling Company ("Hubbard Milling") and
its shareholders under the Merger
<PAGE>
3
Agreement, dated as of March 21, 1997, by and among Hubbard Milling, Windy
Hill Pet Food Company, Inc. and Windy Hill Pet Food Acquisition Co. (the
"Merger Agreement") for claims relating to assets transferred pursuant to
(X) the Merger Agreement or (Y) the sale of the Animal Feed Division and
(ii) the Borrower's interest in the escrow accounts established pursuant
to the Merger Agreement, in each case, to the extent a security interest
therein is granted to secure the full and timely payment and performance
by the Borrower of its indemnification obligations under the Asset
Purchase Agreement for the sale of the Animal Feed Division and (iii) all
property of the Animal Feed Division.
"General Intangibles": all "general intangibles" as such term is
defined in Section 9- 106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which
such Grantor is a party or under which such Grantor has any right, title
or interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture
without the consent of any other party thereto, would not give any other
party to such contract, agreement, instrument or indenture the right to
terminate its obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been obtained
from the other parties thereto (it being understood that the foregoing
shall not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit, restrict
or impair the grant by such Grantor of a security interest pursuant to
this Agreement in any Account or any money or other amounts due or to
become due under any such contract, agreement, instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Loan Document to which such
Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"Guarantors": the collective reference to Holdings and each Grantor
other than the Borrower.
"Hedge Agreements": as to any Person, all interest rate swaps, caps
or collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or
currency exchange rates or the exchange of nominal interest obligations,
either generally or under specific contingencies.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign
<PAGE>
4
laws or otherwise, including, without limitation, the Copyrights, the
Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and
the Trademark Licenses, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by
any Grantor to another Grantor or any of its Subsidiaries.
"Issuers": the collective reference to each issuer of a Pledged
Security.
"New York UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patents": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in
Schedule 6, and (iii) all rights to obtain any reissues or extensions of
the foregoing.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or
sell any invention covered in whole or in part by a Patent, including,
without limitation, any of the foregoing referred to in Schedule 6.
"Pledged Notes": all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business).
"Pledged Securities": the collective reference to the Pledged Notes
and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, shall include, without limitation,
all dividends or other income from the Pledged Securities, collections
thereon or distributions or payments with respect thereto.
"Securities Act": the Securities Act of 1933, as amended.
"Trademarks": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source
<PAGE>
5
or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith other
than any pending intent to use applications for which a statement of use
or an amendment to allege use have not been filed and accepted, whether in
the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof, or otherwise, and all common-law rights
related thereto, including, without limitation, any of the foregoing
referred to in Schedule 6, and (ii) the right to obtain all renewals
thereof.
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing referred to
in Schedule 6.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles and equipment covered by a certificate
of title of any state or of the United States of America and all tires and
other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in
<PAGE>
6
this Section 2 shall have been satisfied by payment in full, no Letter of Credit
shall be outstanding and the Commitments shall be terminated, notwithstanding
that from time to time during the term of the Credit Agreement the Borrower may
be free from any Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any
other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Borrower, any of the Guarantors, any
other guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid in
full, no Letter of Credit shall be outstanding and the Commitments are
terminated.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the Borrower on
account of the Borrower Obligations are paid in full, no Letter of Credit shall
be outstanding and the Commitments are terminated. If any amount shall be paid
to any Guarantor on account of such subrogation rights at any time when all of
the Borrower Obligations shall not have been paid in full, such amount shall be
held by such Guarantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
continued, and the Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
<PAGE>
7
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement and the other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders or all Lenders, as the case may be) may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Administrative Agent or any Lender for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or for the guarantee contained in this Section 2 or any
property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon the guarantee contained in this Section 2 or acceptance
of the guarantee contained in this Section 2; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Borrower and
any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 2.
Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity or enforceability of the Credit Agreement or any other Loan
Document, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Administrative Agent or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on or otherwise pursue such rights and remedies as it may
have against the Borrower, any other Guarantor or any other Person or against
any collateral security or guarantee for the Borrower Obligations or any right
of offset with respect thereto, and any failure by the Administrative Agent or
any Lender to make any such demand, to pursue such other rights or remedies or
to collect any payments from the Borrower, any other Guarantor or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent or
any Lender against any Guarantor. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the
<PAGE>
8
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 11
Madison Avenue, New York, New York 10010.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative
Agent, and hereby grants to the Administrative Agent, for the ratable benefit of
the Lenders, a security interest in, all of the following property now owned or
at any time hereafter acquired by such Grantor or in which such Grantor now has
or at any time in the future may acquire any right, title or interest other than
the Excluded Property (collectively, the "Collateral"), as collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment (other than Vehicles);
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Securities;
(j) all books and records pertaining to the Collateral; and
(k) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrower thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
<PAGE>
9
4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in subsection 6 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Administrative Agent and each Lender
shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty to
the Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed
to be a reference to such Guarantor's knowledge.
4.2 Title; No Other Liens. Except for the security interest granted
to the Administrative Agent for the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Grantor owns each item of the Collateral free and clear
of any and all Liens or claims of others. No financing statement or other public
notice with respect to all or any part of the Collateral is on file or of record
in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of the Lenders, pursuant to this
Agreement or as are permitted by the Credit Agreement and except in the case of
public notice filings at the U.S. Patent and Trademark Office which remain "on
file" despite the filing of a subsequent release.
4.3 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed form) will constitute valid perfected security
interests in all of the Collateral in favor of the Administrative Agent, for the
ratable benefit of the Lenders, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for (i) unrecorded Liens permitted by the
Credit Agreement which have priority over the Liens on the Collateral by
operation of law and (ii) Liens described on Schedule 8.
4.4 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
4.5 Inventory and Equipment. On the date hereof, the Inventory and
the Equipment (other than mobile goods) are kept at the locations listed on
Schedule 5.
4.6 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4.7 Pledged Securities. (a) The shares of Pledged Stock pledged by
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) To the best knowledge of such Grantor, each of the Pledged Notes
constitutes the legal, valid and binding obligation of the obligor with respect
thereto, enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable
<PAGE>
10
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement.
4.8 Accounts. (a) No amount payable to such Grantor under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Accounts will at such times
be accurate.
(c) The places where such Grantor keeps its records concerning such
Grantor's Accounts are listed on Schedule 7 or such other location or locations
of which such Grantor shall have provided prior written notice to the
Administrative Agent pursuant to Section 5.6 hereof.
4.9 Intellectual Property. (a) Schedule 6 lists all registered
Intellectual Property owned and currently used by such Grantor in its own name
on the date hereof.
(b) On the date hereof, all material registered U.S. Intellectual
Property is valid, subsisting, unexpired and enforceable, has not been abandoned
and , to such Grantor's knowledge and as used in connection with the business of
such Grantor, and, except as set forth in Schedule 6, does not infringe the
intellectual property rights of any other Person.
(c) Except as set forth in Schedule 6, on the date hereof, none of
the Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) Except as set forth in Schedule 6, No action or proceeding is
pending, or, to the knowledge of such Grantor, threatened, on the date hereof
(i) seeking to limit, cancel or question the validity of any Intellectual
Property or such Grantor's ownership interest therein, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
Intellectual Property.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Covenants in Credit Agreement. In the case of each Guarantor,
such Guarantor shall take, or shall refrain from taking, as the case may be,
each action that is necessary to be taken or
<PAGE>
11
not taken, as the case may be, so that no Default or Event of Default is caused
by the failure to take such action or to refrain from taking such action by such
Guarantor or any of its Subsidiaries.
5.2 Delivery of Instruments and Chattel Paper. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
5.3 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Administrative Agent and
(ii) to the extent requested by the Administrative Agent, insuring such Grantor,
the Administrative Agent and the Lenders against liability for personal injury
and property damage relating to such Inventory and Equipment, such policies to
be in such form and amounts and having such coverage as may be reasonably
satisfactory to the Administrative Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
during the month of June in each calendar year beginning 1998 and such
supplemental reports with respect thereto as the Administrative Agent may from
time to time reasonably request.
5.4 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.5 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and
<PAGE>
12
deliver, and have recorded, such further instruments and documents and take such
further actions as the Administrative Agent may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code
(or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby.
5.6 Changes in Locations, Name, etc. Such Grantor will not, except
upon 15 days' prior written notice to the Administrative Agent and delivery to
the Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a
location other than those listed on Schedule 5;
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
provided that, prior to taking any such action, or promptly after receiving a
written request therefor from the Administrative Agent, such Grantor shall
deliver to the Administrative Agent all additional executed financing statements
and other documents reasonably requested by the Administrative Agent to maintain
the validity, perfection and priority of the security interests provided for
herein.
5.7 Notices. Such Grantor will advise the Administrative Agent and
the Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.8 Pledged Securities. (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in addition to, in substitution of, as
a conversion of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent,
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13
subject to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Securities upon the
liquidation or dissolution of any Issuer shall be paid over to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
such Grantor will not (i) vote to enable, or take any other action to permit,
any Issuer to issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Pledged Securities issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in Section
5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it.
5.9 Accounts. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Account, (ii) compromise or settle any Account for
less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any Account or (v) amend, supplement or modify any Account in any
manner that could adversely affect the value thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 10% of the aggregate
amount of the then outstanding Accounts.
5.10 Intellectual Property. (a) Such Grantor (either itself or
through licensees) will (i) subject to its reasonable business judgment,
continue to use each material registered Trademark on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in full
force free from any claim of abandonment for non-use, (ii) maintain as in the
past the quality of products and services
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14
offered under such Trademark, (iii) use such Trademark with the appropriate
notice of registration and all other notices and legends required by applicable
Requirements of Law, (iv) not adopt or use any mark which is confusingly similar
or a colorable imitation of such Trademark unless the Administrative Agent, for
the ratable benefit of the Lenders, shall obtain a perfected security interest
in such mark pursuant to this Agreement, and (v) not (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby such Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do
any act, or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will
employ each material Copyright and (ii) will not (and will not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any portion of the material Copyrights may become invalidated or
otherwise impaired. Such Grantor will not (either itself or through licensees)
do any act whereby any portion of the material Copyrights may fall into the
public domain.
(d) Such Grantor (either itself or through licensees) will not do
any act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Notwithstanding anything to the contrary, any breach of clauses
(a) through (d) of this Section 5.10 by a licensee shall not be a breach by any
Grantor if the terms of the license granted to such licensee prohibit or require
the licensee to abide by the acts set forth therein and such Grantor is
diligently taking all reasonable action to cause such licensee to comply with
the terms of such licensee.
(f) Such Grantor will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(g) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may request to evidence the Administrative Agent's and the Lenders'
security interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.
(h) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
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15
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(i) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
5.11 Covenants of Holdings. Holdings covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the Loans, any Reimbursement Obligations, and all other
Obligations then due and owing have been paid in full, no Letter of Credit shall
be outstanding and the Commitments shall have terminated:
5.12.1 Holdings shall not conduct or otherwise engage, in any
business or operations other than (i) transactions contemplated by the Loan
Documents or the provision of administrative, legal, accounting and management
services to or on behalf of the Borrower or any of its Subsidiaries, (ii) the
ownership of the Capital Stock of WHPF (or any successor thereto), and the
exercise of rights and performance of obligations in connection therewith, (iii)
the entry into, and exercise of rights and performance of obligations in respect
of, (A) the Transaction Documents to which Holdings is a party, this Guarantee
and Collateral Agreement and the other Loan Documents to which Holdings is a
party, and any other agreement to which Holdings is a party on the date hereof,
in each case as amended, supplemented, waived or otherwise modified from time to
time, and any refinancings, refundings, renewals or extensions thereof, (B)
contracts and agreements with officers, directors and employees of the Holdings
or a Subsidiary thereof relating to their employment or directorships, (C)
insurance policies and related contracts and agreements, and (D) equity
subscription agreements, registration rights agreements, voting and other
stockholder agreements, engagement letters, underwriting agreements and other
agreements in respect of its equity securities or any offering, issuance or sale
thereof, (iv) the offering, issuance and sale of its equity securities, (v) the
filing of registration statements, and compliance with applicable reporting and
other obligations, under federal, state or other securities laws, (vi) the
listing of its equity securities and compliance with applicable reporting and
other obligations in connection therewith, (vii) the retention of transfer
agents, private placement agents, underwriters, counsel, accountants and other
advisors and consultants, (viii) the performance of obligations under and
compliance with its certificate of incorporation and by-laws, or any applicable
law, ordinance, regulation, rule, order, judgment, decree or permit, including,
without limitation, as a result of or in connection with the activities of the
Borrower and its Subsidiaries, (ix) the incurrence and payment of its operating
and business expenses and any taxes for which it may be liable, and (x) other
activities incidental or related to the foregoing.
5.12.2 Holdings shall not own, lease, manage or otherwise operate
any properties or assets (other than in connection with the activities described
in Section 5.12.1 above), or incur, create, assume or suffer to exist any
Indebtedness or Guarantee Obligations of Holdings (other than such as may be
incurred, created or assumed or exist in connection with the activities
described in Section 5.12.1 above).
5.12 Covenants of WHPF. WHPF covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the Loans, any Reimbursement Obligations, and all other
Obligations then due and owing have been paid in full, no Letter of Credit shall
be outstanding and the Commitments shall have terminated:
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16
5.13.1 WHPF shall not conduct or otherwise engage, in any business
or operations other than (i) transactions contemplated by the Loan Documents or
the provision of administrative, legal, accounting and management services to or
on behalf of the Borrower or any of its Subsidiaries, (ii) the ownership of the
Capital Stock of the Borrower (or any successor thereto) and Armour, and the
exercise of rights and performance of obligations in connection therewith, (iii)
the entry into, and exercise of rights and performance of obligations in respect
of, (A) the Transaction Documents to which WHPF is a party, this Guarantee and
Collateral Agreement and the other Loan Documents to which WHPF is a party, and
any other agreement to which WHPF is a party on the date hereof, in each case as
amended, supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (B) contracts and
agreements with officers, directors and employees of WHPF or a Subsidiary
thereof relating to their employment or directorships, (C) insurance policies
and related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, (iv) the
offering, issuance and sale of its equity securities, (v) the filing of
registration statements, and compliance with applicable reporting and other
obligations, under federal, state or other securities laws, (vi) the listing of
its equity securities and compliance with applicable reporting and other
obligations in connection therewith, (vii) the retention of transfer agents,
private placement agents, underwriters, counsel, accountants and other advisors
and consultants, (viii) the performance of obligations under and compliance with
its certificate of incorporation and by-laws, or any applicable law, ordinance,
regulation, rule, order, judgment, decree or permit, including, without
limitation, as a result of or in connection with the activities of the Borrower
and its Subsidiaries, (ix) the incurrence and payment of its operating and
business expenses and any taxes for which it may be liable, and (x) other
activities incidental or related to the foregoing.
5.13.2 WHPF shall not own, lease, manage or otherwise operate any
properties or assets (other than in connection with the activities described in
Section 5.13.1 above), or incur, create, assume or suffer to exist any
Indebtedness or Guarantee Obligations of WHPF (other than such as may be
incurred, created or assumed or exist in connection with the activities
described in Section 5.13.1 above).
5.13 Covenants of Armour. Armour covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the Loans, any Reimbursement Obligations, and all other
Obligations then due and owing have been paid in full, no Letter of Credit shall
be outstanding and the Commitments shall have terminated:
5.14.1 Armour shall not conduct or otherwise engage, in any business
or operations other than (i) transactions contemplated by the Loan Documents or
the provision of administrative, legal, accounting and management services to or
on behalf of the Borrower or any of its Subsidiaries, (ii) the ownership of the
Capital Stock of the Borrower (or any successor thereto), and the exercise of
rights and performance of obligations in connection therewith, (iii) the entry
into, and exercise of rights and performance of obligations in respect of, (A)
the Transaction Documents to which Armour is a party, this Guarantee and
Collateral Agreement and the other Loan Documents to which Armour is a party,
and any other agreement to which Armour is a party on the date hereof, in each
case as amended, supplemented, waived or otherwise modified from time to time,
and any refinancings, refundings, renewals or extensions thereof, (B) contracts
and agreements with officers, directors and employees of Armour or a Subsidiary
thereof relating to their employment or directorships, (C) insurance policies
and related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering,
<PAGE>
17
issuance or sale thereof, (iv) the offering, issuance and sale of its equity
securities, (v) the filing of registration statements, and compliance with
applicable reporting and other obligations, under federal, state or other
securities laws, (vi) the listing of its equity securities and compliance with
applicable reporting and other obligations in connection therewith, (vii) the
retention of transfer agents, private placement agents, underwriters, counsel,
accountants and other advisors and consultants, (viii) the performance of
obligations under and compliance with its certificate of incorporation and
by-laws, or any applicable law, ordinance, regulation, rule, order, judgment,
decree or permit, including, without limitation, as a result of or in connection
with the activities of the Borrower and its Subsidiaries, (ix) the incurrence
and payment of its operating and business expenses and any taxes for which it
may be liable, and (x) other activities incidental or related to the foregoing.
5.14.2 Armour shall not own, lease, manage or otherwise operate any
properties or assets (other than in connection with the activities described in
Section 5.14.1 above), or incur, create, assume or suffer to exist any
Indebtedness or Guarantee Obligations of Armour (other than such as may be
incurred, created or assumed or exist in connection with the activities
described in Section 5.14.1 above).
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts. (a) At any time and from
time to time after the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the relevant Grantor shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time after the
occurrence and during the continuance of an Event of Default, upon the
Administrative Agent's reasonable request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Accounts and the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of Default,
any Proceeds constituting collections of such Accounts, when collected by such
Grantor (excluding any such collections through the Lockbox system), (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Administrative Agent if required, in the Concentration Account established by
such Grantor maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section , and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the other Lenders, segregated from other funds of such Grantor. Each such
deposit of Proceeds of Accounts shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
All Proceeds constituting collections of Accounts while held by the
Concentration Account bank (or by any Guarantor in trust for the benefit of the
Administrative Agent and the other Lenders) shall continue to be collateral
security for all of the Obligations and shall not constitute payment thereof
until applied as hereinafter provided. At any time when an Event of Default has
occurred and is continuing, at the Administrative Agent's election, the
Administrative Agent may apply all or any part of the funds on deposit in the
Concentration Account established by
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18
the relevant Grantor to the payment of the Obligations of such Grantor then due
and owing, such application to be made as set forth in Section 6.5 hereof. So
long as no Event of Default has occurred and is continuing, the funds on deposit
in the Concentration Account shall be remitted as provided in Section 6.1(e)
hereof. At any time when an Event of Default has occurred and is continuing, at
the Administrative Agent's request, each Grantor shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to such Grantor's Accounts,
including, without limitation, all statements relating to such Grantor's
Accounts.
(c) At any time and from time to time after the occurrence and
during the continuance of an Event of Default, at the Administrative Agent's
request, each Grantor shall deliver to the Administrative Agent all original and
other documents evidencing, and relating to, the agreements and transactions
which gave rise to such Grantor's Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
(d) Lockbox System; Concentration Account. (i) Solely to the extent
required under Section 8.11 of the Credit Agreement, each Grantor shall
establish or cause to be established in the name of the Administrative Agent,
and subject to the control of the Administrative Agent pursuant to such
Grantor's Lockbox Agreements, for the benefit of the Administrative Agent and
the other Lenders, such Grantor's Lockbox system into which the Proceeds of all
such Grantor's Accounts shall be deposited and forwarded to the Concentration
Account bank in accordance with and to the extent and when required under such
Lockbox Agreements. On and after the date, if any, on which any Grantor is
required to establish any Lockbox system for so long as such Grantor is required
to maintain such system, (x) such Grantor shall ensure that all account debtors
in respect of such Grantor's Accounts payable in Dollars shall have been given
instructions reasonably satisfactory to the Administrative Agent directing such
account debtors to make all payments on such Accounts by means of deposits into
such Grantor's Lockbox system, (y) without the prior consent of the
Administrative Agent (which consent shall not be unreasonably withheld), such
Grantor shall not, in a manner materially adverse to the Lenders, change the
form of any such instructions given to account debtors, and (z) unless and until
the Administrative Agent shall have advised such Grantor to the contrary, such
Grantor shall, and the Administrative Agent hereby authorizes such Grantor to,
enforce and collect all amounts owing on such Grantor's Accounts, for the
benefit and on behalf of the Administrative Agent and the other Lenders in
accordance with and subject to the provisions of such Grantor's Lockbox
Agreements; provided, however, that such privilege shall automatically be
suspended upon the occurrence and during the continuance of an Event of Default
specified in Section 10(f) of the Credit Agreement with respect to such Grantor
and may at the option of the Administrative Agent be terminated upon the
occurrence and during the continuance of any other Event of Default with respect
to such Grantor or any other Grantor.
(ii) All Proceeds of such Grantor's Accounts which have been received on
any Business Day through such Grantor's Lockbox system will be transferred into
such Grantor's Concentration Account on such Business Day to the extent required
by the applicable Lockbox Agreement. All of such Grantor's Proceeds received on
any Business Day by the Concentration Account bank pursuant to paragraph (b)
above will be transferred into such Grantor's Concentration Account on such
Business Day. Such Concentration Account is, and shall remain, under the sole
dominion and control of the Administrative Agent. Each Grantor acknowledges and
agrees that (A) such Grantor has no right of withdrawal from its Concentration
Account, (B) the funds on deposit in such Grantor's Concentration Account shall
be collateral security for all of such Grantor's Obligations and (C) upon the
occurrence and during the continuance of an Event of Default, at the
Administrative Agent's election, the funds on deposit in such Grantor's
Concentration Account may be applied by the Administrative Agent to
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19
the payment of such Grantor's Obligations then due and owing, such application
to be made in the order of priority set forth in Section 6.5 hereof.
(e) Grantor's Account. So long as no Event of Default has occurred
and is continuing, and whether or not any Lockbox system shall have been
established or maintained, the Administrative Agent shall instruct the
Concentration Account bank to promptly remit any funds on deposit in each
Grantor's Concentration Account to such Grantor's Account. In the event that an
Event of Default has occurred and is continuing, the Administrative Agent and
the Grantors agree that the Administrative Agent, at its option, may require
that each Concentration Account be established at Credit Suisse First Boston.
Each Grantor shall have the right, at any time and from time to time, to
withdraw such of its own funds from its own Account, and to maintain such
balances in its Account, as it shall deem to be necessary or desirable.
(f) Restructuring of Deposit Accounts. If (a) any Concentration
Account is maintained at a Concentration Account bank located in a state within
the United States in which Article 9 of the Uniform Commercial Code in effect in
such state has been expressly made applicable to (and only for so long as it is
applicable to) demand deposit accounts and all filings have been made in such
state which are necessary to perfect the Lenders' security interest in such
Concentration Account or (b) after the Effective Date the relevant Grantor
demonstrates to the Administrative Agent, and the Administrative Agent in its
sole discretion agrees, that the costs associated with maintaining both a
Concentration Account and a Grantor's Account outweigh any benefits to the
Lenders in terms of any additional protection to their rights in such Grantor's
Collateral that could not be achieved with the use of a single account, then
upon the request of such Grantor, the Administrative Agent may amend this
Agreement to delete the requirement that a separate Account be maintained and
provide that such Grantor be entitled to withdraw funds on deposit in such
Concentration Account at any time so long as no Event of Default has occurred
and is continuing.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default,
communicate with obligors under the Accounts to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Accounts.
(b) Upon the request of the Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default, each Grantor
shall notify obligors on the Accounts that the Accounts have been assigned to
the Administrative Agent for the ratable benefit of the Lenders and that
payments in respect thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Account (or any agreement giving rise thereto) by reason of or arising out
of this Agreement or the receipt by the Administrative Agent or any Lender of
any payment relating thereto, nor shall the Administrative Agent or any Lender
be obligated in any manner to perform any of the obligations of any Grantor
under or pursuant to any Account (or any agreement giving rise thereto), to make
any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
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20
6.3 Pledged Stock. (a) Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities; provided, however, that
no vote shall be cast or corporate right exercised or other action taken which,
in the Administrative Agent's reasonable judgment, would impair the Collateral
or which would be inconsistent with or result in any violation of any provision
of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Administrative Agent may determine, and (ii)
any or all of the Pledged Securities shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In addition
to the rights of the Administrative Agent and the Lenders specified in Section
6.1 with respect to payments of Accounts, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Concentration Account maintained under its sole
dominion and control. All Proceeds while held by the Administrative Agent in a
Concentration Account (or by such Grantor in trust for the
<PAGE>
21
Administrative Agent and the Lenders) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section .
6.5 Application of Proceeds. At such intervals as may be agreed upon
by the Borrower and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent's
election, the Administrative Agent may apply all or any part of Proceeds held in
any Concentration Account in payment of the Obligations in such order as the
Administrative Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the
Administrative Agent to the Borrower or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Borrower or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall occur and
be continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor's premises
or elsewhere. The Administrative Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 6.6, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Administrative Agent may elect, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
New York UCC, need the Administrative Agent account for the surplus, if any, to
any Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
<PAGE>
22
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
<PAGE>
23
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a)
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, without notice to or assent by such Grantor, to do any or all of
the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Account or with respect
to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section
6.6 or 6.7, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) ask or demand for, collect, and receive payment
of and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(iii) sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with
any of the Collateral; (iv) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other
right in respect of any Collateral; (v) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral;
(vi) settle, compromise or adjust any such suit, action or proceeding and,
in connection therewith, give such discharges or releases as the
Administrative Agent may deem appropriate; (vii) assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which any
such Copyright, Patent or Trademark pertains), throughout the world for
such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and (viii)
generally, sell, transfer, pledge and make any agreement with respect to
or otherwise deal with
<PAGE>
24
any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent's option and such Grantor's expense, at any time, or
from time to time, all acts and things which the Administrative Agent
deems necessary to protect, preserve or realize upon the Collateral and
the Administrative Agent's and the Lenders' security interests therein and
to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the Credit Agreement, from the date
of payment by the Administrative Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely to
protect the Administrative Agent's and the Lenders' interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
the New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
<PAGE>
25
7.4 Authority of Administrative Agent. Each Grantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with subsection 12.1 of the Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 12.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees
to pay or reimburse each Lender and the Administrative Agent for all its costs
and expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Lender and of
counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
<PAGE>
26
(c) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement to the
extent the Borrower would be required to do so pursuant to subsection 12.5 of
the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time while an
Event of Default pursuant to subsection 10(a) of the Credit Agreement shall have
occurred and be continuing, without notice to such Grantor or any other Grantor,
any such notice being expressly waived by each Grantor, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the
Administrative Agent or such Lender to or for the credit or the account of such
Grantor, or any part thereof in such amounts as the Administrative Agent or such
Lender may elect, against and on account of the obligations and liabilities of
such Grantor to the Administrative Agent or such Lender hereunder and claims of
every nature and description of the Administrative Agent or such Lender against
such Grantor, in any currency, whether arising hereunder, under the Credit
Agreement, any other Loan Document or otherwise, as the Administrative Agent or
such Lender may elect, whether or not the Administrative Agent or any Lender has
made any demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured. The Administrative Agent and each Lender
shall notify such Grantor promptly of any such set-off and the application made
by the Administrative Agent or such Lender of the proceeds thereof, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Administrative Agent and each Lender
under this Section 8.6 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Administrative Agent or
such Lender may have.
8.7 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
<PAGE>
27
8.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts
of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential
damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Grantors and the Lenders.
<PAGE>
28
8.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.15 Additional Grantors. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to subsection 8.10 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.16 Releases. (a) At such time as the Loans, the Reimbursement
Obligations and the other Obligations shall have been paid in full, the
Commitments have been terminated and no Letters of Credit shall be outstanding,
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Administrative Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrower, a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Subsidiary Guarantor shall be sold, transferred or
otherwise disposed of in a transaction permitted by the Credit Agreement;
provided that the Borrower shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Subsidiary Guarantor and the terms
of the sale or other disposition in reasonable detail, including the price
thereof and any expenses in connection therewith, together with a certification
by the Borrower stating that such transaction is in compliance with the Credit
Agreement and the other Loan Documents.
<PAGE>
29
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
WINDY HILL PET FOOD HOLDINGS, INC.
By: /s/ M. Laurie Cummings
-------------------------------
Title: V.P.
WHPF INC.
By: /s/ M. Laurie Cummings
-------------------------------
Title: V.P.
ARMOUR CORPORATION
By: /s/ M. Laurie Cummings
-------------------------------
Title: V.P.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ M. Laurie Cummings
-------------------------------
Title: V.P.
Acknowledged and Agreed to as
of the date hereof by:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By:
--------------------------------------
Title:
<PAGE>
29
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
WINDY HILL PET FOOD HOLDINGS, INC.
By:
-------------------------------
Title:
WHPF INC.
By:
-------------------------------
Title:
ARMOUR CORPORATION
By:
-------------------------------
Title:
WINDY HILL PET FOOD COMPANY, INC.
By:
-------------------------------
Title:
Acknowledged and Agreed to as
of the date hereof by:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By: /s/ PP Wenger /s/ PP Lubinsky
--------------------------------------
Title: Associate VP
<PAGE>
29
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
WINDY HILL PET FOOD HOLDINGS, INC.
By:
-------------------------------
Title:
WHPF INC.
By:
-------------------------------
Title:
ARMOUR CORPORATION
By:
-------------------------------
Title:
WINDY HILL PET FOOD COMPANY, INC.
By:
-------------------------------
Title:
Acknowledged and Agreed to as
of the date hereof by:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent
By: /s/ PP Horgan /s/ PP Wenger
--------------------------------------
Title: Vice President Associate
<PAGE>
Schedule 1
to the Guarantee and
Collateral Agreement
NOTICE ADDRESSES OF GUARANTORS
WHPF Inc. Two Maryland Farms
Suite 301
Brentwood, TN 37027-2487
Attn: Robert V. Dale
Facsimile: 615-373-9152
c/o Dartford Partnership
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attn: M. Laurie Cummings
Facsimile: 415-982-3023
Windy Hill Pet Food Holdings, Inc. c/o Dartford Partnership
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attn: M. Laurie Cummings
Facsimile: 415-982-3023
Armour Corporation Two Maryland Farms
Suite 301
Brentwood, TN 37027-2487
Attn: Robert V. Dale
Facsimile: 615-373-9152
c/o Dartford Partnership
456 Montgomery Street
Suite 2200
San Francisco, CA 94104
Attn: M. Laurie Cummings
Facsimile: 415-982-3023
<PAGE>
Schedule 2
to the Guarantee and
Collateral Agreement
DESCRIPTION OF PLEDGED SECURITIES
<TABLE>
<CAPTION>
Pledgor Issuer Class of Stock Stock Certificate No. of Shares
- ------- ------ -------------- ----------------- -------------
<S> <C> <C> <C> <C>
Pledged Stock:
WHPF Inc. Windy Hill Pet Food Common 2 2,744
Company, Inc. (MN)
Armour Corporation Common 28 10,000
Preferred 4 25,000
Armour Corporation Windy Hill Pet Food Common 1 1,756
Company, Inc. (MN)
Pledged Notes:
Issuer Payee Principal Amount
- ------ ----- ----------------
WHPF Inc. Windy Hill Pet Food $7,936,357.54
Company, Inc.
</TABLE>
<PAGE>
Schedule 3
to the Guarantee and
Collateral Agreement
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
Company Jurisdiction
- ------- ------------
WHPF Inc. California Sec. of State
Delaware Sec. of State
Tennessee Sec. of State
Armour Corporation California Sec. of State
Delaware Sec. of State
Tennessee Sec. of State
Borrower California Sec. of State
and County Recorder of Deeds of Los Angeles
County
and County Recorder of Deeds of San Joaquin
County
and County Clerk of Adams County
Colorado Sec. of State
and Adams County
Florida Sec. of State
and Duval County
Georgia Clerk of Superior Court in Bartow County
Idaho Sec. of State
Illinois Sec. of State
and County Recorder of Deeds of Kankakee
County
and County Recorder of Deeds of Dupage County
Indiana Sec. of State
and Jay County
Iowa Sec. of State
and Cerro Gordo County
<PAGE>
Company Jurisdiction
- ------- ------------
Kansas Sec. of State
and McPherson County
and County Recorder of Deeds of Shawnee
County
Maryland State Dept. of Assessments and Taxation
Michigan Sec. of State
Minnesota Sec. of State
and Ottertail County
and Le Suena County
and Swift County
and Becker County
and Blue Earth County
Missouri Sec. of State
and the County Recorder of Deeds of Bates
County
Montana Sec. of State
Nebraska Sec. of State
New Jersey Sec. of State
and County Clerk of Somerset County
New York Sec. of State
and the County Clerk of Rockland County
North Dakota Sec. of State
and the Register of Deeds in Burleigh County
Ohio Sec. of State and the County
and the Recorders of Shelby and Lucas Counties
Oregon Sec. of State
and Clackamas County
Pennsylvania Sec. of the Commonwealth
and the Prothonotary of Columbia County
and the Prothonotary of Lehigh County
South Dakota Sec. of State
Tennessee Sec. of State
and Williamson County
and Weakly County
and Carroll County
Texas Sec. of State
and County Clerk of Dallas County
and County Clerk of Tarrant County
Washington State Dept. of Licensing
Wisconsin Sec. of State
and Walworth County
Wyoming Sec. of State
<PAGE>
Patent and Trademark Filings
Covered by the UCC filings listed above and U.S. Patent and Trademark Office.
Actions with respect to Pledged Stock
Delivery to the Administrative Agent.
Other Actions
None.
<PAGE>
Schedule 4
to the Guarantee and
Collateral Agreement
LOCATION OF JURISDICTION OF ORGANIZATION
AND CHIEF EXECUTIVE OFFICE
Grantor Location
- ------- --------
Windy Hill Pet Food Company, Inc. (MN) Two Maryland Farms
Suite 301
Brentwood, TN 37027-2487
Attn: Robert V. Dale
(See Schedule 1 for others.)
<PAGE>
Schedule 5
to the Guarantee and
Collateral Agreement
LOCATION OF INVENTORY AND EQUIPMENT
Grantor: The Borrower
Locations:
1. 2 Maryland Farms
Suite 301
Brentwood, Tennessee 37027
County: Williamson
2. 633 Euclid Avenue
McKenzie, Tennessee 38201
County: Weakly
3. 145 First Avenue, North
Perham, Minnesota 56573
County: Ottertail
4. 400 Block of 5th Street, N.W.
Perham, Minnesota 56573
County: Ottertail
5. 136 9th Avenue, S.W.
Perham, Minnesota 56573
County: Ottertail
6. 100 Block of 2nd Street, N.E.
Perham, Minnesota 56573
County: Ottertail
7. Premier Distribution Services, Inc.
2501 71st Street
North Bergen, NJ 07047
County: Somerset
<PAGE>
8. Rudie Wilhelm Warehouse Co.
1200 S.E. Jennifer
Clackamas, OR 97015
County: Clackamas
9. Nawf Co. Inc.
1213 W. North Carrier Parkway
Grand Prarie, TX 75050
County: Tarrant
10. Acme Distribution Centers, Inc.
18101 East Colfax Avenue
Aurora, CO 80011
County: Adams
11. Weber Distribution Warehouse
15500 Pheobe Avenue
La Miranda, CA 90638
County: Los Angeles
12. La Grou Distribution System
3514 South Kostner Avenue, West
Chicago, Illinois 60632
County: Dupage
13. Southern Packaging
5330 West 5th Street
Jacksonville, Florida 32209
County: Duval
14. Exel Logistics
1720 Hayden Road
Carrollton, Texas 75006
County: Dallas
15. Star-Kist Foods, Inc.
20801 S. Santa Fe Avenue
Carson, California 90810
County: Los Angeles
16. Prism
3664 Perlman Drive
Stockton, California 95215
<PAGE>
County: San Joaquin
17. Star-Kist Foods, Inc.
1551 E. Willow Street
Kankakee, Illinois 60901
County: Kankakee
18. Star-Kist Foods, Inc.
6650 Low Street
Bloomburg, Pennsylvania
County: Columbia
19. Carroll Sales
600 4th Street, S.W.
Mason City, Iowa 50401
County: Cerro Gordo
20. Star-Kist Foods, Inc.
1040 Ways Avenue
Terminal Island, California 90731
County: Los Angeles
21. Star-Kist Foods, Inc.
2200 N.W. Brickyard Road
Topeka, Kansas 66618
County: Shawnee
22. Heritage Industries
One Heritage Place
Frazee, Minnesota
County: Becker
23. 424 North Riverfront Drive
Mankato, Minnesota
County: Blue Earth
24. 218 East Lincoln Street
Portland, Indiana
County: Jay
25. 1084 Arapaho Road
Inman, Kansas
County: McPherson
<PAGE>
26. 105 and 309 Atlantic Avenue
DeGraff, Minnesota
County: Swift
27. 1800 Hubbard Lane
LeSueur, Minnesota
County: LeSueur
28. 6821 Ruppsville Road
Allentown, Pennsylvania
County: Lehigh
29. Route 59
Hillburn, New York
County: Rockland
30. (Tax No. FD2500002)
Delavan, Wisconsin
County: Walworth
31. 424 North Riverfront Drive
Mankato, Minnesota
County: Blue Earth
32. Old Highway 22
McKenzie, Tennessee
County: Carroll
33. First Avenue
North Perham, Minnesota
County:
34. 2 Maryland Farms
Brentwood, Tennessee
County: Williamson
35. 400 Block of 5th Street, N.W.
Perham, Minnesota
County: Ottertail
36. 136 9th Avenue, S.W.,
Perham, Minnesota
County: Ottertail
<PAGE>
37. 100 Block of 2nd Street, N.E.
Perham, Minnesota
County: Ottertail
38. 145 First Avenue
North Perham, Minnesota
County:
39. Rudie Welhelm Warehouse Co.
P.O. Box 22226
Milwaukee, OR 97269-2226
County: Clackamas
40. 17 Veronica Avenue
Somerset, NJ 08873
County: Somerset
41. La Grou Distribution System
1800 Hawthorne Lane
W. Chicago, IL 60185
County: DuPage
<PAGE>
Schedule 6
to the Guarantee and
Collateral Agreement
(See attachment.)
<PAGE>
Schedule 7
to the Guarantee and
Collateral Agreement
ACCOUNTS
Windy Hill Pet Food Company, Inc. (MN) Two Maryland Farms
Suite 301
Brentwood, TN 37027-2487
Attn: Robert V. Dale
(See Schedule 1 for others.)
<PAGE>
Schedule 8
to the Guarantee and
Collateral Agreement
EXISTING PRIOR LIENS
(See Schedule 9.3(g) of the Credit Agreement.)
<PAGE>
Attachment
to Schedule 6
of the Guarantee and
Collateral Agreement
INTELLECTUAL PROPERTY
I. OWNED INTELLECTUAL PROPERTY
A. EXISTING BUSINESS
1. U.S. Registered Marks
Mark Reg. No. Reg. Date Status
- ---- -------- --------- ------
BONKERS 1,402,410 07/22/86 REGISTERED
FIELD FORMULA 1,089,841 04/18/78 REGISTERED
FOOD OF CHAMPIONS 947,325 11/14/72 REGISTERED
G. WHISKERS 1,555,992 09/12/89 REGISTERED
G. WHISKERS 1,474,393 01/26/88 REGISTERED
HOME AND FIELD 1,272,053 03/27/84 REGISTERED
MEATY MEAL 1,094,125 06/20/78 REGISTERED
ROSE'S 1,050,886 10/19/76 REGISTERED
ROSE'S 1,457,669 09/15/87 REGISTERED
ROYAL FEAST 1,276,457 05/01/84 REGISTERED
TRAIL BLAZER and Design 985,144 05/28/74 REGISTERED
TRAIL MASTER 1,840,059 06/14/94 REGISTERED
TUFFY'S 2,010,312 10/22/96 REGISTERED
CANINE PRIME and Design 1,991,988 08/06/96 REGISTERED
FELINE PRIME and Design 1,991,987 08/06/96 REGISTERED
2. Foreign Marks
<TABLE>
<CAPTION>
Mark Country Registered Owner Reg. No. Reg. Date Status
- ---- ------- ---------------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
BONKERS Canada Martha White 339,181 04/15/88 REGISTERED
Foods, Inc.
BONKERS Germany Windmill 1,077,871 06/10/85 REGISTERED
Corporation
BONKERS Japan Windmill 3,097,544 ? REGISTERED
Corporation
TRAIL BLAZER Germany The PFB 1,088,102 02/18/86 REGISTERED
Partnership L.P.
</TABLE>
-1-
<PAGE>
2. Foreign Marks
<TABLE>
<CAPTION>
Mark Country Registered Owner Reg. No. Reg. Date Status
- ---- ------- ---------------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
TRAIL BLAZER Singapore Windmill 2720/9 ? REGISTERED
Corporation
TUFFY Benelux Windy Hill Pet 319,988 07/23/73 REGISTERED
Food Company,
Inc.
TUFFY'S Canada Windy Hill Pet TMA205,343 02/14/75 REGISTERED
Food Company,
Inc.
TUFFY'S Japan Windy Hill Pet 1,279,595 06/24/77 REGISTERED
Food Company,
Inc.
TUFFY'S in Japan Windy Hill Pet 1,302,914 10/03/77 REGISTERED
Katakana Food Company,
Characters Inc.
TUFFY'S Taiwan Windy Hill Pet 683,198 07/01/95 REGISTERED
Food Company,
Inc.
TUFFY'S and Taiwan Windy Hill Pet 484,245 05/16/90 REGISTERED
TUFFY'S in Food Company,
Chinese Inc.
Characters
TUFFY'S PET Canada Windy Hill Pet TMA183,128 05/12/72 REGISTERED
FOODS Food Company,
Inc.
</TABLE>
3. State Trademark Registrations/Variety Designators
<TABLE>
<CAPTION>
Mark Country Registered Owner Reg. No. Reg. Date Status
- ---- ------- ---------------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
DIXIE TREAT Tennessee Windmill 930,428 04/28/93 REGISTERED
COUNTRY Corporation
STYLE DOG (d/b/a Martha
FOOD and White Foods)
Design
TUFFY'S Montana Windy Hill Pet 9147 06/04/71 REGISTERED
Food Company,
Inc.
TUFFY'S Nevada Windy Hill Pet -- 05/31/72 REGISTERED
Food Company,
Inc.
TUFFY'S West Virginia Windy Hill Pet 247,184 08/14/72 REGISTERED
Food Company,
Inc.
</TABLE>
-2-
<PAGE>
4. Fictitious Business Names/Trade Names/Common Law Trademarks
TUFFY'S PET PRODUCTS
TUFFY'S PET PRODUCTS COMPANY
CHUNK (Canada only)
GOLDEN CHUNKS (United States only)
HIGH PROTEIN MEAL (United States and Canada only)
PREMIUM PUPPY GROWTH FORMULA (United States and Canada only)
DINNERTIME (United States and Canada only)
HIGH DENSITY FORMULA (United States and Canada only)
PERFORMANCE BLEND (United States only)
B. HUBBARD PET FOOD DIVISION
1. U.S. Registered Marks and Pending Applications
a. Registrations
Registration NO.
MARK (DATE) STATUS
- ---- ---------------- ------
BECAUSE FRIENDS TAKE CARE OF FRIENDS
United States 1,760,755 REGISTERED
(03/23/93)
BONES AND BITS
United States 1,816,454 REGISTERED
(01/11/94)
CHOICE CHUNKS
United States 1,149,458 REGISTERED
(03/24/81)
CHOICE STARS
United States 1,697,061 REGISTERED
(06/23/92)
CHOMPERS (Stylized Letters)
United States 1,318,473 REGISTERED.
(02/05/85)
COUNTRY PRIME
United States 1,993,173 REGISTERED.
(08/13/96)
COUNTRY PRIME KIBBLES AND NIBBLES
-3-
<PAGE>
Registration NO.
MARK (DATE) STATUS
- ---- ---------------- ------
United States 1,799,565 REGISTERED
(10/19/93)
COUNTRY PRIME MOIST & TASTY
United States 1,895,651 REGISTERED.
(05/23/95)
DINNER BELL
United States 1,416,856 REGISTERED.
(11/11/86)
ENERGY INJECTED FOR THE ACTIVE DOG
United States 1,662,685 REGISTERED
(10/29/91)
GPI-DINE A MITE and Design
United States 1,122,511 REGISTERED
(07/17/79)
HUBBARD
United States 621,047 RENEWED. Section
(02/14/56) 2(f).
United States 641,332 RENEWED. Section
(02/15/57) 2(f).
HUBBARD SOW POWER
United States 1,206,410 REGISTERED.
(08/24/82) Section 8 & 15
accepted.
H AND DESIGN
United States 911,597 RENEWED.
(06/04/71)
United States 914,461 RENEWED.
(06/08/71)
IMPERIAL CHOICE
United States 1,720,574 REGISTERED
(09/29/92)
LASSY
United States 1,627,472 REGISTERED
(12/11/90)
LASSY (Block Letters)
United States 431,236 RENEWED.
(07/15/47)
LASSY (Stylized)
-4-
<PAGE>
Registration NO.
MARK (DATE) STATUS
- ---- ---------------- ------
United States 525,450 RENEWED.
(05/23/50)
LI'L NIBBLERS
United States 1,797,231 REGISTERED
(10/05/93)
MAGNUM
United States 1,412,549 REGISTERED
(10/07/86)
United States 1,274,511 (04/17/84) REGISTERED
MORTON
United States 1,341,301 (06/11/85) REGISTERED
MORTON'S DOG CHUNKS
United States 1,160,203 (07/07/81) REGISTERED
MORTON'S MAINMEAL
United States 1,187,960 (01/26/82) REGISTERED
PEPPY
United States 1,631,804 (01/15/41) REGISTERED
PEPPY CHASE
United States 892,557 RENEWED
PORTRAIT
United States 1,300,854 (10/16/84) REGISTERED
PROCLAIM
United States 1,693,416 (06/09/92) REGISTERED.
PUPPY-GRO
United States 1,125,864 REGISTERED.
(05/20/80)
SPORTSMAN
United States 979,519 (02/26/74) RENEWED.
United States 1,735,116 (11/24/92) REGISTERED.
SUPREME
United States 1,585,003 (02/27/90) REGISTERED.
SUPREME COUNTRY FRESH
United States 1,050,891(10/19/76) RENEWED.
SUPREME DOG FOOD AND DESIGN
-5-
<PAGE>
Registration NO.
MARK (DATE) STATUS
- ---- ---------------- ------
United States 1,286,279 (07/17/84) REGISTERED.
SWEET LASSY (Block Letters)
United States 235,240 RENEWED.
(11/15/27)
DESIGN ONLY
United States 1,175,403 (10/27/81) REGISTERED.
b. Pending Applications
Mark Serial No. Date Status
- ---- ---------- ---- ------
LEFTOVERS
United States 75/010,088 (10/24/95) N/A
MILKFLAKES
United States 74/696,089 (07/03/94) N/A
TABLE SCRAPS
United States 75/009,732 (10/18/95) N/A
2. Foreign Registrations
Mark Date Status
- ---- ---- ------
HUBBARD
Canada 431,333
(08/05/94) REGISTERED
PROCLAIM
Canada 450,594
(11/24/95) REGISTERED
3. Fictitious Business Names/Trade Names/Common Law Trademarks
The following has been registered as an assumed name in the
jurisdictions noted:
Name Jurisdiction
---- ------------
Proclaim Pet Products Illinois, Indiana, Michigan, Missouri,
Nebraska, North Dakota, Ohio, Wisconsin
-6-
<PAGE>
II. LICENSES
A. Existing Business
1. Grantor has pursuant to that certain License Agreement, dated
April 29, 1996, granted an exclusive, royalty-free perpetual right and license
to Heinz Pet Products Company, a division of Star-Kist Foods, Inc. to use the
mark TUFFY'S in connection with the manufacture, distribution or sale of pet
food products outside the United States and Canada.
B. Hubbard Pet Food Division
1. Grantor has pursuant to that certain License Agreement, dated May
__, 1996, granted an exclusive, royalty-free perpetual right and license to
Feed-Rite (US) Animal Feeds, Inc. to use the marks listed below in the United
States and Canada in connection with the manufacture, distribution and sale of
livestock and equine animal feed and dietary supplements for livestock and
equine animals.
Mark Reg. No.
- ---- --------
HUBBARD
United States 621,407
641,332
Canada 431,913
H and Design
United States 911,597
914,461
HUBBARD SOW POWER
United States 1,206,410
LASSY (Stylized)
United States 525,450
SWEET LASSY (Block Letters)
United States 235,740
2. Grantor has pursuant to that certain Distribution Agreement,
dated May __,1996, granted a non-exclusive license to Feed-Rite (US) Animal
Feeds, Inc. to use the marks and any related trade dress formats or logos listed
below in connection with the distribution and sale of certain pet products in
portions of the United States for a period of 3 years from the date of the
agreement.
HUBBARD HAPPY HOUND
HUBBARD CAT STARS
HUBBARD HIGH ENERGY DOG FOOD
LASSY SELECT DOG FOOD
LASSY DOG FOOD
HUBBARD CHUNKS
SPORTSMAN DOG FOOD
SPORTSMAN CAT FOOD
PURRFECT CAT FOOD
LASSY CAT FOOD
LASSY ACTIVE
HUBBARD PUPPY GRO
HUBBARD HIGH PERFORMANCE
PROCLAIM
IMPERIAL CHOICE
-7-
<PAGE>
COUNTRY PRIME
ROYAL FLUSH
HUBBARD BISCUITS
HUBBARD FISH FOOD
III. CLAIMS CHALLENGING USE OR VALIDITY OF INTELLECTUAL PROPERTY
A. Existing Business
1. U.S. Registration No.1,023,889 for the mark TUFFY'S expired as a result
of the failure to renew the registration on or before October 28, 1995.
2. U.S. Registration No. 1,555,992 for the mark G. WHISKERS (stylized) was
cancelled for failure to file a Declaration under Section 8 on or before
September 12, 1995. The Section 8 Declaration, however, was filed on September
7, 1995 and the Grantor's Petition for Reinstatement was accepted.
3. Keco Milling Company owns a Tennessee state registration of the mark
DIXIE TREAT for "foods and ingredients of Foods" which was issued on April 28,
1963.
4. Agreement dated July 8, 1974 between Star-Kist Foods, inc. and L.V.
Patterson Ltd. whereby Star-Kist agreed to discontinue the use of "golden
Chunks" in Canada but reserved the right to use the word "Chunks."
5. Opposition by Martin & Robertson Limited and/or its affiliated company
Delta Food Processors Ltd. to Application No.367,480 for TUFFY'S in Canada.
Opposition was withdrawn.
6. Distributor in Taiwan was advised not to distribute Tuffy's packaging
with paw print in Taiwan.
7. Non-use to date in the relevant foreign jurisdictions of all or some of
the marks which are the subject of the foreign registrations described in
Section I.A.2 and the state registrations described in Section I.A.3 above may
subject these registration to cancellation and/or affect Grantor's ability to
use the relevant mark in the relevant jurisdiction and/or Grantor's ability to
maintain the relevant registrations. Furthermore, the recordation of the
assignment of these registrations to the Grantor (and/or its predecessors in
interest) has not been completed or in some instances has not yet been
undertaken.
8. Abandoned application for Tuffy's (Serial No.1095760 filed May 18,
1978) in the United Kingdom because of prior registration for "Tuffy's" owned by
Food Securities Limited (Reg. No.862480 in class 31) covering among other things
"food stuffs for animals."
9. Heinz Pet Products Company, a division of Star-Kist Foods, Inc., and
their affiliates own various trademarks incorporating the word formatives
"Meaty" and "Meal" in the United States, Canada and throughout the world and
Grantor did not acquire any rights to any such trademarks in connection with the
acquisition of certain assets from Heinz pursuant to that Certain Purchase
Agreement, dated April 29, 1996 between Grantor and Heinz.
10. Lender acknowledges the existence of the following registrations and
uses by third parties of the mark or name TUFFY on pet products:
Mark U.S. Reg. No. Goods Registrant
---- ------------- ----- ----------
Tuffy 1558243 Pet Toys Bounce Inc.
Name Owner Goods
---- ----- -----
Tuffy Kong Company, Inc. Natural rubber "Jawrobics" dog toys,
"Jawrobeaks" bird toys, teeth
cleaning tug-flossing/chew toy, cat and
dog grooming tools
-8-
<PAGE>
Tuffy Toy Ben Richter Co. Pet products
Tuffy Togs Ben Richter Co. Cat and dog products
11. Grantor makes no representation as to the validity of or its exclusive
right to use either DINNER ROUNDS or any of the fictitious business names, trade
names, common law trademarks or variety designators identified above.
12. The assignment of U.S. Registration Numbers 1,991,987 and 1,991,988
of the marks CANINE PRIME and Design and FELINE PRIME and Design, respectively,
from Star-Kist Foods, Inc. as of April 29, 1996 has not been properly recorded
by the U.S. Patent and Trademark Office.
B. Hubbard Pet Food Division
1. In November 1994 Pet Life Foods, Inc. sued Hubbard for alleged
trademark infringement for sale of a peanut-shaped, peanut-flavored dog biscuit.
This issue was resolved by Hubbard agreeing to discontinue use of the particular
shape.
2. Hubbard in March 1992 objected to use of SUPREME in connection
with sale of dog food by Mounds Agri-Service. The issue was resolved by
agreement by Mounds Agri-Service to discontinue offending usage.
3. Hubbard in March 1994 threatened opposition to registration of
SUNSHINE SUPREME for pet feed by Carlson Specialty Seeds, Inc. The issue was
resolved by limitation of the product to feed for birds.
4. Hubbard in August 1995 objected to use of SUPREME in connection
with sale of dog food by Shenandoah Valley Kennels. The maker was not pursued
upon protestations by Shenandoah Valley Kennels that use was permissible
descriptive use.
5. Grantor makes no representations as to the validity of or its
exclusive rights to use any of the foreign trademarks, fictitious business
names, trade names, common law trademarks or variety designators identified
above with respect to the Hubbard Pet Food Division.
-9-
<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of CREDIT SUISSE FIRST BOSTON, as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") parties to the Credit Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, Windy Hill Pet Food Acquisition Co., the Lenders, the
Administrative Agent and The Chase Manhattan Bank, as documentation agent for
the Lenders (the "Documentation Agent") have entered into a Credit Agreement,
dated as of May 21, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower (as
defined therein) and certain of its Affiliates (other than the Additional
Grantor) have entered into the Guarantee and Collateral Agreement, dated as of
May 21, 1997 (as amended, supplemented or otherwise modified from time to time,
the "Guarantee and Collateral Agreement") in favor of the Administrative Agent
for the benefit of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to
become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver
this Assumption Agreement in order to become a party to the Guarantee and
Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering
this Assumption Agreement, the Additional Grantor, as provided in Section 8.15
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder. The information set forth in Annex 1-A
hereto is hereby added to the information set forth in Schedules ____________ to
the Guarantee and Collateral Agreement. The Additional Grantor hereby represents
and warrants that each of the representations and warranties contained in
Section 4 of the Guarantee and Collateral Agreement is true and correct on and
as the date hereof (after giving effect to this Assumption Agreement) as if made
on and as of such date.
2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
------------------------------
Name:
Title:
<PAGE>
CONSENT AND RELEASE
May 19, 1997
Windy Hill Pet Food Holdings, Inc.
Two Maryland Farms
Suite 301
Brentwood, Tennessee 37027
Windy Hill Pet Food Company, Inc.
Two Maryland Farms
Suite 301
Brentwood, Tennessee 37027
Re: Credit Agreement (the "Credit Agreement"), dated as of April
29, 1996, by and among Windy Hill Pet Food Holdings, Inc.
("Holdings"), Windy Hill Pet Food Company, Inc. (the
"Borrower"), and their subsidiaries (collectively with
Holdings and the Borrower, the "Credit Parties"),
NationsBank of Tennessee, N.A. as Administrative Agent for
the lenders party thereto (the "Administrative Agent") and
PNC Bank, National Association as documentation agent for
the lenders party thereto (the "Lenders") and the Lenders
Ladies and Gentlemen:
We, the undersigned, being the Administrative Agent and all the Lenders
under the Credit Agreement, understand that on Wednesday, May 21, 1997 or soon
thereafter, the Borrower will consummate the following transaction (the
"Transaction"):
Windy Hill Pet Food Acquisition Co., a Minnesota corporation and
newly-formed, wholly-owned subsidiary of the Borrower ("Acquisition Co."), will
acquire and be merged with and into Hubbard Milling Corporation, a Minnesota
corporation ("Hubbard"), and the Borrower will purchase all of the capital stock
of Armour Corporation, a holding company, which owns 5% of the capital stock of
Hubbard. Concurrently therewith, Hubbard, the surviving corporation in the
merger, will be renamed Windy Hill Pet Food Company, Inc., and the Borrower will
transfer to such corporation all of its operating assets and liabilities,
including all amounts owing to the Administrative Agent and the Lenders (the
"Loans") under the Credit Agreement and the Collateral Documents (as defined in
the Credit Agreement; and the Collateral Documents, together with the Credit
Agreement, as any may have been amended, modified or supplemented, the "Loan
Documents"). Immediately upon consummation of the foregoing, the Loans shall be
paid off in full (the "Repayment") and the Loan Documents shall be terminated
(the "Termination").
The Administrative Agent and each of the Lenders hereby:
1. consent to the Transaction and agree that the Transaction shall not
constitute an Event of Default under the Loan Documents;
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 2
2. consent to the assignment of any mortgages or deeds of trust or similar
real property instruments previously executed and delivered to the
Administrative Agent by the Credit Parties, as requested by any Credit Party,
and agree to cooperate with such Credit Party and its representatives to ensure
that such assignments are effected at the time the Transaction is consummated;
and
3. subject to the immediately foregoing paragraph, agree to release,
discharge and acquit each Credit Party (including Acquisition Co. and the Windy
Hill Pet Food Company, Inc., survivor to the merger), from all of their
obligations under the Loan Documents (other than those obligations and
liabilities of the Borrower or Holdings which are stated to survive the
termination of the Loan Documents, as set forth in the Loan Documents), and to
terminate the Loan Documents.
The effectiveness of the foregoing consents and agreements, and of any
termination statements or other similar release instruments delivered by the
Administrative Agent hereunder or otherwise, are subject to and conditioned upon
the receipt by the Administrative Agent of the Repayment immediately upon the
consummation of the Transaction.
This Agreement shall be covered by the indemnification provisions in
section 10.7 of the Credit Agreement.
This Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original hereof (including signatures transmitted by
facsimile machine) and submissible into evidence and all of which together shall
be deemed to be a single instrument.
Very truly yours,
NATIONSBANK OF TENNESSEE, N.A.
as Administrative Agent and a
Lender
/s/ B.E. Dishman
-----------------------------
By: B.E. Dishman
Title: Vice President
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 3
PNC BANK, KENTUCKY, INC.
/s/ Ralph A. Phillips
-----------------------------
By: Ralph A. Phillips
Title: Vice President
FIRST SOURCE FINANCIAL LLP
-----------------------------
By:
Title:
SANWA BUSINESS CREDIT CORPORATION
-----------------------------
By:
Title:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
-----------------------------
By:
Title:
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
-----------------------------
By:
Title:
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 3
PNC BANK, KENTUCKY, INC.
/s/ Ralph A. Phillips
-----------------------------
By: Ralph A. Phillips
Title: Vice President
FIRST SOURCE FINANCIAL LLP
/s/ David C. Wagner
-----------------------------
By: David C. Wagner
Title: Vice President
SANWA BUSINESS CREDIT CORPORATION
-----------------------------
By:
Title:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
-----------------------------
By:
Title:
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
-----------------------------
By:
Title:
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 3
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 3
PNC BANK, KENTUCKY, INC.
-----------------------------
By:
Title:
FIRST SOURCE FINANCIAL LLP
-----------------------------
By:
Title:
SANWA BUSINESS CREDIT CORPORATION
/s/ Lawrence J. Placek
-----------------------------
By: Lawrence J. Placek
Title: Vice President
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
-----------------------------
By:
Title:
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
-----------------------------
By:
Title:
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 3
PNC BANK, KENTUCKY, INC.
-----------------------------
By:
Title:
FIRST SOURCE FINANCIAL LLP
-----------------------------
By:
Title:
SANWA BUSINESS CREDIT CORPORATION
-----------------------------
By:
Title:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
/s/ Steven W. Davis
-----------------------------
By: Steven W. Davis
Title: Vice President
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
-----------------------------
By:
Title:
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 3
PNC BANK, KENTUCKY, INC.
-----------------------------
By:
Title:
FIRST SOURCE FINANCIAL LLP
-----------------------------
By:
Title:
SANWA BUSINESS CREDIT CORPORATION
-----------------------------
By:
Title:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
-----------------------------
By:
Title:
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
/s/ David H. Strickert
-----------------------------
By: David H. Strickert
Title: Vice President
<PAGE>
Windy Hill Pet Food Holdings, Inc
Windy Hill Pet Food Company, Inc.
May 19, 1997
page 4
ACKNOWLEDGED AND AGREED:
WINDY HILL PET FOOD HOLDINGS, INC.,
a Delaware corporation
By: /s/ Ray Chung
--------------------------------
Title: Executive Vice President
WINDY HILL PET FOOD COMPANY, INC.,
a Delaware corporation
By: /s/ Ray Chung
--------------------------------
Title: Executive Vice President
<PAGE>
NATIONSBANK OF TENNESSEE, N.A.
One NationsBank Plaza
TN1-100-02-19
Nashville, TN 37239-1697
May 20, 1997
Windy Hill Pet Food Holdings, Inc.
Two Maryland Farms
Suite 301
Brentwood, Tennessee 37027
Windy Hill Pet Food Company, Inc.
Two Maryland Farms
Suite 301
Brentwood, Tennessee 37027
Re: Credit Agreement (the "Credit Agreement"),
dated as of April 29, 1996, by and among
Windy Hill Pet Food Holdings, Inc.
("Holdings"), Windy Hill Pet Food Company,
Inc. (the "Borrower"), and their subsidiaries
(collectively with Holdings and the Borrower,
the "Credit Parties"), NationsBank of
Tennessee, N.A. as Administrative Agent for
the lenders party thereto (the
"Administrative Agent") and PNC Bank,
National Association as documentation agent
for the lenders party thereto (the "Lenders")
and the Lenders
Ladies and Gentlemen:
We understand that, on Wednesday, May 21, 1997 or soon thereafter,
the Borrower will consummate the following transaction (the "Transaction"):
Windy Hill Pet Food Acquisition Co., a Minnesota corporation and newly-formed,
wholly-owned subsidiary of the Borrower ("Acquisition Co."), will acquire and be
merged with and into Hubbard Milling Corporation, a Minnesota corporation
("Hubbard"), and the Borrower will purchase all of the capital stock of Armour
Corporation, a holding company, which owns 5% of the capital stock of Hubbard.
Concurrently therewith, Hubbard, the surviving corporation in the merger, will
be renamed Windy Hill Pet Food Company, Inc. ("Windy Hill"), and the Borrower
will transfer to such corporation all of its operating assets and liabilities,
including all amounts owing to the Lenders under the Credit Agreement
(collectively, the "Loans"). Immediately upon consummation of the Transaction,
the Loans shall be paid off in full (the "Repayment") and the Credit Agreement
shall be terminated (the "Termination").
<PAGE>
Windy Hill Pet Food Holdings, Inc.
Windy Hill Pet Food Company, Inc.
May 20, 1997
page 2
Pursuant to the letter agreement dated May 19, 1997 by and between
the Borrower, Holdings, the Administrative Agent and the Lenders (the "Consent
and Release Agreement"), the Administrative Agent and the Lenders have given
certain consents and made certain agreements subject to and conditioned upon
receiving the Repayment.
1. Account Stated. Administrative Agent confirms that, as of May 21,
1997, prior to any payments being made pursuant to this Agreement, there will be
an aggregate of $43,214,384.56 owing and outstanding under the Credit Agreement
and the Collateral Documents (as defined therein; the Collateral Documents,
together with the Credit Agreement, the "Loan Documents"), whether as principal,
interest, expenses, fees, increased costs, taxes, indemnities, penalties or
otherwise.
2. Termination and Releases.
(a) Subject to the terms and conditions contained herein, the
Administrative Agent hereby releases, discharges and acquits each Credit Party
(including but not limited to Acquisition Co. and Windy Hill) from its
obligations under the Loan Documents, all of which are hereby terminated,
canceled and of no further force and effect (other than those obligations and
liabilities of the Borrower or Holdings which are stated to survive the
termination of the Loan Documents, as set forth in the Loan Documents).
(b) Except for assignments of mortgages made pursuant to the Consent
and Release Agreement, the Administrative Agent hereby terminates and releases
any and all security interests in, liens upon, rights of setoff against and
pledges of, and hereby reassigns to the Credit Parties, all properties and
assets of the Credit Parties heretofore granted, pledged or assigned to, or
otherwise claimed by the Administrative Agent or any Lender, whether personal,
real or mixed, tangible or intangible, pursuant to the Collateral Documents.
(c) The Credit Parties, for and in consideration of the release
above, hereby terminate the Loan Documents and release, discharge and acquit the
Administrative Agent and the Lenders from any of their respective obligations
thereunder (other than those obligations to release and return the Collateral
which are stated to survive the termination of the Loan Documents, as set forth
in the Loan Documents).
<PAGE>
Windy Hill Pet Food Holdings, Inc.
Windy Hill Pet Food Company, Inc.
May 20, 1997
page 3
3. Reimbursement for Returned Items. Notwithstanding anything to the
contrary contained in Section 1 above, the Borrower agrees to reimburse
Administrative Agent and the Lenders for any loss arising from non-payment or
dishonor of any checks or other customer remittance items which have been
credited by Administrative Agent or any Lender to the account of the Borrower
with the Administrative Agent or any such Lender, together with any reasonable
expenses or other reasonable and customary charges incident thereto.
4. Delivery of Documents. Without limiting any provision which
survives the Loan Documents, the Administrative Agent, upon request, agrees to
deliver to the Credit Parties, at the expense of the Credit Parties, upon
satisfaction of the conditions set forth in Section 5 hereof, the originals of:
(a) all promissory notes returned to the Administrative Agent by the
Lenders which were previously executed and delivered to the Administrative Agent
and such Lenders by the Credit Parties, duly marked "paid in full" or
"cancelled" as may be appropriate;
(b) Uniform Commercial Code releases and/or terminations prepared by
the Borrower or its legal counsel in form acceptable for recording covering all
financing statements which have been filed by Administrative Agent or on its
behalf against the Credit Parties;
(c) trademark and patent releases and reassignments, prepared by the
Borrower or its legal counsel, if any, releasing and reassigning to the Credit
Parties (or persons specified by any Credit Party) all trademarks, patents and
related assets heretofore assigned by the Credit Parties to the Administrative
Agent pursuant to the Loan Documents;
(d) Stock Certificate No. 1 evidencing 100 shares of common stock of
Windy Hill Pet Food Company, Inc. and the stock power related thereto, or in
lieu thereof a certificate of loss and indemnity; and
(e) any discharges, satisfactions or assignments, prepared by the
Borrower or its legal counsel, as requested by a Credit Party, and of any
mortgages or deeds of trust or similar real property instruments previously
executed and delivered to Administrative Agent by the Credit Parties.
<PAGE>
Windy Hill Pet Food Holdings, Inc.
Windy Hill Pet Food Company, Inc.
May 20, 1997
page 4
5. Conditions Precedent. The effectiveness of this Agreement, and of
any termination statements or other similar release instruments delivered by the
Administrative Agent hereunder, are subject to and conditioned upon the receipt
by the Administrative Agent of the following:
(a) payment of the amount set forth in numbered paragraph 1 hereof,
sent by Federal Wire transfer to the bank account of the Administrative Agent
pursuant to the instructions indicated below for such purpose;
(b) payment of legal fees and disbursements in the amount of
$3,200.00 to Moore & Van Allen, PLLC; and
(c) an original of this Agreement duly executed by the parties
hereto.
6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof (including
signatures transmitted by facsimile machine) and submissible into evidence and
all of which together shall be deemed to be a single instrument.
<PAGE>
Windy Hill Pet Food Holdings, Inc.
Windy Hill Pet Food Company, Inc.
May 20, 1997
page 5
Account number and wire instructions referred to in Section 5(a) and 5(b) for
payment:
Nationsbank of Tennessee, N.A.
One NationsBank Plaza
Nashville, TN 37239-1697
ABA# 064-000-020
Attn.: Corporate Credit Support
Reference: Windy Hill Pet Food
Account # 136621-0083
Very truly yours,
NATIONSBANK OF TENNESSEE, N.A.
as Administrative Agent for the
Lenders
By: /s/ B.E. M[illegible]
----------------------------
Title: Vice President
ACKNOWLEDGED AND AGREED:
WINDY HILL PET FOOD HOLDINGS, INC.,
a Delaware corporation
By: /s/ Ray Chung
--------------------------------
Title: Executive Vice President
WINDY HILL PET FOOD COMPANY, INC.,
a Delaware corporation
By: /s/ Ray Chung
--------------------------------
Title: Executive Vice President
<PAGE>
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
1. Parties. The parties to this Agreement are The Andersons, 1200
Dussel Drive, Maumee, Ohio 43537, a limited partnership organized under the laws
of the State of Ohio, and Hubbard Milling Company, P.O. Box 8500, 424 N. Front
Street, Mankato, Minnesota 56001, a Minnesota corporation. The Andersons will be
referred to as "Andersons" when individual reference is made. Hubbard Milling
Company will be referred to as "Hubbard" when individual reference is made.
2. Supplements. This document summarizes the result of months of
discussions between the parties. The parties anticipate that this Agreement may
be modified and supplemented in the future. Such changes and additions will be
in writing and will be prepared and executed as supplements to this Statement of
Understanding.
3. Representations. Each party to this Agreement represents and
warrants to the other that it is completely authorized to enter into this
Agreement. Andersons and Hubbard will at all times provide the other with all
information relevant to the venture contemplated hereby. Each party to this
Agreement also represents and warrants to the other that there are no suits or
proceedings pending or threatened against it, other than litigation that is
immaterial to the respective parties and the Venture.
4. Businesses of Andersons and Hubbard. Andersons is an agribusiness
with, among other things, terminal and country grain elevators, agricultural and
lawn fertilizer plants, retail stores, cob plants and a feed mill. Its main
facility is located along Illinois Avenue in Maumee, Ohio. Hubbard is an
agribusiness with, among other things, flour mills, food production and
marketing concerns, and feed and pet food plants at various locations in the
midwest.
5. Formation of Joint Venture; Purpose; Other Activities. Hubbard
and Andersons hereby agree to form a joint venture (the "Venture") for the
purpose of engaging in the manufacturing, marketing and production of pet foods
at a feed mill (the "Feed Mill") owned by Andersons and located along Illinois
Avenue, Maumee, Ohio. Additional products and activities may be added as may be
agreed from time to time between Andersons and Hubbard. It is recognized that
both Andersons and Hubbard have separate businesses which are intended to
co-exist with the Venture. Some of these separate businesses have and will
compete with the activity of the Venture. Said competitive activities are hereby
<PAGE>
approved so long as there is no deliberate intent to diminish the profitability
of the Venture.
6. Andersons' Purchase of Additional Equipment. The Feed Mill is
owned by Andersons and needs certain improvements. Andersons will, at its sole
expense, make the repairs and install the additional equipment and improvements
specifically listed in Schedule A attached hereto and made a part hereof, even
if the cost thereof exceeds the estimates contained in Schedule A. Such repairs
and additions will be the property of Andersons. Other acquisitions of equipment
by or for the use of the Venture shall be made in accordance with paragraph 14.
7. Purchase of Feed Mill Warehouse. A new warehouse is needed by the
Venture. The parties agree to share equally in the cost of constructing,
equipping and maintaining a warehouse of approximately 20,000 square feet to be
located on Andersons' property in close proximity to the Feed Mill. Said
warehouse building shall be owned by Andersons and Hubbard as tenants in common
and shall be available to the Venture for its operations.
8. Production of Certain Products for Hubbard and Andersons. Hubbard
agrees that, while this Agreement remains in effect, it will use its best
efforts to produce orders from customers for at least 8,350 tons of pet food for
production at the Feed Mill, so long as such pet food can be produced most
economically at the Feed Mill. Similarly, Andersons agrees that, while this
Agreement remains in effect, it will use its best efforts to have all of its
production requirements for pet food produced by the Venture and to purchase
such pet food from the Venture; provided, however, that nothing in this
Agreement shall prohibit Andersons from selling competing pet food products in
its retail stores. When the additional equipment purchases contemplated by
paragraph 6 hereof have been made, the Feed Mill will have a total operating
capacity for pet food of approximately 30,000 tons per year. Hubbard agrees to
use its best efforts to cause to be produced and sold total pet food tonnage in
quantities sufficient to utilize the Feed Mill's stated capacity and to make the
Venture mutually profitable.
9. Trademarks, Etc. The Venture will operate under the name(s),
trademark(s), patent(s), copyright(s), license(s) and other registrations
presently being used by the parties, or such names, trademarks, patents,
copyrights, licenses and other registrations as may be agreed and acquired from
time to time. Each party agrees to comply with all applicable laws, rules and
regulations and to indemnify and hold the other harmless from its breach hereof.
Each party further agrees to protect the other's trademarks, patents,
copyrights, licenses and other registrations from the misuse thereof. Neither
party shall have the right to use any trademark, patent, copyright, license or
other registration
-2-
<PAGE>
the Venture acquires or uses or any name the Venture chooses to operate under in
connection with any other business or other enterprise without the express
written consent of the other party, however, regardless of whether the Venture
is or is not in business.
10. Mailing Address. The mailing address for the Venture will be:
The Andersons, P.O. Box 119, Maumee, Ohio 43537, Attention: Bob Buenning.
11. Services; Employees.
(a) Subject to the authority of the Management Committee, and
subject to the provisions of this Agreement regarding reimbursement of
expenses, Hubbard agrees to provide the following services to the Venture,
with the nature and extent of such services to be determined in Hubbard's
discretion (in light of, among other things, the scope and activities of
the Venture): research and product development; customer account
development; advertising, promotional literature and general
merchandising; receiving orders and billing customers; routine accounting
services (not including preparation of annual financial statements);
collection of accounts receivable; consulting services regarding
technical, marketing, quality control and production aspects of the
Venture's business, including a full-time, on-site Quality Assurance
Manager (the "Quality Assurance Manager"). Subject to the provisions of
this Agreement regarding reimbursement of expenses, Andersons agrees to
provide the following services to the Venture: the use of the Feed Mill;
the use of all equipment owned by Andersons necessary for the production
of pet food; the use of Andersons' employees engaged in the production of
pet food and of other employees engaged in support and management services
relating to Andersons' pet food operation. All quality assurance work,
including but not limited to, all laboratory work, sampling, systems,
inventory control, and records maintenance shall be the responsibility of
Hubbard and shall be in conformity with standards established or approved
by the Management Committee.
(b) The parties acknowledge and agree that any Andersons' employees
who perform services for the Venture shall remain employees of Andersons,
and Andersons shall remain solely responsible for establishing the terms
and conditions of their employment, including hiring, discipline and
discharge. Neither Hubbard nor any of its employees (including, without
limitation, the Quality Assurance Manager), shall have any responsibility
for the development or approval of personnel policies with respect to
Andersons' employees performing services for the Venture. Andersons and
Hubbard remain
-3-
<PAGE>
solely liable for the payment of compensation or any employment benefits
to their respective employees and for the payment of any taxes, charges or
assessments payable with respect to their respective employees, including
without limitation any such payments made to governmental agencies or
bodies. Neither the Venture nor Hubbard shall be considered a successor
employer of Andersons' employees, and neither the Venture nor Andersons
shall be considered a successor employer of Hubbard's employees.
12. Quality Assurance Manager. The Quality Assurance Manager shall,
in general, be available to Andersons at the Feed Mill for consultation in
connection with Andersons' production of pet food for the Venture. In
particular, the Quality Assurance Manager will be responsible for approving
utilization of the time of Andersons' employees in the Venture and for
consulting with Andersons regarding the technical aspects of the production of
pet food by the Venture, especially with respect to the operation and
utilization of equipment and to the quality of and ingredients for such pet
food. The Quality Assurance Manager shall be an employee of Hubbard and a
consultant to Andersons.
13. Profits and Losses; Distributions. Each of Hubbard and Andersons
shall, as a member of the Venture, have a fifty percent (50%) interest in and to
the Venture. The net profits or net losses of the Venture shall be credited or
charged, as the case may be, equally to each of them. If Andersons or Hubbard
shall pay any expense properly allocable or chargeable to the Venture and shall
not be reimbursed by the Venture, said unreimbursed expense shall be shared by
the other party in the same proportion as profits and losses are shared. The
earnings and profits of the Venture for the purpose of determining the share
therein of each of Hubbard and Andersons shall be determined in accordance with
generally accepted accounting principles. A separate income account shall be
maintained for each of Hubbard and Andersons to which shall be credited or
debited, as the case may be, their respective shares of the net profits or net
losses of the Venture. Net profits and net losses shall be credited or debited,
as the case may be, to the separate income accounts of Hubbard and Andersons as
soon as practicable after the end of each month during the term of the Venture.
Cash distributions to Hubbard and Andersons will be made in the discretion of
the Management Committee referred to in paragraph 15.
14. Additional Capital Expenditures; Working Capital.
(a) Except as otherwise provided in this Agreement for equipment
described in Schedules A and B hereto, the cost of all capital
expenditures for equipment used in the business of the Venture shall be
shared equally by Hubbard and Andersons. All capital expenditures for such
equipment
-4-
<PAGE>
shall be approved by the Management Committee, except that the Quality
Assurance Manager and Andersons' Feed Mill Production Manager may jointly
authorize capital expenditures for equipment used by the Venture costing
not more than $1,000 (or $10,000 with the prior joint approval of
Hubbard's Pet Food General Manager and Andersons' Management Committee
Representative with respect to each purchase. The Management Committee
shall, for the purposes of this Agreement, determine which expenditures
are "capital" expenditures. All equipment so acquired shall be owned by
Andersons and Hubbard as tenants in common and shall be available to the
Venture for its operations.
(b) The cost of all capital expenditures for repairs or improvements
to the Feed Mill and the Feed Mill warehouse shall be shared by Hubbard
and Andersons in such manner as the Management Committee shall determine.
All such expenditures shall be approved by the Management Committee.
(c) Any advances to the Venture for working capital approved by the
Management Committee shall be shared equally by Hubbard and Andersons.
15. Management Committee. Policy and management decisions shall be
made by a committee (the "Management Committee") consisting of one
representative of each of Hubbard and Andersons. Each party will designate a
representative who will serve on the Management Committee and one alternate who
shall act in the absence of such representative. Until further notice, these
representatives will be Jon Klotz with Bob Buenning as alternate, for Andersons,
and Richard P. Confer with Paul R. Holzheuter as alternate, for Hubbard. Each
party may, by written notice to the other, designate a substitute representative
or alternate.
16. Allocations of Expenses.
(a) Except as otherwise specifically provided in this Agreement,
Hubbard and Andersons shall be reimbursed by the Venture for expenses
incurred only as approved by the Management Committee.
(b) As to the specific items set forth in Schedules B and C attached
hereto and incorporated herein, allocations will be made to the Venture
consistent with the terms in said Schedules.
(c) The Quality Assurance Manager and Andersons' Feed Mill
Production Manager shall have joint authority to approve all routine,
recurring expenses charged to the Venture.
-5-
<PAGE>
(d) Notwithstanding any other provision of this Agreement, Hubbard
and Andersons agree that if Andersons discontinues or curtails its
livestock feed operation in the Feed Mill, the allocation of expenses
provided for herein shall not be affected, which shall mean, without
limiting the generality of the foregoing, that any inefficiencies in
operation of the Feed Mill resulting from such action shall not increase
the expenses allocated to the Venture; provided, however, that after any
such discontinuation or curtailment, allocations of expenses to the
Venture otherwise based upon the relative tonnage produced by said
livestock feed operation and the Venture shall be made in such manner as
the Management Committee shall determine, but in no event shall more than
50% of the total of such expenses be allocated to the Venture.
17. Purchase of Inventories, Etc. The parties contemplate that from
time to time the Venture will acquire from Hubbard or Andersons inventories and
supplies. These acquisitions may be at original cost, market, or some other
valuation, whichever is deemed appropriate in the particular circumstances. The
goal will be to follow consistent practices without giving any special advantage
to the Venture, to Andersons, or to Hubbard. Affiliates of Andersons and Hubbard
will be dealt with as if they were the equivalent of Andersons and Hubbard.
Recognizing that the definition of cost is frequently complex, the general goal
will be to achieve total actual cost without the inclusion of arbitrary markup.
Until further agreement of the parties, the charge to the Venture for ingredient
costs during any calendar month shall be the market price of such ingredient,
F.O.B. Maumee, on the Wednesday of the previous month that falls between the
18th and 24th of that month. Such ingredient costs shall be adjusted for a 5%
shrinkage factor. Bags shall be actual cost, F.0.B. Maumee, adjusted for a 1%
shrinkage factor. Andersons shall be reimbursed weekly for ingredient costs
based upon the amount shipped. Any raw materials and inventory will be the
property of Andersons until shipped by the Venture.
18. Reputations of Parties. Andersons and Hubbard both cherish their
reputations in the world at large and internally. The Venture will use every
reasonable means to respect and enhance those reputations.
19. Tax Status; Accounting; Bank Account. The Venture will function
as a partnership for tax purposes. Its fiscal and tax year will be the calendar
year or such other year as shall be approved by the Management Committee. Such
certified public accountant as is selected by the Management Committee will be
asked to prepare an annual certified audit and do such other work for the
Venture as may be agreed upon from time to time. Hubbard shall be responsible
for maintaining books of account of the
-6-
<PAGE>
Venture and shall prepare and distribute monthly unaudited operating
statements. Hubbard shall maintain a separate bank account into which all
funds of the Venture shall be deposited and Hubbard shall be responsible for
making disbursements of such funds for expenses of the Venture.
20. Indemnification. Neither Hubbard nor Andersons shall, by virtue
of this Agreement, be deemed to have assumed any personal liability of any kind
or nature whatsoever arising with respect to activities or products of the other
not undertaken as part of the Venture; provided, however, that neither the other
party to this Agreement nor the Venture shall be liable for workers'
compensation or employment-related damages or action relating to the employees
of either party to this Agreement. The Venture, or one or both of the parties to
this Agreement, will obtain and maintain such insurance coverage as the
Management Committee shall determine is adequate in connection with the
activities of the Venture.
21. Composition of Andersons. Hubbard understands that from time to
time the composition of Andersons changes. For purposes of this Agreement, such
succeeding partnerships operating as The Andersons shall be deemed to be the
same entity as the one executing this Agreement, provided that the net worth of
such succeeding partnerships is not materially less than the net worth of the
entity executing this Agreement.
22. Trade Secrets, Etc. Trade secrets, customer lists, and other
similar knowledge coming into the hands of Andersons and Hubbard as a result of
the Venture may be used by the Venture. However, both Andersons and Hubbard
agree that no other advantage will be taken from said knowledge, nor will the
same be used by either Andersons or Hubbard in their separate business
activities at any time except by specific written agreement of the parties.
23. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the State of Ohio and, to the extent applicable, by the Uniform
Partnership Act as adopted from time to time by the State of Ohio.
24. Andersons' Livestock Feed Operation. The parties recognize that
Andersons has been producing and selling certain livestock feed from the Feed
Mill. Andersons may continue to manufacture and sell livestock feed from the
Feed Mill (now anticipated to be approximately 36,000 tons per year) and the
parties agree to cooperate in the scheduling so that the production of pet foods
and livestock feed is beneficial to the Venture and to Andersons, respectively.
-7-
<PAGE>
25. Purchase Option for Hubbard. Andersons hereby grants to Hubbard
the exclusive right and option to purchase the property described in Exhibit 1
attached hereto and made a part hereof on the terms and conditions set forth in
said Exhibit 1. Andersons covenants and warrants to Hubbard that it is, or at
the time of closing will be, the fee owner of and have good and marketable title
to all real property described in Exhibit 1, and have good title to all personal
property described in Exhibit 1. Andersons will, at the request of Hubbard,
execute a memorandum of the terms of this option, excluding the price, if
possible, which memorandum shall be in recordable form and shall, at Hubbard's
option, be placed of record; provided, however, that if Hubbard requests that
the memorandum be recorded, Hubbard shall bear the expense of any property
survey required for obtaining a legal description of the property covered by
Hubbard's option. Hubbard agrees to release said memorandum of record upon the
termination of the Venture.
26. Assignment; Successors and Assigns. Andersons is given the
specific right to transfer or assign its interest in the realty and equipment in
the Feed Mill to another entity provided that: Andersons does not assign its
responsibilities under this Agreement without the express written consent of
Hubbard; Hubbard is reasonably satisfied with the financial stability of the
transferee; and such transferee specifically agrees to be bound by the terms of
this Agreement. Each and every provision in this Agreement shall survive such
transfer or assignment and remain in full force and effect. This Agreement shall
inure to the benefit of the parties hereto, their successors and assigns. Except
as otherwise provided in this paragraph 26, neither party may make any
assignment of its rights or obligations hereunder without the written consent of
the other party.
27. Other Instruments, Etc. The parties agree that they will perform
all other acts and execute and deliver all of the documents as may be necessary
or appropriate to carry out the intent and purposes of this Agreement. The
parties recognize that many issues will have to be resolved after the date of
this Agreement. The parties will use maximum diligence to voluntarily and
appropriately resolve all future concerns of this kind.
28. Arbitration. It is agreed nevertheless that all unresolved
disputes or controversies arising out of or in relation to this Agreement shall
be determined and settled by arbitration at a mutually convenient location in
accordance with the Commercial Rules of the American Arbitration Association in
effect at the time of said controversy, and judgment upon any award rendered by
the arbitrator(s) may be entered in any court of competent jurisdiction. The
arbitrator(s) may decide all collateral issues such as whether this paragraph 28
is applicable. The expenses of the arbitration shall be borne by the Venture,
provided that each
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<PAGE>
of Andersons and Hubbard shall pay for and bear the costs of its own experts,
evidence, and legal counsel. Whenever any action is required to be taken under
this Agreement within a specified period of time and the taking of such action
is materially affected by a matter submitted to arbitration, such period shall
automatically be extended for the number of days plus ten that are taken for the
determination of that matter by the arbitrator(s).
29. Termination. This Agreement and the Venture shall terminate as
follows:
(a) by the mutual written consent of Hubbard and Andersons;
(b) at the option of Hubbard or Andersons as of the end of any
calendar year commencing after December 31, 1985, by such party giving
written notice of such termination to the other no later than July 1 of
such year; and
(c) as of the date, if any, on which there occurs a closing of a
purchase of assets by Hubbard pursuant to the exercise of the option
granted under paragraph 25 of this Agreement.
Unless this Agreement and the Venture are terminated as indicated above or
otherwise by operation of law, this Agreement and the Venture shall continue
indefinitely through succeeding calendar years. Nothing contained in this
paragraph shall affect or impair any rights or obligations arising prior to or
at the time of the termination of this Agreement, or which may arise by an event
causing the termination of this Agreement and the Venture.
30. Liquidation and Dissolution. Upon termination of the Venture,
Hubbard and Andersons shall proceed to wind up and liquidate the affairs and
assets of the Venture. The proceeds of such liquidation shall be applied and
distributed in the following order of priority:
(i) to the payment of debts and liabilities of the Venture and
expenses of liquidation;
(ii) to the setting up of any reserves which the Management
Committee shall deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Venture arising out of or in connection
with the Venture; said reserves shall be paid over by Hubbard and
Andersons to a mutually designated party, as escrow agent, to be held for
the purpose of disbursing such reserves in payment of any of the
aforementioned contingencies; at the expiration of such period of time as
Hubbard and Andersons shall deem mutually
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<PAGE>
advisable, said escrow agent shall distribute the balance thereof
remaining in the manner set forth in subparagraph (iii) hereof; and
(iii) any balance remaining after the application of subparagraphs
(i) and (ii), equally to Hubbard and Andersons.
31. Purchase of Hubbard's Assets by Andersons. If termination and
dissolution of the Venture occurs other than as a result of Hubbard's exercise
of its purchase option, Andersons shall, within 90 days of such termination,
purchase from Hubbard:
(a) Hubbard's interest in the feed mill warehouse built pursuant to
paragraph 7 hereof, at a purchase price equal to the book value (original
cost less depreciation) of Hubbard's interest in such warehouse; and
(b) Hubbard's interest in any equipment purchased by Hubbard and
Andersons pursuant to paragraph 14 hereof, at a purchase price equal to
the book value (original cost less depreciation) of Hubbard's interest in
such equipment.
The purchase price calculated as set forth above shall be paid to Hubbard in the
form of a bank cashier's check. Upon payment of such amount, Hubbard shall
deliver to Andersons such instruments of transfer as shall be reasonably
requested by Andersons.
32. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
by mail by depositing a copy thereof in a registered or certified envelope,
postage prepaid, addressed to the other party at its address hereinabove set
forth or at such other address as the other party shall have theretofore
designated. The date of giving such notice shall be the date received, if served
personally, or the date on which the envelope is delivered to the other party as
indicated by the return receipt.
33. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate copy as of the 1st day of June, 1984. The effective date of the
Venture shall be June 1, 1984.
THE ANDERSONS
By /s/ Richard R. Anderson
--------------------------------------
General Partner
HUBBARD MILLING COMPANY
By /s/ [ILLEGIBLE]
--------------------------------------
Its President Acting in Behalf
of Its Board of Directors and
Within the Authority of Its
Articles of Incorporation
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<PAGE>
SCHEDULE A
Improvements to be provided by The Andersons:
1. Install a flavor system to allow for additional liquid and dry
coatings on dog food and cat food.
- Estimate of Maximum Requirement: $120,000
2. Modify and/or install additional screening and grinding equipment
just prior to pet food extrusion.
- Estimate of Maximum Requirement: $40,000
3. Install additional conveyance equipment in the pet food packaging
area to allow for simultaneous production of two different products.
- Estimate of Maximum Requirement: $36,000
4. Modification and renovation of existing pet food warehouse to reduce
risk of product contamination.
- Estimate of Maximum Requirement: $30,000
5. Purchase Technicon Product Analyzer.
- Estimate of Maximum Requirement: $36,000
6. Install additional stretch wrap equipment for small size packing
line.
- Estimate of Maximum Requirement: $7,000
7. Modify liquid storage tanks to allow for use of poultry fat in
addition to animal fat presently being used.
- Estimate of Maximum Requirement: $1,000
<PAGE>
SCHEDULE B
ANDERSONS - HUBBARD VENTURE
ALLOCATIONS TO PRODUCTION
1. Gas
A. 100% of the 2" gas line feeding the pet food drier will be charged
to the joint venture.
B. 73% of the 3" gas line that feeds both pet food and feed will be
charged to the joint venture.
C. On the 3" line there will be a maximum charge per ton of $3.40 plus
any percent increase in fuel cost with the base cost of $5.54/MCF,
which is the current cost of gas to the Andersons. This was based on
usage over the calendar year 1983 and the tons for the same time
period. We used standard cost at other feed mills to cross check the
Feed and Pet Food allocations.
2. Electric
A. 50% of the electric cost will be charged to the venture for the pet
food production: 50% to The Andersons for its livestock production.
B. B. A maximum charge per ton to the venture of $2.88 plus any percent
increase in electric cost with a base cost of $.0643 per KWH. Again,
this was based on standard cost at other feed mills to cross check
the Feed and Pet Food allocations.
3. Water and Sewer
A. 85% of the water and sewer cost will be charged to the joint venture. Pet
Food is by far the major user of the water and sewer.
4. Management
A. 30% of Andersons' Feed Division Production Manager wages will be
charged to the joint venture.
B. 100% of Hubbard's on site Q.A. Manager will be charged to the joint
venture.
- 1 -
<PAGE>
5. Equipment Repair Costs
A. All repair expenses related to materials for pet food equipment
solely, will be charged 100% to the venture. Examples would be
extruder repairs and pet food packaging equipment repairs.
B. All repair materials for equipment common to both operations
(Livestock Feed and Pet Food) will be charged on an allocated
percentage basis determined from tonnage produced in each of the two
areas. Examples would be receiving repairs and repairs to boilers
and air compressors. (*)
6. Building and Grounds Maintenance and Repair
A. Repair and maintenance service to the building and to the related
property will be charged directly to the area of operation, if
possible. For example, repairs to the overhead door in the livestock
warehouse will be charged 100% to The Andersons. A door repair in
the pet food warehouse would be charged 100% to the venture.
B. Building maintenance and services that are not specifically related
to either department will be charged to the venture on an allocated
percentage basis determined from the tonnage produced in each area.
Snow removal expenses for plowing the parking lot, trash removal
charges and plant rodent control services would fall into this
category. (*)
7. Real and Personal Property Tax - Personal Property Taxes charged to the
venture will be calculated as follows:
A. Tax on finished pet food only: viz. at an average inventory tons of
700 ton and an average cost per ton of $225.
B. Average Cost x Average Ton x 34% x Tax Rate =Annual Tax
viz., $225 x 700 x 34% x .05885 = $3,151
This calculation was arrived at through telecon with Neil Rupp.
C. Real Estate Taxes for 1983 were $11,380 per Anderson computer
report #402 dated January 19, 1984.
8. Labor Cost/Ton - Labor costs for mixing, receiving and maintenance.
A. Mixing and receiving - Costs/ton was calculated as follows:
* In no event shall the Venture be charged with more than 50% of such costs.
<PAGE>
Average Ton/Day = 24,000 Annual Tonnage / 252 Days = 95 Tons
Average Ton/Hour = 15 Ton
Wage Rate $11.00
95 Ton / 15 Ton = $6.35 Hour/Day x $11 = $69.85
$69.85 x 252 Days = $17,602/Year
$17,602 / 2,400 Ton = $0.73
B. Maintenance - Costs to the venture will be charged by actual hours
spent on maintenance determined from the work order at an hourly
labor rate.
9. Toledo Scale Computer
A. All maintenance contract agreements for servicing and maintaining
the Toledo Scale Computer and related hardware will be excluded from
venture expenses.
B. All equipment in the batching room of the feed mill would normally
be covered by maintenance contract not charged to the venture.
C. Substitution of computerized batching equipment at some point in the
future will be at the expense of The Andersons. (*)
10. The parties agree to prepare a budget for the venture each year and to
prepare an annual management letter which will define general and
administrative charges to be made to the venture.
* Replacement equipment shall have equal or greater capacity than present
equipment.
<PAGE>
SCHEDULE C
April 24, 1984 COST PROJECTIONS FOR HUBBARD - ANDERSON PET FOOD JOINT VENTURE
for first 12 months of operations
---------------------------------
<TABLE>
<CAPTION>
GENERAL AND ADMINISTRATIVE
--------------------------
A. ANDERSON G & A COSTS - NON-PLANT
<S> <C> <C>
3000 DATA PROCESSING CHARGE FOR COMPUTER TO KEEP TRACK OF MANUFACTURING EXPENSES.
1000 TELEPHONE MAIN OFFICE LONG DISTANCE CALLS.
4000 SAFETY & SECURITY FIRE ALARMS & SPRINKLER SYSTEM CHECKS AT THE PLANT, ETC.
1000 MAIL SERVICE TO HANDLE INCOMING, OUTGOING, AND INTER-OFFICE MAIL.
3000 PAYROLL COSTS BIWEEKLY CHECK PREPARATION AND WITHHOLDING FILINGS FOR PLANT EMPLOYEES.
4000 GENERAL ACCOUNTING COST ACCOUNTING BY DEPARTMENT AT PLANT. FEED CHARGED $27,000 IN TOTAL.
6000 ACCOUNTS PAYABLE PROCESSING PURCHASE ORDERS AND CHECKS. FEED CHARGED $15,00 IN TOTAL.
3000 TRAFFIC GET RATE QUOTES AND SET UP HAULERS.
6000 HOPPER CARS $3000 LEASE FEE ON 1 CAR FOR A YEAR; $3000 LABOR TO SWITCH CARS.
15000 INGREDIENT PURCHASING 1/2 SALARY & BENEFIT COST OF CHERYL HAAS.
8000 DIVISION ACCOUNTING 1/3 SALARY & BENEFIT COST OF RANDY SAVORY.
8000 MISCELLANEOUS TRAVEL COSTS, ETC.
3000 MISCELLANEOUS
65000 TOTAL ANDERSON G & A
</TABLE>
<TABLE>
<CAPTION>
SELLING EXPENSES
<S> <C> <C>
43000 SALESMAN COST WAGES AND BENEFITS.
18960 SALESMAN TRAVEL FIXED AUTO - $3432; AUTO OPERATING - $3180; EXTRA AUTO
DEPRECIATION- $960; TRAVEL EXP. - $7200; ENTERTAINMENT -
$1200; TELEPHONE - $2220; MISCELLANEOUS - $768
6720 SALES MGR. TRAVEL 8 TRIPS @ $840 PER TRIP.
6800 COMMISSIONS FOR HUBBARD FEED OPERATIONS SALESMEN. 1700 TONS AT AN
AVERAGE COST OF $4.00 PER TON.
10000 COMMISSIONS FOR ANDERSONS FEED OPERATIONS SALESMEN ON PARTNERS PLUS. 2500
TONS AT AN AVERAGE COST OF $4.00 PER TON.
4800 CUSTOMER TRAVEL TO ATTEND PLANT TOURS AND MEETINGS.
90280 TOTAL SELLING EXPENSE
</TABLE>
<TABLE>
<CAPTION>
A. ANDERSON G & A COSTS - MAUMEE PLANT
<S> <C> <C>
26995 WAGES & BENEFITS 1/5 BOB BEUNIG AND 1/2 OF DEE. DEE TO HANDLE COMPUTER ENTRIES AND SECRETARIAL.
4200 TELEPHONE BILLS FOR PLANT EXTENSIONS.
1500 COMPUTER $125 MONTHLY CHARGE FOR TERMINAL CONNECTED TO MANKATO FOR PROCESSING
1200 AUTO OPERATING EXP. CHARGE FOR MILEAGE ON PLANT ERRANDS.
1200 GENERAL TRAVEL TRAVEL EXPENSE FOR PLANT PERSONNEL.
1200 POSTAGE COSTS FOR MAILING LAB SAMPLES TO MANKATO.
720 SUPPLIES OPERATING SUPPLIES FOR PLANT OFFICE.
720 UPS UPS CHARGES FOR SENDING CUSTOMER SAMPLES, ETC.
600 SUPPLIES OFFICE SUPPLIES FOR PLANT OFFICE.
600 REPAIRS REPAIRS OF TYPEWRITERS, COPY MACHINES, ETC. IN PLANT OFFICE
600 MISCELLANEOUS MISC. ITEMS FOR PLANT EMPLOYEES SUCH AS FLOWERS, CHRISTMAS PARTY, ETC.
480 MEETINGS & CONVENTION MEETINGS & SEMINARS FOR PLANT SUPERVISORS.
240 DUES & SUBSCRIPTIONS FOR ITEMS SENT TO THE PLANT.
40255 TOTAL MAUMEE PLANT G & A
</TABLE>
page 1
<PAGE>
<TABLE>
<CAPTION>
C. HUBBARD OFFICE G & A - OPERATING
<S> <C> <C>
6900 WAGES & BENEFITS 1/4 COST OF PAUL HOLZHUETER, RICK BANISTER, SUE JOLLIFFE, MARJ JOHNSON, AND
CHUCK GUMPEL; PLUS 1 CUSTOMER SERVICE REP. TO PROCESS ORDERS.
16800 TRAVEL EXPENSES ON INDIVIDUALS ABOVE EXCEPT FOR RICK BANISTER, WHOSE TRAVEL IS BUDGETED AS A
SELLING EXPENSE. 24 TOTAL TRIPS AT AN AVERAGE COST OF $700 PER TRIP.
12000 LAB FEES FOR TESTS ON FINISHED PET FOOD PRODUCTS AT MANKATO LAB.
3000 RESEARCH EXPENSE RESEARCH CONDUCTED AT OUTSIDE TESTING FACILITIES. 1/4 TOTAL ANNUAL COST.
4800 TELEPHONE INCOMING AND OUTGOING WATS LINES AT MANKATO FOR COMMUNICATION WITH CUSTOMERS,
THE PLANT, BAG SUPPLIERS, ETC. 1/4 TOTAL ANNUAL COST OF PET FOOD.
104600 TOTAL HUBBARD OFFICE
OPERATING G & A
</TABLE>
<TABLE>
<CAPTION>
D. HUBBARD OFFICE G & A - ADMINISTRAT.
<S> <C> <C>
12000 COMPUTER COSTS FOR ORDER TRANSMISSIONS, PRICING CALCULATIONS, PRICING LETTERS, INVOICING,
SALES REPORTS, AGED TRIALS, ETC.
6000 PRINT SHOP OFFICE SUPPLIES, PAPER, ADVERTISING PRODUCTION, MAIL SERVICE, MISC. PRINTING.
12000 ACCOUNTING ALL OFFICIAL ACCOUNTING FOR THE JOINT VENTURE; PREPARE MONTHLY STATEMENTS.
3000 COMPANY AIRPLANE ESTIMATE OF USEAGE FEE; WILL BE BASED ON ACTUAL USE.
12000 ENGINEERING COST OF SALARIES, BENEFITS, AND TRAVEL COSTS. BASED ON ACTUAL TIME WORKED.
400 PERSONNEL DEPARTMENT TIME SPENT ON JOINT VENTURE ITEMS. BASED ON ACTUAL TIME WORKED.
45400 TOTAL HUBBARD OFFICE
ADMINISTRATIVE G & A.
E. TOTAL JOINT VENTURE G & A
65000 A. ANDERSONS G & A - NON-PLANT
40255 B. ANDERSONS G & A - MAUMEE PLANT
104600 C. HUBBARD OFFICE G & A - OPERATING
45400 D. HUBBARD OFFICE G & A - ADMINISTRATIVE
255255 TOTAL JOINT VENTURE G & A
</TABLE>
page 2
<PAGE>
EXHIBIT 1
TERMS OF PURCHASE OPTION
1. Property Covered. The following real and personal property is
subject to the purchase option (the "Option") granted to Hubbard under the
foregoing Statement of Understanding between Hubbard and Andersons (the
"Statement of Understanding") relating to the joint venture described therein
(the "Venture"):
(a) All of the real estate and all improvements now or hereafter
located thereon (including without limitation Andersons' interest in the
feed mill warehouse purchased pursuant to paragraph 7 of the Statement of
Understanding), situated in the City of Maumee, County of Lucas and State
of Ohio, the location of which is marked by the shaded outline on Annex I
attached hereto and made a part hereof, together with all existing
railroad leases, rail sidings, easements and other rights over the
property of others owned by Andersons and together with perpetual
easements over property of Andersons needed to operate and maintain
present rail, highway and utility services reasonably needed for the use
and operation of the plants and facilities that are part of said property
(the "Real Property");
(b) All fixtures, machinery and equipment owned by Andersons used in
Andersons' and the Venture's feed business (including Andersons' livestock
feed business) except for any typewriters, adding machines, calculators
and any mainline computer terminals not directly used in mixing and
producing pet food, including, but without limiting the generality of the
foregoing, all loading and unloading equipment, scales, dumps, bins,
machinery, equipment, feed plant office furniture, materials handling
equipment, spare parts, tools, motors and supplies; and
(c) All plant books and records relating to production and shipment
of Andersons' and the Venture's feeds and related items after January 1,
1984, feed formulas in current use, and the like, and Andersons' records
and reports regarding DOL, FDA, OSHA, EPA and other governmental
examinations and clearances in respect of Andersons' and the Venture's
feed business.
Notwithstanding anything in the foregoing paragraphs, the accounts receivable,
inventory and open purchase contracts of Andersons' and the Venture's feed
business shall be excluded from the property sold to Hubbard pursuant to this
Purchase Option. The Real Property and all personal property described in this
paragraph 1 are sometimes hereinafter referred to collectively as the "Purchased
Property".
<PAGE>
2. Exercise. The Option shall be exercisable from and after the date
on which the Statement of Understanding is executed through and including the
fifth anniversary date thereof, unless prior thereto the Venture has been
terminated and dissolved, in which case the Option shall be exercisable through
and including the date on which the business of the Venture has been dissolved
and wound up. The Option shall be deemed fully exercised if written notice of
election to purchase is delivered to Andersons in the manner specified for
notices in the Statement of Understanding.
3. Purchase Price. The purchase price of the Purchased Property
shall be equal to the sum of (a) $1,000,000, plus (b) the original cost
(including installation) of the equipment purchased by Andersons pursuant to
paragraph 6 of the Statement of Understanding, plus (c) the book value (original
cost less depreciation) of Andersons' interest in the feed mill warehouse built
pursuant to paragraph 7 of the Statement of Understanding, plus (d) the book
value (original cost less depreciation) of Andersons' interest in any Purchased
Property that consists of equipment purchased jointly by Hubbard and Andersons
pursuant to paragraph 14 of the Statement of Understanding. Hubbard shall
receive a credit against the purchase price payable hereunder for the amount, if
any, paid by Hubbard for a survey of the Purchased Property pursuant to
paragraph 25 of the Statement of Understanding.
4. Title Insurance, Survey, Lien Searches. Anderson shall, at its
expense and as soon as practicable after Hubbard's exercise of the Option,
furnish to Hubbard:
(i) An unconditional commitment to insure title to the Real Property
on ALTA Form B-1970 issued by a title insurance company acceptable to
Hubbard in an amount equal to $1,000,000 plus the amount determined under
subparagraph (c) in paragraph 3 above, containing such affirmative
insurance as Hubbard may reasonably request relating to rights or
interests connected with the operation of the business conducted on the
Purchased Property (including, but hot limited to, easements), and
deleting or limiting on a basis approved by Hubbard's legal counsel all
exceptions to coverage relating to mechanics' liens, facts disclosed by
survey and parties in possession, provided, however, (a) unless written
objections are made to title within fifteen (15) days after Hubbard's
receipt of such title commitment and the survey to be provided by
Andersons pursuant to paragraph 4(ii) hereof, they shall be deemed waived,
but if any objections are so made to the marketability of title, Hubbard
shall be allowed such period as Hubbard by notice grants to Andersons,
which shall not be less than sixty (60) nor more than one hundred twenty
(120) days thereafter to make such title marketable and Andersons shall
use best efforts to do so; (b) pending
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<PAGE>
correction of title, the Closing Date shall be postponed if the same would
occur prior to expiration of the time period allowed Andersons to correct
title objections, and (c) Hubbard may waive in writing, either
conditionally or absolutely, any or all title objections at any time and
from time to time on or prior to the Closing Date. Hubbard shall also have
the right to object to title from time to time after said fifteen (15) day
period, if by subsequent endorsement said commitment is amended, subject
to the provisions of clause (b) above. If the title objections are cured
on or prior to the Closing (including as postponed pursuant to clause (b)
above), the Closing shall occur as otherwise provided in this Agreement.
In addition, Hubbard's obligations shall be contingent upon receipt of an
endorsement to the title commitment at the Closing changing the effective
date thereof to the date of the Closing, affirmatively insuring against
changes in the status of title from the effective date to the date of
recording the deed, and reflecting Hubbard as the fee owner of the Real
Property and without any other change, except that the commitment may show
any mortgage and collateral security documents that Hubbard may place
against the Real Property as of the Closing. Andersons and Hubbard shall
each be responsible for payment of one-half (1/2) of the premium for the
policy issued pursuant to such commitment;
(ii) A survey of the Real Property certified to Hubbard and its
Lender, if any, and its assigns as of a current date covering such matters
as Hubbard may reasonably require; and
(iii) UCC and tax lien searches from the appropriate Secretaries of
State that reflect that all Purchased Property that is personal property
is free from all liens, claims and encumbrances, which searches shall be
paid for by Hubbard.
5. Closing. If the Option is exercised, the parties shall close the
sale of the Purchased Property at a mutually agreed upon place (in Lucas County,
Ohio) and time on such date as Hubbard shall specify upon not less than ten (10)
days prior written notice to Andersons. At Closing, Andersons shall deliver to
Hubbard, at Andersons' expense:
(i) a warranty deed, subject only to such exceptions as are set
forth in the commitment for title insurance provided pursuant to paragraph
4(i) hereof;
(ii) a general conveyance or bill of sale or bills of sale and other
good and sufficient instruments of transfer, assignment and conveyance
transferring, assigning and conveying to Hubbard all of the assets
included in the Purchased Property other than the Real Property, including
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<PAGE>
such warranties of title as Hubbard may reasonably require; and
(iii) full possession and right to possession to all of the
Purchased Property and all of the books, records and other documents
included in the Purchased Property.
The foregoing shall be delivered to Hubbard by Andersons in return for the
purchase price payable by Hubbard, all of which shall be payable on the date of
Closing in the form of a bank cashier's check.
6. Proration. Taxes, assessments, utilities, city water and
insurance shall be prorated as of the Closing.
7. Noncompetition. Andersons covenants and agrees that as an entity
it shall not, after the Closing Date, engage in or have any interest in
(directly or indirectly, whether as principal, employee, agent, partner,
stockholder of a corporation [except to the extent that Andersons beneficially
owns in the aggregate not more than one percent (1%) of the value of the
outstanding stock of the corporation] or otherwise), any person, firm,
corporation, association, trust or other entity, directly or indirectly engaged
in any aspect of the production of pet food.
8. Miscellaneous. Hubbard shall be entitled to such representations
and warranties from Andersons as are customary in connection with a purchase and
sale of assets; provided, however, that all Purchased Property will be sold to
Hubbard on an "as is" basis. Hubbard shall not, in connection with the purchase
of the Purchased Property, assume any liability or obligation of Andersons
except as expressly otherwise mutually agreed by the parties. Hubbard may, in
its sole discretion, offer employment to employees of Andersons, but such
employment shall be on terms and conditions established by Hubbard, and
Andersons shall be solely responsible for any termination obligations of any
kind whatsoever with respect to the personnel in Andersons' feed business
whether or not any of such personnel are employed by Hubbard following
termination of their employment by Andersons.
So long as Andersons or its assigns continue to operate the grain
operation adjoining the Real Property, Andersons will move cars to and from the
Real Property over its tracks substantially as at present. The use by Hubbard of
Andersons' tracks shall be non-exclusive and subject to all applicable rules of
the railroad and no reasonable requirements set by Andersons or its assigns for
contribution by Hubbard to the maintenance of tracks used by Hubbard. Further,
if Hubbard exercises its option to purchase, Hubbard agrees to indemnify and
hold harmless Andersons
-4-
<PAGE>
for any damages arising out of Hubbard's use of Andersons' tracks from and after
the date of the closing of such purchase.
-5-
<PAGE>
NEW
ANNEX I
[DIAGRAM OF UNDERGROUND WATER AND SPRINKLER MAIN]
Note: This property line along the tracks outlined in red will be
drawn from the centerline of the track toward the feed mill for a distance that
equals required railroad minimum clearances and does not extend beyond any
property not presently owned by Andersons.
<PAGE>
SUPPLEMENT NO. 1
TO
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
THIS SUPPLEMENT NO. 1 dated as of May 31, 1989, between THE
ANDERSONS ("Andersons"), a limited partnership organized under the laws of the
State of Ohio, and HUBBARD MILLING COMPANY ("Hubbard"), a Minnesota corporation.
RECITALS
1. Pursuant to a Statement of Understanding Regarding Pet Food Joint
Venture dated June 1, 1984 ( the "Joint Venture Agreement"), Andersons and
Hubbard have created a joint venture (the "Venture") for the purpose of engaging
in the manufacturing, marketing and production of pet foods at the Feed Mill (as
defined in the Joint Venture Agreement).
2. Andersons and Hubbard desire to supplement and amend the Joint
Venture Agreement in several respects as herein provided.
AGREEMENT
For good and valueable consideration, Andersons and Hubbard hereby
agree as follows:
1. Other Activities. Paragraph 5 of the Joint Venture Agreement
provides, among other things, that competitive activities by Andersons and
Hubbard are approved so long as there is no deliberate intent to diminish the
profitability of the Venture. Paragraph 8 of the Joint Venture Agreement
provides, among other things, that Andersons will use its best efforts to have
all of its production requirements for pet food produced by the Venture and to
purchase such pet food for the Venture. Andersons and Hubbard hereby acknowledge
and agree that notwithstanding those or any other provisions of the Joint
Venture Agreement that could be construed as prohibiting such activities,
Anderson may, without involving the Venture, (i) manufacture, market and produce
pet products other than cat food, dog food, biscuits, and treats of a type
manufactured by Hubbard or the Venture, and (ii) distribute pet food for IAMS.
2. Termination. Paragraph 29 of the Joint Venture Agreement is
hereby amended and restated in its entirety as follows:
"29. Termination. This Agreement and the Venture shall terminate as
follows:
<PAGE>
(a) by the mutual written consent of Hubbard and Andersons;
(b) on April 30, 1991, unless Hubbard and Andersons shall
agree no later than January 31, 1991, upon the terms and conditions
of an extension of the Venture; and
(c) as of the date, if any, on or after April 30, 1991, on
which there occurs a closing of a purchase of assets by Hubbard
pursuant to the exercise of the option granted under paragraph 25 of
this Agreement.
Nothing contained in this paragraph shall affect or impair any
rights or obligations arising prior to or at the time of the
termination of this Agreement, or which may arise by an event
causing the termination of this Agreement and the Venture."
3. Extension and Future Exercise of Option. Paragraph 2 of
Exhibit 1 to the Joint Venture Agreement is hereby amended and restated in its
entirety as follows:
"2. Exercise. The Option shall not be voluntarily exercisable
by Hubbard until April 30, 1991. From and after such date, Hubbard
may voluntarily exercise the Option by delivering written notice of
election to purchase to Andersons in the manner specified for
notices in the Statement of Understanding.
The Option shall be deemed to have been exercised by Hubbard
on January 31, 1991, if Hubbard and Andersons shall not agree to an
extension of the term of the Venture by January 31, 1991, with
closing to occur on April 30, 1991, or any other reasonably
appropriate later date specified by Hubbard in accordance with
Paragraph 5 of Exhibit 1 to the Statement of Understanding. As
provided in Section 29(b) of the Statement of Understanding, the
Venture will terminate as of April 30, 1991, unless Hubbard and the
Andersons agree on an extension of the Venture by January 31, 1991."
4. Noncompetition. Paragraph 7 of Exhibit 1 to the Joint
Venture Agreement is hereby amended and restated in its entirety as follows:
"7. Noncompetition: Purchase of Requirements. Andersons
covenants and agrees that, for a period of five (5) years from and
after the Closing Date, it will not engage directly or indirectly in
any Directly Competitive Activity (as hereinafter defined), or
directly or indirectly own, operate or enter into any business
engaging in any Directly Competitive Activity. As used herein,
"Directly Competitive Activity" shall mean engaging in any aspect of
the production or wholesale distribution of cat food, dog food,
biscuits or treats of a type produced by Hubbard, unless the product
being produced or distributed (i) is not produced by Hubbard, (ii)
has been purchased from Hubbard, or (iii) is a recognized national
brand.
<PAGE>
In addition to the foregoing agreement, Andersons convenants
and agrees for a period of five (5) years from and after the Closing
Date, it will use its best efforts to have all of its requirements for
dog food, cat food, biscuits or treats produced by Hubbard and to
purchase the same from Hubbard, except that Andersons may purchase any
recognized national brand of pet food through other sources."
IN WITNESS WHEREOF, Andersons and Hubbard have caused this
Supplement No. 1 to be executed by their duly authorized representatives as of
the date first written above.
THE ANDERSONS
BY THE ANDERSON MANAGEMENT CORPORATION,
A GENERAL PARTNER
By: /s/ Dale W. Fallat
---------------------------------
Dale W. Fallat
Senior Vice President
HUBBARD MILLING COMPANY
By: /s/ Paul R. [illegible]
---------------------------------
Its: Div. Vice President
<PAGE>
SUPPLEMENT NO. 2
TO
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
THIS SUPPLEMENT NO. 2 dated as of the 27th day of Nov, 1990, between
THE ANDERSONS ("Andersons"), a limited partnership organized under the laws of
the State of Ohio, and HUBBARD MILLING COMPANY ("Hubbard"), a Minnesota
corporation.
RECITALS
1. Pursuant to a Statement of Understanding Regarding Pet Food Joint
Venture dated June 1, 1984 (the "Joint Venture Agreement"), Andersons and
Hubbard have created a joint venture (the "Venture") for the purpose of engaging
in the manufacturing, marketing and production of pet foods at the Feed Mill (as
defined in the Joint Venture Agreement). The Joint Venture Agreement was
supplement by Supplement No. 1 dated May 31, 1989.
2. Andersons and Hubbard again desire to supplement and amend the
Joint Venture Agreement and Supplement No. 1 in several respects as herein
provided.
AGREEMENT
For good and valuable consideration, Andersons and Hubbard hereby
agree as follows:
1. Termination. Paragraph 29 of the Joint Venture Agreement is
hereby amended and restated in its entirety as follows:
"29. Termination. This Agreement and the Venture shall terminate as
follows:
(a) by the mutual written consent of Hubbard and Andersons;
(b) on April 30, 1993, unless Hubbard and Andersons shall agree no
later than January 31, 1993, upon the terms and conditions of an extension
of the Venture; and
(c) as of the date, if any, on or after April 30, 1993, on which
there occurs a closing of a purchase of assets by Hubbard pursuant to the
exercise of the option granted under paragraph 25 of this Agreement.
Nothing contained in this paragraph shall affect or impair any rights or
obligations arising prior to or at the time of the termination of this
Agreement or which may arise by an event causing the termination of this
Agreement and the Venture."
2. Extension and Future Exercise of Option. Paragraph 2 of Exhibit 1
to the Joint Venture Agreement is hereby amended and restated in its entirety as
follows:
<PAGE>
"2. Exercise. The Option shall not be voluntarily exercisable by
Hubbard until April 30, 1993. From and after such date, Hubbard may
voluntarily exercise the Option by delivering written notice of election
to purchase to Andersons in the manner specified for notices in the
Statement of Understanding.
The Option shall be deemed to have been exercised by Hubbard on
January 31, 1993, if Hubbard and Andersons shall not agree to an extension
of the term of the Venture by January 31, 1993, with closing to occur on
April 30, 1993, or any other reasonably appropriate later date specified
by Hubbard in accordance with Paragraph 5 of Exhibit I to the Statement of
Understanding. As provided in Section 29(b) of the Statement of
Understanding, the Venture will terminate as of April 30, 1993, unless
Hubbard and the Andersons agree on an extension of the Venture by January
31, 1993."
3. Paragraphs 2 and 3 of Supplement No. 1 are superseded by the
provision of this Supplement No. 2.
IN WITNESS WHEREOF, Andersons and Hubbard have caused this
Supplement No. 2 to be executed by their duly authorized representatives as of
the date first written above.
THE ANDERSONS
BY THE ANDERSON MANAGEMENT CORPORATION,
A GENERAL PARTNER
By: /s/ Chris Anderson
------------------------------------------
Chris Anderson
Manager-Ventures & Business Development
HUBBARD MILLING COMPANY
By: /s/ Paul Holzhueter
------------------------------------------
Paul R. Holzhueter
Vice President
<PAGE>
SUPPLEMENT NO. 3
TO
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
THIS SUPPLEMENT No. 3 dated as of the 18th day of Nov, 1992, between
THE ANDERSONS ("Andersons"), a limited partnership organized under the laws of
the State of Ohio, and HUBBARD MILLING COMPANY ("Hubbard"), a Minnesota
corporation.
RECITALS
1. Pursuant to a Statement of Understanding Regarding Pet Food Joint
Venture dated June 1, 1984 (the "Joint Venture Agreement"), Andersons and
Hubbard have created a joint venture (the "Venture") for the purpose of engaging
in the manufacturing, marketing and production of pet foods at the Feed Mill (as
defined in the Joint Venture Agreement). The Joint Venture Agreement was
supplement by Supplement No. 1 dated May 31, 1989, and Supplement No. 2 dated
November 27, 1990.
2. Andersons and Hubbard again desire to supplement and amend the
Joint Venture Agreement and Supplements No. 1 and No. 2 in several respects as
herein provided.
AGREEMENT
For good and valuable consideration, Andersons and Hubbard hereby
agree as follows:
1. Termination. Paragraph 29 of the Joint Venture Agreement is
hereby amended and restated in its entirety as follows:
"29. Termination. This Agreement and the Venture shall terminate as
follows:
(a) by the mutual written consent of Hubbard and Andersons;
(b) on April 30, 1995, unless Hubbard and Andersons shall agree no
later than January 31, 1995, upon the terms and conditions of an extension
of the Venture; and
(c) as of the date, if any, on or after April 30, 1995, on which
there occurs a closing of a purchase of assets by Hubbard pursuant to the
exercise of the option granted under paragraph 25 of this Agreement.
Nothing contained in this paragraph shall affect or impair any rights or
obligations arising prior to or at the time of the termination of this
Agreement or which may arise by an event causing the termination of this
Agreement and the Venture."
2. Extension and Future Exercise of Option. Paragraph 2 of Exhibit 1
to the Joint venture Agreement is hereby amended and restated in its entirety as
follows:
<PAGE>
"2. Exercise. The Option shall not be voluntarily exercisable by
Hubbard until April 30, 1995. From and after such date, Hubbard may
voluntarily exercise the Option by delivering written notice of election
to purchase to Andersons in the manner specified for notices in the
Statement of Understanding.
The Option shall be deemed to have been exercised by Hubbard on
January 31, 1995, if Hubbard and Andersons shall not agree to an extension
of the term of the Venture by January 31, 1995, with closing to occur on
April 30, 1995, or any other reasonably appropriate later date specified
by Hubbard in accordance with Paragraph 5 of Exhibit 1 to the Statement of
Understanding. As provided in Section 29(b) of the Statement of
Understanding, the Venture will terminate as of April 30, 1995, unless
Hubbard and the Andersons agree on an extension of the venture by January
31, 1995."
3. Paragraphs 1 and 2 of Supplement No. 2 are superseded by the
provision of this Supplement No. 3.
IN WITNESS WHEREOF, Andersons and Hubbard have caused this
Supplement No. 3 to be executed by their duly authorized representatives as of
the date first written above.
THE ANDERSONS
BY THE ANDERSON MANAGEMENT CORPORATION,
A GENERAL PARTNER
By: /s/ Chris Anderson
------------------------------------------
Chris Anderson
Manager-Ventures & Business Development
HUBBARD MILLING COMPANY
By: /s/ Timothy C. Violet
------------------------------------------
Timothy C. Violet
Vice President
-2-
<PAGE>
SUPPLEMENT No. 4
TO
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
THIS SUPPLEMENT NO. 4 dated as of the 9th day of November, 1994, between
THE ANDERSONS ("Andersons"), a limited partnership organized under the laws of
the State of Ohio, and HUBBARD MILLING COMPANY ("Hubbard"), a Minnesota
corporation.
RECITALS
1. Pursuant to a Statement of Understanding Regarding Pet Food Joint
Venture dated June 1, 1984 (the "Joint Venture Agreement"), Andersons and
Hubbard have created a joint venture (the "Venture") for the purpose of engaging
in the manufacturing, marketing and production of pet foods at the Feed Mill (as
defined in the Joint Venture Agreement). The Joint Venture Agreement was
supplement by Supplement No. 1 dated May 31, 1989, Supplement No. 2 dated
November 27, 1990, and Supplement No. 3 dated November 18, 1992.
2. Andersons and Hubbard again desire to supplement and amend the Joint
Venture Agreement and Supplements No. 1, No. 2, and No 3 in several respects as
herein provided.
AGREEMENT
For good and valuable consideration, Andersons and Hubbard hereby agree as
follows:
1. Termination. Paragraph 29 of the Joint Venture Agreement is
hereby amended and restated in its entirety as follows:
"29. Termination. This Agreement and the Venture shall terminate as
follows:
(a) by the mutual written consent of Hubbard and Andersons;
(b) on April 30, 1997, unless Hubbard and Andersons shall agree no
later than January 31, 1997, upon the terms and conditions of an extension
of the Venture; and
(c) as of the date, if any, on or after April 30, 1997, on which
there occurs a closing of a purchase of assets by Hubbard pursuant to the
exercise of the option granted under paragraph 25 of this Agreement.
Nothing contained in this paragraph shall affect or impair any rights or
obligations arising prior to or at the time of the termination of this
Agreement or which may arise by an event causing the termination of this
Agreement and the Venture."
2. Extension and Future Exercise of Option. Paragraph 2 of Exhibit 1
to the Joint Venture Agreement is hereby amended and restated in its entirety as
follows:
"2. Exercise. The Option shall not be voluntarily exercisable by
Hubbard until April 30, 1997. From and after such date, Hubbard may voluntarily
exercise the Option by delivering written notice of election to purchase to
Andersons in the manner specified for notices in the Statement of Understanding
<PAGE>
The Option shall be deemed to have been exercised by Hubbard on
January 31, 1997, if Hubbard and Andersons shall not agree to an extension
of the term of the Venture by January 31, 1997, with closing to occur on
April 30, 1997, or any other reasonably appropriate later date specified
by Hubbard in accordance with Paragraph 5 of Exhibit 1 to the Statement of
Understanding. As provided in Section 29(b) of the Statement of
Understanding, the Venture will terminate as of April 30, 1997, unless
Hubbard and the Andersons agree on an extension of the Venture by January
31, 1997."
3. Paragraphs 1 and 2 of Supplement No. 3 are superseded by the
provision of this Supplement No. 4.
IN WITNESS WHEREOF, Andersons and Hubbard have caused this
Supplement No. 4 to be executed by their duly authorized representatives as of
the date first written above.
THE ANDERSONS
BY THE ANDERSON MANAGEMENT CORPORATION,
A GENERAL PARTNER
By: /s/ Chris Anderson
------------------------------------------
Chris Anderson
Manager-Ventures & Business Development
HUBBARD MILLING COMPANY
By: /s/ Paul Holzhueter
------------------------------------------
Paul Holzhueter
Group Vice President
-2-
<PAGE>
SUPPLEMENT NO. 5
TO
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
THIS SUPPLEMENT NO. 5 dated as of the 16th day of January, 1997, between
THE ANDERSONS, INC. ("Andersons") a corporation organized under the laws of the
State of Ohio, and HUBBARD MILLING COMPANY ("Hubbard"), a Minnesota corporation.
RECITALS
1. Pursuant to a Statement of Understanding Regarding Pet Food Joint
Venture dated June 1, 1984 (the "Joint Venture Agreement"), Andersons and
Hubbard have created a joint venture (the "Venture") for the purpose of engaging
in the manufacturing, marketing and production of pet foods at the Feed Mill (as
defined in the Joint Venture Agreement). The Joint Venture Agreement was
supplement by Supplement No. 1 dated May 31, 1989, Supplement No. 2 dated
November 27, 1990, Supplement No. 3 dated November 18, 1992, and Supplement No.
4 dated November 9, 1994.
2. Andersons and Hubbard again desire to supplement and amend the Joint
Venture Agreement and Supplements No. 1, No. 2, No. 3, and No. 4 as herein
provided.
AGREEMENT
For good and valuable consideration, Andersons and Hubbard hereby agree as
follows:
1. Termination. Paragraph 29 of the Joint Venture Agreement is
hereby amended and restated in its entirety as follows:
"29. Termination. This Agreement and the Venture shall terminate as
follows:
(a) by the mutual written consent of Hubbard and Andersons;
(b) on July 31, 1997, unless Hubbard and Andersons shall agree no
later than April 30, 1997, upon the terms and conditions of an extension
of the Venture; and
(c) as of the date, if any, on or after July 31, 1997, on which
there occurs a closing of a purchase of assets by Hubbard pursuant to the
exercise of the option granted under paragraph 25 of this Agreement.
<PAGE>
Nothing contained in this paragraph shall affect or impair any rights or
obligations arising prior to or at the time of the termination of this
Agreement or which may arise by an event causing the termination of this
Agreement and the Venture."
2. Extension and Future Exercise of Option. Paragraph 2 of Exhibit 1
to the Joint Venture Agreement is hereby amended and restated in its entirety as
follows:
"2. Exercise. The Option shall not be voluntarily exercisable by
Hubbard until July 31, 1997. From and after such date, Hubbard may
voluntarily exercise the Option by delivering written notice of election
to purchase to Andersons in the manner specified for notices in the
Statement of Understanding.
The Option shall be deemed to have been exercised by Hubbard on
April 30, 1997, if Hubbard and Andersons shall not agree to an extension
of the term of the Venture by April 30, 1997, with closing to occur on
July 31, 1997, or any other reasonably appropriate late date specified by
Hubbard in accordance with Paragraph 5 of Exhibit 1 to the Statement of
Understanding. As provided in Section 29(b) of the Statement of
Understanding, the Venture will terminate as of July 31, 1997, unless
Hubbard and the Andersons agree on an extension of the Venture by April
30, 1997."
3. Paragraphs 1 and 2 of the Supplement No. 4 are superseded by the
provision of this Supplement No. 5.
IN WITNESS WHEREOF, Andersons and Hubbard have caused this
Supplement No. 5 to be executed by their duly authorized representatives as of
the date first written above.
THE ANDERSONS, INC.
By: /s/ Chris Anderson
------------------------------------------
Chris Anderson
President - Processing & Manufacturing
HUBBARD MILLING COMPANY
By: /s/ Paul Holzhueter
------------------------------------------
Paul Holzhueter
Group Vice President
<PAGE>
January 28, 1988
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
1. Parties. The parties to this Agreement are Merrick Pet Foods, a
division of Hereford Bi-Products, Inc., Highway 60 and FM 2943, Hereford, Texas
79045, a Texas corporation ("Merrick"), and Hubbard Milling Company, P.O. Box
8500, 424 North Riverfront Drive, Mankato, Minnesota 56001, a Minnesota
corporation ("Hubbard").
2. Supplements. This document summarizes the result of discussions between
the parties. The parties anticipate that this Agreement may be modified and
supplemented in the future. In particular, it is contemplated that the
Management Committee, as hereinafter defined, will periodically review and make
recommendations to the parties with respect to provisions relating to the amount
of reimbursable expenses and the price of products sold. Such changes and
additions if mutually acceptable will be in writing and will be prepared and
executed as supplements to this Statement of Understanding.
3. Representations. Each party to this Agreement represents and warrants
to the other that it is authorized to enter into this Agreement. Merrick and
Hubbard will at all times provide the other with all information relevant to the
venture contemplated hereby. Each party to this Agreement also represents and
warrants to the other that there are no suits or proceedings pending or
threatened against it, other than litigation that is immaterial to the
respective parties and the venture contemplated hereby and that such party has
all permits, licenses and authorizations, governmental or otherwise, necessary
to enter into this Agreement and to carry out the transactions contemplated by
it.
4. Businesses of Hereford Bi-Products and Hubbard. HBP is an agribusiness
company with, among other facilities, production plants that process dead beef
stock, produce feed ingredients and manufacture pet food for the pet food and
greyhound industry. Its primary production plant and headquarters are located
along Highway 60 and FM 2943 in Hereford, Texas. Hubbard is also an agribusiness
company with, among other things, interests in the manufacturing, marketing and
production of pet food at various plants located in the United States.
5. Formation of Joint Venture; Purpose; Other Activities. Hubbard and
Merrick hereby agree to form a joint venture (the "Venture") for the purpose of
engaging in the manufacturing, marketing and production of pet food at a
facility (the "Facility") owned by Merrick and located along Highway 60 and FM
2943 in Hereford, Texas. The Facility as used herein refers to the recently
built extrusion portion of Merrick's operation and does not include any portion
of Merrick's operations presently used for meat processing for the pet food
1
<PAGE>
industry. It is agreed that Merrick shall be principally responsible for
purchasing ingredients, manufacturing pet food products pursuant to Hubbard's
formulations and specifications and warehousing inventories of ingredients,
packaging and finished product. Hubbard shall be principally responsible for
sales and marketing, customer contacts, purchasing packaging and specialty
ingredients and pet food formulations. Additional products and activities may be
added as may be agreed from time to time between Merrick and Hubbard. It is
recognized that both Merrick and Hubbard have separate businesses which are
intended to co-exist with the Venture. Some of these separate businesses have
and will compete with the activity of the Venture. Orders for existing customers
being serviced from the Hereford plant can not be transferred to other Hubbard
plants without approval of the Management Committee. Orders for new customers
within a 500 mile radius of Hereford will be serviced from the Hereford or
Hubbard plants based on economic analysis of the Management Committee.
6. Management Committee. The parties agree that policy and management
decisions relating to the Venture shall be made by a committee (the "Management
Committee") consisting of one representative of each of Hubbard and Merrick.
Each party will designate a representative who will serve on the Management
Committee and one alternate who shall act in the absence of such representation.
Until further notice, these representatives will be Garth Merrick with Dan
Scanlon as alternate, for Merrick, and Paul Holzhueter with Michael Mitchell as
alternate, for Hubbard. Each party may, by written notice to the other,
designate a substitute representative or alternate.
7. Services to be Provided by Merrick.
(a) Start up Facility; Purchase of Additional Equipment. The Facility
owned by Merrick is a start-up facility that needs certain work to be completed
and improvements necessary to manufacture Hubbard pet food products. In
connection therewith, Merrick will, at its sole expense, provide the following:
(i) A liquid flavor application system along with provisions for feeding
this system from barrels;
(ii) Installation and start-up of small bag packaging equipment which has
already been ordered by Merrick;
(iii) Additional warehouse space as needed by the Venture (this space can
be rented, alternative warehouse space presently owned by Merrick or
a new warehouse to be built, but in all cases the warehouse space
provided must meet Hubbard's quality specifications and all costs of
providing such warehouse space, whether rented or built will be
borne by Merrick and not chargeable to the Venture as a
manufacturing expense); and
(iv) A dry flavor application system to apply such items as gravy dust,
milk coating, dry digest, etc.
Such additions will be the property of Merrick. Other acquisitions of
2
<PAGE>
equipment by or for the use of the Venture shall be made in accordance with
paragraph 13.
(b) Purchasing of Packaging and Ingredients. Merrick shall be responsible
for purchasing directly from ingredient suppliers approved by Hubbard quality
ingredients meeting Hubbard's specifications. Notwithstanding the preceding
sentence, Merrick shall have the right to specify sources of ingredients,
including premixes, that are used solely and specifically in Merrick's branded
label products; provided, however, that to the extent separate storage is
required, the use of these specific ingredients for Merrick's products shall not
limit, impair or in any manner effect the Venture's efficient use of all
ingredients necessary for the balance of the product line as interpreted by the
Management Committee. Merrick will maintain all title and interest in the
ingredients until the finished product is sold by the Venture. Notwithstanding
the foregoing, Hubbard agrees to use its purchasing power to buy ingredients if
Hubbard can purchase such ingredients at a lower cost than Merrick; provided,
however, that in any such event, invoices shall, if acceptable to the vendor, be
sent directly to Merrick and paid by Merrick when due, or if such arrangement is
not acceptable to the vendor, Merrick will promptly repurchase such ingredients
from Hubbard at Hubbard's cost within 15 days after receipt of invoice, Merrick
will also pay for when due, or repurchase from Hubbard, F.0.B. Hereford, Texas,
15 days after receipt of an invoice from Hubbard, at Hubbard's cost, as the
case may be, all packaging and specialty ingredients purchased by Hubbard for
the Venture pursuant to paragraph 8(c) and will maintain all title and interest
in such packaging and specialty ingredients purchased from Hubbard until the
finished product is sold by the Venture.
(c) Manufacturing of Pet Food. Merrick will manufacture quality pet food
products for the Venture pursuant to Hubbard's formulations and specifications
and will use its best efforts to control its cost of manufacturing consistent
with Hubbard's standard of quality. In connection therewith, Merrick will make
available the use of all equipment owned by Merrick necessary for the production
of dry extruded pet food, the use of Merrick's employees engaged in the
production of dry extruded pet food and of other employees engaged in support
and management services as necessary for the Venture's production of dry
extruded pet food. Merrick shall be entitled to be reimbursed by the Venture for
all actual expenses related to the cost of manufacturing, provided, however,
that such expenses shall not include depreciation or insurance costs (other than
product liability and worker's compensation insurance as provided in paragraph
17). The aggregate amount of all manufacturing expenses shall not exceed $30.00
per sellable ton of pet food for a period of two years (subject to periodic
adjustment for inflation as determined by the Management Committee) after the
effective date hereof, after which actual costs will be used. In addition to
reimbursable manufacturing expenses, Merrick shall be entitled to be reimbursed
by the Venture for general and administrative expenses as approved by the
Management Committee.
(d) Storage of Ingredients and Finished Products. Merrick will maintain
and store at its expense an inventory of packaging and ingredients and an
3
<PAGE>
inventory of finished products adequate to satisfy purchase orders obtained by
Hubbard from customers.
(e) Customer Service. Merrick shall make every effort to satisfy customer
requests as to delivery, customer pick-up and other related courtesies required
to satisfy the needs of customers. In connection therewith, Merrick shall
maintain an adequate supply of Hubbard pet food products which are not
manufactured at the Facility sufficient to satisfy anticipated customer demands,
including without limitation, treats, canned pet foods, semi-moist products and
other dry pet food products. Such products will be sold by Hubbard to Merrick,
F.O.B. Hereford, Texas, at a price of $25.00 per ton under the Venture's selling
price (subject to periodic adjustments for inflation as determined by the
Management Committee) and resold by Merrick as needed by the Venture (or at such
time as such Products become outdated, if later) to the Venture at Merrick's
cost (i.e. the price paid by Merrick to Hubbard). Such products shall be paid
for within 60 days after receipt of an invoice from Hubbard. Upon payment,
Merrick will maintain all title and interest in such products until sold to the
Venture.
(f) Quality Assurance. Merrick shall be responsible for performing the
following activities in accordance with quality control standards established by
Hubbard: (i) purchasing proper ingredients; (ii) maintaining quality standards
on the Facility and on products manufactured at the Facility, including
implementing sanitation policies and programs; and (iii) taking samples,
inventory control and maintaining plant production records necessary for quality
control. Merrick shall be entitled to charge the Venture for quality assurance
services that are normally performed during the manufacturing of pet foods (i.e.
technician work); provided, however, that such expenses shall constitute
manufacturing expenses for purposes of paragraph 7(c).
(g) Purchase of Products. Merrick will purchase all its dry extruded
branded label products exclusively from the Venture. The Venture will charge
Merrick $25.00 per ton over its cost for such products based on extruder output
(subject to periodic adjustments for inflation as determined by the Management
Committee). Merrick shall bear all costs related to the sales and marketing of
all Merrick branded label products. The Management Committee will review new
products marketed by either Hubbard or Merrick that will be produced by the
Venture to determine that they do not cause a negative economic impact on the
Venture.
8. Services to be Provided by Hubbard.
(a) Sales and Marketing. Hubbard agrees that, while this Agreement remains
in effect, it will use reasonable efforts to produce orders from customers for
pet food for production at the Facility (along with Merrick products that
Hubbard agrees to sell through the Venture), so long as such pet food can be
produced most economically at the Facility, is of a quality satisfactory to
Hubbard and can be produced consistent with Hubbard's requirements for delivery,
customer pick-up and other related customer courtesies. Attached as Exhibit I
hereto is a schedule of projected sales by the Venture for 1988
4
<PAGE>
and 1989 developed by the parties. Said Exhibit is attached hereto for
informational purposes only and the parties acknowledge that the figures in
Exhibit 1 and any projections hereafter developed are projections only and in no
way represent any commitment by either Hubbard or Merrick that the sales of the
Venture will meet such projections. All first orders from customers of the
Venture shall be subject to credit approval by the Management Committee of the
Venture. Any bad debt on products sold by the Venture to customers approved by
the Management Committee will be charged against the Venture. The parties
further acknowledge that the Venture shall not be liable for any bad debt on
products sold to Hubbard or Merrick and resold by Hubbard or Merrick.
(b) Production Assistance; Pet Food Formulations. Hubbard will provide
Merrick with Hubbard's production assistance as required by the Management
Committee and with all formulations for pet food products manufactured at the
Facility.
(c) Purchase of Packaging and Specialty Ingredients. Hubbard shall be
responsible for purchasing or arranging for the purchase by Merrick of all
packaging and specialty ingredients for pet food products manufactured by the
Venture, except for (i) packaging and specialty ingredients where it is
determined by the Management Committee that such packaging and specialty
ingredients can be purchased at a lower cost by Merrick or the Venture, or (ii)
packaging and ingredients, including premixes, that are used solely and
specifically in Merrick's branded label products. Merrick shall be responsible
for payment when due of all invoices for packaging and specialty ingredients
sent directly by vendors to Merrick and shall reimburse Hubbard for packaging
and ingredients purchased from Hubbard in accordance with paragraph 7(b). In the
case of ingredients manufactured by Hubbard, Hubbard shall charge the Venture a
total cost factor which will include freight to Hereford, Texas.
(d) Quality Assurance. Hubbard will provide a quality assurance program in
connection with the production of pet food by the Venture to be implemented by
Merrick's Quality Assurance Division (Ag Analysis). This program will be
monitored by Hubbard's Quality Assurance Department for compliance. The
Management Committee will arrange for laboratory work to be performed by Merrick
or Hubbard based on economics.
(e) Quality Assurance Manager. In order to enhance Hubbard's
responsibility for formulation and quality control, Hubbard will provide an
onsight employee of Hubbard that will be responsible for reviewing all
production and quality of pet food products (the "Quality Assurance Manager").
The Quality Assurance Manager shall, in general, be available at the Facility
for consultation in connection with Merrick's production of pet food for the
Venture. In particular, the Quality Assurance Manager will be responsible for
consulting with Merrick regarding technical aspects of the production of pet
food by the Venture. The Quality Assurance Manager will not be full time at the
Facility, but will devote such time to the Venture as the Management Committee
deems appropriate in light of the scope and activities of the Venture.
5
<PAGE>
(f) Payment for Ingredients and Packaging Costs. Hubbard will reimburse
Merrick for the "Cost of Ingredients", as hereafter defined, and packaging used
in finished product sold by the Venture within 15 days after receipt of a proper
invoice from Merrick. Merrick shall invoice Hubbard based on the formula of the
product manufactured and the ingredients used therein as ingredients and
packaging are converted into finished product and sold by the Venture. For
purposes hereof, the ingredients used shall be multiplied times the Cost of
Ingredients, as hereafter defined, plus a shrink factor to be determined and
agreed upon where appropriate. Until an exact factor can be determined, Hubbard
and Merrick agree to use an ingredient shrink factor of 4% and a packaging
shrink factor of 1%. This total dollar amount will be invoiced to Hubbard on a
weekly basis and Hubbard will be billed with sufficient detail to justify
charges. The "Cost of Ingredients" will be established on a monthly basis and
shall be the market price of an ingredient, F.O.B. Hereford, Texas, on the
Wednesday of the previous month that falls between the 11th and 17th of that
month, unless otherwise agreed upon. Market price of an ingredient shall be the
actual lowest cost that an ingredient can be purchased for at the time of the
monthly pricing.
(g) Customer Orders, Accounts Receivable. All customer orders will be
called into the Hubbard order desk in Mankato, Minnesota, including Merrick's
orders for Merrick branded label products. Orders will be transmitted daily to
the Facility via computer terminals. Hubbard will process all customer invoices,
collect accounts receivable and carry such receivables until collected or
written off by the Venture as uncollectable.
(h) Reimbursement. Hubbard's and Merrick's obligation to provide services
to the Venture is conditioned on the Venture reimbursing Hubbard and Merrick for
all its actual expenses related to pet foods manufactured by the Venture at the
Facility including but not necessarily limited to the following: computer link
ups, the cost of goods sold, all marketing and sales expenses, all other
directly related expenses (including all expenses relating to quality assurance,
salary and benefits of the Quality Assurance Manager, all credits, travel
expenses to and from the Facility, and all other similar expenses) and general
and administrative expenses as approved by the Management Committee.
Notwithstanding the foregoing, the parties agree that the Venture will only be
charged a flat fee of $5.00 per ton for direct salesperson expenses for travel,
meals, lodging, etc. for a period of two years, after which the actual cost will
be charged to the Venture.
(i) Other Services. The nature and extent of any other services to be
provided by Hubbard will be determined mutually by the Management Committee in
light of, among other things, the scope and activities of the Venture.
9. Trademarks, Etc. The Venture will operate under the name(s),
trademark(s), patent(s), copyright(s), license(s) and other registrations
presently being used by both Hubbard and Merrick and made available to the
Venture by Hubbard or Merrick, and such names, trademarks, patents, copyrights,
licenses and other registrations as may be agreed upon and acquired from time to
time. Hubbard and Merrick agree to protect and to cause the Venture to
6
<PAGE>
protect such trademarks, patents, copyrights, licenses and other registrations
from the misuse thereof. Such names, trademarks, patents, copyrights, and
licenses shall remain the property of the respective partner and neither the
Venture nor Hubbard or Merrick shall have any right, title or interest of the
other partner therein by reason hereof.
10. Trade Secrets, Etc. Trade secrets, customer lists and other similar
knowledge which is the property of one of the parties hereto prior to the date
hereof, shall remain the property and trade secret of such party notwithstanding
disclosure to the Venture. Any such trade secrets may be used by the Venture
but shall not be used by the other party hereto or any other advantage taken
thereof by such party in its separate business activities at any time except by
specific written agreement of the parties. Trade secrets and other similar
knowledge which is developed by the Venture shall be the property of the
Venture, but may be used by either party in its own separate business
activities.
11. Employees. The parties acknowledge and agree that any of Merrick's
employees who perform services for the Venture shall remain employees of Merrick
and Merrick shall remain solely responsible for establishing the terms and
conditions of their employment, including hiring, discipline and discharge.
Neither Hubbard nor any of its employees (including, without limitation, the
Quality Assurance Manager) shall have any responsibility for the development or
approval of personnel policies with respect to Merrick's employees performing
services for the Venture. Merrick and Hubbard shall remain solely liable for the
payment of compensation or any employment benefits to their respective employees
and for the payment of any taxes, charges or assessments payable with respect to
their respective employees, including without limitation any such payments made
to governmental agencies or bodies. Neither the Venture nor Hubbard shall be
considered a successor employer of Merrick's employees, and neither the Venture
nor Merrick shall be considered a successor employer of Hubbard's employees.
12. Profits and Losses; Distributions. Each of Hubbard and Merrick shall,
as a member of the Venture, have a fifty percent (50%) interest in and to the
Venture. The net profits or net losses of the Venture shall be credited or
charged, as the case may be, equally to each of them. The earnings and profits
of the Venture for the purpose of determining the share therein of each of
Hubbard and Merrick shall be determined in accordance with generally accepted
accounting principles. A separate income account shall be maintained for each of
Hubbard and Merrick to which shall be credited or debited, as the case may be,
their respective shares of the net profits or net losses of the Venture. Net
profits and net losses shall be credited or debited, as the case may be, to the
separate income accounts of Hubbard and Merrick as soon as practicable after the
end of each month during the term of the Venture. Cash distributions will be
made in the discretion of the Management Committee.
13. Additional Capital Expenditures; Working Capital.
(a) The cost of all capital expenditures to repair or replace equipment
7
<PAGE>
presently owned by Merrick or acquired by Merrick pursuant to paragraph 7(a)
(including upgrades of items which have depreciated due to time or use) shall be
borne by Merrick and any replacement equipment so acquired shall be owned by
Merrick.
(b) Except as otherwise provided in this Agreement, the cost of all
capital expenditures for additional equipment, other than equipment presently
owned by Merrick or acquired by Merrick pursuant to paragraph 7(a), needed to
improve the efficiency or process for manufacturing of pet food products and all
depreciation and other tax benefits on such equipment shall be shared equally by
Hubbard and Merrick. All capital expenditures for such equipment shall be
approved by the Management Committee. The Management Committee shall, for the
purposes of this Agreement, determine which expenditures are "capital"
expenditures for additional equipment. All equipment so acquired shall be owned
by Merrick and Hubbard as tenants in common and shall be available to the
Venture for its operations.
(c) Routine maintenance which does not constitute a capital expenditure
shall be Merrick's responsibility and shall constitute a manufacturing expense
for purposes of paragraph 7(c).
(d) Any advances to the Venture for working capital approved by the
Management Committee shall be shared equally by Hubbard and Merrick.
14. Allocations of Expenses.
(a) Except as otherwise specifically provided in this Agreement, Hubbard
and Merrick shall be reimbursed by the Venture for expenses incurred only as
approved by the Management Committee.
(b) The Quality Assurance Manager and Merrick's production manager shall
have joint authority to approve all routine expenses of $500 or less. Individual
expenses of an amount greater than $500 must have approval of the Management
Committee.
15. Reputations of Parties. Merrick and Hubbard both cherish their
reputations in the world at large and internally. The Venture will use every
reasonable means to respect and enhance those reputations.
16. Tax Status; Accounting. The Venture will function as a partnership for
tax purposes. Its fiscal and tax year will be the calendar year or such other
year as shall be approved by the Management Committee. Such certified public
accountant as is selected by the Management Committee will be asked to prepare
an annual certified audit and do such other work for the Venture as may be
agreed upon from time to time. Hubbard shall be responsible for maintaining
books of account of the Venture and shall prepare and distribute monthly
unaudited operating statements in a format similar to that attached hereto as
Exhibit 2. Hubbard shall maintain separate accounting for all funds of the
Venture and shall be responsible for making disbursements of such funds for
expenses of the Venture. Each party shall have the right to review and audit
8
<PAGE>
such books and records relating to the Venture maintained by the other party as
such party may request; provided, however, that if the review of such books and
records would, in the judgment of the party keeping such books and records,
result in the disclosure of confidential information not related to the Venture,
such party may require that such review be by a mutually satisfactory third
party bound to keep such information confidential.
17. Other Activities; Insurance. Neither Hubbard nor Merrick shall, by
virtue of this Agreement, be deemed to have assumed any liability of any kind or
nature whatsoever arising with respect to activities or products of the other
not undertaken as part of the Venture. No party to this Agreement (or the
Venture) shall be liable for worker's compensation or employment-related damages
or action relating to the employees of the other party to this Agreement. The
Venture will obtain and maintain at least such minimum amount of insurance
coverage in connection with the activities of the Venture as is deemed adequate
by each of the parties hereto, including, subject to availability, at least
$1,000,000 of product liability insurance which Hubbard shall secure. The cost
of such product liability insurance shall be reimbursed by the Venture.
18. Mailing Address. The mailing address for the Venture will be:
Merrick Pet Foods
P.O. Box 2257
Highway 60 and FM 2943
Hereford, Texas 79045
19. Merrick's and Hubbard's Other Operations. Both parties recognize that
Hubbard and Merrick will have no involvement in any other operations of the
other party that are not directly related to the Venture. All items purchased
for, and maintenance and other costs related to, any other operations of either
party not directly related to the Venture have nothing to do with the Venture
and shall not be charged to the Venture.
20. Non-competition Agreement. Merrick agrees that it will not, prior to
termination of the Venture, purchase dry extruded pet food products except from
the Venture or from Hubbard. Merrick or Hubbard will not directly or indirectly
engage in any competition with the Venture with the exception of its Merrick or
Hubbard branded labels within a 500 mile radius of the Hereford plant.
21. Termination. Unless sooner terminated pursuant to paragraph 22, this
Agreement shall continue for a term of 25 years from the effective date of the
Venture.
22. Termination. This Agreement and the Venture shall terminate as
follows:
(a) by the mutual written consent of Hubbard and Merrick;
(b) at the option of Hubbard at any time after May 31, 1989, provided
9
<PAGE>
Hubbard has given Merrick at least 12 months written notice of its intention to
terminate this Agreement;
(c) upon written notice by either party of the desire to terminate the
Venture following the institution of any bankruptcy or insolvency proceedings
against the Venture or the other party (whether voluntary or involuntary, and
whether under federal or state law), the dissolution, liquidation or winding up
of either party or the assignment by either party of any significant portion of
its property or assets for the benefit of creditors or claimants;
(d) upon written notice by either party if there is a willful breach by
the other party of a material term of this Agreement and such breach has not
been cured within 60 days after written notice of such breach; or
(e) in the event the Facility is destroyed by fire, tornado, flood or
other natural destruction, unless Merrick notifies Hubbard of its intent to
rebuild an essentially equivalent or better Facility and promptly, within
reason, commences rebuilding the Facility.
Nothing contained in this paragraph 22 shall affect or impair any rights or
obligations arising prior to or at the time of the termination of this
Agreement, or which may arise by an event causing the termination of this
Agreement and the Venture. In the event this Agreement terminates pursuant to
paragraph 22(e), but only pursuant to paragraph 22(e), Merrick acknowledges that
Hubbard shall, notwithstanding any other provision herein and without
consideration, have all right, title and interest in and to the surviving books
and records, customer lists, reports, goodwill and general intangibles of the
Venture or of Merrick as they relate to the Venture.
23. Licenses. Nothing herein shall constitute a license by Hubbard for
Merrick to use, or a license by Merrick for Hubbard to use, the names,
trademarks, patents, copyrights, licenses and other registrations and
specifications made available to the Venture by such party.
24. Liquidation and Dissolution. Upon termination of the Venture, Hubbard
and Merrick shall proceed to wind up and liquidate the affairs and assets of the
Venture. The proceeds of such liquidation shall be applied and distributed in
the following order of priority:
(i) to the payment of debts and liabilities of the Venture and expenses of
liquidation;
(ii) to the setting up of any reserves which the Management Committee
shall deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Venture arising out of or in connection with the Venture;
said reserves shall be paid over by Hubbard and Merrick to a mutually designated
party, as escrow agent, to be held for the purpose of disbursing such reserves
in payment of any of the aforementioned contingencies; at the expiration of such
period of time as Hubbard and Merrick shall deem mutually advisable, said
escrow agent shall distribute the balance thereof remaining in
10
<PAGE>
the manner set forth in subparagraph (iii) hereof; and
(iii) any balance remaining after the application of subparagraphs (i) and
(ii), equally to Hubbard and Merrick.
25. Purchase of Hubbard's Interests in Venture Assets by Merrick. Merrick
shall, within 90 days after termination, expiration or dissolution of the
Venture, purchase from Hubbard its interest in any equipment purchased by
Hubbard and Merrick pursuant to paragraph 13(b) hereof, at a purchase price
equal to the book value (original cost less depreciation) of Hubbard's interest
in such equipment. The purchase price calculated as set forth above shall be
paid to Hubbard in the form of a bank cashier's check. Upon payment of such
amount, Hubbard shall deliver to Merrick such instruments of transfer as shall
be reasonably requested by Merrick.
26. Assignment; Successors and Assigns. Each party is given the specific
right to transfer or assign its interest in the Venture, and in the case of
Merrick, in the realty and equipment in the Facility, to another entity provided
that such party does not assign its responsibilities under this Agreement
without the express written consent of the other party; the other party is
reasonably satisfied with the financial stability of the transferee; and such
transferee specifically agrees to be bound by the terms of this Agreement. Each
and every provision in this Agreement shall survive such transfer or assignment
and remain in full force and effect. This Agreement shall inure to the benefit
of the parties hereto, their successors and assigns. Except as otherwise
provided in this paragraph 26, neither party may make any assignment of its
rights or obligations hereunder without the written consent of the other party.
27. Other Instruments, Etc. The parties agree that they will perform all
other acts and execute and deliver such other documents as may be necessary or
appropriate to carry out the intent and purpose of this Agreement. The parties
recognize that many issues will have to be resolved after the date of this
Agreement. The parties will use maximum diligence to voluntarily and
appropriately resolve all future concerns of this kind.
28. Arbitration. It is agreed nevertheless that all unresolved disputes or
controversies arising out of or in relation to this Agreement shall be
determined and settled by arbitration at a mutually convenient location in
accordance with the Commercial Rules of the American Arbitration Association in
effect at the time of said controversy, and judgment upon any award rendered by
the arbitrator(s) may be entered in any court of competent jurisdiction. The
arbitrator(s) may decide all collateral issues such as whether this paragraph 28
is applicable. The expenses of the arbitration shall be borne by the Venture,
provided that each of Merrick and Hubbard shall pay for and bear the costs of
its own experts, evidence, and legal counsel. Whenever any action is required to
be taken under this Agreement within a specified period of time and the taking
of such action is materially affected by a matter submitted to arbitration, such
period shall automatically be extended for the number of days plus 10 that are
taken for the determination of that matter by the
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<PAGE>
arbitrator(s).
29. Governing Law. This Agreement shall be interpreted in accordance with
the laws of the State of Texas and, to the extent applicable, by the Uniform
Partnership Act as adopted from time to time by the State of Texas.
30. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
by mail by depositing a copy thereof in a registered or certified envelope,
postage prepaid, addressed to the other party at its address hereinabove set
forth or at such other address as the other party shall have theretofore
designated. The date of giving such notice shall be the date received, if served
personally, or the date on which the envelope is delivered to the other party as
indicated by the return receipt.
31. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the 28
day of January, 1988. The effective date of the Venture shall be February 1,
1988.
MERRICK PET FOODS
By /s/ Garth Merrick
----------------------
----------------------
HUBBARD MILLING COMPANY
By /s/ Paul Holzhueter
----------------------
Paul Holzhueter,
Division Vice President,
Pet Food Division
12
<PAGE>
- --------------------------------------------------------------------------------
JOINT VENTURE AGREEMENT
between
MFA, INC.
and
HUBBARD MILLING COMPANY
Dated as of January 9, 1992
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Formation of Joint Venture 1
2. Property Plant and Equipment 1
a. Initial Property, Plant and Equipment 1
b. Renovation of Facility 2
c. Additional Property, Plant and Equipment 2
d. Ownership of Facility 2
3. Trade Secrets 2
4. Trademarks, Etc. 3
5. Working Capital 3
6. Direct Expenses; Administrative Services Fee 3
a. Reimbursement of Direct Expenses 3
b. Examples of Direct Expenses 3
c. Administrative Services Fee 4
7. Transactions with the Venture 4
a. Purchases of Pet Food from the Venture 4
b. Sales of Pet Food to the Venture 4
8. Management and Operation; Personnel; Ancillary Services 4
a. Management Committee 4
b. Day-to-Day Operations 5
c. Limitations on Authority of Parties 5
d. Personnel 5
e. Management Personnel 6
f. Employment Matters 6
g. Ancillary Services 6
9. Accounting Matters 7
a. Fiscal Year 7
b. Books of Account 7
c. Bank Accounts 7
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Section Page
- ------- ----
10. Distribution of Net Income 7
11. Other Business Operations of Parties 7
a. MFA 7
b. Hubbard 8
12. Certain Liabilities; Insurance 8
13. Representations and Warranties 9
a. Generally 9
b. Additional Representations and Warranties
of MFA 10
14. Initial Term and Renewal Terms 10
15. Early Termination 10
16. Disposition of Assets Following Termination 11
a. Generally 11
b. Option to Purchase Assets of Venture Following
Optional Termination 11
c. Option to Purchase Assets of Venture Following
Bankruptcy, Breach, Etc. 11
d. Other Disposition of Assets 12
e. Application of Cash 12
17. Purchase of Products Following Termination 13
18. Assignment 13
19. Successors and Assigns 13
20. Further Assurances 13
21. Waivers and Amendments 14
22. Arbitration 14
23. Indemnification, etc. 14
24. Liability of Parties to Venture 14
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<PAGE>
Section Page
- ------- ----
25. Governing Law 15
26. Notices 15
27. Entire Agreement 15
28. Headings 15
29. Counterparts 15
EXHIBITS
- --------
EXHIBIT A - Description of Facility
EXHIBIT B - Construction and Equipment Budget
EXHIBIT C - Forms of Periodic Financial Statements
-iii-
<PAGE>
JOINT VENTURE AGREEMENT
Joint Venture Agreement, dated January 9, 1992 by and between MFA, Inc., a
Missouri corporation ("MFA"), and Hubbard Milling Company, a Minnesota
corporation ("Hubbard").
RECITALS
MFA owns an animal feed manufacturing facility in Butler, Missouri more
fully described in Exhibit A hereto (the "Facility") suitable for conversion to
a pet food manufacturing facility.
Hubbard is engaged in the pet food business throughout the United States
and, in connection therewith, has developed substantial expertise in the pet
food business and has implemented an extensive sales, marketing and distribution
structure for the pet food business.
MFA and Hubbard now desire to form a joint venture for the manufacture of
pet food at the Facility.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements herein contained, MFA and Hubbard agree as follows:
1. Formation of Joint Venture. MFA and Hubbard hereby form a joint venture
(the "Venture") for the manufacture of pet food at the Facility and the sale,
marketing and distribution of pet food in connection therewith. The Venture
shall constitute a special purpose general partnership governed by the Uniform
Partnership Act, as adopted in the State of Missouri. The name of the Venture
shall be: MFA/Hubbard Pet Food Venture.
2. Property Plant and Equipment.
a. Initial Property, Plant and Equipment. MFA will contribute on or
prior to April 30, 1992 the Facility to the Venture, free and clear
of all liens, claims and encumbrances, by warranty deed and bill of
sale; provided, however, that MFA shall remove from the Facility at
its expense any feed manufacturing equipment not necessary for or
useful in connection with the manufacture of pet food by the Venture
and any equipment so removed by MFA shall be deemed to have been
excluded from the contribution of the Facility to the Venture and
shall not constitute a part of the Facility. Prior to such
contribution of the Facility, the Facility shall be operated by MFA
for its own
<PAGE>
account and shall not constitute property of the Venture.
b. Renovation of Facility. The parties recognize that substantial
renovation of the Facility, including the installation of additional
manufacturing and building equipment, will be required prior to the
commencement of operations at the Facility. Attached hereto as
Exhibit B is a preliminary construction and equipment budget
reflecting the projected costs of such renovation. The final budget,
together with plans and specifications for the renovation, shall be
prepared by Hubbard subject to the approval of MFA, such approval
not to be unreasonably withheld. Each of MFA and Hubbard shall
contribute to the Venture an amount equal to 50% of the costs of all
renovations, when and as such costs are payable by the Venture.
c. Additional Property, Plant and Equipment. If the Management
Committee (as defined in Section 8(a) hereof) shall determine after
the date hereof that any additional property, plant and equipment is
required for the Venture, each of MFA and Hubbard shall contribute
to the Venture an amount equal to 50% of the costs thereof, when and
as such costs are payable by the Venture.
d. Ownership of Facility. The Facility, as initially contributed to the
Venture pursuant to Section 2(a) hereof and as renovated and
equipped pursuant to Section 2(b) hereof, together with any
additional property, plant and equipment acquired from time to time
pursuant to Section 2(c) hereof, shall constitute property of the
Venture and title thereto shall be in the name of the Venture.
3. Trade Secrets. Proprietary manufacturing processes, customer lists and
other similar confidential information (collectively, "Trade Secrets")
constituting the property of a party hereto prior to the date hereof shall
remain the property and Trade Secrets of such party and shall not constitute
property of the Venture notwithstanding disclosure to the other party in
connection with the Venture. Any such Trade Secrets may be used by the Venture
but shall not be used by the other party, disclosed to others, or any other
advantage taken thereof by such party in its own separate business activities.
Trade Secrets developed by the Venture shall be and become the property and
Trade Secrets of the Venture, but may be used by either party in its own
separate business activities.
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<PAGE>
4. Trademarks, Etc. The Venture will employ the trademark(s), patent(s),
copyright(s), license(s) and other intellectual property rights presently being
used by MFA and Hubbard in connection with their respective pet food businesses,
all of which are hereby made available on a non-exclusive basis to the Venture.
Such trademarks, patents, copyrights and other intellectual property rights
shall remain the property of MFA or Hubbard, as the case may be, and shall not
constitute property of the Venture. Each of MFA and Hubbard shall establish
quality control standards for all products sold using its trademarks, and shall
specify policies and programs to monitor compliance with such standards.
5. Working Capital. MFA and Hubbard shall agree upon an initial equal
contribution of cash to the Venture for purposes of funding the initial working
capital of the Venture. To the extent cash proceeds of sales and collections on
accounts receivable by the Venture from time to time do not fund current working
capital requirements, each of MFA and Hubbard will advance to the Venture on an
interest-free basis an amount equal to 50% of such working capital deficiency.
6. Direct Expenses: Administrative Services Fee.
a. Reimbursement of Direct Expenses. Each of Hubbard and MFA shall from
time to time prepare and submit to the Management Committee a
written statement, the detail of which shall be determined by the
Management Committee, for the actual direct expenses incurred by
Hubbard and MFA in connection with the Venture. The Venture shall
reimburse Hubbard or MFA, as the case may be, for such expenses
immediately upon receipt of any such statement. In connection with
the submission of written statements for direct expenses to the
Management Committee, each of Hubbard and MFA shall identify any
material variances in such expenses from the projected expenses
reflected in any operating budget for such period prepared by the
Management Committee.
b. Examples of Direct Expenses. Direct expenses for which Hubbard and
MFA shall be paid include, without limitation, all direct
manufacturing expenses (e.g., labor, utilities, maintenance and
insurance expenses) and all direct sales expenses. General corporate
overhead and corporate administrative expense, interest or other
indirect expenses shall not constitute direct expenses for purposes
of this Section 6.
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<PAGE>
c. Administrative Services Fee. In consideration of the accounting,
bookkeeping, computer and other administrative services to be
provided to the Venture by Hubbard, the Venture shall pay to Hubbard
an administrative services fee, the amount of which shall be
approved by the Management Committee.
7. Transactions with the Venture.
a. Purchases of Pet Food from the Venture. MFA agrees that during the
term of this Agreement it will purchase from the Venture, to the
extent available from the Venture, the entirety of its pet food and
fish food requirements. The price to be charged MFA for products
purchased from the Venture shall be established by the Management
Committee so as to yield to the Venture a per ton profit
substantially equivalent to the per ton profit then being realized
by the Venture on sales of products to others. The Venture shall
invoice MFA for all products sold to MFA, and MFA shall pay all such
invoices upon receipt thereof.
b. Sales of Pet Food to the Venture. In order to supplement the product
line of the Venture, Hubbard will sell to the Venture pet food
products from time to time manufactured by Hubbard but not
manufactured by the Venture ("Supplemental Products"). The price to
be charged to the Venture by Hubbard for Supplemental Products shall
be established by Hubbard, subject to the approval of the Management
Committee, and shall yield to the Venture a per ton profit
substantially equivalent to the average per ton profit of other pet
food products manufactured by the Venture. Hubbard shall invoice the
Venture for all Supplemental Products sold to the Venture, and the
Venture shall pay all such invoices upon receipt thereof.
8. Management and Operation; Personnel; Ancillary Services.
a. Management Committee. Management of the Venture shall be vested in a
committee (the "Management Committee") consisting of one
representative of MFA and one representative of Hubbard. Each party
will designate a representative who will serve on the Management
Committee and one alternate who shall act in the absence of such
representative. MFA has designated Joe Powell as
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<PAGE>
its representative and David Jobe as its alternate. Hubbard has
designated Paul Holzhueter as its representative and Mike Mitchell
as its alternate. Each party may from time to time, by written
notice to the other, designate a new representative or alternate.
b. Day-to-Day Operations. Hubbard shall be responsible for conducting
the day-to-day operations of the Venture, subject to the management
authority of the Management Committee. In such capacity, Hubbard
shall cause the Facility to be operated, and supply all basic
services to the Venture, including sales and marketing, research and
nutrition, quality assurance, purchasing of packaging, production
services and the like. Hubbard shall coordinate ingredient
purchasing with MFA, with ingredient purchases for the Venture to be
made by the party that obtains the lowest cost. The Venture shall
purchase its requirements of corn and milo from the MFA elevator at
Passaic, Missouri, provided that the quality meets specifications
for the Venture and that the price is competitive with other
suppliers of corn and milo.
c. Limitations Upon Authority of Parties. Neither party, without the
consent of the other, shall (i) borrow money for or in the name of
the Venture or utilize any property of the Venture as collateral for
any such borrowing; (ii) as a partner in the Venture, make, execute
or deliver any assignment for the benefit of creditors, confession
of judgment, chattel mortgage, deed, guarantee, indemnity bond or
surety bond; (iii) buy, sell, encumber or lease any property of the
Venture, or any interest therein, other than in the ordinary course
of business; or (iv) undertake or authorize any construction of any
kind or nature other than necessary or appropriate repairs in the
ordinary course of business.
d. Personnel. Subject to such changes as from time to time approved by
the Management Committee, all employees at the Facility will be
employed by Hubbard. The Venture shall reimburse Hubbard in
accordance with Section 6 hereof as a direct expense of the Venture
for compensation and benefits to such employees.
-5-
<PAGE>
e. Management Personnel. Each of MFA and Hubbard shall devote the
attention of their management personnel to the Venture from time to
time as appropriate, but except as expressly provided in Section
6(c) hereof, neither MFA nor Hubbard shall charge a management fee
to the Venture or allocate to the Venture as a direct expense any
portion of the compensation and benefits paid to its management
personnel.
f. Employment Matters. Employees of MFA or Hubbard who perform services
for the Venture shall remain employees of their respective employer,
which shall remain solely responsible for establishing the terms and
conditions of their employment, including hiring, discipline and
discharge. Neither MFA nor Hubbard (or any of their respective
employees) shall have any responsibility for the development or
approval of personnel policies with respect to the employees of the
other party performing services for the Venture. MFA and Hubbard
shall remain solely liable for the payment of compensation and any
employment benefits to their respective employees and for the
payment of any taxes, charges or assessments payable with respect to
their respective employees, including without limitation any such
payments made to governmental agencies or bodies. Neither the
Venture nor MFA shall be considered a successor employer of any
employees of Hubbard, and neither the Venture nor Hubbard shall be
considered a successor employer of any employees of MFA.
g. Ancillary Services. If the Management Committee shall from time to
time determine that ancillary services required for operation of the
Venture (e.g., lab analysis) can be provided to the Venture more
efficiently or more economically by MFA or Hubbard than by having
such services provided by personnel regularly engaged in operation
of the Venture or by a third party contractor, then MFA or Hubbard,
as the case may be, agrees to provide such ancillary services to the
Venture on such terms as may be agreed by such party and the
Management Committee; provided, however, that neither MFA nor
Hubbard shall have any obligation to provide such ancillary services
to the Venture if, in the reasonable judgment of such party, to do
so would materially interfere with its other business operations or
is not otherwise practicable under the circumstances.
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<PAGE>
9. Accounting Matters.
a. Fiscal Year. The fiscal year of the Venture shall end on April 30.
b. Books of Account. Hubbard shall be responsible for maintaining books
of account for the Venture. In connection therewith, Hubbard shall
prepare and distribute to the parties on or prior to the 15th
working day of each month an income statement and balance sheet for
the Venture for the preceding month substantially in the form of
Exhibit C hereto, with such changes in form as may from time to time
be approved by the Management Committee. Hubbard and MFA shall cause
to be performed periodic audits of the books of account as from time
to time determined by the Management Committee.
c. Bank Accounts. Hubbard shall maintain such separate bank account or
bank accounts for funds of the Venture as the Management Committee
determines necessary. Interest on any such accounts shall accrue to
the benefit of the Venture.
10. Distribution of Net Income. An amount equal to 50% of the
Distributable Net Income (as hereinafter defined) shall be distributed to each
party from time to time, as determined by the Management Committee.
"Distributable Net Income" for any period shall mean the excess, if any, of (i)
the net income for such period over (ii) the aggregate net losses for all prior
periods to the extent not offset against net income for prior periods in
computing "Distributable Net Income" for such prior periods.
11. Other Business Operations of Parties.
a. MFA. MFA has determined to withdraw from the business of
manufacturing pet food and fish food and agrees that it will not
engage in such business, other than through the Venture, during the
term of this Agreement. The Facility is located adjacent to the
fertilizer manufacturing business of MFA in Butler, Missouri, which
fertilizer manufacturing business does not constitute a part of the
Venture. MFA agrees to cooperate with the Venture, and the Venture
shall cooperate with MFA, to assure that continued operation of the
fertilizer manufacturing business of MFA does not materially
interfere with the pet food and fish food business of the Venture
and that operation of the pet food and fish food business of the
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<PAGE>
Venture does not materially interfere with the fertilizer
manufacturing business of MFA. MFA agrees to a complete separation
of its fertilizer operation from the Facility and to take all steps
necessary to prevent the possibility of any cross-contamination.
b. Hubbard. Hubbard engages in the pet food and fish food business at
other locations throughout the United States, which other operations
do not constitute part of the Venture. MFA recognizes that such
other operations of Hubbard may compete with the Venture. Hubbard
agrees, however, that in the conduct of such other pet food and fish
food operations during the term of this Agreement it will not
solicit customers traditionally serviced primarily from the Facility
so as to capture such sales for its own account rather than the
account of the Venture. Hubbard agrees that, during the term of this
Agreement, it will send orders from customers for pet food and fish
food produced at the Facility so long as such products can be
produced economically at the Facility, are of a quality satisfactory
to such customers of the Venture and can be produced consistent with
the delivery requirements. MFA acknowledges that decisions as to
which orders will be assigned by Hubbard to the Facility are within
the discretion and control of Hubbard, to be reasonably exercised.
12. Certain Liabilities: Insurance. Neither MFA nor Hubbard shall, by
virtue of this Agreement, be deemed to have assumed any liability of any kind or
nature whatsoever arising with respect to activities or products of the other
not undertaken as part of the Venture. No party to this Agreement shall be
liable for workers' compensation or employment-related damages or actions
relating to the employees of the other party to this Agreement. The following
insurance coverages shall be obtained regarding the operations and assets of the
Venture:
(i) The Venture shall obtain property and casualty insurance with
respect to the Facility in such amounts and with such deductibles
as shall be determined by the Management Committee.
(ii) The Venture shall obtain property and casualty insurance with
respect to the inventory, packaging and supplies of the Venture in
such amounts and with such deductibles as shall be determined by the
Management Committee.
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<PAGE>
(iii) The Venture shall obtain comprehensive general and products
liability insurance with respect to the Venture. All such policies
shall name each party and the Venture as insureds thereunder.
(iv) Each party shall obtain appropriate workers' compensation insurance
with respect to such party's employees.
(v) The Venture shall obtain such other insurance coverage as the
Management Committee shall deem appropriate in connection with the
activities of the Venture.
The premiums of any such insurance shall constitute a direct expense of
the Venture for purposes of Section 6 hereof.
13. Representations and Warranties.
a. Generally. Each of MFA and Hubbard represents and warrants to the
other that:
(i) it is a corporation duly organized and in good standing under the
laws of the state of its incorporation;
(ii) it is duly qualified to do business in the State of Missouri;
(iii) it has obtained all necessary corporate approval to execute, deliver
and perform this Agreement and to engage in operation of the Venture
as contemplated hereby;
(iv) the execution, delivery and performance of this Agreement and
operation of the Venture as contemplated hereby does not violate the
terms of any agreement to which it is a party or by which it is
bound;
(v) there are no suits or proceedings pending or, to its knowledge,
threatened against it which, if decided adversely to such party,
would adversely affect its authority to execute, deliver and perform
this Agreement or to engage in operation of the Venture in
accordance herewith; and
(vi) it has all necessary licenses, permits and authorizations,
governmental or otherwise, necessary to execute, deliver and perform
this Agreement and to engage in operation of the Venture as
contemplated hereby.
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<PAGE>
b. Additional Representations and Warranties of MFA. MFA has, and will
convey to the Venture, good and marketable title to the Facility,
free and clear of all liens, claims and encumbrances. MFA has not
discharged at the Facility or permitted or suffered the discharge at
the Facility any hazardous substances the release or disposal of
which is regulated by any law, regulation, ordinance or code, and to
the knowledge of MFA no such hazardous substances exist in, on or
under the Facility. Except as disclosed in writing to Hubbard by
MFA, no storage tanks for petroleum, petroleum by-products or other
hazardous substances are present in, on or under the Facility.
14. Initial Term and Renewal Terms. The Venture shall have a term
commencing on the date hereof and continuing to and including April 30, 2022.
Thereafter the term of the Venture shall be automatically extended for
successive two-year renewal terms unless either party elects by written notice
to the other party given not less than twelve (12) months prior to expiration of
the initial term or any renewal term, to terminate the Venture upon expiration
of the initial term or renewal term, as the case may be.
15. Early Termination. The Venture shall terminate prior to expiration of
the initial term or any renewal term, as follows:
(i) by the mutual written agreement of MFA and Hubbard;
(ii) by either party upon not less than twelve (12) months written notice
of its election to terminate the Venture; provided that the Venture
cannot be terminated prior to April 30, 1995 pursuant to this clause
(ii);
(iii) by either party upon written notice of its election to terminate the
Venture following the institution of any bankruptcy or insolvency
proceedings by or against the Venture or the other party (whether
voluntary or involuntary, and whether under federal or state law),
the dissolution, liquidation or winding up of the other party or the
assignment by the other party of any significant portion of its
property or assets for the benefit of creditors or claimants;
(iv) by either party upon written notice of its election to terminate the
Venture if there is a
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<PAGE>
willful breach by the other party of a material term of this
Agreement and such breach has not been cured within sixty (60) days
after written notice of such breach; or
(v) upon one hundred eighty (180) days prior written notice by either
party (or its assignee) following the assignment by a party of its
interest in the Venture in accordance with Section 18 hereof;
provided, however, that such notice of termination may not be given
more than ninety (90) days after the effective date of such
assignment or transfer.
Nothing contained in this Section 15 shall affect or impair any rights or
obligations arising prior to or at the time of the termination of the Venture,
or which may arise by an event causing the termination of the Venture.
16. Disposition of Assets Following Termination.
a. Generally. Upon termination of the Venture, MFA and Hubbard shall
proceed to wind up the affairs of the Venture in accordance with
this Section 16.
b. Option to Purchase Assets of Venture Following Optional Termination.
In the event a party (the "Terminating Party") gives notice of
termination pursuant to clause (ii) of Section 15 hereof, the other
party (the "Notified Party") shall have the option to purchase the
assets of the Venture at a mutually agreed upon price, or if the
parties cannot agree, at a price equal to the then current book
value, net of accumulated depreciation; provided that for such
purpose any remaining undepreciated book value of the Facility as
initially contributed to the Venture by MFA pursuant to Section 1(a)
hereof shall be excluded from such computation.
c. Option to Purchase Assets of Venture Following Bankruptcy, Breach,
Etc. In the event a party (the "Non-Defaulting Party") gives notice
of termination pursuant to clause (iii) or (iv) of Section 15 hereof
to the other party (the "Defaulting Party"), the Non-Defaulting
Party shall have the option to purchase the assets of the Venture at
a mutually agreed upon price, or if the parties cannot agree, at a
price equal to the then current book value, net of accumulated
depreciation; provided that for such purpose any remaining
undepreciated book value of the
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<PAGE>
Facility as initially contributed to the Venture by MFA pursuant to
Section 1(a) hereof shall be excluded from such computation.
d. Other Disposition of Assets. Absent exercise of the purchase option
set forth in Section 16(b) or (c) hereof, as the case may be, upon
termination of the Venture, the assets of the Venture shall be sold
in an orderly fashion in such manner or the Management Committee
shall determine; provided, however, that if such termination of the
Venture is pursuant to clause (ii) of Section 15 hereof and the
Notified Party has not exercised its purchase option under Section
16(b) hereof, or pursuant to clause (iii) or (iv) of Section 15
hereof and the Non-Defaulting Party has not exercised its purchase
option under Section 16(c) hereof, then the Notified Party or
Non-Defaulting Party, as the case may be, shall have a right of
first refusal with respect to any sale of assets pursuant to this
Section 16(d) on such terms as shall be established by the
Management Committee.
e. Application of Cash. Any cash of the Venture, including without
limitation the proceeds of assets sold pursuant to Sections 16(b),
(c) or (d) hereof, shall be applied and distributed in the following
order of priority:
(i) to the payment of debts and liabilities of the Venture (other than
outstanding advances pursuant to Section 5 hereof) and expenses of
liquidation;
(ii) to the setting up of any reserves that the Management Committee
shall deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Venture arising out of or in
connection with the Venture, which reserves shall be paid over by
MFA and Hubbard to a mutually designated party, as escrow agent, to
be held for the purpose of disbursing such reserves in payment of
any of the aforementioned contingencies; provided, however, that at
the expiration of such period of time as MFA and Hubbard shall deem
mutually advisable, said escrow agent shall distribute the balance
thereof remaining in the manner set forth in subparagraph (iv)
hereof;
(iii) to outstanding advances pursuant to Section 5 hereof; and
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<PAGE>
(iv) any balance remaining after the application in accordance with the
foregoing subparagraphs, equally to MFA and Hubbard.
17. Purchases of Products Following Termination. In the event that either
party (the "Purchasing Party") purchases the Facility pursuant to Section 16(b)
or (c) upon termination of the Venture, then the other party agrees that for a
period of five years from and after termination of the Venture, it will purchase
from the Purchasing Party, to the extent available from the Facility, its
proprietary branded pet food and fish food requirements consistent with
purchases from the Facility made prior to the termination of the Venture. The
price for pet food and fish food products purchased from the Purchasing Party
shall be an amount that will yield to the Purchasing Party a per ton profit
substantially equivalent to the per ton profit then being realized by the
Purchasing Party on sales to others of products manufactured at the Facility.
The Purchasing Party shall provide invoices for all such pet food and food
products and such invoices shall be payable upon receipt thereof.
18. Assignment. Except as expressly permitted by this Section 18, neither
party shall assign or encumber its interest in the Venture. A party may assign
its interest in the Venture to another entity in connection with the sale of
substantially all of the assets of a division or component of its business to
another entity provided that (i) such party remains liable for observance and
performance of its obligations under this Agreement; (ii) the financial
condition of the transferee is reasonably satisfactory to the other party; (iii)
the transferee specifically agrees to be bound by the terms of this Agreement;
and (iv) such assignment or transfer does not, in the reasonable judgment of the
other party, materially adversely affect the Venture or its property for future
business operations or materially adversely affect such other party's other
business operations. Each and every provision in this Agreement shall survive
such assignment or transfer and remain in full force and effect.
19. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto, their successors and permitted assigns.
20. Further Assurances. The parties agree that they will perform such
other acts and execute and deliver such other documents as may be necessary or
appropriate from time to time to carry out the intent and purpose of this
Agreement. The parties recognize that issues may arise in connection with the
Venture which are not provided for in this Agreement and cannot be resolved by
the Management Committee. Subject to the early termination provisions of Section
15 hereof, the parties agree
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<PAGE>
to negotiate in good faith the resolution of such issues by amendment or
modification of this Agreement in accordance with Section 21 hereof.
21. Waivers and Amendments. This Agreement may be amended or modified, and
the terms hereof may be waived, only by a written instrument executed by the
parties hereto or in the case of a waiver, by the party waiving compliance. The
failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement or in any other such instrument, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any breach, or a waiver of the breach of
any other term or covenant contained herein.
22. Arbitration. All unresolved disputes or controversies arising out of
or in relation to this Agreement shall be determined and settled by arbitration
at a mutually convenient location in the State of Missouri in accordance with
the Commercial Rules of the American Arbitration Association in effect at the
time of said controversy, and judgment upon any award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. The
expenses of the arbitration shall be borne by the Venture, provided that each of
MFA and Hubbard shall pay for and bear the costs of its own experts, evidence,
and legal counsel. Whenever any action is required to be taken under this
Agreement within a specified period of time and the taking of such action is
materially affected by a matter submitted to arbitration, such period shall
automatically be extended for ten (10) days plus the number of days that are
taken for the determination of that matter by the arbitrator(s). Nothing herein
contained shall bar either party from seeking equitable remedies in a court of
competent jurisdiction.
23. Indemnification, etc. The Venture shall indemnify and hold harmless
each of MFA and Hubbard for and against all claims, actions, suits and
proceedings asserted against such party in connection with the Venture or any
act or omission of such party in its capacity as a party to the Venture;
provided, however, that neither MFA nor Hubbard shall be indemnified and held
harmless for its gross negligence or willful misconduct.
24. Liability of Parties to Venture. Neither MFA nor Hubbard shall be
liable to the Venture or the other party for any act or omission of such party
in its capacity as a party to the Venture unless such act or omission
constitutes gross negligence or willful misconduct of such party.
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<PAGE>
25. Governing Law. This Agreement shall be interpreted in accordance with
the laws of the State of Missouri.
26. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
transmitted by registered or certified U.S. Mail, return receipt requested and
postage prepaid, addressed to the other party at its address hereinafter set
forth or at such other address as the other party shall theretofore have
designated by notice in accordance with this Section 26:
MFA, Inc.
615 Locust Street
Columbus, Missouri 65201
Attention: President
Hubbard Milling Company
424 North Riverfront Drive
Mankato, Minnesota 56001
Attention: President
The date of giving such notice shall be the date received, if served
personally, or the date on which the notice is delivered to the other party as
indicated by the return receipt.
27. Entire Agreement. This Agreement and the Exhibits hereto set forth the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof and supersede all prior agreements, arrangements and
understandings, written or oral, relating to the subject matter hereof.
28. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
29. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
9th day of January, 1992.
MFA, INC.
By /s/ [ILLEGIBLE]
--------------------------------------
Its President
--------------------------------------
HUBBARD MILLING COMPANY
By /s/ Richard P. Confer
--------------------------------------
Its President
--------------------------------------
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<PAGE>
EXHIBIT A
Description of Facility
AREA TO BE CONVEYED
FINAL LEGAL DESCRIPTION TO BE PREPARED
<PAGE>
EXHIBIT B
Preliminary Construction and Equipment Budget
General $45,000
Site work 25,000
Concrete 35,000
Masonry 5,000
Structural steel 320,000
Thermal, Moist. Protec. 3,000
Finishes 10,000
Specialities 91,000
Equipment 1,088,000
Special Construction 10,000
Conveying Systems 199,000
Mechanical 207,000
Electrical 97,000
---------
Subtotal 2,135,000
General Contingency 65,000
---------
TOTAL $2,200,000
<PAGE>
EXHIBIT C
Forms of Periodic Financial Statements
JOINT VENTURE
PET FOOD INCOME STATEMENT
________ 3l, 1992
CURRENT MONTH YEAR-TO-DATE
/31/92 /31/92
--------------------------- --------------------------
Actual Budget Variance Actual Budget Variance
--------------------------- --------------------------
CUSTOMER TONS
INTER-CO. TONS
TOTAL TONS
Plant Sales
Cost Of Sales
Gross Profit
Manufacturing (Hubbard)
Manufacturing (MFA)
G&A Plant (Hubbard)
G&A Plant (MFA)
G&A Non-Plant (Hubbard)
G&A Non-Plant (MFA)
Operating Expenses
OPERATING INCOME
Freight Out
Product Liability
Allowances
Brokerage
Cash Discounts
Total Discounts
Bad Debt Provision
Selling
Advertising
Total Marketing
Interest Income
Misc. Income/Expense
Total Other Income
VENTURE NET INCOME
MFA SHARE
HUBBARD SHARE
<PAGE>
Forms of Periodic Financial Statements
BALANCE SHEET
(DATE)
BEGINNING OF CURRENT MONTH
YEAR BALANCE
- --------------------------------------------------------------------------------
CASH
RECEIVABLES
OTHER RECEIVABLES
INVENTORIES
PREPAID EXPENSES
TOTAL CURRENT ASSETS
LAND, BUILDINGS & EQUIPMENT
NET OF DEPRECIATION
OTHER ASSETS
TOTAL ASSETS
ACCOUNTS PAYABLE & ACCRUED EXPENSES
PARTNER ADVANCES
MFA
HUBBARD
TOTAL CURRENT LIABILITIES
LONG TERM LIABILITIES
TOTAL LIABILITIES
CAPITAL INVESTMENT
MFA
HUBBARD
TOTAL VENTURE CAPITAL
TOTAL LIABILITIES AND CAPITAL
<PAGE>
================================================================================
JOINT VENTURE AGREEMENT
between
J.R. SIMPLOT COMPANY
and
HUBBARD MILLING COMPANY
Dated as of July 28, 1993
================================================================================
<PAGE>
TABLE OF CONTENTS
1. Formation of Joint Venture ........................................... 1
2. Property, Plant, and Equipment ....................................... 1
(a) Initial Property, Plant and Equipment ......................... 1
(b) Additional Property, Plant and Equipment ...................... 2
(c) Ownership of Facility ......................................... 2
3. Trade Secrets ........................................................ 2
4. Trademarks, Etc. ..................................................... 2
5. Working Capital ...................................................... 3
(a) Generally ..................................................... 3
(b) Methods Established by Management Committee ................... 3
(c) Absence of Methods Established by Management Committee ........ 3
6. Direct Expenses ...................................................... 3
(a) Reimbursement of Direct Expenses .............................. 3
(b) Description of Direct Expenses ................................ 4
(c) Administrative Services Fee ................................... 4
7. Transactions with the Venture ........................................ 4
(a) Purchases of Pet Food from the Venture by Simplot ............. 4
(b) Purchases of Pet Food from the Venture by Hubbard ............. 4
(c) Sales of Pet Food to the Venture .............................. 5
8. Management and Operation; Personnel; Ancillary Services .............. 5
(a) Management Committee .......................................... 5
(b) Day-to-Day Operations ......................................... 5
(c) Quality of Pet Food ........................................... 6
(d) Storage of Ingredients and Finished Products .................. 6
(e) Customer Service .............................................. 6
(f) Customer Orders ............................................... 7
(g) Limitations Upon Authority of Parties ......................... 7
(h) Personnel ..................................................... 7
(i) Management Personnel .......................................... 7
(j) Employment Matters ............................................ 7
(k) Ancillary Services ............................................ 8
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<PAGE>
9. Accounting Matters ................................................... 8
(a) Tax Status .................................................... 8
(b) Books of Account .............................................. 8
(c) Bank Accounts ................................................. 9
(d) Settlement of Intercompany Accounts ........................... 9
10. Distribution of Net Income ........................................... 9
11. Other Business Operations of Parties ................................. 9
(a) Simplot ....................................................... 9
(b) Hubbard ....................................................... 9
12. Insurance ............................................................ 9
13. Representations and Warranties ....................................... 10
(a) Generally ..................................................... 10
(b) Additional Representations and Warranties of Simplot .......... 11
14. Initial Term and Renewal Terms ....................................... 11
15. Early Termination .................................................... 11
16. Disposition of Assets Following Termination .......................... 12
(a) Generally ..................................................... 12
(b) Option to Lease Facility ...................................... 12
(c) Option to Purchase Additional Equipment ....................... 12
(d) Disposition of Assets ......................................... 13
(e) Application of Cash ........................................... 13
17. Option of Simplot to Participate with Hubbard in Ownership
and Operation of New Facility ........................................ 14
18. Assignment ........................................................... 14
19. Successors and Assign ................................................ 15
20. Further Assurances ................................................... 15
21. Waivers and Amendments ............................................... 15
22. Arbitration .......................................................... 15
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<PAGE>
23. Indemnification, Etc . ............................................... 15
(a) By Simplot .................................................... 15
(b) By Hubbard .................................................... 16
(c) By the Venture ................................................ 16
24. Liability of Parties ................................................. 16
25. Governing Law ........................................................ 17
26. Notices .............................................................. 17
27. Entire Agreement ..................................................... 17
28. Headings ............................................................. 17
29. Counterparts ......................................................... 17
EXHIBITS
- --------
A Description of Facility
B Additional Equipment
C Description of Direct Expenses
D Administrative Services
E Form of Financial Statements
F Terms of Lease
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<PAGE>
JOINT VENTURE AGREEMENT
Joint Venture Agreement, dated July 28, 1993, by and between J.R.
SIMPLOT COMPANY, DIVERSIFIED PRODUCTS GROUP, a Nevada corporation ("Simplot"),
and HUBBARD MILLING COMPANY, a Minnesota corporation ("Hubbard").
RECITALS
Simplot owns a fish food manufacturing facility in Caldwell, Idaho, more
fully described in Exhibit A hereto (the Facility") suitable for conversion to a
pet food and manufacturing facility.
Hubbard is engaged in the pet food business throughout the United States
and, in connection therewith, has developed substantial expertise in the pet
food business and has implemented an extensive sales, marketing and distribution
network for pet food products.
Simplot and Hubbard now desire to form a joint venture for the
manufacture of pet food at the Facility and the sale, marketing and
distribution of pet food in connection therewith.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements herein contained, Simplot and Hubbard agree as follows:
1. Formation of Joint Venture. Simplot and Hubbard hereby form a joint
venture (the "Venture") for the manufacture of pet food at the Facility and the
sale, marketing and distribution of pet food in connection therewith. The
Venture shall constitute a special purpose general partnership governed by the
Uniform Partnership Act, as adopted in the State of Idaho. The name of the
Venture shall be: Simplot/Hubbard Pet Food Venture. For purpose of this
Agreement, the term "pet food" shall mean manufactured food products prepared
for ingestion by domestic companion animals, including primarily dogs and cats.
2. Property, Plant, and Equipment.
(a) Initial Property, Plant and Equipment. Simplot will make the
Facility available to the Venture on a rent-free basis during the
term of this Agreement. The parties recognize that substantial
additional equipment will be required to commence operations by
the Venture at the Facility and that additional warehouse space
and/or loading facilities may be required at the Facility.
Attached hereto as Exhibit B is a preliminary list of the
additional equipment and a budget reflecting the projected cost
of such equipment. The final budget, together with plans and
specifications for the additional equipment and installation
thereof, shall be prepared jointly and mutually agreed to by the
parties as soon as practical following the execution hereof to
facilitate the earliest possible plant start-up. Simplot and
Hubbard shall each contribute an amount equal to fifty percent
(50%) of the costs of acquiring and installing the additional
equipment, when and as such costs are payable by the Venture.
Simplot will make available to the
<PAGE>
Venture adequate warehouse space and loading dock(s) necessary
for the conduct of the business of the Venture, either by making
available existing warehouse space at the Facility or by
constructing additional warehouse space, and by constructing
appropriate truck height loading dock(s). Simplot shall bear the
costs of construction of any additional warehouse space and
loading dock(s), and shall not be reimbursed therefore by the
Venture.
(b) Additional Property, Plant and Equipment. If the Management
Committee (as defined in Section 8(a) hereof) shall determine
after the date hereof that any additional property, plant and
equipment is required for the Venture, other than that specified
in Section 2(a) above, each of Simplot and Hubbard shall
contribute to the capital of the Venture an amount equal to 50%
of the costs thereof, when and as such costs are payable by the
Venture.
(c) Ownership of Facility. The Facility, as initially made available
to the Venture pursuant to Section 2(a) hereof, together with the
warehouse and loading dock(s) contemplated by Section 2(a)
hereof, shall constitute property of Simplot and title thereto
shall be in the name of Simplot. Any additional property, plant
and equipment acquired from time to time pursuant to Section 2(a)
or (b) hereof shall constitute property of the Venture and title
thereto shall be in the name of the Venture.
3. Trade Secrets. Proprietary manufacturing processes, customer lists
and other similar confidential information relating to the manufacture, sale,
marketing and distribution of pet food products (collectively, "Trade Secrets")
constituting the property of a party hereto prior to the date hereof shall not
constitute property of the Venture notwithstanding disclosure to the other party
in connection with the Venture. Any such Trade Secrets may be used by the
Venture but shall not be used by the other party, disclosed to others, or any
other advantage taken thereof by such party in its own separate business
activities (unless such Trade Secrets become part of the public domain through
no action of such party, or are subsequently independently developed by such
party). Trade Secrets developed by the Venture shall be and become the property
and Trade Secrets of the Venture, but may be used by either party in its own
separate business activities.
4. Trademarks. Etc. The Venture will employ the trademark(s), patent(s),
copyright(s), license(s) and other intellectual property rights presently being
used by Simplot and Hubbard in connection with their respective pet food
businesses, other than the brand names used by Hubbard and Simplot in connection
with the sale by Hubbard and Simplot of products purchased from the Venture
pursuant to Sections 7(a) and (b) hereof. All of such trademarks, patents,
copyrights and other intellectual property rights are hereby made available on a
non-exclusive basis to the Venture. Such trademarks, patients, copyrights and
other intellectual property rights shall remain the property of Simplot or
Hubbard, as the case may be, and shall not constitute property of the Venture.
Each of Simplot and Hubbard shall establish quality control standards for all
products sold using its trademarks, and shall specify policies and programs to
monitor compliance with such standards.
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5. Working Capital.
(a) Generally. Each of Simplot and Hubbard shall provide 50% of the working
capital from time to time required for operation of the Venture;
provided, however, that the cost of property, plant and equipment
required for the Venture shall be funded in accordance with Section 2(a)
and 2(b) hereof.
(b) Methods Established by Management Committee. The Management Committee
may from time to time establish such methods as it deems appropriate for
the working capital requirements of the Venture to be satisfied in
accordance with Section 5(a) hereof.
(c) Absence of Methods Established by Management Committee. Absent
establishment of other methods by the Management Committee in accordance
with Section 5(b) hereof, the working capital requirements of the
Venture shall be satisfied as set forth in this Section 5(c).
(i) Advances. To the extent the cash proceeds of sales and
collections on, accounts receivable by the Venture from time to
time do not fund current working capital requirements, including
without limitation payments to Simplot and Hubbard for direct
expenses incurred in connection with the Venture and required to
be paid by the Venture in accordance with Section 6 hereof and
periodic distributions of Distributable Net Income (as defined in
Section 10 hereof), each of Simplot and Hubbard agrees to advance
50% of such additional working capital to the Venture from time
to time pursuant to this Section 5(c).
(ii) Repayment of Advances. To the extent cash proceeds of sales and
collections on accounts receivable by the Venture from time to
time exceed its current working capital requirements, such excess
will be applied to repayment of advances made by Simplot and
Hubbard pursuant to this Section 5(c), pro rata.
(iii) Character of Advances to the Venture. Advances to the Venture
pursuant to this Section 5(c) shall constitute non-interest
bearing advances.
6. Direct Expenses.
(a) Reimbursement of Direct Expenses. Each of Simplot and Hubbard shall from
time to time prepare and submit to the Management Committee a written
statement, the detail of which shall be determined by the Management
Committee, for the actual direct expenses incurred by it in connection
with the Venture. The Venture shall credit the intercompany account of
Simplot or Hubbard, as the case may be, for such expenses promptly upon
receipt of any such statement. In connection with the submission of
written statements for direct expenses to the
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Management Committee, each of Simplot and Hubbard shall identify any
material variances in such expenses from the projected expenses reflected
in any operating budget for such period prepared by the Management
Committee.
(b) Description of Direct Expenses. Direct expenses for which Simplot and
Hubbard shall be reimbursed pursuant to Section 6(a) hereof shall
include the expenses described in Exhibit C hereto, together with such
other expenses from time to time approved by the Management Committee.
General corporate overhead and corporate administrative expense,
interest, depreciation or other indirect expenses shall not constitute
direct expenses for purpose of this Section 6.
(c) Administrative Services Fee. In consideration of the accounting,
bookkeeping, computer and other administrative services to be provided to
the Venture by Simplot or Hubbard, the Venture shall pay to Simplot or
Hubbard , as the case may be, an administrative services fee, the amount
of which shall be established from time to time by the Management
Committee. The Venture shall pay such amounts by crediting the
intercompany account of Simplot or Hubbard, as the case may be. The
amount of such administrative services fee shall be the amount,
reasonably determined by the Management Committee, necessary to reimburse
Simplot and/or Hubbard for the cost of providing such services directly
related to the Venture. The initial administrative services to be
provided by either Simplot or Hubbard to the Venture are set forth on
Exhibit D hereto.
7. Transactions with the Venture.
(a) Purchases of Pet Food from the Venture by Simplot. It is anticipated that
the Facility may be able to manufacture certain pet food and fish food
products marketed by Simplot under the Simplot brand name. Simplot agrees
that during the term of this Agreement it will purchase from the Venture,
to the extent available from the Venture, the entirety of its
requirements for pet food and fish food products. The price to be charged
Simplot for such products purchased from the Venture shall be established
by the Management Committee so as to yield to the Venture a per ton
profit substantially equivalent to the per ton profit then being realized
by the Venture on sales of products to others. The Venture shall invoice
Simplot for all products sold to Simplot, and debit the intercompany
account of Simplot for the amount of such invoices.
(b) Purchases of Pet Food from the Venture by Hubbard. It is anticipated that
the Facility may be able to manufacture certain pet food products
currently marketed by Hubbard under the Supreme, Proclaim and Country
Prime brand names. In the event Hubbard determines to purchase such
products from the Venture, the price to be charged Hubbard for such
products shall be established by the Management Committee so as to yield
to the Venture a per ton profit substantially equivalent to the per ton
profit then being realized by the Venture on sales of products to others.
The Venture shall invoice Hubbard for all products sold to
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Hubbard, and debit the intercompany account of Hubbard for the amount of
such invoices.
(c) Sales of Pet Food to the Venture. In order to supplement the product line
of the Venture, Hubbard and/or Simplot will sell to the Venture pet food
products from time to time manufactured by Hubbard or Simplot but not
manufactured by the Venture ("Supplemental Products"). The price to be
charged to the Venture by Hubbard or Simplot for Supplemental Products
shall be subject to the approval of the Management Committee, and shall
yield to the Venture a per ton profit substantially equivalent to the
average per ton profit of other pet food products manufactured by the
Venture. Hubbard and Simplot shall invoice the Venture for all
Supplemental Products sold to the Venture, and the Venture shall credit
the intercompany account of Hubbard or Simplot, as the case may be, for
the amount of such invoices.
8. Management and Operation; Personnel; Ancillary Services.
(a) Management Committee. Management of the Venture shall be vested in
committee (the "Management Committee") consisting of one representative
of Simplot and one representative of Hubbard. Each party will designate
a representative who will serve on the Management Committee and one
alternative who shall act in the absence of such representative. Simplot
has designated Ray Kaufman as its representative and Steve O'Loughlin as
its alternate. Hubbard has designated Tim Violet as its representative
and Mike Mitchell as its alternate. Each party may from time to time, by
written notice to the other, designate a new representative or
alternate.
(b) Day-to-Day Operations. Responsibility for the day-to-day operations of
the Venture shall be divided between Simplot and Hubbard as provided in
this Section 8(b), subject to the overall management authority of the
Management Committee and such changes in the respective responsibilities
of Simplot and Hubbard as to the Management Committee shall from time to
time determine.
(i) Simplot. Simplot shall be primarily responsible for the
day-to-day operation of the Facility, including the purchase of
common ingredients on behalf of the Venture; the purchase of
specialty ingredients, including premixes, and packaging used
solely in Simplot's branded label products; the manufacture of
pet food products on behalf of the Venture at the Facility
pursuant to Hubbard's formulations and specifications; and
warehousing inventories of ingredients, packaging and finished
product at the Facility.
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(ii) Hubbard. Hubbard shall be primarily responsible for purchase of
packaging and specialty ingredients on behalf of the Venture
(except as otherwise provided in subparagraph (i) above); the
development of pet food formulations; the marketing and sales of
pet food products manufactured or distributed by the Venture; and
the collection of accounts receivable arising from the sale of
pet food products on behalf of the Venture.
(iii) Alternate Arrangements. if the Management Committee shall from
time to time determine that a party can purchase goods on behalf
of the Venture at a price or on terms materially more favorable
to the Venture than the party responsible for the purchase of
such goods under subparagraph (i) or (ii) above, then
notwithstanding the provisions of such subparagraphs, such other
party shall purchase such goods on behalf of the Venture.
(c) Quality of Pet Food. Simplot will use its best efforts to operate the
Facility on behalf of the Venture to manufacture pet food products
pursuant to Section 8(b) hereof which are of consistently high quality in
accordance with Hubbard's formulations and specifications and will use
its best efforts to control the cost of manufacturing consistent with
Hubbard's standard of quality. Hubbard will provide a quality assurance
program in connection with the production of pet food by the Venture to
be implemented by Simplot. This program will be monitored by Hubbard's
Quality Assurance Department for compliance. Simplot shall be responsible
for performing the following activities in accordance with quality
control standards established by Hubbard: (i) purchasing proper
ingredients; (ii) maintaining quality standards at the Facility and on
products manufactured at the Facility, including implementing sanitation
policies and programs; and (iii) taking samples, inventory control and
maintaining plant production records necessary for quality control.
Simplot shall be entitled to charge the Venture for quality assurance
services that are normally performed during the manufacturing of pet
foods (i.e. technician work).
(d) Storage of Ingredients and Finished Products. Simplot will maintain and
store at the Facility on behalf of the Venture an inventory of packaging
and ingredients and an inventory of finished products adequate to satisfy
purchase orders obtained by Hubbard from customers.
(e) Customer Service. Simplot shall make every effort to satisfy customer
requests as to delivery, customer pick-up and other related courtesies
required to satisfy the needs of customers. In connection therewith, the
Venture shall maintain an adequate supply of Hubbard pet food products
which are not manufactured at the Facility sufficient to satisfy
anticipated customer demands, including treats, canned pet foods,
semi-moist products, biscuits and other pet food products.
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(f) Customer Orders. Hubbard agrees that, during the term of this Agreement,
it will use reasonable efforts to produce orders from customers for pet
food for production at the Facility so long as such pet food can be
produced economically at the Facility, is of a quality satisfactory to
Hubbard and can be produced consistent with Hubbard's requirements for
delivery, customer pick-up and other related customer courtesies. Simplot
acknowledges, however, that decisions as to which orders will be assigned
by Hubbard to the Facility are within the discretion and control of
Hubbard, to be reasonably exercised. All first orders from customers of
the Venture shall be subject to credit approval by the Management
Committee of the Venture. Any bad debt on products sold by the Venture to
customers approved by the Management Committee will be charged against
the Venture. The parties further acknowledge that the Venture shall not
be liable for any bad debt on products sold to Hubbard or Simplot and
resold by Hubbard or Simplot. All customer orders will be called into the
Hubbard order desk in Mankato, Minnesota, including Simplot's orders for
Simplot brand products. Orders will be transmitted daily to the Facility
via computer terminals.
(g) Limitations Upon Authority of Parties. Neither party, without the consent
of the other, shall (i) borrow money for or in the name of the Venture or
utilize any party of the Venture as collateral for any such borrowing;
(ii) as a partner in the Venture, make, execute or deliver any assignment
for the benefit of creditors, confession of judgement, chattel mortgage,
deed, guarantee, indemnity bond or surety bond; (iii) buy, sell, encumber
or lease any property of the Venture, or any interest therein, other than
in the ordinary course of business; or (iv) undertake or authorize any
construction of any kind or nature other than necessary or appropriate
repairs in the ordinary course of business.
(h) Personnel. Subject to such changes as from time to time approved by the
Management Committee, all employees at the Facility will be employed by
Simplot. The Venture shall reimburse Simplot in accordance with Section 6
hereof as a direct expense of the Venture for compensation and benefits
to such employees.
(i) Management Personnel. Each of Simplot and Hubbard shall devote the
attention of their management personnel to the Venture from time to time
as appropriate, but except as expressly provided in Section 6(c) hereof
with respect to administrative service fees, neither Simplot nor Hubbard
shall charge a management fee to the Venture or allocate to the Venture
as a direct expense any portion of the compensation and benefits paid to
its management personnel.
(j) Employment Matters. Employees of Simplot or Hubbard who perform services
for the Venture shall remain employees of their respective employer,
which shall remain solely responsible for establishing the terms and
conditions of their employment, including hiring, discipline and
discharge. Neither Simplot nor Hubbard (or any of their respective
employees) shall have any responsibility for
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the development or approval of personnel policies with respect to the
employees of the other party performing services for the Venture. Subject
to the right of reimbursement as a direct expenses as previously provided
hereinabove, Simplot and Hubbard shall remain solely liable for the
payment of compensation and any employment benefits to their respective
employees and for the payment of any taxes, charges or assessments
payable with respect to their respective employees, including without
limitation any such payments made to governmental agencies or bodies. No
party to this Agreement shall be liable for workers' compensation or
employment-related damages or actions relating to the employees of the
other party to this Agreement. Neither the Venture nor Hubbard shall be
considered a successor employer of any employees of Simplot, and neither
the Venture nor Simplot shall be considered a successor employer of any
employees of Hubbard.
(k) Ancillary Services. If the Management Committee shall from time to time
determine that ancillary services required for operation of the Venture
(e.g., lab analysis) can be provided to the Venture more efficiently or
more economically by Simplot or Hubbard than by having such services
provided by personnel regularly engaged in operation of the Venture or by
a third party contractor, then Simplot or Hubbard, as the case may be,
agrees to provide such ancillary services to the Venture on such terms as
may be agreed by such party and the Management Committee; provided,
however, that neither Simplot nor Hubbard shall have any obligation to
provide such ancillary services to the Venture if, in the reasonable
judgment of such party, to do so would materially interfere with its
other business operations or is not otherwise practicable under the
circumstances.
9. Accounting Matters.
(a) Tax Status. The Venture will function as a partnership for tax purposes.
The fiscal year of the Venture shall end on April 30, or such other year
as shall be approved by the Management Committee.
(b) Books of Account. Hubbard shall be responsible for maintaining books of
account for the Venture. In connection therewith, Hubbard shall prepare
and distribute to the parties on or prior to the 15th day of each month
an income statement and balance sheet for the venture for the preceding
month substantially in the form of Exhibit E hereto, with such changes in
form as may from time to time be approved by the Management Committee.
Hubbard and Simplot shall cause to be performed periodic independent
audits of the books of account as from time to time determined by the
Management Committee. The parties and their agents shall have full access
to the books and records of the Venture at all reasonable times and shall
have the right to make copies of extracts from such books and records.
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(c) Bank Accounts. Hubbard shall keep all funds of the Venture in one or more
bank accounts in Hubbard's name. Such funds may be commingled with other
funds of Hubbard, but Hubbard shall separately account for such funds and
interest on such funds shall accrue to the benefit of the Venture.
(d) Settlement of Intercompany Accounts. The intercompany account of each
party shall be settled on a monthly basis or on such other schedule
approved by the Management Committee. Each party shall remit to the
Venture the amount of any net charges to its account, or the Venture
shall remit to the party the amount of any net credits to its account.
10. Distribution of Net Income. An amount equal to 50% of the
Distributable Net Income (as hereinafter defined) shall be distributed to each
party from time to time, as determined by the Management Committee.
"Distributable Net Income" for any period shall mean the excess, if any, of (i)
the net income (computed without regard to any deduction for depreciation of
Venture assets) for such period over (ii) the aggregate net losses for all prior
periods to the extent not offset against net income for prior periods in
computing "Distributable Net Income" for such prior periods.
11. Other Business Operations of Parties.
(a) Simplot. Simplot engages in the pet food business at other
locations throughout the Pacific Northwest, which other
operations do not constitute part of the Venture.
(b) Hubbard. Hubbard engages in the pet food business at other
locations throughout the United States, which other operations do
not constitute part of the Venture. Simplot recognizes that such
other operations of Hubbard may compete with the Venture.
12. Insurance. The following insurance coverages shall be obtained
regarding the operations and assets of the Venture:
(i) Simplot shall obtain property and casualty insurance with
respect to the Facility, and the Venture shall obtain
property and casualty insurance with respect to any
additional property, plant and equipment acquired by the
Venture pursuant to Section 2(b), in each case written on
an all risks replacement cost basis. All losses payable
thereunder that relate to (x) the Facility shall be
payable solely to Simplot and (y) the property, plant and
equipment acquired by the Venture pursuant to Section 2(b)
shall be payable solely to the Venture; provided, however,
that such proceeds shall be applied to repair, restoration
or replacement of the damaged property.
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(ii) The Venture shall obtain property and casualty insurance
with respect to the inventory, packaging and supplies of
the Venture in such amounts and with such deductibles as
shall be determined by the Management Committee.
(iii) The Venture shall obtain comprehensive general and
products liability insurance with respect to the Venture.
All such policies shall name each party and the Venture as
insured thereunder.
(iv) Each party shall obtain appropriate workers' compensation
insurance with respect to such party's employees.
(v) The Venture shall obtain such other insurance coverage as
the Management Committee shall deem appropriate in
connection with the activities of the Venture.
The premiums of any such insurance shall constitute a direct expense of
the Venture for purposes of Section 6 hereof.
13. Representations and Warranties.
(a) Generally. Each of Simplot and Hubbard represents and warrants
to the other that:
(i) it is a corporation duly organized and in good standing
under the laws of the state of its incorporation;
(ii) it is duly qualified to do business in the State of Idaho;
(iii) it has obtained all necessary corporate approval to
execute, deliver and perform this Agreement and to engage
in operation of the Venture as contemplated hereby;
(iv) the execution, delivery and performance of this Agreement
and operation of the Venture as contemplated hereby does
not violate the terms of any agreement to which it is a
party or by which it is bound;
(v) there are no suits or proceedings pending or, to its
knowledge, threatened against it which, if decided
adversely to such party, would adversely affect its
authority to execute, deliver and perform this Agreement
or to engage in operation of the Venture in accordance
herewith; and
(vi) it has all necessary licenses, permits and authorizations,
governmental or otherwise, necessary to execute, deliver
and perform this Agreement and to engage in operation of
the Venture as contemplated hereby.
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(b) Additional Representations and Warranties of Simplot. To the best
of Simplot's knowledge, Simplot has not discharged at the
Facility or permitted or suffered the discharge at the Facility
of any hazardous substances the release or disposal of which is
regulated by any law, regulation, ordinance or code, and to the
knowledge of Simplot no such hazardous substances exist in, on or
under the Facility. Except as disclosed in writing to Hubbard by
Simplot, no storage tanks for petroleum, petroleum by-products or
other hazardous substances are present in, on or under the
Facility.
14. Initial Term and Renewal Terms. The Venture shall have a term
commencing on the date hereof and continuing to and including April 30, 2018.
Thereafter, the term of the Venture shall be automatically extended for
successive two-year renewal terms unless either party elects by written notice
to the other party given not less than twelve (12) months prior to expiration of
the initial term or any renewal term, to terminate the Venture upon expiration
of the initial term or renewal term, as the case may be.
15. Early Termination. The Venture shall terminate prior to the initial
term or any renewed term, as follows:
(a) by the mutual written agreement of Simplot and Hubbard;
(b) by either party upon not less than twelve (12) months written
notice of its election to terminate the Venture; provided that
the Venture cannot be terminated prior to April 30, 1998,
pursuant to this clause (b);
(c) by Simplot upon not less than thirty (30) days written notice of
its election to terminate the Venture if Hubbard shall fall to
produce orders for production and/or sales of pet food (including
orders for products described in Sections 7(a), (b) and (c)
hereof) at least equal to (i) 8,000 tons per year for each of the
first two years of the Venture, and (ii) 12,000 tons per year for
each year thereafter; provided, however, that the Venture shall
not terminate if within such thirty (30) day period Hubbard shall
elect to pay to Simplot an amount equal to 50% of the Venture's
average per ton profit on all sales for such year, times the
number of tons in the shortfall for such year;
(d) by either party upon not less than thirty (30) days written
notice of its election to terminate the Venture if during the
first five (5) years of the Venture the Venture (i) sustains a
net loss (before any deduction for depreciation of Venture
property) in each of twelve (12) consecutive months, or (ii)
sustains a net loss (before any deduction for depreciation of
Venture property) during any period of twelve (12) consecutive
months ending as of the end of the month immediately preceding
the month in which such party gives notice hereunder in excess of
$300,000;
(e) by either party upon written notice of its election to terminate
the Venture following the institution of any bankruptcy or
insolvency proceedings by or
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against the other party (whether voluntary or involuntary, and
whether under federal or state law), the dissolution, liquidation
or winding up of the other party or the assignment by the other
party of any significant portion of its property or assets for
the benefit of creditors or claimants;
(f) by either party upon written notice of its election to terminate
the Venture if there is a willful breach by the other party of a
material term of this Agreement and such breach has not been
cured within sixty (60) days after written notice of such breach;
or
(g) upon one hundred eighty (180) days prior written notice by the
remaining party or the permitted assignee of the other party
following the assignment by the other party of its interest in
the Venture in accordance with Section 17 hereof; provided,
however, that such notice of termination may not be given more
than ninety (90) days after the effective date of such assignment
or transfer.
Nothing contained in this Section 15 shall affect or impair any rights
or obligations arising prior to or at the time of the termination of the
Venture, or which may arise by an event causing the termination of the Venture.
16. Disposition of Assets Following Termination.
(a) Generally. Upon termination of the Venture, Simplot and Hubbard
shall proceed to wind up the affairs of the Venture in accordance
with this Section 16.
(b) Option to Lease Facility. In the event Simplot gives notice of
termination pursuant to clause (b) of Section 15 hereof, or in
the event Hubbard gives notice of termination pursuant to clause
(e) or (f) of Section 15 hereof, then Hubbard shall have an
option, exercisable by written notice by Hubbard to Simplot at
any time on or prior to the effective date of such termination,
to lease the Facility (including any equipment purchased by
Simplot pursuant to clause (c) of this Section 16) for a period
of up to two (2) years commencing on the date of termination of
the Venture on the terms set forth on Exhibit F hereto.
(c) Option to Purchase Additional Equipment. In the event the Venture
is terminated for any reason, Simplot shall have the option,
exercisable by written notice by Simplot to Hubbard at any time
on or prior to the effective date of such termination, to
purchase the equipment of the Venture at a mutually agreed upon
price, or if the parties cannot agree, at a price equal to the
then current book value, net of accumulated depreciation. In the
event Simplot shall not exercise its option to purchase the
equipment of the Venture pursuant to this clause (c), then
Hubbard shall have the option, exercisable by written notice by
Hubbard to Simplot within 30 days following the effective date of
termination, to purchase the equipment of the Venture at a
mutually agreed upon price, or if the parties
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cannot agree, at a price equal to the then current book value, net of
accumulated depreciation.
(d) Disposition of Assets.
(i) Upon termination of the Venture, subject to the option of Simplot
and Hubbard to purchase the equipment owned by the Venture
pursuant to clause (c) of this Section 16, the assets of the
Venture shall be sold in an orderly fashion in such manner as the
Management Committee shall determine.
(ii) absent a lease of the Facility by Hubbard under clause (b) of
this Section 16, upon termination of the Venture exclusive
possession of the Facility, free and clear of any rights of the
Venture or Hubbard, shall revert to Simplot.
(iii) upon termination of the Venture, each party's right to use Trade
Secrets of the other party shall cease and each party shall
return to the other party any and all materials in such party's
possession or control which contain or relate to Trade Secrets of
the other party.
(e) Application of Cash. Any cash of the Venture, including without
limitation the proceeds of assets sold pursuant to clauses (c) and (d)
of this Section 16, shall be applied and distributed in the following
order of priority:
(i) to the payment of debts and liabilities of the Venture (other
than outstanding advances pursuant to Section 5 hereof) and
expenses of liquidation;
(ii) to the setting up of any reserves that the Management Committee
shall deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Venture arising out of or in
connection with the Venture, which reserves shall be paid over by
Simplot and Hubbard to a mutually designated party, as escrow
agent, to be held for the purpose of disbursing such reserves in
payment of any of the aforementioned contingencies; provided,
however, that at the expiration of such period of time as Simplot
and Hubbard shall deem mutually advisable, said escrow agent
shall distribute the balance thereof remaining in the manner set
forth in subparagraph (iv) hereof;
(iii) to outstanding advances pursuant to Section 5 hereof; and
(iv) any balance remaining after the application in accordance with
the foregoing subparagraph, equally to Simplot and Hubbard.
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17. Option of Simplot to Participate with Hubbard in Ownership and
Operation of New Facility.
(a) In the event during the term of the Venture Hubbard commences
construction of a new dry pet food manufacturing facility in the
state of Washington, Oregon or Idaho to which substantially all
of the business of the Facility is or will be transferred (a
"Replacement Facility"), then upon or prior to the commencement
of construction Hubbard shall submit to Simplot a written offer
to participate with Hubbard as a 50% owner of the Replacement
Facility and a 50% participant in the operation of the
Replacement Facility (a "Joint Ownership Offer?") in accordance
with this Section 17.
(b) The Joint Ownership Offer shall provide for the Replacement
Facility to be owned by Hubbard and Simplot as tenants in common
or, alternatively, provide for the Replacement Facility to be
owned by a joint venture in which Hubbard and Simplot each hold a
50% interest, and shall provide for Hubbard and Simplot directly,
or through a joint venture, to share equally in the cost of
operating the Replacement Facility and share equally in the
profits or losses derived from operation of the Replacement
Facility. To the extent practicable, Hubbard shall endeavor in
good faith to structure the Joint Ownership Option in a manner
consistent with the structure of the Venture established pursuant
to this Agreement, except that Simplot directly, or through such
joint venture, would purchase a 50% ownership interest in the
Replacement Facility, and the employees operating the Replacement
Facility may be employees of Hubbard or the joint venture, rather
than employees of Simplot.
(c) Simplot shall have a period of sixty (60) days after receipt of
the Joint Ownership Offer to accept the Joint Ownership Option by
written notice of acceptance to Hubbard. Following timely notice
of acceptance, Hubbard agrees to negotiate in good faith the
definitive documentation for the joint ownership and operation of
the Replacement Facility by Hubbard and Simplot. If Hubbard shall
have so negotiated in good faith with Simplot, but within a
period of sixty (60) days after notice of acceptance, the parties
shall not have executed and delivered definitive documents for
joint operation and ownership of the Replacement Facility, then
the rights of Simplot to participate in the ownership and
operation of the Replacement facility shall cease and be of no
further force or effect.
18. Assignment. Except as expressly permitted by this Section 18,
neither party shall assign or encumber its interest in the Venture and Simplot
shall not transfer or encumber the Facility. A party may assign its interest in
the Venture and Simplot may transfer the Facility to another entity in either
case in connection with the sale of substantially all of the assets of a
division or component of its business to another entity provided that (i) such
party remains liable for observance and performance of its obligations under
this Agreement; (ii) the financial condition of the transferee is reasonably
satisfactory to the other party; and (iii) the transferee
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specifically agrees to be bound by the terms of this Agreement. Each and every
provision in this Agreement shall survive such assignment or transfer and remain
in full force and effect.
19. Successors and Assign. This Agreement shall bind and inure to the
benefit of the parties hereto, there successors and permitted assigns.
20. Further Assurances. The parties agree that they will perform such
other acts and execute and deliver such other documents as may be necessary or
appropriate from time to time to carry out the intent and purpose of this
Agreement. The parties recognize that issues may arise in connection with the
Venture which are not provided for in this Agreement and cannot be resolved by
the Management Committee. Subject to the early termination provisions of Section
15 hereof, the parties agree to negotiate in good faith the resolution of such
issues by amendment or modification of this Agreement in accordance with Section
21 hereof.
21. Waivers and Amendments. This Agreement may be amended or modified,
and the terms hereof may be waived, only by a written instrument executed by the
parties hereto or in the case of a waiver, by the party waiving compliance. The
failure of either party at any time or tunes to require performance of any
provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, or m any other such instrument, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any breach, or a waiver of the breach of
any other term or covenant contained herein.
22. Arbitration. All unresolved disputes or controversies arising out of
or in relation to this Agreement shall be determined and settled by arbitration
at a mutually convenient location in the State of Idaho in accordance with the
Commercial Rules of the American Arbitration Association in effect at the time
of said controversy, and judgment upon any award rendered by the arbitrator(s)
may be entered in any court of competent jurisdiction. The expenses of the
arbitration shall be borne by the Venture, provided that each of Simplot and
Hubbard shall pay for and bear the costs of its own experts, evidence, and legal
counsel. Whenever any action is required to be taken under this Agreement within
a specified period of time and the taking of such action is materially affected
by a matter submitted to arbitration, such period shall automatically be
extended for ten (10) days plus the number of days that are taken for the
termination of that matter by the arbitrator(s). Nothing herein contained shall
bar either party from seeking equitable remedies in a court of competent
jurisdiction.
23. Indemnification. Etc.
(a) By Simplot. Simplot shall indemnify and hold harmless Hubbard and
the Venture for and against:
(i) all claims, actions, suits and proceedings asserted
against Hubbard or the Venture with respect to any and
all liabilities and obligations arising from ownership of
the Facility prior to the date of commencement of the
Venture (the "Commencement Date"), operation of the
manufacturing business at the Facility by Simplot prior
to the Commencement Date, and
-15-
<PAGE>
incidents and occurrences prior to the Commencement Date
relating to the Facility and such business;
(ii) without limiting the generality of the foregoing, any and
all product liability or similar claims in respect of
products manufactured at the Facility by Simplot prior to
the Commencement Date;
(iii) any and all loss, injury, damage or deficiency resulting
from any misrepresentation or breach of warranty on the
part of Simplot under this Agreement;
(iv) any and all loss, injury, damage or deficiency resulting
from the discharge at the Facility of any hazardous
substances the release or disposal of which is regulated
by any law, regulation, ordinance or code, whether prior
to or after the Commencement Date, or the existence of any
such hazardous substances in, on or under the Facility;
and
(v) any and all loss, injury damage or deficiency resulting
from the gross negligence or willful misconduct of
Simplot.
(b) By Hubbard. Hubbard shall indemnify and hold harmless Simplot
and the Venture for and against:
(i) any and all loss, injury, damage or deficiency resulting
from any misrepresentation or breach of warranty on the
part of Hubbard under this Agreement; and
(ii) any and all loss, injury, damage or deficiency resulting
from the gross negligence or willful misconduct of
Hubbard.
(c) By the Venture. The Venture shall indemnify and hold harmless
each of Simplot and Hubbard for and against all claims, actions,
suits and proceedings asserted against such party in connection
with the Venture or any act or omission of such party in its
capacity as a party to the Venture; provided, however, that
neither Simplot nor Hubbard shall be indemnified and held
harmless pursuant to this Section 23(c) for any matter with
respect to which it is required to indemnify and hold harmless
the Venture and the other party pursuant to Section 23(a) or
23(b) hereof.
24. Liability of Parties. Neither Simplot nor Hubbard shall, by virtue
of this Agreement, be deemed to have assumed any liability of any kind or nature
whatsoever arising with respect to activities or products of the other not
undertaken as part of the Venture. Neither Simplot nor Hubbard shall be liable
to the Venture or the other party for any act or omission of such party in its
capacity as a party to the Venture unless such act or omission constitutes
gross negligence or willful misconduct of such party.
-16-
<PAGE>
25. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the State of Idaho.
26. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
transmitted by registered or certified U.S. Mail, return receipt requested and
postage prepaid, addressed to the other party at its address hereinafter set
forth or at such other address as the other party shall theretofore have
designated by notice in accordance with this Section 26:
If to Simplot: J.R. Simplot Company
P.O. Box 27
Boise, Idaho 83707
Attention: Secretary
With a copy to: J. R. Simplot Company
223 Rodeo Avenue
Caldwell, Idaho 83605
If to Hubbard: Hubbard Milling Company
424 North Riverfront Drive
Mankato, Minnesota 56001
Attention: President
The date of giving such notice shall be the date received, if served
personally, or the date on which the notice is delivered to the other party as
indicated by the return receipt.
27. Entire Agreement. This Agreement and the Exhibits hereto set forth
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements, arrangements
and understandings, written or oral, relating to the subject matter hereof.
28. Headings. The headings contained in this Agreement are for
referenced purposes only and shall not affect the meaning or interpretation of
this Agreement.
29. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first-above written.
J.R. SIMPLOT COMPANY
By Ray C. B[ILLEGIBLE]
-------------------------------
Its President D.P.G.
---------------------------
HUBBARD MILLING COMPANY
By Timothy C. Violett
-------------------------------
Its Vice President Pet Food
---------------------------
-18-
<PAGE>
EXHIBIT A
DESCRIPTION OF FACILITY
Site Plan
TRUCK LOADOUT
[ ] = Fish Food Manufacturing Facility
EXISTING
FISHFOOD
PLANT
11,600 SQ.FT WAREHOUSE W/FIRESPRINKLER SYSTEM
TRUCK RECEIVING
<PAGE>
Equipment List
1. Truck bottom dump receiving auger
2. Six 40-50 ton holding bins with elevator and transfer
conveyors
3. Hayes-Stolz 2 ton Ribbon Blender on weight load cells
4. In/Out feed conveyors and elevators
5. Jacobson Hammer Mill XLT 42336-D 150 h.p. motor capable of product
reduction to 3/64"
6. Dalamatic Air Scrubber
7. 1 ton live bottom surge bin
8. Dual Agitator Pre-conditioner capable of water, oil, slurry
and/or steam injection
9. X-175 Weger Extruder with 200 h.p. motor
10. Negative Air System to transfer product from extruder to dryer
11. Wenger 960 2 stage dryer/cooler with optional product crumbler
12. Three Screen Rotex to remove "overs", "unders" and fines
13. Hayes-Stolz Fats Applicator complete with Hersey Flow Rate
Indicator/Totalizer motor
14. Accurate Dry Powder Applicator for finished product
15. Two bulk load-outs bins 20 ton each capacity
16. Assorted conveyors, elevators to facilitate product flow through system
17. Howe Richardson Packaging Scale
18. Union Special Stitcher with tape applicator
A-2
<PAGE>
EXHIBIT B
Additional Equipment
This list comprises equipment deemed necessary for volume production and sales
of quality pet foods.
Pallet racking for M-T Bag inventory $ 7,000.00
Sanitary guidelines related to pet contract 10,000.00
Easy Open Top sewing machine DoBoy 20,000.00
Upgrade Liquid Digest Application 25,000.00
Additional Forklift 15,000.00
Pallet Stretch Wrap 10,000.00
Increase "hand add" batching area 5,000.00
Technicon Analyzer 30,000.00
Conveyor from product coater to elevator 2,475.00
Elevator 4,175.00
Two finished product bins; capacity 12 ton each 16,500.00
2# to 10# Electronic bagging scale 8,668.95
Bag closing machine heat seal 5,800.00
Electronic contracting includes high-low indicators 5,400.00
Millwright services for transitions, gates, tank
installations with crane service, scaler and closing
machine installations. Labor would be $ 12,300.00
Total $177,318.95
<PAGE>
EXHIBIT C
Description of Direct Expenses
I. PLANT G & A
Employee Benefits
Fixed Insurance Expense
Office Equipment Rent
Administrative Wages
Operating Supplies
Office Supplies
Computer Supplies
Auto Operating Expense
Entertainment & Customer Relations
Entertainment - Meals
Travel Meals
General Travel
Lodging Expense
Meetings & Conventions
Telephone Toll Charges
Postage
UPS Charges
Dues and Subscriptions
Airplane Expenses Charged
Public and Employee Relations
Miscellaneous
II. PRODUCTION EXPENSE
Non-Productive Wages
Sweepers Wages
Miscellaneous Millwright Wages
Extruder Millwright Wages
Supt and Foreman Wages
Millers and Mixers Prod Wages
Pack/Pack Large Prod Wages
Extruder Production Wages
Small Pack Production Wages
Warehouse Production Wages
Outside Labor
Project Expense
Repairs Maintenance Building and Grounds
Repairs Mixing Equipment
Repairs Packing Equipment
Repairs Receiving Equipment
Repairs Warehouse Equipment
Repairs Dryer Equipment
Repairs Extruding Equipment
Fuel
<PAGE>
II. PRODUCTION EXPENSE (continued)
Controllable Liability
Power and Light
Water and Sewer Service
Fork Truck Gas and Oil
Fork Truck Tires
Fork Truck Repairs
Operating Supplies
Expendable Tools and Equipment
Fumigation Expense
Miscellaneous
Services Charged
Employee Benefits
Insurance Expense
All real estate tax that is incurred on the facility incurred on the
facility over the amount existing on the commencement date of the
venture.
III. SALES EXPENSE
Employee Benefits
Amortization Expense
Fixed Insurance Expense
Salesmen Wages
Entertainment and Customer Relations
Entertainment - Meals
Travel - Meals
General Travel
Lodging Expense
Meetings and Conventions
Telephone Toll Charges
Sales Material Expense
Miscellaneous Professional Charges
Package Development Freight
Postage
Dues and Subscriptions
Airplane Expense Charges
Miscellaneous
Services Charged
C-2
<PAGE>
EXHIBIT D
Administrative Services
Purchasing
Accounting
R & D/Quality
Customer Service
Tonnage Taxes
Travel
Kennel
Outside Research
Professional Fees
Laboratory
Supplies
Postage
Computer Service
Miscellaneous
<PAGE>
EXHIBIT E
HUBBARD - SIMPLOT JOINT VENTURE
PET FOOD INCOME STATEMENT
________,1993
<TABLE>
<CAPTION>
CURRENT MONTH YEAR-TO-DATE
00/00/93 00/00/93
Actual Last Year Variance Actual Last Year Variance
<S> <C> <C> <C> <C> <C> <C>
CUSTOMER TONS
INTER-CO. TONS
TOTAL TONS
Plant Sales
Cost of Sales
Gross Profit
Manufacturing (Hubbard)
Manufacturing (Simplot)
G&A Plant (Hubbard)
G&A Plant (Simplot)
G&A Non-Plant (Hubbard)
G&A Non-Plant (Simplot)
Operating Expenses
OPERATING INCOME
Freight Out
Product Liability
Allowances
Brokerage
Cash Discounts
Total Discounts
Bad Debt Provision
Selling
Advertising
Total Marketing
Interest Income
Misc. Income/Expense
Provision of Income Tax
Total Other Income
VENTURE NET INCOME
SIMPLOT SHARE
HUBBARD SHARE
</TABLE>
<PAGE>
EXHIBIT F
TERMS OF LEASE
Term: Up to two (2) years at the option of Hubbard, commencing
on the date of termination of the Venture. Hubbard to
specify term at the time notice of exercise of the option
to lease is delivered to Simplot.
Rental: Greater of (i) $5,000 per month, plus all real estate
taxes allocable to the Facility, or (ii) 20% of the net
income from the Facility, computed in a manner consistent
with the computation of net income under the Joint Venture
Agreement.
Insurance: Simplot to obtain casualty insurance for Facility.
Casualty insurance to be for full insurable value of the
Facility. Hubbard to obtain commercial liability insurance
for the Facility with Simplot named as an additional
insured.
Maintenance: Hubbard to be responsible for routine maintenance and
repairs of the Facility (including equipment in the
Facility) consistent with standards maintained during the
term of the Venture, other than structural repairs.
Simplot to be responsible for all structural repairs to
the Facility.
Compliance
with Laws: Hubbard will be required to conduct its operations at the
Facility in accordance with all applicable laws.
Notwithstanding the foregoing, Simplot will be responsible
for, all improvements, alterations or additions to the
Facility necessary to comply with all such laws, including
the Americans with Disabilities Act.
Non-Interference: Hubbard and Simplot to each take reasonable steps to
prevent conflict between Hubbard's operation of the
Facility and Simplot's operation of its adjacent
facilities.
<PAGE>
Faegre & Benson Client No: Client: [ILLEGIBLE]
Corporate Finance Group Matter No: Matter: [ILLEGIBLE]
DOCUMENT TRACKING SHEET
-----------------------
<TABLE>
<CAPTION>
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Revise
this
Document Name Doc. # Copy #1 Copy #2 Copy #3 Copy #4 Copy #5 Copy #6 Copy #7
================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joint Venture MFF09185 MFF09185 MFF09185
Agreement
- ------------------------------------------------------------------------------------------------
</TABLE>
* Note document was originally copied from a Hubbard disk.
<PAGE>
- --------------------------------------------------------------------------------
JOINT VENTURE AGREEMENT
between
FLINT RIVER MILLS, INC.
and
HUBBARD MILLING COMPANY
Dated as of April 7, 1995
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
1. Formation of Joint Venture ............................................ 1
2. Property Plant and Equipment, Receivables, Inventories ................ 1
a. Initial Property, Plant and Equipment ............................ 1
b. Initial Inventory and Receivables ................................ 1
c. Capital Additions to the Facility ................................ 2
d. Additional Property, Plant and Equipment ......................... 2
e. Ownership of Facility ............................................ 2
3. Trade Secrets ......................................................... 2
4. Trademarks, Etc ....................................................... 2
5. Working Capital ....................................................... 3
6. Direct Expenses; Administrative Services Fee .......................... 3
a. Reimbursement of Direct Expenses ................................. 3
b. Examples of Direct Expenses ...................................... 3
c. Administrative Services Fee ...................................... 3
7. Transactions with the Venture ......................................... 4
a. Purchases of Pet Food and Fish Food from the Venture ............. 4
b. Sales of Pet Food to the Venture ................................. 4
8. Management and Operation; Personnel; Ancillary Services ............... 4
a. Management Committee.............................................. 4
b. Day-to-Day Operations ............................................ 4
c. Limitations Upon Authority of Parties ............................ 5
d. Personnel ........................................................ 5
e. Management Personnel ............................................. 5
f. Employment Matters ............................................... 5
g. Ancillary Services ............................................... 5
9. Accounting Matters .................................................... 6
a. Fiscal Year ...................................................... 6
b. Books of Account ................................................. 6
c. Cash Accounts .................................................... 6
<PAGE>
10. Distribution of Net Income ............................................ 6
11. Other Business Operations of Parties/Non-Compete ...................... 7
a. FRM .............................................................. 7
b. Hubbard .......................................................... 7
12. Certain Labialities; Insurance ........................................ 7
13. Representations and Warranties ........................................ 8
a. Generally ........................................................ 8
b. Additional Representations and Warranties of Hubbard ............. 8
14. Initial Term and Renewal Terms ........................................ 8
15. Early Termination ..................................................... 9
16. Disposition of Assets Following Termination ........................... 9
a. Generally ........................................................ 9
b. Hubbard Option to Purchase Assets of Venture
Following Optional Termination ................................... 9
c. Option to Purchase Assets of Venture Following
Bankruptcy, Breach, Etc. ......................................... 10
d. Other Disposition of Assets ...................................... 10
e. Application of Cash .............................................. 10
17. Purchases of Products Following Termination ........................... 10
18. Assignment ............................................................ 11
19. Successors and Assigns ................................................ 11
20. Further Assurances .................................................... 11
21. Waivers and Amendments ................................................ 11
22. Arbitration ........................................................... 11
23. Indemnification, Etc. ................................................. 12
24. Liability of Parties to Venture ....................................... 12
25. Governing Law ......................................................... 12
26. Notices ............................................................... 12
27. Entire Agreement ...................................................... 12
ii
<PAGE>
28. Headings .............................................................. 12
29. Counterparts .......................................................... 12
30. Announcements ......................................................... 13
31. Future Expansion ...................................................... 13
Exhibits
EXHIBIT A - Description of Facility
EXHIBIT B - Preliminary Construction and Equipment Budget
EXHIBIT C - Administrative Expense Categories
EXHIBIT D - Forms of Periodic Financial Statements
iii
<PAGE>
JOINT VENTURE AGREEMENT
Joint Venture Agreement, dated April 7, 1995 by and between Flint River
Mills, Inc., a Georgia corporation ("FRM"), and Hubbard Milling Company, a
Minnesota corporation ("Hubbard").
RECITALS
Hubbard owns a pet food manufacturing facility in Cartersville, Georgia
more fully described in Exhibit A hereto (the "Facility").
Hubbard is engaged in the pet food and fish food business throughout the
United States and, in connection therewith, has developed substantial expertise
in the pet food and fish food business and has implemented an extensive sales,
marketing and distribution structure for the pet food and fish food business
(the "Business").
FRM currently purchases pet food and fish food from other suppliers and
desires to obtain a source for all of its pet food and fish food requirements.
FRM and Hubbard now desire to form a joint venture for the manufacture
of pet food and fish food and the expansion of the Facility to accommodate such
manufacturing.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements herein contained, FRM and Hubbard agree as follows:
1. Formation of Joint Venture. FRM and Hubbard hereby form a joint
venture (the "Venture") for the manufacture of pet food and fish food at the
Facility and the sale, marketing and distribution of pet food and fish food in
the States of Mississippi, Alabama, Georgia, Florida, South Carolina, and North
Carolina (hereinafter the "Territory") in connection therewith. The Venture
shall constitute a special purpose general partnership governed by the Uniform
Partnership Act, as adopted in the State of Georgia. The name of the Venture
shall be: FRM/Hubbard Pet Food Venture.
2. Property Plant and Equipment Receivables, Inventories.
a. Initial Property, Plant and Equipment. On May 1, 1995 or such
other date mutually agreed to by the parties (such date
hereinafter the "Closing Date"), Hubbard will contribute the
Facility to the capital of the Venture, free and clear of all
liens, claims and encumbrances, by warranty deed and bill of
sale. For purposes of this Agreement, the Facility will be
treated as having a fair market value on the Closing Date equal
to Hubbard's current book value of the existing fixed assets of
the Facility, plus any capital additions in process.
b. Initial Inventory and Receivables. On the Closing Date, FRM will
contribute to the capital of the Venture all inventory and
receivables attributable to business done at the Facility and
acquired by FRM from Hubbard pursuant to a separate Purchase
Agreement. For purposes of this Agreement, such inventory and
<PAGE>
receivables will be treated as having a fair market value equal
to FRM's cost of acquiring such inventory and receivables.
c. Capital Additions to the Facility. The parties recognize that
substantial additional capital additions are necessary at the
Facility, including the installation of additional manufacturing
and building equipment. Attached hereto as Exhibit B is a
preliminary construction and equipment budget reflecting the
projected costs of such additions. The final budget, together
with plans and specifications for the renovation, shall be
prepared by Hubbard subject to the approval of FRM, such approval
not to be unreasonably withheld. On the Closing Date, FRM shall
contribute to the capital of the Venture, in cash, an amount
equal to the amount by which the amount of Hubbard's capital
contribution pursuant to Section 2(a) hereof exceeds the amount
of FRM's capital contribution pursuant to Section 2(b) hereof. In
the event that the amount of the projected costs exceeds the
amount contributed by FRM pursuant to the preceding sentence,
each of Hubbard and FRM shall contribute, in cash, an amount
equal to 50% of such excess.
d. Additional Property, Plant and Equipment. If the Management
Committee (as defined in Section 8(a) hereof) shall determine
after the date hereof that any additional property, plant and
equipment is required for the Venture, each of FRM and Hubbard
shall contribute to the Venture an amount equal to 50% of the
costs thereof, when and as such costs are payable by the Venture.
e. Ownership of Facility. The Facility, as initially contributed to
the Venture pursuant to Section 2(a) hereof and as improved and
equipped pursuant to Section 2(c) hereof, together with any
additional property, plant and equipment acquired from time to
time pursuant to Section 2(d) hereof, shall constitute property
of the Venture and title thereto shall be in the name of the
Venture. The Facility will be open for inspection and review by
either party during normal business hours or at any time it is in
operation.
3. Trade Secrets. Proprietary manufacturing processes, customer lists
and other similar confidential information (collectively, "Trade Secrets")
constituting the property of a party hereto prior to the date hereof shall
remain the property and Trade Secrets of such party and shall not constitute
property of the Venture notwithstanding disclosure to the other party in
connection with the Venture. Any such Trade Secrets may be used by the Venture
but shall not be used by the other party, disclosed to others, or any other
advantage taken thereof by such party in its own separate business activities.
Trade Secrets developed by the Venture shall be and become the property and
Trade Secrets of the Venture, but may be used by either party in its own
separate business activities.
4. Trademarks. Etc. The Venture will employ the trademark(s), patent(s),
copyright(s), license(s) and other intellectual property rights presently being
used by FRM and Hubbard in connection with their respective businesses, all of
which are hereby made available on a non-exclusive basis to the Venture. Such
trademarks, patents, copyrights and other intellectual property rights shall
remain the property of FRM or Hubbard, as the case may be, and shall not
constitute property of the Venture. Each of FRM and Hubbard shall establish
quality control standards
2
<PAGE>
for all products sold using its trademarks, and shall specify policies and
programs to monitor compliance with such standards.
5. Working Capital. FRM shall contribute to the initial working capital
of the Venture pursuant to Section 2(b) above. To the extent cash proceeds of
sales and collections on accounts receivable by the Venture from time to time do
not fund current working capital requirements, each of FRM and Hubbard will
advance to the Venture on an interest-free basis an amount equal to 50% of such
working capital deficiency. The amount of any such additional advances shall be
established from time to time by the Management Committee.
6. Direct Expenses; Administrative Services Fee.
a. Reimbursement of Direct Expenses. Each of Hubbard and FRM shall
on a monthly basis prepare and submit to the Management Committee
a written statement, the detail of which shall be determined by
the Management Committee, for the actual direct expenses incurred
by Hubbard or FRM, as the case may be, in connection with the
Venture. The Venture shall reimburse Hubbard or FRM, as the case
may be, for such expenses immediately upon receipt of any such
statement. In connection with the submission of written
statements for direct expenses to the Management Committee, each
of Hubbard and FRM shall identify any material variances in such
expenses from the projected expenses reflected in any operating
budget for such period prepared by the Management Committee.
b. Examples of Direct Expenses. Direct expenses for which Hubbard
and FRM shall be paid include, without limitation, all direct
manufacturing expenses (e.g., labor, utilities, maintenance and
insurance expenses) and all direct sales expenses. General
corporate overhead and corporate administrative expense, interest
or other indirect expenses shall not constitute direct expenses
for purposes of this Section 6.
c. Administrative Services Fee. In consideration of the accounting,
bookkeeping, computer and other administrative services to be
provided to the Venture by Hubbard, the Venture shall pay to
Hubbard an administrative services fee, the amount of which
shall be approved by the Management Committee on an annual
basis. Such expense categories are further defined in Exhibit C,
Administrative Expense Categories attached hereto.
3
<PAGE>
7. Transactions with the Venture.
a. Purchases of Pet Food and Fish Food from the Venture. FRM agrees
that during the term of this Agreement it will, and will cause
each of its Affiliates to purchase from the Venture, to the
extent available from the Venture, the entirety of their
respective pet food and fish food requirements. The price to be
charged FRM and its Affiliates for products purchased from the
Venture shall be established by the Management Committee so as to
yield to the Venture a per ton profit substantially equivalent to
the per ton profit then being realized by the Venture on sales of
products to others. The Venture shall invoice FRM and its
Affiliates for all products sold to FRM and its Affiliates, and
FRM and its Affiliates shall pay all such invoices at net terms
upon receipt thereof. "Affiliates" shall mean any corporation,
partnership or other entity which now or hereafter, directly or
indirectly, controls, or is controlled by, or is under common
control with FRM.
b. Sales of Pet Food to the Venture. In order to supplement the
product line of the Venture, Hubbard will sell to the Venture pet
food products from time to time manufactured by Hubbard but not
manufactured by the Venture ("Supplemental Products"). The price
to be charged to the Venture by Hubbard for Supplemental Products
shall be established by Hubbard, subject to the approval of the
Management Committee, and shall yield to the Venture a per ton
profit substantially equivalent to the average per ton profit of
other pet food products manufactured by the Venture. Hubbard
shall invoice the Venture for all Supplemental Products sold to
the Venture, and the Venture shall pay all such invoices upon
receipt thereof.
8. Management and Operation; Personnel; Ancillary Services.
a. Management Committee. Management of the Venture shall be vested
in a committee (the "Management Committee") consisting of one
representative of FRM and one representative of Hubbard. Each
party will designate a representative who will serve on the
Management Committee and one alternate who shall act in the
absence of such representative. FRM has designated Henry Metcalf
as its representative and Alec Poitevint as its alternate.
Hubbard has designated Paul Holzhueter as its representative and
Mike Mitchell as its alternate. Each party may from time to time,
by written notice to the other, designate a new representative or
alternate.
b. Day-to-Day Operations. Hubbard shall be responsible for
conducting the day-to-day operations of the Venture, subject to
the management authority of the Management Committee. In such
capacity, Hubbard shall cause the Facility to be operated, and
supply all basic services to the Venture, including sales and
marketing, research and nutrition, quality assurance, purchasing
of packaging, production services and the like. Hubbard shall
coordinate ingredient purchasing with FRM, with ingredient
purchases for the Venture to be made by the party that obtains
the lowest cost. The Management
4
<PAGE>
Committee will pre-approve credit policy for the Venture and
Hubbard will administer credit consistent therewith.
c. Limitations Upon Authority of Parties. Neither party, without the
consent of the other, shall (i) borrow money for or in the name
of the Venture or utilize any property of the Venture as
collateral for any such borrowing, (ii) as a partner in the
Venture, make, execute or deliver any assignment for the benefit
of creditors, confession of judgment, chattel mortgage, deed,
guarantee, indemnity bond or surety bond; (iii) buy, sell,
encumber or lease any property of the Venture, or any interest
therein, other than in the ordinary course of the Venture, or any
interest therein, other than in the ordinary course of business;
or (iv) undertake or authorize any construction of any kind or
nature other than necessary or appropriate repairs in the
ordinary course of business.
d. Personnel. Subject to such changes as from time to time approved
by the Management committee, all employees at the Facility will
be employed by Hubbard. The Venture shall reimburse Hubbard in
accordance with Section 6 hereof as a direct expense of the
Venture for compensation and benefits to such employees.
e. Management Personnel. Each of FRM and Hubbard shall devote the
attention of their management personnel to the Venture from time
to time as appropriate, but except as expressly provided in
Section 6(c) hereof, neither FRM nor Hubbard shall charge a
management fee to the Venture or allocate to the Venture as a
direct expense any portion of the compensation and benefits paid
to its management personnel.
f. Employment Matters. Employees of FRM or Hubbard who perform
services for Venture shall remain employees of their respective
employer, which shall remain solely responsible for establishing
the terms and conditions of their employment, including hiring,
discipline and discharge. Neither FRM nor Hubbard (or any of
their respective employees) shall have any responsibility for the
development or approval of personnel policies with respect to the
employees of the other party performing services for the Venture.
FRM and Hubbard shall remain solely liable for the payment of
compensation and any employment benefits to their respective
employees and for the payment of any taxes, charges or
assessments payable with respect to their respective employees,
including without limitation any such payments made to
governmental agencies or bodies. Neither the Venture nor FRM
shall be considered a successor employer of any employees of
Hubbard, and neither the Venture nor Hubbard shall be considered
a successor employer of any employees of FRM.
g. Ancillary Services. If the Management Committee shall from time
to time determine that ancillary services required for operation
of the Venture (e.g., lab analysis, engineering, environmental,
safety and training) can be provided to the Venture more
efficiently or more economically by FRM or Hubbard than by having
such services provided by personnel regularly engaged in
operation of
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<PAGE>
the Venture or by a third party contractor, then FRM or Hubbard,
as the case may be, agrees to provide such ancillary services to
the Venture on such terms as may be agreed by such party and the
Management Committee; provided, however, that neither FRM nor
Hubbard shall have any obligation to provide such ancillary
services to the Venture if, in the reasonable judgment of such
party, to do so would materially interfere with its other
business operations or is not otherwise practicable under the
circumstances.
9. Accounting Matters.
a. Fiscal Year. The fiscal year of the Venture shall end on April
30, or such other date as determined by the Management Committee.
b. Books of Account. Hubbard shall be responsible for maintaining
books of account for the Venture. In connection therewith,
Hubbard shall prepare and distribute to the parties on or prior
to the 15th working day of each month an income statement and
balance sheet for the Venture for the preceding month
substantially in the form of Exhibit D hereto, with such changes
in form as may from time to time be approved by the Management
Committee. Hubbard and FRM shall cause to be performed periodic
audits of the books of account as from time to time determined by
the Management Committee. Following completion and approval by
Hubbard and FRM of any audit, no further audits shall be
performed on the books of account of the Venture for any period
prior to the end of the period to which such audit relates.
Details related to preparing the books shall be available for
review by both parties.
c. Cash Accounts. Hubbard shall maintain such cash account or
accounts for funds of the Venture as the Management Committee
determines necessary. Such funds may be commingled with other
funds of Hubbard, but Hubbard shall separately account for such
funds. Interest on any such funds shall accrue to the benefit of
the Venture. In the event the Venture has a short-term cash
deficient in its account, Hubbard may, subject to the right of
the Management Committee to require both parties to advance
additional funds to the Venture pursuant to Section 5 hereof,
advance funds to the Venture on a short-term basis and charge the
Venture an equivalent interest rate on such advances.
10. Distribution of Net Income. An amount equal to 50% of the
Distributable Net Income (as hereinafter defined) shall be distributed to each
party on a quarterly basis or from time to time, as determined by the Management
Committee. "Distributable Net Income" for any period shall mean the excess, if
any, of (i) the net income for such period over (ii) the aggregate net losses
for all prior periods to the extent not offset against net income for prior
periods in computing "Distributable Net Income" for such prior periods.
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<PAGE>
11. Other Business Operations of Parties/Non-Compete.
a. FRM. FRM engages in a variety of other production activities.
During the term of the Venture and for a period of five years
thereafter, FRM covenants and agrees that it will not, and will
not permit any of its Affiliates, to own, control, manage or
operate, or participate in the ownership, control, management or
operation of, or otherwise engage in or have any interest in,
directly or indirectly, as principal, partner, stockholder of a
corporation, agent, or otherwise, in its own behalf or through
any person, firm, corporation, association, trust or other
entity, any business engaged in the Business or any component
thereof within the United States.
b. Hubbard. Hubbard engages in the pet food and fish food business
at other locations throughout the United States, which other
operations do not constitute part of the Venture. FRM recognizes
that such other operations of Hubbard may compete with the
Venture. Hubbard agrees, however, that in the conduct of such
other pet food and fish food operations during the term of this
Agreement it will not solicit customers traditionally serviced
primarily from the Facility so as to capture such sales for its
own account rather than the account of the Venture. Hubbard
agrees that, during the term of this Agreement, it will send
orders from customers for pet food and fish food produced at the
Facility so long as such products can be produced economically at
the Facility, are of a quality satisfactory to such customers of
the Venture and can be produced consistent with the delivery
requirements. Absent these factors, it is anticipated that sales
of pet food and fish food within the Territory will be assigned
to the Venture. FRM acknowledges that decisions as to which
orders will be assigned by Hubbard to the Facility are within the
discretion and control of Hubbard, to be reasonably exercised
consistent with the above.
12. Certain Liabilities Insurance. Neither FRM nor Hubbard shall, by
virtue of this Agreement, be deemed to have assumed any liability of any kind or
nature whatsoever arising with respect to activities or products of the other
not undertaken as part of the Venture. No party to this Agreement shall be
liable for workers' compensation or employment-related damages or actions
relating to the employees of the other party to this Agreement. The following
insurance coverages shall be obtained regarding the operations and assets of the
Venture:
(i) The Venture shall obtain property and casualty insurance with
respect to the Facility in such amounts and with such deductibles
as shall be determined by the Management Committee.
(ii) The Venture shall obtain property and casualty insurance with
respect to the inventory, packaging and supplies of the Venture
in such amounts and with such deductibles as shall be determined
by the Management Committee.
(iii) The Venture shall obtain comprehensive general and products
liability insurance with respect to the Venture. All such
policies shall name each party and the Venture as insureds
thereunder.
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(iv) Each party shall obtain appropriate workers' compensation
insurance with respect to such party's employees.
(v) The Venture shall obtain such other insurance coverage as the
Management Committee shall deem appropriate in connection with
the activities of the Venture.
The premiums of any such insurance shall constitute a direct expense
of the Venture for purposes of Section 6 hereof.
13. Representations and Warranties.
a. Generally. Each of FRM and Hubbard represents and warrants to the
other that:
(i) it is a corporation duly organized and in good standing under the
laws of the state of its incorporation;
(ii) it is duly qualified to do business in the State of Georgia;
(iii) it has obtained all necessary corporate approval to execute,
deliver and perform this Agreement and to engage in operation of
the Venture as contemplated hereby;
(iv) the execution, delivery and performance of this Agreement and
operation of the Venture as contemplated hereby does not violate
the terms of any agreement to which it is a party or by which it
is bound;
(v) there are no suits or proceedings pending or to its knowledge,
threatened against it which, if decided adversely to such party,
would adversely affect its authority to execute, deliver and
perform this Agreement or to engage in operation of the Venture
in accordance herewith; and
(vi) it has all necessary licenses, permits and authorizations,
governmental or otherwise, necessary to execute, deliver and
perform this Agreement and to engage in operation of the Venture
as contemplated hereby.
b. Additional Representations and Warranties of Hubbard. Hubbard
has, and will convey to the Venture, good and marketable title to
the Facility, free and clear of all liens, claims and
encumbrances.
14. Initial Term and Renewal Terms. The Venture shall have a term
commencing on the date hereof and continuing to and including April 30, 2025.
Thereafter the term of the Venture shall be automatically extended for
successive two-year renewal terms unless either party elects by written notice
to the other party given not less than twelve (12) months prior to expiration
of the initial
8
<PAGE>
term or any renewal term, to terminate the Venture upon expiration of the
initial term or renewal term, as the case may be.
15. Early Termination. The Venture shall terminate prior to expiration
of the initial term or any renewal term, as follows:
(i) by the mutual written agreement of FRM and Hubbard;
(ii) by either party upon not less than twelve (12) months written
notice of its election to terminate the Venture;
(iii) by either party upon written notice of its election to terminate
the Venture following the institution of any bankruptcy or
insolvency proceedings by or against the Venture or the other
party (whether voluntary or involuntary, and whether under
federal or state law), the dissolution, liquidation or winding up
of the other party or the assignment by the other party of any
significant portion of its property or assets for the benefit of
creditors or claimants;
(iv) by either party upon written notice of its election to terminate
the Venture if there is a willful breach by the other party of a
material term of this Agreement and such breach has not been
cured within sixty (60) days after written notice of such
breach;
(v) upon one hundred eighty (180) days prior written notice by either
party (or its assignee) following the assignment by a party of
its interest in the Venture in accordance with Section 18 hereof,
provided, however, that such notice of termination may not be
given more than ninety (90) days after the effective date of such
assignment or transfer; or
(vi) by Hubbard in accordance with Section 31 hereof.
Nothing contained in this Section 15 shall affect or impair any rights
or obligations arising prior to or at the time of the termination of the
Venture, or which may arise by an event causing the termination of the Venture.
16. Disposition of Assets Following Termination.
a. Generally. Upon termination of the Venture, FRM and Hubbard shall
proceed to wind up the affairs of the Venture in accordance with
this Section 16.
b. Hubbard Option to Purchase Assets of Venture Following Optional
Termination. In the event either party gives notice of
termination pursuant to clause (ii) or (v) of Section 15 hereof,
or Hubbard elects to terminate the Venture pursuant to Section 31
hereof, Hubbard shall have the option to purchase the assets of
the Venture at a price equal to the then current book value, net
of accumulated depreciation
9
<PAGE>
c. Option to Purchase Assets of Venture Following Bankruptcy,
Breach, Etc. In the event a party (the "Non-Defaulting Party")
gives notice of termination pursuant to clause (iii) or (iv) of
Section 15 hereof to the other party (the "Defaulting Party"),
the Non-Defaulting Party shall have the option to purchase the
assets of the Venture at a price equal to the then current book
value, net of accumulated depreciation.
d. Other Disposition of Assets. Absent exercise of the purchase
option set forth in Section 16(b) or (c) hereof, as the case may
be, upon termination of the Venture, the assets of the Venture
shall be sold in an orderly fashion in such manner or the
Management Committee shall determine; provided, however, that if
such termination of the Venture is pursuant to clause (ii) or (v)
of Section 15 hereof or pursuant to Section 31 hereof and Hubbard
has not exercised its purchase option under Section 16(b) hereof,
or pursuant to clause (iii) or (iv) of Section 15 hereof and the
Non-Defaulting Party has not exercised its purchase option under
Section 16(c) hereof, then Hubbard or Non-Defaulting Party, as
the case may be, shall have a right of first refusal with respect
to any sale of assets pursuant to this Section 16(d) on such
terms as shall be established by the Management Committee.
e. Application of Cash. Any cash of the Venture, including without
limitation the proceeds of assets sold pursuant to Sections
16(b), (c) or (d) hereof shall be applied and distributed in the
following order of priority:
(i) to the payment of debts and liabilities of the Venture
(other than outstanding advances pursuant to Section 5
hereof) and expenses of liquidation;
(ii) to the setting up of any reserves that the Management
Committee shall deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of
the Venture arising out of or in connection with the
Venture, which reserves shall be paid over by FRM and
Hubbard to a mutually designated party, as escrow agent,
to be held for the purpose of disbursing such reserves
in payment of any of the aforementioned contingencies;
provided, however, that at the expiration of such period
of time as FRM and Hubbard shall deem mutually advisable,
said escrow agent shall distribute the balance thereof
remaining in the manner set forth in subparagraph (iv)
hereof;
(iii) to outstanding advances pursuant to Section 5 hereof;
and
(iv) any balance remaining after the application in accordance
with the foregoing subparagraphs, equally to FRM and
Hubbard.
17. Purchases of Products Following Termination. In the event FRM elects
to terminate the Venture pursuant to Section 15 or Hubbard elects to terminate
the Venture pursuant to Section l5(iv), and Hubbard pursuant to Section 16(b) or
16(c) purchases the Facility upon
10
<PAGE>
termination of the Venture, then FRM agrees that for a period of five years from
and after termination of the Venture, both it and its Affiliates will purchase
from Hubbard, to the extent available from the Facility, their respective pet
food and fish food requirements consistent with purchases from the Facility made
prior to the termination of the Venture. The price for pet food and fish food
products purchased from Hubbard shall be an amount that will yield to Hubbard a
per ton profit substantially equivalent to the per ton profit then being
realized by Hubbard on sales to others of products manufactured at the Facility.
Hubbard shall provide invoices for all such pet food and fish food products and
such invoices shall be payable upon receipt thereof. In the event Hubbard elects
to terminate the Venture pursuant to Section 15 (other than pursuant to Section
l5(iv)), FRM and its Affiliates shall be free to purchase their pet food and
food requirements from any source.
18. Assignment. Except as expressly permitted by this Section 18,
neither party shall assign or encumber its interest in the Venture. A party may
assign its interest in the Venture to another entity in connection with the sale
of substantially all of the assets of a division or component of its business to
another entity provided that (i) such party remains liable for observance and
performance of its obligations under this Agreement; (ii) the financial
condition of the transferee is reasonably satisfactory to the other party; and
(iii) the transferee specifically agrees to be bound by the terms of this
Agreement.
19. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto, their successors and permitted assigns.
20. Further Assurances. The parties agree that they will perform such
other acts and execute and deliver such other documents as may be necessary or
appropriate from time to time to carry out the intent and purpose of this
Agreement. The parties recognize that issues may arise in connection with the
Venture which are not provided for in this Agreement and cannot be resolved by
the Management Committee. Subject to the early termination provisions of Section
15 hereof, the parties agree to negotiate in good faith the resolution of such
issues by amendment or modification of this Agreement in accordance with Section
21 hereof.
21. Waivers and Amendments. This Agreement may be amended or modified,
and the terms hereof may be waived, only by a written instrument executed by the
parties hereto or in the case of a waiver, by the party waiving compliance. The
failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement or in any other such instrument, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any breach, or a waiver of the breach of
any other term or covenant contained herein.
22. Arbitration. All unresolved disputes or controversies arising out of
or in relation to this Agreement shall be determined and settled by arbitration
at a mutually convenient location in the State of Georgia in accordance with the
Commercial Rules of the American Arbitration Association in effect at the time
of said controversy, and judgment upon any award rendered by the arbitrator(s)
may be entered in any court of competent jurisdiction. The expenses of the
arbitration shall be borne by the Venture, provided that each of FRM and Hubbard
shall pay for and bear the costs of its own experts, evidence, and legal
counsel. Whenever any action is required to be taken under this Agreement within
a specified period of time and the taking of such action is materially affected
by a
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<PAGE>
matter submitted to arbitration, such period shall automatically be extended for
ten (10) days plus the number of days that are taken for the determination of
that matter by the arbitrator(s). Nothing herein contained shall bar either
party from seeking equitable remedies in a court of competent jurisdiction.
23. Indemnification, Etc. The Venture shall indemnify and hold harmless
each of FRM and Hubbard for and against all claims, actions, suits and
proceedings asserted against such party in connection with the Venture or any
act or omission of such party in its capacity as a party to the Venture;
provided, however, that neither FRM nor Hubbard shall be indemnified and held
harmless for its gross negligence or willful misconduct.
24. Liability of Parties to Venture. Neither FRM nor Hubbard shall be
liable to the Venture or the other party for any act or omission of such party
in its capacity as a party to the Venture unless such act or omission
constitutes gross negligence or willful misconduct of such party.
25. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the State of Georgia.
26. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
transmitted by registered or certified U.S. Mail, return receipt requested and
postage prepaid, addressed to the other party at its address hereinafter set
forth or at such other address as the other party shall theretofore have
designated by notice in accordance with this Section 26:
Flint River Milis, Inc.
P.O. Box 278
Bainbridge, GA 31717
Attention: President
Hubbard Milling Company
424 North Riverfront Drive
Mankato, Minnesota 56001
Attention: President
The date of giving such notice shall be the date received, if served
personally, or the date on which the notice is delivered to the other party as
indicated by the return receipt.
27. Entire Agreement. This Agreement and the Exhibits hereto set forth
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements, arrangements
and understandings, written or oral, relating to the subject matter hereof.
28. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
29. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
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30. Announcements. Any public announcement of this Agreement or any of
the transactions contemplated by this Agreement, shall require the prior written
approval of both parties.
31. Future Expansion. Subject to the obligations of Hubbard contained in
Section 11(b) hereof, nothing herein shall be deemed to limit or otherwise
impair the right of Hubbard to expand its pet food and fish food business within
the Territory. If Hubbard in its sole discretion determines that it requires
additional manufacturing facilities within the Territory, then Hubbard shall be
free to build, purchase or otherwise acquire the use of such facilities;
provided that during the term of this Agreement, Hubbard shall afford FRM the
opportunity to participate equally with Hubbard in the ownership and/or
operation, as the case may be, of any facility for the manufacture of dry pet
foot or dry fish food. FRM shall have a reasonable time to determine whether to
participate with Hubbard in the ownership and/or operation of such facilities,
but in no case longer than thirty (30) days following disclosure to FRM of the
material terms relating thereto. if FRM declines to participate in any new
facility, Hubbard shall be free to purchase or otherwise acquire the use of such
facility for its own account, and to the extent Hubbard's ownership and/or
operation of the new facility conflict with its obligations under this
Agreement, the parties agree to amend this Agreement to pennit Hubbard to own
and/or operate the new facility without financial or other penalty. if the
parties cannot agree to any such amendments, Hubbard may terminate the Venture
and the affairs of the Venture shall be wound up in accordance with Sections 16
and 17 hereof. In the event that any new facility involves the expansion or
renovation of facilities owned by FRM, or the construction of new facilities on
property owned by FRM, and FRM elects to participate with Hubbard in such
expansion, renovation or construction, FRM will contribute any existing assets
to the new venture for $1.00, and any new investment shall be shared by Hubbard
and FRM on a 50/50 basis.
N WITNESS WHEREOF, the parties have executed this Agreement as of the
7th day of April, 1995.
FLINT RIVER MILLS, INC.
By [ILLEGIBLE] Paint
--------------------------------
Its President
-------------------------------
HUBBARD MILLNG COMPANY
By /s/ Paul R. Holzhueter
--------------------------------
Its Group Vice President
-------------------------------
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EXHIBIT A
DESCRIPTION OF FACILITY
All that tract or parcel of land lying and being in Land Lot 671 of the
4th District and 3rd Section, Bartow County Georgia, and being in the City of
Cartersville, as shown by survey prepared for Hubbard Milling Company by William
C. Smith, Georgia Registered Land Surveyor, plat dated December 21, 1983,
revised February 15, 1990, recorded in Plat Book 33 page 353, Clerk's Office,
Superior Court of Bartow County Georgia, for which reference is hereby made and
incorporated herein, property more particularly described as follows; BEGINNING
at an iron pin located at the intersection of the north right of way of
Swisher Street and the east right of way of River Road; thence along the east
right of way of River Road north 1 degree 29 minutes west 600.01 feet to an
iron pin; thence north 88 degrees 31 minutes 56 seconds east 398.63 feet to an
iron pin located at the centerline of CSX Railroad spur track; thence south 4
degrees 00 minutes east along the centerline of the CSX Railroad spur track
250.65 feet to a point; thence south 1 degree 31 minutes 45 seconds east 349.49
feet to a point located on the north right of way of Swisher Street; thence
along said right of way south 88 degrees 31 minutes west 409.92 feet to an iron
pin and the beginning point. Said tract containing 5.61l acres.
<PAGE>
EXHIBIT B
PRELIMINARY CONSTRUCTION AND
EQUIPMENT BUDGET
1. Packing Room Heaters $ 7,500
2. Mixing Grinding Reflow 88,000
3. Receiving System Magnet 5,000
4. Dryer Cyclone 50,000
5. Compressed Air Dryer 10,000
6. Extruder Water Surge Tank 7,500
7. Fines Handling System 15,000
8. Revamp Corn Grinding 10,OOO
9. Install Delta-Wye System 10,000
10. Warehouse Addition 260,000
11. Upgrade Coating System 50,000
12. Warehouse Racks 12,000
13. New Forklift 18,000
14. Semi-automatic Palletizer 130,000
15. Computerize Batching 34,000
16. Large Pack Scale and Hanger 88,000
-------
$795,000
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<PAGE>
EXHIBIT C
ADMINISTRATIVE EXPENSE
CATEGORIES
Customer Service
Purchasing
R & D/Quality
Tonnage Tax
Technicon Maintenance
Travel
Telephone
Kennel
Outside Research
Professional Fees
Laboratory Expense
Postage
Office Supplies
Accounting
Computer Service
Engineering
Airplane Expense (Actual)
Employee Relations
<PAGE>
8/6/93
STATE OF UNDERSTANDING
REGARDING PET FOOD VENTURE
1. Parties. The parties to this Agreement are Phelps Industries,
Inc., a Massachusetts corporation ("Phelps"), and Hubbard Milling Company, a
Minnesota corporation ("Hubbard").
2. Entire Agreement; Amendments and Modifications. This Agreement
sets forth the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior written documents or oral discussions
with respect to such subject matter. The parties anticipate that this Agreement
may be amended and modified from time to time. Such amendments and modifications
will be in writing and will be prepared and executed by the parties as
supplements to this Agreement.
3. Representations. Each party to this Agreement represents and
warrants to the other that it is authorized to enter into this Agreement. Each
party also represents and warrants to the other that there are no suits or
proceedings pending or threatened against it, other than litigation that is
immaterial to it and to the Venture contemplated hereby, and that such party has
all permits, licenses and authorizations, governmental or otherwise, necessary
to enter into this Agreement and to carry out the transactions contemplated
hereby.
4. Businesses of Phelps and Hubbard. Phelps is a consumer products
company with, among other things, a pet treat production plant in Rockford,
Illinois (the "Facility"), that manufactures a variety of pet treat products.
Hubbard is an agribusiness company with, among other things, interests in the
manufacturing, marketing and production of pet food at various plants located in
the United States.
5. The Venture.
(a) Nature of Venture. Hubbard and Phelps hereby enter into a
venture (the "Venture") whereby commencing July 28, 1993 Phelps will
manufacture and sell to Hubbard, and Hubbard will resell to customers
those pet treat products listed on Exhibit I hereto together with such
additional products, if any, as Hubbard and Phelps may from time to time
agree (collectively, the "Products").
(b) Offer of New Products to Venture. If during the term of this
Agreement a party shall propose to manufacture or market a pet treat
product which does not constitute a Product of the Venture but is the same
as or substantially similar to a Product of the Venture (other than a
product being manufactured or marketed on the date hereof in the United
States or Canada by such party, a corporate affiliate of such party or a
joint venture in which such party participates), such party shall first
offer in writing to the other to add such product as a Product of the
Venture. If within thirty
<PAGE>
(30) days of such offer, the other party responds in writing expressing
its desire to add such product as a Product of the Venture, then such
product shall become an additional Product of the Venture, and Phelps will
manufacture and sell to Hubbard, and Hubbard will resell to customers such
Product on the terms set forth in this Agreement, with such changes, if
any, as the parties may mutually agree. If the other party shall not have
so responded expressing its desire to add the product as a Product of the
Venture then the offering party shall be free to manufacture and market
such product without restriction and such product shall not be added as a
Product of the Venture.
6. Authorized Representatives.
(a) Designation. The parties agree that policy and management
decisions relating to the Venture shall be made an authorized
representative of each party (individually an "Authorized Representative",
and collectively the "Authorized Representatives"). Each party will
designate its Authorized Representative and one alternate who shall act in
the absence of such Authorized Representative. Until further notice, the
Authorized Representative of Phelps will be Vin Foley with Peter Bower as
alternate, and the Authorized Representative of Hubbard will be Tim Violet
with Michael Mitchell as alternate. Each party may, by written notice to
the other, designate a substitute representative or alternate.
(b) Matters Requiring Joint Approval. The following actions can be
taken only with the prior written approval of the Authorized
Representatives of both Hubbard and Phelps:
i. the addition of new Products to the Venture;
ii. the creation of or material changes to the design or any
other specifications with respect to the packaging of any Product;
iii. the establishment of or material changes to the
formulation or specification of any Product;
iv. the establishment of or material changes in quality
control standards with respect to the manufacturing of any Product;
v. approval of a request by Hubbard to establish credit
policies for the sale of Products materially inconsistent with those
in effect as of the date hereof for its sales of pet food
products generally; and
vi. such other matters as by terms of this Agreement require
the approval or agreement of the Authorized Representatives.
-2-
<PAGE>
7. Responsibilities of Phelps.
(a) Purchase of Packaging and Ingredients. Phelps shall be
responsible for purchasing or arranging for the purchase of all packaging
and ingredients for the Products; provided, however, that if the
Authorized Representatives shall from time to time determine that
packaging and ingredients can be purchased at a lower cost by Hubbard,
Hubbard shall purchase such packaging and ingredients for Phelps. Phelps
shall be responsible for payment when due of all invoices for packaging
and ingredients and shall reimburse Hubbard for the cost of any packaging
and ingredients purchased by Hubbard for Phelps hereunder. The cost of all
art, design, plates, development and related costs with respect to
packaging will be paid by Phelps, subject to the 50% reimbursement
obligation of Hubbard set forth in Section 8(g) hereof. In the event
Hubbard incurs any such costs, Phelps will reimburse Hubbard therefor upon
submission of a statement by Hubbard to Phelps. If Phelps purchases
reasonable quantities of packaging pursuant to this Section 7(a) but
through no fault of Phelps, such packaging thereafter becomes obsolete and
Phelps does not recover the cost thereof from a third party, then Hubbard
will reimburse Phelps for 50% of the cost of such obsolete packaging.
(b) Nature and Source of Ingredients. Phelps shall be responsible
for purchasing Product ingredients that meet the quality specifications
for such Product. Phelps shall have the right to specify sources of
ingredients, including premixes, that are used for the Products.
(c) Manufacturing of the Products. Subject to the provisions of
Section 10 hereof, Phelps will manufacture and package quality Products
for sale to Hubbard pursuant to the agreed upon formulations and
specifications and will use its best efforts to control its cost of
manufacturing consistent with the quality specifications for the Products.
Phelps will devote to such manufacturing all equipment owned or leased by
Phelps necessary for the production of the Products, and the services of
all Phelps employees necessary for such production.
(d) Storage of Ingredients and Finished Product. Phelps will
maintain and store an inventory of packaging and ingredients and an
inventory of finished products adequate to satisfy purchase orders.
(e) Shipment of Products. Following transmission of a customer order
to Phelps by Hubbard pursuant to Section 8(c) hereof, Phelps shall deliver
Products to a carrier at the Facility for shipment in accordance with such
customer order.
(f) Servicing the Customer. Phelps shall make every reasonable
effort to satisfy customer requests as to delivery,
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<PAGE>
customer pick-up and other related courtesies required to satisfy the
needs of customers.
(g) Quality Assurance. Phelps shall be responsible for performing
the following activities in accordance with quality control standards
established by the Authorized Representatives: (i) purchasing proper
ingredients; (ii) maintaining quality standards at the Facility and for
Products manufactured at the Facility, including implementing sanitation
policies and programs; and (iii) taking samples, inventory control and
maintaining plant production records necessary for quality control.
(h) Insurance. Phelps shall purchase products liability insurance
for Products of the Venture in an amount not less than $3,000,000 with
Phelps and Hubbard both named as insured parties thereunder. Such
insurance shall be in addition to such products liability insurance, if
any, as Phelps from time to time maintains for other products manufactured
by Phelps.
(i) Books and Records. Phelps shall maintain books and records with
respect to its activities in connection with the Venture and will make
such books and records available to the Authorized Representatives and to
Hubbard on reasonable notice and during normal business hours for the
purpose of establishing and from time to time adjusting the Transfer Price
for Products. Such books and records shall be maintained in accordance
with generally accepted accounting principles.
(j) Reimbursement of Certain Expenses. Phelps shall reimburse
Hubbard for 50% of (i) the cost of Product registrations paid by Hubbard
in accordance with Section 8(e) hereof, and (ii) such other direct
expenses of Hubbard from time to time approved by the Authorized
Representatives incurred by Hubbard in connection with the Venture but
not included in Hubbard's selling cost in establishing the anticipated net
profit pursuant to Section 9(b) hereof.
8. Responsibilities of Hubbard.
(a) Sales and Marketing. Hubbard shall be responsible for reselling
in the United States and Canada (the "Territory") Products manufactured by
Phelps and sold to Hubbard. Hubbard will have the exclusive right to sell
the Products within the Territory, except as otherwise expressly provided
in Exhibit II hereto. In consideration of such exclusive right, Hubbard
(i) except as provided in Section 5(b) and Section 10 hereof, shall
purchase its requirements for Products and pet treat products that are the
same as or substantially similar to the Products from Phelps to the extent
such requirements can be reasonably satisfied by Phelps, and (ii) shall
use reasonable efforts and endeavor in good faith to generate sales of
Products within the Territory.
-4-
<PAGE>
A sale of Products by Hubbard shall be deemed to be within the Territory
if the principal customer contact is within the Territory, notwithstanding
that the customer may resell some portion of the Product outside the
Territory. Conversely, a sale of Products by Phelps shall be deemed to be
outside the Territory if the principal customer contact is outside the
Territory, notwithstanding that the customer may resell some portion of
the Product within the Territory.
(b) Quality Assurance/Production Assistance. Hubbard will provide
consulting services to Phelps with respect to quality assurance and
production as from time to time reasonably requested by Phelps. Phelps
shall pay consulting fees for such services in such amount as from time to
time agreed by the parties.
(c) Customer Orders, Accounts Receivable/Invoices. Hubbard shall be
responsible for maintaining an order desk in Mankato, Minnesota to which
all customer orders for Products shall be directed. Orders will be
transmitted daily by Hubbard to Phelps at such location as the Phelps
Authorized Representative shall from time to time specify. Hubbard will
process all customer invoices, collect accounts receivable and carry such
receivables until collected or written off as uncollectible.
(d) New Customer Development. Hubbard shall be responsible for
developing customers. Hubbard shall disclose new customer prospects to
Phelps, and Phelps personnel shall have the option to accompany Hubbard
personnel on new customer calls.
(e) Product Registrations. Hubbard will be responsible for all
governmental registrations for Products in the United States and Canada
and will pay all costs with respect thereto, subject to the 50%
reimbursement obligation of Phelps contained in Section 7(j) hereof.
(f) Books and Records. Hubbard shall maintain books and records with
respect to its activities in connection with the Venture and will make
such books and records available to the Authorized Representatives and to
Phelps on reasonable notice and during normal business hours for the
purpose of establishing and from time to time adjusting the Transfer Price
for Products. Such books and records shall be maintained in accordance
with generally accepted accounting principles.
(g) Reimbursement of Certain Expenses. Hubbard shall reimburse
Phelps for 50% of (i) the cost of all art, design, plates, development and
related costs with respect to packaging paid by Phelps in accordance with
Section 7(a) hereof, and (ii) such other direct expenses of Phelps from
time to time approved by the Authorized Representatives
-5-
<PAGE>
incurred by Phelps in connection with the Venture but not recoverable
through the Transfer Price, as defined in Section 9(b) hereof.
9. Sale of Products by Phelps to Hubbard; Accounts Receivable from
Resale of Products by Hubbard.
(a) Generally. Phelps shall sell to Hubbard, and Hubbard shall
purchase from Phelps, Products when and as delivered by Phelps to a
carrier for shipment in accordance with Section 7(e) hereof. The price for
such Products shall be the Transfer Price (as hereinafter defined). Phelps
shall invoice Hubbard for the Transfer Price for Products not more often
than weekly, and Hubbard shall pay each such invoice within fifteen (15)
days of receipt thereof by Hubbard.
(b) Transfer Price. The Transfer Price for any Product shall be
equal to the sum of the cost of ingredients, packaging cost, production
cost, freight and 50% of the anticipated net profit, all determined in
accordance with this Section 9(b) and Exhibit III hereto:
i. Cost of Ingredients. The cost of ingredients will be
calculated by multiplying the pounds of each ingredient used
(including a shrink factor as provided in Exhibit III hereto) by the
ingredient's cost per pound. Each ingredient's cost will be
established on a quarterly basis and shall be the market price of
the ingredient, F.O.B. the Facility, on the Wednesday of the month
that falls between the 4th and 10th of the month prior to
commencement of the calendar quarter, unless otherwise agreed by the
Authorized Representatives. Market price of an ingredient shall be
the actual lowest cost that an ingredient can be purchased for at
the time of the quarterly pricing in the quantities required by
Phelps.
ii. Packaging Cost. The packaging cost will be calculated
using the actual cost of the packaging, F.O.B. the Facility, less
all applicable rebates, credits or discounts. A shrink factor shall
be included in the determination of actual cost as provided in
Exhibit III hereto.
iii. Production Cost. The production cost shall include direct
labor costs of production employees, a production supervision charge
for supervisory employees, utilities, quality assurance costs
incurred pursuant to Section 7(g) hereof, product liability
insurance costs incurred pursuant to Section 7(h) hereof, and such
other direct manufacturing expenses as are identified in Exhibit III
hereto or otherwise approved by the Authorized Representatives, but
excluding depreciation.
-6-
<PAGE>
iv. Freight. Freight shall include any costs actually incurred
by Phelps for delivery of the Product.
v. Anticipated Net Profit. The anticipated net profit for each
Product shall be an amount per unit from time to time approved by
the Authorized Representatives as the excess per unit of (A) the
estimated sales price by Hubbard to the customer over (B) the sum
of the estimated Transfer Price (excluding anticipated net profit)
and Hubbard's estimated selling cost. Hubbard's selling cost shall
consist of the following expenses incurred by Hubbard: all marketing
and sales expenses, travel, promotional costs, discounts,
advertising, freight, and other expenses directly related to selling
the Product as are identified in Exhibit IV hereto or otherwise
approved by the Authorized Representatives. The Authorized
Representatives shall meet periodically, not less frequently than
quarterly, to review and adjust as appropriate the anticipated net
profit for each Product.
(c) Periodic Adjustment of Transfer Price. Upon the completion of
each calendar quarter, the Authorized Representatives shall review the
Transfer Price (including without limitation anticipated net profit and
Hubbard's selling costs taken into account in establishing the anticipated
net profit) for each Product relative to the actual costs of the parties
incurred in connection with the manufacture and sale of Products and the
actual sales price of Products. Based upon such review, the Authorized
Representatives shall from time to time adjust the Transfer Price in order
to assure that the parties generally recover their respective costs in
connection with the manufacture and sale of Products and generally derive
an equal profit from their activities in connection with the Venture.
(d) Title to Inventory; Risk of Loss. Phelps shall have title to and
bear the risk of loss with respect to all inventories of Product raw
materials, packaging, work in process and finished goods except Products
delivered to a carrier for shipment in accordance with Section 7(e)
hereof. Upon delivery of Products to a carrier for shipment in accordance
with Section 7(e) hereof, title to and risk of loss (as between Phelps and
Hubbard) with respect to such Products shall shift from Phelps to Hubbard.
(e) Accounts Receivable. Accounts receivable arising from the sale
of Products by Hubbard to customers shall be and remain the property of
Hubbard. However, in consideration of 50% of the anticipated net profit
of Hubbard from such sale being included in the Transfer Price from Phelps
to Hubbard in accordance with Section 9(b) hereof, Phelps agrees to
reimburse Hubbard for 50% of (i) all adjustments to accounts receivable
after the date of invoice arising from claims made
-7-
<PAGE>
by customers with respect to the Products, and (ii) all accounts
receivable for Products written off by Hubbard as uncollectible. Hubbard
shall submit to Phelps written statements for such reimbursement and
Phelps shall pay such statements within thirty (30) days of the date
thereof. Unless otherwise approved by the Authorized Representatives,
Hubbard shall establish credit policies for the sale of Products
consistent with those from time to time in effect for its sales of pet
food products generally. Hubbard shall review its credit policies with
Phelps from time to time upon the request of Phelps.
10. Projected Requirements. During the first sixty (60) days of
each calendar quarter Hubbard will furnish Phelps a good faith estimate of its
requirements for the delivery of Products during the next calendar quarter, and
Phelps shall promptly inform Hubbard of its acceptance of such requirements (and
any failure by Phelps to furnish any notice to Hubbard within fifteen (15) days
after the receipt by Phelps of such estimate shall be deemed acceptance) or of
any difficulties Phelps anticipates in meeting such requirements. In the event
any such difficulties are identified by Phelps, the Authorized Representatives
will meet promptly to establish mutually agreeable delivery requirements.
Although Phelps will thereafter use reasonable efforts to meet any requests for
delivery of Products in excess of the amounts agreed upon, Phelps shall have no
liability to Hubbard for the failure of Phelps to deliver such excess Products
and Hubbard may purchase such excess Products from other sources.
11. Trademarks, Etc. Except as set forth below, all existing and new
names, trademarks, patents, copyrights, and licenses of each party shall remain
its property, and the other party shall not acquire any right, title, or
interest therein by reason of this Agreement or by reason of the use of such
trademarks, patents, copyrights, licenses, or other registrations for the sale
of Products under this Agreement. Notwithstanding the foregoing, new tradenames
or trademarks that are developed during the term of this Agreement solely for
use in the sale of Products in the Territory ("New Product Marks") shall be
registered by Hubbard in Hubbard's name. If upon termination of this Agreement
either party wishes to continue to use a New Product Mark, it shall pay the
other party 50% of the value thereof, as mutually agreed by the parties, and
such New Product Mark shall be registered in the name of the party acquiring the
mark.
12. Trade Secrets, Etc. Both parties agree to a full and open
exchange of all information relating to the Products including, but, not limited
to formulations, specifications, customer lists, product know-how, marketing
plans, manufacturing and process technology, customer credit files, trade
secrets, etc. (hereafter referred to as "Proprietary Information"). During the
term of this Agreement, each party agrees that it will not use any Proprietary
Information received by it from the other except as required to carry out its
responsibilities hereunder. Upon
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<PAGE>
termination of the Venture, each party will be free to use its Proprietary
Information as it shall see fit, but neither party will use any Proprietary
Information of the other for any purpose. Proprietary Information developed by
the parties in furtherance of this Venture shall be the property of both parties
and may be used by either party in its own separate business activities, both
during the term of the Venture and upon termination.
13. Employees. Employees of Phelps or Hubbard who perform services
in connection with the Venture shall remain employees of their respective
employer which shall remain solely responsible for establishing the terms and
conditions of their employment, including hiring, discipline and discharge.
Neither Phelps nor Hubbard (or any of their respective employees) shall have any
responsibility for the development or approval of personnel policies with
respect to the employees of the other; provided, however, that any increase in
the compensation of employees who perform services in connection with the
Venture and whose compensation is included in the pricing of Products will be
excluded from Product pricing unless (i) such increase is in the ordinary course
of business consistent with the employer's past practices, or (ii) such increase
is approved by the Authorized Representatives. Phelps and Hubbard shall remain
solely liability for the payment of compensation or any employment benefits to
their respective employees and for the payment of any taxes, charges or
assessments payable with respect to their respective employees, including
without limitation any such payments made to governmental agencies or bodies.
Neither the Venture nor Hubbard shall be considered a successor employer of
Phelps' employees, and neither the Venture nor Phelps shall be considered a
successor employer of Hubbard's employees.
14. Reputations of Parties. Phelps and Hubbard both cherish their
reputations in the world at large and internally. Both parties agree they will
use every reasonable means to respect and enhance those reputations.
15. Status. The Venture is a contractual arrangement between the
parties for the manufacture and sale of goods and does not constitute a separate
entity.
16. No Assumption of Liabilities, Etc. Neither Hubbard nor Phelps
shall, by virtue of this Agreement be deemed to have assumed any liability of
any kind or nature whatsoever arising with respect to activities or operations
of the other, including without limitation employee compensation, workers
compensation or employment-related claims, environmental matters, taxes or other
governmental charges. Neither party to this Agreement shall be deemed to have
become, as a result of this Agreement, the owner or operator of any facility of
the other party.
17. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
transmitted by registered or
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<PAGE>
certified U.S. Mail, return receipt requested and postage prepaid, or by
facsimile transmission with receipt confirmed, addressed to the other party at
its address hereinafter set forth or at such other address as the other party
shall theretofore have designated by notice in accordance with this Section 17.
Phelps Industries, Inc.
122 Quincy Shore Drive
Quincy, Massachusetts 02170
Attention: President
Hubbard Milling Company
424 North Riverfront Drive
P.O. Box 8500
Mankato, Minnesota 56002-8500
Attention: President
The date of giving such notice shall be the date received, if served personally,
or the date on which the notice is delivered to the other party as indicated by
the return receipt.
18. Phelps' and Hubbard's Other Operations. It is understood that
both Phelps and Hubbard conduct businesses similar to the contemplated business
of the Venture, both within and outside the Territory (the "Other Activities").
It is agreed that nothing in this Agreement is intended to limit the conduct by
either party of its Other Activities, except as expressly set forth herein, and
neither party shall include, directly or indirectly, as costs of its activities
related to the Venture any costs arising out of any of its Other Activities.
19. No Hiring of Employees. During the term of this Agreement and
for a period of two years thereafter, neither Phelps nor Hubbard will, without
the prior written consent of the other, hire or attempt to hire anyone who is at
the time or was within the period of one year prior to such time an employee of
the other.
20. Term.
The term of this Agreement is twenty-five (25) years unless
terminated earlier in accordance with this Section 20. This Agreement shall
terminate prior to expiration of the stated term, as follows:
i. This Agreement may be terminated at any time with the
mutual written consent of Phelps and Hubbard.
ii. This Agreement may be terminated by either party upon not
less than eighteen (18) months prior written notice to the other
party of its election to terminate the Agreement.
iii. This Agreement may be terminated by either party upon
written notice of its election to terminate
-10-
<PAGE>
the Agreement following the institution of any bankruptcy or
insolvency proceedings by or against the other party (whether
voluntary or involuntary, and whether under federal or state law),
the dissolution, liquidation or winding up of either party or the
assignment by the other party of any significant portion of its
property or assets for the benefit of creditors or claimants.
iv. This Agreement may be terminated by either party upon
written notice of its election to terminate the Agreement if there
is a willful breach by the other party of a material term of this
Agreement and such breach has not been cured within sixty (60) days
after written notice of such breach.
v. This Agreement may be terminated by either the remaining
party or the permitted assignee of the other party upon not less
than twelve (12) months written notice to the remaining party or
such assignee, as the case may be, following the assignment of a
party's interest in the Venture pursuant to Section 23 hereof;
provided, however, that such notice of termination may not be given
more than three (3) months after the effective date of such
assignment.
vi. This Agreement shall terminate six (6) months after the
assignment of a party's interest in the Agreement pursuant to
Section 23 hereof, or on such earlier date after the assignment as
specified by the non-assigning party upon not less than thirty (30)
days prior written notice to the assigning party and its assignee,
if (A) prior to such assignment, the assigning party requested in
writing that the other party consent to the assignment, such consent
not to be unreasonable withheld, and (B) the other party failed to
consent in writing to such assignment within thirty (30) days of
such request; provided, however, that nothing herein contained shall
require a party to request such consent prior to an assignment of
its interest in the Agreement pursuant to Section 23 hereof.
Following any notice, of termination of the Agreement pursuant to this Section
20, and upon any such termination, the parties shall endeavor in good faith to
effect an orderly winding up of the manufacture and sale of Products under the
Agreement. Nothing contained in this Section 20 shall affect or impair any
rights or obligations arising prior to or at the time of the termination of this
Agreement, or which may arise by an event causing the termination of this
Agreement.
21. Certain Payments of Profits After Termination. If the term of
this Agreement is terminated by either party pursuant to Section 20 (ii) or
Section 20(v), then for a period of three (3) years after the effective date
of such termination the party giving
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<PAGE>
notice of termination shall pay to the other 50% of its profit, computed on the
same basis as anticipated net profit in accordance with Section 9(b) hereof, as
nearly as practicable under the circumstances then existing (recognizing that
such party may then be both manufacturing and selling Products), with respect to
all sales by it of Products within the Territory to entities that were customers
of the Venture at the time such notice is given; provided, however, that a party
terminating this Agreement pursuant to Section 20(v) as the result of the other
party assigning its interest in the Agreement shall be required to share profits
pursuant to this Section 21 only if (i) prior to the assignment of its interest
in the Agreement the assigning party requested in writing the consent of the
terminating party to such assignment, which consent shall not be unreasonably
withheld, (ii) the terminating party granted such consent in writing within
thirty (30) days of such request, and (iii) the terminating party thereafter
terminates the Agreement pursuant to Section 20(v) as a result of such
assignment.
22. Licenses. Nothing herein shall constitute a license by Hubbard
for Phelps to use, or a license by Phelps for Hubbard to use, the names,
trademarks, patents, copyrights, licenses and other registrations or
specifications made available to the Venture by such party.
23. Assignment. Except as expressly permitted by this Section 23,
neither party shall assign or encumber its interest in the Venture. For purposes
of this Agreement, the sale or transfer of 50% or more of the common stock of a
party in a single transaction or integrated series of transactions (a "Change of
Control") shall be deemed to be an assignment by such party of its interest in
the Venture. A party's interest in the Venture may be assigned to another entity
in connection with the sale of such party's business substantially as a whole or
substantially all of the assets of a division or component of such party's
business to another entity, or as a result of a Change of Control, provided
that, in the case of a sale by such party of substantially all of its business
or a division or component thereof, (i) such party remains liable for observance
and performance of its obligations under this Agreement; (ii) the financial
condition of the transferee is reasonably satisfactory to the other party; and
(iii) the transferee specifically agrees to be bound by the terms of this
Agreement. Each and every provision in this Agreement shall survive such
assignment or transfer and remain in full force and effect.
24. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties hereto, their successors and permitted assigns.
25. Other Instruments, Etc. The parties agree that they will perform
all other acts and execute and deliver such other documents as may be necessary
or appropriate to carry out the intent and purpose of this Agreement. The
parties recognize that
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<PAGE>
this is a long term Agreement and that issues will arise from time to time in
the course of the Venture requiring further negotiations and agreement of the
parties. The parties agree to negotiate in good faith all such issues as they
arise.
26. Arbitration. All unresolved disputes or controversies arising
out of or in relation to this Agreement shall be determined and settled by
arbitration at a mutually convenient location in accordance with the commercial
Rules of the American Arbitration Association in effect at the time of said
controversy, and judgment upon any award rendered by the arbitrator(s) may be
entered in any court of competent jurisdiction. The expenses of the arbitration
shall be divided equally between the parties, provided that each of Phelps and
Hubbard shall pay for and bear the costs of its own experts, evidence, and legal
counsel. Whenever any action is required to be taken under this Agreement within
a specified period of time and the taking of such action is materially affected
by a matter submitted to arbitration, such period shall automatically be
extended for the number of days plus ten (10) that are taken for the
determination of that matter by the arbitrator(s).
27. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the State of Minnesota and Phelps hereby consents to the
jurisdiction of the State of Minnesota.
28. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the 10th day of August, 1993.
PHELPS INDUSTRIES, INC.
By /s/ Richard J. Phelps
--------------------------
Richard J. Phelps
President
HUBBARD MILLING COMPANY
By /s/ Timothy C. Violet
--------------------------
Timothy C. Violet
Vice President, Pet Food
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<PAGE>
EXHIBIT I
PET TREAT PRODUCTS
Round Jerky Sticks (formulated and produced as a clone to Pupperoni(R))
Flat Jerky Strips (formulated and produced as a clone of Hartz(R)
Jerky Dog Snacks)
(See attached specification sheets)
<PAGE>
----------------------------------------
A Pupperoni Style Product
----------------------------------------
The Market: Pupperoni is the second largest brand in the Jerky
category: 22% dollar increase in 91-92 makes it the
fastest growing dog treat brand.
Proposed Product: 12/2.8 oz. Jerky Stick Snacks in beef flavor. 12
sticks to the 2.8 oz. package, 3/8" diameter x 4 3/4"
length. Other flavors can be added.
Positioning: A quality jerky stick item sold everyday at
approximately 33% below the national brand at
attractive gross margins.
Ingredients: Meat By Products, Soy Grits, Liver, Sugar, Beef,
Dextrose, Glycerin, Spices, Hydrolized Plant Protein,
Natural Smoke Flavor, Potassium Sorbate (A
Preservative), Monosodium Glutamate, Sodium Nitrate
(for color retention)
Guaranteed Analysis: Crude Protein Minimum 28.0%, Crude Fat Minimum 5.0%,
Crude Fiber Maximum 2.02%, Moisture Maximum 24.0%
Shelf Life: 8 months. Code dates will reflect customer policy.
Acceptance: Equal to Pupperoni in kennel tests (results on
request).
Promotional Support: Planned program to create attractive special
pricing.
Packaging: 100 guage OPP (Oriented Polyproalene) laminated with
12 pound polyethelene. Laminated to 48 guage
metalized [illegible] polyester.
Master Case: Self contained corrugated shipper caddy.
Packaging Design: Maximum six color. Flat or line artwork should be
used. Process printing would require additional cost.
Product Specification:
Case Dimensions: 81/2" (L) x 5" (W) x 9" (D)
Case Cube: .22 cubic feet
Gross weight: 3.6 lbs.
Cases Per Pallet: 200
Pallet Pattern: 40 cases/[illegible] -5/high
Minimum Purchase: 1 pallet
<PAGE>
----------------------------------------
A Private Label Jerky Program
3 Oz. Foil Laminate Pouch
----------------------------------------
Specification Sheet
The Market: Over 30% of dog treat unit purchases are jerky items.
Jerky represents over 21% of all dog treat retail
dollars-second to biscuits.
Proposed Product: 12/3 oz. Jerky in beef and bacon flavors, typically
14-15 sticks to each 3 oz. package. Liver and Chicken
flavors also available.
Positioning: A quality jerky product sold every day at 35% below
the national brand prices at attractive gross profit
margins.
Ingredients: Meat by-products, soy grits, dextrose, beef (or liver
or chicken or bacon), salt, spice, hydrolyzed
vegetable proteins, natural and artificial flavor,
potassium sorbate (a preservative), natural smoke
flavor, monosodium glutamate, vegetable oil,
tricalcium phosphate, sodium nitrate, artificial
color.
Guaranteed Analysis: Crude protein minimum 37%, crude fat minimum 10%,
crude fiber minimum 3%, moisture maximum 20%.
Shelf Life: 8 months. Code dates will reflect customer policy.
Acceptance: Out performs Jerky Treats in kennel tests (results on
request).
Promotional Support: Planned program to create attractive special pricing.
Packaging: 100 guage OPP (Oriented Polypropelene) laminated with
12 pound polyethelene. Laminated to 48 guage
metalized scalable polyester.
Master Case: Self contained corrugated shipper caddy.
Packaging Design: Maximum six color. Flat or line artwork should be
used. Process printing would require additional cost.
Product Specification:
Case Dimensions: 81/2" (L) x 5" (W) x 9" (D)
Case Cube: .22 cubic feet
Gross weight: 3.75 lbs.
Cases Per Pallet: 200
Pallet Pattern: 40 cases/[illegible] -5/high
Minimum Purchase: 1 pallet
TERMS: 2% 10 days cash discount, net 11 days
PRODUCT LIABILITY: $2 million bodily injury/property damage/general
liability (Certificate Available on Request)
<PAGE>
EXHIBIT II
1. All sales by Phelps of the Products outside of the territory of the United
States and Canada are excluded from this Agreement.
2. All sales by Phelps under the Phelps-owned brand name "Glad-Wags" and
other Phelps-owned brand names existing or hereinafter registered are
excluded from this Agreement.
3. All sales by Phelps to Nestle of the Products are excluded from this
Agreement, and Phelps will handle this account directly until such time as
the Authorized Representatives deem there to be a customer advantage for
this account to be covered by the Agreement. Until such time as this
account becomes covered by the Agreement, all costs and profits of the
account will be retained by Phelps.
4. All sales by Phelps to Vons' Giant and Eagle of the Products are excluded
from this Agreement, and Phelps will handle these accounts directly until
such time as the Authorized Representatives deem there to be a customer
advantage for these accounts to be covered by the Agreement. Until such
time as these accounts becomes covered by the Agreement, all costs and
profits of these accounts will be retained by Phelps.
5. All sales by Phelps to Pet Life of the Products are excluded from this
Agreement. No additional sales will be made to Pet Life without agreement
of Authorized Representatives.
6. All sales by Phelps to Kmart, Stop 'N Shop, Foodtown, Shaw's, Weis
Markets, A & P, SGC, WFC, Safeway, Target, Golub, ConAgra and Hartz of the
Products are excluded from this Agreement during the initial transition
period of 12 months from the date of the commencement of the Venture.
During this transition, Phelps will handle these accounts directly, and
costs and profits of the accounts will be retained by Phelps. After the
transition period, these accounts will become subject to the Agreement,
with Phelps manufacturing the Products for sale to Hubbard and resale by
Hubbard to the accounts. All other terms and conditions of the Agreement
apply to these accounts after the transition period with the exception of
the profit percentages specified in Section 14 which shall be 80% Phelps
and 20% Hubbard through June 30, 1997, after which time the 50% split
shall apply on these accounts.
<PAGE>
Joint Venture
Hubbard Milling Cornpany/Phe1ps Industries, Inc.
Strips & Sticks
Exhibit III
3 Oz. 2.8 Oz.
P.L. Jerky P.L. Jerky
Strips Sticks
---------- ----------
Meat & Additives
Sticks { Assumed Wgt - 7.1 grams
{ X 156 Pos (2.45 lbs Case) 1.2005
Sticks { Assumed Wgt - 7.6 grams
{ x 132 Pos (2.22 lbs. Case) 1.0785
Packaging
Film 12x.05 x 112% .6720 .6720} No
Master (.20 x 1.025) .2153 .2153} Actual's
Cards (.0081 x 1.025) x 12 .0996 .0996} Based On
------- -------
Total Packaging: .9869 .9869} Strips
------- -------
Total Materials: 2.1874 2.0654
Direct Labor & Fringes
Processing .2236 .356
Packing .2766 .495
------- -------
Sub Total: .5002 .851
Add: 54% Fringes .2701 .459
------- -------
Total Labor & Fringes: .7703 1.310
Manufacturing Overhead
.0073 Per Pos 1.1388 0.9636
------- -------
Total Cost FOB, Rockford 4.0965 4.339
<PAGE>
Exhibit III
Notes
Meat & Ingredients (Jerky Strips 12/3 Oz. Case)
Approx Batch Gross Weight: 393 lbs
Approx Dry Packed Yeild: 165 lbs (41.98%)
Avg Cost Ingredients in Batch: 81.00
Avg Cost Per Dry Pound: 0.49 (cents)
Avg Weight 3 Oz. Case of 12: 2.45 lbs
Meat & Ingredients (Jerky Sticks 12/2.8 Oz. Case)
Approx Batch Gross Weight: 430 lbs
Approx Dry Packed Yeild: 220 lbs (51%)
Avg Cost Ingredients in Batch: 106.88
Avg Cost Per Dry Pound: 0.4858 (cents)
Avg Weight 2.8 Oz. Case of 12: 2.22 lbs
Packaging (12/3 Oz. Strips & 12/2.8 Oz. Sticks)
Prices will vary with quantity and complexity of film etc. Costs on Exhibit III
are average costs for private label. Film includes scrap factor of 12%. Master
cartons and cards include scrap factor of 2.5%.
Direct Labor & Fringes
Costs on Exhibit III represents average cost for five month period ended
5/28/93. Cost can vary slightly from month to month depending on volume
throughput.
Manufacturing Overhead
Attached is a list of accounts included in this cost category.
<PAGE>
Manufacturing Overheads - Chart Of Accounts
Exhibit III
Indirect Labor (Line Supervisor & Maintenance Man)
Plant Accountant
Plant Manager
Office Person
Fringes On Above (54% for indirect labor and 19% of all others)
Plant Manager Travel
Employee Gratuities
Rent
Building Repairs
Manufacturing Supplies
Depreciation Expense
Insurance Expense
Real Estate Taxes
Telephone Expense
Water Expense
Electric Expense
Gas Expense
Repair - M&E
Uniform Rentals
Misc. Manufacturing Exp
UPS & Federal Express Exp
Truck Lease Expense
<PAGE>
EXHIBIT IV
Hubbard's Selling Costs
Allocation 12/3 oz. Case
Method Amount/Case
--------------------- ------------
Freight (Hubbard to Customer) *Actual
Off-Invoice Allowances and Incentives *Actual Program
Brokerage *Actual
Cash Discounts Calculated 2% of Sale $.17
Registration and Tonnage Taxes *Actual
Selling/Advertising Calculated $.25
Warehousing Costs Calculated $.04
* "Actual" will be established after the program is agreed on between
the venture and the customer. This will be outlined on individual
margin sheet by account.
<PAGE>
EXECUTION COPY
================================================================================
9-3/4% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
dated May 16, 1997
among
WINDY HILL PET FOOD ACQUISITION CO.,
CHASE SECURITIES INC.
and
CREDIT SUISSE FIRST BOSTON CORPORATION
================================================================================
<PAGE>
$120,000,000
9-3/4% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
May 16, 1997
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
c/o Chase Securities Inc.
270 Park Avenue, 4th Floor
New York, New York 10017
Dear Ladies and Gentlemen:
WINDY HILL PET FOOD COMPANY, INC. (as more fully defined below, the
"Company") proposes to issue and sell to CHASE SECURITIES INC. and CREDIT SUISSE
FIRST BOSTON CORPORATION (the "Initial Purchasers") $120,000,000 aggregate
principal amount of its 9-3/4% Senior Subordinated Notes due 2007 (the "Notes").
The Notes will be issued pursuant to an Indenture to be dated as of May 21, 1997
(the "Indenture"), between the Company and Wilmington Trust Company, as trustee
(the "Trustee"). This is to confirm the agreement concerning the purchase of the
Notes from the Company by the Initial Purchasers. For all purposes of this
Agreement, the term "Company" shall mean, as the context requires and except as
noted below, (i) prior to the consummation of the Transaction (as defined in the
Offering Memorandum), Windy Hill Pet Food Acquisition Co., a Minnesota
corporation ("Acquisition Co."), and (ii) upon consummation of the Transaction,
the surviving corporation (whose name shall be changed to Windy Hill Pet Food
Company, Inc.) after the merger of Acquisition Co. and the pet food business of
Hubbard Milling Company, a Minnesota corporation, and the contribution of the
assets and liabilities of Windy Hill Pet Food Company, Inc., a Delaware
corporation, to the surviving entity, as described in the Offering Memorandum.
For purposes of Section 1 of this Agreement, the term "Company", used as of the
date hereof, shall include the pet food business of Hubbard Milling Company and
Windy Hill Pet Food Company, Inc., a Delaware corporation.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on an exemption therefrom. The Company has prepared a
preliminary offering memorandum, dated May 2, 1997 (the "preliminary offering
memorandum"), and will prepare an offering memorandum dated the date hereof
(such offering memorandum, in the form furnished to the Initial Purchasers for
use in connection with the offering of the Notes, the "Offering Memorandum"),
setting forth information concerning the Company and the Notes. Copies of the
preliminary offering memorandum have been, and copies of the Offering Memorandum
will be delivered by the Company to the Initial Purchasers
<PAGE>
2
pursuant to the terms of this Agreement. Any references herein to the
preliminary offering memorandum and the Offering Memorandum shall be deemed to
include all amendments and supplements thereto and all documents incorporated
therein by reference. The Company hereby confirms that it has authorized the use
of the preliminary offering memorandum and the Offering Memorandum in connection
with the offering and resale of the Notes by the Initial Purchasers in
accordance with Section 3 hereof.
The Initial Purchasers and their direct and indirect transferees
will be entitled to the benefits of the Exchange and Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company will agree to
use its best efforts to commence an offer to exchange the Notes for securities
which have been registered under the Securities Act (the "Exchange Notes" and,
together with the Notes, the "Securities"), and which are identical in all
material respects to the Notes (except with respect to transfer restrictions),
or to cause a shelf registration statement to become effective under the
Securities Act and to remain effective for the period designated in such
Registration Rights Agreement.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to and agrees with the Initial Purchasers that:
(a) Each of the preliminary offering memorandum and the Offering
Memorandum, as of its respective date, contains all the information that, if
requested by a prospective purchaser, would be required to be provided pursuant
to Rule 144A(d)(4) under the Securities Act. Each of the preliminary offering
memorandum and the Offering Memorandum, as of its date did not, and the Offering
Memorandum as of the Closing Date (as defined below), will not, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading; provided, however, that
the Company makes no representation or warranty as to information contained in
or omitted from the preliminary offering memorandum or the Offering Memorandum,
as amended or supplemented, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Initial Purchasers
specifically for use therein (the "Initial Purchasers' Information"). The
parties acknowledge and agree that the Initial Purchasers' Information consists
solely of the statements relating to the Initial Purchasers in the second
sentence of the third paragraph and the third sentence of the fourth paragraph
in its entirety under the heading "Plan of Distribution" in the Offering
Memorandum.
(b) It is not required by applicable law or regulation in connection
with the issuance and sale of the Notes to the Initial Purchasers and the offer,
resale and delivery of the Notes in the manner contemplated by this Agreement
and the Offering Memorandum, to register the Notes under the Securities Act or
to qualify the Indenture in respect of the Notes under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act").
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Minnesota, is
duly qualified to
<PAGE>
3
do business and is in good standing as a foreign corporation in each
jurisdiction in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to so qualify
would not have, singularly or in the aggregate, a material adverse effect on the
condition (financial or otherwise), results of operations, business or prospects
of the Company (a "Material Adverse Effect"), and has the corporate power and
authority necessary to own or hold its respective properties and to conduct the
businesses in which it is engaged as described in the Offering Memorandum. As of
the Closing Date, upon the consummation of the AF Sale (as defined in the
Offering Memorandum), the Company will not have any subsidiaries.
(d) On the Closing Date the Company will have an authorized
capitalization of 4,500 shares of common stock all of which are issued and
outstanding, and all of the issued shares of capital stock of the Company will
have been duly and validly authorized and issued, will be fully paid and
non-assessable.
(e) The Company has the corporate right, power and authority to
execute and deliver this Agreement, the Indenture, the Registration Rights
Agreement and the Notes (collectively, the "Transaction Documents") and to
perform its obligations hereunder and thereunder; and all corporate action
required to be taken for the due and proper authorization, execution and
delivery of the Transaction Documents and the consummation of the transactions
contemplated thereby have been duly and validly taken.
(f) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and legally binding agreement of the
Company.
(g) The Registration Rights Agreement has been duly authorized by
the Company, and when duly executed and delivered by the Company on the Closing
Date, will constitute a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) or an implied covenant of good faith and fair dealing.
(h) The Indenture has been duly authorized by the Company, and when
duly executed and delivered by the Company and the Trustee on the Closing Date,
will constitute a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing. At the Closing Date, the
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Securities and Exchange
Commission (the "Commission") applicable to an indenture which is qualified
thereunder.
<PAGE>
4
(i) The Notes have been duly authorized by the Company, and, when
duly executed, authenticated, issued and delivered as provided in the Indenture
and paid for as provided herein, will be duly and validly issued and
outstanding, and will constitute valid and legally binding obligations of the
Company enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) or an
implied covenant of good faith and fair dealing.
(j) The Transaction Documents and each of the Stockholders Agreement
and Management Services Agreements (as defined in the Offering Memorandum)
conform in all material respects to the description thereof contained in the
Offering Memorandum.
(k) The execution, delivery and performance of the Transaction
Documents by the Company, the issuance, authentication, sale and delivery of the
Notes, and compliance with the terms thereof will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of the property or assets of the Company is subject, nor will such
actions result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or, assuming the accuracy of the
representations and warranties of the Initial Purchasers contained herein, any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or assets;
and except for such consents, approvals, authorizations, registrations or
qualifications as may be required under the applicable state securities laws in
connection with the purchase and resale of the Notes by the Initial Purchasers,
no consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the execution,
delivery and performance of the Transaction Documents by the Company, the
issuance, authentication, sale and delivery of the Notes, and compliance with
the terms thereof, and the consummation by the Company of the transactions
contemplated thereby.
(l) KPMG Peat Marwick LLP are independent public accountants with
respect to the Company as required by the Securities Act and the rules and
regulations thereunder for financial statements included in a definitive
prospectus forming part of a registration statement on Form S-1 under the
Securities Act. The historical financial statements (including the related notes
and supporting schedules, if any) included in the Offering Memorandum comply in
all material respects with the requirements applicable to a Registration
Statement on Form S-1 and have been prepared, and fairly present the financial
position of the entity purported to be shown thereby at the respective dates
indicated and, as applicable, the results of its operations and its cash flows
for the respective periods indicated, in accordance with generally accepted
accounting principles consistently
<PAGE>
5
applied throughout such periods; and the financial information and financial
data set forth in the Offering Memorandum under the captions "Summary Pro Forma
Financial Data", "Capitalization", "Selected Historical Financial Data" and "Pro
Forma Financial Information" are derived from the accounting records of the
Company and fairly present the data purported to be shown. The pro forma
financial statements contained in the Offering Memorandum have been prepared on
a basis consistent with such historical financial statements, except for the pro
forma adjustments specified therein, and include all material adjustments to the
historical financial data required to reflect the transactions described in the
Offering Memorandum, and give effect to assumptions made on a reasonable basis
and present fairly the historical and proposed transactions contemplated by the
Offering Memorandum and this Agreement.
(m) There are no pending actions or suits or judicial, arbitral,
rule-making or other administrative or other proceedings to which the Company is
a party or of which any property or assets of the Company is the subject which,
singularly or in the aggregate could reasonably be expected to have a Material
Adverse Effect; and to the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others.
(n) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the issuance of the Notes or suspends the sale of the Notes in
any jurisdiction; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued with respect to
the Company which would prevent or suspend the issuance or sale of the Notes, or
the use of the preliminary offering memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the best
of the Company's knowledge, threatened against or affecting the Company, before
any court or arbitrator or any governmental body, agency or official, domestic
or foreign, which could reasonably be expected to interfere with or adversely
affect the issuance of the Notes or in any manner draw into question the
validity thereof or in any manner draw into question the validity of the
Transaction Documents or any action taken or to be taken pursuant thereto.
(o) The Company (i) is not in violation of its certificate of
incorporation or by-laws, (ii) is not in default in any material respect, and no
event has occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term, covenant or
condition contained in any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its properties or assets is subject and (iii) except
as provided in Sections 1(p) and 1(v), is not in violation in any material
respect of any law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject.
(p) The Company possesses all material licenses, certificates,
authorizations or permits issued by, and has made all declarations and filings
with, the appropriate state,
<PAGE>
6
federal or foreign regulatory agencies or bodies which are necessary for the
ownership of its properties or the conduct of its business as described in the
Offering Memorandum, except where the failure to possess or make the same would
not have, singularly or in the aggregate, a Material Adverse Effect, and the
Company has not received notification of any revocation or modification of any
such license, certificate, authorization or permit nor has any reason to believe
that any such license, certificate, authorization or permit will not be renewed.
(q) The Company is not (i) an "investment company" or a company
"controlled by" an investment company within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and the rules
and regulations of the Commission thereunder or (ii) a "holding company" or a
"subsidiary company" of a holding company, or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(r) The Company owns or possesses adequate rights to use all
material patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights, licenses and
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures) necessary for
the conduct of its business and has no reason to believe that the conduct of its
business will conflict with, and has not received any notice of any claim of
conflict with, any such rights of others.
(s) The Company has good and indefeasible title in fee simple to, or
has valid rights to lease or otherwise use, all items of real and personal
property which are material to the business of the Company, in each case free
and clear of all liens, encumbrances and defects except such as are described in
the Offering Memorandum or such as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company or such as would not reasonably be expected
to have a Material Adverse Effect.
(t) No labor disturbance by the employees of the Company exists or,
to the best knowledge of the Company, is imminent which might be expected to
have a Material Adverse Effect.
(u) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended from time to time (the "Code"))
or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any
of the events set forth in Section 4043(b) of ERISA (other than events with
respect to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan of the
Company which could have a Material Adverse Effect; each such employee benefit
plan is in compliance in all material respects with applicable law, including
ERISA and the Code; the Company has not incurred and does not expect to
<PAGE>
7
incur liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any "pension plan"; and each "pension plan" (as defined in
ERISA) for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and to our knowledge, after due inquiry, nothing has occurred, whether
by action or by failure to act, which could cause the loss of such
qualification.
(v) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic
or other wastes or other hazardous substances by, due to, or caused by the
Company (or, to the best knowledge of the Company, any other entity, including
their predecessors, for whose acts or omissions the Company is or may be liable)
upon any of the property now or previously owned or leased by the Company, or
upon any other property, in violation of any statute or any ordinance, rule,
regulation, order, judgment, decree or permit or which would, under any statute
or any ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any violation
or liability which would not have, singularly or in the aggregate with all such
violations and liabilities, a Material Adverse Effect; there has been no
disposal, discharge, emission or other release of any kind onto such property or
into the environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which the Company has knowledge,
except for any such disposal, discharge, emission, or other release of any kind
which would not have, singularly or in the aggregate with all such discharges
and other releases, a Material Adverse Effect.
(w) Since December 28, 1996 there has not been any change in the
capital stock or long-term debt of the Company (other than scheduled redemptions
or payments) or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the management, financial
position, stockholders' equity or results of operations of the Company, other
than as set forth or contemplated in the Offering Memorandum.
(x) The Company has filed all federal, state, local and foreign
income and franchise tax returns required to be filed through the date hereof
and has paid all material taxes due thereon, and no tax deficiency has been
determined adversely to the Company which has had (nor does the Company have any
knowledge of any tax deficiency which, if determined adversely to the Company,
might reasonably be expected to have) a Material Adverse Effect.
(y) Except as set forth in or contemplated by the Offering
Memorandum, since December 28, 1996, the Company has not (i) issued or granted
any securities (other than under plans, agreements and arrangements disclosed
in, and in effect on the date of, the Offering Memorandum), (ii) incurred any
liability or obligation, direct or contingent, other than liabilities and
obligations which were incurred in the ordinary course of business, (iii)
entered into any transaction not in the ordinary course of business or (iv)
declared or paid any dividend on its capital stock.
<PAGE>
8
(bb) There are no securities of the Company registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed on a
national securities exchange or quoted in a U.S. automated inter-dealer
quotation system.
(cc) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")) of the Company
has directly, or through any agent (provided that no representation is made as
to the Initial Purchasers or any person acting on their behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be integrated
with the offering and sale of the Notes in a manner that would require the
registration of the Notes under the Securities Act or (ii) engaged in any form
of general solicitation or general advertising (within the meaning of Regulation
D) in connection with the offering of the Notes.
(dd) Neither the Company nor its affiliates has taken, and the
Company will not take, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Notes.
(ee) None of the proceeds of the sale of the Notes will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Notes to be considered a "purpose credit"
within the meanings of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
(ff) On the Closing Date, the Company (after giving effect to the
issuance of the Notes) will be Solvent. As used in this paragraph (ff), the term
"Solvent" means, with respect to a particular date, that on such date (i) the
aggregate fair value (or present fair salable value) of the assets of the
Company is not less than its total existing debts and liabilities (including
contingent liabilities) as they become absolute and matured in the normal course
of business and (ii) the Company does not have an unreasonably small amount of
capital with which to conduct its business. In computing the amount of such
contingent liabilities at any time, it is intended that such liabilities will be
computed at the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
(gg) Neither the Company nor to the best of the Company's knowledge,
any director, officer, agent, employee or other person associated with or acting
on behalf of the Company, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
<PAGE>
9
(hh) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(ii) The Company has and will maintain insurance covering its
properties, operations, personnel and businesses, which insurance is in amounts
and insures against such losses and risks, in each case as is adequate in its
reasonable business judgment to protect the Company and its businesses. The
Company has not received notice from any insurer or agent of such insurer that
capital improvements or other expenditures will have to be made in order to
continue such insurance.
(jj) Except as described in "Certain Related Transactions" in the
Offering Memorandum, the Company is not a party to any contract, agreement or
understanding with any person that would give rise to a valid claim against the
Company or the Initial Purchasers for a brokerage commission, finder's fee or
like payment.
(kk) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
2. PURCHASE OF THE NOTES BY THE INITIAL PURCHASERS. (a) On the basis
of the representations, warranties and agreements herein contained, and subject
to the terms and conditions set forth herein, the Company agrees to issue and
sell to the Initial Purchasers, and the Initial Purchasers agree to purchase
from the Company, the principal amount of the Notes as set forth opposite the
name of such Initial Purchaser on Schedule 1 hereto, at a purchase price equal
to 97% of the principal amount thereof by wire transfer of immediately available
funds.
(b) The Company shall not be obligated to deliver any of the Notes,
except upon payment for all of the Notes to be purchased as provided herein.
3. SALE AND RESALE OF THE NOTES BY THE INITIAL PURCHASERS. (a) The
Initial Purchasers have advised the Company that they propose to offer the Notes
for resale upon the terms and conditions set forth in this Agreement and in the
Offering Memorandum. Each of the Initial Purchasers hereby represents and
warrants to, and agrees with, the Company that it (i) is purchasing the Notes
pursuant to a private sale exempt from registration under the Securities Act,
(ii) will not solicit offers for, or offer or sell, the Notes by means of any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act, and (iii)
will solicit offers for the Notes only from, and will offer, sell or deliver the
Notes, as part of its initial
<PAGE>
10
offering, only to persons in the United States whom the Initial Purchasers
reasonably believes to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("Rule 144A") or, if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and in each case,
in transactions under Rule 144A.
(b) The Company acknowledges and agrees that the Initial Purchasers
may sell Securities to any of their respective affiliates which are Qualified
Institutional Buyers and that any such affiliates may sell Securities purchased
by it to the Initial Purchasers.
4. DELIVERY OF AND PAYMENT FOR THE NOTES. (a) Delivery of and
payment for the Notes shall be made at the offices of Richards & O'Neil, LLP,
New York, New York, or at such other place as shall be agreed upon by the
Initial Purchasers and the Company, at 10:00 A.M., New York City time, on May
21, 1997 or at such other time or date, not later than seven full business days
thereafter, as shall be agreed upon by the Initial Purchasers and the Company
(such date and time of payment and delivery being herein called the "Closing
Date").
(b) On the Closing Date, payment of the purchase price for the Notes
shall be made to the Company by wire transfer of same-day funds to such account
or accounts as the Company shall specify prior to the Closing Date or by such
other means as the parties hereto shall agree prior to the Closing Date against
delivery to the Initial Purchasers of the certificates evidencing the Notes.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligations of the
Initial Purchasers hereunder. Upon delivery, the Notes shall be in global form,
registered in such names and in such denominations as the Initial Purchasers
shall request in writing not less than two full business days prior to the
Closing Date. For the purpose of expediting the checking and packaging of
certificates evidencing the Notes, the Company agrees to make such certificates
available for inspection by the Initial Purchasers at least 24 hours prior to
the Closing Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
Initial Purchasers:
(a) To furnish to the Initial Purchasers, without charge, as many
copies of the Offering Memorandum and any supplements and amendments thereto as
they may reasonably request.
(b) To advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes any
statement of a material fact made in the Offering Memorandum untrue or which
requires the making of
<PAGE>
11
any additions to or changes in the Offering Memorandum (as amended or
supplemented from time to time) in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and not to
effect such amendment or supplementation without the consent of the Initial
Purchasers; to advise the Initial Purchasers promptly of any order preventing or
suspending the use of the preliminary offering memorandum or the Offering
Memorandum, or the suspension of the qualification of the Securities for
offering or sale in any jurisdiction and of the initiation or threatening of any
proceeding for any such purpose; and to use reasonable best efforts to prevent
the issuance of any such order preventing or suspending the use of the
preliminary offering memorandum or the Offering Memorandum or suspending any
such qualification and, if any such suspension is issued, to obtain the lifting
thereof at the earliest possible time.
(c) Prior to making any amendment or supplement to the Offering
Memorandum, the Company shall furnish a copy thereof to each of the Initial
Purchasers and counsel to the Initial Purchasers and will not effect any such
amendment or supplement to which the Initial Purchasers shall reasonably object
by notice to the Company after a reasonable period to review, which shall not in
any case be longer than five business days after receipt of such copy.
(d) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchasers to other purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of counsel
for the Initial Purchasers or counsel for the Company, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances existing at the time it is delivered to a purchaser, or if it is
necessary to amend or supplement the Offering Memorandum to comply with
applicable law, to promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so that the Offering
Memorandum, as so amended or supplemented, will comply with applicable law and
to furnish to the Initial Purchasers such number of copies thereof as they may
reasonably request.
(e) So long as the Notes are outstanding and are "Restricted
Securities" within the meaning of Rule 144(a)(3) under the Securities Act, to
furnish to holders of the Notes and prospective purchasers of Notes designated
by such holders, upon request of such holders or such prospective purchasers,
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, unless the Company is then subject to and in compliance with
Section 13 or 15(d) of the Exchange Act.
(f) For a period of five years following the Closing Date, to
furnish to the Initial Purchasers copies of any annual reports, quarterly
reports and current reports filed with the Commission on Forms 10-K, 10-Q and
8-K, or such other similar forms as may be designated by the Commission, and
such other documents, reports and information as shall be furnished by the
Company to the Trustee or to the holders of the Notes pursuant
<PAGE>
12
to the Indenture or the Exchange Act or any rule or regulation of the Commission
thereunder.
(g) To use its reasonable best efforts to qualify the Notes for sale
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may reasonably designate and to continue such qualifications in
effect so long as required for the distribution of the Notes. The Company will
also arrange for the determination of the eligibility for investment of the
Notes under the laws of such jurisdictions as the Initial Purchasers may
reasonably request. Notwithstanding the foregoing, the Company shall not be
obligated to qualify as a foreign corporation in any jurisdiction in which they
are not so qualified or to file a general consent to service of process in any
jurisdiction.
(h) To use its reasonable best efforts to permit the Notes to be
designated Private Offerings, Resales and Trading through Automated Linkages
Market ("PORTAL") securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. ("NASD")
relating to trading in the PORTAL Market and to permit the Notes to be eligible
for clearance and settlement through the Depository Trust Company (the "DTC").
(i) Not to, and will cause its affiliates (as such term is defined
in Rule 501(B) under the Securities Act) not to, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect (except as contemplated in the
Offering Memorandum or hereby) of any security (as defined in the Securities
Act) which could be integrated with the sale of the Notes in a manner which
would require the registration of the Notes under the Securities Act.
(j) Except following the effectiveness of the Exchange Offer or the
Shelf Registration Statement, as the case may be, not to, and will cause its
affiliates (as such term is defined in Rule 501(B) under the Securities Act) not
to, and will not authorize or knowingly permit any person acting on their behalf
to, solicit any offer to buy or offer to sell the Notes by means of any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(k) To apply the net proceeds from the sale of the Notes as set
forth in the Offering Memorandum.
(l) For a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose
of, directly or indirectly, or file a registration statement for, or announce
any offer, sale, contract for sale of or other disposition of any debt
securities issued or guaranteed by the Company or any of its subsidiaries (other
than the Notes) without the prior written consent of the Initial Purchasers.
<PAGE>
13
(m) In connection with the offering, until the Initial Purchasers
shall have notified the Company of the completion of the resale of the Notes,
neither the Company nor any of its affiliated purchasers (as defined in Rule
10b-6 under the Exchange Act), either alone or with one or more other persons,
will bid for or purchase, for any account in which it or any of its affiliated
purchasers has a beneficial interest, any Notes, or attempt to induce any person
to purchase any Notes; and neither it nor any of its affiliated purchasers will
make bids or purchase for the purpose of creating actual, or apparent, active
trading in or of raising the price of the Notes.
6. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of
the Initial Purchasers hereunder are subject to the accuracy, on the date hereof
and on the Closing Date, of the representations and warranties of the Company
contained herein, to the accuracy of the statements of the Company made in any
certificates delivered pursuant to provisions hereof, to the performance by the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:
(a) The Initial Purchasers shall not have discovered and disclosed
to the Company on or prior to the Closing Date that the Offering Memorandum or
any amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of Simpson Thacher & Bartlett, counsel for the Initial
Purchasers, is material or omits to state a fact which, in the opinion of such
counsel is material and is required to be stated therein or is necessary to make
the statements therein not misleading; and no stop order suspending the sale of
the Securities in any jurisdiction shall have been issued and no proceeding for
that purpose shall have been commenced or shall be pending or threatened.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents, the
Notes and the Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby shall be
reasonably satisfactory in all material respects to counsel for the Initial
Purchasers, and the Company shall have furnished to such counsel all documents
and information that they may reasonably request to enable them to pass upon
such matters.
(c) (i) Richards & O'Neil, LLP shall have furnished to the Initial
Purchasers their written opinion, as special counsel to the Company, addressed
to the Initial Purchasers and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers, substantially to the effect
set forth in Exhibit B-1 hereto and (ii) Leonard, Street and Deinard shall have
furnished to the Initial Purchasers their written opinion as local counsel to
the Company, addressed to the Initial Purchasers and dated the Closing Date, in
form and substance reasonably satisfactory to the Initial Purchasers,
substantially to the effect set forth in Exhibit B-2 hereto.
(d) The Initial Purchasers shall have received from Simpson Thacher
& Bartlett, counsel for the Initial Purchasers, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Initial Purchasers may
reasonably require, and the
<PAGE>
14
Company shall have furnished to such counsel such documents and information as
they reasonably request for the purpose of enabling them to pass upon such
matters.
(e) With respect to the letter of KPMG Peat Marwick LLP ("KPMG")
delivered to the Initial Purchasers concurrently with the execution of this
Agreement (the "Initial Letter"), the Company shall have furnished to the
Initial Purchasers a letter (the "Bring-Down Letter") of KPMG addressed to the
Initial Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants within the meaning of Rule 101 of the American
Institute of Certified Public Accountants' Code of Professional Conduct and its
rulings and interpretations; (ii) stating, as of the date of the Bring-Down
Letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Offering Memorandum, as of a date not more than five days prior to the date of
such Bring-Down Letter), that the conclusions and findings of the firm with
respect to the financial information and other matters covered by the Initial
Letter are accurate and (iii) confirming in all material respects the
conclusions and findings set forth in its Initial Letter.
(f) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, of its President or any Vice President and
its chief financial officer stating that (A) such officers have carefully
examined the Offering Memorandum, (B) in their opinion, as of the date hereof
the Offering Memorandum did not include any untrue statement of a material fact
and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and since the date
hereof, no event has occurred which should have been set forth in a supplement
or amendment to the Offering Memorandum and (C) to the best of their knowledge
after reasonable investigation, as of the Closing Date, the representations and
warranties of the Company in this Agreement are true and correct, the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and subsequent
to the date of the most recent financial statements in the Offering Memorandum,
there has been no material adverse change in the financial position or results
of operations of the Company, or any change, or any development including a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, business or prospects of the Company, except as set forth
in the Offering Memorandum.
(g) The Initial Purchasers shall have received on the Closing Date
the Registration Rights Agreement executed and delivered by duly authorized
officers of the Company.
(h) The Notes shall have been approved by the NASD for trading in
the PORTAL Market.
(i) The Indenture shall have been duly executed and delivered by the
Company and the Trustee and the Notes shall have been duly executed and
delivered by the Company and duly authenticated by the Trustee.
<PAGE>
15
(j) If any event shall have occurred that requires the Company under
Section 5(c) hereof to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the Initial
Purchasers shall have been given a reasonable opportunity to comment thereon,
and copies thereof shall have been delivered to the Initial Purchasers
reasonably in advance of the Closing Date.
(k) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed withdrawal
of any rule or regulation under the Securities Act or the Exchange Act by the
Commission or any amendment or proposed amendment thereof by the Commission
which in the reasonable judgment of the Initial Purchasers would materially
impair the ability of the Initial Purchasers to purchase, hold or effect resales
of the Notes as contemplated hereby.
(l) At the Closing Date, there shall exist no default or event of
default under the Indenture or the Senior Bank Facilities (as defined in the
Offering Memorandum).
(m) Since December 28, 1996, except for the transactions
contemplated by the Offering Memorandum, there shall not have been any change in
the capital stock or long-term debt of the Company or any change, or any
development involving a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects of the
Company, the effect of which, in any such case described above, is, in the
reasonable judgment of the Initial Purchasers, so material and adverse as to
make it impracticable or inadvisable to proceed with the sale or delivery of the
Notes on the terms and in the manner contemplated in the Offering Memorandum
(exclusive of any supplement).
(n) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Notes by any
"nationally recognized statistical rating organization," as that term is defined
by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of
the Commission under the Securities Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review (other than an
announcement with positive implications of a positive upgrading) its rating of
the Notes.
(o) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or limited, or minimum prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, or trading in any securities of the Company on
any exchange or in the over-the-counter market shall have been suspended or,
(ii) a general moratorium on commercial banking activities shall have been
declared by Federal or New York State authorities, or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a national
emergency or war, or (iv) a material adverse change in general economic,
political or financial conditions (or the effect of international
<PAGE>
16
conditions on the financial markets in the United States shall be such) the
effect of which, in the case of this clause (iv), is, in the reasonable judgment
of the Initial Purchasers, so material and adverse as to make it impracticable
or inadvisable to proceed with the sale or delivery of the Notes on the terms
and in the manner contemplated by this Agreement and the Offering Memorandum
(exclusive of any supplement).
(p) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance or sale of the Notes;
and no injunction, restraining order or order of any other nature by a federal
or state court of competent jurisdiction shall have been issued as of the
Closing Date which would prevent the issuance or sale of the Notes.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
7. TERMINATION. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Notes if, prior to that time, any of the events described in Sections 6(k),
(m), (n), (o) or (p) shall have occurred and be continuing.
8. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If (a) this
Agreement shall have been terminated pursuant to Section 7, (b) the Company
shall fail to tender the Notes for delivery to the Initial Purchasers for any
reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Notes for any reason permitted under this Agreement, the
Company shall reimburse the Initial Purchasers for the reasonable fees and
expenses of their counsel and for such other reasonable out-of-pocket expenses
as shall have been reasonably incurred by the Initial Purchasers in connection
with this Agreement and the proposed purchase of the Notes.
9. INDEMNIFICATION. (a) The Company shall indemnify and hold
harmless the Initial Purchasers, their respective affiliates, and their
respective officers, directors, employees, representatives and agents, and each
person, if any, who controls an Initial Purchaser within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 9 and Section 10 as the Initial Purchasers) from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Notes), to which that Initial
Purchasers may become subject, under the Securities Act, the Exchange Act or any
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary offering memorandum or the Offering Memorandum
or in any amendment or supplement thereto or any information provided
<PAGE>
17
by the Company pursuant to Section 5(e) hereof or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse the
Initial Purchasers promptly upon demand for any legal or other expenses
reasonably incurred by the Initial Purchasers in connection with investigating
or defending or preparing to defend against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Initial Purchasers'
Information; and provided further that with respect to any such untrue statement
or omission made in the preliminary offering memorandum, the indemnity agreement
contained in this Section 9(a) shall not inure to the benefit of the Initial
Purchasers, to the extent that the sale to the person asserting any such loss,
claim, damage, liability or action was an initial resale by the Initial
Purchasers and any such loss, claim, damage, liability or action is a result of
the fact that both (i) to the extent required by applicable law, a copy of the
Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Notes to such person, and (ii) the
untrue statement or omission in the preliminary offering memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Company
with Section 5(c).
(b) The Initial Purchasers shall, severally and not jointly,
indemnify and hold harmless the Company, its affiliates, and its officers,
directors, employees, representatives and agents, and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 9 and Section 10 as
the Company), from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company may become
subject, under the Securities Act, the Exchange Act or any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary offering memorandum or the Offering Memorandum or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with the Initial Purchasers'
Information, and shall reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9,
<PAGE>
18
notify the indemnifying party in writing of the claim or the commencement of
that action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 9 except to the extent that such indemnifying party has been materially
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 9. If any such claim or
action shall be brought against an indemnified party, it shall notify the
indemnifying party thereof, and the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
each indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm of attorneys (in addition to any local counsel) at any one
time for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
The obligations of the Company and the Initial Purchasers in this
Section 9 and in Section 10 are in addition to any other liability which the
Company or the Initial Purchasers, as the case may be, may otherwise have.
<PAGE>
19
10. CONTRIBUTION. If the indemnification provided for in Section 9
is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other from the offering of the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Notes purchased under this Agreement (before deducting expenses) received
by the Company, on the one hand, and the total discounts and commissions
received by the Initial Purchasers with respect to the Notes purchased under
this Agreement, on the other hand, bear to the total gross proceeds from the
offering of the Notes under this Agreement, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Initial Purchasers' Information on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 10 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10 shall be deemed to include, for
purposes of this Section 10, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 10, Initial
Purchasers shall not be required to contribute any amount in excess of the
amount by which the total price at which the Notes sold and distributed by it
was offered to purchasers exceeds the amount of any damages which the Initial
Purchasers have otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Company
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Sections 9 and 10 with respect to
<PAGE>
20
affiliates, officers, directors, employees, representatives, agents and
controlling persons of the Company and the Initial Purchasers and in Section
5(f) with respect to holders and prospective purchasers of the Notes. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 11, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein.
12. EXPENSES. The Company agrees with the Initial Purchasers to pay
(a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Notes and any taxes payable in that connection, (b) the costs
incident to the preparation and printing of the preliminary offering memorandum
and the Offering Memorandum and any amendments or supplements thereto, (c) the
costs of distributing the preliminary offering memorandum and the Offering
Memorandum and any amendments or supplements thereto, (d) the costs of printing,
reproducing and distributing the Transaction Documents, (e) the costs incident
to the preparation, printing and delivery of the certificates representing the
Notes, including stamp duties and stock transfer taxes, if any, payable upon
issuance of any of the Notes, (f) the fees and disbursements of the Company's
counsel and accountants, (g) the fees and disbursements of accountants for the
Company, (h) any fees charged by rating agencies for rating the Notes, (i) the
fees and expenses of qualifying the Notes under securities laws of the several
jurisdictions as provided in Section 5(g) and of preparing, printing and
distributing a Blue Sky memorandum (including related reasonable fees and
expenses of Simpson Thacher & Bartlett, counsel to the Initial Purchasers), (j)
the fees and expenses of the Trustee and any paying agent, (including related
fees and expenses of any counsel for such parties), (k) all expenses and listing
fees incurred in connection with the application for quotation of the Notes on
the PORTAL Market and the approval of the Notes for book-entry transfer by The
Depository Trust Company, and (l) all other reasonable costs and expenses
incident to the performance of the Company's obligations hereunder which are not
otherwise specifically provided for in this Section; provided, however, that
except as provided in this Section 12 and Section 8, the Initial Purchasers
shall pay their own costs and expenses, including the costs and expenses of
their counsel.
13. SURVIVAL. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Initial
Purchasers contained in this Agreement or made by or on behalf on them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Notes and shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of any of them or any person controlling any of them.
14. NOTICES. All statements, requests, notices and agreements
hereunder shall be in writing, and:
<PAGE>
21
(a) if to the Initial Purchasers, shall be delivered or sent
by mail or facsimile transmission to c/o Chase Securities Inc., 270
Park Avenue, New York, New York 10017, Attention: James C. Neary
(Fax: 212-270- 0994); or
(b) if to the Company, shall be delivered or sent by mail or
facsimile transmission to the address of the Company: Two Maryland
Farms, Suite 301, Brentwood, Tennessee 37027, Attn: Robert V. Dale,
with a copy to Nancy Young, Esq., Richards & O'Neil, LLP, 885 Third
Avenue, New York, New York 10022.
provided, however, that any notice to the Initial Purchasers pursuant to Section
9(c) shall be delivered or sent by mail to the Initial Purchasers at c/o Chase
Securities Inc., 270 Park Avenue, 39th Floor, New York, New York 10017,
Attention: Legal Department. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
15. DEFINITION OF TERMS. For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
16. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York but without giving effect
to applicable principles of conflicts of law to the extent that the application
of the laws of another jurisdiction would be required thereby.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. AMENDMENTS. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
19. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument will become a binding agreement among the Company and the
Initial Purchasers in accordance with its terms.
Very truly yours,
WINDY HILL PET FOOD ACQUISITION CO.
By: /s/ Ray Chung
----------------------------------
Name: Ray Chung
Title: Executive Vice President
Accepted:
CHASE SECURITIES INC.
By: /s/ Joseph C. Purcell
----------------------------------
Authorized Signatory
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ M.W. Kennelly
----------------------------------
Authorized Signatory
<PAGE>
EXHIBIT B-1
FORM OF OPINION OF
RICHARDS & O'NEIL LLP
Richards & O'Neil LLP shall furnish to the Initial Purchasers their
written opinion, as special counsel to Windy Hill Pet Food Acquisition Co.
(the "MergerSub") and the Company, addressed to the Initial Purchasers and
dated the Closing Date, in form and substance reasonably satisfactory to
the Initial Purchasers, to the effect that:
1. Assuming that each of the Purchase Agreement and the
Registration Rights Agreement has been duly authorized and executed,
the Purchase Agreement has been duly delivered by the MergerSub and
the Registration Rights Agreement has been duly delivered by the
Company, and each of the Purchase Agreement and the Registration
Rights Agreement constitutes a valid and legally binding agreement,
enforceable against such party in accordance with its terms, except
as the enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency, or other similar laws affecting
creditors' rights generally or by general principles of equity
(regardless of whether enforcement is sought in a proceeding in
equity or at law).
2. Assuming that the Indenture has been duly authorized
and executed by the Company and, assuming due authorization,
execution and delivery thereof by the Trustee, the Indenture has
been duly delivered by the Company, and constitutes a valid and
legally binding agreement of the Company enforceable in accordance
with its terms, except as the enforcement thereof may be limited by
applicable bankruptcy, reorganization, insolvency, or other similar
laws affecting creditors' rights generally or by general principles
of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
3. Assuming that the Notes have been duly authorized,
executed and issued by the Company and, assuming due authentication
thereof by the Trustee and upon payment and delivery in accordance
with the Purchase Agreement, the Notes will constitute valid and
legally binding obligations of the Company enforceable in accordance
with their respective terms, except as the enforcement thereof may
be limited by applicable bankruptcy, reorganization, insolvency, or
other similar laws affecting creditors' rights generally or by
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law). The statements made in
the Offering Memorandum under the caption "Description of Notes" and
"Exchange and Registration Rights Agreement," insofar as they
purport to constitute summaries of certain terms of the Indenture,
the Notes
<PAGE>
2
and the Registration Rights Agreement, constitute accurate summaries
of the terms of such documents in all material respects.
4. The execution, delivery and performance by the Company
of each of the Transaction Documents, the issuance, authentication,
sale and delivery of the Notes and compliance by the Company with
the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents will not result in any
violation of the provisions of the charter or by-laws of the Company
or any statute or any judgment, order, decree, rule or regulation of
any court or governmental agency or body having jurisdiction over
the Company or any of its properties or assets except for such as
would not have a Material Adverse Effect; and to our knowledge no
consent, approval, authorization or order of, or filing or
registration with, any such court or arbitrator or governmental
agency or body under any such statute, judgment, order, decree, rule
or regulation is required for the execution, delivery and
performance by the Company of each of the Transaction Documents, the
issuance, authentication, sale and delivery of the Notes and
compliance by the Company with the terms thereof and the
consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations,
filings, registrations or qualifications (i) which have been
obtained or made prior to the Closing Date and (ii) as may be
required to be obtained or made under the Securities Act and
applicable state securities laws as provided in the Registration
Rights Agreement.
5. Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes will violate Regulation G, T, U or X of the
Federal Reserve Board.
6. To the knowledge of such counsel, there is no
litigation or other proceedings to which the Company is a party
which questions the validity or enforceability of any of the
Transaction Documents or any action taken or to be taken pursuant
thereto.
7. The Company is not an "investment company" or a
company "controlled" by an investment company within the meaning of
the Investment Company Act.
8. Assuming (i) the accuracy of the representations,
warranties and agreements of the Company and of the Initial
Purchasers contained in the Purchase Agreement and (ii) that the
persons who buy the Notes in the initial resale thereof are
Qualified Institutional Buyers, the issuance and sale of the Notes
and the offer, resale and delivery of the Notes in the manner
contemplated in the Offering Memorandum and the Purchase Agreement,
are
<PAGE>
3
exempt from the registration requirements of the Securities Act and
it is not necessary to qualify the Indenture under the Trust
Indenture Act.
Such counsel shall state that they have participated in conferences
with representatives of the Company and with representatives of its
independent accountants, and you and your counsel at which conferences the
contents of the Offering Memorandum, any amendment thereof and supplement
thereto and related matters were discussed, and, although such counsel
assume no responsibility for the factual accuracy or completeness of the
Offering Memorandum, any amendment thereof or supplement thereto (except
as expressly provided above), such counsel believes that the Offering
Memorandum or any amendment thereof or supplement thereto (other than the
financial statements and other financial and statistical information
contained therein, as to which such counsel need express no belief)
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (i) as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials which are
furnished to the Initial Purchasers and (ii) with respect to the due
authorization, execution and delivery of the Transaction Documents by the
Company, on the opinion of Leonard, Street and Deinard.
<PAGE>
EXHIBIT B-2
FORM OF OPINION OF
LEONARD, STREET AND DEINARD
Leonard, Street and Deinard shall furnish to the Initial Purchasers
their written opinion, as local counsel to Windy Hill Pet Food Acquisition
Co. ("MergerSub") and the Company, addressed to the Initial Purchasers and
dated the Closing Date, in form and substance reasonably satisfactory to
the Initial Purchasers, to the effect that:
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Minnesota, and has all power and authority necessary to own
or hold its properties and to conduct the businesses in which it is
engaged as described in the Offering Memorandum. To such counsel's
knowledge, upon consummation of the AF Sale (as defined in the
Offering Memorandum), the Company has no subsidiaries except for
certain dormant subsidiaries listed on Annex A.
2. The Company's authorized capitalization is 4,500
shares of common stock all of which are issued and outstanding, and,
to such counsel's knowledge all of the issued shares of capital
stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable.
3. The Company has the corporate right, power and
authority to execute and deliver the Transaction Documents and to
perform its obligations thereunder; and all corporate action
required to be taken for the due and proper authorization, execution
and delivery of the Transaction Documents and the consummation of
the transactions contemplated thereby have been duly and validly
taken.
4. The Purchase Agreement has been duly authorized,
executed and delivered by MergerSub.
5. Each of the Registration Rights Agreement and the
Indenture has been duly authorized, executed and delivered by the
Company.
6. The Notes have been duly authorized, executed and
issued by the Company.
7. The execution, delivery and performance by MergerSub
of the Purchase Agreement and by the Company of each of the
Transaction Documents, the issuance, authentication, sale and
delivery of the Notes and compliance by the Company with the terms
thereof and the consummation of the transactions contemplated by the
Transaction Documents will not
<PAGE>
2
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the MergerSub or the Company pursuant to, any
material indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument set forth on Schedule A to which
the Company is a party or by which the MergerSub or the Company is
bound or to which any of the property or assets of the MergerSub or
the Company is subject, nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company
or any Minnesota statute or any judgment, order, decree, rule or
regulation of any court or governmental agency or body having
jurisdiction over the MergerSub or the Company or any of its
properties or assets except for such conflicts, breaches,
violations, defaults, liens, charges or encumbrances as would not
have a Material Adverse Effect; and to our knowledge no consent,
approval, authorization or order of, or filing or registration with,
any such court or arbitrator or governmental agency or body under
any such statute, judgment, order, decree, rule or regulation is
required for the execution, delivery and performance by the
MergerSub of the Purchase Agreement and by the Company of each of
the Transaction Documents, the issuance, authentication, sale and
delivery of the Securities and compliance by the MergerSub or the
Company with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for
such consents, approvals, authorizations, filings, registrations or
qualifications (i) which have been obtained or made prior to the
Closing Date and (ii) as may be required to be obtained or made
under the Securities Act and applicable state securities laws as
provided in the Registration Rights Agreement.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of
responsible officers of the MergerSub or the Company and public officials
which are furnished to the Initial Purchasers.
<PAGE>
Schedule 1
Principal Amount
of Notes to
Initial Purchaser Be Purchased
- ----------------- ----------------
Chase Securities Inc. $ 60,000,000
Credit Suisse First Boston Corporation 60,000,000
$ 120,000,000
=============
<PAGE>
EXECUTION - 2
TRADEMARK LICENSE AND OPTION AGREEMENT
AGREEMENT made this 29th day of April, 1996 by and among WINDY HILL
PET FOOD COMPANY, INC., a Delaware corporation with its principal place of
business at Two Maryland Farms, Suite 301, Brentwood, Tennessee 37037
("Licensee") and PROMARK INTERNATIONAL INC., an Idaho corporation with its
principal place of business at 877 W. Main Street, Suite 510, Boise, Idaho 83702
("Licensor").
WHEREAS, Licensor is the owner of (i) the name, trade name and
trademark KOZY KITTEN, which is registered as a trademark on the principal
register of the U.S. Patent and Trademark Office under Registration No.730,530
for cat food, and (ii) unregistered common law trademarks, trade dress and label
designs utilized solely therewith and good will associated therewith (the
"Mark"); and
WHEREAS, by agreement dated the 20th of June, 1995, Licensor has
granted to HEINZ PET PRODUCTS COMPANY, a division of Star-Kist Foods, Inc., a
California corporation with its principal place of business at One Riverfront
Place, Newport, Kentucky 41071 ("HPP") a non-exclusive five-year license (the
"ProMark License") to use, among other intellectual property, the Mark in the
United States, including its territories and possessions; and
WHEREAS, HPP has, by that certain letter agreement, dated as of
April 29, 1996, (i) waived any and all rights to the Mark in connection with the
Licensed Products (as defined in Section 1 below) under the ProMark License,
(ii) agreed to amend the same to provide that the Mark is no longer included in
the intellectual property covered by the ProMark License in relation to the
Licensed Products (as defined in Section 1 below) and (iii) immediately upon
Licensee's exercise of its Option (as defined in Section 9 below), HPP has
agreed to waive any and all rights to the Mark under the ProMark License and to
amend the same to provide that the Mark is no longer included in the
intellectual property covered by the ProMark License; and
WHEREAS, Licensor, Licensee, HPP and the other Sellers defined
therein, have entered into that certain Purchase Agreement dated April 17, 1996
(the "Purchase Agreement"), pursuant to which, among other things, Licensor has
agreed to grant to Licensee an exclusive license to use the Mark as provided
below; and
<PAGE>
WHEREAS, Licensor desires to grant to Licensee and Licensee desires
to obtain the exclusive right to use the Mark in connection with the
manufacture, distribution or sale of dry and/or semi-moist pet food as more
particularly set forth in this Agreement; and
WHEREAS, Licensor also desires to grant to Licensee an irrevocable
option to purchase the Mark as more particularly set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties agree as follows:
1. License Grant.
(a) During the Term (as defined in Section 8 below) and
subject to payment of the licensing fee in the amount of Two Million Two Hundred
Thousand Dollars ($2,200,000.00) as provided in Section 2.5 of the Purchase
Agreement, the receipt of which Licensor hereby acknowledges, Licensor hereby
grants to Licensee the exclusive right and license to use the Mark throughout
the world (the "Territory") on and in connection with the manufacture,
distribution or sale of dry and/or semi-moist pet food products (the "Licensed
Products"), including, but not limited to, on packaging, in trade materials, in
print, television and radio advertising and any and all other uses related to
the manufacture, distribution or sale of the Licensed Products. Without limiting
the foregoing, Licensee shall have the right to use the Mark either as a primary
brand, subbrand, maker's mark or otherwise in connection with Licensed Products
in any and all channels of distribution provided, however, Licensee agrees that
it will not use the Mark with any trademark owned by any entity other than
Licensor, except as a corporate identifier.
(b) Licensee shall have no right to the Mark or to make, use
or sell any products utilizing the Mark (or any reproduction, counterfeit, copy
or colorable imitation thereof) other than as expressly granted in this
Agreement. Furthermore, Licensee is aware that Licensor has no history of sale
or distribution of products using the Mark or any registration of the Mark in
any jurisdiction other than the United States and that conflicting use or
registrations of the Mark outside the United States may prevent the use or
registration of the Mark in jurisdictions outside the United States.
(c) Licensor and Licensee each expressly acknowledge and agree
that nothing in this Agreement gives the other any rights to or interest in any
product specifications, recipes or other proprietary materials related to any
products in connection with which the Mark is used by the other party and all
such information shall be considered confidential information subject to Section
12.
-2-
<PAGE>
2. Quality Standard; Inspections.
(a) Licensee shall maintain such quality standards for the
Licensed Products as it has maintained for products similar to the Licensed
Products prior to the date of this Agreement. Furthermore, Licensee shall take
such action as is reasonably necessary to maintain the quality and integrity of
the Mark. Licensee represents, warrants and agrees that the Licensed Products
bearing the Mark shall be in compliance with all applicable federal, state and
local laws, rules and regulations.
(b) Upon request, Licensee shall furnish to Licensor a
reasonable number of representative production samples of the Licensed Products,
in order for Licensor to assure itself that the provisions of this Agreement
are being observed. Upon introduction of a new Licensed Product, Licensee agrees
that upon request it shall furnish to Licensor a reasonable number of
representative production samples of the Licensed Products.
(c) During the Term, Licensor or its respective designees,
shall have the right to conduct annual inspections of the relevant portions of
Licensee's manufacturing facilities for compliance with the foregoing quality
standards; provided, however, Licensee may restrict access by Licensor's
representatives to only those areas where the Licensed Products and ingredients
and materials for the Licensed Products are processed, tested or stored.
Inspections also may be conducted at any time during the Term when Licensor has
reasonable belief that there are or may be quality problems with respect to the
Licensed Products. Any or all plant inspections shall be conducted only during
regular business hours and upon at least twenty-four (24) hours prior notice.
Notwithstanding such right of inspection, nothing herein shall relieve Licensee
from any liability or shift any liability to Licensor for Licensee's
nonconformance with federal, state or local laws or regulations.
3. Display; Legends. Licensee shall submit copies of use of the Mark
on packaging, labeling, promotional and advertising materials to Licensor prior
to use. Licensee shall be free to display the Mark on Licensed Products in such
forms or manners as Licensee may choose, provided that any such use shall be of
a kind and quality which does not materially detract from the value of the Mark.
Licensee shall cause to appear on all written materials on or in connection with
which the Mark is used, such legends, markings and notices as Licensor may
prescribe in order to give appropriate notices of any trademark or other rights.
-3-
<PAGE>
4. Restrictions On and Covenants Of Licensor.
(a) During the Term, Licensee shall be the exclusive licensee
and/or authorized user of the Mark in the Territory in connection with the
Licensed Products and Licensor specifically agrees, on behalf of itself and its
successors and assigns, not to license the Mark to any third party or use the
Mark in any manner whatsoever in connection with the manufacture, distribution
or sale of either (i) the Licensed Products or (ii) any other products other
than canned cat food. Furthermore, Licensor covenants and agrees that at no time
during the Term (x) will the Licensor permit the Mark to be subject to any
liens, security interests or other encumbrances of any nature whatsoever
(provided that Licensor will not be held liable for any liens, claims or
encumbrances related to the Mark to the extent that the same arise through the
actions of Licensee), nor (y) will Licensor assign, transfer or delegate its
ownership in the Mark, this Agreement or any other rights with respect to the
Mark to a party other than its parent or an affiliate (provided such party
expressly agrees to be bound by the terms and conditions of this Agreement and
such assignment, transfer or delegation shall not effect the obligations of
Heinz as defined in and pursuant to Section 15 below) without complying with the
provision below. In the event that Licensor or any of the other Sellers (as
defined in the Purchase Agreement) intend to sell or otherwise transfer
ownership of the Mark, this Agreement or any other rights with respect to the
Mark as part of the sale of all or part of Licensor's or any of the other
Sellers' business other than to its parent or an affiliate, Licensor covenants
and agrees to give Licensee a minimum of thirty (30) days (the "Sale Notice
Period") written notice (the "Sale Notice") of the proposed sale, including, the
name of the proposed buyer or buyers. During the Sale Notice Period or at any
time after the delivery of a Sale Notice, Licensee shall have the irrevocable
right to exercise the Option as provided in Section 9. Licensor covenants and
agrees that neither it nor any of the other Sellers will consummate any sale or
other transfer of the Mark, this Agreement or any other rights with respect to
the Mark during a Sale Notice Period unless Licensee gives Licensor written
notice of its intent not to exercise the Option during the relevant Sale Notice
Period.
(b) Licensor shall be free to display the Mark on or in
relation to any of its canned cat food products bearing the Mark in such forms
or manners as Licensor may choose, provided that (i) any such use shall be of a
kind and quality which does not materially detract from the value of the Mark;
(ii) Licensor agrees it will not use the Mark with any trademark owned by any
entity other than Licensor; and (iii) all such forms of the Mark (and any
registrations thereof) automatically shall be covered by Licensee's Option (as
defined in Section 9 below).
-4-
<PAGE>
(c) Licensor covenants and agrees to maintain at all times
during the Term in full force and effect any and all registrations of the Mark
in the United States Patent and Trademark office. In the event Licensee desires
to use the Mark with any other mark or design Licensor, upon Licensee's request,
shall apply to register such mark or design in the United States and Canada and
Licensee shall be responsible for the reasonable costs of Licensor associated
with such registration and such mark(s) automatically shall become part of the
definition of the "Mark" for purposes of this License Agreement and shall be
covered by Licensee's Option (as defined in Section 9 below). Furthermore, in
the event that Licensee desires to have Licensor register the Mark or any other
mark used with the Mark in any other country (the "Foreign Registrations"),
Licensor will use all reasonable efforts to promptly do so and any Foreign
Registrations automatically shall become part of the definition of the "Mark"
for purposes of this License Agreement and shall be covered by Licensee's Option
(as defined in Section 9 below). Licensee shall be responsible for the
reasonable costs of Licensor associated with any Foreign Registrations of the
Mark requested by Licensee and actually applied for by Licensor; provided,
however, if Licensor decides to distribute canned cat food in any country in
which Licensee has covered the costs of registration of the Mark, Licensor
promptly will reimburse Licensee for fifty percent (50%) of the costs paid by
Licensee with respect to such Foreign Registration. Licensor may decide not to
apply for registration in any country requested by Licensee outside the United
States should Licensor, in its reasonable discretion, consider such application
or registration likely to lead to opposition or litigation which would adversely
affect the Mark. In addition, Licensor covenants and agrees to use its
reasonable efforts to maintain at all times during the Term in full force and
effect any and all Canadian or other Foreign Registrations of the Mark applied
for in the manner described above in those countries in the Territory in which
Licensee is using the Mark in a manner sufficient to meet the requirements for
continued registration of the Mark in the relevant country.
(d) In the event that Licensor shall fail to take any action
reasonably required by Licensor to effectuate the foregoing, Licensor hereby
appoints Licensee as its attorney-in-fact for such purpose (it being
acknowledged that such appointment is irrevocable and coupled with an interest)
with full power of substitution and delegation. Licensee shall supply Licensor
with copies of any such documents promptly after execution.
5. Dispute Resolution.
(a) Licensee and Licensor agree that, in the event that there
is a disagreement with regard to whether the quality of a product or a use of
the Mark materially detracts from the value of the Mark, senior management of
the parties will meet and negotiate in good faith in an attempt to resolve the
dispute.
-5-
<PAGE>
In the event that the parties are unable to resolve the dispute within thirty
(30) days from the date of written notice of disagreement, either party may
submit the dispute to binding arbitration, which shall be conducted as follows:
(i) the arbitration panel shall be composed of three parties, one appointed by
Licensee, one appointed by Licensor and one chosen by the arbitrators appointed
by Licensor and Licensee, provided, however, the third arbitrator shall be an
independent third party knowledgeable in marketing and pet food sales and
mutually satisfactory to Licensor and Licensee; (ii) the arbitrators, in
conducting such arbitration, shall have access to all relevant documents and
records of the parties; (iii) the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(the "Rules") in effect on the date such arbitration is commenced and shall be
final and binding on the parties; and (iv) unless otherwise agreed, all
arbitration proceedings shall be conducted in New York City, New York in
English. In the event a mutually satisfactory third arbitrator is not appointed
within fifteen (15) days of submission of a dispute to binding arbitration,
appointment of the third arbitrator shall be as provided in the Rules.
Notwithstanding the foregoing, the arbitration panel shall have no power or
authority to order the termination of the license of this Agreement for any
reason whatsoever.
(b) If either party concludes in good faith that the quality
of a product being sold by the other party bearing the Mark presents a material
health hazard, such party shall have the right, notwithstanding the negotiation
and arbitration provisions set forth above, to seek an injunction in a court of
competent jurisdiction to cause the other party to cease manufacturing, sale or
distribution of the offending product, or to recall already distributed product.
Furthermore, except as set forth in subsection (a) above, nothing herein shall
prevent either party from exercising any other rights or remedies available at
law to enforce or preserve their rights under this License Agreement, including,
but not limited to, their respective rights to indemnification pursuant to
Section 10 of this Agreement.
6. Ownership. Licensee acknowledges Licensor's ownership of the Mark
subject to this License Agreement and Licensee agrees that all use by Licensee
of the Mark during the Term shall inure to Licensor's benefit. Licensee shall at
any time execute any documents reasonably required by Licensor to confirm
Licensor's ownership of all such rights.
7. Infringement Proceedings.
(a) During the Term, each party agrees to notify the other of
any unauthorized uses of the Mark by any third party as promptly as such matters
come to such party's attention. Either Licensee or Licensor shall have the right
and discretion to bring infringement or unfair competition proceedings involving
the
-6-
<PAGE>
Mark in the manner more specifically described below; provided, however, that
each party covenants and agrees to cooperate with and furnish full assistance to
one another in connection with the procurement, protection and maintenance of
the Mark and their rights associated therewith.
(b) Licensor shall have the initial right to determine whether
or not any demand, suit or other action shall be taken on account of or with
reference to any infringement or unfair competition in connection with the Mark
and shall have the right to take such action as it may determine. Licensee shall
not institute any suit or take any action on account of any such infringement or
unfair competition without first obtaining the express written consent of
Licensor to do so. Licensor's consent shall not be unreasonably withheld or
delayed. The parties agree to cooperate with each other in any manner which the
litigating party may reasonably request in connection with any such litigation;
provided, however, that the non-litigating party will be entitled to
reimbursement of its reasonable expenses directly related to such cooperation in
excess of $5000.00. In all instances, the party commencing the litigation shall
have the right to employ counsel of its choosing and to direct the handling of
the litigation and the settlement thereof. Notwithstanding the foregoing, no
action may be settled by Licensee without the prior consent of Licensor, which
consent shall not be unreasonably withheld or delayed. All amounts awarded as
damages, profits or otherwise in connection with such litigation shall be
divided among the parties as their interests may appear. Nothing herein shall be
construed as imposing any duty or obligation upon Licensor to take any action
against any alleged infringer.
8. Term/Post Termination Agreements. The term of this Agreement
shall be for a period of ten (10) years commencing on the date hereof and ending
on the tenth (10th) anniversary of such date (the "Term"). Upon expiration of
this Agreement, unless Licensee exercises its option to purchase the Mark as
provided in Section 9 below, Licensee shall destroy any molds, plates, packaging
or finished product bearing the Mark which are in its possession or control and
thereafter cease any and all use of the Mark.
9. Irrevocable Option to Purchase the Mark.
(a) Licensor agrees to and hereby does give and grant to
Licensee the exclusive and irrevocable option (the "Option") to purchase all of
Licensor's right, title and interest in and to the Mark and any and all
derivatives of the Mark, free of all liens, claims and encumbrances of
whatsoever nature (provided that Licensor will not be held liable for any liens,
claims or encumbrances related to the Mark to the extent that the same arise
through the actions of Licensee), for a purchase price of Fourteen Million Five
Hundred Thousand Dollars ($14,500,000.00) (the "Option Payment") at any time
either (i) on or after the fifth
-7-
<PAGE>
anniversary of the date of this Agreement and prior to the expiration of the
Term; (ii) at any time during the Term if Licensor has breached its covenants
regarding liens and assignments set forth in Section 4(a)(x) or 4(a)(y); (iii)
at any time during any Sale Notice Period; or (iv) at any time during the Term
after the delivery of a Sale Notice ((i)-(iv) are collectively referred to as
the "Option Period"). The Option may be exercised by Licensee at any time during
the Option Period by delivering to Licensor a minimum of ten (10) business days
written notice (the "Option Notice") of its intention to exercise the Option.
After such exercise, immediately upon receipt of written confirmation from the
Escrow Agent (as defined below) that Licensor has deposited the License Payment
(as defined below) with the Escrow Agent, Licensee shall deliver to Licensor
payment of the Option Payment by wire transfer of immediately available funds to
Licensor. Immediately upon receipt of the Option Payment, (i) Licensor shall
execute and deliver to Licensee an assignment of the Mark in the form of Exhibit
B and/or take such further action reasonably required by Licensee to effectuate
the assignment of the Mark, (ii) Licensor also shall execute and deliver to
Licensee assignments of any Foreign Registrations in form satisfactory to
Licensee and/or take such further action reasonably required by Licensee to
effectuate the assignment of the Foreign Registrations, (iii) Licensor also
shall deliver to Licensee a waiver in the form of Exhibit C duly executed by
Licensor and HPP pursuant to which HPP waives any and all rights to the Mark
under the ProMark License and the ProMark License is amended to provide that the
Mark (including any unregistered common law trademarks, trade dress and label
designs utilized solely therewith) is no longer included in the definition of
Licensed Property (as such term is defined in the ProMark License) and (iv)
Licensee shall license the Mark to Licensor or its successor in title as
provided in Section 9(b) below.
(b) In the event Licensee exercises the Option, Licensee
agrees to grant to Licensor and Licensor shall be obligated to accept a license
to use the Mark on the terms and conditions set forth in the form of license
agreement attached as Exhibit A to this Agreement. Furthermore, within ten (10)
business days of receipt by Licensor of the Option Notice, at a time and date
during such ten (10) business day period to be mutually agreed to by the
parties, Licensor shall deposit the payment required by the terms of such
license in the amount of Twelve Million Dollars ($12,000,000.00) (the "License
Payment") by wire transfer of immediately available funds with an escrow agent
(the "Escrow Agent") mutually satisfactory to Licensor and Licensee pursuant to
an escrow agreement mutually satisfactory to Licensor and Licensee or in such
other manner as Licensor and Licensee mutually agree. The License Payment shall
be released to Licensee by the Escrow Agent simultaneously with payment by
Licensee of the Option Payment. Immediately upon receipt of the License Payment,
Licensor and Licensee shall execute and Licensor shall receive delivery of a
license agreement in the form of Exhibit A.
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<PAGE>
(c) Provided that Licensee complies with the provisions of
this Section 9, Licensee shall be unconditionally entitled to exercise the
Option, notwithstanding any claims by Licensor with respect to Licensee's use or
misuse of the Mark pursuant to this Agreement or otherwise or any other claims
of whatsoever nature by Licensor against Licensee, including, without
limitation, nonpayment of the Promissory Note (as defined in the Purchase
Agreement), or any breach or default by Licensee of the Purchase Agreement or
this Agreement, any agreement contemplated by, or executed in connection with,
the Purchase Agreement or any other agreement or arrangement between Licensee
and Licensor or any of their respective affiliates.
(d) Under no circumstances whatsoever shall either Licensor or
Licensee be entitled to offset any portion of either the Option Payment or the
License Payment against any amounts payable on or with respect to any claims of
whatsoever nature between Licensor and Licensee, including, without limitation,
in connection with the Purchase Agreement, the Promissory Note, any agreement
contemplated by, or executed in connection with, the Purchase Agreement or any
other agreement or arrangement between Licensee and Licensor or any of their
respective affiliates. Notwithstanding the foregoing, in the event Licensor
fails to deposit the full amount of the License Payment as provided in Section
9(b) above Licensee shall be permitted to set-off the License Payment against
the Option Payment and deliver the net amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) as payment in full of the Option Payment.
10. Indemnification. Licensee shall indemnify and agrees to defend
Licensor from any and all damages (but excluding any incidental or consequential
damages or claims for lost profits) resulting from or arising out of the
manufacture, packaging, distribution, selling, handling, consumption or
marketing of Licensed Products by Licensee except to the extent such damages are
the result of or caused by the negligence of Licensor or its agents or
employees, or the result of instructions or standards dictated by Licensor with
respect to the Licensed Products. Furthermore, each party indemnifies and agrees
to defend the other in the event of any breach of any covenant or provision of
this Agreement. The indemnifications set forth in this paragraph shall include
reasonable attorney's fees, settlement costs and any other expenses reasonably
related to the indemnification. Each party (a) shall provide the other with
reasonable notice of any such claims and cooperate with the defense of any such
claim, and (b) agrees that the provisions of this Section 10 shall survive the
expiration of this Agreement for the period of any applicable statute of
limitations.
11. Insurance. Licensee shall maintain throughout the Term a
reasonably adequate products liability insurance policy with limits of no less
than
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<PAGE>
One Million Dollars ($1,000,000.00) combined single limit with a financially
responsible insurance carrier naming Licensor as an additional insured and
providing Licensor with thirty (30) days notice of cancellation or alteration.
12. Confidentiality. Any confidential information disclosed by
either party to the other, except as set forth below, shall be considered
confidential information, and shall be accorded the same treatment which the
receiving party gives to its own confidential information. The obligation of
confidentiality set forth in the preceding sentence shall not apply to
information which (a) was publicly available at the time of the disclosure to
the receiving party; (b) subsequently becomes publicly available through no
fault of the receiving party; (c) is rightfully acquired by the receiving party,
subsequent to disclosure by the other party, from a third party who to the
receiving party's knowledge is not in breach of a confidential relationship with
regard to such information; (d) is purchased by Licensee from Licensor pursuant
to the Purchase Agreement (but Licensor will keep confidential any such
information it sells or has sold to Licensee provided this obligation shall not
apply to information which falls under subsections (a), (b), (c) or (e) hereof)
or (e) is independently developed by the receiving party solely through the
efforts of individuals who did not have access to the confidential information.
13. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
permitted assigns. Notwithstanding the foregoing, neither party shall assign,
transfer or delegate any of its rights under this Agreement or delegate any of
its obligations under this Agreement to any entity which is not a parent or
affiliate of the assigning party without the other party's prior written
approval, and any such assignment, transfer or delegation made without such
approval shall be void ab initio; provided, however, (a) Licensee shall be
permitted to assign, transfer or delegate any of its rights and/or obligations
under this Agreement in connection with the sale of all or part of its business
to any third party and/or to any lender providing financing to Licensee and such
lender shall be permitted to assign this license to any third party without the
consent of Licensor and (b) Licensor shall be permitted to assign, transfer or
delegate any of its rights under this Agreement or to the Mark to the buyer
identified in the relevant Sale Notice in the event Licensee does not exercise
its Option during the relevant Sale Notice Period.
14. Force Majeure. Neither party to this Agreement shall be held
liable for failure to comply with any of the terms of this Agreement when such
failure has been caused by fire, flood, labor dispute, strike, war, energy
shortage, insurrection, government restrictions or regulations or force majeure
beyond the control of the party involved; provided, however, in no event shall
the foregoing be construed to relieve Licensor or Licensee of its obligations
pursuant to Section 9 above.
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<PAGE>
15. Heinz Guaranty. H. J. Heinz Company, a Pennsylvania corporation
("Heinz"), hereby guarantees the prompt performance by Licensor of its covenants
and obligations hereunder. In the event of nonperformance by Licensor of any
such covenants or obligations, Heinz shall promptly perform or cause Licensor to
promptly perform such covenants and obligations. Heinz shall be entitled to the
benefit of any defenses to and limitations on the guaranteed covenants and
obligations to the same extent Licensor would have had such benefit, except that
in no event shall the validity of this guarantee or the obligations of Licensor
be in any way terminated, affected or impaired by its dissolution or the
rejection of such obligations under any bankruptcy, insolvency or similar laws,
now or hereafter enacted.
16. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO ITS RULES OR CONFLICTS OF LAW.
(b) Nothing herein contained shall be deemed to create the
relationship of partnership or joint venture between the parties. Neither party
shall have the right to incur any obligation to third parties which shall be
binding upon the other and neither party shall have any interest whatever in the
profits and liabilities of the other arising out of or resulting from the
subject matter of this Agreement.
(c) Unless otherwise specified herein, notices to the parties
shall be sent by prepaid certified or registered mail, or by a national
overnight courier service, to the parties at the following addresses (or at such
other address as shall be specified by like notice):
(i) If to Licensee, to:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, Tennessee 37037
Attention: Mr. Bobby Dale, President
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<PAGE>
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022
Attn: Craigh Leonard, Esq.
(ii) If to Licensor, to:
ProMark International Inc.
877 W. Main Street, Suite 510
Boise, Idaho 83702
Attention: President
with copies to:
H.J. Heinz Company
600 Grant Street
Pittsburgh, Pennsylvania 15230
Attn: Senior Vice President and General Counsel
Heinz Pet Products Company
One Riverfront Place
Newport, Kentucky 41071
Attn: Vice President Value Brands Marketing
(d) The failure of either party to insist on compliance with
any provision hereof shall not constitute a waiver or modification of such
provision or any other provision.
(e) If any provision hereof is held to be invalid or
unenforceable by any court of competent jurisdiction or any other authority
vested with jurisdiction, such holding shall not effect the validity or
enforceability of any other provision hereto.
(f) The paragraph order and heading are for convenience only
and shall not be deemed to affect in any way the language, obligations or the
provisions to which they refer.
(g) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, and may be amended or
modified only in writing executed by each party hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WINDY HILL PET FOOD COMPANY, PROMARK INTERNATIONAL INC.
Inc.
By: /s/ D. Gadd By: /s/ Eric S. Nielsen
---------------------------- ----------------------------
Name: D. Gadd Name: Eric S. Nielsen
Title: V.P. Finance Title: President
H.J. HEINZ COMPANY as to HEINZ PET PRODUCTS COMPANY,
Section 15 only a division of Star-Kist Foods, Inc.
as to Section 9(a)(iii) only
By: By: /s/ Michael Jon Bertasso
---------------------------- ----------------------------
Name: Name: Michael Jon Bertasso
--------------------------- Title: Chief Cost Officer
Title:
--------------------------
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WINDY HILL PET FOOD COMPANY, PROMARK INTERNATIONAL INC.
Inc.
By: By: /s/ Eric S. Nielsen
---------------------------- ----------------------------
Name: Name: Eric S. Nielsen
--------------------------- Title: President
Title:
--------------------------
H.J. HEINZ COMPANY as to HEINZ PET PRODUCTS COMPANY,
Section 15 only a division of Star-Kist Foods, Inc.
as to Section 9(a)(iii) only
By: /s/ David R. Williams By:
---------------------------- ----------------------------
Name: David R. Williams Name:
Title: Senior Vice President ---------------------------
Title:
--------------------------
<PAGE>
EXHIBIT A
TRADEMARK LICENSE AGREEMENT
AGREEMENT made this ___ day of ______, 19__ between WINDY HILL PET
FOOD COMPANY, INC., a Delaware corporation with its place of business at Two
Maryland Farms, Suite 301, Brentwood, Tennessee 37037 ("Licensor") and PROMARK
INTERNATIONAL INC., an Idaho corporation with its place of business at 877 W.
Main Street, Suite 510, Boise, Idaho 83702 ("Licensee").
WHEREAS, Licensor is the owner of (i) the name, trade name and
trademark KOZY KITTEN, which is registered as a trademark on the principal
register of the U.S. Patent and Trademark Office under Registration No.730,530
for cat food and (ii) unregistered common law trademarks, trade dress and label
designs utilized solely therewith and good will associated therewith (the
"Mark");
WHEREAS, Licensor, Licensee and the other Sellers defined therein
have entered into that certain Purchase Agreement, dated April 17, 1996,
pursuant to which among other things, Licensor agreed to grant to Licensee an
exclusive royalty-free license to use the Mark as provided below; and
WHEREAS, by Agreement, dated June 20, 1995, Licensee has granted to
Heinz Pet Products Company, a division of Star-Kist Foods Inc. ("HPP") a
non-exclusive five-year license (the "ProMark License") to use, among other
intellectual property, the Mark in the United States, including its territories
and possessions; and
WHEREAS, Licensee and HPP have, by that certain letter agreement,
dated April __, 1996 expressly (i) waived any and all rights to the Mark under
the ProMark License and (ii) amended the same to provide that the Mark is not
longer included in the intellectual property covered by the ProMarK License; and
WHEREAS, Licensor desires to grant to Licensee and Licensee desires
to obtain the exclusive right to use the Mark in connection with the
manufacture, distribution or sale of canned cat food as more particularly set
forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties agree as follows:
<PAGE>
1. License Grant.
(a) Subject to payment of the License Payment as provided in
Section 9, Licensor hereby grants to Licensee the exclusive, perpetual right and
license to use the Mark throughout the world (the "Territory") on and in
connection with the manufacture, distribution or sale of canned cat food (the
"Licensed Products"), including, but not limited to, on packaging, in trade
materials, in print, television and radio advertising and any and all other uses
related to the manufacture, distribution or sale of the Licensed Products.
Without limiting the foregoing, Licensee shall have the right to use the Mark
either as a primary brand, subbrand, maker's mark or otherwise in connection
with Licensed Products in any and all channels of distribution provided,
however, Licensee agrees that it will not use the Mark with any trademark owned
by any entity other than Licensor, except as a corporate identifier.
(b) Licensee shall have no right to the Mark or to make, use
or sell any products utilizing the Mark (or any reproduction, counterfeit, copy
or colorable imitation thereof) other than as expressly granted in this
Agreement. Furthermore, Licensee is aware that in the event Licensor has no
history of sale or distribution of products using the Mark or any registration
of the Mark in any jurisdiction other than the United States that conflicting
use or registrations of the Mark outside the United States may prevent the use
or registration of the Mark in jurisdictions outside the United States.
(c) Licensor and Licensee each expressly acknowledge and agree
that nothing in this Agreement gives the other any rights to or interest in any
product specifications, recipes or other proprietary materials related to any
products in connection with which the Mark is used by the other party and all
such information shall be considered confidential information subject to Section
12.
(d) Subject to the prior written approval of Licensor, which
shall not be unreasonably withheld, Licensee may sublicense the Mark or utilize
the services of third party manufacturers to produce the Licensed Products to be
sold by Licensee or its approved sublicensees; provided, however, no consent of
Licensor is necessary to grant a sublicense to a parent or affiliate of Licensee
or to use a parent of affiliate of Licensee as a third party manufacturer.
However, in the event Licensee desires to grant a sublicense to a third party
who is a major branded competitor or affiliated to a major branded competitor of
Licensor, its subsidiaries or its affiliates, Licensee shall notify Licensor in
writing of the proposed sublicensee and the material terms of the proposed
sublicense and Licensor shall have a right of first refusal to enter into an
agreement with Licensee on substantially the same terms and conditions. Within
ten (10) business days of receipt of the relevant notice, Licensor shall either
notify Licensee of its intention to exercise its right of first refusal or
consent to the proposed sublicense and sublicensee on the terms
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<PAGE>
contained in the relevant notice from Licensee. Subject to Licensor's written
approval, Licensee will assure that there are adequate quality control
provisions in any third party manufacturer agreement or sublicense. Subject to
Licensor's written approval, Licensee shall take all steps reasonably necessary
to enforce and implement such quality control provisions. Licensee will not
distribute or permit any of its sublicensees to distribute any Licensed Products
which are not produced in compliance with the standards and procedures set forth
in Section 2 below.
2. Quality Standard; Inspections.
(a) Licensee shall maintain such quality standards for the
Licensed Products as it has maintained for products similar to the Licensed
Products prior to the date of this Agreement. Furthermore, Licensee shall take
such action as is reasonably necessary to maintain the quality and integrity of
the Mark. Licensee represents, warrants and agrees that the Licensed Products
bearing the Mark shall be in compliance with all applicable federal, state and
local laws, rules and regulations.
(b) Upon request, Licensee shall furnish to Licensor a
reasonable number of representative production samples of the Licensed Products,
in order for Licensor to assure itself that the provisions of this Agreement are
being observed. Upon introduction of a new Licensed Product, Licensee agrees
that without request it shall furnish to Licensor a reasonable number of
representative production samples of the Licensed Products.
(c) During the term of this License Agreement, Licensor or its
respective designees, shall have the right to conduct annual inspections of the
relevant portions of Licensee's manufacturing facilities for compliance with the
foregoing quality standards; provided, however, Licensee may restrict access by
Licensor's representatives to only those areas where the Licensed Products and
ingredients and materials for the Licensed Products are processed, tested or
stored. Inspections also may be conducted at any time during the Term when
Licensor has reasonable belief that there are or may be quality problems with
respect to the Licensed Products. Any or all plant inspections shall be
conducted only during regular business hours and upon at least twenty-four (24)
hours prior notice. Notwithstanding such right of inspection, nothing herein
shall relieve Licensee from any liability or shift any liability to Licensor for
Licensee's nonconformance with federal, state or local laws or regulations.
3. Display; Legends. Licensee shall submit copies of use of the Mark
on packaging, labeling, promotional and advertising materials to Licensor prior
to use. Licensee shall be free to display the Mark on Licensed Products in such
forms or manners as Licensee may choose, provided that any such use shall be of
a kind and quality which does not materially detract from the value of the Mark.
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<PAGE>
Licensee shall cause to appear on all written materials on or in connection with
which the Mark is used, such legends, markings and notices as Licensor may
prescribe in order to give appropriate notices of any trademark or other rights.
4. Restrictions On and Covenants Of Licensor.
(a) So long as this Agreement is in effect, as between
Licensor and Licensee, Licensee shall be the exclusive licensee and/or
authorized user of the Mark in the Territory in connection with the Licensed
Products and Licensor specifically agrees, on behalf of itself and its
successors and assigns, not to license the Mark to any third party or use the
Mark in any manner whatsoever in connection with the manufacture, distribution
or sale of the Licensed Products.
(b) Licensor shall be free to display the Mark on or in
relation to any of its products bearing the Mark in such forms or manners as
Licensor may choose, provided that any such use shall be of a kind and quality
which does not materially detract from the value of the Mark. Licensor agrees
that it will not use the Mark with any trademark owned by an entity other than
Licensor.
(c) Licensor covenants and agrees that, so long as this
Agreement is in effect, it will maintain in full force and effect any and all
registrations of the Mark in the United States Patent and Trademark Office. In
the event Licensee desires to use the Mark with any other mark, Licensor, upon
Licensee's request, shall apply to register such mark in the United States and
Licensee shall be responsible for the reasonable costs of Licensor associated
with such registration and such mark(s) automatically shall become part of the
definition of the "Mark" for purposes of this License Agreement. Furthermore, in
the event that Licensee desires to have Licensor register the Mark or any other
mark used with the Mark in any other country (the "Foreign Registrations"),
Licensor will use all reasonable efforts to promptly do so and such Foreign
Registrations automatically shall become part of the definition of the "Mark"
for the purposes of this License Agreement. Licensee shall be responsible for
the reasonable costs of Licensor associated with any Foreign Registrations of
the Mark requested by Licensee and actually applied for by Licensor; provided,
however, if Licensor decides to distribute products under the Mark in any
country in which Licensee has covered the costs of registration of the Mark,
Licensor promptly will reimburse Licensee for fifty percent (50%) of the costs
paid by Licensee with respect to such Foreign Registration. Licensor may decide
not to apply for registration in any country requested by Licensee outside the
United States should Licensor, in its reasonable discretion, consider such
application or registration likely to lead to opposition or litigation which
would adversely affect the Mark. In addition, Licensor covenants and agrees to
use its reasonable efforts to maintain at all times during the term of this
Agreement in full force and effect any and all Foreign
A-4
<PAGE>
Registrations of the Mark applied for in the manner described above in those
countries in the Territory in which Licensee is using the Mark in a manner
sufficient to meet the requirements for continued registration of the Mark in
the relevant country.
5. Dispute Resolution.
(a) Licensee and Licensor agree that, in the event that there
is a disagreement with regard to whether the quality of a product or a use of
the Mark materially detracts from the value of the Mark, senior management of
the parties will meet and negotiate in good faith in an attempt to resolve the
dispute. In the event that the parties are unable to resolve the dispute within
thirty (30) days from the date of written notice of disagreement, either party
may submit the dispute to binding arbitration, which shall be conducted as
follows: (i) the arbitration panel shall be composed of three parties, one
appointed by Licensee, one appointed by Licensor and one chosen by the
arbitrators appointed by Licensor and Licensee, provided, however, the third
arbitrator shall be an independent third party knowledgeable in marketing and
pet food sales and mutually satisfactory to Licensor and Licensee; (ii) the
arbitrators, in conducting such arbitration, shall have access to all relevant
documents and records of the parties; (iii) the arbitration shall be conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules") in effect on the date such arbitration is commenced
and shall be final and binding on the parties; and (iv) unless otherwise agreed,
all arbitration proceedings shall be conducted in New York City, New York in
English. In the event a mutually satisfactory third arbitrator is not appointed
within fifteen (15) days of submission of a dispute to binding arbitration,
appointment of the third arbitrator shall be as provided in the Rules.
(b) If either party concludes in good faith that the quality
of a product being sold by the other party bearing the Mark presents a material
health hazard, such party shall have the right, notwithstanding the negotiation
and arbitration provisions set forth above, to seek an injunction in a court of
competent jurisdiction to cause the other party to cease manufacturing, sale or
distribution of the offending product, or to recall already distributed product.
Furthermore, except as set forth in subsection (a) above, nothing herein shall
prevent either party from exercising any other rights or remedies available at
law to enforce or preserve their rights under this License Agreement, including,
but not limited to their respective rights to indemnification pursuant to
Section 10 of this Agreement.
6. Ownership. Licensee acknowledges Licensor's ownership of the Mark
subject to this License Agreement and Licensee agrees that all use by Licensee
of the Mark shall inure to Licensor's benefit. Licensor and Licensee further
agree that any and all alterations or new packaging, label designs or trade
dress used on or in connection with the Licensed Products will become part of
the
A-5
<PAGE>
Mark and shall be deemed owned from their inception by Licensor without the need
for additional or future assignments. Licensee shall at any time execute any
documents reasonably required by Licensor to confirm Licensor's ownership of all
such rights. In the event that Licensee shall fail to execute and return to
Licensor any documents reasonably required by Licensor to confirm Licensor's
ownership of such rights, Licensee hereby appoints Licensor as its
attorney-in-fact for such purpose (it being acknowledged that such appointment
is irrevocable and coupled with an interest) with full power of substitution and
delegation. Licensor shall supply Licensee with copies of any such documents
promptly after execution.
7. Infringement Proceedings.
(a) So long as this Agreement is in effect, each party agrees
to notify the other of any unauthorized uses of the Mark by any third party as
promptly as it comes to such party's attention. Either Licensee or Licensor
shall have the right and discretion to bring infringement or unfair competition
proceedings involving the Mark in the manner more specifically described below;
provided, however, that each party covenants and agrees to cooperate with and
furnish full assistance to one another in connection with the procurement,
protection and maintenance of the Mark and their rights associated therewith.
(b) Licensor shall have the initial right to determine whether
or not any demand, suit or other action shall be taken on account of or with
reference to any infringement or unfair competition in connection with the Mark
and shall have the right to take such action as it may determine. Licensee shall
not institute any suit or take any action on account of any such infringement or
unfair competition without first obtaining the express written consent of
Licensor to do so. Licensor's consent shall not be unreasonably withheld or
delayed. The parties agree to cooperate with each other in any manner which the
litigating party may reasonably request in connection with any such litigation;
provided, however, that the non-litigating party will be entitled to
reimbursement of its reasonable expenses directly related to such cooperation in
excess of $5000.00. In all instances, the party commencing the litigation shall
have the right to employ counsel of its choosing and to direct the handling of
the litigation and the settlement thereof. Notwithstanding the foregoing, no
action may be settled by Licensee without the prior consent of Licensor, which
consent shall not be unreasonably withheld or delayed. All amounts awarded as
damages, profits or otherwise in connection with such litigation shall be
divided among the parties as their interests may appear. Nothing herein shall be
construed as imposing any duty or obligation upon Licensor to take any action
against any alleged infringer.
8. Termination. Notwithstanding anything herein to the contrary,
Licensor shall have the right to terminate this Agreement effective upon ninety
(90) days written notice to Licensee in the event (i) Licensee commits a
material breach
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<PAGE>
of this Agreement which is not cured to comply with the terms of this Agreement
within such ninety (90) day notice period or (ii) Licensee ceases to use the
Mark in connection with the manufacture, distribution or sale of the Licensed
Products, either as a primary brand, subbrand, maker's mark or otherwise in the
ordinary course of business, in connection with Licensed Products for a period
in excess of twelve (12) months and does not commence use of the Mark in
connection with Licensed Products in the ordinary course of business within the
ninety (90) day notice period. Upon termination of this Agreement, Licensee
agrees to destroy any molds, plates, packaging or finished product bearing the
Mark which are in its possession or control and thereafter cease any and all use
of the Mark.
9. License Payment. As payment in full of all fees for use of the
Mark as provided in this Agreement, Licensee shall pay to Licensor,
simultaneously with the execution of this Agreement, the sum of Twelve Million
Dollars ($12,000,000.00) (the "License Payment") by wire transfer of immediately
available funds.
10. Indemnification. Licensee shall indemnify and agrees to defend
Licensor from any and all damages (but excluding any incidental or consequential
damages or claims for lost profits) resulting from or arising out of the
manufacture, packaging, distribution, selling, handling, consumption or
marketing of Licensed Products by Licensee except to the extent such damages are
the result of or caused by the negligence of Licensor or its agents or
employees, or the result of instructions or standards dictated by Licensor with
respect to the Licensed Products. Furthermore, each party indemnifies and agrees
to defend the other in the event of any breach of any covenant or provision of
this Agreement. Each party (a) shall provide the other with reasonable notice of
any such claims and cooperate with the defense of any such claim, and (b) agrees
that the provisions of this Section 10 shall survive the expiration of this
Agreement for the period of any applicable statute of limitations. The
indemnifications set forth in this paragraph shall include reasonable attorney's
fees, settlement costs and any other expenses reasonably related to the
indemnification.
11. Insurance. Licensee shall maintain throughout the Term a
reasonably adequate products liability insurance policy with limits of no less
than One Million Dollars ($1,000,000.00) combined single limit with a
financially responsible insurance carrier naming Licensor as an additional
insured and providing Licensor with thirty (30) days notice of cancellation or
alteration.
12. Confidentiality. Any confidential information disclosed by
either party to the other, except as set forth below, shall be considered
confidential information, and shall be accorded the same treatment which the
receiving party gives to its own confidential information. The obligation of
confidentiality set forth in the preceding sentence shall not apply to
information which (a) was publicly
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<PAGE>
available at the time of the disclosure to the receiving party; (b) subsequently
becomes publicly available through no fault of the receiving party; (c) is
rightfully acquired by the receiving party, subsequent to disclosure by the
other party, from a third party who to the receiving party's knowledge is not in
breach of a confidential relationship with regard to such information; or (d) is
independently developed by the receiving party solely through the efforts of
individuals who did not have access to the confidential information.
13. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
permitted assigns. Notwithstanding the foregoing, neither party shall assign,
transfer or delegate any of its rights under this Agreement or delegate any of
its obligations under this Agreement to any entity which is not a parent or
affiliate of the assigning party without the other party's prior written
approval, and any such assignment, transfer or delegation made without such
approval shall be void ab initio; provided, however, (i) Licensor and Licensee
shall be permitted to assign, transfer or delegate any of its rights and/or
obligations under this Agreement in connection with the sale of all or part of
its business to any third party without the consent of the other party provided
such third party expressly agrees to be bound by the terms and conditions of
this Agreement and (ii) Licensee shall be permitted to assign, transfer or
delegate any of its rights and/or obligations under this Agreement or to the
Mark to any lender providing financing to Licensor without the consent of
Licensee provided such assignment, transfer or delegation is expressly subject
to the terms and conditions of this Agreement.
14. Force Majeure. Neither party to this Agreement shall be held
liable for failure to comply with any of the terms of this Agreement when such
failure has been caused by fire, flood, labor dispute, strike, war, energy
shortage, insurrection, government restrictions or regulations or force majeure
beyond the control of the party involved.
15. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO ITS RULES OR CONFLICTS OF LAW.
(b) Nothing herein contained shall be deemed to create the
relationship of partnership or joint venture between the parties. Neither party
shall have the right to incur any obligation to third parties which shall be
binding upon the other and neither party shall have any interest whatever in the
profits and liabilities of the other arising out of or resulting from the
subject matter of this Agreement.
A-8
<PAGE>
(c) Unless otherwise specified herein, notices to the parties
shall be sent by prepaid certified or registered mail, or by a national
overnight courier service, to the parties at the following addresses (or at such
other address as shall be specified by like notice):
(i) If to Licensee, to:
ProMark International Inc.
877 W. Main Street, Suite 510
Boise, Idaho 83702
with copies to:
H.J. Heinz Company
600 Grant Street
Pittsburgh, Pennsylvania 15230
Attn: Senior Vice President and General Counsel
Heinz Pet Products Company
One Riverfront Place
Newport, Kentucky 41071
Attention: Vice President Value Brands Marketing
(ii) If to Licensor, to:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, Tennessee 37037
Attention: Mr. Bobby Dale, President
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022
Attn: Craigh Leonard, Esq.
(d) The failure of either party to insist on compliance with
any provision hereof shall not constitute a waiver or modification of such
provision or any other provision.
(e) If any provision hereof is held to be invalid or
unenforceable by any court of competent jurisdiction or any other authority
vested
A-9
<PAGE>
with jurisdiction, such holding shall not effect the validity or enforceability
of any other provision hereto.
(f) The paragraph order and heading are for convenience only
and shall not be deemed to affect in any way the language, obligations or the
provisions to which they refer.
(g) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof; and may be amended or
modified only in writing executed by each party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WINDY HILL PET FOOD PROMARK INTERNATIONAL INC.
COMPANY, INC.
By: By:
---------------------------- ----------------------------
Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
A-10
<PAGE>
EXHIBIT B
ASSIGNMENT OF U.S. TRADEMARK
WHEREAS, PROMARK INTERNATIONAL INC., an Idaho corporation, whose
principal address is 877 W. Main Street, Suite 510, Boise, Idaho 83702
(hereinafter "Assignor") is the owner of and has adopted, licensed and/or is
otherwise using (i) the name, trade name and/or trademark KOZY KITTEN which is
the subject of U.S. Registration Number 730,530, and (ii) any unregistered
common law trademarks, trade dress and label designs utilized solely therewith
and good will associated therewith (hereinafter referred to as the "Mark"); and
WHEREAS, WINDY HILL PET FOOD COMPANY, INC., a Delaware corporation,
whose principal address is Two Maryland Farms, Suite 301, Brentwood, Tennessee
37037 (hereinafter "Assignee") desires to acquire any and all rights that
Assignor may have in and to the Mark (including the registration issued by the
United States Patent and Trademark Office identified above and all renewals and
extensions thereof), together with the goodwill of the business in connection
with which the Mark is used and which is symbolized by the Mark;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby assign unto Assignee all of
Assignor's right, title and interest in and to the Mark throughout the world
(including without limitation, any and all related registrations issued by the
United States Patent and Trademark Office, all renewals and extensions thereof
and any unregistered common law trademarks, trade dress and/or label designs
utilized solely therewith), together with the goodwill of the business in
connection with which the Mark is used and which is symbolized by the Mark and
the right to recover for damages and profits for past infringements thereof.
Assignor agrees to execute and deliver, at the request of the
Assignee, such additional papers, instruments, and assignments, as the Assignee
may reasonably require in order to vest Assignor's right, title, and interest in
and to the Mark in the Assignee and/or to carry out the intent of this
Assignment.
IN WITNESS WHEREOF, Assignor has executed this Assignment this
______ day of _____,19__.
PROMARK INTERNATIONAL INC.
By:
----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
Corporate Acknowledgment Form
STATE OF )
)ss.:
COUNTY OF )
On this __ day of_________ 19__, before me personally came
_______________________ to me known, who being by me duly sworn did depose and
say that he/she is the ______________________ of ProMark International Inc., the
corporation described in and which executed the foregoing instrument; and that
he/she signed his/her name thereto by order of the Board of Directors of said
corporation.
---------------------------------
Notary Public
-B-2-
<PAGE>
EXHIBIT C
WAIVER
Re: Trademark License Agreement between ProMark International, Inc. and
Windy Hill Pet Food Company, Inc.
Pursuant to this Letter Agreement and in consideration of and as
provided in the Asset Purchase Agreement, dated April 17, 1996, made between
Heinz Pet Products Company, a division of Star-Kist Foods, Inc. ("HPP"), ProMark
International Inc., Perk Foods Co. Incorporated, H.J. Heinz Company, Windy Hill
Pet Food Holdings, Inc. and Windy Hill Pet Food Company, Inc., HPP agrees to and
hereby does waive any and all rights to the KOZY KITTEN trademark (including any
unregistered common law trademarks, trade dress and label designs utilized
solely therewith) under that certain License Agreement, dated June 20, 1995
("ProMark License"). Furthermore, the definition of Licensed Property in the
ProMark License is hereby amended to provide that the KOZY KITTEN trademark
(including any unregistered common law trademarks, trade dress and label designs
utilized solely therewith) is no longer included in the definition of Licensed
Property (as such term is defined in the ProMark License).
PROMARK INTERNATIONAL INC.
By:
----------------------------
Name:
---------------------------
Title:
--------------------------
Agreed and Accepted this ___ day of _______________, 1996.
Heinz Pet Products Company,
a division of Star-Kist Foods, Inc.
By:
----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
TRADEMARK LICENSE AGREEMENT
AGREEMENT made this 29th day of April, 1996 between WINDY HILL PET
FOOD COMPANY, INC., a Delaware corporation with its place of business at Two
Maryland Farms, Suite 301, Brentwood, Tennessee 37037 ("Licensor") and HEINZ PET
PRODUCTS COMPANY, a division of Star-Kist Foods Inc., a California corporation
with its place of business at One Riverfront Place, Newport, Kentucky 41071
("Licensee").
WHEREAS, Licensor is the owner of (i) the name, trade name and
trademark TUFFY'S which is the subject of certain foreign trademark
registrations set forth on Schedule A and (ii) unregistered common law
trademarks, trade dress and label designs utilized solely therewith and good
will associated therewith (the "Mark");
WHEREAS, Licensor, Licensee and the other Sellers defined therein
have entered into that certain Purchase Agreement, dated April 17, 1996,
pursuant to which among other things, Licensor agreed to grant to Licensee an
exclusive royalty free license to use the Mark as provided below; and
WHEREAS, by Agreement, dated June 20, 1995, ProMark International
Inc. ("ProMark") has granted to Licensee a non-exclusive five-year license (the
"ProMark License") to use, among other intellectual property, the Mark in the
United States, including its territories and possessions; and
WHEREAS, Licensee and ProMark have, by that certain letter
agreement, dated as of April 29, 1996, expressly (i) waived any and all rights
to the Mark under the ProMark License and (ii) amended the same to provide that
the Mark is no longer included in the intellectual property covered by the
ProMark License; and
WHEREAS, Licensor desires to grant to Licensee and Licensee desires
to obtain the exclusive right to use the Mark in connection with the
manufacture, distribution or sale of its pet food products outside the United
States and Canada as more particularly set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties agree as follows:
1. License Grant.
(a) Licensor hereby grants to Licensee the exclusive,
royalty-free, perpetual right and license to use the Mark throughout the world
but expressly excluding the United States (including its territories and
possessions) and
<PAGE>
Canada (the "Territory") on and in connection with the manufacture, distribution
or sale of pet food products (the "Licensed Products"), including, but not
limited to, on packaging, in trade materials, in print, television and radio
advertising and any and all other uses related to the manufacture, distribution
or sale of the Licensed Products. Without limiting the foregoing, Licensee shall
have the right to use the Mark either as a primary brand, subbrand, maker's mark
or otherwise in connection with Licensed Products in any and all channels of
distribution provided, however, Licensee agrees that it will not use the Mark
with any trademark owned by any entity other than Licensor, except as a
corporate identifier.
(b) Licensee shall have no right to the Mark or to make, use
or sell any products utilizing the Mark (or any reproduction, counterfeit, copy
or colorable imitation thereof) other than as expressly granted in this
Agreement. Furthermore, Licensee is aware that Licensor has no history of sale
or distribution of products using the Mark in certain areas of the Territory and
that conflicting use or registrations of the Mark in the Territory may prevent
the use or registration of the Mark in jurisdictions in the Territory,
including, but not limited in those jurisdictions listed on Schedule A.
(c) Licensor and Licensee each expressly acknowledge and agree
that nothing in this Agreement gives the other any rights to or interest in any
product specifications, recipes or other proprietary materials related to any
products in connection with which the Mark is used by the other party and all
such information shall be considered confidential information subject to Section
11.
(d) Subject to the prior written approval of Licensor, which
shall not be unreasonably withheld, Licensee may sublicense the Mark or utilize
the services of third party manufacturers to produce the Licensed Products to be
sold by Licensee or its approved sublicensees; provided, however, no consent of
Licensor is necessary to grant a sublicense to a parent or affiliate of Licensee
or to use a parent or affiliate of Licensee as a third party manufacturer.
However, in the event Licensee desire to grant a sublicense to a third party who
is a major branded competitor or affiliated to a major branded competitor of
Licensor, its subsidiaries or its affiliates, Licensee shall notify Licensor in
writing of the proposed sublicensee and the material terms of the proposed
sublicense and Licensor shall have a right of first refusal to enter into an
agreement with Licensee on substantially the same terms and conditions. Within
ten (10) business days of receipt of the relevant notice, Licensor shall either
notify Licensee of its intention to exercise its right of first refusal or
consent to the proposed sublicense and sublicensee on the terms contained in the
relevant notice from Licensee. Subject to Licensor's written approval, Licensee
will assure that there are adequate quality control provisions in any third
party manufacturer agreement or sublicense. Subject to Licensor's written
approval, Licensee shall take all steps reasonably necessary to enforce and
-2-
<PAGE>
implement such quality control provisions. Licensee will not distribute or
permit any of its sublicensees to distribute any Licensed Products which are not
produced in compliance with the standards and procedures set forth in Section 2
below.
2. Quality Standard; Inspections.
(a) Licensee shall maintain such quality standards for the
Licensed Products as it has maintained for products similar to the Licensed
Products prior to the date of this Agreement. Furthermore, Licensee shall take
such action as is reasonably necessary to maintain the quality and integrity of
the Mark. Licensee represents, warrants and agrees that the Licensed Products
bearing the Mark shall be in compliance with all applicable federal, state and
local laws, rules and regulations.
(b) Upon request, Licensee shall furnish to Licensor a
reasonable number of representative production samples of the Licensed Products,
in order for Licensor to assure itself that the provisions of this Agreement are
being observed. Upon introduction of a new Licensed Product, Licensee agrees
that without request it shall furnish to Licensor a reasonable number of
representative production samples of the Licensed Products.
(c) During the term of this License Agreement, Licensor or its
respective designees, shall have the right to conduct annual inspections of the
relevant portions of Licensee's manufacturing facilities for compliance with the
foregoing quality standards; provided, however, Licensee may restrict access by
Licensor's representatives to only those areas where the Licensed Products and
ingredients and materials for the Licensed Products are processed, tested or
stored. Inspections also may be conducted at any time during the Term when
Licensor has reasonable belief that there are or may be quality problems with
respect to the Licensed Products. Any or all plant inspections shall be
conducted only during regular business hours and upon at least twenty-four (24)
hours prior notice. Notwithstanding such right of inspection, nothing herein
shall relieve Licensee from any liability or shift any liability to Licensor for
Licensee's nonconformance with federal, state or local laws or regulations.
3. Display; Legends. Licensee shall submit copies of use of the Mark
on packaging, labelling, promotional and advertising materials to Licensor prior
to use. Licensee shall be free to display the Mark on Licensed Products in such
forms or manners as Licensee may choose, provided that any such use shall be of
a kind and quality which does not materially detract from the value of the Mark.
Licensee shall cause to appear on all written materials on or in connection with
which the Mark is used, such legends, markings and notices as Licensor may
prescribe in order to give appropriate notices of any trademark or other rights.
-3-
<PAGE>
4. Restrictions On and Covenants Of Licensor.
(a) So long as this Agreement is in effect, as between
Licensor and Licensee, Licensee shall be the exclusive licensee and/or
authorized user of the Mark in the Territory in connection with the Licensed
Products and Licensor specifically agrees, on behalf of itself and its
successors and assigns, not to license the Mark to any third party or use the
Mark in any manner whatsoever in connection with the manufacture, distribution
or sale of the Licensed Products in the Territory.
(b) Licensor shall be free to display the Mark on or in
relation to any of its products bearing the Mark in such forms or manners as
Licensor may choose, provided that any such use shall be of a kind and quality
which does not materially detract from the value of the Mark. Licensor agrees
that it will not use the Mark with any trademark owned by an entity other than
Licensor.
(c) Licensee covenants and agrees to use its reasonable
efforts to maintain at all times during the term of this Agreement in full force
and effect the registrations of the Mark listed on Schedule A or new
registrations applied for in the manner described below in those countries in
the Territory in which Licensee is using the Mark in a manner sufficient to meet
the requirements for continued registration of the Mark in the relevant country.
In the event that Licensee desires to have Licensor register the Mark or any
other mark used with the Mark in any country in the Territory (the "Foreign
Registrations"), Licensor will use all reasonable efforts to promptly do so and
any such Foreign Registrations automatically shall become part of the definition
of the "Mark" for purposes of this License Agreement. Licensee shall be
responsible for the reasonable costs of Licensor associated with any Foreign
Registrations of the Mark requested by Licensee and actually applied for by
Licensor. Licensor may decide not to apply for registration in any country
requested by Licensee in the Territory should Licensor, in its reasonable
discretion, consider such application or registration likely to lead to
opposition or litigation which would materially adversely affect the Mark.
(d) In the event that Licensor shall fail to take any action
in the Territory reasonably required by Licensor to effectuate the foregoing and
Licensor has not advised Licensee that it considers such action, in its
reasonable discretion, likely to lead to opposition or litigation which would
materially adversely affect the Mark, Licensor hereby appoints Licensee as its
attorney-in-fact solely for such purpose (it being acknowledged that such
appointment is irrevocable and coupled with an interest) with full power of
substitution and delegation. Licensee shall supply Licensor with copies of any
such documents promptly after
-4-
<PAGE>
execution. In such circumstances, Licensor will use its reasonable efforts to
cooperate with Licensee to obtain registration of the Mark in the relevant
country.
5. Dispute Resolution.
(a) Licensee and Licensor agree that, in the event that there
is a disagreement with regard to whether the quality of a product or a use of
the Mark materially detracts from the value of the Mark, senior management of
the parties will meet and negotiate in good faith in an attempt to resolve the
dispute. In the event that the parties are unable to resolve the dispute within
thirty (30) days from the date of written notice of disagreement, either party
may submit the dispute to binding arbitration, which shall be conducted as
follows: (i) the arbitration panel shall be composed of three parties, one
appointed by Licensee, one appointed by Licensor and one chosen by the
arbitrators appointed by Licensor and Licensee, provided, however, the third
arbitrator shall be an independent third party knowledgeable in marketing and
pet food sales and mutually satisfactory to Licensor and Licensee; (ii) the
arbitrators, in conducting such arbitration, shall have access to all relevant
documents and records of the parties; (iii) the arbitration shall be conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules") in effect on the date such arbitration is commenced
and shall be final and binding on the parties; and (iv) unless otherwise agreed,
all arbitration proceedings shall be conducted in New York City, New York in
English. In the event a mutually satisfactory third arbitrator is not appointed
within fifteen (15) days of submission of a dispute to binding arbitration,
appointment of the third arbitrator shall be as provided in the Rules.
(b) If either party concludes in good faith that the quality
of a product being sold by the other party bearing the Mark presents a material
health hazard, such party shall have the right, notwithstanding the negotiation
and arbitration provisions set forth above, to seek an injunction in a court of
competent jurisdiction to cause the other party to cease manufacturing, sale or
distribution of the offending product, or to recall already distributed product.
Furthermore, except as set forth in subsection (a) above, nothing herein shall
prevent either party from exercising any other rights or remedies available at
law to enforce or preserve their rights under this License Agreement, including,
but not limited to, their respective rights to indemnification pursuant to
Section 9 of this Agreement.
6. Ownership. Licensee acknowledges Licensor's ownership of the Mark
subject to this License Agreement and Licensee agrees that all use by Licensee
of the Mark shall inure to Licensor's benefit. Licensor and Licensee further
agree that any and all alterations or new packaging, label designs and trade
dress used on or in connection with the Licensed Products will become part of
the Mark and shall be deemed owned from their inception by Licensor without the
-5-
<PAGE>
need for additional or further assignments. Licensee shall at any time execute
any documents reasonably required by Licensor to confirm Licensor's ownership of
all such rights. In the event that Licensee shall fail to execute and return to
Licensor any documents reasonably required by Licensor to confirm Licensor's
ownership of such rights, Licensee hereby appoints Licensor as its
attorney-in-fact for such purpose (it being acknowledged that such appointment
is irrevocable and coupled with an interest) with full power of substitution and
delegation. Licensor shall supply Licensee with copies of any such documents
promptly after execution.
7. Infringement Proceedings.
(a) So long as this Agreement is in effect, each party agrees
to notify the other of any unauthorized uses of the Mark by any third party as
promptly as it comes to such party's attention. Either Licensee or Licensor
shall have the right and discretion to bring infringement or unfair competition
proceedings involving the Mark in the manner more specifically described below;
provided, however, that each party covenants and agrees to cooperate with and
furnish full assistance to one another in connection with the procurement,
protection and maintenance of the Mark and their rights associated therewith.
(b) Licensor shall have the initial right to determine whether
or not any demand, suit or other action shall be taken on account of or with
reference to any infringement or unfair competition in connection with the Mark
and shall have the right to take such action as it may determine. Licensee shall
not institute any suit or take any action on account of any such infringement or
unfair competition without first obtaining the express written consent of
Licensor to do so. Licensor's consent shall not be unreasonably withheld or
delayed. The parties agree to cooperate with each other in any manner which the
litigating party may reasonably request in connection with any such litigation;
provided, however, that the non-litigating party will be entitled to
reimbursement of its reasonable expenses directly related to such cooperation in
excess of $5000.00. In all instances, the party commencing the litigation shall
have the right to employ counsel of its choosing and to direct the handling of
the litigation and the settlement thereof. Notwithstanding the foregoing, no
action may be settled by Licensee without the prior consent of Licensor, which
consent shall not be unreasonably withheld or delayed. All amounts awarded as
damages, profits or otherwise in connection with such litigation shall be
divided among the parties as their interests may appear. Nothing herein shall be
construed as imposing any duty or obligation upon Licensor to take any action
against any alleged infringer.
8. Termination. Notwithstanding anything herein to the contrary,
Licensor shall have the right to terminate this Agreement effective upon ninety
(90) days written notice to Licensee in the event (i) Licensee commits a
material breach
-6-
<PAGE>
of this Agreement which is not cured to comply with the terms of this Agreement
within such ninety (90) day notice period or (ii) Licensee ceases to use the
Mark in connection with the manufacture, distribution or sale of the Licensed
Products, either as a primary brand, subbrand, maker's mark or otherwise in the
ordinary course of business, in connection with Licensed Products for a period
in excess of twelve (12) and does not commence use of the Mark in connection
with the Licensed Products in the ordinary course of business within the ninety
(90) day notice period. Upon termination of this Agreement, Licensee agrees to
destroy any molds, plates, packaging or finished product bearing the Mark which
are in its possession or control and thereafter cease any and all use of the
Mark.
9. Indemnification. Licensee shall indemnify and agrees to defend
Licensor from any and all damages (but excluding any incidental or consequential
damages or claims for lost profits) resulting from or arising out of the
manufacture, packaging, distribution, selling, handling, consumption or
marketing of Licensed Products by Licensee except to the extent such damages are
the result of or caused by the negligence of Licensor or its agents or
employees, or the result of instructions or standards dictated by Licensor with
respect to the Licensed Products. Furthermore, each party indemnifies and agrees
to defend the other in the event of any breach of any covenant or provision of
this Agreement. Each party (a) shall provide the other with reasonable notice of
any such claims and cooperate with the defense of any such claim, and (b) agrees
that the provisions of this Section 10 shall survive the expiration of this
Agreement for the period of any applicable statute of limitations. The
indemnifications set forth in this paragraph shall include reasonable attorney's
fees, settlement costs and any other expenses reasonably related to the
indemnification.
10. Insurance. Licensee shall maintain throughout the Term a
reasonably adequate products liability insurance policy with limits of no less
than One Million Dollars ($1,000,000.00) combined single limit with a
financially responsible insurance carrier naming Licensor as an additional
insured and providing Licensor with thirty (30) days notice of cancellation or
alteration.
11. Confidentiality. Any confidential information disclosed by
either party to the other, except as set forth below, shall be considered
confidential information, and shall be accorded the same treatment which the
receiving party gives to its own confidential information. The obligation of
confidentiality set forth in the preceding sentence shall not apply to
information which (a) was publicly available at the time of the disclosure to
the receiving party; (b) subsequently becomes publicly available through no
fault of the receiving party; (c) is rightfully acquired by the receiving party,
subsequent to disclosure by the other party, from a third party who to the
receiving party's knowledge is not in breach of a confidential relationship with
regard to such information; or (d) is independently developed by
-7-
<PAGE>
the receiving party solely through the efforts of individuals who did not have
access to the confidential information.
12. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
permitted assigns. Notwithstanding the foregoing, neither party shall assign,
transfer or delegate any of its rights under this Agreement or delegate any of
its obligations under this Agreement to any entity which is not a parent or
affiliate of the assigning party without the other party's prior written
approval, and any such assignment, transfer or delegation made without such
approval shall be void ab initio; provided, however, (i) Licensor and Licensee
shall be permitted to assign, transfer or delegate any of its rights and/or
obligations under this Agreement in connection with the sale of all or part of
its business to any third party without the consent of the other party provided
such third party expressly agrees to be bound by the terms and conditions of
this Agreement and (ii) Licensor shall be permitted to assign, transfer or
delegate any of its rights and/or obligation under this Agreement to any lender
providing financing to Licensor without the consent of Licensee provided such
assignment, transfer or delegation is expressly subject to the terms and
conditions of this Agreement
13. Force Majeure. Neither party to this Agreement shall be held
liable for failure to comply with any of the terms of this Agreement when such
failure has been caused by fire, flood, labor dispute, strike, war, energy
shortage, insurrection, government restrictions or regulations or force majeure
beyond the control of the party involved.
14. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO ITS RULES OR CONFLICTS OF LAW.
(b) Nothing herein contained shall be deemed to create the
relationship of partnership or joint venture between the parties. Neither party
shall have the right to incur any obligation to third parties which shall be
binding upon the other and neither party shall have any interest whatever in the
profits and liabilities of the other arising out of or resulting from the
subject matter of this Agreement.
(c) Unless otherwise specified herein, notices to the parties
shall be sent by prepaid certified or registered mail, or by a national
overnight courier service, to the parties at the following addresses (or at such
other address as shall be specified by like notice):
-8-
<PAGE>
(i) If to Licensee, to:
Heinz Pet Products Company
One Riverfront Place
Newport, Kentucky 41071
Attention: Vice President, Value Brands Marketing
with a copy to:
H.J. Heinz Company
600 Grant Street
Pittsburgh, Pennsylvania 15230
Attn: Senior Vice President and General Counsel
(ii) If to Licensor, to:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, Tennessee 37037
Attention: Mr. Bobby Dale, President
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022
Attn: Craigh Leonard, Esq.
(d) The failure of either party to insist on compliance with
any provision hereof shall not constitute a waiver or modification of such
provision or any other provision.
(e) If any provision hereof is held to be invalid or
unenforceable by any court of competent jurisdiction or any other authority
vested with jurisdiction, such holding shall not effect the validity or
enforceability of any other provision hereto.
(f) The paragraph order and heading are for convenience only
and shall not be deemed to affect in any way the language, obligations or the
provisions to which they refer.
-9-
<PAGE>
(g) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, and may be amended or
modified only in writing executed by each party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WINDY HILL PET FOOD COMPANY, HEINZ PET PRODUCTS COMPANY, a
INC. division of Star-Kist Foods Inc.
By: /s/ Robert V. Dale By: /s/ Michael Jon Bertasso
--------------------------- ------------------------------------
Name: Robert V. Dale Name: Michael Jon Bertasso
Title: President Title: Chief Cost Officer
- 10 -
<PAGE>
SCHEDULE A
LIST OF LICENSED MARKS
================================================================================
Mark Country Reg. No.
---- ------- --------
- --------------------------------------------------------------------------------
Tuffy's Benelux 319,988
- --------------------------------------------------------------------------------
Tuffy's Japan 1,279,595
- --------------------------------------------------------------------------------
Tuffy's Japan 1,302,914
(in Katakana Characters)
- --------------------------------------------------------------------------------
Tuffy's Taiwan 683,198
- --------------------------------------------------------------------------------
Tuffy's and Tuffy's Taiwan 484,245
(in Chinese Characters)
================================================================================
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT, made and entered into this 29th day of April, 1996, by
and between Perk Foods Co., Incorporated ("PERK FOODS") a corporation organized
and existing under the laws of Delaware, having its principal place of business
at One Riverfront Center, Newport, KY, 41701 (hereinafter Perk Foods is referred
to as "LICENSOR"), and Windy Hill Pet Food Company, Inc., a corporation
organized and existing under the laws of Delaware having its principal place of
business at Two Maryland Farms, Suite 301, Brentwood, Tennessee 37037
(hereinafter referred to as "LICENSEE").
WITNESSETH:
WHEREAS, PERK FOODS is the owner of certain rights, title and interest
in registered trademark VETS', Registration No.893,811, in the United States
Patent & Trademark Office and to trade dress, label designs and good will
associated therewith and attached hereto as Exhibit A excluding the terms "Heinz
Pet Products Company" and "H. J. Heinz Company" (cumulatively referred hereafter
as "The Licensed Property"); and
WHEREAS, LICENSOR and certain other parties affiliated to LICENSOR have
entered into an Asset Purchase Agreement with LICENSEE dated the 17th day of
April, 1996 (the "Asset Purchase Agreement") whereby, pursuant to Section 2.1(j)
therein it was agreed that LICENSOR would grant LICENSEE an exclusive royalty
free license to use the Licensed Property in connection with the manufacture,
distribution, marketing and sale of maintenance dry dog food.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and contracts hereinafter set forth, LICENSOR and LICENSEE agree as
follows:
1. Grant of License. LICENSOR hereby grants LICENSEE hereof a non-exclusive
royalty free license to use the Licensed Property in the United States (the
"Territory") in connection with the manufacture, distribution, marketing
and sale of maintenance dry dog food only in the value brand segment of
retail grocery stores (the "Licensed Products"). LICENSOR retains the right
to use the Licensed Property on all other products other than the Licensed
Products.
2. Use of Contract Manufacturer or Sublicense. Subject to the prior written
approval of LICENSOR, which shall not be unreasonably withheld, LICENSEE
may sublicense the Licensed Property or utilize the service of third party
manufacturers to produce the Licensed Products to be sold by LICENSEE.
However, LICENSEE will not grant a sublicense to or utilize the services of
a third party manufacturer
<PAGE>
who is a major branded competitor or affiliated to a competitor of the H.
J. Heinz Company, its subsidiaries or affiliates without the prior written
approval of LICENSOR. Subject to LICENSOR'S written approval, LICENSEE will
assure that there are adequate quality control provisions in any third
party manufacturer agreement or sublicense. Subject to LICENSOR'S written
approval, LICENSEE shall take all steps reasonably necessary to enforce and
implement such quality control provisions. LICENSEE will not distribute or
permit any of its sublicensees to distribute any Licensed Products which
are not produced in compliance with the Standards.
3. Adherence to Standards. LICENSEE shall only use the Licensed Property in
connection with the distribution, marketing and sale of Licensed Products
which have been approved by LICENSOR, in its reasonable discretion and
which have been manufactured by LICENSEE in accordance with the standards
and specifications currently used by LICENSOR in connection with similar
products or such standards, specifications and instructions supplied by or
approved by the LICENSOR, in its reasonable discretion, from time to time
(the "Standards"). Any change to the Standards will be submitted by
LICENSEE to LICENSOR for approval, which approval by LICENSOR shall not be
unreasonably withheld. Failure of LICENSOR to respond in writing within
thirty (30) days of a request for approval shall result in the request
being deemed approved.
4. Plant Inspection and Approval. LICENSEE will not, nor will LICENSEE permit
the plants of its sublicensees or third party manufacturers to, manufacture
the Licensed Products at any time that the plants are not in compliance
with the Standards. LICENSOR, or its respective designees shall have the
continuing right to conduct inspections only of the relevant portions of
the LICENSEE's or its sublicensees or any third party manufacturers
manufacturing plants for compliance with the Standards; provided, however,
LICENSEE may restrict access by LICENSOR or its respective designees to
only those areas where the Licensed Products and ingredients, materials and
data related to the Licensed Products are processed, tested or stored. Such
inspections may be conducted also at any time when LICENSOR has reasonable
belief that there are or may be quality problems or problems with good
manufacturing practices with respect to the Licensed Products. Plant
inspections shall be conducted during regular business hours and upon
48-hour notice. Notwithstanding such right of inspection, nothing herein
shall relieve LICENSEE from any liability or shift any liability to
LICENSOR for LICENSEE's nonconformance with federal, state or local laws or
regulations.
5. Cure of Defects. If the LICENSEE's manufacturing plants fail to comply with
or satisfy such Standards in any material respects, then LICENSOR will so
advise LICENSEE verbally and confirm in writing prescribing a reasonable
period for curing defects. LICENSOR in its reasonable judgment can require
the
- 2 -
<PAGE>
plant(s) to discontinue production until the defect is cured if such defect
could be injurious to consumer health or the Licensed Property.
6. Compliance with Federal, State, and Local Laws. LICENSEE will comply in all
material respects with any and all local, city, county, state and federal
laws, regulations and orders now in effect or which may hereafter be
enacted pertaining to or affecting the manufacture, distribution or sale of
the Licensed Products, including but not limited to: (a) the Federal Food
Drug and Cosmetic Act; and (b) laws and regulations implemented by the
United States Department of Agriculture; and (c) any similar applicable
state laws or regulations.
7. Quality Control. LICENSEE will at all times cooperate reasonably to the
full extent reasonably required by LICENSOR and its authorized
representatives with the enforcement of LICENSOR's quality control programs
(which are incorporated in the Standards). LICENSEE will furnish to
LICENSOR such information as LICENSOR may reasonably request concerning
LICENSEE's quality control program or quality control records in the form
specified in the Standards. LICENSEE shall furnish per the schedule and
methods established in the Standards without cost to LICENSOR random
samples of each Licensed Product being sold or distributed by LICENSEE,
together with packaging materials upon which the Licensed Property is used.
LICENSOR will pay the costs of shipping/transporting samples.
8. Changes in Standards. If LICENSEE submits proposed changes in the
Standards, LICENSEE shall, as a condition precedent to the approval by
LICENSOR submit to LICENSOR for LICENSOR's written approval, a minimum of
two (2) samples of the existing Licensed Product, together with the revised
Standards. LICENSOR shall respond to LICENSEE's request for approval in 14
days and failure by LICENSOR to respond to LICENSEE regarding approval
within 14 days shall be deemed approval.
9. Trademark Use. LICENSEE will submit copies of labels and advertising
materials bearing the Licensed Property to LICENSOR for review prior to
commercial use to assure proper use of the Licensed Property. LICENSOR
shall have seven (7) business days to provide comments to LICENSEE and to
approve use of the Licensed Property. Failure of LICENSOR to reply to
LICENSEE within the seven (7) business days shall be deemed approval of the
use of the Licensed Property.
10. Ownership Rights to Trade Dress and Label Designs. LICENSEE may have
heretofore and may hereafter from time to time alter or develop new
packaging , label designs and trade dress for the Licensed Products
marketed under the Licensed Property. The parties agree that all
alterations or new packaging, label designs and trade dress used on or in
connection with the Licensed Products will become part of the Licensed
Property and shall be deemed owned from their inception by the LICENSOR
without
- 3 -
<PAGE>
need for additional or future assignments. At LICENSEE's request and at
LICENSEE's cost, LICENSOR will file trademark application to register any
such new Licensed Property. LICENSOR, at its discretion, may decline to
file such applications should it conclude in its reasonable judgement that
such action will lead to opposition or litigation.
11. Term and Termination. The term of this Agreement shall be for a period of
three (3) years from the date of execution hereof. LICENSOR may immediately
terminate this Agreement upon the failure of LICENSEE to cure a material
breach of the terms or conditions of this Agreement upon receipt of
forty-five days written notice from LICENSOR. LICENSOR may also immediately
terminate this Agreement in the event that the LICENSEE shall declare
bankruptcy, suffer proceedings in insolvency or make an assignment for the
benefit of creditors; or upon the sale, transfer or other disposition,
without the prior written consent of LICENSOR, including any such transfer
by operation of law, of all or part of LICENSEE's manufacturing business;
or the consolidation or merger of the LICENSEE with or into one (1) or more
corporations unless LICENSEE, its parent, or an affiliate controlled by
LICENSEE or its parent, is the surviving corporation of such consolidation
or merger. "Control" means ownership, directly or indirectly, of at least
51% of the voting shares. Upon termination, LICENSEE shall immediately
cease to manufacture and sell the Licensed Products, shall cease using the
Licensed Property in any form or any term, label design or trade dress
which may be confusingly similar to the Licensed Property. LICENSEE may,
for a period not to exceed ninety days after termination, sell inventory of
Licensed Products which have been manufactured by LICENSEE prior to the
date of termination.
12. Ownership of Standards. LICENSEE agrees that the Standards shall be and
will remain the Property of LICENSOR during and subsequent to the
termination of this Agreement.
13. Non-Disclosure of Confidential Information. The parties acknowledge that
they will exchange certain confidential business information and know-how
including but not limited to the Standards (the "Confidential
Information"). The parties shall treat as confidential all of the
Confidential Information and shall not disclose such Confidential
Information to any unauthorized third person. This obligation of
confidentiality does not extend to (i) information known to the recipient
prior to its disclosure by the disclosing party; (ii) information known to
the public prior to its disclosure or which becomes known to the public
through no fault of the recipient; (iii) information acquired by recipient
from a third party not under an obligation of confidentiality to the
disclosing party; and (iv) information which is independently developed.
The parties shall return all written Confidential Information and all
copies thereof to the other at the termination of this Agreement. The
covenants contained in this paragraph shall survive the termination of this
Agreement regardless of the reason for such termination for a period of
five (5) years after termination.
- 4 -
<PAGE>
14. Trademark Ownership. LICENSEE shall not assert any right or title to or
interest in the Licensed Property for use in connection with the
manufacture, distribution or sale of the Licensed Products except for the
rights granted under this Agreement and the Asset Purchase Agreement and
all use thereof shall inure to the benefit of LICENSOR. LICENSEE shall not
contest the validity, ownership or title of LICENSOR to any of the Licensed
Property. Upon termination of this Agreement for whatever reason, LICENSEE
shall cease using the Licensed Property as provided herein.
15. Ownership of Standards. LICENSEE agrees that the Standards shall be and
will remain the property of LICENSOR during and subsequent to the
termination of this Agreement.
16. Independent Contractors. Each party shall perform its obligations under
this Agreement as an independent contractor and not as an employee or agent
of the other. This Agreement does not constitute a joint venture. Neither
party has authority to create or to assume in the name of the other any
express or implied obligations of the other.
17. Liability. LICENSEE shall indemnify and save harmless LICENSOR from any and
all losses, claims, suits or damages and expenses, including reasonable
attorneys fees, but excluding any incidental or consequential damages or
claims for lost profits, resulting from or arising out of the manufacture,
packaging, distribution, selling, handling, consumption or marketing of the
Licensed Products prepared or sold by LICENSEE, provided however, that such
loss, claim, suit, damage or expense is not determined by a court of
competent jurisdiction to be the result of or caused by the negligence of
LICENSOR or its agents or employees, or the result of instructions dictated
by LICENSOR with respect to labeling or marketing the Licensed Products.
LICENSOR shall indemnify and save harmless LICENSEE from any and all
losses, claims, suits or damages and expenses, including reasonable
attorneys' fees, but excluding any incidental or consequential damages or
claims for lost profits, resulting from or arising out of any third party
claims that LICENSEE's use of the Licensed Property in accordance with the
Agreement infringes any third party trademarks. Furthermore, each party
shall indemnify and save harmless the other in the event such party shall
breach any covenant or other provision of this Agreement. Each party shall
provide the other with reasonable notice of any claims pursuant to this
Section 17 and cooperate with the defense of any such claim.
The provisions of this paragraph shall survive the termination of this
Agreement for any reason for the period of any applicable statute of
limitations.
- 5 -
<PAGE>
18. Recall. LICENSEE will work in cooperation with LICENSOR in the event of
recalls by governmental authorities, or by LICENSOR in reasonable
anticipation of a governmental recall, of any of the Licensed Products.
19. Insurance. LICENSEE shall maintain throughout the term of this Agreement an
adequate Products Liability Insurance Policy with limits of no less than
One Million Dollars ($1,000,000) combined single limit in a financially
responsible insurance carrier naming LICENSOR as an additional insured and
providing LICENSOR with thirty (30) days notice of cancellation or
alteration.
20 Assignment. Neither this Agreement, nor any right conferred therein, shall
be sold, assigned, transferred, sublicensed, pledged or otherwise
encumbered by LICENSEE, nor shall any interest of LICENSEE pass to any
third party by operations of law or otherwise except with the prior written
approval of LICENSOR, except, however, that LICENSEE may transfer to or may
merge, or consolidate, or be acquired by LICENSEE's parent or an affiliated
company controlled by LICENSEE or LICENSEE's parent. "Control" means
ownership, directly or indirectly, of at least 51% of the voting shares.
This Agreement may be assigned by LICENSOR by operation of law or otherwise
without the consent of LICENSEE.
21. Force Majeure. Neither party to this Agreement shall be held liable for
failure to comply with any of the terms of this Agreement when such failure
has been caused by fire, flood, labor dispute, strike, war, energy
shortage, insurrection, government restrictions or regulations or force
majeure beyond the control of the party involved.
22. Taxes. LICENSEE will pay and discharge, at its own expense, any and all
expenses, charges, fees and taxes arising out of and incidental to the
carrying on of its own business and save harmless LICENSOR against any and
all claims for such expenses, charges, fees and taxes.
23. Notices. Any and all notices which either party desires to give to the
other under the terms of this Agreement shall be in writing and shall be
mailed by certified mail, or registered mail, directed to the proper person
at the address set forth herein, or such other address as may be
communicated in writing and such notice, three business days after being
deposited in the United States mail, shall be deemed to have been received
by the other party unless the sending party can show actual receipt at an
earlier date:
If to LICENSOR:
President
Perk Foods Co., Incorporated
One Riverfront Place
Newport, KY 41071
- 6 -
<PAGE>
with a copy to:
Senior Vice President and General Counsel
H.J. Heinz Company
600 Grant Street
Pittsburgh, PA 15230
Vice President, Marketing
Heinz Pet Products Company
One Riverfront Place
Newport, KY 41071
If to LICENSEE:
President
Windy Hill Pet Food Company, Inc.
Two Maryland Farms
Suite 301
Brentwood, Tennessee 37037
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Attention: Craigh Leonard
24. Waiver. The failure by either party to enforce at any time or for any
period of time any one or more of the terms or conditions of this Agreement
shall not be considered a waiver of such terms or conditions or of either
party's right thereafter to enforce each and every term and condition of
this Agreement.
25. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the Commonwealth of Kentucky.
26. Prior Contracts. This License Agreement constitutes the entire
understanding between the parties with respect to the licensing of the
Licensed Property for use on the Licensed Products and may not be altered,
amended or modified unless the same shall be in writing and duly executed
by the duly authorized officers or representatives of each party.
27. Paragraph Headings. The paragraph headings appearing herein are intended
for convenience in the reading of this Agreement and are to have no force
or effect.
28. Calendar Days. All reference to notice periods in days shall mean calendar
days.
- 7 -
<PAGE>
THIS AGREEMENT shall not become binding until it is approved, accepted,
and signed by a duly authorized corporate officer of each of the parties.
PERK FOODS CO., INCORPORATED
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ D. Gadd
---------------------------------------
Name: D. Gadd
Title: V.P. Finance
- 8 -
<PAGE>
THIS AGREEMENT shall not become binding until it is approved, accepted,
and signed by a duly authorized corporate officer of each of the parties.
PERK FOODS CO., INCORPORATED
By: /s/ John Runkel
---------------------------------------
Name: John Runkel
Title: Vice President
WINDY HILL PET FOOD COMPANY, INC.
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
- 8 -
<PAGE>
EXHIBIT A
(ADVERTISEMENT FOR VETS NUGGETS DOG FOOD)
COMPARE
AND SAVE
VETS
NUTRITION RICH
NUGGETS
*100% COMPLETE AND BALANCED
DOG FOOD
NET WT. 5 LBS. (2.27 kg)
<PAGE>
EXHIBIT A
(ADVERTISEMENT FOR VETS NUGGETS DOG FOOD)
COMPARE
AND SAVE
VETS(R)
NUTRITION RICH
NUGGETS
*100% COMPLETE AND BALANCED
DOG FOOD
- --------------------------------------------------------------------------------
*MEETS OR EXCEEDS THE MINIMUM NUTRITIONAL LEVELS ESTABLISHED BY THE NATIONAL
RESEARCH COUNCIL FOR ALL STAGES OF A DOG'S LIFE.
*NATIONAL RESEARCH COUNCIL - NATIONAL ACADEMY OF SCIENCES
WASHINGTON, D.C.
NUTRITIONAL COMPARISONS
NUTRIENT AND * NRC NUTRIENT VETS'
FUNCTION REQUIREMENT MINIMUM
GUIDE (per kg
(per kg of food) of food)
PROTEIN for growth and maintenance 20.0% 21.0%
FAT for energy, skin and coat 4.5% 8.0%
LINOLEIC ACID for skin and coat 0.9% 1.65%
CALCIUM for bones, teeth and muscles 1.0% 1.5%
PHOSPHORUS for bones and teeth 0.8% 1.2%
POTASSIUM for growth 0.5% 1.1%
SODIUM CHLORIDE for normal body
functions, skin and coat 1.0% 1.3%
MAGNESIUM for muscles, blood
and bones 0.036% 0.215%
IRON for blood 54.0 mg. 224.4 mg.
COPPER for blood 6.5 mg. 9.7 mg.
MANGANESE calalyst for metabolic
processes 4.5 mg. 26.8 mg.
ZINC for growth 45.0 mg. 70.8 mg.
IODINE for the thyroid 1.39 mg. 1.70 mg.
SELENIUM for muscles 0.10 mg. 0.15 mg.
FOR VARIETY
SERVE
(BAR CODE) VETS
0 11135 00408 5 CANNED
DOG FOOD
FEEDING DIRECTIONS
The usual daily food requirement is 1 cup of VETS Nuggets for each 8 pounds your
dog weights. Feed according to preference--moisten with warm water or feed
straight from bag. If fed dry, food can be available for dog to eat as desired.
Keep fresh water available at all times...it's good health practice.
NUTRIENT AND * NRC NUTRIENT VETS'
FUNCTION REQUIREMENT MINIMUM
GUIDE (per kg
(per kg of food) of food)
VITAMIN A for eyes, appetite
and growth 4500 IU 4620 IU
VITAMIN D for bones and teeth 450 IU 484 IU
VITAMIN E needed during reproduction 45 IU 90 IU
THIAMINE for appetite, growth
and muscles 0.90 mg. 2.84 mg.
RIBOFLAVIN for skin, eyes and muscles 2.0 mg. 2.7 mg.
PANTOTHENIC ACID for appetite,
growth and digestion 9.0 mg. 15.4 mg.
NIACIN for nerves 10.3 mg. 2.7 mg.
PYRIDOXINE for blood and
normal growth 0.9 mg. 3.4 mg.
FOLIC ACID for blood, reproduction
and maintenance 0.16 mg. 0.22 mg.
BIOTIN for skin and coat 0.09 mg. 0.18 mg.
VITAMIN B12 for growth and blood 0.020 mg. 0.035 mg.
CHOLINE for growth and the liver 1100 mg. 1180 mg.
(PHOTO OF VETS CANNED DOG FOOD) "NUTRITIOUS, GOOD TASTING VETS
CANNED DOG FOOD IS AVAILABLE IN A
VARIETY OF FLAVORS, ALL OF WHICH ARE
SURE TO PLEASE YOUR DOG'S APPETITE.
SERVE RIGHT FROM THE CAN OR MIXED
WITH NUTRITION RICH VETS NUGGETS."
A FOOD FOR PUPPIES
Feed your puppy VETS Nuggets as soon as he is old enough to take solid
nourishment...usually at about 5 weeks. VETS Nuggets gives your puppy proper
nutrition during this important growth period. Feed your puppy all it will eat
in period of 15 minutes. The following is a guide for quantity and number of
feedings per day. From 5-10 weeks, feed 1 cup of Nuggets 4 times a day. From
10-16 weeks 2 cups 3 times a day. In all feedings add sufficient water or milk
for the consistency that your puppy prefers.
FEEDING INSTRUCTIONS:
SIZE OF DOG WEIGHT OF DOG [ILLEGIBLE]
TOY ............................ 5-15 LBS ........................... 1-2 CUPS
SMALL .......................... 15-25 LBS ........................... 2-3 CUPS
MEDIUM ......................... 25-50 LBS ........................... 3-5 CUPS
LARGE .......................... 50-90 LBS ........................... 5-8 CUPS
FOOD REQUIREMENTS WILL VARY WITH THE SIZE AND ACTIVITY OF YOUR DOG.
HEINZ PET PRODUCTS COMPANY,
AN AFFILIATE OF
H.J. HEINZ COMPANY,
NEWPORT, KY 41071
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT A
(ADVERTISEMENT FOR VETS NUGGETS DOG FOOD)
NET WT.
5
LBS.
(2.27 kg)
NUTRITION RICH
[ILLEGIBLE]
VETS
NUGGETS
COMPARE
AND SAVE
PRICE
(ADVERTISEMENT FOR VETS NUGGETS DOG FOOD)
COMPARE
AND SAVE
VETS
NUTRITION RICH
NUGGETS
*100% COMPLETE AND BALANCED
DOG FOOD
- --------------------------------------------------------------------------------
VETS DOG FOOD
INGREDIENTS
GROUND YELLOW CORN, SOYBEAN MEAL, WHEAT MIDDLINGS, MEAT AND BONE MEAL, ANIMAL
FAT PRESERVED WITH BHA, DIGEST OF POULTRY BY-PRODUCTS, SALT, YEAST CULTURE,
CHOLINE CHLORIDE, ZINC OXIDE, IRON SULFATE, MANGANESE SULFATE, VITAMIN E
SUPPLEMENT, VITAMIN A SUPPLEMENT, COPPER OXIDE, CALCIUM PANTOTHENATE, NIACIN,
ETHYLENEDIMINE DIHYDRIODIDE, VITAMIN D8 SUPPLEMENT, COBALT CARBONATE,
RIBOFLAVIN SUPPLEMENT, ETHOXYQUIN (A PRESERVATIVE), PYRIDOXINE HYDROCHLORIDE
(VITAMIN B8 SOURCE), THIAMIN MONONITRATE (VITAMINE B1 SOURCE), FOLIC ACID,
VITAMIN B12 SUPPLEMENT. 1012-QA
GUARANTEED ANALYSIS:
CRUDE PROTEIN ..................................................... MIN. 21.0%
CRUDE FAT ......................................................... MIN. 8.0%
CRUDE FIBER ....................................................... MAX. 5.0%
MOISTURE .......................................................... MAX. 12.0%
HEINZ PET PRODUCTS COMPANY,
AN AFFILIATE OF
H.J. HEINZ COMPANY,
NEWPORT, KY 41071
- --------------------------------------------------------------------------------
(ADVERTISEMENT FOR VETS NUGGETS DOG FOOD)
COMPARE
AND SAVE
VETS
NUTRITION RICH
NUGGETS
*100% COMPLETE AND BALANCED
DOG FOOD
- --------------------------------------------------------------------------------
VETS DOG FOOD
INGREDIENTS
GROUND YELLOW CORN, SOYBEAN MEAL, WHEAT MIDDLINGS, MEAT AND BONE MEAL, ANIMAL
FAT PRESERVED WITH BHA, DIGEST OF POULTRY BY-PRODUCTS, SALT, YEAST CULTURE,
CHOLINE CHLORIDE, ZINC OXIDE, IRON SULFATE, MANGANESE SULFATE, VITAMIN E
SUPPLEMENT, VITAMIN A SUPPLEMENT, COPPER OXIDE, CALCIUM PANTOTHENATE, NIACIN,
ETHYLENEDIMINE DIHYDRIODIDE, VITAMIN D8 SUPPLEMENT, COBALT CARBONATE,
RIBOFLAVIN SUPPLEMENT, ETHOXYQUIN (A PRESERVATIVE), PYRIDOXINE HYDROCHLORIDE
(VITAMINE B8 SOURCE), THIAMIN MONONITRATE (VITAMINE B1 SOURCE), FOLIC ACID,
VITAMIN B12 SUPPLEMENT. 1012-QA
GUARANTEED ANALYSIS:
CRUDE PROTEIN ..................................................... MIN. 21.0%
CRUDE FAT ......................................................... MIN. 8.0%
CRUDE FIBER ....................................................... MAX. 5.0%
MOISTURE .......................................................... MAX. 12.0%
HEINZ PET PRODUCTS COMPANY,
AN AFFILIATE OF
H.J. HEINZ COMPANY,
NEWPORT, KY 41071
- --------------------------------------------------------------------------------
<PAGE>
TRANSITION STORAGE AND HANDLING AGREEMENT
This Transition Storage and Handling Agreement (this "Agreement") is
made and entered into as of April 29, 1996 by and between HEINZ PET PRODUCTS
COMPANY, a Division of Star-Kist Foods Inc., a California corporation,
(hereinafter referred to as "HEINZ") and WINDY HILL PET FOOD COMPANY INC., a
Delaware corporation (hereinafter referred to as "WINDY HILL").
WHEREAS, this Agreement is entered into in connection with the
acquisition of the Tuffy's, Vets, and Kozy Kitten Pet Food Businesses (the "Pet
Food Business") by WINDY HILL, pursuant to the terms and conditions of a certain
Asset Purchase Agreement, dated April 17, 1996 (the "Purchase Agreement").
WHEREAS, upon the consummation of the acquisition and related
transactions contemplated by the Purchase Agreement, WINDY HILL will carry on
the Pet Food Business acquired from HEINZ.
WHEREAS, WINDY HILL desires to have HEINZ provide certain storage and
handling services as specified in Attachment 1 to this Agreement and HEINZ has
agreed to provide such services pursuant to the terms and conditions set forth
below, and
WHEREAS, all capitalized terms used without definition in this
Agreement shall have the meaning specified in the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
that this Agreement contains, and for other good and valuable consideration, the
receipt and adequacy of which the parties acknowledge, WINDY HILL and HEINZ, in
tending to be bound legally agree as follows:
(1) This Agreement shall become effective on April 29, 1996 (the
"Effective Date") and continue in full force and effect through July 29, 1996.
WINDY HILL may, at its sole
1
<PAGE>
discretion, elect to terminate services at any one or more of the warehouses
(each a "Warehouse" and collectively, the "Warehouses") under this Agreement
before July ___, 1996. WINDY HILL shall give HEINZ thirty days' prior written
notice of such early termination.
(2) HEINZ shall store and handle at each of the Warehouses products of
the Pet Foods Business for WINDY HILL as an independent contractor, not as a
partner or agent of WINDY HILL, and shall render services as specified in this
Agreement at the Warehouses.
(3) Services provided by HEINZ shall include in and out handling, order
filling, supervision and clerical services, maintaining inventory records and
supplying daily reports listing quantities received and quantities shipped and
balance on hand, by SKU. HEINZ shall properly rotate the WINDY HILL merchandise.
Damage to WINDY HILL products and inventory loss from causes other than the
negligence of WINDY HILL shall not exceed 0.5% of the dollar amount of outbound
shipments during the term of this Agreement. At the end of the term of this
Agreement, HEINZ shall reimburse WINDY HILL for all loss and damage from causes
other than the negligence of WINDY HILL in excess of said allowance, in an
amount equal to WINDY HILL standard product cost for said excess. HEINZ may
recoup any such damaged product and thus reduce inventory loss. WINDY HILL may,
but shall not be required to, salvage and resell any damaged merchandise, in
which case the net proceeds of the sale shall reduce the inventory loss. HEINZ
shall have no liability or obligation to WINDY HILL for merchandise that becomes
unsaleable because of age due to circumstances other than a breach of the
obligations of HEINZ under this Agreement. HEINZ shall store all goods and
merchandise warehoused for WINDY HILL by HEINZ under this Agreement in a manner
similar to the manner that HEINZ stored such merchandise at the Warehouses
immediately before the Effective Date. HEINZ shall not permit WINDY HILL to
install its inventory management systems at the Warehouses.
HEINZ shall process all orders, shipments, and inventory transactions
through its "COPS" or normal system. HEINZ shall provide WINDY HILL with
information which is currently available as requested at no additional charge.
HEINZ shall honor special requests for information when possible at a
compensation level mutually agreeable to HEINZ and WINDY HILL.
2
<PAGE>
HEINZ shall tender all outbound shipments shipper load / carrier count.
The carrier count shall be binding upon WINDY HILL with respect to product count
and product damage. Notwithstanding the foregoing, HEINZ shall be liable for
shortages or product damage on outbound shipments if HEINZ does not permit the
carrier to count or if WINDY HILL has sufficient evidence that the shortage or
damage was due to the negligence or misconduct of HEINZ. HEINZ may, but shall
not be obligated to, refuse to load any trailer not meeting the safety or
sanitation standards of HEINZ or of WINDY HILL.
HEINZ retains the right, but shall not be obligated to, to inspect all
inbound shipments and to reject any products not meeting its sanitation or
safety requirements. WINDY HILL shall indemnify and hold harmless HEINZ
(including its affiliates, parent, and subsidiary companies) from and against
any and all claims, demands, actions, suits, causes of action, liabilities,
damages, and expenses (including, but not limited to attorneys' fees) arising
from the warehousing, storage, or handling of infested or contaminated WINDY
HILL merchandise under this Agreement.
HEINZ shall be responsible for payment of all demurrage charges of
incoming inventory not unloaded in a timely manner in accordance with historical
standards.
(4) For the services specified above, WINDY HILL shall pay in
accordance with Section 5 to HEINZ a monthly storage, handling, administrative
and transportation charges as set forth in Attachment 1. The monthly storage and
administrative charges shall not be prorated for any partial month of services
being provided. All months shall be on a HEINZ fiscal month basis. These rates
are inclusive and cover all services provided by HEINZ excluding charges for
conducting a physical inventory or charges for extra services.
In the event of a product recall necessitating extra services from
HEINZ with respect to WINDY HILL merchandise at the Warehouses, WINDY HILL shall
reimburse HEINZ fully for the labor costs, at the regular or overtime rate,
whichever is applicable, that HEINZ incurs in providing such extra services. If
WINDY HILL shall desire other extra services from HEINZ at the Warehouses not
associated with recall, the parties shall negotiate a price for such services.
3
<PAGE>
(5) WINDY HILL shall pay all monies due and payable to HEINZ under this
Agreement in accordance with the Transition Services Agreement of even date with
this Agreement between the parties or if such Transition Services Agreement is
not in effect, within ten days after receipt of invoice. HEINZ shall bill WINDY
HILL within ten days after the fifteenth day of each month for the handling
charges incurred in the month preceding and storage charges for the month
following, such invoice to be accompanied by appropriate documentation and in a
fashion so as to recap the activity with reasonable specificity. If termination
of this Agreement is on a date other than the fifteenth day of a month, HEINZ
shall bill WINDY HILL within ten days after termination for the handling charges
incurred from the most recent fifteenth day of a month during the term of this
Agreement to termination.
(6) All taxes, utilities and maintenance relating to the Warehouses
will be the responsibility of HEINZ and are included in the storage rate.
(7) (a) WINDY HILL shall indemnify and hold harmless HEINZ (including
its affiliates, parent and subsidiary companies) from and against any and all
claims, demands, actions, suits, causes of action, damages and expenses
(including, but not limited to, expenses of investigation, settlement,
litigation and attorneys' fees incurred in connection therewith), (i) which are
hereafter made, sustained, or brought against HEINZ (including its affiliates,
parent and subsidiary companies) and/or any of its customers by any individual,
corporation, partnership, limited liability company, joint venture, association,
joint-stock company, trust, unincorporated organization or foreign, federal,
state, local or other governmental authority or regulatory body (each, a
"Person") in connection with damages to or defects in WINDY HILL products
resulting from WINDY HILL'S actions; or (ii) which arise from a breach by WINDY
HILL of the terms of this Agreement.
(b) HEINZ shall indemnify and hold harmless WINDY HILL (including
its affiliates, parent and subsidiary companies) from and against any and all
claims, demands, actions, suits, causes of action, damages and expenses
(including, but not limited to, expenses of investigation, settlement,
litigation and attorneys' fees incurred in connection therewith), (i) which are
hereafter made, sustained, or brought against WINDY HILL (including its
affiliates, parent and subsidiary companies) and/or any of its customers by
any Person in connection
4
<PAGE>
with damages to or defects in WINDY HILL'S products resulting from HEINZ'
actions; or (ii) which arise from a breach by HEINZ of the terms of this
Agreement.
(c) With respect to any third person claim, demand, action, suit,
cause of action, damages and / or expenses against a party entitled to
indemnification hereunder (an "Indemnifying Party"), the party responsible for
indemnification hereunder (the "Indemnifying Party") shall have the right to
conduct and control, through counsel of its choosing, the defense, compromise or
settlement of any such matter as to which indemnification will be sought by the
Indemnified party from the Indemnifying Party hereunder, and in any such case
the Indemnified party shall cooperate in connection therewith and shall furnish
such records, information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested by the
Indemnifying party in connection therewith; provided that the Indemnified Party
may participate, through counsel chosen by it and at its own expense, in the
defense of any such claim, demand, action, suit or cause of action as to which
the Indemnifying Party has so elected to conduct and control the defense
thereof. Notwithstanding the foregoing, the Indemnified party shall have the
right to pay, settle or compromise any such claim, demand, action, suit, cause
of action, damages or expenses; provided, however, that in such event the
Indemnified party shall waive any right to indemnity therefore hereunder.
(8) It is understood and agreed that if any paragraph or portion of
this Agreement shall be in violation of any applicable law, such paragraph or
portion shall be inoperative, but the remainder of the Agreement shall remain
valid and shall continue to bind the parties.
(9) For a period of one year after the end of the term of this
Agreement, WINDY HILL may request HEINZ to provide warehousing and handling
services under this Agreement. HEINZ on its sole discretion may agree to provide
or decline to provide such services. If HEINZ provides such services, the
charges shall be as set forth in Section (B) of Attachment 1.
(10) This Agreement may be terminated by the parties as follows:
(a) WINDY HILL may terminate this Agreement at any time, for
any reason, if it shall have given at least thirty days' prior written
notice of such termination.
5
<PAGE>
(b) WINDY HILL may terminate this Agreement as to any
Warehouse upon thirty days' notice.
(c) WINDY HILL may terminate this Agreement in the event of a
material breach of this Agreement by HEINZ, which breach remains
unremedied fifteen days after notice thereof to HEINZ
Upon expiration or termination of this Agreement for any reason HEINZ
shall return to WINDY HILL all written confidential information received from
WINDY HILL or its affiliates. For the purpose of this paragraph, HEINZ agrees
that upon expiration or termination of this Agreement, it shall promptly advise
WINDY HILL of the quantity of WINDY HILL'S products that it has on hand at such
termination date.
(11) HEINZ shall maintain at its expense such insurance as will fully
protect it from claims under Worker's Compensation and Occupational Disease Acts
and from any other claims for damage for bodily injury, inducing death, and for
property damage, that may arise from operations under this Agreement, whether
such operations be by HEINZ or by any subcontractor or anyone directly or
indirectly employed by either of them.
(12) Any notice required or permitted under the terms of this Agreement
may be given by either party to the other by registered mail, addressed to the
party to whom the notice is to be given at the address as follows:
HEINZ: STAR-KIST FOODS, INC.
One Riverfront Place
Newport, Kentucky 41071
Attn: Vice President - Purchasing and Logistics
6
<PAGE>
WINDY HILL: WINDY HILL PET FOOD COMPANY
Two Maryland Farms
Suite 301
Brentwood, TN 37027
Attn: President
(13) This Transition Storage and Handling Agreement shall be binding
upon the parties, their heirs, beneficiaries, legal representatives, successors
and/or permitted assignees and may not be modified except by instrument in
writing signed by the parties or their respective successors in interest.
(14) This Agreement may not be assigned by WINDY HILL or HEINZ (except
to any majority owned subsidiary or division) unless mutually agreed in writing.
Any assignment of this Agreement other than in accordance with this Section 14
shall be void and of no effect.
(15) This Transition Storage and Handling Agreement contains all of the
agreements of the parties with respect to any matter covered or mentioned in
this Transition Storage and Handling Agreement. No prior agreements or
understanding pertaining to any such matters shall be effective for any purpose.
This Agreement shall not be effective or binding on any party until fully
executed by both parties.
(16) All questions of law, rights and remedies regarding any act, event
or occurrence relating to this Agreement, shall be governed by and construed in
accordance with the law of the Commonwealth of Kentucky without regard to its
provisions concerning conflicts or choice of law.
(17) HEINZ shall not be considered the consignee or the owner of any
merchandise that it stores under this Agreement. WINDY HILL shall not list HEINZ
and shall not permit HEINZ to be listed, as consignee on any bill of lading or
other shipping document for merchandise shipped to the Warehouse for storage
under this Agreement.
(18) Under no circumstances whatsoever shall HEINZ or WINDY HILL be
entitled to offset any amounts payable pursuant to this Agreement against any
amounts payable pursuant
7
<PAGE>
to, or with respect to, any claims of whatsoever nature between HEINZ and WINDY
HILL and any of their respective affiliates under, any other agreement or
arrangement between HEINZ and WINDY HILL or any of their respective affiliates,
without limitation, the Asset Purchase Agreement, dated April 17, 1996, the Kozy
Kitten License Agreement, the Promissory Note, and any other agreement
contemplated by or executed in connection with the Asset Purchase Agreement.
Notwithstanding the foregoing, either party shall be entitled to set off or
recoup against any amount payable to the other party pursuant to this Agreement
any amount payable by the other party to such first party pursuant to this
Agreement.
IN WITNESS WHEREOF, each party has signed this Transition Storage and Handling
Agreement, as of the day and year first above written.
HEINZ PET PRODUCTS COMPANY
A Division of Star-Kist Foods, Inc.
By: /s/ Michael Jon Bertasso
---------------------------------
Title: Chief Cost Officer
WINDY HILL PET FOOD COMPANY
By: /s/ Donald L. Gadd
---------------------------------
Title: V.P. Finance
8
<PAGE>
Attachment 1
Rates for Windy Hill
Warehousing:
(A)
- --------------------------------------------------------------------------------
Storage
Location Handling Initial Recurring
-------- -------- ------- ---------
Bloomsburg, PA $.76 / cwt $.24 / cwt $.32 / cwt
Carrollton, TX * .96 .21 .28
Jacksonville, FL * .76 .195 .26
Kankakee, IL .93 .38 .50
Carson, CA .56 .30 .40
Stockton, CA* .81 .285 .38
- --------------------------------------------------------------------------------
Order Processing / Logistics Services
$7,875 / month or portion of Month
This charge will cover dispatching, combining of orders, and inventory
management. Windy Hill will provide shipment information via EDI to HPP
locations and Global Logistic Services, our third party dispatching provider.
Freight and Delivery
Actual Costs + $.10 / cwt assessorial fee
(B) Should Windy Hill desire to continue to utilize HPP warehouses after
the end of the term of this Agreement pursuant to Section (9) of this
Agreement, the flat fee of $7,875 for Order Processing and Logistic
Services will be replaced by a $13 per order administrative charge. The
separate Storage and Handling charges per cwt. and Freight and Delivery
charges would also continue to apply.
(C) Windy Hill will provide all specialized forms and reports. Windy Hill
will contract directly with any third party warehouses as required.
<PAGE>
TRANSITION SERVICES AGREEMENT
1. Transition Services. During the term of this Agreement as set
forth in Section 2 below (the "Transition Period"), Heinz Pet Products Company,
a division of Star-Kist Foods, Inc. ("Heinz Pet Products") and H.J. Heinz
Company of Canada, Ltd. ("Heinz Canada") (Heinz Pet Products and Heinz Canada
are sometimes referred to together as "Seller") agree to provide or to cause
their affiliates to provide to Windy Hill Pet Food Company, Inc. ("Buyer" or
"Windy Hill Pet Food") the services set forth in Annex A with respect to Kozy
Kitten Dry Cat Food, Kozy Kitten Semi-Moist Cat Food and Vets Dry Dog Food
products and in Canada with respect to Tuffy's Dog Food and Tuffy's Cat Food
(together, the "Kozy Kitten Products") (the "Transition Services").
2. Term of Agreement. The term of this Agreement shall commence on
April 29, 1996 (the "Closing") and shall continue for a period of ninety (90)
days, unless earlier terminated by Windy Hill Pet Food upon five (5) days prior
written notice to Heinz Pet Products. In that event, the service fee set forth
in Section 7 shall be prorated. The term of this Agreement shall also be
referred to as the "Transition Period".
3. Confidentiality.
(a) During the term of this Agreement, Buyer and its employees may
from time to time have access to confidential information relating to the
operation of Heinz Pet Products and its affiliates other than the Kozy Kitten,
Tuffy's and other brands being acquired by Buyer. Windy Hill Pet Food agrees
that such confidential information shall be retained in strict confidence and
not disclosed to any third party; provided that confidential information shall
not include information that: (i) is known or becomes known to the general
public through no violation of this Agreement; (ii) was in Windy Hill Pet Food's
possession prior to its being furnished to Windy Hill Pet Food by or on behalf
of Heinz Pet Products; (iii) becomes available to Windy Hill Pet Food from a
source other than Heinz Pet Products, provided that such source is not known by
Windy Hill Pet Food to be bound by a confidentiality agreement with, or by a
fiduciary or legal obligation to, Heinz Pet Products or any other party with
respect to such information; or (iv) Windy Hill Pet Food can prove was
independently developed by it without the use of confidential information. Buyer
shall inform its agents and employees of the confidential nature of Heinz Pet
Products' confidential information and shall be responsible for the breach of
any provision of this Section 3 by its agents or employees.
(b) During the term of this Agreement, Seller and its employees may
from time to time have access to confidential information relating to the
operation of Buyer and its affiliates. Seller agrees that such confidential
information shall be retained in strict confidence and not disclosed to any
third party; provided that confidential information shall not include
information that: (i) is known or becomes known to the general public through no
violation of this Agreement; (ii) was in Seller's possession prior to its being
furnished to Seller by or on behalf of Buyer and was not sold to Buyer pursuant
to the Asset Purchase Agreement, dated
<PAGE>
April 17, 1996 (the "Asset Purchase Agreement"); (iii) becomes available to
Seller from a source other than Buyer, provided that such source is not known by
Seller to be bound by a confidentiality agreement with, or by a fiduciary or
legal obligation to, Buyer or any other party with respect to such information;
or (iv) Seller can prove was independently developed by it without use of the
confidential information and was not sold to Buyer pursuant to the Asset
Purchase Agreement. Seller shall inform its agents and employees of the
confidential nature of Buyer's confidential information and shall be responsible
for the breach of any provision of this Section 3 by its agents or employees.
4. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of Kentucky.
5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
6. Force Majeure.
(a) Failure of performance of any obligation under this Agreement by
either party, if occasioned by Act of God, strike, public enemy, fire,
explosion, perils of the sea, flood, drought, war, riot, sabotage, accident,
embargo or circumstance of like or different character beyond the control of the
failing party shall not subject either party to any liability to the other
party.
(b) If, by reason of the provision of this section, either party is
substantially prevented from performing for a period of 30 consecutive days or
more, the party able to perform may cancel this Agreement by giving written
notice to that effect to the other party. In such event, this Agreement will be
concluded upon the notice without liability on the part of either party.
7. Payments. For the services rendered under this Agreement, Buyer
shall pay Seller a fee of $9,625 per month. Buyer shall also pay Seller the
amounts for which Annex A indicates that Buyer is to reimburse Seller. Seller
shall pay to Buyer the Cash Settlement as set forth in Annex B.
8. Reconciliation and Net Payment. At the end of each of Seller's
fiscal months during the term of this Agreement (the "Transition Period"),
Seller will prepare a reconciliation (the "Reconciliation") with supporting
documentation as Buyer reasonably requests of all payments required of Seller
and Buyer to each other under this Agreement and under the Transition Storage
and Handling Agreement, dated Apri1 29, 1996, between Seller and
-2-
<PAGE>
Buyer. Seller shall make from the Reconciliation a determination of the net
payment required (the "Net Payment") for that period and the direction of such
payment (i.e., to Seller or to Buyer). The Net Payment will be due fifteen (15)
days following the end of each fiscal month for which payment is due or, in
cases in which payment is due from Buyer, five (5) days after receipt of the
Reconciliation (or the next business day if such day falls on a weekend or a
holiday). Within fifteen (15) days of delivery of the Reconciliation to Buyer,
either party may object to the calculation of the Reconciliation. Unresolved
objections shall be resolved pursuant to Section 12.
9. General Intent. Except as the parties otherwise agree during the
Transition Period, Seller shall provide only the transition services that are
set forth on Annex A. Buyer shall use reasonable commercial efforts to terminate
its use of such assistance, in accordance with Section 1, as soon as reasonably
practicable.
10. Validity of Documents. Each party shall be entitled to rely upon
the genuineness, validity or truthfulness of any document, instrument or other
writing presented in connection with this Agreement unless such document,
instrument or other writing appears on its face to be fraudulent, false or
forged.
11. Liability and Indemnification.
(a) Seller's liability for any data processing errors, failure to
comply with any standard of care or other errors occurring in connection with
the services performed under this Agreement shall be limited to reprocessing the
data, revising the reports or otherwise performing such services as are required
to correct any error. Such remedies shall be exclusive of all other remedies
available by statute, rule or regulations, under common law, in equity or
otherwise. Buyer expressly waives its rights to any such other remedies
available by statute, rule or regulation, under common law, in equity or
otherwise.
(b) Buyer shall indemnify, defend and hold harmless Seller from and
against any and all claims, losses, demands, costs or liabilities, including
reasonable attorneys' fees, resulting from or in connection with third party
claims arising from Seller's performance of the services under this Agreement,
unless such third party claims are due from Seller's gross negligence or willful
misconduct in performing the services. Such indemnification shall survive the
termination of this Agreement. Promptly upon receipt by Seller of notice of the
assertion of any third party claim in respect to which indemnity may be sought
against Buyer pursuant to this Section 11, Seller shall notify Buyer in writing
thereof, but the omission to so notify Buyer will not relieve Buyer from any
liability which it may have to Seller under this Section 11, except to the
extent such failure to so notify materially prejudices the ability of Buyer to
defend against such action. In defending against the claim, Buyer shall have the
right to employ counsel of its own choosing and shall at all times have the
power to direct the defense against the claim. Seller
-3-
<PAGE>
shall provide such assistance and cooperation as Buyer may reasonably request in
connection with the defense of any claim with respect to which indemnity may be
sought against Buyer pursuant to this Section 11.
12. No Offsets. Under no circumstances whatsoever may Buyer or
Seller be entitled to offset any amounts payable pursuant to this Agreement
against any amounts payable pursuant to, or with respect to any claims of
whatsoever nature between Buyer and Seller and any of their respective
affiliates under, any other agreement or arrangement between Seller and Buyer or
any of their respective affiliates, including, without limitation, the Asset
Purchase Agreement, Kozy Kitten License Agreement, the Promissory Note or the
Co-Pack Agreement and any other agreement contemplated by or executed in
connection with the Asset Purchase Agreement. Notwithstanding the foregoing,
either party shall be entitled to set off or recoup against any amount payable
to the other party pursuant to this Agreement any amount payable by the other
party to such first party pursuant to this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
it as of the day and year first written above.
HEINZ PET PRODUCTS COMPANY
A Division of Star-Kist Foods, Inc.
By /s/ Michael Jon Bertasso
----------------------------------
Name: Michael Jon Bertasso
Title: Chief Cost Officer
WINDY HILL PET FOOD COMPANY, INC.
By /s/ D. Gadd
----------------------------------
Name: D. Gadd
Title: V.P. Finance
H.J. HEINZ COMPANY OF CANADA, LTD.
By /s/ F. W. Daily
----------------------------------
Name: F. W. Daily
Title: Vice President
-4-
<PAGE>
Annex A - "Transition Service Agreement"
Sales Operations
a) Seller shall at Closing provide to Buyer a current file of all
Kozy Kitten Products, including price lists, specifications,
shipping requirements, current customer lists and any
exceptions to pricing or shipping requirements from those
published prices.
b) Seller shall at Closing provide to Buyer terms of payment and
lead times as published to class of trade and any exceptions
to those published terms or lead times that may be in practice
or committed to.
c) Heinz Pet Products and Windy Hill Pet Food shall have, by
Closing, agreed upon letters to the trade and brokers
announcing the acquisition, transition, termination and
appointment, in addition to any select letters covering any
EDI and Customer Requirements Planning ("CRP") arrangements
where appropriate. These letters will be mailed within
twenty-four (24) hours of the Closing to the appropriate
parties by both Heinz Pet Products and Windy Hill Pet Food.
d) Seller will work with Windy Hill Pet Food before the Closing
to determine mutually acceptable customers for continuous CRP
of Kozy Kitten Products and determine any appropriate charges.
e) Seller will, by or at the Closing, provide an understanding to
Windy Hill Pet Food of promotional price programs, inclusive
of off-invoice, bill backs, and other funds used for or
charged to Kozy Kitten Products, including accrued funds and
their handling by either Heinz Pet Products brokers or Seller
personnel. This may be communicated orally or in writing,
subject to questions of clarity.
f) Seller shall provide to Buyer at the Closing the ending dates
of price programs, inclusive of preprice, off-invoice,
billbacks and/or other financial commitments and any
exceptions that may apply to published dates.
g) Heinz Pet Products at the Closing shall provide to Windy Hill
Pet Food, the complete 1996 fiscal year Quarterly Sales Plan
Binder for all markets and channels inclusive of first and
second quarter of 1997 fiscal year as may have been given to
Heinz Pet Products brokers for implementation. If not included
in the Quarterly Sales Plan Binder, Heinz Pet Products will
advise Buyer of any Kozy Kitten Products included in any
Star-Kist-Heinz Pet Products umbrella promotions.
-5-
<PAGE>
h) Seller at the Closing shall provide to Windy Hill Pet Food the
customer files that may be an exception to the market offers
described above and those offers inclusive of dates.
i) Seller at the Closing shall turn over to Buyer all available
sales and/or marketing manuals, product information, product
files and market files that are related to Kozy Kitten
semi-moist and dry products, Tuffy's, Vets, Canine and Feline
Prime that Buyer shall have acquired under the Asset Purchase
Agreement.
j) Seller will maintain an accrual for Kozy Kitten Products
against transition invoices for customer performance charges
and will advise Buyer monthly of the accrual amount and the
amount of deduction charged that month. Supporting
documentation will be available to support accruals and
charges.
k) Heinz Pet Products shall use its best efforts to cause its
brokers to attend individual transition meetings with Windy
Hill Pet Food brokers to be arranged by Windy Hill Pet Food
brokers in conjunction with Heinz Pet Products broker
schedules. The purpose of this meeting will be to insure a
complete transition of customer commitments, issues, plans,
promotions, and transfer of Heinz Pet Products broker files
and Kozy Kitten information.
l) Heinz Pet Products brokers, where terminated, will not need to
provide or retain any sales support or headquarters support.
Such brokers, however, shall accept and transmit orders for
Kozy Kitten Products during the Transition Period.
m) Heinz Pet Products will provide sales communications, service
or direction to Heinz Pet Products sales personnel or broker
as might be necessary to fulfill the transition arrangements.
n) Heinz Pet Products will pay Heinz Pet Products terminated
brokers for the first 30 days of transition in lieu of notice
of termination. Heinz Pet Products will then pay the brokers,
reimbursed by Windy Hill Pet Food, at a 50% rate for days
31-90. These payments are for order processing as appropriate
in accordance with past practices.
Customer Services
a) Seller will perform all order entry functions for the Buyer in
a manner consistent with Seller's current practices with
respect to the acquired brands.
b) Heinz Pet Products broker will continue to accept, place and
handle customer orders in a manner consistent with Heinz Pet
Products and broker's current practices until the end of the
Transition Period.
-6-
<PAGE>
c) Seller and brokers shall respond to customer issues and
inquiries as appropriate and forward such issues and inquiries
to Windy Hill Pet Food and its brokers for follow through or
follow up during the transition period.
d) Orders in the Seller's order entry system at the end of the
Transition Period (the "Transition Date") will be processed as
during Transition Period. Orders that Seller receives after
the Transition Date will be kicked back to the Heinz Pet
Products broker or Seller direct sales force and customer
service at Windy Hill Pet Food for proper routing of future
orders. Windy Hill Pet Food will be notified by Seller order
entry of the order for appropriate handling by Windy Hill Pet
Food.
Purchasing Services
Seller will continue to perform all purchasing services
(ingredients, MRO'S, etc.) until Windy Hill Pet Food can enter
corresponding vendor agreements but no later than the Transition
Date. Windy Hill Pet Food shall complete the transition of vendor
agreements as soon as possible. Buyer shall reimburse Seller for all
purchasing costs immediately upon presentation of an invoice to
Buyer by Seller.
Accounting Services
a) General Ledger Operations - Seller will provide Buyer with the
information required to permit Buyer to convert the payroll
function to its system by the Closing.
b) Tuffy's lockbox accountant First Minnesota Bank will be
transferred to Windy Hill Pet Food as of the Closing.
c) Seller shall provide to Buyer:
o actual sales report by month on an actual case basis by
UPC.
o Total monthly actual case sales report by customer.
o Daily sales (actual case) report.
See Annex C for specifications.
d) Seller shall provide to Buyer:
o Monthly product contribution statement by product.
o Consumer complaint reports.
o Other relevant reports regarding specific
brokers/customers where information is reported directly
to Heinz Pet Products.
-7-
<PAGE>
o Cash settlement arrangements per Annex B.
Information Services
Startup Work - Work necessary to provide transition services, including
separating the acquired businesses from other Seller businesses. Specific items
include:
a) A monthly detail of invoices during the transition period and
a 24 month history, by month, for each line item UPC from the
end of the month prior to the Closing.
b) Accounts Receivable - customer master list.
c) General Ledger - Perham structure for payroll and
manufacturing.
d) Accounts Payable - vendor master list.
e) Sales Reporting - daily sales by class in cases and monthly by
UPC four working days after the Heinz Pet Products fiscal
month close.
f) Open purchase orders and other relevant vendor information
(vendor master).
g) Inventory management and all relevant warehousing information.
Seller may fulfill this requirement by providing copies of the
IM-675 report limited to the Kozy Kitten Products for all of
Seller's warehouse locations during the Transition Period.
h) CRP where beneficial to Seller and Windy Hill Pet Food.
i) Seller will provide assistance prior to the Closing regarding
specific EDI setup for trading partners that Buyer is
currently not engaged in EDI transactions with. (This is to
shorten the "trial run" times to the shortest possible time to
enable the fastest EDI transaction possible.)
Ongoing Services
a) Initial computer support and other support related to running
"applications."
b) Equipment repairs and software maintenance, as necessary.
Direct costs associated with repairs or maintenance of
equipment and software owned by Windy Hill Pet Food or located
at the new Windy Hill Pet Food facility is to be reimbursed to
Sellers.
c) Maintenance on the S/36 will be retained by Heinz Pet Products
during the Transition Period and be treated as a reimbursed
direct cost.
d) Seller will provide Windy Hill Pet Food with any data that may
not have been listed in this Agreement as it applies to the
purchase of the acquired businesses to ensure a complete
information exchange.
-8-
<PAGE>
e) Telecommunications, long distance and line services/modem
dial-up necessary to support the transition services, in the
event a Windy Hill Pet Food to Seller connection is necessary.
Seller required hardware and/or software, whether purchased or
developed by Windy Hill Pet Food employees, shall be furnished
at Seller's expense, inclusive of training.
f) CRP services for agreed upon customers at an agreed upon
price.
Cut-over Activities and Projects - Work necessary to support the transfer of
information to and the start-up of temporary Windy Hill Pet Food systems during
and at the end of the Transition Period. Specific items include:
a) Accounts payable - Buyer will transition each vendor as soon
as possible pending credit agreements with each vendor.
b) Customer master.
c) Product master.
d) Sales history.
e) Payroll information for production employees fifteen (15)
calendar days before the anticipated Closing date.
f) Final inventory information at cut over.
g) Pricing data.
h) Promotional information in place at cut over.
i) Purchase order commitments information.
Note: Seller will not provide payroll services to Windy Hill Pet
Food and will be responsible for filing tax information only
up to the date of the Closing, subject to Buyer's receiving
payroll information as specified above. Buyer will provide
W-2s for all hourly employees for any payroll period that
includes the Closing Date. Seller will provide Buyer prior to
the Closing with such information as Buyer may require with
respect to its provision of benefits to the hourly employees.
Transportation and Warehousing - Heinz Canada shall provide transportation and
warehousing services through third party vendors. Buyer shall reimburse Heinz
Canada for its actual cost for such services.
-9-
<PAGE>
Annex B - "Cash Settlement"
Net settlement of revenues and expenses are defined as follows:
Add: Net sales revenue.
Less: Reimbursement for warehousing.
Less: Reimbursement for freight and delivery.
Less: Reimbursement for swell allowances at historical HPP rates.
Less: Reimbursement for coupons and other promotional expense.
Less: Reimbursement for any other direct cost incurred for producing
Kozy Kitten products at the Topeka, Kansas plant at the
December 1995 Perham standard rate (including freight),
adjusted for price variance on raw materials and freight, as
shown on Annex B-1.
Less: Brokerage.
Net sales revenue shall be list sales less (i) off-face promotional allowances,
(ii) cash discounts (2% of list), and (iii) performance billbacks based on
Seller's accruals at normal historical levels.
<PAGE>
ANNEX B-1
PLANT STANDARDS HEINZ PET PRODUCTS
[LOGO] SORT - BY BRAND FY 96 BUD 28-Mar-96
Heinz 4:00 PM
<TABLE>
<CAPTION>
FCST
PPIC CA ---- COLD Percent
CODE CODE CT SIZE UM CA DESC PROD. ING. PKG. LABOR VAR O/H FRT STORAGE Cold
- ---- ---- -- ---- -- ------- ----- ---- ---- ----- ------- --- ------- -------
2050 KOZY KITTEN DRY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
P00540 63013 1 20 LB KK Sea Sweet DCF 1.8175 0.5477 0.0639 0.1922 0.0000 0.0000 0.0000
P58490 63032 12 3.12 LB KK Sea Sweet 1.69 DCF 3.3995 1.9977 0.1474 0.4808 1.2984 0.0000 0.0000
P58500 63033 12 3.12 LB KK Country Mix 1.69 DCF 3.3567 1.9977 0.1474 0.4808 1.2496 0.0000 0.0000
P59240 63036 12 16 OZ KK Sea Sweet .69 DCF 1.1136 1.2442 0.0663 0.1865 0.4842 0.0000 0.0000
P59250 63037 12 16 OZ KK Country Mix .69 DCF 1.0996 1.2442 0.0663 0.1865 0.4847 0.0000 0.0000
P60010 63038 12 16 OZ KK Sea Sweet DCF 150.9 1.1136 1.2442 0.0663 0.1865 0.4528 0.0000 0.0000
P60020 63037 12 16 OZ KK Country Mix DCF 81.8 1.0996 1.2442 0.0663 0.1865 0.4253 0.0000 0.0000
P60030 63036 12 16 OZ KK Catfish DCF 1.1376 1.2442 0.0663 0.1865 0.4842 0.0000 0.0000
P60070 63045 12 16 OZ KK Sea Sweet .79 DCF 65.4 1.1136 1.2442 0.0663 0.1865 0.4842 0.0000 0.0000
P60680 63044 12 16 OZ KK Country Mix .79 DCF 54.4 1.0996 1.2442 0.0663 0.1865 0.4847 0.0000 0.0000
P60690 63032 12 3.12 LB KK Sea Sweet DCF 251.1 3.3995 1.9977 0.1474 0.4808 1.1978 0.0000 0.0000
P60700 63033 12 3.12 LB KK Country Mix DCF 95.9 3.3567 1.9977 0.1474 0.4808 1.0267 0.0000 0.0000
P60710 63034 12 3.12 LB KK Catfish DCF 3.4729 1.9977 0.1474 0.4808 1.2496 0.0000 0.0000
P65870 63043 12 3.12 LB KK Catfish 1.49 DCF 3.4729 1.9977 0.1474 0.4808 1.2496 0.0000 0.0000
P65880 63042 12 3.12 LB KK Sea Sweet 1.59 DCF 127.0 3.3995 1.9977 0.1474 0.4808 1.2984 0.0000 0.0000
P65890 63041 12 3.12 LB KK Country Mix 1.59 DCF 60.5 3.3567 1.9977 0.1474 0.4808 1.2496 0.0000 0.0000
P65900 63031 5 6.5 LB KK Sea Sweet DCF 106.8 2.9506 1.5395 0.1785 0.4530 1.0893 0.0000 0.0000
P65910 63030 5 6.5 LB KK Country Mix DCF 30.0 2.9135 1.5395 0.1785 0.4530 0.7747 0.0000 0.0000
P66790 63050 5 6.5 LB KK Country Mix 3.49 DCF 1.2 2.9135 1.4575 0.1785 0.4530 0.8171 0.0000 0.0000
P66800 63040 5 6.5 LB KK Sea Sweet 3.49 DCF 4.9 2.9506 1.4575 0.1785 0.4530 0.8209 0.0000 0.0000
P66900 63029 1 16 LB KK Sea Sweet DCF 102.8 1.4569 0.5056 0.0587 0.1714 0.4677 0.0000 0.0000
P67710 63013 1 20 LB KK Sea Sweet DCF 0.0 1.8175 0.5477 0.0639 0.1922 0.0000 0.0000 0.0000
PUN136 NA 12 3.12 LB KK Sea Sweet 1.69 PP 66.5 3.3995 1.9977 0.1474 0.4808 1.1978 0.0000 0.0000
</TABLE>
PPIC TOTAL FIXED TOTAL
CODE VAR O/H COST
- ---- ----- ----- -----
P00540 2.6213 0.2222 2.8435
P58490 7.3238 0.5946 7.9164
P58500 7.2322 0.5946 7.8268
P59240 3.0948 0.2784 3.3732
P59250 3.0813 0.2784 3.3597
P60010 3.0634 0.2784 3.3418
P60020 3.0219 0.2784 3.3003
P60030 3.1188 0.2784 3.3972
P60070 3.0948 0.2784 3.3732
P60680 3.0813 0.2784 3.3597
P60690 7.2232 0.5946 7.8178
P60700 7.0093 0.5946 7.6039
P60710 7.3484 0.5946 7.9430
P65870 7.3484 0.5946 7.9430
P65880 7.3238 0.5946 7.9184
P65890 7.2322 0.5946 7.8268
P65900 6.2109 0.6431 6.8540
P65910 5.8592 0.6431 6.5023
P66790 5.8195 0.6431 6.4627
P66800 5.0605 0.6431 5.6038
P66900 2.6603 0.2077 2.8680
P67710 2.6213 0.2222 2.8435
PUN136 7.2232 0.5946 7.0170
<PAGE>
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B AR COM BRN SIZE FLVR PK COUNT
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PENDING
DOLLARS AVG AVG ORDERS CURRENT PENDING
MTD NET NET/ LIST/ MTD THIS MONTHS ORDERS TODAYS
AMT CASE CASE INVOICE MONTH BUSINESS FUTURE INVOICE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LAST
YEARS
MONTH PCT
TODAYS END TO
ORDERS INVOICE LAST
- -------------------------
- -------------------------
- -------------------------
- -------------------------
- -------------------------
- -------------------------
- -------------------------
- -------------------------
<PAGE>
Annex D - "Accounting Services Reimbursement"
Accounting
Finance
MIS
Purchasing
Manufacturing
Management
Broker Management
Deduction Clearing
Transition Support
Consumer Affairs
Other
- 11 -
<PAGE>
HIGHWOODS PLAZA II
103 POWELL COURT
BRENTWOOD, TENNESSEE 37027
Schedule to Lease Agreement
The following Schedule comprises an integral part of the Lease Agreement between
the Lessor and Lessee hereinafter named, dated May 16, 1997 (hereinafter
referred to as the "Lease"). Unless the context otherwise requires, the terms
described below shall have the meanings ascribed to them and shall be governed
and construed in accordance with the terms of the Lease.
Lessor: W. FRED WILLIAMS, TRUSTEE FOR THE BENEFIT OF
HIGHWOODS/TENNESSEE HOLDINGS, L.P., whose address is
c/o Highwoods/Eakin & Smith, 2100 West End Avenue,
Suite 950, Nashville, Tennessee 37203.
Lessee: WINDY HILL PET FOOD COMPANY, INC. a Tennessee
corporation whose address is Two Maryland Farms,
Suite 350, Brentwood, TN 37027.
Leased Premises: 25,481 net rentable square feet designated as Suite
200 on the Second Floor of the Highwoods Plaza II
Office Building, 103 Powell Court, Brentwood,
Tennessee (the "Building"), and more particularly
described on the Floor Plan attached to the Lease
and made a part thereof as Exhibit "A".
Term: 84 months.
Renewal Option: One (1) Five (5) year renewal term.
Commencement Date: September 1, 1997, subject to change as provided in
Section 1 of the Lease.
Expiration Date: August 31, 2004, subject to change as provided in
Section 1 of the Lease.
Rent: From* Through* Rate/SF Monthly
- ----- ----- -------- ------- -------
9/1/97 8/31/98 $18.75 $39,814.06
9/1/98 8/31/99 $19.00 $40,344.92
9/1/99 8/31/00 $19.25 $40,875.77
9/1/00 8/31/01 $19.50 $41,406.63
9/1/01 8/31/02 $19.75 $41,937.48
Highwoods Plaza II 1
<PAGE>
From* Through* Rate/SF Monthly
----- -------- ------- -------
9/1/02 8/31/03 $20.00 $42,468.33
9/1/03 8/31/04 $20.25 $42,999.19
* Date subject to change commensurate with any
change in the commencement date and the expiration
date as set forth in the Lease.
Rentable Area: 25,481 rentable square feet.
Tenant Cost Allowance: $611,544 to be used and applied in the manner
specified in Section 4 of the Lease. Lessee agrees
to approve and furnish the final floor plans no
later than May 31, 1997.
Security Deposit: None Required.
Permitted Use: Office Space which is consistent with a first class
office building, excluding food services or any
other use which could be deemed a public
accommodation, subject to the terms, limitations and
conditions provided in the Lease.
Broker: Highwoods/Eakin & Smith and Colliers Turley Martin
Smith & Co.
LESSOR: LESSEE:
W. FRED WILLIAMS, TRUSTEE WINDY HILL PET FOOD COMPANY,
FOR THE BENEFIT OF HIGHWOODS/ INC.
TENNESSEE HOLDINGS, L.P.
By: /s/ W. Brian Reames By: /s/ Donald L. Gadd
------------------------------------ -------------------------------
W. Brian Reames or John W. Eakin as
Authorized Agent for W. Fred Williams
Trustee, under that certain Amended Title: V.P. Finance
and Restated Trust Agreement effective
as of November 27, 1996 by and Date: 5-19-97
between Highwoods/Tennessee
Holdings, L.P. and W. Fred Williams
Title: Vice President
Date: 5-19-97
Highwoods Plaza II 2
<PAGE>
LEASE AGREEMENT
W. FRED WILLIAMS, TRUSTEE FOR THE BENEFIT OF HIGHWOODS/TENNESSEE HOLDINGS,
L.P., (hereinafter referred to as "Lessor") agrees to lease to the Lessee named
in the Schedule (hereinafter referred to as "Lessee"), and Lessee accepts from
Lessor the Leased Premises described in the Schedule (hereinafter referred to as
the "Leased Premises") in consideration of the following mutual covenants and
conditions:
1. Term. This Lease shall commence upon the Commencement Date specified in
the Schedule, and it shall continue until the Expiration Date specified in the
Schedule (hereinafter referred to as the "Term"). In the event of any delay on
the part of Lessor in making the Leased Premises available for occupancy by
Lessee that is not caused by Lessee, the Commencement Date of the Term and the
obligation of the Lessee to pay rent on the Leased Premises shall be extended to
the date the Leased Premises are ready for occupancy by the Lessee and the
expiration date shall be extended by the same number of days. If Lessor shall
fail to make the Leased Premises ready for occupancy by Lessee within three (3)
months after the date for commencement of the Term specified above as extended
by the period of any delay caused by Lessee, Lessee at its sole discretion, may
terminate this Lease by written notice to Lessor prior to Lessee's occupancy of
the Leased Premises.
2. Rent. Lessee shall pay monthly base rental in the amount specified in
the Schedule (hereinafter referred to as "Base Rental"). Such Base Rental,
together with one-twelfth (1/12) of the Base Rental Adjustment as hereinafter
defined, shall be due and payable in advance without demand on the first day of
each calendar month during the Term of this Lease. In addition, Lessee shall pay
to Lessor any sales, use or other tax (excepting corporate franchise excise and
income tax) that may be levied upon or in any way measured by this Lease or the
rents payable by Lessee, notwithstanding the fact that a statue, ordinance or
enactment imposing the same may endeavor to impose such tax upon Lessor. If the
Term of this Lease commences on other than the first day of a calendar month or
terminates on other than the last day of a calendar month, then the Base Rental
and the Base Rental Adjustment for the first and last months shall be prorated,
but all other months shall be due on the first (1st) of the month. Lessee shall
also pay as additional rent, all such other sums of money as shall become due
from and payable by Lessee to Lessor under this Lease. All Base Rental and
installments of the Base Rental Adjustment due hereunder, if not paid by the
tenth (10th) day of the month when due, shall be subject to a charge of 5% of
the amount due. In addition, Lessee shall pay to Lessor all costs of collection
of the sums due hereunder including reasonable attorney fees.
3. Security Deposit. Intentionally Omitted.
4. Improvements to Leased Premises. Lessee agrees to furnish Lessor with a
detailed floor plan layout and working drawings (the "Plans") reflecting the
partitions and improvements desired by Lessee in the Leased Premises no later
than the date specified in the Schedule. After receipt and approval of said
Plans by Lessor's Architect, Lessor will cause the Leased Premises to be
constructed in accordance therewith by a contractor approved by Lessor;
provided, however, Lessor shall not be required to install any partitions or
improvements that
Highwoods Plaza II 3
<PAGE>
are not in conformity with the plans and specifications for the Building
referenced in the Schedule (hereinafter referred to as the "Building") or which
are not approved by Lessor's architect. The cost of all improvements in excess
of the Tenant Cost Allowance as set forth in the Schedule shall be paid by
Lessee to Lessor prior to commencement of construction promptly upon being
invoiced therefor. Failure on the part of Lessee to deliver plans in a timely
manner or subsequent changes requested by Lessee that delay construction work
are to be regarded as delays caused by the Lessee, for the purpose of
determining the Commencement Date of the Term and the obligation of Lessee to
commence payment of rent. Lessor (and Lessor's architect) shall not unreasonably
withhold their approval of Lessee's contractor or Lessee's plans and specs.
5. Base Rental Adjustment. The Base Rental Adjustment shall be calculated
and paid as follows:
(a) The Rentable Area (hereinafter referred to as "RA") in the
Leased Premises is hereby stipulated to be the number of square feet of Rentable
Area specified in the Schedule, whether the same should be more or less as a
result of variations resulting from actual construction and completion of the
Leased Premises for occupancy.
(b) "Operating Costs" shall mean all operating expenses of the
Building and all Common Areas as hereinafter defined as computed on the cash
basis in accordance with generally accepted accounting principles consistently
applied and shall include all expenses, costs and disbursements (but not
payments of principal and interest on notes secured by deeds of trust on the
Building and Common Areas, capital investment items related to the initial
construction of the Building and Common Areas and replacements or renovations
thereof, or costs specially billed to specific tenants) of every kind and nature
that Lessor shall pay or become obligated to pay because of or in connection
with the ownership and operation of the Building or Common Areas, including but
not limited to, the following:
(i) All reasonable wages, salaries, taxes, insurance and
benefits directly attributable to all employees engaged solely in operating,
maintaining, managing or providing security exclusively for the Building or
Common Areas and to personnel who may provide traffic control relating to
ingress and egress between the parking areas and adjacent public streets.
(ii) All supplies and materials used in operation and
maintenance of the Building and Common Areas.
(iii) Utilities for the Building and Common Areas, including
water, power, heating, lighting, air conditioning and ventilation.
(iv) Maintenance, janitorial, security, and service agreements
for the Building or Common Areas, the sidewalks and common areas, appurtenant to
the Building, and the equipment therein.
(v) Casualty, liability, and rent loss insurance applicable to
the Building and Common Areas and Lessor's personal property used in connection
therewith.
Highwoods Plaza II 4
<PAGE>
(vi) Property taxes, assessments and governmental charges
attributable to the Building and all Common Areas.
(vii) Repairs and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Lessee or other third
parties).
(viii) Amortization (over useful life) of the cost of
installation of capital investment items that are primarily for the purpose of
reducing Operating Costs as hereinafter defined or which may be required by
governmental authority by the passage of new laws, regulations, or requirements.
(ix) Lessor's accounting costs attributable to the Building.
(x) Fees paid by Lessor for management of the Building that
are at market rates and equal to fees for managing comparable buildings in
Brentwood, Tennessee.
(xi) Legal consultants', appraisers' and auditing fees
incurred in connection with an appeal for reduction of taxes or for other
management purposes directly incurred in the operation of the Building and all
Common Areas.
(c) Lessee's Annual Base Rental includes an annual component
applicable to Operating Costs (as herein defined) equal to those costs for the
calendar year 1997. The base year will be adjusted to reflect at least a
ninety-five percent (95%) occupancy rate.
(d) For the purpose of computing the annual amount of Operating
Costs per square foot of RA, RA for the entire Building shall be deemed to be
103,000 Rentable Square Feet.
(e) As Additional Base Rental, Lessee shall pay Lessor an amount
equal to the excess of annual Operating Costs per square foot of RA over the
annual Operating Costs component of Lessee's Base Rental described in
subparagraph (c) hereof during any calendar year within the Term of this Lease,
or during any fractional part of a calendar year, with Lessee's obligation in
such case to be prorated (the "Base Rental Adjustment"). For this purpose,
Lessor may estimate the amount by which the annual Operating Costs per square
foot of RA for each calendar year or portion thereof during the Term will exceed
the annual Operating Costs component described in subparagraph (c) hereof, and
Lessee's Base Rental shall be adjusted upward by the amount of such estimated
excess multiplied by Lessee's RA (the "Estimated Base Rental Adjustment"). Said
Estimated Base Rental Adjustment shall be divided by twelve and paid to Lessor
as Additional Base Rental monthly on the same day the Monthly Base Rental is due
and payable.
(f) Within one hundred, fifty (150) days or as soon thereafter as
may be reasonably practicable after the conclusion of each calendar year during
the Term, Lessor shall furnish to Lessee a report describing the actual amount
of Operating Costs per square foot or RA for such calendar year and the actual
Base Rental Adjustment. A lump sum payment shall be made by Lessor to Lessee or
by Lessee to Lessor, as appropriate, within thirty (30) days after the delivery
of such report equal to the amount of any difference between the actual Base
Rental Adjustment payable by Lessee pursuant to this Section 5 and the amount of
any previous
Highwoods Plaza II 5
<PAGE>
payments thereof by Lessee due to the Estimated Base Rental Adjustment based
upon Lessor's estimate of annual Operating Costs. Lessor shall keep adequate
books and records regarding operating costs. For a ninety (90) day period
following the giving of such report, Lessor shall afford Lessee and its
representatives and agents reasonable access to Lessor's books and records with
respect to Operating Costs, to enable Lessee to verify the amount of Operating
Costs that are the basis for the computation of the actual Base Rental
Adjustment and the actual amount of the difference to be paid by Lessee or
Lessor, as applicable.
6. Services to be Furnished by Lessor. Lessor shall furnish the following
services:
(a) Entry to the Leased Premises during normal working hours on
business days. On other days and after normal working hours, Lessee may have
entry to the Leased Premises at such times by a key, card key system, or by
signing in with a guard, whichever is chosen by Lessor.
(b) Elevator facilities on business days from 7:00 a.m. to 6:00 p.m.
and an elevator subject to call at all other times.
(c) Hot and cold water at those points of supply provided for
general use of other tenants in the Building; central heat and air conditioning
in season from 7:00 a.m. to 6:00 p.m. on business days and from 7:00 a.m. to
2:00 p.m. on Saturdays, at such temperatures and in such amounts as are
reasonably necessary for the comfortable occupancy of the Leased Premises, but
service at times during business days other than normal business hours for the
Building, other hours on Saturdays, and on Sundays and holidays or in an amount
considered by Lessor to be in excess of standard (machinery, lighting fixtures
or equipment in the Leased Premises having an electrical load in excess of four
(4) watts per square foot of RA or occupancy in excess of one person per 200
square feet of RA being conclusively presumed to be in excess of standard) to be
furnished only upon the request of Lessee at a rate of $35.00 per hour; routine
maintenance and electric lighting service for all public areas and special
service areas of the Building in the manner and to the extent deemed by Lessor
to be standard. Lessee, at Lessee's option, shall have the right to operate a
Liebert-type auxiliary HVAC unit located in Lessee's designated computer room 24
hours a day and at no additional charge by Lessor. Repair and maintenance of
said auxiliary HVAC unit shall be the sole responsibility and expense of Lessee.
(d) Janitorial service on business days as specified in Exhibit C
attached hereto; provided Lessee shall provide cleaning for any area used for
storage, preparation, service or consumption of food or beverages on a daily
basis and pest extermination on a monthly basis in a manner reasonably
satisfactory to Lessor.
(e) Electrical facilities and sufficient power for typewriters,
voice writers, calculating and duplicating machines, personal computers, and
other machines of similar low electrical consumption; but not including
electricity required for main frame or mini-computer, electronic data processing
equipment and special lighting in excess of building standards, or any item of
electrical equipment which (singularly) consumes more than 0.5 kilowatts at
rated capacity or requires a voltage other than 120 volts single phase. If
Lessee uses any of the services or electrical current as enumerated in this
subparagraph (e) in an amount greater than
Highwoods Plaza II 6
<PAGE>
5,000 watt hours annually per square foot of RA or such larger amounts as may be
deemed excessive by Lessor, Lessor reserves the right to charge Lessee as
Additional Rent a reasonable sum as reimbursement for the direct cost of such
added services. Said Additional Rent shall be due and payable on the same day
the Monthly Base Rental is due and payable as set forth in paragraph 2 hereof.
In the event of disagreement as to the reasonableness of such charge, the
opinion of the appropriate local utility company or a local independent
professional engineer reasonably selected by Lessor shall prevail. Any
additional equipment, feeders or risers necessary to supply Lessor's electrical
requirements in excess of the amount to be provided by Lessor pursuant to this
subsection (e) shall be supplied by Lessor at the expense of Lessee, provided
such installations will not, in Lessor's judgement, overload the electrical
system of the Building or entail excessive or unreasonable alterations to the
Building or the Leased Premises.
(f) All building standard fluorescent bulb replacement in all areas
and all incandescent bulb replacement in public areas, toilet and restroom areas
and stairwells.
Failure by Lessor to any extent to furnish the services described in this
Section 6, or any cessation thereof, resulting from the repair or alteration of
the Building or causes beyond the reasonable control of Lessor shall not be
construed as an eviction of Lessee, nor work an abatement of rent, nor relieve
Lessee from fulfillment of any covenant or agreement hereof; provided however,
that Lessee may terminate this Lease if any such cessation exceeds 30 days and
provided Lessee has notified Lessor in writing of the cessation of said services
and only if Lessor is not diligently pursuing a cure of such cessation.
7. Common Areas. During the term of this Lease, for so long as Lessee is
not in default hereunder (beyond applicable periods of notice and cure), Lessor
grants Lessee a non-exclusive license to use and occupy in common with others so
entitled, the common areas of the Building, including, but not limited to,
corridors, stairways, elevators, restrooms, lobbies, entranceways, parking
areas, service roads, loading facilities, sidewalks, and other facilities as may
be designated from time to time by Lessor subject to the terms and conditions of
this Lease.
8. Keys, Locks and Card Keys. Lessor shall furnish Lessee with two (2)
keys for each corridor door entering the Leased Premises and two (2) card keys
(if applicable) to the Building. Additional keys will be furnished at a
reasonable charge by Lessor on an order signed by Lessee or Lessee's authorized
representative. All such keys shall remain the property of Lessor. No additional
locks shall be allowed on any door of the Leased Premises nor shall Lessee
change the locks without Lessor's permission, and Lessee shall not make, or
permit to be made any duplicate keys, except those furnished by Lessor. Upon
termination of this Lease, Lessee shall surrender to Lessor all keys and card
keys of the Leased Premises and give to Lessor the explanation of the
combination of all locks for safes, safe cabinets and vault doors, if any,
installed in the Leased Premises by Lessee.
9. Graphics. Lessor shall provide and install, at Lessor's cost, all
letters or numerals on entrance doors to the Leased Premises and Building
Directory. All such letters and numerals shall be in the Building standard
graphics and size, and no others shall be used or permitted on the Leased
Premises.
Highwoods Plaza II 7
<PAGE>
10. Parking. Lessee shall have the right to use in common with the other
tenants in the building the parking spaces as provided by Lessor adjacent to the
building for parking of Lessee's automobiles and those of its employees and
visitors, subject to the reasonable rules and regulations now or hereafter
adopted by Lessor. Lessee shall not use nor permit any of its employees, agents
or visitors to use any parking area owned by Lessor other than the parking area
adjacent to and assigned to the building. If Lessor deems it advisable, Lessor
may set aside a part of the total parking field for use as a separate area for
visitors. Lessor reserves the right to adopt any reasonable regulations
necessary to curtail unauthorized parking, including the required use of
"parking permits."
11. Permitted Uses. Lessee shall use and occupy the Leased Premises for
the purpose specified in the Schedule and for no other purpose; provided,
however Lessee shall not occupy or use, or permit any portion of the Leased
Premises to be occupied or used for any business or purpose which is unlawful,
disreputable or deemed to be extra-hazardous on account of fire, or permit
anything to be done which would in any way increase the rate of fire or
liability or any other insurance coverage on the Building and/or its contents,
cause the load upon any floor of the Building to exceed the load for which the
floor was designed or the amount permitted by law, or use electrical energy
exceeding the capacity of the then existing feeders or wiring installations.
Lessee shall further conduct its business and control its agents, employees,
invitees, and visitors in such manner as not to create any nuisance, or
unreasonably interfere with, annoy or disturb any other tenant or Lessor in its
operation of the Building. No food, soft drink or other vending machine shall be
installed within the Leased Premises. Lessee shall not allow the Premises to be
used in any way which could be construed as a public accommodation, as now
defined by ADA, and shall indemnify and hold Lessor harmless against any costs
that may be incurred as a result of such use.
12. Laws, Regulations, and Rules of Building. Lessee shall comply with all
applicable laws, ordinances, rules and regulations relating to the use,
condition or occupancy of the Leased Premises and all common areas. Lessee shall
comply with reasonable rules and regulations as may be adopted or altered by
Lessor from time to time for the safety, care and cleanliness of the Leased
Premises, Building and common areas and for preservation of good order therein
after receiving notice thereof, including, but not limited to, the Rules and
Regulations attached hereto as Schedule 2.
13. Repairs by Lessor. Except as otherwise provided in Section 4 hereof,
Lessor shall not be required to make any improvements to or repairs of any kind
or character in the Leased Premises during the Term of this Lease, except such
repairs as may be deemed necessary by Lessor for normal maintenance operations
required to maintain the Leased Premises in tenantable condition. Lessor shall
keep in good order, condition and state of repair the structural portions of the
Building, the plumbing, heating, air conditioning and electrical system, roof,
ceiling, exterior walls and the common area facilities provided by Lessor under
the provisions hereof; provided, however, Lessor's obligation to make such
repairs shall not relieve Lessee of the obligation to pay all sums which become
due under this Lease. The obligation of Lessor to maintain and repair the Leased
Premises shall be limited to building standard items. Special leasehold
improvements will, at Lessee's written request, be maintained by Lessor at
Lessee's expense, at a cost or charge equal to the direct costs incurred in such
maintenance. Lessee shall reimburse Lessor upon demand for the cost of repairing
any damage to the Leased Premises or
Highwoods Plaza II 8
<PAGE>
the Building caused by the deliberate act or negligent act of Lessee or its
employees, agents or invitees not covered by insurance. Lessee shall, at its
expense, keep in good order, condition and state of repair all portions of the
Leased Premises with the exception of those to be maintained and repaired by
Lessor under the foregoing provisions. In the event Lessee fails to comply with
the requirements of this paragraph, Lessor may make such maintenance and repair
and the cost thereof, with interest at 10% per annum shall be immediately
payable to Lessor as Additional Rent.
14. Repairs and Alterations by Lessee. To the extent not coverable by
Lessee's insurance, Lessee shall, at its own cost and expense, repair or replace
any damage or injury done to the Leased Premises or the Building or Common Area,
caused by Lessee or Lessee's agents, employees, invitees, contractors, or
servants; provided, however, if Lessee fails to make such repairs or
replacements promptly, Lessor may, at its option, make such repairs or
replacements, and Lessee shall pay the costs thereof to the Lessor on demand as
additional rent. No structural alterations in the Leased Premises or signs
visible from outside the Leased Premises shall be made or installed by Lessee
without the prior written consent of Lessor, and at Lessor's election such
alterations or additions shall become the property of Lessor upon termination of
this Lease. All plans for repairs, replacements, alterations, or installations
required or permitted to be made by Lessee shall be subject to the approval of
Lessor, which shall not be unreasonably withheld, but may be subject to any
reasonable protections or restrictions designed to preserve the architectural
design and structural integrity of the Building and to protect against claims by
materialmen and laborers.
15. Care of Leased Premises. Lessee shall not commit or allow any waste or
damage to be committed on any portion of the Leased Premises, and at the
termination of this Lease, Lessee shall deliver possession of the Leased
Premises to Lessor in as good condition as at date of possession by Lessee, or
as the same may have been improved during the term, ordinary wear and tear or
damage resulting from condemnation, fire or other unavoidable casualty excepted.
If Lessee installs improvements in the Leased Premises reasonably determined by
Lessor to be special or non-standard, Lessor may require Lessee to remove such
special or non-standard improvements and restore the Leased Premises to its
original condition at Lessee's sole cost and expense upon the termination of
this Lease so long as such requirement is made known to Lessee at the time
Lessor gives its consent.
16. Lessor's Right to Substitute Space. Intentionally Deleted.
17. Peaceful Enjoyment. Lessee shall have the right to peacefully occupy,
use and enjoy the Leased Premises during the Lease Term, subject to the other
terms hereof, provided Lessee pays the rent and other sums herein required to be
paid by Lessee and performs all of Lessee's covenants and agreements herein
contained.
18. Lessor's Right of Entry. Lessor or its agents or representatives shall
have the right to enter into and upon any part of the Leased Premises at all
reasonable hours, upon reasonable notice, to inspect the same, clean or make
repairs, alterations or additions thereto, as Lessor may deem necessary or
desirable. Lessor further reserves the right to show the Leased Premises to
prospective tenants or brokers during the last six (6) months of the Lease
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Term as extended, and to prospective purchasers or mortgagees at all reasonable
times, provided prior notice is given to Lessee in each case, and Lessee's use
and occupancy of the Premises shall not be materially inconvenienced. Lessee
shall not be entitled to any abatement or reduction of rent by reason of the
exercise of the foregoing rights on the part of Lessor.
19. Limitation of Lessor' Liability. Lessor's liability to Lessee shall be
limited as follows:
(a) Lessor shall not be liable or responsible to Lessee for any injury to
person or property occurring in the parking areas, the Building, the Common
Areas, or the Leased Premises unless caused by the negligence of Lessor, its
agents, servants or employees other than the employees of any independent,
bonded janitorial service company engaged by Lessor to provide janitorial
service to the Leased Premises. Any janitorial service company so engaged by
Lessor shall be solely responsible for any such injury to person or property
caused by its employees, and Lessor shall provide Lessee with the name and
address of such company, and shall reasonably cooperate if necessary to recover
from such janitorial service.
(b) Lessor shall not be liable or responsible to Lessee for lost profits,
business interruption or any other type of incidental, consequential, or special
damages caused by the making of repairs or alterations to the Leased Premises,
the Building, or the Common Area, failure to provide or interruption of
services, failure to make repairs, injury to person or property, or otherwise.
(c) All separate and personal liability of Lessor or any partner thereof
of every kind or nature, if any, is hereby expressly waived by Lessee, and by
every person now or hereafter claiming by, through, or under Lessee; and Lessee
shall look solely to Lessor's interest in the Building and the proceeds of any
condemnation or insurance maintained by Lessor in connection with the Building
for the payment of any claim against Lessor.
20. Hold Harmless. Lessor shall not be liable to Lessee, or to Lessee's
agents, servants, employees, customers, invitees, or visitors for any damage to
person or property caused by the negligence of Lessee or such persons, and
Lessee agrees to indemnify and hold Lessor harmless from all liability and
claims for any such damage. Lessee shall not be liable to Lessor, or to Lessor's
agents, servants, employees, customers, invitees, or visitors for any damage to
person or property caused by any negligence of Lessor or such persons, and
Lessor agrees to indemnify and hold Lessee harmless from all liability and
claims for such damages.
21. Defaults and Lessor's Remedies. Lessor shall have all rights and
remedies allowed at law or in equity; including, but not limited to the
following:
(a) If any voluntary or involuntary petition under any section of
any bankruptcy act shall be filed by or against Lessee, or any voluntary or
involuntary proceeding in any court or tribunal shall be instituted to declare
the Lessee insolvent or unable to pay Lessee's debts, and in the case of an
involuntary petition or proceeding, the petition or proceeding is not dismissed
within forty-five (45) days from the date it is filed, Lessor may elect, upon
notice of such election, to terminate this Lease.
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(b) If Lessee defaults in the payment of any installment of the rent
and does not cure the default within five (5) days after notice, or if Lessee
defaults in the prompt performance of any other provision of this Lease and does
not cure such other default within ten (10) days, or forthwith if the default
involves a hazardous condition, after written notice by Lessor, or if the
leasehold interest of Lessee be levied upon under execution or be attached by
process of law, or if Lessee makes an assignment for the benefit of creditors,
or if a receiver be appointed for any property of Lessee, or if Lessee abandons
the Leased Premises, Lessor may terminate this Lease and Lessee's right to
possession of the Leased Premises or, without terminating this Lease, forthwith
terminate Lessee's right to possession of the Leased Premises.
(c) Upon any termination of this Lease, or upon any termination of
the Lessee's right to possession without termination of the Lease, Lessee shall
immediately vacate the Leased Premises and deliver possession to Lessor.
(d) If Lessor elects to terminate Lessee's rights to possession
only, without terminating this Lease, Lessor may, at Lessor's option, enter into
the Leased Premises, remove Lessee's signs and other evidences of tenancy, and
take and hold possession thereof without such entry and possession terminating
this Lease or releasing Lessee from the obligation to pay the rent hereunder for
the full Term. Upon and after entry into possession without termination of this
Lease, Lessor may relet the Leased Premises or any part thereof for the account
of Lessee for such rent, for such time and upon such terms as Lessor in its sole
discretion shall determine, and Lessor shall not be required to accept any
tenant offered by Lessee or to observe any instructions given by Lessee about
such reletting. A reletting for a term longer than the then remaining Lease Term
shall not constitute an acceptance by Lessor of a surrender of this Lease or a
waiver of any Lessor's rights hereunder. In any such case, Lessor may make
repairs, alterations and additions in or to the Leased Premises, and redecorate
the same to the extent reasonably deemed necessary or desirable by Lessor, and
Lessee shall, upon demand, pay the cost thereof, together with Lessor's expense
of the reletting. If the consideration collected by Lessor upon any such
reletting for Lessee's account is not sufficient to pay monthly the full amount
of the rent reserved in this Lease, together with the costs of repairs,
alterations, additions, redecorating and Lessor's expenses of reletting, Lessee
shall pay to Lessor the amount of each monthly deficiency upon demand.
(e) Any property which may be removed from the Leased Premises by
the Lessor pursuant to the authority of this Lease or of law, to which Lessee is
or may be entitled, may be handled, removed or stored by Lessor at the risk,
cost and expense of Lessee, and Lessor shall in no event be responsible for the
value, preservation or safe-keeping thereof. Lessee shall pay to Lessor, upon
demand, any and all expenses incurred in such removal and all storage charges
against such property so long as the same shall be in Lessor's possession or
under Lessor's control. Any such property of Lessee not retaken from storage by
Lessee within thirty (30) days after the end of the Lease Term, however
terminated, shall be conclusively presumed to have been conveyed by Lessee to
Lessor under this Lease as a bill of sale.
(f) In the event Lessee defaults in the performance of any of the
terms, covenants, agreements or conditions contained in this Lease and Lessor
places the enforcement of this Lease, or any part thereof, or the collection of
any rent due, or to become due hereunder
Highwoods Plaza II 11
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or recovery of the possession of the Leased Premises in the hands of an
attorney, or files suit upon the same, Lessee agrees to pay Lessor's reasonable
attorney's fees.
(g) Failure of Lessor to declare any default immediately upon
occurrence thereof, or delay in taking any action in connection therewith, shall
not waive such default, but Lessor shall have the right to declare any such
default at any time and take such action as might be lawful or authorized
hereunder, either at law or in equity.
22. Holding Over. If Lessee retains possession of the Leased Premises or
any part thereof after the termination of this Lease, Lessee shall pay rent
(including Base Rent and Base Rental Adjustment) at one hundred fifty percent
(150%) the rate payable on the month preceding such holding over computed on a
daily basis for each day that Lessee remains in possession. In addition thereto,
Lessee shall be liable for and pay to Lessor, all damages, consequential as well
as direct, sustained by reason of Lessee's holding over.
23. Condemnation. If the Leased Premises shall be partially taken or
condemned for any public purpose to such an extent as to render a portion of the
Leased Premises untenantable, the rental provided for herein shall abate as to
the portion rendered untenantable. In the event the whole of the Leased Premises
shall be so taken or condemned, this Lease shall terminate as of the date of
taking of possession. All proceeds from any taking or condemnation of the Leased
Premises shall belong to and be paid to Lessor.
24. Damage or Destruction to the Leased Premises
If the Leased Premises, the Building, or the Common Area is damaged
or destroyed by fire or other casualty, cause or condition whatsoever through no
fault or neglect of Lessee, its agents, employees, customers, invitees, visitors
or contractors so as to cause the Leased Premises to be untenantable or to make
it impractical for Lessee to continue its normal business operations therein, a
just proportion of the rent herein reserved shall abate according to the extent
the full use and enjoyment of the Lease Premises are rendered untenantable by
reason of such damage until such time as Lessor makes such portion of the Leased
Premises tenantable, or useable for Lessee's normal business operations, as the
case may be. If Lessor determines that such damage or destruction cannot be
repaired within one hundred and twenty (120) days so as to restore fully
Lessee's full use and enjoyment of the Leased Premises, Lessor may, by written
notice to the Lessee given within thirty (30) days after such damage terminate
this Lease as to all the Leased Premises as of the date of such destruction, and
all rent owed up to the time of such destruction shall be paid by Lessee. If
Lessor does not exercise its right to terminate after such damage, Lessor shall
proceed with due diligence to restore Lessee's full use and enjoyment of the
Leased Premises within one hundred twenty (120) days from the date of such
destruction.
25. Casualty Insurance. Lessor shall maintain fire and extended coverage
insurance on the portion of the Building constructed by Lessor, including
additions and improvements by Lessee that are required to be made by Lessee
under this Lease and which have become or are to become the property of Lessor
upon vacation of the Leased Premises by Lessee. Said insurance shall be
maintained with an insurance company authorized to do business in Tennessee in
amounts equal to the replacement cost of the building and at the expense of
Lessor and
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payments for losses thereunder shall be made solely to Lessor. Lessee shall
maintain at its expense fire and extended coverage insurance on all of its
personal property, including removable trade fixtures, located in the Leased
Premises and on all additions and improvements made by Lessee and not required
to be insured by Lessor above, and Lessee shall provide Lessor with a current
certificate evidencing such coverage in form reasonably satisfactory to Lessor.
If the annual premiums to be paid by Lessor shall exceed the standard rates
because of Lessee's operations, contents of the Leased Premises, or improvements
with respect to the Leased Premises beyond building standard, resulting in
extra-hazardous exposure, Lessee shall promptly pay the excess amount of the
premium upon request by Lessor as additional rent.
26. Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee each hereby waive any and all rights of
recovery, claim action or cause of action, against the other, its agents,
officers, or employees, for any loss or damage that may occur to the Leased
Premises, or any improvements thereto, or to the Building of which the Leased
Premises are a part, or any improvements thereto, or any personal property of
such party therein, by reason of fire, the elements, or any other cause which
could be insured against under the terms of standard fire and extended coverage
insurance policies referred to in Section 25 hereof, regardless of cause or
origin, including negligence of the other party hereto, its agents, officers or
employees, and covenants that no insurer shall have any right of subrogation
against such other party.
27. Liability Insurance. Lessee shall maintain comprehensive general
public liability insurance against claims for bodily injury, death or property
damage occurring in, on or about the parking areas, Building or the Leased
Premises in a combined single limit of not less than Two Million Dollars
($2,000,000.00). Such insurance shall be effected under policies reasonably
satisfactory to Lessor that shall name Lessor as an additional insured. Lessee
shall furnish Lessor with a certificate evidencing such coverage that shall
contain an undertaking by the insurer to give Lessor ten (10) days prior written
notice of any modification or cancellation of the coverage afforded by such
insurance.
28. Subordination and Attornment. This Lease is subject and subordinate to
all Mortgages now or hereafter placed upon the Building, and all other
encumbrances and matters of public record applicable to the Building, including
without limitation, any reciprocal easement or operating agreements, covenants,
conditions and restrictions and Lessee shall not act or permit the Premises to
be operated in violation thereof. If any foreclosure or power of sale
proceedings are initiated by any Lender or a deed in lieu is granted (or if any
ground lease is terminated), Lessee agrees, upon written request of any such
Lender or any purchaser at such foreclosure sale, to attorn and pay rent to such
party and to execute and deliver any instruments necessary or appropriate to
evidence or effectuate such attornment. In the event of attornment, no Lender
whose name and address have been provided to Lessee in a written notice from
Lessor shall be: (i) liable for any act or omission of Lessor, or subject to any
offsets or defenses which Lessee might have against Lessor (prior to such Lender
becoming Lessor under such attornment), (ii) liable for any security deposit or
bound by any prepaid Rent not actually received by such Lender, or (iii) bound
by any future modification of this Lease not consented to by such Lender. Any
Lender may elect to make this Lease prior to the lien of its Mortgage, and if
the Lender under any prior Mortgage shall require, this Lease shall be prior to
any subordinate Mortgage; such elections shall be effective upon written notice
to Lessee. Lessee
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agrees to give any Lender by certified mail, return receipt requested, a copy of
any notice of default served by Lessee upon Lessor, provided that prior to such
notice Lessee has been notified in writing (by way of service on Lessee of a
copy of an assignment of leases, or otherwise) of the name and address of such
Lender. Lessee further agrees that if Lessor shall have failed to cure such
default within the time permitted Lessor for cure under this Lease, any such
Lender whose address has been so provided to Lessee shall have an additional
period of thirty (30) days in which to cure (or such additional time as may be
required due to causes beyond such Lender's control, including time to obtain
possession of the Building by power of sale or judicial action or deed in lieu
of foreclosure). The provisions of this Article shall be self-operative;
however, Lessee shall execute such documentation as Lessor or any Lender may
request from time to time in order to confirm the matters set forth in this
Article in recordable form. To the extent not expressly prohibited by Law,
Lessee waives the provisions of any Law now or hereafter adopted which may give
or purport to give Lessee any right or election to terminate or otherwise
adversely affect this Lease or Lessee's obligations hereunder if such
foreclosure or power of sale proceedings are initiated, prosecuted or completed
subject to section 44 hereof. Lessee agrees to execute any instruments
evidencing such subordination and attornment as reasonably may be required by
the holder of any mortgage or deed of trust on the building.
29. Estoppel Letter. Lessee shall at any time, upon not less than ten (10)
days prior written request, execute and deliver in form and substance
satisfactory to Lessor and any mortgagee or beneficiary under a deed of trust
affecting the Leased Premises, an estoppel letter certifying:
(a) The date upon which the Lease Term commences and expires:
(b) The date to which rent has been paid;
(c) That Lessee has accepted the Leased Premises and that all
improvements have been satisfactorily completed (or if not so accepted or
completed, the matters objected to by Lessee);
(d) That the Lease is in full force and effect and has not been
modified or amended (or if modified or amended, a description of same);
(e) That there are no defaults by Lessor under the Lease nor any
existing condition with respect to which the giving of notice or lapse of time
would constitute a default;
(f) That Lessee has not received any concession;
(g) That Lessee has received no notice from any insurance company of
any defects or inadequacies in the Leased Premises;
(h) That Lessee has no options or rights other than as set forth in
this Lease or any amendment thereto described in such letter; and
Highwoods Plaza II 14
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(i) Such other matters as may be necessary or appropriate to qualify
Lessee's response to any of the foregoing statements of which Lessor may
reasonably request.
if such letter is to be delivered to a purchaser of the Building, it shall
further include the agreement of Lessee to recognize such purchaser as Lessor
under this Lease, and thereafter to pay rent to the purchaser or its designee in
accordance with the terms of this Lease. Lessee acknowledges that any purchaser
or prospective mortgagee of the Building may rely upon such estoppel letter and
that Lessor may incur substantial damages by reason of any failure on the part
of Lessee to provide such letter in a timely manner.
30. Lease Commission. Lessee and Lessor represent and warrant they have
dealt with and only with the Broker(s) named in the Schedule in connection with
this Lease and each agrees to indemnify and hold harmless the other and any
broker employed by such party from any claims of other broker(s) in connection
with this Lease. Lessor shall pay the leasing commission due to the within-named
Broker(s).
31. Hazardous Substance - General. The term "Hazardous Substances," as
used in this lease shall mean pollutants, contaminants, toxic or hazardous
wastes, or any other substances the use and/or the removal of which is
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law, ordinance or other statue of a
governmental authority relating to pollution or protection of the environment.
Lessee hereby agrees that (i) no activity will be conducted on the Leased
Premises or in the Building that will produce any Hazardous Substance, except
for such activities that are part of the ordinary course of Lessee's business
activities (the "Permitted Activities") provided said Permitted Activities are
conducted in accordance with all Environmental Laws and have been approved in
advance in writing by Lessor; Lessee shall be responsible for obtaining any
required permits and paying any fees and providing any testing required by any
governmental agency; (ii) the Leased Premises will not be used in any manner for
the storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Lessee's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Lessor; Lessee shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency; (iii) no portion of the Leased Premises will be used as a
landfill or a dump; (iv) Lessee will not install any underground tanks of any
type; (v) Lessee will not allow any surface or subsurface conditions to exist or
come into existence that constitute, or with the passage of time may constitute
a public or private nuisance; (vi) Lessee will not permit any Hazardous
Substances to be brought into the Leased Premises, except for the Permitted
Materials described above, and if so brought or found located thereon, the same
shall be immediately removed, with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all Environmental Laws.
Upon prior notice and during normal business hours, Lessor or Lessor's
representative shall have the right but not the obligation to enter the Leased
Premises for the purpose of inspecting the storage, use and disposal of
Permitted Materials, and if such Permitted Materials are being improperly
stored, used, or disposed of, then Lessee shall immediately take such corrective
action as requested by Lessor. Should Lessee fail to take such corrective action
within 24 hours, Lessor shall have the right to perform such work and Lessee
shall promptly reimburse Lessor for any and all costs associated with said work.
If at any time during or after the term of the Lease, the Leased
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Premises is found to be so contaminated or subject to said conditions, Lessee
shall diligently institute proper and thorough cleanup procedures at Lessee's
sole cost, and Lessee agrees to indemnify and hold Lessor harmless from all
claims, demand, actions, liabilities, costs, expenses, damages and obligations
of any nature arising from or as a result of the use of the Leased Premises by
Lessee. The foregoing indemnification and the responsibilities of Lessee shall
survive the termination or expiration of this Lease.
32. ADA General Compliance. Lessee, at Lessee's sole expense, shall comply
with all laws, rules, orders, ordinances, directions, regulations and
requirements of federal, state, county and municipal authorities now in force or
which may hereafter be in force, which shall impose any duty upon the Lessor or
Lessee with respect to the use, occupation or alteration of the Leased Premises,
and Lessee shall use all reasonable efforts to fully comply with The American's
With Disabilities Act of 1990, all to the extent such requirements relate solely
to Lessee's particular use of the Premises (and do not relate to the building as
a whole). Lessor's responsibility for compliance with The American's With
Disabilities Act of 1990 shall include the Building (as a whole), the common
areas and restrooms of the Building, but not the Leased Premises.
Within ten (10) days after receipt, Lessee shall advise Lessor in writing, and
provide the Lessor with copies of (as applicable), any notices alleging
violation of the Americans with Disabilities Act of 1990 ("ADA") relating to any
portion of the Property or of the Premises; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion of the
Property or of the Premises; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with ADA and
relating to any portion of the Property or the Premises.
33. Assignment by Lessor. Lessor shall have the right to transfer and
assign, in whole or in part, all its rights and obligations hereunder and in the
Building. In such event and upon such transfer of Lessor's fee interest in the
Building (but excluding collateral assignment), no further liability or
obligation shall accrue against the assigning Lessor.
34. Assignment or Sublease. In the event Lessee should desire to assign
this Lease or sublet the Leased Premises or any part thereof, except to a wholly
owned affiliate of equal or greater net worth, Lessee shall give Lessor at least
thirty (30) days prior written notice, which shall specify the terms and
effective date thereof. Lessor shall have fifteen (15) days following receipt of
such notice to notify Lessee in writing that Lessor elects (a) to terminate this
Lease as to the space so affected as of the effective date specified by Lessee
in which event Lessee will be relieved on such effective date of all further
obligation hereunder as to such space, (b) to permit Lessee to assign or sublet
such space, subject, however, to subsequent written approval not to be
unreasonably withheld of the proposed assignee or sublessee by Lessor, or (c) to
refuse to consent (with reasonable cause only) to Lessee's proposed assignment
or sublease and to continue this Lease in full force and effect as to the entire
Leased Premises. If Lessor should fail to notify Lessee in writing of such
election within such fifteen (15) day period, Lessor shall be deemed to have
elected option (b) above. If Lessor elects to exercise option (b) above, Lessee
agrees to provide, at its expense, direct access from the assignment or sublease
space if less than the entire premises, to a public corridor of the Building.
Lessee may assign this Lease or sublet all or a portion of the Leased Premises
to a wholly owned affiliate of Lessee with
Highwoods Plaza II 16
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written notice to Lessor but without Lessor's consent. No assignment or
subletting by Lessee shall relieve Lessee of any obligation under this Lease.
Any attempted assignment or sublease by Lessee in violation of the terms and
covenants of this paragraph shall be void.
In no event shall the proposed sublessee or assignee be an existing occupant of
any space in the Building or Affiliate of any such occupant without Lessor's
written consent.
35. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing signed by all parties hereto. Lessee agrees that it shall
execute such further amendments to this Lease as may be reasonably requested by
any future holder of a first mortgage on the Building, provided such amendments
do not materially and adversely affect the interest of Lessee hereunder.
36. Binding Agreement. This Lease shall be binding upon and inure to the
benefit of the successors and assigns of Lessor, and to the extent assignment
may be approved by Lessor hereunder, Lessee's successors and assigns.
37. Gender. The pronouns of any gender shall include the other genders,
and either the singular or the plural shall include the other.
38. Governing Law. This Lease shall be governed, construed and enforced in
accordance with the laws of the State of Tennessee.
39. Entire Agreement. This Lease and the Exhibits attached hereto and
forming a part hereof set forth the entire agreement between Lessor and Lessee.
40. Severability. The invalidity or unenforceability of a particular
provision of this Lease shall not affect the other provisions hereof, and this
Lease shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
41. Payment and Notices. Any payment or notice required or permitted
hereunder shall be deemed to have been duly made or given when personally
delivered or deposited in the United States Mail, postage prepaid, and addressed
to Lessor at the address specified in the Schedule and to Lessee at the address
specified in the Schedule until the commencement of the Term and thereafter at
the address previously furnished in writing to the other party.
42. Mortgage Protection. Lessee agrees to give any mortgage and/or deed of
trust holders, as to all or a portion of the Building, a copy of any notice of
default served upon Lessor, provided that prior to such notice Lessee has been
notified in writing (by way of notice or assignment of rents and leases, or
otherwise) of the addresses of such mortgage and/or deed available by virtue of
Lessor's default unless Lessee has given such mortgage and/or deed of trust
holders thirty (30) days after receipt of notice of such default or such other
amount of time as may be reasonable required to cure such default.
Lessor and Lessee understand, agree and acknowledge that:
Highwoods Plaza II 17
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a. This Lease has been freely negotiated by both parties.
b. That in any controversy, dispute, or contest over the meaning,
interpretation, validity, or enforceability of this Lease or any of
its terms or conditions, there shall be no inference, presumption,
or conclusion drawn whatsoever against either party by virtue of
that party having drafted this Lease or any portion thereof.
43. Option to Renew Lease. Provided that Lessee is not in default of any
of the terms, conditions and provisions hereof beyond applicable periods of
notice to cure, Lessee shall have the option to extend the term of this Lease
for one (1) five (5) year term upon the same terms, conditions and provisions
hereof, except that the annual base rental rate per rentable square foot shall
increase fifty cents ($.50) per annum over the prior year with the base rental
of Year 7 of the Lease serving as the initial basis for all rental increases. To
exercise such option to extend, Lessee shall give Lessor written notice of its
election to exercise said option at least one hundred eighty (180) calendar days
prior to the expiration of this Lease.
44. Non-Disturbance of Lessee's Possession. In the event Lessor encumbers
the real property on which the improvements containing the Leased Premises are
located, which encumbrance is evidenced by a deed of trust or mortgage (the
"Secured Instrument"), Lessor shall obtain from the holder of the Secured
Instrument (the "Lender") its agreement to be bound by the following provision:
So long as Lessee is not in default in the payment of rent,
additional rent, or other charges, or in the performance of any of
the other terms, covenants or conditions of this Lease beyond
applicable periods of notice and cure, Lessee shall not be disturbed
by Lender, or any purchaser at foreclosure, in Lessee's occupancy of
the Leased Premises during the original or any renewal term of this
Lease or any extension thereof, notwithstanding foreclosure of the
Security Instrument, exercise of the power of sale thereunder,
acceptance of a deed in lieu of foreclosure, or exercise of any
remedy provided in the Security Instrument or in any assignment of
leases and rents in favor of Lender, or pursuant to the laws of the
State of Tennessee.
The subordination provisions set forth in Section 28 of this Lease
shall not be effective with respect to any Lender unless such Lender
agrees in writing to the foregoing provisions.
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IN WITNESS WHEREOF, the parties hereto have executed this foregoing Lease
as of the 16th day of May, 1997.
LESSOR: LESSEE:
W. FRED WILLIAMS, TRUSTEE FOR WINDY HILL PET FOODS COMPANY,
THE BENEFIT OF HIGHWOODS/ INC.
TENNESSEE HOLDINGS, L.P.
By: /s/ W. Brian Reames By: /s/ Donald L. Gadd
------------------------------------ --------------------------------
W. Brian Reames or John W. Eakin
as Authorized Agent for W. Fred
Williams, Trustee, under that certain Title: V.P. Finance
Amended and Restated Trust Agreement
effective as of November 27, 1996 Date: 5-19-97
by and between Highwoods/Tennessee
Holdings, L.P. and W. Fred Williams
Title: Vice President
Date: 5-19-97
Highwoods Plaza II 19
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EXHIBIT A
(Final spaceplan to be attached here when furnished by Lessee)
Highwoods Plaza II 20
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EXHIBIT B
Building's Rules and Regulations
1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways,
corridors or halls of the Building shall not be obstructed or encumbered or used
for any purpose other than ingress and egress to and from the premises demised
to any tenant or occupant.
2. No awnings or other projection shall be attached to the outside walls or
windows of the Building without the prior consent of Landlord. No curtains,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with, any window or door of the premises demised to any tenant or
occupant, without the prior consent of Landlord. Such awnings, projections,
curtains, blinds, shades, screens or other fixtures must be of a quality, type,
design and color, and attached in a manner, approved by Landlord.
3. No sign, advertisement, object, notice or other lettering shall be exhibited,
inscribed, painted or affixed on any part of the outside or inside of the
premises demised to any tenant or occupant of the Building without the prior
consent of Landlord. Interior signs on doors and directory tables, if any, shall
be of a size, color and style approved by Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the Building
shall not be covered or obstructed, nor shall any bottles, parcels, or other
articles be placed on any window sills.
5. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building nor placed in the halls, corridors,
vestibules or other public parts of the Building.
6. The water and wash closets and other plumbing fixtures shall not be used for
any purposes other than those for which they were constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. No tenant shall
bring or keep, or permit to be brought or kept, any inflammable, combustible,
explosive or hazardous fluid, materials, chemical or substance in or about the
premises demised to such tenant.
7. No tenant or occupant shall mark, paint, drill into, or in any way deface any
part of the Building or the premises demised to such tenant or occupant. No
boring, cutting or stringing of wires shall be permitted, except with the prior
consent of Landlord, and as Landlord may direct. No tenant or occupant shall
install any resilient tile or similar floor covering in the premises demised to
such tenant or occupant except in a manner approved by Landlord.
8. No bicycles, vehicles or animals of any kind shall be brought into or kept in
or about the premises demised to any tenant. No cooking shall be done or
permitted in the Building by any tenant without the approval of the Landlord. No
tenant shall cause or permit any unusual or objectionable odors to emanate from
the premises demised to such tenant.
9. No space in the Building shall be used for manufacturing, for the storage of
merchandise, or for the sale of merchandise, goods, or property of any kind at
auction, without the prior consent of Landlord.
10. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with other tenants or occupants of the Building
or neighboring buildings or premises whether by the use of any musical
instrument, radio, television set or other audio device, unmusical noise,
whistling, singing, or in any other way. Nothing shall be thrown out of any
doors or windows.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows, nor shall any changes be made in locks or the mechanism
thereof without consent of Lessor. Each tenant must, upon the termination of its
tenancy, restore to Landlord all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by, such tenant.
Highwoods Plaza II 21
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12. All removals from the Building, or the carrying in or out of the Building or
the premises demised to any tenant, of any safes, freight, furniture or bulky
matter of any description must take place at such time and in such manner as
Landlord or its agents may determine, from time to time. Landlord reserves the
right to inspect all freight to be brought into the Building and to exclude from
the Building all freight which violates any of the Rules and Regulations or the
provisions of such tenant's lease.
13. No tenant shall use or occupy, or permit any portion of the premises demised
to such tenant to be used or occupied, as an office for a public stenographer or
typist, or to a barber or manicure shop, or as an employment bureau. No tenant
or occupant shall engage or pay any employees in the Building, except those
actually working for such tenant or occupant in the Building, nor advertise for
laborers giving an address at the Building.
14. No tenant or occupant shall purchase spring water, ice, food, beverage,
lighting maintenance, cleaning towels or other like service, from any company or
person not approved by Landlord. No vending machines of any description shall be
installed, maintained or operated upon the premises demised to any tenant
without the prior consent of Landlord.
15. Landlord shall have the right to prohibit any advertising by any tenant or
occupant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon notice from
Landlord, such tenant or occupant shall refrain from or discontinue such
advertising.
16. Landlord reserves the right to exclude from the Building, between the hours
of 6:00 p.m. and 800 a.m. on business days and at all hours on Saturdays,
Sundays and holidays, all persons who do not present a pass to the Building
signed by Landlord. Landlord will furnish passes to persons for whom any tenant
requests such passes. Each tenant shall be responsible for all persons for whom
it requests such passes and shall be liable to Landlord for all acts of such
persons.
17. Each tenant, before closing and leaving the premises demised to such tenant
at any time, shall see that all entrance doors are locked and all windows
closed. Corridor doors, when not in use, shall be kept closed.
18. Each tenant shall, at its expense, provide artificial light in the premises
demised to such tenant for Landlord's agents, contractors and employees while
performing janitorial or other cleaning services and making repairs or
alterations in said premises.
19. No premises shall be used, or permitted to be used for lodging or sleeping,
or for any immoral or illegal purposes.
20. The requirements of tenants will be attended to only upon application at the
office of Landlord. Building employees shall not be required to perform, and
shall not be requested by any tenant or occupant to perform, and work outside of
their regular duties, unless under specific instructions from the office of
Landlord.
21. Canvassing, soliciting and peddling in the Building are prohibited and each
tenant and occupant shall cooperate in seeing their prevention.
22. There shall not be used in the Building, either by any tenant or occupant or
by their agents or contractors, in the delivery or receipt of merchandise,
freight, or other matter, any hand trucks or other means of conveyance except
those equipped with rubber tires, rubber side guards and such other safeguards
as Landlord may require.
23. If the Premises demised to any tenant become infested with vermin, such
tenant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
24. No premises shall be used, or permitted to be used, at any time, without the
prior approval of Landlord, as a store for the sale or display of goods, wares
or merchandise of any kind, or as a restaurant, shop, booth, bootblack or other
stand, or for the conduct of any business or occupation which predominantly
involves direct patronage of the general public in the premises demised to such
tenant, or for manufacturing or for other similar purposes.
25. No tenant shall clean any window in the Building from the outside.
Highwoods Plaza II 22
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26. No tenant shall move, or permit to be moved, into or out of the Building or
the premises demised to such tenant, any heavy or bulky matter, without the
specific approval of Landlord. If any such matter requires special handling,
only a qualified person shall be employed to perform such special handling. No
tenant shall place, or permit to be placed, on any part of the floor or floors
of the premises demised to such tenant, a load exceeding the floor load per
square foot which such floor was designed to carry and which is allowed by law.
Landlord reserves the right to prescribe the weight and position of safes and
other heavy matter, which must be placed so as to distribute the weight.
27. Landlord shall provide and maintain an alphabetical directory board in the
first floor (main lobby) of the Building and no other directory shall be
permitted without the prior consent of Landlord. Each tenant shall be allowed
one line on such board unless otherwise agreed to in writing.
28. With respect to work being performed by a tenant in its premises with the
approval of Landlord, the tenant shall refer all contractors, contractors'
representatives and installation technicians to Landlord for its supervision,
approval and control prior to the performance of any work or services. This
provision shall apply to all work performed in the Building including
installation of telephones, telegraph equipment, electrical devices and
attachments, and installations of every nature affecting floors, walls,
woodwork, trim, ceilings, equipment and any other physical portion of the
Building.
29. Landlord shall not be responsible for lost or stolen personal property,
equipment, money, or jewelry from the premises of tenants or public rooms
whether or not such loss occurs when the Building or the premises are locked
against entry.
30. Landlord shall not permit entrance to the premises of tenants by use of pass
keys controlled by Landlord, to any person at any time without written
permission from such tenant, except employees, contractors, or service personnel
directly supervised by Landlord and employees of the United Postal Service.
31. Each tenant and all of tenant's employees and invitees shall observe and
comply with the driving and parking signs and markers on the Land surrounding
the Building, and Landlord shall not be responsible for any damage to any
vehicle towed because of noncompliance with parking regulations.
32. Without Landlord's prior approval, no tenant shall install any radio or
television antenna, loudspeaker, music system or other device on the roof or
exterior walls of the Building or on common walls with adjacent tenants.
33. Each tenant shall store all trash and garbage within its premises or in such
other areas specifically designated by Landlord. No material shall be placed in
the trash boxes or receptacles in the Building unless such materials may be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage and will not result in a violation of any law or ordinance
governing such disposal. All garbage and refuse disposal shall be only through
entryways and elevators provided for such purposes and at such times as Landlord
shall designate.
34. No tenant shall employ any persons other than the janitor or Landlord for
the purpose of cleaning its premises without the prior consent of Landlord. No
tenant shall cause any unnecessary labor by reason of its carelessness or
indifference in the preservation of good order and cleanliness. Janitor service
shall include ordinary dusting and cleaning by the janitor assigned to such work
and shall not include beating of carpets or rugs or moving of furniture or other
special services. Janitor service shall be furnished Mondays through Fridays,
legal holidays excepted; janitor service will not be furnished to areas which
are occupied after 9:30 p.m. Window cleaning shall be done only by Landlord, and
only between 6:00 a.m. and 5:00 p.m.
Highwoods Plaza II 23
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EXHIBIT C
HIGHWOODS PLAZA II
BRENTWOOD, TENNESSEE
JANITORIAL SERVICE SPECIFICATIONS
Building Common Areas (Daily):
* Halls, lobbies, public areas, mailroom, building entries
* Vacuum carpet
* Clean glass entrance doors
* Clean and sanitize drinking fountains
* Dust as required
* Building service areas - owner's responsibility
* Spot clean, sweep and dustmop all hard surface floors
* Remove fingerprints from corridor walls
* Keep janitor closets orderly
* Spot clean carpet in common areas as required
* Sweep all entrances
* Clean all ash/trash cans, remove debris
Tenant Areas (Daily):
* Vacuum all carpet
* Dust desktops and accessories
* Empty wast containers, and replace liners as needed
* Dust all office furniture, counters, file cabinets and telephones
* Spot clean glass, walls, doors and frames
* Remove fingerprints from doors and glass partitions
Highwoods Plaza II 24
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EASTPARK AT MARYLAND FARMS
One, Two & Three Maryland Farms
Brentwood, Tennessee 37027
Schedule to Lease Agreement
The following Schedule comprises an integral part of the Lease Agreement between
the Lessor and Lessee hereinafter named, dated Feb 24, 1995 (hereinafter
referred to as the "Lease"). Unless the context otherwise requires, the terms
described below shall have the meanings ascribed to them and shall be governed
and construed in accordance with the terms of the Lease.
Lessor EASTPARK, L.P., a Tennessee limited partnership whose
address is c/o Eakin & Smith, Inc., 2100 West End
Avenue, Suite 950, Nashville, Tennessee 37203.
Lessee: P.F.B. Partnership a Tennessee corporation whose
address is Two Maryland Farms, Brentwood, TN 37027.
Leased Premises: 6,887 net rentable square feet designated as Suite 350
on the 3rd Floor on the East side of the Eastpark
Building, Two Maryland Farms, (the "Building"), and
more particularly described on the Floor Plan attached
to the Lease and made a part thereof as Exhibit "A".
Term: 36 months.
Commencement Date: June 1, 1995, subject to change as provided in Section
1 of the Lease and Exhibit "C" attached hereto.
Expiration Date: May 31, 1998, subject to change as provided in Section
1 of the Lease and Exhibit "C" attached hereto.
Rent: From To Rate/SF Monthly
------ ------- ------- ---------
6-1-95 5-31-98 $14.00 $8,034.83
EASTPARK
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Rentable Area: 6,887 square feet.
Tenant Cost Allowance: $41,142 to be used and applied in the manner specified
in Section 4 of the Lease. Lessee agrees to approve and
furnish the final floor plans no later than March 15,
1995.
Security Deposit: $8,034.83 to be held and applied in accordance with
Section 3 of the Lease.
Permitted Use: Office Space which is consistent with a first class
office building, excluding food services or any other
use which could be deemed a public accommodation,
subject to the terms, limitations and conditions
provided in the Lease.
Broker: Eakin & Smith, Inc.
LESSOR: LESSEE:
EASTPARK, L.P., acting by P.F.B. PARTNERSHIP
and through Eakin & Smith, Inc. its
Property Manager
By: /s/John W. Eakin By: /s/Donald L. Gadd
------------------------ ------------------------
Title: Pres. Title: V.P. Finance
--------------------- ---------------------
Date: 2-24-95 Date: 2/24/95
--------------------- ---------------------
EASTPARK
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LEASE AGREEMENT
EASTPARK, L.P., (hereinafter referred to as "Lessor") agrees to lease to
the Lessee named in the Schedule (hereinafter referred to as "Lessee"), and
Lessee accepts from Lessor the Leased Premises described in the Schedule
(hereinafter referred to as the "Leased Premises") in consideration of the
following mutual covenants and conditions:
1. Term. This Lease shall commence upon the Commencement Date specified
in the Schedule, (as modified on The Supplemental Notice Agreement attached
hereto as Exhibit "C"), and it shall continue until the Expiration Date
specified in the Schedule (hereinafter referred to as the "Term"). In the event
of any delay on the part of Lessor in making the Leased Premises available for
occupancy by Lessee that is not caused by Lessee, the Commencement Date of the
Term and the obligation of the Lessee to pay rent on the Leased Premises shall
be extended to the date the Leased Premises are ready for occupancy by the
Lessee. If Lessor shall fall to make the Leased Premises ready for occupancy by
Lessee within three (3) months after the date for commencement of the Term
specified above as extended by the period of any delay caused by Lessee, Lessee
at its sole discretion, may terminate this Lease by written notice to Lessor
prior to Lessee's occupancy of the Leased Premises.
2. Rent. Lessee shall pay an annual base rental in the amount specified
in the Schedule (hereinafter referred to as "Base Rental"). Such Base Rental,
together with one-twelfth (1/12) of the Base Rental Adjustment as hereinafter
defined, shall be due and payable in advance without demand on the first day of
each calendar month during the Term of this Lease. In addition, Lessee shall pay
to Lessor any sales, use or other tax (excepting corporate excise and income
tax) that may be levied upon or in any way measured by this Lease or the rents
payable by Lessee, notwithstanding the fact that a statue, ordinance or
enactment imposing the same may endeavor to impose such tax upon Lessor. If the
Term of this Lease commences on other than the first day of a calendar month or
terminates on other than the last day of a calendar month, then the Base Rental
and the Base Rental Adjustment for such month or months shall be prorated.
Lessee shall also pay as additional rent, all such other sums of money as shall
become due from and payable by Lessee to Lessor under this Lease. All rent or
other payments due hereunder, if not paid when due, shall bear interest at the
per annum rate of the Base Rate of interest that Citibank, N.A. establishes from
time to time as its Base Rate, plus 2%, said interest rate to be adjusted on the
date the Base Rate changes, but not to exceed the maximum lawful rate of
interest chargeable under the laws of the State of Tennessee, from the date due
until paid. In addition, Lessee shall pay to Lessor all costs of collection of
the sums due hereunder including reasonable attorney fees.
3. Security Deposit. Lessor acknowledges that Lessee has deposited with
Lessor a security deposit in the amount specified in the Schedule, and Lessor
shall apply such security deposit to any delinquent rent due Lessor under this
Lease. Lessee shall not be entitled to interest on the security deposit, and
Lessor may commingle such security deposit with other funds of Lessor.
Furthermore, Lessor at its option may apply such part of the deposit as may be
necessary to cure any default under this Lease, and if Lessor does so, Lessee
shall, upon demand, redeposit with Lessor an amount equal to that so applied so
that Lessor will have the
EASTPARK
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full security deposit on hand at all times during the term of this Lease. Upon
the termination of this Lease, provided Lessee is not in default hereunder,
Lessor shall refund to Lessee any of the then remaining balance of the deposit
without interest. In the event of a sale or leasing of the Building or the real
property on which the Building is located, Lessor shall have the right to
transfer the deposit to the vendee or lessee and Lessor shall thereupon be
released by Lessee from all liability for the return of such deposit and Lessee
agrees to look to the new landlord solely for the return of said deposit. The
provisions hereof shall apply to every transfer or assignment made of the
deposit to a new landlord.
4. Improvements to Leased Premises. Lessee agrees to furnish Lessor with
a detailed floor plan layout and working drawings (the "Plans"), the cost of
which shall be included in the total costs referenced below, reflecting the
partitions and improvements desired by Lessee in the Leased Premises no later
than the date specified in the Schedule. After receipt and approval of said
Plans by Lessor's Architect, Lessor will cause the Leased Premises to be
constructed in accordance therewith by a contractor approved by Lessor;
provided, however, Lessor shall not be required to install any partitions or
improvements that are not in conformity with the plans and specifications for
the Building referenced in the Schedule (hereinafter referred to as the
"Building") or which are not approved by Lessor's architect. The cost of all
improvements in excess of the Tenant Cost Allowance as set forth in the Schedule
plus an additional overhead charge of 15% shall be paid by Lessee to Lessor
prior to commencement of construction promptly upon being invoiced therefor.
Failure on the part of Lessee to deliver plans in a timely manner or subsequent
changes requested by Lessee that delay construction work are to be regarded as
delays caused by the Lessee, for the purpose of determining the Commencement
Date of the Term and the obligation of Lessee to commence payment of rent.
5. Base Rental Adjustment. The Base Rental Adjustment shall be calculated
and paid as follows:
(a) The Rentable Area (hereinafter referred to as "RA") in the Leased
Premises is hereby stipulated to be the number of square feet of Rentable Area
specified in the Schedule, whether the same should be more or less as a result
of variations resulting from actual construction and completion of the Leased
Premises for occupancy.
(b) "Operating Costs" shall mean all operating expenses of the
Building and all Common Areas as hereinafter defined as computed on the cash
basis in accordance with generally accepted accounting principles consistently
applied and shall include all expenses, costs and disbursements (but not
payments of principal and interest on notes secured by deeds of trust on the
Building and Common Areas, capital investment items related to the initial
construction of the Building and Common Areas and replacements thereof, or costs
specially billed to specific tenants) of every kind and nature that Lessor shall
pay or become obligated to pay because of or in connection with the ownership
and operation of the Building or Common Areas, including but not limited to, the
following:
EASTPARK
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(i) Wages, salaries, taxes, insurance and benefits directly
attributable to all employees engaged in operating, maintaining, managing or
providing security for the Building or Common Areas and to personnel who may
provide traffic control relating to ingress and egress between the parking areas
and adjacent public streets.
(ii) All supplies and materials used in operation and maintenance
of the Building and Common Areas.
(iii) Utilities for the Building and Common Areas, including
water, power, heating, lighting, air conditioning and ventilation.
(iv) Maintenance, janitorial, security, and service agreements
for the Building or Common Areas, the sidewalks and common areas, appurtenant to
the Building, and the equipment therein.
(v) Casualty, liability, and rent loss insurance applicable to
the Building and Common Areas and Lessor's personal property used in connection
therewith.
(vi) Taxes, assessments and governmental charges attributable to
the Building and all Common Areas.
(vii) Repairs and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Lessee or other third
parties).
(viii) Amortization of the cost of installation of capital
investment items that are primarily for the purpose of reducing Operating Costs
as hereinafter defined or which may be required by governmental authority by the
passage of new laws, regulations, or requirements.
(ix) Lessor's accounting costs attributable to the Building.
(x) Fees paid by Lessor for management of the Building.
(xi) Legal consultants', appraisers' and auditing fees incurred
in connection with an appeal for reduction of taxes or for other management
purposes directly incurred in the operation of the Building and all Common
Areas.
(c) Lessee's Annual Base Rental includes an annual component
applicable to Operating Costs (as herein defined) equal to those costs for the
calendar year 1995.
(d) For the purpose of computing the annual amount of Operating Costs
per square foot of RA, RA for the entire Buildings shall be deemed to be 191,522
Rentable Square Feet.
EASTPARK
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(e) As Additional Base Rental, Lessee shall pay Lessor an amount
equal to the excess of annual Operating Costs per square foot of RA over the
annual Operating Costs component of Lessee's Base Rental described in
subparagraph (c) hereof during any calendar year within the Term of this Lease,
or during any fractional part of a calendar year, with Lessee's obligation in
such case to be prorated (the "Base Rental Adjustment"). For this purpose,
Lessor may estimate the amount by which the annual Operating Costs per square
foot of RA for each calendar year or portion thereof during the Term will exceed
the annual Operating Costs component described in subparagraph (c) hereof, and
Lessee's Base Rental shall be adjusted upward by the amount of such estimated
excess multiplied by Lessee's RA (the "Estimated Base Rental Adjustment"). Said
Estimated Base Rental Adjustment shall be divided by twelve and paid to Lessor
as Additional Base Rental monthly on the same day the Monthly Base Rental is due
and payable.
(f) Within one hundred, fifty (150) days or as soon thereafter as may
be reasonably practicable after the conclusion of each calendar year during the
Term, Lessor shall furnish to Lessee a report describing the actual amount of
Operating Costs per square foot or RA for such calendar year and the actual Base
Rental Adjustment. A lump sum payment shall be made by Lessor to Lessee or by
Lessee to Lessor, as appropriate, within thirty (30) days after the delivery of
such report equal to the amount of any difference between the actual Base Rental
Adjustment payable by Lessee pursuant to this Section 5 and the amount of any
previous payments thereof by Lessee due to the Estimated Base Rental Adjustment
based upon Lessor's estimate of annual Operating Costs. For a ninety (90) day
period following the giving of such report, Lessor shall afford Lessee
reasonable access to Lessor's books and records with respect to Operating Costs,
to enable Lessee to verify the amount of Operating Costs that are the basis for
the computation of the actual Base Rental Adjustment and the actual amount of
the difference to be paid by Lessee or Lessor, as applicable; or, in lieu of
such right of inspection, Lessor may, in its sole discretion, provide Lessee
with an audit of Lessor's books and records with respect to Operating Costs
prepared by an independent certified public accountant.
6. Services to be Furnished by Lessor. Lessor shall furnish the following
services:
(a) Entry to the Leased Premises during normal working hours on
business days. On other days and after normal working hours, Lessee may have
entry to the Leased Premises at such times by a key, card key system, or by
signing in with a guard, whichever is chosen by Lessor.
(b) Elevator facilities on business days from 7:00 a.m. to 6:00 p.m.
and an elevator subject to call at all other times.
(c) Hot and cold water at those points of supply provided for general
use of other tenants in the Building; central heat and air conditioning in
season from 7:00 a.m. to 5:30 p.m. on business days and from 7:00 a.m. to 2:00
p.m. on Saturdays, at such temperatures and in such amounts as are considered by
Lessor to be standard, but service at times during business days other than
normal business hours for the Building, other hours on Saturdays, and on Sundays
and holidays or in an amount considered by Lessor to be in excess of standard
(machinery, lighting fixtures or equipment in the Leased Premises having an
electrical load in
EASTPARK
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excess of four (4) watts per square foot of RA or occupancy in excess of one
person per 200 square feet of RA being conclusively presumed to be in excess of
standard) to be furnished only upon the request of Lessee, who shall bear the
entire cost thereof; routine maintenance and electric lighting service for all
public areas and special service areas of the Building in the manner and to the
extent deemed by Lessor to be standard.
(d) Janitorial service on business days; provided Lessee shall
provide cleaning for any area used for storage, preparation, service or
consumption of food or beverages on a daily basis and pest extermination on a
monthly basis in a manner satisfactory to Lessor.
(e) Electrical facilities and sufficient power for typewriters, voice
writers, calculating and duplicating machines, personal computers, and other
machines of similar low electrical consumption; but not including electricity
required for main frame or mini-computer, electronic data processing equipment
and special lighting in excess of building standards, or any item of electrical
equipment which (singularly) consumes more than 0.5 kilowatts at rated capacity
or requires a voltage other than 120 volts single phase. If Lessee uses any of
the services or electrical current as enumerated in this subparagraph (e) in an
amount greater than 5,000 watt hours annually per square foot of RA or such
larger amounts as may be deemed excessive by Lessor, Lessor reserves the right
to charge Lessee as Additional Rent a reasonable sum as reimbursement for the
direct cost of such added services. Said Additional Rent shall be due and
payable on the same day the Monthly Base Rental is due and payable as set forth
in paragraph 2 hereof. In the event of disagreement as to the reasonableness of
such charge, the opinion of the appropriate local utility company or a local
independent professional engineer reasonably selected by Lessor shall prevail.
Any additional equipment, feeders or risers necessary to supply Lessor's
electrical requirements in excess of the amount to be provided by Lessor
pursuant to this subsection (e) shall be supplied by Lessor at the expense of
Lessee, provided such installations will not, in Lessor's judgement, overload
the electrical system of the Building or entail excessive or unreasonable
alterations to the Building or the Leased Premises.
(f) All building standard fluorescent bulb replacement in all areas
and all incandescent bulb replacement in public areas, toilet and restroom areas
and stairwells. Failure by Lessor to any extent to furnish the services
described in this Section 6, or any cessation thereof, resulting from the repair
or alteration of the Building or causes beyond the reasonable control of Lessor
shall not be construed as an eviction of Lessee, nor work an abatement of rent,
nor relieve Lessee from fulfillment of any covenant or agreement hereof.
7. Common Areas. During the term of this Lease, for so long as Lessee is
not in default hereunder, Lessor grants Lessee a non-exclusive license to use
and occupy in common with others so entitled, the common areas of the Building,
including, but not limited to, corridors, stairways, elevators, restrooms,
lobbies, entranceways, parking areas, service roads, loading facilities,
sidewalks, and other facilities as may be designated from time to time by Lessor
subject to the terms and conditions of this Lease.
8. Keys. Locks and Card Keys. Lessor shall furnish Lessee with two (2)
keys for each corridor door entering the Leased Premises and two (2) card keys
(if applicable) to the Building Additional keys will be furnished at a charge by
Lessor on an order signed by Lessee
EASTPARK
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or Lessee's authorized representative. All such keys shall remain the property
of Lessor. No additional locks shall be allowed on any door of the Leased
Premises nor shall Lessee change the locks without Lessor's permission, and
Lessee shall not make, or permit to be made any duplicate keys, except those
furnished by Lessor. Upon termination of this Lease, Lessee shall surrender to
Lessor all keys and card keys of the Leased Premises and give to Lessor the
explanation of the combination of all locks for safes, safe cabinets and vault
doors, if any, installed in the Leased Premises by Lessee.
9. Graphics. Lessor shall provide and install, at Lessor's cost, all
letters or numerals on entrance doors to the Leased Premises and Building
Directory. All such letters and numerals shall be in the Building standard
graphics and size, and no others shall be used or permitted on the Leased
Premises.
10. Parking. Lessee shall have the right to use in common with the other
tenants in the building the parking spaces as provided by Lessor adjacent to the
building for parking of Lessee's automobiles and those of its employees and
visitors, subject to the rules and regulations, now or hereafter adopted by
Lessor. Lessee shall not use nor permit any of its employees, agents or visitors
to use any parking area owned by Lessor other than the parking area adjacent to
and assigned to the building. If Lessor deems it advisable, Lessor may set aside
a part of the total parking field for use as a separate area for visitors.
Lessor reserves the right to adopt any regulations necessary to curtail
unauthorized parking, including the required use of "parking permits."
11. Permitted Uses. Lessee shall use and occupy the Leased Premises for
the purpose specified in the Schedule and for no other purpose; provided,
however Lessee shall not occupy or use, or permit any portion of the Leased
Premises to be occupied or used for any business or purpose which is unlawful,
disreputable or deemed to be extra-hazardous on account of fire, or permit
anything to be done which would in any way increase the rate of fire or
liability or any other insurance coverage on the Building and/or its contents,
cause the load upon any floor of the Building to exceed the load for which the
floor was designed or the amount permitted by law, or use electrical energy
exceeding the capacity of the then existing feeders or wiring installations.
Lessee shall further conduct its business and control its agents, employees,
invitees, and visitors in such manner as not to create any nuisance, or
interfere with, annoy or disturb any other tenant or Lessor in its operation of
the Building. No food, soft drink or other vending machine shall be installed
within the Leased Premises. Lessee shall not allow the Premises to be used in
any way which could be construed as a public accommodation and shall indemnify
and hold Lessor harmless against any costs that may be incurred as a result of
such use.
12. Laws, Regulations and Rules of Building. Lessee shall comply with all
applicable laws, ordinances, rules and regulations relating to the use,
condition or occupancy of the Leased Premises and all common areas. Lessee shall
comply with reasonable rules and regulations as may be adopted or altered by
Lessor from time to time for the safety, care and cleanliness of the Leased
Premises, Building and common areas and for preservation of good order therein
after receiving notice thereof, including, but not limited to, the Rules and
Regulations attached hereto as Exhibit "B".
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13. Repairs by Lessor. Except as otherwise provided in Section 4 hereof,
Lessor shall not be required to make any improvements to or repairs of any kind
or character in the Leased Premises during the Term of this Lease, except such
repairs as may be deemed necessary by Lessor for normal maintenance operations
required to maintain the Leased Premises in tenantable condition. Lessor shall
keep in good order, condition and state of repair the structural portions of the
Building, the plumbing, heating, air conditioning and electrical system and the
common area facilities provided by Lessor under the provisions hereof; provided,
however, Lessor's obligation to make such repairs shall not relieve Lessee of
the obligation to pay all sums which become due under this Lease. The obligation
of Lessor to maintain and repair the Leased Premises shall be limited to
building standard items. Special leasehold improvements will, at Lessee's
written request, be maintained by Lessor at Lessee's expense, at a cost or
charge equal to the direct costs incurred in such maintenance plus 15% of said
cost to cover overhead. Lessee shall reimburse Lessor upon demand for the cost
of repairing any damage to the Leased Premises or the Building caused by the
deliberate act or negligent act of Lessee or its employees, agents or invitees
not covered by insurance. Lessee shall, at its expense, keep in good order,
condition and state of repair all portions of the Leased Premises with the
exception of those to be maintained and repaired by Lessor under the foregoing
provisions. In the event Lessee fails to comply with the requirements of this
paragraph, Lessor may make such maintenance and repair and the cost thereof,
plus 15% of said costs to cover overhead, with interest at 15% per annum shall
be immediately payable to Lessor as Additional Rent.
14. Repairs and Alterations by Lessee. Lessee shall, at its own cost and
expense, repair or replace any damage or injury done to the Leased Premises or
the Building or Common Area, caused by Lessee or Lessee's agents, employees,
invitees, contractors, or servants; provided, however, if Lessee fails to make
such repairs or replacements promptly, Lessor may, at its option, make such
repairs or replacements, and Lessee shall pay the costs thereof to the Lessor on
demand as additional rent. No alterations in the Leased Premises or signs
visible from outside the Leased Premises shall be made or installed by Lessee
without the prior written consent of Lessor, and at Lessor's election such
alterations or additions shall become the property of Lessor upon termination of
this Lease. All plans for repairs, replacements, alterations, or installations
required or permitted to be made by Lessee shall be subject to the approval of
Lessor, which may be subject to any reasonable protections or restrictions
designed to preserve the architectural design and structural integrity of the
Building and to protect against claims by materialmen and laborers.
15. Care of Leased Premises. Lessee shall not commit or allow any waste or
damage to be committed on any portion of the Leased Premises, and at the
termination of this Lease, Lessee shall deliver possession of the Leased
Premises to Lessor in as good condition as at date of possession by Lessee, or
as the same may have been improved during the term, ordinary wear and tear or
damage resulting from fire or other unavoidable casualty excepted. If Lessee
installs improvements in the Leased Premises reasonably determined by Lessor to
be special or non-standard, Lessor may require Lessee to remove such special or
non-standard improvements and restore the Leased Premises to its original
condition at Lessee's sole cost and expense upon the termination of this Lease.
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16. Lessor's Right to Substitute Space. (a) In the event the Demised
Premises leased to Tenant contain less than one-half (1/2) of the total square
feet of Rentable Floor Area on the floor on which the Demised Premises are
located, Landlord reserves the right at any time or from time to time, at its
option and upon giving not less than thirty (30) days' prior written notice to
Tenant, to transfer and remove Tenant from the Demised Premises herein specified
to any other available rooms and offices of substantially equal size and area in
the Building (or other building in the development of which the Building is a
part) and at an equivalent Base Rental. Landlord shall bear the expense of said
removal together with the reasonable expense of replacement business cards and
stationery and the expense of any renovation or alterations to said substituted
space necessary to make the same substantially conform in arrangement and layout
to the original space described in this Lease. If Landlord exercises such
option, then the substituted space shall for all purposes hereof be deemed to be
and to constitute the Demised Premises under this Lease and all terms,
conditions, covenants, warranties, agreements and provisions of this Lease
including but not limited to the same Base Rental Rate per square foot of
Rentable Floor Area shall continue in full force and effect and shall apply to
the substituted space. Tenant agrees to vacate the Demised Premises herein
specified and relocate to said substituted space promptly after the substituted
space is ready for Tenant's occupancy as provided herein, and Tenant's failure
to do so shall constitute an event of default by Tenant under this Lease.
(b) In the event the Demised Premises leased to Tenant contain less
than one-half (1/2) of the total square feet of Rentable Floor Area on the floor
on which the Demised Premises are located, Landlord shall have the right to
terminate this Lease effective at any time during the final twelve (12) months
of the Lease Term upon giving written notice of such election to Tenant at least
ninety (90) days prior to the effective date of such termination. In the event
Landlord shall exercise such option to terminate this Lease, Landlord shall bear
the cost of moving Tenant's furniture, files and other personal property from
the Demised Premises to other office space in the metropolitan Nashville,
Davidson County, Tennessee, area selected by Tenant, and in addition, the Base
Rental for the last month of Tenant's occupancy of the Demised Premises shall be
waived.
17. Peaceful Enjoyment. Lessee shall have the right to peacefully occupy,
use and enjoy the Leased Premises during the Lease Term, subject to the other
terms hereof, provided Lessee pays the rent and other sums herein required to be
paid by Lessee and performs all of Lessee's covenants and agreements herein
contained.
18. Lessor's Right of Entry. Lessor or its agents or representatives shall
have the right to enter into and upon any part of the Leased Premises at all
reasonable hours to inspect the same, clean or make repairs, alterations or
additions thereto, as Lessor may deem necessary or desirable. Lessor further
reserves the right to show the Leased Premises to prospective tenants or brokers
during the last six (6) months of the Lease Term as extended, and to prospective
purchasers or mortgagees at all reasonable times, provided prior notice is given
to Lessee in each case, and Lessee's use and occupancy of the Premises shall not
be materially inconvenienced. Lessee shall not be entitled to any abatement or
reduction of rent by reason of the exercise of the foregoing rights on the part
of Lessor.
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19. Limitation of Lessor' Liability. Lessor's liability to Lessee shall be
limited as follows:
(a) Lessor shall not be liable or responsible to Lessee for any
injury to person or property occurring in the parking areas, the Building, the
Common Areas, or the Leased Premises unless caused by the negligence of Lessor,
its agents, servants or employees other than the employees of any independent,
bonded janitorial service company engaged by Lessor to provide janitorial
service to the Leased Premises. Any janitorial service company so engaged by
Lessor shall be solely responsible for any such injury to person or property
caused by its employees, and Lessor shall provide Lessee with the name and
address of such company.
(b) Lessor shall not be liable or responsible to Lessee for lost
profits, business interruption or any other type of incidental, consequential,
or special damages caused by the making of repairs or alterations to the Leased
Premises, the Building, or the Common Area, failure to provide or interruption
of services, failure to make repairs, injury to person or property, or
otherwise.
(c) All separate and personal liability of Lessor or any partner
thereof of every kind or nature, if any, is hereby expressly waived by Lessee,
and by every person now or hereafter claiming by, through, or under Lessee; and
Lessee shall look solely to Lessor's interest in the Building and the proceeds
of any insurance maintained by Lessor in connection with the Building for the
payment of any claim against Lessor.
20. Hold Harmless. Lessor shall not be liable to Lessee, or to Lessee's
agents, servants, employees, customers, invitees, or visitors for any damage to
person or property caused by the negligence of Lessee or such persons, and
Lessee agrees to indemnify and hold Lessor harmless from all liability and
claims for any such damage. Lessee shall not be liable to Lessor, or to Lessor's
agents, servants, employees, customers, invitees, or visitors for any damage to
person or property caused by any negligence of Lessor or such persons, and
Lessor agrees to indemnify and hold Lessee harmless from all liability and
claims for such damages.
21. Defaults and Lessor's Remedies. Lessor shall have all rights and
remedies allowed at law or in equity; including, but not limited to the
following:
(a) If any voluntary or involuntary petition under any section of any
bankruptcy act shall be filed by or against Lessee, or any voluntary or
involuntary proceeding in any court or tribunal shall be instituted to declare
the Lessee insolvent or unable to pay Lessee's debts, and in the case of an
involuntary petition or proceeding, the petition or proceeding is not dismissed
within thirty (30) days from the date it is filed, Lessor may elect, upon notice
of such election, to terminate this Lease.
(b) If Lessee defaults in the payment of any installment of the rent
and does not cure the default within five (5) days after notice, or if Lessee
defaults in the prompt performance of any other provision of this Lease and does
not cure such other default within ten (10) days, or forthwith if the default
involves a hazardous condition, after written notice by Lessor, or if the
leasehold interest of Lessee be levied upon under execution or be attached by
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process of law, or if Lessee makes an assignment for the benefit of creditors,
or if a receiver be appointed for any property of Lessee, or if Lessee abandons
the Leased Premises, Lessor may terminate this Lease and Lessee's right to
possession of the Leased Premises or, without terminating this Lease, forthwith
terminate Lessee's right to possession of the Leased Premises.
(c) Upon any termination of this Lease, or upon any termination of
the Lessee's right to possession without termination of the Lease, Lessee shall
immediately vacate the Leased Premises and deliver possession to Lessor.
(d) If Lessor elects to terminate Lessee's rights to possession only,
without terminating this Lease, Lessor may, at Lessor's option, enter into the
Leased Premises, remove Lessee's signs and other evidences of tenancy, and take
and hold possession thereof without such entry and possession terminating this
Lease or releasing Lessee from the obligation to pay the rent hereunder for the
full Term. Upon and after entry into possession without termination of this
Lease, Lessor may relet the Leased Premises or any part thereof for the account
of Lessee for such rent, for such time and upon such terms as Lessor in its sole
discretion shall determine, and Lessor shall not be required to accept any
tenant offered by Lessee or to observe any instructions given by Lessee about
such reletting. A reletting for a term longer than the then remaining Lease Term
shall not constitute an acceptance by Lessor of a surrender of this Lease or a
waiver of any Lessor's rights hereunder. In any such case, Lessor may make
repairs, alterations and additions in or to the Leased Premises, and redecorate
the same to the extent reasonably deemed necessary or desirable by Lessor, and
Lessee shall, upon demand, pay the cost thereof, together with Lessor's expense
of the reletting. If the consideration collected by Lessor upon any such
reletting for Lessee's account is not sufficient to pay monthly the full amount
of the rent reserved in this Lease, together with the costs of repairs,
alterations, additions, redecorating and Lessor's expenses of reletting, Lessee
shall pay to Lessor the amount of each monthly deficiency upon demand.
(e) Any property which may be removed from the Leased Premises by the
Lessor pursuant to the authority of this Lease or of law, to which Lessee is or
may be entitled, may be handled, removed or stored by Lessor at the risk, cost
and expense of Lessee, and Lessor shall in no event be responsible for the
value, preservation or safe-keeping thereof. Lessee shall pay to Lessor, upon
demand, any and all expenses incurred in such removal and all storage charges
against such property so long as the same shall be in Lessor's possession or
under Lessor's control. Any such property of Lessee not retaken from storage by
Lessee within thirty (30) days after the end of the Lease Term, however
terminated, shall be conclusively presumed to have been conveyed by Lessee to
Lessor under this Lease as a bill of sale.
(f) In the event Lessee defaults in the performance of any of the
terms, covenants, agreements or conditions contained in this Lease and Lessor
places the enforcement of this Lease, or any part thereof, or the collection of
any rent due, or to become due hereunder or recovery of the possession of the
Leased Premises in the hands of an attorney, or files suit upon the same, Lessee
agrees to pay Lessor's reasonable attorney's fees.
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(g) Failure of Lessor to declare any default immediately upon
occurrence thereof, or delay in taking any action in connection therewith, shall
not waive such default, but Lessor shall have the right to declare any such
default at any time and take such action as might be lawful or authorized
hereunder, either at law or in equity.
22. Holding Over. If Lessee retains possession of the Leased Premises or
any part thereof after the termination of this Lease, Lessee shall pay rent
(including Base Rent and Base Rental Adjustment) at double the rate payable on
the month preceding such holding over computed on a daily basis for each day
that Lessee remains in possession. In addition thereto, Lessee shall be liable
for and pay to Lessor, all damages, consequential as well as direct, sustained
by reason of Lessee's holding over.
23. Condemnation. If the Leased Premises shall be partially taken or
condemned for any public purpose to such an extent as to render a portion of the
Leased Premises untenantable, the rental provided for herein shall abate as to
the portion rendered untenantable. In the event the whole of the Leased Premises
shall be so taken or condemned, this Lease shall terminate as of the date of
taking of possession. All proceeds from any taking or condemnation of the Leased
Premises shall belong to and be paid to Lessor.
24. Damage or Destruction to the Leased Premises
If the Leased Premises, the Building, or the Common Area is damaged or
destroyed by fire or other casualty, cause or condition whatsoever through no
fault or neglect of Lessee, its agents, employees, customers, invitees, visitors
or contractors so as to cause the Leased Premises to be untenantable or to make
it possible for Lessee to continue its normal business operations therein, a
just proportion of the rent herein reserved shall abate according to the extent
the full use and enjoyment of the Lease Premises are rendered impossible by
reason of such damage until such time as Lessor makes such portion of the Leased
Premises tenantable, or useable for Lessee's normal business operations, as the
case may be. If Lessor determines that such damage or destruction cannot be
repaired within one hundred and eighty (180) days so as to restore fully
Lessee's full use and enjoyment of the Leased Premises, Lessor may, by written
notice to the Lessee given within thirty (30) days after such damage terminate
this Lease as to all the Leased Premises as of the date of such destruction, and
all rent owed up to the time of such destruction shall be paid by Lessee. If
Lessee does not exercise its right to terminate after such damage, Lessor shall
proceed with due diligence to restore Lessee's full use and enjoyment of the
Leased Premises within one hundred eighty (180) days from the date of such
destruction.
25. Casualty Insurance. Lessor shall maintain fire and extended coverage
insurance on the portion of the Building constructed by Lessor, including
additions and improvements by Lessee that are required to be made by Lessee
under this Lease and which have become or are to become the property of Lessor
upon vacation of the Leased Premises by Lessee. Said insurance shall be
maintained with an insurance company authorized to do business in Tennessee in
amounts desired by Lessor and at the expense of Lessor and payments for losses
thereunder shall be made solely to Lessor. Lessee shall maintain at its expense
fire and extended coverage insurance on all of its personal property, including
removable trade fixtures, located in the
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Leased Premises and on all additions and improvements made by Lessee and not
required to be insured by Lessor above, and Lessee shall provide Lessor with a
current certificate evidencing such coverage in form reasonably satisfactory to
Lessor. If the annual premiums to be paid by Lessor shall exceed the standard
rates because of Lessee's operations, contents of the Leased Premises, or
improvements with respect to the Leased Premises beyond building standard,
resulting in extra-hazardous exposure, Lessee shall promptly pay the excess
amount of the premium upon request by Lessor as additional rent.
26. Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee each hereby waive any and all rights of
recovery, claim action or cause of action, against the other, its agents,
officers, or employees, for any loss or damage that may occur to the Leased
Premises, or any improvements thereto, or to the Building of which the Leased
Premises are a part, or any improvements thereto, or any personal property of
such party therein, by reason of fire, the elements, or any other cause which
could be insured against under the terms of standard fire and extended coverage
insurance policies referred to in Section 23 hereof, regardless of cause or
origin, including negligence of the other party hereto, its agents, officers or
employees, and covenants that no insurer shall have any right of subrogation
against such other party.
27. Liability Insurance. Lessee shall maintain comprehensive general
public liability insurance against claims for bodily injury, death or property
damage occurring in, on or about the parking areas, Building or the Leased
Premises in a combined single limit of not less than Two Million Dollars
($2,000,000.00). Such insurance shall be effected under policies satisfactory to
Lessor that shall name Lessor as an additional insured. Lessee shall furnish
Lessor with a certificate evidencing such coverage that shall contain an
undertaking by the insurer to give Lessor ten (10) days prior written notice of
any modification or cancellation of the coverage afforded by such insurance.
28. Subordination and Attornment. This Lease is subject and subordinate to
all Mortgages now or hereafter placed upon the Building, and all other
encumbrances and matters of public record applicable to the Building, including
without limitation, any reciprocal easement or operating agreements, covenants,
conditions and restrictions and Lessee shall not act or permit the Premises to
be operated in violation thereof. If any foreclosure or power of sale
proceedings are initiated by any Lender or a deed in lieu is granted (or if any
ground lease is terminated), Lessee agrees, upon written request of any such
Lender or any purchaser at such foreclosure sale, to attorn and pay rent to such
party and to execute and deliver any instruments necessary or appropriate to
evidence or effectuate such attornment. In the event of attornment, no Lender
shall be: (i) liable for any act or omission of Lessor, or subject to any
offsets or defenses which Lessee might have against Lessor (prior to such Lender
becoming Lessor under such attornment), (ii) liable for any security deposit or
bound by any prepaid Rent not actually received by such Lender, or (iii) bound
by any future modification of this Lease not consented to by such Lender. Any
Lender may elect to make this Lease prior to the lien of its Mortgage. and if
the Lender under any prior Mortgage shall require, this Lease shall be prior to
any subordinate Mortgage; such elections shall be effective upon written notice
to Lessee. Lessee agrees to give any Lender by certified mail, return receipt
requested, a copy of any notice of default served by Lessee upon Lessor,
provided that prior to such notice Lessee has been
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notified in writing (by way of service on Lessee of a copy of an assignment of
leases, or otherwise) of the name and address of such Lender. Lessee further
agrees that if Lessor shall have failed to cure such default within the time
permitted Lessor for cure under this Lease, any such Lender whose address has
been so provided to Lessee shall have an additional period of thirty (30) days
in which to cure (or such additional time as may be required due to causes
beyond such Lender's control, including time to obtain possession of the
Building by power of sale or judicial action or deed in lieu of foreclosure).
The provisions of this Article shall be self-operative; however, Lessee shall
execute such documentation as Lessor or any Lender may request from time to time
in order to confirm the matters set forth in this Article in recordable form. To
the extent not expressly prohibited by Law, Lessee waives the provisions of any
Law now or hereafter adopted which may give or purport to give Lessee any right
or election to terminate or otherwise adversely affect this Lease or Lessee's
obligations hereunder if such foreclosure or power of sale proceedings are
initiated, prosecuted or completed. Lessee agrees to execute any instruments
evidencing such subordination and attornment as reasonably may be required by
the holder of any mortgage or deed of trust on the building.
29. Estoppel Letter. Lessee shall at any time, upon not less than ten (10)
days prior written request, execute and deliver in form and substance
satisfactory to Lessor and any mortgagee or beneficiary under a deed of trust
affecting the Leased Premises, an estoppel letter certifying:
(a) The date upon which the Lease Term commences and expires:
(b) The date to which rent has been paid;
(c) That Lessee has accepted the Leased Premises and that all
improvements have been satisfactorily completed (or if not so accepted or
completed, the matters objected to by Lessee);
(d) That the Lease is in full force and effect and has not been
modified or amended (or if modified or amended, a description of same);
(e) That there are no defaults by Lessor under the Lease nor any
existing condition with respect to which the giving of notice or lapse of time
would constitute a default;
(f) That Lessee has not received any concession;
(g) That Lessee has received no notice from any insurance company of
any defects or inadequacies in the Leased Premises;
(h) That Lessee has no options or rights other than as set forth in
this Lease or any amendment thereto described in such letter; and
(i) Such other matters as may be necessary or appropriate to qualify
Lessee's response to any of the foregoing statements of which Lessor may
reasonably request.
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If such letter is to be delivered to a purchaser of the Building, it shall
further include the agreement of Lessee to recognize such purchaser as Lessor
under this Lease, and thereafter to pay rent to the purchaser or its designee in
accordance with the terms of this Lease. Lessee acknowledges that any purchaser
or prospective mortgagee of the Building may rely upon such estoppel letter and
that Lessor may incur substantial damages by reason of any failure on the part
of Lessee to provide such letter in a timely manner.
30. Lease Commission. Lessee represents and warrants that Lessee has dealt
with and only with the Broker(s) named in the Schedule in connection with this
Lease and Lessee agrees to indemnify and hold harmless Lessor and any broker
employed by Lessor from any claims of other broker(s) in connection with this
Lease. Lessor shall pay the leasing commission due to the within-named
Broker(s).
31. Hazardous Substance - General. The term "Hazardous Substances," as
used in this lease shall mean pollutants, contaminants, toxic or hazardous
wastes, or any other substances the use and/or the removal of which is
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law, ordinance or other statue of a
governmental authority relating to pollution or protection of the environment.
Lessee hereby agrees that (i) no activity will be conducted on the Leased
Premises or in the Building that will produce any Hazardous Substance, except
for such activities that are part of the ordinary course of Lessee's business
activities (the "Permitted Activities") provided said Permitted Activities are
conducted in accordance with all Environmental Laws and have been approved in
advance in writing by Lessor; Lessee shall be responsible for obtaining any
required permits and paying any fees and providing any testing required by any
governmental agency; (ii) the Leased Premises will not be used in any manner for
the storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Lessee's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Lessor; Lessee shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency; (iii) no portion of the Leased Premises will be used as a
landfill or a dump; (iv) Lessee will not install any underground tanks of any
type; (v) Lessee will not allow any surface or subsurface conditions to exist or
come into existence that constitute, or with the passage of time may constitute
a public or private nuisance; (vi) Lessee will not permit any Hazardous
Substances to be brought into the Leased Premises, except for the Permitted
Materials described above, and if so brought or found located thereon, the same
shall be immediately removed, with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all Environmental Laws.
Upon prior notice and during normal business hours, Lessor or Lessor's
representative shall have the right but not the obligation to enter the Leased
Premises for the purpose of inspecting the storage, use and disposal of
Permitted Materials, and if such Permitted Materials are being improperly
stored, used, or disposed of, then Lessee shall immediately take such corrective
action as requested by Lessor. Should Lessee fail to take such corrective action
within 24 hours, Lessor shall have the right to perform such work and Lessee
shall promptly reimburse Lessor for any and all costs associated with said work.
If at any time during or after the term of the Lease, the Leased Premises is
found to be so contaminated or subject to said conditions, Lessee shall
diligently institute proper and thorough cleanup procedures at Lessee's sole
cost, and Lessee agrees to
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indemnify and hold Lessor harmless from all claims, demand, actions,
liabilities, costs, expenses, damages and obligations of any nature arising from
or as a result of the use of the Leased Premises by Lessee. The foregoing
indemnification and the responsibilities of Lessee shall survive the termination
or expiration of this Lease.
32. ADA General Compliance. Lessee, at Lessee's sole expense, shall comply
with all laws, rules, orders, ordinances, directions, regulations and
requirements of federal, state, county and municipal authorities now in force or
which may hereafter be in force, which shall impose any duty upon the Lessor or
Lessee with respect to the use, occupation or alteration of the Leased Premises,
and Lessee shall use all reasonable efforts to fully comply with The American's
With Disabilities Act of 1990. Lessor's responsibility for compliance with The
American's With Disabilities Act of 1990 shall include the common areas and
restrooms of the Building, but not the Leased Premises.
Within ten (10) days after receipt, Lessee shall advise Lessor in writing, and
provide the Lessor with copies of (as applicable), any notices alleging
violation of the Americans with Disabilities Act of 1990 ("ADA") relating to any
portion of the Property or of the Premises; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion of the
Property or of the Premises; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with ADA and
relating to any portion of the Property or the Premises.
33. Assignment by Lessor. Lessor shall have the right to transfer and
assign, in whole or in part, all its rights and obligations hereunder and in the
Building. In such event and upon such transfer, no further liability or
obligation shall accrue against the assigning Lessor.
34. Assignment or Sublease. In the event Lessee should desire to assign
this Lease or sublet the Leased Premises or any part thereof, Lessee shall give
Lessor at least sixty (60) days prior notice, which shall specify the terms and
effective date thereof. Lessor shall have thirty (30) days following receipt of
such notice to notify Lessee in writing that Lessor elects (a) to terminate this
Lease as to the space so affected as of the effective date specified by Lessee
in which event Lessee will be relieved on such effective date of all further
obligation hereunder as to such space, (b) to permit Lessee to assign or sublet
such space, subject, however, to subsequent written approval of the proposed
assignee or sublessee by Lessor, or (c) to refuse to consent (with reasonable
cause only) to Lessee's proposed assignment or sublease and to continue this
Lease in full force and effect as to the entire Leased Premises. If Lessor
should fail to notify Lessee in writing of such election within such thirty (30)
day period, Lessor shall be deemed to have elected option (b) above. If Lessor
elects to exercise option (b) above, Lessee agrees to provide, at its expense,
direct access from the assignment or sublease space to a public corridor of the
Building. No assignment or subletting by Lessee shall relieve Lessee of any
obligation under this Lease. Any attempted assignment or sublease by Lessee in
violation of the terms and covenants of this paragraph shall be void.
EASTPARK
17
<PAGE>
35. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing signed by all parties hereto. Lessee agrees that it shall
execute such further amendments to this Lease as may be reasonably requested by
any future holder of a first mortgage on the Building, provided such amendments
do not materially and adversely affect the interest of Lessee hereunder.
36. Binding Agreement. This Lease shall be binding upon and inure to the
benefit of the successors and assigns of Lessor, and to the extent assignment
may be approved by Lessor hereunder, Lessee's successors and assigns.
37. Gender The pronouns of any gender shall include the other genders, and
either the singular or the plural shall include the other.
38. Governing Law. This Lease shall be governed, construed and enforced in
accordance with the laws of the State of Tennessee.
39. Entire Agreement. This Lease and the Exhibits attached hereto and
forming a part hereof set forth the entire agreement between Lessor and Lessee.
40. Severability. The invalidity or unenforceability of a particular
provision of this Lease shall not affect the other provisions hereof, and this
Lease shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
41. Payment and Notices. Any payment or notice required or permitted
hereunder shall be deemed to have been duly made or given when personally
delivered or deposited in the United States Mail, postage prepaid, and addressed
to Lessor at the address specified in the Schedule and to Lessee at the address
specified in the Schedule until the commencement of the Term and thereafter at
the address previously furnished in writing to the other party.
42. Mortgage Protection. Lessee agrees to give any mortgage and/or deed of
trust holders, as to all or a portion of the Building, a copy of any notice of
default served upon Lessor, provided that prior to such notice Lessee has been
notified in writing (by way of notice or assignment of rents and leases, or
otherwise) of the addresses of such mortgage and/or deed available by virtue of
Lessor's default unless Lessee has given such mortgage and/or deed of trust
holders thirty (30) days after receipt of notice of such default or such other
amount of time as may be reasonable required to cure such default.
43. Renewal Option. (a) As long as Tenant is not in default in the
performance of its covenants under this Lease, Lessor shall grant Lessee the
option to renew (the "Renewal Option") the term of this Lease for a period of
thirty-six (36) additional months (the "Renewal Term"). Lessee shall exercise
the Renewal Option by delivering written notice of such election to Landlord at
least six (6) months prior to the expiration of the initial term of this Lease.
The renewal of this Lease shall be upon the same terms and conditions of this
Lease, except (i) the Base Rental Rate during the Renewal Term shall be a
Market-Base Rental Rate, (ii) Lessee shall have no option to renew this Lease
beyond the expiration of the Renewal Term, and (iii) Lessee shall not have the
right to assign its renewal rights to any sublessee of the Leased Premises or
EASTPARK
18
<PAGE>
any portion thereof or to any assignee of the Lease, nor may any such sublessee
or assignee exercise or enjoy the benefit of such renewal rights.
Notwithstanding the foregoing, Lessee shall have no right to exercise such
option to renew, and Lessor shall have no obligation to renew this Lease, unless
(A) this Lease shall be in full force and effect upon the date of the exercise
of the Renewal Option and upon the date of the expiration of the original term,
and (B) on the date of the exercise of the Renewal Option and on the date of the
expiration or the original term there shall exist no default on the part of
Lessee under this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this foregoing Lease
as of the 24 day of Feb, 1995.
LESSOR:
EASTPARK, L.P. acting by and through
Eakin & Smith, Inc., its Property Manager
By: /s/ John W. Eakin
--------------------------------
Title: Pres.
-----------------------------
LESSEE:
P.F.B. PARTNERSHIP
By: /s/ Donald L. Gadd
--------------------------------
Title: V.P. Finance
-----------------------------
EASTPARK
19
<PAGE>
EXHIBIT "A"
FLOORPLAN
[GRAPHIC OF FLOORPLAN OMITTED]
TWO MARYLAND FARMS
THIRD FLOOR
<PAGE>
EXHIBIT B
Building's Rules and Regulations
1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways,
corridors or halls of the Building shall not be obstructed or encumbered or used
for any purpose other than ingress and egress to and from the premises demised
to any tenant or occupant.
2. No awnings or other projection shall be attached to the outside walls or
windows of the Building without the prior consent of Landlord. No curtains,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with, any window or door of the premises demised to any tenant or
occupant, without the prior consent of Landlord. Such awnings, projections,
curtains, blinds, shades, screens or other fixtures must be of a quality, type,
design and color, and attached in a manner approved by Landlord.
3. No sign, advertisement, object, notice or other lettering shall be exhibited,
inscribed, painted or affixed on any part of the outside or inside of the
premises demised to any tenant or occupant of the Building without the prior
consent of Landlord. Interior signs on doors and directory tables, if any, shall
be of a size, color and style approved by Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the Building
shall not be covered or obstructed, nor shall any bottles, parcels, or other
articles be placed on any window sills.
5. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors,
vestibules or other public parts of the Building.
6. The water and wash closets and other plumbing fixtures shall not be used for
any purposed other than those for which they are constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. No tenant shall
bring or keep, or permit to be brought or kept, any inflammable, combustible,
explosive or hazardous fluid, materials, chemical or substance in or about the
premises demised to such tenant.
7. No tenant or occupant shall mark, paint, drill into, or in any way deface any
part of the Building or the premises demised to such tenant or occupant. No
boring, cutting or stringing of wires shall be permitted, except with the prior
consent of Landlord, and as Landlord may direct. No tenant or occupant shall
install any resilient tile or similar floor covering in the premises demised to
such tenant or occupant except in a manner approved by Landlord.
8. No bicycles, vehicles or animals of any kind shall be brought into or kept in
or about the premises demised to any tenant. No cooking shall be done or
permitted in the Building by any tenant without the approval of the Landlord. No
tenant shall cause or permit any unusual or objectionable odors to emanate from
the premises demised to such tenant.
9. No space in the Building shall be used for manufacturing, for the storage of
merchandise, or for the sale of merchandise, goods, or property of any kind at
auction, without the prior consent of Landlord.
10. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with other tenants or occupants of the Building
or neighboring buildings or premises whether by the use of any musical
instrument, radio, television set or other audio device, unmusical noise,
whistling, singing, or in any other way. Nothing shall be thrown out of any
doors or windows.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows, nor shall any changes be made in locks or the mechanism
thereof. Each tenant must, upon the termination of its tenancy, restore to
Landlord all keys of stores, offices and toilet rooms, either furnished to, or
otherwise procured by, such tenant.
EASTPARK
21
<PAGE>
12. A11 removals from the Building, or the carrying in or out of the Building or
the premises demised to any tenant, of any safes, freight, furniture or bulky
matter of any description must take place at such time and in such manner as
Landlord or its agents may determine from time to time. Landlord reserves the
right to inspect all freight to be brought into the Building and to exclude from
the Building all freight which violates any of the Rules and Regulations or the
provisions of such tenant's lease.
13. No tenant shall use or occupy, or permit any portion of the premises demised
to such tenant to be used or occupied, as an office for a public stenographer or
typist, or to a barber or manicure shop, or as an employment bureau. No tenant
or occupant shall engage or pay any employees in the Building, except those
actually working for such tenant or occupant in the Building, nor advertise for
laborers giving an address at the Building.
14. No tenant or occupant shall purchase spring water, ice, food, beverage,
lighting maintenance, cleaning towels or other like service, from any company or
person not approved by Landlord. No vending machines of any description shall be
installed, maintained or operated upon the premises demised to any tenant
without the prior consent of Landlord.
15. Landlord shall have the right to prohibit any advertising by any tenant or
occupant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon notice from
Landlord, such tenant or occupant shall refrain from or discontinue such
advertising.
16. Landlord reserves the right to exclude from the Building, between the hours
of 6:00 p.m. and 8:00 a.m. on business days and at all hours on Saturdays,
Sundays and holidays, all persons who do not present a pass to the Building
signed by Landlord. Landlord will furnish passes to persons for whom any tenant
requests such passes. Each tenant shall be responsible for all persons for whom
it requests such passes and shall be liable to Landlord for all acts of such
persons.
17. Each tenant, before closing and leaving the premises demised to such tenant
at any time, shall see that all entrance doors are locked and all windows
closed. Corridor doors, when not in use, shall be kept closed.
18. Each tenant shall, at its expense, provide artificial light in the premises
demised to such tenant for Landlord's agents, contractors and employees while
performing janitorial or other cleaning services and making repairs or
alterations in said premises.
19. No premises shall be used, or permitted to be used for lodging or sleeping,
or for any immoral or illegal purposes.
20. The requirements of tenants will be attended to only upon application at the
office of Landlord. Building employees shall not be required to perform, and
shall not be requested by any tenant or occupant to perform and work outside of
their regular duties, unless under specific instructions from the office of
Landlord.
21. Canvassing, soliciting and peddling in the Building are prohibited and each
tenant and occupant shall cooperate in seeking their prevention.
22. There shall not be used in the Building, either by any tenant or occupant or
by their agents or contractors, in the delivery or receipt of merchandise,
freight, or other matter, any hand trucks or other means of conveyance except
those equipped with rubber tires, rubber side guards and such other safeguards
as Landlord may require.
23. If the Premises demised to any tenant become infested with vermin, such
tenant, at its sole cost and expense. shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
24. No premises shall be used, or permitted to be used, at any time, without the
prior approval of Landlord, as a store for the sale or display of goods, wares
or merchandise of any kind, or as a restaurant, shop, booth, bootblack or other
stand, or for the conduct of any business or occupation which predominantly
involves direct patronage of the general public in the premises demised to such
tenant, or for manufacturing or for other similar purposes.
EASTPARK
22
<PAGE>
25. No tenant shall clean any window in the Building from the outside.
26. No tenant shall move, or permit to be moved, into our out of the Building or
the premises demised to such tenant, any heavy or bulky matter, without the
specific approval of Landlord. If any such matter requires special handling,
only a qualified person shall be employed to perform such special handling. No
tenant shall place, or permit to be placed, on any part of the floor or floors
of the premises demised to such tenant, a load exceeding the floor load per
square foot which such floor was designed to carry and which is allowed by law.
Landlord reserves the right to prescribe the weight and position of safes and
other heavy matter which must be placed so as to distribute the weight.
27. Landlord shall provide and maintain an alphabetical directory board in the
first floor (main lobby) of the Building and no other directory shall be
permitted without the prior consent of Landlord. Each tenant shall be allowed
one line on such board unless otherwise agreed to in writing.
28. With respect to work being performed by a tenant in its premises with the
approval of Landlord, the tenant shall refer all contractors, contractors'
representatives and installation technicians to Landlord for its supervision,
approval and control prior to the performance of any work or services. This
provision shall apply to all work performed in the Building including
installation of telephones, telegraph equipment, electrical devices and
attachments, and installations of every nature affecting floors, walls,
woodwork, trim, ceilings, equipment and any other physical portion of the
Building.
29. Landlord shall not be responsible for lost or stolen personal property,
equipment, money, or jewelry from the premises of tenants or public rooms
whether or not such loss occurs when the Building or the premises are locked
against entry.
30. Landlord shall not permit entrance to the premises of tenants by use of pass
keys controlled by Landlord, to any person at any time without written
permission from such tenant, except employees, contractors, or service personnel
directly supervised by Landlord and employees of the United States Postal
Service.
31. Each tenant and all of tenant's employees and invitees shall observe and
comply with the driving and parking signs and markers on the Land surrounding
the Building, and Landlord shall not be responsible for any damage to any
vehicle towed because of noncompliance with parking regulations.
32. Without Landlord's prior approval, to tenant shall install any radio or
television antenna, loudspeaker, music system or other devise on the roof or
exterior walls of the Building or on common walls with adjacent tenants.
33. Each tenant shall store all trash and garbage within its premises or in such
other areas specifically designated by Landlord. No materials shall be placed in
the trash boxes or receptacles in the Building unless such materials may be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage and will not result in a violation of any law or ordinance
governing such disposal. All garbage and refuse disposal shall be only through
entryways and elevators provided for such purposes and at such times as Landlord
shall designate.
34. No tenant shall employ any persons other than the janitor or Landlord for
the purpose of cleaning its premises without the prior consent of Landlord. No
tenant shall cause any unnecessary labor by reason of its carelessness or
indifference in the preservation of good order and cleanliness. Janitor service
shall include ordinary dusting and cleaning by the janitor assigned to such work
and shall not include beating of carpets or rugs or moving of furniture or other
special services. Janitor service shall be furnished Mondays through Fridays,
legal holidays excepted; janitor service will not be furnished to areas which
are occupied after 9:30 p.m. Window cleaning shall be done only by Landlord, and
only between 6:00 a.m. and 5:00 p.m.
EASTPARK
23
<PAGE>
EXHIBIT "C"
SUPPLEMENTAL NOTICE
RE: Lease dated as of ______________________________, 199_____, by and
between ___________________________________________, as Landlord and
____________________________________________, as Tenant.
Dear Sir:
Pursuant to Article 1 of the captioned Lease, please be advised as follows:
1. The Rental Commencement Date is the _______ day of __________________,
199_____, and the expiration date of the Lease Term is the ______ day
of ___________________________________, _________,s subject however to
the terms and provisions of the Lease.
2. The Rentable Floor Area of the Demised Premises is ___________________
square feet.
3. Terms denoted herein by initial capitalization shall have the meanings
ascribed thereto in the Lease.
LANDLORD:
EASTPARK, L.P.
By: _________________________________
Title: _________________________________
EASTPARK
20
<PAGE>
Agri-Data Systems, Inc.
21620 North 19th Avenue
Suite A-10
Phoenix, Arizona 85027
Telephone: (602) 582-3888
Fax:(602) 582-2916
- --------------------------------------------------------------------------------
Licensee: WINDY HILL PET FOOD COMPANY Effective Date: _______
Address: Two Maryland Farms, Suite 301 Key # ______ (if applicable)
Brentwood, Tennessee 37027-2487
Ship to: Same Formulation Software:
Contact: Donald L. Gadd
Phone: 615-373-7774 Visual LCF Extended,
Level III
One Plant
- --------------------------------------------------------------------------------
Software License Agreement
THIS AGREEMENT is made this 29th day of April, 1996, between AGRI-DATA
SYSTEMS, INC., ("ADS") and "Licensee". The site of Licensee's computer is at the
location stated above.
TERMS AND CONDITIONS
I. CONFIDENTIALITY, TITLE, OWNERSHIP, WARRANTY
All programs and documentation furnished the LICENSEE by ADS, under the terms of
this Agreement shall remain the confidential and proprietary property of ADS.
LICENSEE will protect the proprietary rights of ADS.
As provided by this Agreement, the LICENSEE is entitled to the use of the
software and documentation but acquires no rights to title or ownership of ADS
property.
The software and documentation will not be altered, modified or adapted,
including but not limited to translating, decompiling, disassembling or creating
derivative works by anyone other than authorized ADS personnel.
Distribution, rental, sub-license, or lease of ADS software programs and
documentation by LICENSEE is expressly prohibited.
II. CONSIDERATION
The total licensing fee for the software licensed under this Agreement is:
$7,500.00
LICENSEE will pay ADS the amount of Seven Thousand, Five Hundred Dollars
($7,500.00) upon approval of this Agreement, prior to the installation of
programs, unless other terms have been approved by the parties.
1
<PAGE>
III. PROGRAMS AND MAINTENANCE
ADS shall furnish executable programs to the LICENSEE in a media suitable for
incorporation into the LICENSEE's library for use on their computer system. ADS
will maintain the programs, to include correcting any errors or malfunctions in
the packages, free of charge for a term of twelve (12) months commencing upon
execution of License Agreement.
IV. CONTINUED CUSTOMER SUPPORT/ANNUAL RENEWAL
Provided LICENSEE subscribes to the ADS Customer Support and Maintenance
Program, ADS shall continue maintenance services, updates and enhancements of
the licensed software. A Customer Support Agreement is offered herewith to
LICENSEE. The Agreement shall be renewed annually upon payment of the Support
and Maintenance fees. The Customer Support annual fees will be payable on each
anniversary of the License Agreement effective date. ADS shall mail an invoice
to LICENSEE in advance of anniversary date.
In the absence of an executed Customer Support/Maintenance Agreement, LICENSEE
will be assessed a fee at the rate of $125.00 per hour for customer support
services. A fifteen (15) minute will apply.
In the event that any data errors occur due to errors in any programs,
procedures or systems provided by ADS, and unaltered by anyone except authorized
ADS personnel, ADS will correct the data by coordinating an effort between
authorized personnel of ADS and LICENSEE. In the event correction of the data is
necessary, ADS reserves the right to determine whatever means are required to
accomplish this goal, if the work is to be done free of charge.
ADS shall not be liable for incidental or consequential damages resulting from
the performance or use of this software.
V. CUSTOM SOFTWARE PROGRAMS
All programming done on a custom basis shall be billed at the rate in effect at
the time the services are performed.
Any programs developed specifically for the Licensee will require additional
programming and maintenance fees for incorporation into continuing software
revisions.
VI. INSTALLATION AND TRAINING
Installation and training will be performed on-site by ADS Personnel at the
option of LICENSEE. An installation and training fee of Three Hundred Fifty
Dollars ($350.00) per day, plus related travel expenses will be billed for
installation, training and testing of systems. This fee will be billed
separately, as incurred, and payable fifteen (15) days after receipt of invoice.
2
<PAGE>
VII. EXECUTION OF LICENSE
Receipt by ADS of Agreement signed by authorized representative of LICENSEE
constitutes execution of License. The LICENSEE shall receive executable code for
the PC compatible Computer.
Transfer of this License Agreement, software, documentation or security key(s)
is prohibited.
VIII. TERMINATION OF LICENSE AGREEMENT
A. This Agreement and rights to use the software licensed herein may be
terminated for breach of this License Agreement.
B. Should this Agreement by terminated for any reason, LICENSEE will
promptly return the property of ADS to its principal office.
GENERAL
This Agreement shall be governed by the laws of the State of Arizona and
constitutes the entire agreement between the parties. This agreement shall not
be modified or rescinded without express written approval of both parties.
WINDY HILL PET FOOD COMPANY AGRI-DATA SYSTEMS, INC.
By /s/ Robert V. Dale By /s/ Russell M. Schmente
--------------------------- ---------------------------
Title President Title President
Date: Date: April 24, 1996
-------------------------
3
<PAGE>
IN WITNESS HERETO, AGRI-DATA and the CUSTOMER have caused this Agreement to
be executed by their duly authorized representatives.
WINDY HILL PET FOOD COMPANY AGRI-DATA SYSTEMS, INC.
By /s/ Robert V. Dale By /s/ Russell M. Schmente
--------------------------- ---------------------------
Title President Title President
Date: Date: April 24, 1996
-------------------------
4
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 29, 1996, by and between
Windy Hill Pet Food Company, Inc. (the "Company"), a Delaware corporation, and
Robert V. Dale (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee and Windy Hill Pet Food Company, L.L.C., a
Delaware limited liability company ("Windy Hill LLC"), are parties to that
certain employment agreement dated May 8, 1995 (the "Former Employment
Agreement");
WHEREAS, Windy Hill LLC has transferred all of its assets and
liabilities to the Company through its parent, Windy Hill Pet Food Holdings,
Inc., a Delaware corporation;
WHEREAS, from the date hereof, the Company will transact the
business formerly transacted by Windy Hill LLC;
WHEREAS, the Company desires to employ the Employee on the same
terms and conditions as he was employed by Windy Hill LLC; and
WHEREAS, the parties desire to terminate the Former Employment
Agreement and enter into this Agreement upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Termination of Former Employment Agreement. The Former Employment
Agreement is hereby terminated in its entirety and shall no longer be of any
force or effect.
2. Employment. Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
3. Term of Employment. (a) The initial term of this Agreement shall
commence on the date hereof (the "Commencement Date") and shall continue in
effect through May 1, 1998; provided, however, that (i) commencing on the first
anniversary of the Commencement Date and each anniversary thereafter (subject to
clause (ii) of this Section 3(a)), the term of this Agreement shall
automatically be extended for one additional year so that such term ends two
years after any such anniversary unless, not later than 30 days prior
<PAGE>
to such automatic extension date, the Company or the Employee shall have given
notice that such party does not wish to extend the term of this Agreement; and
(ii) if a Change of Control of the Company shall occur during the initial or
extended term of this Agreement, the term of this Agreement shall automatically
be extended to the date that is two years after the date such Change of Control
occurs and the automatic extension set forth in clause (i) of this Section 3(a)
shall be of no further force and effect.
(b) A "Change of Control" of the Company shall mean (i) the sale,
exchange or other disposition of more than 50% of the shares of capital stock of
the Company to or with a person or entity (other than the Company or an
affiliate of the Company), (ii) the sale of all or substantially all of the
assets of the Company to a person or entity (other than an affiliate of the
Company), or (iii) the merger, consolidation or other business combination of
the Company with or into another entity not controlled by the Company or an
affiliate of the Company.
4. Duties; Extent of Services.
(a) Duties. During the term of this Agreement, as extended in
accordance herewith (the "Term"), the Employee shall serve in such executive
capacity as may be reasonably designated by the board of member managers of the
Company (the "Board"), initially as President of the Company and shall perform
the duties, undertake the responsibilities and exercise the authority
customarily performed, undertaken and exercised by a person in such position in
the business in which the Company is engaged. The Employee shall report to and
carry out the lawful directions of the Board.
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Employee shall (i) devote his full time
and attention during normal business hours to the businesses of the Company and
its subsidiaries; (ii) use his best efforts to promote the interests of the
Company and its subsidiaries; (iii) discharge such executive and administrative
duties not inconsistent with his position as may be assigned to him by the
Board; and (iv) serve, without additional compensation, as a director or officer
of any subsidiary of the Company if elected as such.
5. Compensation.
(a) Base Salary. In consideration of the services rendered by
the Employee hereunder and provided that the Employee has substantially
performed all of his obligations provided for herein, the Company will pay to
the Employee a base salary (the "Base Salary") at the rate of $190,000 per year
during the Term. The Board may in its discretion increase, but not decrease, the
Base Salary. The Base Salary shall be paid in accordance with the Company's
normal payroll practice.
- 2 -
<PAGE>
(b) Bonus. The Employee shall be eligible to be paid a bonus
pursuant to the terms and conditions of any bonus policy of the Company then in
effect and applicable to the Employee.
6. Other Employee Benefits. During the Term, the Employee shall be
entitled (i) to vacation time in accordance with the Company's policy from time
to time in effect; (ii) to participate in all employee insurance and other
fringe benefit programs, including, without limitation, life, health, dental and
accident insurance plans and long term disability now or hereafter maintained by
the Company for senior executive or other salaried personnel for which the
Employee is eligible; and (iii) to participate in a pension plan with terms
similar to those applicable to executives of the Company.
7. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Employee's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Employee. For purposes of this Agreement, "Cause"
shall mean (A) dishonesty of the Employee detrimental to the best interests of
either the Company or any of its subsidiaries or affiliates or conviction of the
Employee of a crime which constitutes a felony, (B) any material act or omission
by the Employee during the Term involving willful malfeasance or gross
negligence in the performance of his duties hereunder, or (C) repeated failure
of the Employee to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Employee)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Employee. During the Term the Employee shall be entitled to only one such
notice and right to cure for any single act or event. If the Employee's
employment is terminated for Cause, the Employee shall be entitled to receive
only the unpaid portion of the Base Salary then in effect which has accrued to
the date of termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term the Board reasonably determines that the Employee has been
or will be unable, as a result of physical or mental illness or incapacity, to
perform his duties hereunder for a period of four consecutive months or for an
aggregate of more than six months in any twelve month period (a "Permanent
Disability"), the Employee's employment hereunder may be terminated by the Board
upon thirty days' written notice to the Employee. If the Employee's employment
is terminated by reason of Permanent Disability, the Employee shall be entitled
to receive only the unpaid portion of the Base Salary then in effect which has
accrued to the date of termination.
- 3 -
<PAGE>
(c) Termination By Reason of Death. The Employee's employment
hereunder shall automatically terminate on the date of his death. If the
Employee's employment is so terminated by his death, the Company shall pay to
the Employee's estate a lump sum amount equal to the unpaid portion of the Base
Salary then in effect through the end of the month in which his death occurs.
Such amount shall be paid within thirty days after the date of his death if a
personal representative has been appointed by the end of such thirty day period
or, if a personal representative has not been appointed by the end of such
thirty day period, promptly after a personal representative has been appointed.
(d) Other Termination Provisions. The Board may terminate the
Employee's employment hereunder at any time for any reason without Cause in
which case the Employee shall remain entitled to receive all compensation
hereunder until the earlier of the end of the current two year term or his
earlier Permanent Disability or death. Notwithstanding the foregoing, in the
event the Board (or the Board or similar body of any successor or assign of the
Company) terminates the Employee's employment without Cause within two years
after a Change of Control, any compensation by way of salary or cash bonuses
received by the Employee from any person, business or entity with respect to
full or part-time employment for the period from the date of such termination to
the second anniversary of such Change of Control shall reduce, on a
dollar-for-dollar basis, any obligation of the Company (or its successors or
assigns) to pay to Employee any Base Salary or cash bonus hereunder with respect
to such period.
8. Covenants of the Employee.
(a) Non-Competition. Except with respect to a termination
described in Section 7(d) hereof or for a termination resulting from a notice
given by the Company under Section 3(a)(i) hereof, until the first anniversary
of the date of the termination of the Employee's employment hereunder, the
Employee shall not, directly or indirectly, be associated with any entity which
competes with the Company and whose primary business is, or personally engage
in, the same or similar line of business of the Company, whether as a director,
officer, employee, agent, consultant, partner, owner, independent contractor or
otherwise.
(b) Non-Solicitation of Employees of the Employer. Until the
first anniversary of the date of such termination, the Employee shall not, and
shall cause each business or entity with which he shall become associated in any
capacity not to, solicit for employment or employ any person who is then, or who
was at any time after the date four months prior to the date of such
termination, employed in a professional or managerial position by the Company,
its subsidiaries or affiliates.
- 4 -
<PAGE>
(c) Confidentiality. The Employee agrees and acknowledges that
the Confidential Information of the Company and its subsidiaries and affiliates,
as hereinafter defined, is valuable, special and unique to their business; that
such business depends on such Confidential Information; and that the Company
wishes to protect such Confidential Information by keeping it confidential for
the use and benefit of the Company and its subsidiaries and affiliates. Based on
the foregoing, the Employee agrees to undertake the following obligations with
respect to such Confidential Information:
(i) the Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and affiliates;
(ii) the Employee agrees that, except as required by
applicable law or as authorized in writing by the Board, he will not
at any time during or after the termination of his employment
hereunder, disclose, directly or indirectly, any Confidential
Information of the Company or any of subsidiaries or affiliates;
(iii) the Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure that
all Confidential Information is kept confidential for the use and
benefit of the Company and subsidiaries and affiliates; and
(iv) the Employee agrees that, upon termination of his
employment hereunder or at any other time the Company, may in
writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all
copies thereof) that are in his possession or under his control. The
Employee further agrees that, if requested by the Company, to return
any Confidential Information pursuant to this subparagraph (iv), he
will not make or retain any copy or extract from such materials.
For purposes of paragraph (c) of this Section 8, "Confidential
Information" means any and all information developed by or for the Company or
any of its subsidiaries or affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment with
the Company that is (A) not generally known in any industry in which the Company
or any of its subsidiaries or affiliates is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for the Company or any of its
subsidiaries or affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices, plans
for development of products, services or expansion into new areas or markets,
internal operations, and any trade secrets and
- 5 -
<PAGE>
proprietary information of any type owned by the Company or any of its
subsidiaries or affiliates, together with all written, graphic and other
materials relating to all or any part of the same.
9. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Employee, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Employee. Neither this Agreement nor any right or
interest hereunder may be assigned by the Employee, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 9 shall preclude (i) the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
the Employee or his estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Employee.
10. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return receipt
requested, or delivered by overnight courier addressed as follows:
(i) If to the Company:
Windy Hill Pet Food Company, Inc.
801 Montgomery Street, Suite 400
San Francisco, CA 94133
Attention: Chief Executive Officer
(ii) If to the Employee:
Robert V. Dale
Two Maryland Farms, Suite 301
Brentwood, TN 37027
or, in each case, at such other address as may from time to time be specified to
the other party in a notice similarly given.
- 6 -
<PAGE>
11. Governing Law; Expenses.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee without giving
effect to the conflicts of law principles thereof.
(b) Expenses. All costs and expenses (including attorneys'
fees) incurred in connection with any claim, dispute or litigation pertaining to
this Agreement shall be paid by the party incurring such expenses.
12. Entire Agreement. This Agreement contains the entire agreement
of the parties and their affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto.
13. Severability. If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons, property or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall remain valid and enforceable to
the fullest extent permitted by law.
14. Remedies.
(a) Injunctive Relief. The Employee acknowledges and agrees
that the covenants and obligations of the Employee contained in subsections (a),
(b) and (c) of Section 8 hereof relate to special, unique and extraordinary
matters and are reasonable and necessary to protect the legitimate interests of
the Company and its subsidiaries and affiliates and that a breach of any of the
terms of such covenants and obligations will cause the Company irreparable
injury for which adequate remedies at law are not available. Therefore the
Employee agrees that the Company shall be entitled to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies
under this Section 14 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
- 7 -
<PAGE>
15. Withholding Taxes. The Company may deduct any federal, state or
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required to
deduct under applicable law.
16. Amendments, Miscellaneous, etc. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts and shall be the valid and binding agreement of the parties when
such counterparts have been duly executed and delivered by each party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ Donald L. Gadd
---------------------------------
Name: Donald L. Gadd
Title: Vice President Finance
/s/ Robert V. Dale
------------------------------------
ROBERT V. DALE
With respect to Section 1 only:
WINDY HILL PET FOOD COMPANY, L.L.C.
By: /s/ Donald L. Gadd
---------------------------------
Name: Donald L. Gadd
Title: Vice President Finance
- 8 -
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 29, 1996, by and between
Windy Hill Pet Food Company, Inc. (the "Company"), a Delaware corporation, and
Donald L. Gadd (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee and Windy Hill Pet Food Company, L.L.C., a
Delaware limited liability company ("Windy Hill LLC"), are parties to that
certain employment agreement dated May 8, 1995 (the "Former Employment
Agreement");
WHEREAS, Windy Hill LLC has transferred all of its assets and
liabilities to the Company through its parent, Windy Hill Pet Food Holdings,
Inc., a Delaware corporation;
WHEREAS, from the date hereof, the Company will transact the
business formerly transacted by Windy Hill LLC;
WHEREAS, the Company desires to employ the Employee on the same
terms and conditions as he was employed by Windy Hill LLC; and
WHEREAS, the parties desire to terminate the Former Employment
Agreement and enter into this Agreement upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Termination of Former Employment Agreement. The Former
Employment Agreement is hereby terminated in its entirety and shall no longer
be of any force or effect.
2. Employment. Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
3. Term of Employment. (a) The initial term of this Agreement shall
commence on the date hereof (the "Commencement Date") and shall continue in
effect through May 1, 1998; provided, however, that (i) commencing on the first
anniversary of the Commencement Date and each anniversary thereafter (subject to
clause (ii) of this Section 3(a)), the term of this Agreement shall
automatically be extended for one additional year so that such term ends two
years after any such anniversary unless, not later than 30 days prior
<PAGE>
to such automatic extension date, the Company or the Employee shall have given
notice that such party does not wish to extend the term of this Agreement; and
(ii) if a Change of Control of the Company shall occur during the initial or
extended term of this Agreement, the term of this Agreement shall automatically
be extended to the date that is two years after the date such Change of Control
occurs and the automatic extension set forth in clause (i) of this Section 3(a)
shall be of no further force and effect.
(b) A "Change of Control" of the Company shall mean (i) the sale,
exchange or other disposition of more than 50% of the shares of capital stock of
the Company to or with a person or entity (other than the Company or an
affiliate of the Company), (ii) the sale of all or substantially all of the
assets of the Company to a person or entity (other than an affiliate of the
Company), or (iii) the merger, consolidation or other business combination of
the Company with or into another entity not controlled by the Company or an
affiliate of the Company.
4. Duties; Extent of Services.
(a) Duties. During the term of this Agreement, as extended in
accordance herewith (the "Term"), the Employee shall serve in such executive
capacity as may be reasonably designated by the board of member managers of the
Company (the "Board"), initially as Vice President, Finance of the Company and
shall perform the duties, undertake the responsibilities and exercise the
authority customarily performed, undertaken and exercised by a person in such
position in the business in which the Company is engaged. The Employee shall
report to and carry out the lawful directions of the Board.
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Employee shall (i) devote his full time
and attention during normal business hours to the businesses of the Company and
its subsidiaries; (ii) use his best efforts to promote the interests of the
Company and its subsidiaries; (iii) discharge such executive and administrative
duties not inconsistent with his position as may be assigned to him by the
Board; and (iv) serve, without additional compensation, as a director or officer
of any subsidiary of the Company if elected as such.
5. Compensation.
(a) Base Salary. In consideration of the services rendered by
the Employee hereunder and provided that the Employee has substantially
performed all of his obligations provided for herein, the Company will pay to
the Employee a base salary (the "Base Salary") at the rate of $102,000 per year
during the Term. The Board may in its discretion increase, but not decrease, the
Base Salary. The Base Salary shall be paid in accordance with the Company's
normal payroll practice.
- 2 -
<PAGE>
(b) Bonus. The Employee shall be eligible to be paid a bonus
pursuant to the terms and conditions of any bonus policy of the Company then in
effect and applicable to the Employee.
6. Other Employee Benefits. During the Term, the Employee shall be
entitled (i) to vacation time in accordance with the Company's policy from time
to time in effect; (ii) to participate in all employee insurance and other
fringe benefit programs, including, without limitation, life, health, dental and
accident insurance plans and long term disability now or hereafter maintained by
the Company for senior executive or other salaried personnel for which the
Employee is eligible; and (iii) to participate in a pension plan with terms
similar to those applicable to executives of the Company.
7. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Employee's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Employee. For purposes of this Agreement, "Cause"
shall mean (A) dishonesty of the Employee detrimental to the best interests of
either the Company or any of its subsidiaries or affiliates or conviction of the
Employee of a crime which constitutes a felony, (B) any material act or omission
by the Employee during the Term involving willful malfeasance or gross
negligence in the performance of his duties hereunder, or (C) repeated failure
of the Employee to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Employee)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Employee. During the Term the Employee shall be entitled to only one such
notice and right to cure for any single act or event. If the Employee's
employment is terminated for Cause, the Employee shall be entitled to receive
only the unpaid portion of the Base Salary then in effect which has accrued to
the date of termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term the Board reasonably determines that the Employee has been
or will be unable, as a result of physical or mental illness or incapacity, to
perform his duties hereunder for a period of four consecutive months or for an
aggregate of more than six months in any twelve month period (a "Permanent
Disability"), the Employee's employment hereunder may be terminated by the Board
upon thirty days' written notice to the Employee. If the Employee's employment
is terminated by reason of Permanent Disability, the Employee shall be entitled
to receive only the unpaid portion of the Base Salary then in effect which has
accrued to the date of termination.
- 3 -
<PAGE>
(c) Termination By Reason of Death. The Employee's employment
hereunder shall automatically terminate on the date of his death. If the
Employee's employment is so terminated by his death, the Company shall pay to
the Employee's estate a lump sum amount equal to the unpaid portion of the Base
Salary then in effect through the end of the month in which his death occurs.
Such amount shall be paid within thirty days after the date of his death if a
personal representative has been appointed by the end of such thirty day period
or, if a personal representative has not been appointed by the end of such
thirty day period, promptly after a personal representative has been appointed.
(d) Other Termination Provisions. The Board may terminate the
Employee's employment hereunder at any time for any reason without Cause in
which case the Employee shall remain entitled to receive all compensation
hereunder until the earlier of the end of the current two year term or his
earlier Permanent Disability or death. Notwithstanding the foregoing, in the
event the Board (or the Board or similar body of any successor or assign of the
Company) terminates the Employee's employment without Cause within two years
after a Change of Control, any compensation by way of salary or cash bonuses
received by the Employee from any person, business or entity with respect to
full or part-time employment for the period from the date of such termination to
the second anniversary of such Change of Control shall reduce, on a
dollar-for-dollar basis, any obligation of the Company (or its successors or
assigns) to pay to Employee any Base Salary or cash bonus hereunder with respect
to such period.
8. Covenants of the Employee.
(a) Non-Competition. Except with respect to a termination
described in Section 7(d) hereof or for a termination resulting from a notice
given by the Company under Section 3(a)(i) hereof, until the first anniversary
of the date of the termination of the Employee's employment hereunder, the
Employee shall not, directly or indirectly, be associated with any entity which
competes with the Company and whose primary business is, or personally engage
in, the same or similar line of business of the Company, whether as a director,
officer, employee, agent, consultant, partner, owner, independent contractor or
otherwise.
(b) Non-Solicitation of Employees of the Employer. Until the
first anniversary of the date of such termination, the Employee shall not, and
shall cause each business or entity with which he shall become associated in any
capacity not to, solicit for employment or employ any person who is then, or who
was at any time after the date four months prior to the date of such
termination, employed in a professional or managerial position by the Company,
its subsidiaries or affiliates.
- 4 -
<PAGE>
(c) Confidentiality. The Employee agrees and acknowledges that
the Confidential Information of the Company and its subsidiaries and affiliates,
as hereinafter defined, is valuable, special and unique to their business; that
such business depends on such Confidential Information; and that the Company
wishes to protect such Confidential Information by keeping it confidential for
the use and benefit of the Company and its subsidiaries and affiliates. Based on
the foregoing, the Employee agrees to undertake the following obligations with
respect to such Confidential Information:
(i) the Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and affiliates;
(ii) the Employee agrees that, except as required by
applicable law or as authorized in writing by the Board, he will not
at any time during or after the termination of his employment
hereunder, disclose, directly or indirectly, any Confidential
Information of the Company or any of subsidiaries or affiliates;
(iii) the Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure that
all Confidential Information is kept confidential for the use and
benefit of the Company and subsidiaries and affiliates; and
(iv) the Employee agrees that, upon termination of his
employment hereunder or at any other time the Company, may in
writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all
copies thereof) that are in his possession or under his control. The
Employee further agrees that, if requested by the Company, to return
any Confidential Information pursuant to this subparagraph (iv), he
will not make or retain any copy or extract from such materials.
For purposes of paragraph (c) of this Section 8, "Confidential
Information" means any and all information developed by or for the Company or
any of its subsidiaries or affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment with
the Company that is (A) not generally known in any industry in which the Company
or any of its subsidiaries or affiliates is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for the Company or any of its
subsidiaries or affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices, plans
for development of products, services or expansion into new areas or markets,
internal operations, and any trade secrets and
- 5 -
<PAGE>
proprietary information of any type owned by the Company or any of its
subsidiaries or affiliates, together with all written, graphic and other
materials relating to all or any part of the same.
9. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Employee, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Employee. Neither this Agreement nor any right or
interest hereunder may be assigned by the Employee, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 9 shall preclude (i) the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
the Employee or his estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Employee.
10. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return receipt
requested, or delivered by overnight courier addressed as follows:
(i) If to the Company:
Windy Hill Pet Food Company, Inc.
801 Montgomery Street, Suite 400
San Francisco, CA 94133
Attention: Chief Executive Officer
(ii) If to the Employee:
Donald L. Gadd
Two Maryland Farms, Suite 301
Brentwood, TN 37027
or, in each case, at such other address as may from time to time be specified to
the other party in a notice similarly given.
- 6 -
<PAGE>
11. Governing Law; Expenses.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee without giving
effect to the conflicts of law principles thereof.
(b) Expenses. All costs and expenses (including attorneys'
fees) incurred in connection with any claim, dispute or litigation pertaining to
this Agreement shall be paid by the party incurring such expenses.
12. Entire Agreement. This Agreement contains the entire agreement
of the parties and their affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto.
13. Severability. If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons, property or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall remain valid and enforceable to
the fullest extent permitted by law.
14. Remedies.
(a) Injunctive Relief. The Employee acknowledges and agrees
that the covenants and obligations of the Employee contained in subsections (a),
(b) and (c) of Section 8 hereof relate to special, unique and extraordinary
matters and are reasonable and necessary to protect the legitimate interests of
the Company and its subsidiaries and affiliates and that a breach of any of the
terms of such covenants and obligations will cause the Company irreparable
injury for which adequate remedies at law are not available. Therefore the
Employee agrees that the Company shall be entitled to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies
under this Section 14 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
- 7 -
<PAGE>
15. Withholding Taxes. The Company may deduct any federal, state or
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required to
deduct under applicable law.
16. Amendments, Miscellaneous, etc. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts and shall be the valid and binding agreement of the parties when
such counterparts have been duly executed and delivered by each party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ Robert V. Dale
---------------------------------
Name: Robert V. Dale
Title: President
/s/ Donald L. Gadd
------------------------------------
DONALD L. GADD
With respect to Section 1 only:
WINDY HILL PET FOOD COMPANY, L.L.C.
By: Robert V. Dale
-------------------------------
Name: Robert V. Dale
Title: President
- 8 -
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 29, 1996, by and between
Windy Hill Pet Food Company, Inc. (the "Company"), a Delaware corporation, and
F. Donald Cowan, Jr. (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee and Windy Hill Pet Food Company, L.L.C., a
Delaware limited liability company ("Windy Hill LLC"), are parties to that
certain employment agreement dated May 8, 1995 (the "Former Employment
Agreement");
WHEREAS, Windy Hill LLC has transferred all of its assets and
liabilities to the Company through its parent, Windy Hill Pet Food Holdings,
Inc., a Delaware corporation;
WHEREAS, from the date hereof, the Company will transact the
business formerly transacted by Windy Hill LLC;
WHEREAS, the Company desires to employ the Employee on the same
terms and conditions as he was employed by Windy Hill LLC; and
WHEREAS, the parties desire to terminate the Former Employment
Agreement and enter into this Agreement upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Termination of Former Employment Agreement. The Former Employment
Agreement is hereby terminated in its entirety and shall no longer be of any
force or effect.
2. Employment. Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
3. Term of Employment. (a) The initial term of this Agreement shall
commence on the date hereof (the "Commencement Date") and shall continue in
effect through May 1, 1998; provided, however, that (i) commencing on the first
anniversary of the Commencement Date and each anniversary thereafter (subject to
clause (ii) of this Section 3(a)), the term of this Agreement shall
automatically be extended for one additional year so that such term ends two
years after any such anniversary unless, not later than 30 days prior
<PAGE>
to such automatic extension date, the Company or the Employee shall have given
notice that such party does not wish to extend the term of this Agreement; and
(ii) if a Change of Control of the Company shall occur during the initial or
extended term of this Agreement, the term of this Agreement shall automatically
be extended to the date that is two years after the date such Change of Control
occurs and the automatic extension set forth in clause (i) of this Section 3(a)
shall be of no further force and effect.
(b) A "Change of Control" of the Company shall mean (i) the sale,
exchange or other disposition of more than 50% of the shares of capital stock of
the Company to or with a person or entity (other than the Company or an
affiliate of the Company), (ii) the sale of all or substantially all of the
assets of the Company to a person or entity (other than an affiliate of the
Company), or (iii) the merger, consolidation or other business combination of
the Company with or into another entity not controlled by the Company or an
affiliate of the Company.
4. Duties; Extent of Services.
(a) Duties. During the term of this Agreement, as extended in
accordance herewith (the "Term"), the Employee shall serve in such executive
capacity as may be reasonably designated by the board of member managers of the
Company (the "Board"), initially as Vice President, Operations of the Company
and shall perform the duties, undertake the responsibilities and exercise the
authority customarily performed, undertaken and exercised by a person in such
position in the business in which the Company is engaged. The Employee shall
report to and carry out the lawful directions of the Board.
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Employee shall (i) devote his full time
and attention during normal business hours to the businesses of the Company and
its subsidiaries; (ii) use his best efforts to promote the interests of the
Company and its subsidiaries; (iii) discharge such executive and administrative
duties not inconsistent with his position as may be assigned to him by the
Board; and (iv) serve, without additional compensation, as a director or officer
of any subsidiary of the Company if elected as such.
5. Compensation.
(a) Base Salary. In consideration of the services rendered by
the Employee hereunder and provided that the Employee has substantially
performed all of his obligations provided for herein, the Company will pay to
the Employee a base salary (the "Base Salary") at the rate of $150,000 per year
during the Term. The Board may in its discretion increase, but not decrease, the
Base Salary. The Base Salary shall be paid in accordance with the Company's
normal payroll practice.
- 2 -
<PAGE>
(b) Bonus. The Employee shall be eligible to be paid a bonus
pursuant to the terms and conditions of any bonus policy of the Company then in
effect and applicable to the Employee.
6. Other Employee Benefits. During the Term, the Employee shall be
entitled (i) to vacation time in accordance with the Company's policy from time
to time in effect; (ii) to participate in all employee insurance and other
fringe benefit programs, including, without limitation, life, health, dental and
accident insurance plans and long term disability now or hereafter maintained by
the Company for senior executive or other salaried personnel for which the
Employee is eligible; and (iii) to participate in a pension plan with terms
similar to those applicable to executives of the Company.
7. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Employee's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Employee. For purposes of this Agreement, "Cause"
shall mean (A) dishonesty of the Employee detrimental to the best interests of
either the Company or any of its subsidiaries or affiliates or conviction of the
Employee of a crime which constitutes a felony, (B) any material act or omission
by the Employee during the Term involving willful malfeasance or gross
negligence in the performance of his duties hereunder, or (C) repeated failure
of the Employee to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Employee)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Employee. During the Term the Employee shall be entitled to only one such
notice and right to cure for any single act or event. If the Employee's
employment is terminated for Cause, the Employee shall be entitled to receive
only the unpaid portion of the Base Salary then in effect which has accrued to
the date of termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term the Board reasonably determines that the Employee has been
or will be unable, as a result of physical or mental illness or incapacity, to
perform his duties hereunder for a period of four consecutive months or for an
aggregate of more than six months in any twelve month period (a "Permanent
Disability"), the Employee's employment hereunder may be terminated by the Board
upon thirty days' written notice to the Employee. If the Employee's employment
is terminated by reason of Permanent Disability, the Employee shall be entitled
to receive only the unpaid portion of the Base Salary then in effect which has
accrued to the date of termination.
- 3 -
<PAGE>
(c) Termination By Reason of Death. The Employee's employment
hereunder shall automatically terminate on the date of his death. If the
Employee's employment is so terminated by his death, the Company shall pay to
the Employee's estate a lump sum amount equal to the unpaid portion of the Base
Salary then in effect through the end of the month in which his death occurs.
Such amount shall be paid within thirty days after the date of his death if a
personal representative has been appointed by the end of such thirty day period
or, if a personal representative has not been appointed by the end of such
thirty day period, promptly after a personal representative has been appointed.
(d) Other Termination Provisions. The Board may terminate the
Employee's employment hereunder at any time for any reason without Cause in
which case the Employee shall remain entitled to receive all compensation
hereunder until the earlier of the end of the current two year term or his
earlier Permanent Disability or death. Notwithstanding the foregoing, in the
event the Board (or the Board or similar body of any successor or assign of the
Company) terminates the Employee's employment without Cause within two years
after a Change of Control, any compensation by way of salary or cash bonuses
received by the Employee from any person, business or entity with respect to
full or part-time employment for the period from the date of such termination to
the second anniversary of such Change of Control shall reduce, on a
dollar-for-dollar basis, any obligation of the Company (or its successors or
assigns) to pay to Employee any Base Salary or cash bonus hereunder with respect
to such period.
8. Covenants of the Employee.
(a) Non-Competition. Except with respect to a termination
described in Section 7(d) hereof or for a termination resulting from a notice
given by the Company under Section 3(a)(i) hereof, until the first anniversary
of the date of the termination of the Employee's employment hereunder, the
Employee shall not, directly or indirectly, be associated with any entity which
competes with the Company and whose primary business is, or personally engage
in, the same or similar line of business of the Company, whether as a director,
officer, employee, agent, consultant, partner, owner, independent contractor or
otherwise.
(b) Non-Solicitation of Employees of the Employer. Until the
first anniversary of the date of such termination, the Employee shall not, and
shall cause each business or entity with which he shall become associated in any
capacity not to, solicit for employment or employ any person who is then, or who
was at any time after the date four months prior to the date of such
termination, employed in a professional or managerial position by the Company,
its subsidiaries or affiliates.
- 4 -
<PAGE>
(c) Confidentiality. The Employee agrees and acknowledges that
the Confidential Information of the Company and its subsidiaries and affiliates,
as hereinafter defined, is valuable, special and unique to their business; that
such business depends on such Confidential Information; and that the Company
wishes to protect such Confidential Information by keeping it confidential for
the use and benefit of the Company and its subsidiaries and affiliates. Based on
the foregoing, the Employee agrees to undertake the following obligations with
respect to such Confidential Information:
(i) the Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and affiliates;
(ii) the Employee agrees that, except as required by
applicable law or as authorized in writing by the Board, he will not
at any time during or after the termination of his employment
hereunder, disclose, directly or indirectly, any Confidential
Information of the Company or any of subsidiaries or affiliates;
(iii) the Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure that
all Confidential Information is kept confidential for the use and
benefit of the Company and subsidiaries and affiliates; and
(iv) the Employee agrees that, upon termination of his
employment hereunder or at any other time the Company, may in
writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all
copies thereof) that are in his possession or under his control. The
Employee further agrees that, if requested by the Company, to return
any Confidential Information pursuant to this subparagraph (iv), he
will not make or retain any copy or extract from such materials.
For purposes of paragraph (c) of this Section 8, "Confidential
Information" means any and all information developed by or for the Company or
any of its subsidiaries or affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment with
the Company that is (A) not generally known in any industry in which the Company
or any of its subsidiaries or affiliates is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for the Company or any of its
subsidiaries or affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices, plans
for development of products, services or expansion into new areas or markets,
internal operations, and any trade secrets and
- 5 -
<PAGE>
proprietary information of any type owned by the Company or any of its
subsidiaries or affiliates, together with all written, graphic and other
materials relating to all or any part of the same.
9. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Employee, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Employee. Neither this Agreement nor any right or
interest hereunder may be assigned by the Employee, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 9 shall preclude (i) the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
the Employee or his estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Employee.
10. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return receipt
requested, or delivered by overnight courier addressed as follows:
(i) If to the Company:
Windy Hill Pet Food Company, Inc.
801 Montgomery Street, Suite 400
San Francisco, CA 94133
Attention: Chief Executive Officer
(ii) If to the Employee:
F. Donald Cowan, Jr.
Two Maryland Farms, Suite 301
Brentwood, TN 37027
or, in each case, at such other address as may from time to time be specified to
the other party in a notice similarly given.
- 6 -
<PAGE>
11. Governing Law; Expenses.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee without giving
effect to the conflicts of law principles thereof.
(b) Expenses. All costs and expenses (including attorneys'
fees) incurred in connection with any claim, dispute or litigation pertaining to
this Agreement shall be paid by the party incurring such expenses.
12. Entire Agreement. This Agreement contains the entire agreement
of the parties and their affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto.
13. Severability. If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons, property or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall remain valid and enforceable to
the fullest extent permitted by law.
14. Remedies.
(a) Injunctive Relief. The Employee acknowledges and agrees
that the covenants and obligations of the Employee contained in subsections (a),
(b) and (c) of Section 8 hereof relate to special, unique and extraordinary
matters and are reasonable and necessary to protect the legitimate interests of
the Company and its subsidiaries and affiliates and that a breach of any of the
terms of such covenants and obligations will cause the Company irreparable
injury for which adequate remedies at law are not available. Therefore the
Employee agrees that the Company shall be entitled to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies
under this Section 14 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
- 7 -
<PAGE>
15. Withholding Taxes. The Company may deduct any federal, state or
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required to
deduct under applicable law.
16. Amendments, Miscellaneous, etc. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts and shall be the valid and binding agreement of the parties when
such counterparts have been duly executed and delivered by each party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ Robert V. Dale
-------------------------------
Name: Robert V. Dale
Title: President
/s/ F. Donald Cowan, Jr.
----------------------------------
F. DONALD COWAN, JR.
With respect to Section 1 only:
WINDY HILL PET FOOD COMPANY, L.L.C.
By: /s/ Robert V. Dale
---------------------------------
Name: Robert V. Dale
Title: President
- 8 -
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 29, 1996, by and between
Windy Hill Pet Food Company, Inc. (the "Company"), a Delaware corporation, and
Vaughn R. Oakley (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee and Windy Hill Pet Food Company, L.L.C., a
Delaware limited liability company ("Windy Hill LLC"), are parties to that
certain employment agreement dated May 8, 1995 (the "Former Employment
Agreement");
WHEREAS, Windy Hill LLC has transferred all of its assets and
liabilities to the Company through its parent, Windy Hill Pet Food Holdings,
Inc., a Delaware corporation;
WHEREAS, from the date hereof, the Company will transact the
business formerly transacted by Windy Hill LLC;
WHEREAS, the Company desires to employ the Employee on the same
terms and conditions as he was employed by Windy Hill LLC; and
WHEREAS, the parties desire to terminate the Former Employment
Agreement and enter into this Agreement upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Termination of Former Employment Agreement. The Former Employment
Agreement is hereby terminated in its entirety and shall no longer be of any
force or effect.
2. Employment. Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
3. Term of Employment. (a) The initial term of this Agreement shall
commence on the date hereof (the "Commencement Date") and shall continue in
effect through May 1, 1998; provided, however, that (i) commencing on the first
anniversary of the Commencement Date and each anniversary thereafter (subject to
clause (ii) of this Section 3(a)), the term of this Agreement shall
automatically be extended for one additional year so that such term ends two
years after any such anniversary unless, not later than 30 days prior
<PAGE>
to such automatic extension date, the Company or the Employee shall have given
notice that such party does not wish to extend the term of this Agreement; and
(ii) if a Change of Control of the Company shall occur during the initial or
extended term of this Agreement, the term of this Agreement shall automatically
be extended to the date that is two years after the date such Change of Control
occurs and the automatic extension set forth in clause (i) of this Section 3(a)
shall be of no further force and effect.
(b) A "Change of Control" of the Company shall mean (i) the sale,
exchange or other disposition of more than 50% of the shares of capital stock of
the Company to or with a person or entity (other than the Company or an
affiliate of the Company), (ii) the sale of all or substantially all of the
assets of the Company to a person or entity (other than an affiliate of the
Company), or (iii) the merger, consolidation or other business combination of
the Company with or into another entity not controlled by the Company or an
affiliate of the Company.
4. Duties; Extent of Services.
(a) Duties. During the term of this Agreement, as extended in
accordance herewith (the "Term"), the Employee shall serve in such executive
capacity as may be reasonably designated by the board of member managers of the
Company (the "Board"), initially as Vice President, Sales of the Company and
shall perform the duties, undertake the responsibilities and exercise the
authority customarily performed, undertaken and exercised by a person in such
position in the business in which the Company is engaged. The Employee shall
report to and carry out the lawful directions of the Board.
(b) Extent of Services. Except for illness and permitted
vacation periods, during the Term the Employee shall (i) devote his full time
and attention during normal business hours to the businesses of the Company and
its subsidiaries; (ii) use his best efforts to promote the interests of the
Company and its subsidiaries; (iii) discharge such executive and administrative
duties not inconsistent with his position as may be assigned to him by the
Board; and (iv) serve, without additional compensation, as a director or officer
of any subsidiary of the Company if elected as such.
5. Compensation.
(a) Base Salary. In consideration of the services rendered by
the Employee hereunder and provided that the Employee has substantially
performed all of his obligations provided for herein, the Company will pay to
the Employee a base salary (the "Base Salary") at the rate of $130,000 per year
during the Term. The Board may in its discretion increase, but not decrease, the
Base Salary. The Base Salary shall be paid in accordance with the Company's
normal payroll practice.
- 2 -
<PAGE>
(b) Bonus. The Employee shall be eligible to be paid a bonus
pursuant to the terms and conditions of any bonus policy of the Company then in
effect and applicable to the Employee.
6. Other Employee Benefits. During the Term, the Employee shall be
entitled (i) to vacation time in accordance with the Company's policy from time
to time in effect; (ii) to participate in all employee insurance and other
fringe benefit programs, including, without limitation, life, health, dental and
accident insurance plans and long term disability now or hereafter maintained by
the Company for senior executive or other salaried personnel for which the
Employee is eligible; and (iii) to participate in a pension plan with terms
similar to those applicable to executives of the Company.
7. Termination Provisions.
(a) Termination for Cause. The Board may terminate the
Employee's employment hereunder for Cause, as hereinafter defined, immediately
upon written notice to the Employee. For purposes of this Agreement, "Cause"
shall mean (A) dishonesty of the Employee detrimental to the best interests of
either the Company or any of its subsidiaries or affiliates or conviction of the
Employee of a crime which constitutes a felony, (B) any material act or omission
by the Employee during the Term involving willful malfeasance or gross
negligence in the performance of his duties hereunder, or (C) repeated failure
of the Employee to follow the reasonable instructions of the Board (other than
inattention or neglect resulting from illness or disability of the Employee)
which inattention and neglect does not cease within fifteen days after written
notice thereof specifying the details of such conduct is given by the Board to
the Employee. During the Term the Employee shall be entitled to only one such
notice and right to cure for any single act or event. If the Employee's
employment is terminated for Cause, the Employee shall be entitled to receive
only the unpaid portion of the Base Salary then in effect which has accrued to
the date of termination.
(b) Termination By Reason of Permanent Disability. If at any
time during the Term the Board reasonably determines that the Employee has been
or will be unable, as a result of physical or mental illness or incapacity, to
perform his duties hereunder for a period of four consecutive months or for an
aggregate of more than six months in any twelve month period (a "Permanent
Disability"), the Employee's employment hereunder may be terminated by the Board
upon thirty days' written notice to the Employee. If the Employee's employment
is terminated by reason of Permanent Disability, the Employee shall be entitled
to receive only the unpaid portion of the Base Salary then in effect which has
accrued to the date of termination.
- 3 -
<PAGE>
(c) Termination By Reason of Death. The Employee's employment
hereunder shall automatically terminate on the date of his death. If the
Employee's employment is so terminated by his death, the Company shall pay to
the Employee's estate a lump sum amount equal to the unpaid portion of the Base
Salary then in effect through the end of the month in which his death occurs.
Such amount shall be paid within thirty days after the date of his death if a
personal representative has been appointed by the end of such thirty day period
or, if a personal representative has not been appointed by the end of such
thirty day period, promptly after a personal representative has been appointed.
(d) Other Termination Provisions. The Board may terminate the
Employee's employment hereunder at any time for any reason without Cause in
which case the Employee shall remain entitled to receive all compensation
hereunder until the earlier of the end of the current two year term or his
earlier Permanent Disability or death. Notwithstanding the foregoing, in the
event the Board (or the Board or similar body of any successor or assign of the
Company) terminates the Employee's employment without Cause within two years
after a Change of Control, any compensation by way of salary or cash bonuses
received by the Employee from any person, business or entity with respect to
full or part-time employment for the period from the date of such termination to
the second anniversary of such Change of Control shall reduce, on a
dollar-for-dollar basis, any obligation of the Company (or its successors or
assigns) to pay to Employee any Base Salary or cash bonus hereunder with respect
to such period.
8. Covenants of the Employee.
(a) Non-Competition. Except with respect to a termination
described in Section 7(d) hereof or for a termination resulting from a notice
given by the Company under Section 3(a)(i) hereof, until the first anniversary
of the date of the termination of the Employee's employment hereunder, the
Employee shall not, directly or indirectly, be associated with any entity which
competes with the Company and whose primary business is, or personally engage
in, the same or similar line of business of the Company, whether as a director,
officer, employee, agent, consultant, partner, owner, independent contractor or
otherwise.
(b) Non-Solicitation of Employees of the Employer. Until the
first anniversary of the date of such termination, the Employee shall not, and
shall cause each business or entity with which he shall become associated in any
capacity not to, solicit for employment or employ any person who is then, or who
was at any time after the date four months prior to the date of such
termination, employed in a professional or managerial position by the Company,
its subsidiaries or affiliates.
- 4 -
<PAGE>
(c) Confidentiality. The Employee agrees and acknowledges that
the Confidential Information of the Company and its subsidiaries and affiliates,
as hereinafter defined, is valuable, special and unique to their business; that
such business depends on such Confidential Information; and that the Company
wishes to protect such Confidential Information by keeping it confidential for
the use and benefit of the Company and its subsidiaries and affiliates. Based on
the foregoing, the Employee agrees to undertake the following obligations with
respect to such Confidential Information:
(i) the Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and affiliates;
(ii) the Employee agrees that, except as required by
applicable law or as authorized in writing by the Board, he will not
at any time during or after the termination of his employment
hereunder, disclose, directly or indirectly, any Confidential
Information of the Company or any of subsidiaries or affiliates;
(iii) the Employee agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure that
all Confidential Information is kept confidential for the use and
benefit of the Company and subsidiaries and affiliates; and
(iv) the Employee agrees that, upon termination of his
employment hereunder or at any other time the Company, may in
writing so request, he will promptly deliver to the Company all
materials constituting Confidential Information (including all
copies thereof) that are in his possession or under his control. The
Employee further agrees that, if requested by the Company, to return
any Confidential Information pursuant to this subparagraph (iv), he
will not make or retain any copy or extract from such materials.
For purposes of paragraph (c) of this Section 8, "Confidential
Information" means any and all information developed by or for the Company or
any of its subsidiaries or affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment with
the Company that is (A) not generally known in any industry in which the Company
or any of its subsidiaries or affiliates is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for the Company or any of its
subsidiaries or affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices, plans
for development of products, services or expansion into new areas or markets,
internal operations, and any trade secrets and
- 5 -
<PAGE>
proprietary information of any type owned by the Company or any of its
subsidiaries or affiliates, together with all written, graphic and other
materials relating to all or any part of the same.
9. Successors; Assignment.
(a) The Company. The Company may assign any of its rights and
obligations hereunder, without the written consent of the Employee, in
connection with a Change of Control. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns.
(b) The Employee. Neither this Agreement nor any right or
interest hereunder may be assigned by the Employee, his beneficiaries, or legal
representatives without the prior written consent of the Board; provided,
however, that nothing in this Section 9 shall preclude (i) the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives of
the Employee or his estate from assigning any rights hereunder to distributees,
legatees, beneficiaries, testamentary trustees or other legal heirs of the
Employee.
10. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return receipt
requested, or delivered by overnight courier addressed as follows:
(i) If to the Company:
Windy Hill Pet Food Company, Inc.
801 Montgomery Street, Suite 400
San Francisco, CA 94133
Attention: Chief Executive Officer
(ii) If to the Employee:
Vaughn R. Oakley
Two Maryland Farms, Suite 301
Brentwood, TN 37027
or, in each case, at such other address as may from time to time be specified to
the other party in a notice similarly given.
- 6 -
<PAGE>
11. Governing Law; Expenses.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee without giving
effect to the conflicts of law principles thereof.
(b) Expenses. All costs and expenses (including attorneys'
fees) incurred in connection with any claim, dispute or litigation pertaining to
this Agreement shall be paid by the party incurring such expenses.
12. Entire Agreement. This Agreement contains the entire agreement
of the parties and their affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto.
13. Severability. If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons, property or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall remain valid and enforceable to
the fullest extent permitted by law.
14. Remedies.
(a) Injunctive Relief. The Employee acknowledges and agrees
that the covenants and obligations of the Employee contained in subsections (a),
(b) and (c) of Section 8 hereof relate to special, unique and extraordinary
matters and are reasonable and necessary to protect the legitimate interests of
the Company and its subsidiaries and affiliates and that a breach of any of the
terms of such covenants and obligations will cause the Company irreparable
injury for which adequate remedies at law are not available. Therefore the
Employee agrees that the Company shall be entitled to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies
under this Section 14 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
- 7 -
<PAGE>
15. Withholding Taxes. The Company may deduct any federal, state or
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required to
deduct under applicable law.
16. Amendments, Miscellaneous, etc. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts and shall be the valid and binding agreement of the parties when
such counterparts have been duly executed and delivered by each party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ Robert V. Dale
------------------------------
Name: Robert V. Dale
Title: President
/s/ Vaughn R. Oakley
---------------------------------
VAUGHN R. OAKLEY
With respect to Section 1 only:
WINDY HILL PET FOOD COMPANY, L.L.C.
By: /s/ Robert V. Dale
--------------------------------
Name: Robert V. Dale
Title: President
- 8 -
<PAGE>
DARTFORD PARTNERSHIP L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
As of May 2, 1997
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, TN 37027-2487
Re: Management Services Agreement
Gentlemen:
This letter sets forth our amended and restated understanding with
respect to the engagement by you, Windy Hill Pet Food Company, Inc., a Delaware
company (the "Company"), of the undersigned Dartford Partnership L.L.C., a
Delaware limited liability company ("Dartford"), to provide management services
to the Company.
1. Terms of Agreement and Duties.
(a) Engagement. The Company hereby retains Dartford to provide
management services to the Company on a non-exclusive basis for a period (the
"Term") beginning on the date hereof and ending on the Termination Date (as such
term is hereinafter defined ), on the terms and conditions set forth in this
Agreement.
(b) Duties -- Management. During the Term, Dartford will render such
management services including, without limitation, providing the Chief Executive
Officer, providing organization and strategic direction, oversight of
operations, corporate and financial planning, financial and tax reporting,
treasury and cash management, auditing and internal control reviews, production
of business plans, definition and development of business opportunities,
investment recommendations and analysis and such other advisory work in
connection with the organization, financing, management and operations of the
Company, as the Company may reasonably request from time to time.
(c) Duties -- Acquisitions. During the Term, Dartford will also
render financial advisory services to the Company in connection with
acquisitions, financings and sales of business segments, including identifying
and analyzing appropriate acquisition candidates, negotiating acquisition
agreements, identifying sources of acquisition financing and
<PAGE>
negotiating and identifying potential buyers for some or all segments of the
Company's business and negotiating the terms of such sales.
(d) Services. The Company will use the services of Dartford and
Dartford will make itself available for the performance of services under this
Agreement upon reasonable notice during the Term. Dartford will perform its
services at the times and places reasonably requested by the Company to meet its
needs and requirements, taking into account other engagements that Dartford may
have.
(e) Management Personnel. Dartford will make available to the
Company from time to time the services of Messrs. Ian R. Wilson, James B. Ardrey
and Ray Chung and Ms. M. Laurie Cummings and such other of its management
personnel as are necessary to fulfill Dartford's obligations under this
Agreement.
2. Compensation of Dartford.
(a) Management Fee. Subject to the terms and conditions hereof,
during the Term, the Company shall pay Dartford an executive services fee (the
"Executive Services Fee") for the services set forth in Section 1(b) and an
acquisition fee (the "Acquisitions Fee") for the services set forth in 1(c) (the
Executive Services Fee and the Acquisitions Fee being herein sometimes referred
to collectively as the "Management Fee"). The Executive Services Fee shall be
paid in at least quarterly installments at a rate equal to $800,000 per annum
for the period from the date hereof to the Termination Date; provided, that if
this Agreement will terminate pursuant to Section 3(i) below, the Management Fee
payable for the three months immediately preceding the Termination Date shall be
at a rate equal to 50% of the rate which would otherwise be payable absent this
proviso. The Acquisitions Fee shall be paid in at least quarterly installments
at a rate equal to $200,000 per annum from the date hereof to the Termination
Date. Notwithstanding the foregoing, payment of the Management Fee may, at the
election of the Company, be deferred (i) during any period in which a payment
event of default exists and is continuing or (ii) during any period, commencing
30 days after a financial covenant default has occurred, that such financial
covenant default is continuing, in either case under the Company's $8,500,000
12% Subordinated Notes due 2006 or under the Company's $52,000,000 Credit
Agreement with NationsBank of Tennessee, N.A., as Administrative Agent (the
"Senior Credit Agreement") or any refinancings of the Senior Credit Agreement,
or (iii) during any period when the annual Management Fee exceeds 5% of the
Company's consolidated EBITDA for the preceding four fiscal quarters (provided,
in the case of this subclause (iii) only the excess of the Management Fee over
such 5% of EBITDA may be deferred) but the Management Fee shall nonetheless
continue to accrue during any period of such deferral. In addition, all payments
and increases of the Management Fee shall be subject in all respects to the
provisions of the Senior Credit Agreement and the Intercreditor and
Subordination Agreement dated as of the date hereof by and among
- 2 -
<PAGE>
Dartford, the Company, the Administrative Agent and Bruckmann, Rosser, Sherrill
& Co., Inc.
(b) Adjustments to Management Fee.
(i) In the event that the Company or any direct or indirect
subsidiary of the Company consummates a material acquisition or disposition of
the stock or assets of another entity (including without limitation by way of
merger or consolidation), enters into or terminates a significant joint venture
with another entity, or effects any similar investment or business combination
during the Term, the Management Fee shall be subject to increase or decrease in
an amount that is mutually agreed upon by the Company and Dartford, with the
proportionate increase of the Management Fee to be less than the proportionate
contribution of the acquired entity to the Company;
(ii) Anything in Section 2(a) to the contrary notwithstanding,
in the event that a majority of the members of the Company's Board reasonably
determines, in its sole discretion, that Dartford is not adequately performing
its duties described in Section 1(c) it may elect to terminate the duties of
Dartford described in Section 1(c), in which event Dartford's right to the
Acquisitions Fee shall terminate from and after the Effective Date of such
election and the Management Fee shall be reduced to a rate of $800,000 per annum
from and after the effective date of such election.
(iii) The Management Fee shall be decreased by an amount
mutually agreed upon by Dartford and the Company in the event the Company either
(x) consummates a sale to the public, for its own account, of shares of its
capital stock pursuant to a registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended or (y) hires or
appoints a chief executive officer for the Company who has no affiliation with
Dartford.
3. Termination and Engagement. This Agreement and the Company's
engagement of Dartford hereunder shall terminate on the date (the "Termination
Date") that is the earlier of (i) the date that is six months following a sale
of substantially all of the equity securities or assets of the Company or of
Windy Hill Pet Food Holdings, Inc., the Company's parent, or of 51% or more of
the stock of Windy Hill Pet Food Holdings, Inc., (ii) April 30, 2001, provided
that unless either the Company or Dartford shall have given notice prior to
March 31, 2000 or prior to March 31st of any year thereafter of its election not
to extend this Agreement, the date set forth in this subclause (ii) shall
automatically be extended to April 1st of the next succeeding year; (iii) at the
Company's election provided that a majority of all members of the Company's
Board have voted in favor of such election, or (iv) at the Company's election,
upon repeated willful neglect by Dartford of any duty or responsibility created
pursuant to Section 1 of this Agreement, which breach or neglect shall
- 3 -
<PAGE>
not have been cured within 30 days after written notice thereof from the Company
to Dartford.
4. Notices. All notices, requests, demands and other communications
hereunder must be in writing and shall be deemed to have been duly given if
delivered by hand or mailed first class, certified mail, return receipt
requested, postage and registry fees prepaid and addressed as follows:
If to Dartford:
Dartford Partnership L.L.C.
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Ian R. Wilson
If to the Company:
Windy Hill Pet Food Company, Inc.
Two Maryland Farms, Suite 301
Brentwood, TN 37027-2487
Attention: President
Addresses may be changed by a notice in writing in accordance with the
provisions of this paragraph 4.
5. Miscellaneous. This Agreement shall be construed and enforced in
accordance with, and shall be governed by the laws of the State of New York,
without giving effect to the conflict of laws principles thereof. This Agreement
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof. This Agreement may not be modified or amended, and no term or
provision hereof may be waived or discharged, except in a writing signed by the
party against which such modification, amendment, waiver or discharge is sought
to be enforced. This Agreement cannot be assigned by either party hereto, except
that it may be assigned to an affiliate of the Company in connection with the
acquisition by the Company of all of the outstanding capital stock of Hubbard
Milling Company. The headings in this Agreement are for purposes of reference
only and shall not limit or otherwise affect the meaning hereof. This Agreement
may be executed in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
- 4 -
<PAGE>
If you are in agreement with the foregoing, please so indicate by
signing the enclosed copy of this letter, whereupon it shall become a binding
agreement between the parties hereto as of the day and year first above written.
DARTFORD PARTNERSHIP L.L.C.
By /s/ Ray Chung
--------------------------------------
Name: Ray Chung
Title: Member Manager
Agreed to and accepted:
WINDY HILL PET FOOD COMPANY, INC.
By /s/ Robert V. Dale
------------------------------
Name: Robert V. Dale
Title: President
- 5 -
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
Two Maryland Farms, Suite 301 o Brentwood, TN 37027
April 29, 1996
Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street
New York, NY 10022
Attention: Mr. Stephen C. Sherrill
Dear Mr. Sherrill:
In connection with certain services performed by Bruckmann, Rosser,
Sherrill & Co., Inc. ("BRS & Co.") to facilitate the acquisition of certain
assets by Windy Hill Pet Food Company, Inc. (the "Company") pursuant to the
Asset Purchase Agreement dated April 17, 1996 among the Company, Windy Hill Pet
Food Holdings, Inc. and Star-Kist Foods, Inc. (the "Acquisition"), the Company
hereby agrees with BRS & Co. as follows:
In consideration of the general management, financial and other
corporate advisory services rendered by BRS & Co. prior to the date hereof in
connection with the Acquisition and the contemporaneous financing thereof, the
Company agrees to pay BRS & Co. $500,000 on the fifth anniversary of the date
hereof; provided, that in the event of (i) a Change in Control (as defined in
the Credit Agreement), (ii) a sale of all or substantially all of the assets of
the Company (whether pursuant to an asset sale, a sale of capital stock, a
merger, or otherwise) or (iii) the consummation of an initial public offering of
the Company's capital stock, or, at the option of BRS & Co., such payment may be
accelerated by BRS & Co.
The payment of the fee hereunder is subject in all respects to the
terms and provisions of the Credit Agreement dated as of the date hereof
(the "Credit Agreement") by and among NationsBank of Tennessee, N.A.
("NationsBank"), the Company, Holdings and the lenders party thereto and the
Intercreditor and Subordination Agreement dated as of the date hereof by and
among the Company, BRS & Co., NationsBank, PNC Capital Corp and Dartford
Partnership L.L.C.
This letter agreement may be executed in separate counterparts, each
of which shall be an original and all of which taken together shall constitute
one and the same instrument.
* * * * *
<PAGE>
The terms of this letter agreement shall be governed by the internal
laws, and not the laws of conflicts, of the State of New York.
WINDY HILL PET FOOD COMPANY, INC.
By: /s/ Ray Chung
-------------------------------------
Name:
Title:
Accepted and agreed:
BRUCKMANN, ROSSER, SHERRILL & CO., INC.
By: ___________________________________
Name:
Title:
2
<PAGE>
The terms of this letter agreement shall be governed by the internal
laws, and not the laws of conflicts, of the state of New York.
WINDY HILL PET FOOD COMPANY, INC.
By:
-------------------------------------
Name:
Title:
Accepted and agreed:
BRUCKMANN, ROSSER, SHERRILL & CO., INC.
By: /s/ S. Sherrill
-----------------------------------
Name:
Title:
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
(f/k/a Hubbard Milling Company)
WHPF INC.
(f/k/a Windy Hill Pet Food Company, Inc.)
May 21, 1997
Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street
New York, NY 10022
Attention: Mr. Stephen C. Sherrill
Gentlemen:
Reference is made to the April 29, 1996 letter agreement (the
"Letter Agreement") between Bruckmann, Rosser, Sherrill & Co., Inc. and WHPF
Inc. (f/k/a Windy Hill Pet Food Company, Inc.) ("WHPF").
In connection with the acquisition of Windy Hill Pet Food Company,
Inc. (f/k/a Hubbard Milling Company) (the "Company") by WHPF pursuant to a
Merger Agreement, dated March 21, 1997, and the contribution to the Company of
all of the assets of WHPF (the "Contribution"), this will evidence our agreement
that (x) the Letter Agreement is hereby assigned to the Company, (y) the
obligations of WHPF thereunder are hereby assumed by the Company, which
assumption shall not relieve WHPF of its obligations under the Letter Agreement,
and (z) that the Contribution does not constitute a sale of all or substantially
all of the assets of WHPF for purposes of the Letter Agreement.
WHPF, INC.
By /s/ Robert V. Dale
--------------------------------------
Name: Robert V. Dale
Title: President
<PAGE>
WINDY HILL PET FOOD COMPANY,
INC.
By /s/ Ray Chung
--------------------------------------
Name: Ray Chung
Title: Executive Vice President
Accepted and agreed to:
BRUCKMANN, ROSSER, SHERRILL & CO., INC.
By /s/ Stephen C. Sherrill
------------------------------------
Name:
Title:
- 2 -
<PAGE>
WINDY HILL PET FOOD COMPANY,
INC.
By /s/ Ray Chung
--------------------------------------
Name: Ray Chung
Title: Executive Vice President
Accepted and agreed to:
BRUCKMANN, ROSSER, SHERRILL & CO., INC.
By /s/ Stephen C. Sherrill
------------------------------------
Name:
Title:
- 2 -
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.1
WINDY HILL PET FOOD COMPANY, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS)
TWELVE MONTHS THREE MONTHS TWELVE MONTHS
ENDED DECEMBER 31, ENDED MARCH 31, ENDED MARCH 31,
1996 1997 1997
------------------ --------------- ---------------
<S> <C> <C> <C>
Net income 2,452 696 2,591
Income taxes 1,635 464 1,727
------------------ --------------- ---------------
Income before income taxes 4,087 1,160 4,318
Fixed charges:
Interest expense 13,160 3,291 13,160
Amortization of deferred financing costs 1,115 279 1,115
Amortization of portion of rental expense 85 23 86
------------------ --------------- ---------------
Total fixed charges 14,360 3,593 14,361
Earnings before income taxes and fixed charges 18,447 4,753 18,679
Ratio of earnings to fixed charges 1.3 1.3 1.3
================== =============== ===============
</TABLE>
<PAGE>
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
WINDY HILL PET FOOD COMPANY, INC.
(Exact name of obligor as specified in its charter)
Minnesota 41-0323270
(State of incorporation) (I.R.S. employer identification no.)
Two Maryland Farms
Brentwood, Tennessee 37027
(Address of principal executive offices) (Zip Code)
9 3/4% Senior Subordinated Notes due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervision authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is a affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to this requirement or the Trust Indenture Act of 1939, the
trustee, Wilmington Trust Company, a corporation organized and existing under
the laws of Delaware, has duly caused this Statement of Eligibility to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the City of
Wilmington and State of Delaware on the 20th day of June, 1997.
WILMINGTON TRUST COMPANY
(SEAL)
Attest: /s/ Patricia A. Evans By: /s/ Christopher L. Kaiser
--------------------- -------------------------
Assistant Secretary Name: Christopher L. Kaiser
Title: Vice President
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "Wilmington Trust Company" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to discount
bills, notes or other evidences of debt, to receive deposits of money,
or securities for money, to buy gold and silver bullion and foreign
coins, to buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue bonds and
secure the same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the Corporation,
and to sell and pledge such bonds, as and when the Board of Directors
shall determine, and in the promotion of its said corporate business of
investment and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or interest
therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article Fourth), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by
them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article Fourth and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article Fourth that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
8
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
<PAGE>
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
10
<PAGE>
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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<PAGE>
such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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<PAGE>
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who by the Board of Directors from its own members and who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board
of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which
the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
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There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
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any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
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EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: June 20, 1997 By: /s/ Christopher L. Kaiser
-----------------------------
Name: Christopher L. Kaiser
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has
not been approved by any state banking authorities. Refer
to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
Name of Bank City
in the State of DELAWARE , at the close of business on March 31, 1997.
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.................181,744
Interest-bearing balances............................................... 0
Held-to-maturity securities............................................ 445,954
Available-for-sale securities............................................767,337
Federal funds sold and securities purchased under agreements to resell... 86,900
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,685,616
LESS: Allowance for loan and lease losses. . . . . . 52,478
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..3,633,138
Assets held in trading accounts................................................0
Premises and fixed assets (including capitalized leases)..................94,513
Other real estate owned................................................... 3,702
Investments in unconsolidated subsidiaries and associated companies......... 20
Customers' liability to this bank on acceptances outstanding...................0
Intangible assets..........................................................4,012
Other assets.............................................................103,524
Total assets...........................................................5,320,844
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices....................................................3,618,174
Noninterest-bearing . . . . . . . . 784,267
Interest-bearing. . . . . . . . . . 2,833,907
Federal funds purchased and Securities sold under agreements to repurchase......
293,862
Demand notes issued to the U.S. Treasury..................................64,550
Trading liabilities (from Schedule RC-D).......................................0
Other borrowed money:....................................................///////
With original maturity of one year or less..........................774,000
With original maturity of more than one year.........................43,000
Bank's liability on acceptances executed and outstanding.......................0
Subordinated notes and debentures..............................................0
Other liabilities (from Schedule RC-G).................................. 95,672
Total liabilities......................................................4,889,258
EQUITY CAPITAL
Perpetual preferred stock and related surplus..................................0
Common Stock.................................................................500
Surplus (exclude all surplus related to preferred stock)..................62,118
Undivided profits and capital reserves...................................371,107
Net unrealized holding gains (losses) on available-for-sale securities.
(2,139)
Total equity capital.....................................................431,586
Total liabilities, limited-life preferred stock, and equity capital....5,320,844
Thousands of dollars
<PAGE>
June , 1997
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0007
Ladies and Gentlemen:
Windy Hill Pet Food Company (the "Company"), a Delaware corporation,
hereby appoints Wilmington Trust Company ("Wilmington Trust") to act as exchange
agent (the "Exchange Agent") in connection with an exchange offer by the Company
to exchange an aggregate principal amount of up to $120,000,000 of its 9 3/4%
Senior Subordinated Notes due 2007 (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended, for a like principal amount of its
outstanding 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes"). The
terms and conditions of the exchange offer are set forth in a Prospectus, dated
, 1997 (as the same may be amended or supplemented from time to time, the
"Prospectus"), and in the related Letter of Transmittal, which together
constitute the "Exchange Offer." Capitalized terms used herein and not defined
shall have the respective meanings ascribed thereto in the Prospectus.
On the basis of the representations, warranties and agreements of
the Company and Wilmington Trust contained herein and subject to the terms and
conditions hereof, the following sets forth the agreement between the Company
and Wilmington Trust as Exchange Agent for the Exchange Offer:
1. Appointment and Duties as Exchange Agent.
(a) The Company hereby authorizes Wilmington Trust to act as
Exchange Agent in connection with the Exchange Offer and Wilmington Trust agrees
to act as Exchange Agent in connection with the Exchange Offer. As Exchange
Agent, Wilmington Trust will perform those services as are outlined herein or
which are customarily performed by an exchange agent in connection with an
exchange offer of like nature, including, but not limited to, accepting tenders
of the Old Notes, assisting the Company in the preparation of
<PAGE>
Wilmington Trust Company
June , 1997
Page 2
the documentation necessary to effect the transactions herein contemplated
(without assuming responsibility for such documentation, unless such information
has been furnished to the Company in writing by Wilmington Trust).
(b) The Company acknowledges and agrees that Wilmington Trust has
been retained pursuant to this Agreement to act solely as Exchange Agent in
connection with the Exchange Offer, and in such capacity, Wilmington Trust shall
perform such duties as are outlined herein and which are specifically set forth
in the section of the Prospectus captioned "The Exchange Offer" and in the
Letter of Transmittal; provided, however, that in no way will Wilmington Trust's
general duty to act in good faith and without gross negligence or willful
misconduct be discharged by the foregoing.
(c) Wilmington Trust will examine each of the Letters of Transmittal
(or electronic instructions transmitted by the Depository Trust Corporation (the
"DTC Transmissions") and certificates for the Old Notes and any other documents
delivered or mailed to Wilmington Trust by or for holders of the Old Notes (or
any Book-Entry Confirmations (as set forth in the Prospectus) received by
Wilmington Trust with respect to the Old Notes), to ascertain whether: (i) the
Letters of Transmittal and any such other documents are duly executed and
properly completed in accordance with the instructions set forth therein (or
that the DTC Transmission contains the proper information required to be set
forth therein) and (ii) the Old Notes have otherwise been properly tendered (or
that the Book-Entry Confirmations are in due and proper form and contain the
information required to be set forth therein). In each case where the Letters of
Transmittal or any other documents have been improperly completed or executed
(or the DTC Transmissions are not in due and proper form or omit certain
information) or certificates for the Old Notes are not in proper form for
transfer (or the Book-Entry Confirmations are not in due and proper form or omit
certain information) or some other irregularity in connection with the tender or
acceptance of the Old Notes exists, Wilmington Trust will endeavor, subject to
the terms and conditions of the Exchange Offer, to advise the tendering holders
of Old Notes of the irregularity and to take any other action as may be
necessary or advisable to cause such irregularity to be corrected.
Notwithstanding the above, Wilmington Trust shall not be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
(d) With the approval of the President, any Senior Vice President,
any Executive Vice President, any Vice President or the Treasurer or any
Assistant Treasurer of the Company (such approval, if given orally, to be
confirmed in writing) or any other party
<PAGE>
Wilmington Trust Company
June , 1997
Page 3
designated by any such officer, Wilmington Trust is authorized to waive any
irregularities in connection with any tender of the Old Notes pursuant to the
Exchange Offer.
(e) Tenders of the Old Notes may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer" and the Old Notes shall be considered properly tendered only
when tendered in accordance with such procedures set forth therein.
Notwithstanding the provisions of this paragraph, the Old Notes which the
President, any Senior Vice President, any Executive Vice President, any Vice
President or the Treasurer, any Assistant Treasurer or any other designated
officer of the Company, shall approve (such approval, if given orally, to be
confirmed in writing) as having been properly tendered shall be considered to be
properly tendered.
(f) Wilmington Trust shall advise the Company with respect to any
Old Notes received as soon as possible after 5:00 p.m., New York City time, on
the Expiration Date and accept its instructions with respect to disposition of
such Old Notes.
(g) Wilmington Trust shall (i) ensure that each Letter of
Transmittal and, if required pursuant to the terms of the Exchange Offer, the
related Old Notes or a bond power are duly executed (with signatures guaranteed
where required) by the appropriate parties in accordance with the terms of the
Exchange Offer; (ii) in those instances where the person executing the Letter of
Transmittal (as indicated on the Letter of Transmittal) is acting in a fiduciary
or a representative capacity, ensure that proper evidence of his or her
authority so to act is submitted; (iii) in those instances where the Old Notes
are tendered by persons other than the registered holder of such Old Notes,
ensure that customary transfer requirements, including any applicable transfer
taxes, and the requirements imposed by the transfer restrictions on the Old
Notes (including any applicable requirements for certifications, legal opinions
or other information) are fulfilled; (iv) ensure that the Old Notes tendered in
part are tendered in principal amounts of $1,000 and integral multiples thereof;
and (v) deliver certificates for the Old Notes tendered in part to the transfer
agent for split-up and shall return any untendered Old Notes or Old Notes which
have not been accepted by the Company to the holders of such Old Notes (or in
the case of Old Notes tendered by book-entry transfer, such non-exchanged Old
Notes will be credited to an account maintained with the Book-Entry Transfer
Facility) promptly after the expiration or termination of the Exchange Offer.
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Wilmington Trust Company
June , 1997
Page 4
(h) Upon acceptance by the Company of any Old Notes duly tendered
pursuant to the Exchange Offer (such acceptance if given orally, to be confirmed
in writing), Wilmington Trust will cause the New Notes in exchange therefor to
be issued as promptly as possible (subject to receipt from the Company of
appropriate certificates under the related Indenture) and Wilmington Trust will
deliver such New Notes on behalf of the Company at the rate of $1,000 principal
amount of New Notes for each $1,000 principal amount of the Old Notes tendered
as promptly as possible after acceptance by the Company of the Old Notes for
exchange and notice (such notice if given orally, to be confirmed in writing) of
such acceptance by the Company; provided, however, that in all cases, the Old
Notes tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by Wilmington Trust of certificates for such Old Notes (or a
Book-Entry Confirmation), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
any other required documents (or a properly completed DTC Transmission). Unless
otherwise instructed by the Company, Wilmington Trust shall issue the New Notes
only in denominations of $1,000 or any integral multiple thereof.
(i) Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and the conditions set forth in the Prospectus and
the Letter of Transmittal, the Old Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time on or prior to the Expiration Date in accordance
with the terms of the Exchange Offer.
(j) Notice of any decision by the Company not to exchange any Old
Notes tendered shall be given by the Company either orally (if given orally, to
be confirmed in writing) or in a written notice to Wilmington Trust.
(k) If, pursuant to the Exchange Offer, the Company does not accept
for exchange all or part of the Old Notes tendered because of an invalid tender,
the occurrence of certain other events set forth in the Prospectus under the
caption "The Exchange Offer --Certain Conditions to the Exchange Offer" or
otherwise, Wilmington Trust shall, upon notice from the Company (such notice if
given orally, to be confirmed in writing), promptly after the expiration or
termination of the Exchange Offer return such certificates for unaccepted Old
Notes (or effect appropriate Book-Entry Confirmations), together with any
related required documents and the Letters of Transmittal (or DTC Transmissions)
relating thereto that are in Wilmington Trust's possession, to the persons who
deposited such certificates.
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Wilmington Trust Company
June , 1997
Page 5
(l) Certificates for reissued Old Notes, unaccepted Old Notes or New
Notes shall be forwarded by (a) first-class certified mail, return receipt
requested under a blanket surety bond obtained by Wilmington Trust protecting
Wilmington Trust and the Company from loss or liability arising out of the
non-receipt or non-delivery of such certificates or (b) by registered mail
insured by Wilmington Trust separately for the replacement value of each such
certificate.
(m) Wilmington Trust is not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, commercial
bank, trust company or other nominee or to engage or use any person to solicit
tenders.
(n) As Exchange Agent, Wilmington Trust:
(i) shall have no duties or obligations other than those
specifically set forth in the Prospectus, the Letter of Transmittal or herein or
as may be subsequently agreed to in writing;
(ii) will make no representations and will have no
responsibilities as to the validity, value or genuineness of any of the
certificates for the Old Notes deposited pursuant to the Exchange Offer, and
will not be required to and will make no representation as to the validity,
value or genuineness of the Exchange Offer; provided, however, that in no way
will Wilmington Trust general duty to act in good faith and without gross
negligence or willful misconduct be limited by the foregoing;
(iii) shall not be obligated to take any legal action
hereunder which might in Wilmington Trust reasonable judgment involve any
expense or liability, unless Wilmington Trust shall have been furnished with
reasonable indemnity;
(iv) may reasonably rely on and shall be protected in acting
in reliance upon any certificate, instrument, opinion, notice, letter, telegram
or other document or security delivered to Wilmington Trust and reasonably
believed by Wilmington Trust to be genuine and to have been signed by the proper
party or parties;
(v) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and
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Wilmington Trust Company
June , 1997
Page 6
effectiveness of its provisions, but also as to the truth and accuracy of any
information contained therein, which Wilmington Trust believes in good faith to
be genuine and to have been signed or represented by a proper person or persons
acting in a fiduciary or representative capacity (so long as proper evidence of
such fiduciary's or representative's authority so to act is submitted to
Wilmington Trust) and Wilmington Trust examines and reasonably concludes that
such evidence properly establishes such authority;
(vi) may rely on and shall be protected in acting upon written
or oral instructions from the President, any Senior Vice President, any
Executive Vice President, any Vice President, the Treasurer, any Assistant
Treasurer or any other designated officer of the Company;
(vii) may consult with its own counsel with respect to any
questions relating to Wilmington Trust's duties and responsibilities and the
written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken by
Wilmington Trust hereunder in good faith and in accordance with the written
opinion of such counsel; and
(viii) shall not advise any person tendering Old Notes
pursuant to the Exchange Offer as to whether to tender or refrain from tendering
all or any portion of its Old Notes or as to the market value, decline or
appreciation in market value of any Old Notes that may or may not occur as a
result of the Exchange Offer or as to the market value of the New Notes.
(o) Wilmington Trust shall take such action as may from time to time
be requested by the Company (and such other action as Wilmington Trust may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery or such other forms as may be
approved from time to time by the Company, to all persons requesting such
documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for tendering into (or withdrawing from) the Exchange Offer.
The Company will furnish you with copies of such documents at your request.
(p) Wilmington Trust shall advise orally and promptly thereafter
confirm in writing to the Company and such other person or persons as the
Company may request, daily
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Wilmington Trust Company
June , 1997
Page 7
(and more frequently during the week immediately preceding the Expiration Date
and if otherwise reasonably requested) up to and including the Expiration Date,
the aggregate principal amount of the Old Notes which have been duly tendered
pursuant to and in compliance with the terms of the Exchange Offer and the items
received by Wilmington Trust pursuant to the Exchange Offer and this Agreement,
separately reporting and giving cumulative totals as to items properly received
and items improperly received. In addition, Wilmington Trust will also provide,
and cooperate in making available to the Company, or any such other person or
persons upon request (such request if made orally, to be confirmed in writing)
made from time to time, such other information as the Company may reasonably
request. Such cooperation shall include, without limitation, the granting by
Wilmington Trust to the Company, and such person or persons as the Company may
request, access to those persons on Wilmington Trust staff who are responsible
for receiving tenders, in order to ensure that immediately prior to the
Expiration Date the Company shall have received adequate information in
sufficient detail to enable the Company to decide whether to extend the Exchange
Offer. Wilmington Trust shall prepare a final list of all persons whose tenders
were accepted, the aggregate principal amount of the Old Notes tendered, the
aggregate principal amount of the Old Notes accepted and deliver said list to
the Company.
(q) Letters of Transmittal, Book-Entry Confirmations, DTC
Transmissions and Notices of Guaranteed Delivery shall be stamped by Wilmington
Trust as to the date and the time of receipt thereof and shall be preserved by
Wilmington Trust for a period of time at least equal to the period of time
Wilmington Trust preserves other records pertaining to the transfer of
securities, or one year, whichever is longer, and thereafter shall be delivered
by Wilmington Trust to the Company. Wilmington Trust shall dispose of unused
Letters of Transmittal and other surplus materials by returning them to the
Company.
(r) Wilmington Trust hereby expressly waives any lien, encumbrance
or right of set-off whatsoever that Wilmington Trust may have with respect to
funds deposited with it for the payment of transfer taxes by reasons of amounts,
if any, borrowed by the Company, or any of its subsidiaries or affiliates
pursuant to any loan or credit agreement with Wilmington Trust or for
compensation owed to Wilmington Trust hereunder or for any other matter.
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Wilmington Trust Company
June , 1997
Page 8
2. Compensation.
In consideration of Wilmington Trust acceptance of the appointment
set forth in Paragraph 1 above, the Company agrees to (i) pay Wilmington Trust a
fee for all services rendered under the foregoing appointment of [$3,500] and
(ii) reimburse Wilmington Trust for any reasonable out-of-pocket expenses
incurred as Exchange Agent in performing the services described herein;
provided, however, that Wilmington Trust shall not be entitled to reimbursement
for the fees or disbursements of its legal counsel without the prior written
consent of the Company.
3. Indemnification.
(a) The Company hereby agrees to protect, defend, indemnify and hold
harmless Wilmington Trust against and from any and all costs, losses,
liabilities, expenses (including reasonable counsel fees and disbursements) and
claims imposed upon or asserted against Wilmington Trust on account of any
action taken or omitted to be taken by Wilmington Trust in connection with its
acceptance of or performance of its duties under this Agreement and the
documents related thereto as well as the reasonable costs and expenses of
defending itself against any claim or liability arising out of or relating to
this Agreement and the documents related thereto. This indemnification shall
survive the release, discharge, termination, and/or satisfaction of this
Agreement. Anything in this Agreement to the contrary notwithstanding, the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of Wilmington Trust bad
faith, gross negligence or willful misconduct. In no case shall the Company be
liable under this indemnification agreement with respect to any claim against
Wilmington Trust unless the Company shall be notified by Wilmington Trust, by
letter, of the written assertion of a claim against Wilmington Trust or of any
other action commenced against Wilmington Trust, reasonably promptly after
Wilmington Trust shall have received any such written assertion or shall have
been served with a summons in connection therewith. The Company shall be
entitled to participate at its own expense in the defense of any such claim or
other action, and, if the Company so elects, the Company may assume the defense
of any pending or threatened action against Wilmington Trust in respect of which
indemnification may be sought hereunder, in which case the Company shall not
thereafter be responsible for the fees and disbursements of legal counsel for
Wilmington Trust under this paragraph; provided that the Company shall not be
entitled to assume the defense of any such action if the named
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Wilmington Trust Company
June , 1997
Page 9
parties to such action include both the Company and Wilmington Trust and
representation of both parties by the same legal counsel would, in the written
opinion of counsel for Wilmington Trust, be inappropriate due to actual or
potential conflicting interests between them. It is understood that the Company
shall not be liable under this paragraph for the fees and disbursements of more
than one legal counsel for Wilmington Trust. In the event that the Company shall
assume the defense of any such suit, the Company shall not therewith be liable
for the fees and expenses of any counsel retained by Wilmington Trust.
(b) Wilmington Trust agrees that, without the prior written consent
of the Company (which consent shall not be unreasonably withheld), it will not
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding in respect of which indemnification could
be sought in accordance with the indemnification provision of this Agreement
(whether or not Wilmington Trust or the Company or any of its directors,
officers and controlling persons is an actual or potential party to such claim,
action or proceeding).
4. Tax Information.
(a) Wilmington Trust shall arrange to comply with all requirements
under the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that Wilmington Trust is required, in
certain instances, to deduct [31%] with respect to interest paid on the New
Notes and proceeds from the sale, exchange, redemption or retirement of the New
Notes from holders of the New Notes who have not supplied their correct Taxpayer
Identification Number or required certification. Such funds will be turned over
by Wilmington Trust to the Internal Revenue Service.
(b) Wilmington Trust shall notify the Company of the amount of any
transfer taxes payable in respect of the exchange of the Old Notes and, upon
receipt of written approval from the Company shall deliver or cause to be
delivered, in a timely manner, to each governmental authority to which any
transfer taxes are payable in respect of the exchange of the Old Notes, a check
in the amount of all transfer taxes so payable, and the Company shall reimburse
Wilmington Trust for the amount of any and all transfer taxes payable in respect
of the exchange of the Old Notes; provided, however, that Wilmington
- 9 -
<PAGE>
Wilmington Trust Company
June , 1997
Page 10
Trust shall reimburse the Company for amounts refunded to it in respect of its
payment of any such transfer taxes, at such time as such refund is received by
Wilmington Trust.
5. Governing Law.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
6. Notices.
Any communication or notice provided for hereunder shall be in
writing and shall be given (and shall be deemed to have been given upon receipt)
by delivery in person, telecopy, or overnight delivery or by registered or
certified mail (postage prepaid, return receipt requested) to the applicable
party at the addresses indicated below:
If to Wilmington Trust:
Rodney Square North
11 North Market Street
Wilmington, DE 19890-0001
Telecopier No: [(302) 651-1576]
Attention:
If to the Company:
Two Maryland Farms
Brentwood, Tennessee
Telecopier No.: (615) 373-9152
Attention: Robert V. Dale, President
- 10 -
<PAGE>
Wilmington Trust Company
June , 1997
Page 11
or, as to each party, at such other address as shall be designated by such party
in a written notice complying as to delivery with the terms of this Section.
7. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit
of each party hereto and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement. Without
limitation to the foregoing, the parties hereto expressly agree that no holder
of the Old Notes or the New Notes shall have any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
8. Counterparts; Severability.
This Agreement may be executed in one or more counterparts, and by
different parties hereto on separate counterparts, each of which when so
executed shall be deemed an original, and all of such counterparts shall
together constitute one and the same agreement. If any term or other provision
of this Agreement or the application thereof is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other provisions of
this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the agreements contained herein is not affected
in any manner adverse to any party. Upon such determination that any term or
provision or the application thereof is invalid, illegal or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the agreements contained herein may be performed
as originally contemplated to the fullest extent possible.
9. Headings.
The descriptive headings contained in this Agreement are included
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE>
Wilmington Trust Company
June , 1997
Page 12
10. Entire Agreement; Amendment.
This Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement may not be
amended or modified nor may any provision hereof be waived except in writing
signed by each party to be bound thereby.
11. Termination.
This Agreement shall terminate upon the earlier of (a) the 90th day
following the expiration, withdrawal, or termination of the Exchange Offer, (b)
the close of business on the date of actual receipt of written notice by
Wilmington Trust from the Company stating that this Agreement is terminated, (c)
one year following the date of this Agreement, or (d) the time and date on which
this Agreement shall be terminated by mutual consent of the parties hereto.
12. Miscellaneous.
Wilmington Trust hereby acknowledges receipt of the Prospectus and
the Letter of Transmittal and the Notice of Guaranteed Delivery and further
acknowledges that it has examined each of them. Any inconsistency between this
Agreement, on the one hand, and the Prospectus and the Letter of Transmittal and
the Notice of Guaranteed Delivery (as they may be amended or supplemented from
time to time), on the other hand, shall be resolved in favor of the latter three
documents, except with respect to the duties, liabilities and indemnification of
Wilmington Trust as Exchange Agent which shall be controlled by this Agreement.
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<PAGE>
Wilmington Trust Company
June , 1997
Page 13
Kindly indicate your willingness to act as Exchange Agent and
Wilmington Trust's acceptance of the foregoing provisions by signing in the
space provided below for that purpose and returning to the Company a copy of
this Agreement so signed, whereupon this Agreement and Wilmington Trust's
acceptance shall constitute a binding agreement between Wilmington Trust and the
Company.
Very truly yours,
WINDY HILL PET FOOD COMPANY, INC.
By:
--------------------------------------
Name:
Title:
Accepted and agreed to as of
the date first written above:
WILMINGTON TRUST COMPANY
By:
---------------------------------
Name:
Title:
- 13 -
<PAGE>
Wilmington Trust Company
June , 1997
Page 14
EXHIBIT A
EXCHANGE AGENT FEE SCHEDULE
[TO COME]
- 14 -
<PAGE>
LETTER OF TRANSMITTAL
To Tender
Unregistered 9 3/4% Senior Subordinated Notes Due 2007
of
WINDY HILL PET FOOD COMPANY, INC.
Pursuant to the Exchange Offer and Prospectus dated _______________, 1997
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME ON ___________, 1997 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY WINDY HILL PET FOOD COMPANY, INC.
- -------------------------------------------------------------------------------
The Exchange Agent of the Exchange Offer is:
Wilmington Trust Company
By Registered or Certified Mail or
By Hand: by Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
c/o Harris Trust Co. Attn: Jill Rylee
of New York as Agent Corporate Trust Administration
[75] Water Street 1100 North Market Street
New York, NY 10004 Rodney Square North
Wilmington, DE 19890-0001
By Facsimile:
Wilmington Trust Company
(302) 651-1079
Confirmation by telephone and information:
(302) 651-8869
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
Delivery of this Notice to an address or transmission of instructions via
facsimile other than as set forth above will not constitute a valid delivery.
IF YOU WISH TO EXCHANGE UNREGISTERED 9 3/4% SENIOR SUBORDINATED NOTES DUE
2007, FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF REGISTERED 9 3/4% SENIOR
SUBORDINATED NOTES DUE 2007, PURSUANT TO THE EXCHANGE OFFER, YOU MUST VALIDLY
TENDER (AND NOT WITHDRAW) UNREGISTERED 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE>
DESCRIPTION OF TENDERED OLD NOTES
===============================================================================
Name(s) and Address(es) of Registered Owner(s) Certificate Principal Amount
(Please fill in, if blank) Number(s) Tendered
- --------------------------------------------------------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Total Principal
Amount of Notes
Tendered
================================================================================
Ladies and Gentlemen:
1. The undersigned hereby tenders to Windy Hill Pet Food Company, Inc., a
Minnesota corporation (the "Company"), the unregistered 9 3/4% Senior
Subordinated Notes Due 2007 (the "Old Notes"), described above pursuant to the
Company's offer of $1,000 principal amount of registered 9 3/4% Senior
Subordinated Notes Due 2007 (the "New Notes"), in exchange for each $1,000
principal amount of the Old Notes, upon the terms and subject to the conditions
contained in (i) the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission by the Company (the "Registration
Statement"), (ii) the accompanying Prospectus dated ______________, 1997 (the
"Prospectus"), receipt of which is hereby acknowledged, and (iii) this Letter of
Transmittal (items (ii) and (iii) together constitute the "Exchange Offer").
2. The undersigned hereby represents and warrants that it has full
authority to tender the Old Notes described above. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the tender of Old Notes.
3. The undersigned understands that the tender of the Old Notes pursuant
to all of the procedures set forth in the Prospectus will constitute an
agreement between the undersigned and the Company as to the terms and conditions
set forth in the Prospectus.
4. Unless the box under the heading "Special Registration Instructions" is
checked the undersigned hereby represents and warrants that:
(i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving
the New Notes, whether or not such person is the holder of the Old
Notes;
- 2 -
<PAGE>
(ii) neither the undersigned nor any such other person is engaging in or
intends to engage in a distribution of such New Notes;
(iii) neither the undersigned nor any such other person has an arrangement
or understanding with any person to participate in the distribution
of such New Notes; and
(iv) neither the holder nor any such other person is an "affiliate," as
such term is defined under Rule 405 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), of the Company or if
it is an affiliate it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
5. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and delivering a prospectus, the undersigned will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. If the undersigned is a broker-dealer and Old Notes held for its
own account were not acquired as a result of market-making or other trading
activities, such Old Notes cannot be exchanged pursuant to the Exchange Offer.
6. The undersigned may, if, and only if, unable to make all of the
representations and warranties contained in Item 4 above, elect to have its Old
Notes registered in the shelf registration described in the Exchange and
Registration Rights Agreement, dated May 21, 1997, between the Company and Chase
Securities Inc. and Credit Suisse First Boston Corporation in the form filed as
an exhibit to the Registration Statement (the "Registration Agreement") (all
terms used in this Item 6 with their initial letters capitalized, unless
otherwise defined herein, shall have the meanings given them in the Registration
Agreement). Such election may be made by checking the box under "Special
Registration Instructions" on page 5 hereof. By making such election, the
undersigned agrees, as a holder of Transfer Restricted Securities participating
in a Shelf Registration, to indemnify and hold harmless the Company, its
directors, officers, agents and employees and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Securities Exchange Act of 1934, as amended, and the directors, officers,
agents and employees of such controlling persons against any and all loss,
liability, claim, damage or expense (including, without limitation, any legal or
other expenses reasonably incurred in investigating, preparing or defending
against any such action or claim, as incurred) arising out of or based upon any
untrue statements or omissions, or alleged untrue statements or omissions made
in a Shelf Registration Statement or the related prospectus (as such may be
amended or supplemented). Any such indemnification shall be governed by the
terms and subject to the conditions set forth in the Registration Agreement,
including, without limitation, the provisions regarding notice, retention of
counsel, contribution and payment of expenses set forth therein. The above
summary of the indemnification provision
- 3 -
<PAGE>
of the Registration Agreement is not intended to be exhaustive and is qualified
in its entirety by the Registration Agreement.
7. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and legal
and personal representatives of the undersigned.
8. Unless otherwise indicated herein under "Special Delivery
Instructions," please issue the certificates for the New Notes in the name of
the undersigned.
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 1)
To be completed ONLY IF the New Notes are to be sent to the undersigned at
an address other than that provided above.
Mail certificates to:
Name:_____________________________________________________________________
(Please Print)
Address:__________________________________________________________________
______________________________________________________________________
______________________________________________________________________
(Including Zip Code)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL BROKER-DEALER INSTRUCTIONS
(See Item 5)
|_| Check here if you are a broker-dealer and wish to receive 10 additional
copies of the Prospectus and 10 copies of any amendments or supplements thereto.
Name:_____________________________________________________________________
(Please Print)
Address:__________________________________________________________________
______________________________________________________________________
______________________________________________________________________
(Including Zip Code)
- -------------------------------------------------------------------------------
-4-
<PAGE>
- -------------------------------------------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS
(See Item 6)
To be completed ONLY IF (i) the undersigned satisfies the conditions set
forth in Item 6 above, (ii) the undersigned elects to register its Old Notes in
the shelf registration described in the Registration Agreement, and (iii) the
undersigned agrees to indemnify certain entities and individuals as set forth in
the Registration Agreement.
|_| By checking this box the undersigned hereby (i) represents that it is
unable to make all of the representa ions and warranties set forth in Item 4
above, (ii) elects to have its Old Notes registered pursuant to the shelf
registration described in the Registration Agreement, and (iii) agrees to
indemnify certain entities and individuals identified in, and to the extent
provided in, the Registration Agreement.
- -------------------------------------------------------------------------------
- 5 -
<PAGE>
- -------------------------------------------------------------------------------
SIGNATURE
To be completed by (i) all exchanging noteholders and (ii) all noteholders
wishing to register their Old Notes as described in Item 6 above. Must be signed
by registered holder exactly as name appears on Old Notes. If signature is by
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth full title. See Instruction 3.
X_______________________________________________________________________________
X_______________________________________________________________________________
Signature(s) of Registered Holder(s) or Authorized Signature
Dated:__________________________________________________________________________
Name(s):________________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Capacity:_______________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.:____________________________________________________
SIGNATURE GUARANTEE (If Required by Instruction 1)
Certain Signatures Must be Guaranteed by an Eligible Institution
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number
(including area code) of Firm)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Printed Name)
________________________________________________________________________________
(Title)
Dated:__________________________________________________________________________
PLEASE READ THE INSTRUCTIONS ON THE FOLLOWING PAGE,
WHICH FORM A PART OF THIS LETTER OF TRANSMITTAL.
- -------------------------------------------------------------------------------
- 6 -
<PAGE>
INSTRUCTIONS
1. Guarantee of Signatures. Signatures on this Letter of Transmittal must
be guaranteed by an eligible guarantor institution that is a member or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Exchange Act (an "Eligible Institution") unless
the box entitled "Special Delivery Instructions" above has not been completed or
the Old Notes described above are tendered for the account of an Eligible
Institution.
2. Delivery of Letter of Transmittal and Old Notes. The Old Notes,
together with a properly completed and duly executed Letter of Transmittal (or
copy thereof), should be mailed or delivered to the Exchange Agent at the
address set forth above on the cover page of this Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
3. Signature on Letter of Transmittal, Bond Powers and Endorsements. If
this Letter of Transmittal is signed by a person other than a registered holder
of any Old Notes, such Old Notes must be endorsed or accompanied by appropriate
bond powers, signed by such registered holder exactly as such registered
holder's name appears on such Old Notes.
If this Letter of Transmittal or any Old Notes or bond power are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
4. Partial Tenders (not applicable to noteholders who tendered by
book-entry transfer). If less than all of the Old Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount at maturity of Old Notes to be tendered in the box
above entitled "Description of Tendered Old Notes." A reissued certificate
representing the balance of nontendered Old Notes will be sent to such tendering
holder, unless otherwise provided in the appropriate box on this letter,
promptly after the Expiration Date. All of the Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
- 7 -
<PAGE>
5. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the transfer of Old Notes to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter of
Transmittal.
6. Form W-9. Each tendering holder is required to provide the Exchange
Agent with a correct Taxpayer Identification Number ("TIN") on the Department of
the Treasury/Internal Revenue Service Form W-9 attached hereto. If the tendering
holder is exempt from federal income tax withholding because it is an exempt
payee, such tendering holder you must provide its correct TIN in Part I of Form
W-9 and, in accordance with Specific Instruction 6 on page two of Form W-9,
write "EXEMPT" in the block in Part II and sign and date the Form. If a person
is indicated in Special Instruction 1, that person must sign the Form W-9.
Failure to provide the information on the form may subject the tendering holder
to [31%] federal income tax withholding on the payment of any amounts due with
respect to the Old Notes and withholding of an appropriate amount for applicable
state taxes. If the tendering holder is not subject to withholding because it is
a non-resident alien or a foreign entity, such tendering holder must attach a
completed Form W-8 ("Certificate of Foreign Status").
7. Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered Old Notes
will be resolved by the Company in its sole discretion, which determination will
be final and binding. The Company reserves the absolute right to reject any or
all Old Notes not properly tendered or any Old Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities, or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent,
nor any other person shall be under any duty to give notification of defects in
such tenders or shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holder thereof as soon as practicable following the
Expiration Date.
- 8 -
<PAGE>
NOTICE OF GUARANTEED DELIVERY
To Tender
Unregistered 9 3/4% Senior Subordinated Notes Due 2007
of
WINDY HILL PET FOOD COMPANY, INC.
As set forth in the Exchange Offer (as defined in the Prospectus (as
defined below)), this form or one substantially equivalent hereto must be used
to accept the Exchange Offer if certificates for unregistered 9 3/4% Senior
Subordinated Notes Due 2007 (the "Old Notes"), of Windy Hill Pet Food Company,
Inc., a Minnesota corporation (the "Company"), are not immediately available or
time will not permit a holder's Old Notes or other required documents to reach
the Exchange Agent on or prior to the Expiration Date (as defined), or the
procedure for book-entry transfer cannot be completed on a timely basis. This
form may be delivered by facsimile transmission, by registered or certified
mail, by hand, or by overnight delivery service to the Exchange Agent. See "The
Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME ON ___________, 1997 (THE "EXPIRATION DATE"), UNLESS THE
EXCHANGE OFFER IS EXTENDED BY THE COMPANY.
- -------------------------------------------------------------------------------
The Exchange Agent of the Exchange Offer is:
Wilmington Trust Company
By Registered or Certified Mail or
By Hand: by Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
c/o Harris Trust Co. Attn: Jill Rylee
of New York as Agent Corporate Trust Administration
[75] Water Street 1100 North Market Street
New York, NY 10004 Rodney Square North
Wilmington, DE 19890-0001
By Facsimile:
Wilmington Trust Company
(302) 651-1079
Confirmation by telephone and information:
(302) 651-8869
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
Delivery of this Notice to an address or transmission of instructions via
facsimile other than as set forth above will not constitute a valid
delivery.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Windy Hill Pet Food Company, Inc.
a Minnesota corporation (the "Company"), in accordance with the Company's offer,
upon the terms and subject to the conditions set forth in the Prospectus dated ,
1997 (the "Prospectus"), and in the accompanying Letter of Transmittal, receipt
of which is hereby acknowledged, $______________ in aggregate principal amount
of Old Notes pursuant to the guaranteed delivery procedures described in the
Prospectus.
- -------------------------------------------------------------------------------
Name(s) of Registered Holder(s):________________________________________________
(Please Type or Print)
Address:________________________________________________________________________
________________________________________________________________________________
Area Code & Telephone No.:______________________________________________________
Certificate Number(s) for
Old Notes (if available):_______________________________________________________
Total Principal Amount Tendered
and Represented by Certificate(s):$_____________________________________________
Signature of Registered Holder(s):______________________________________________
Dated:__________________________________________________________________________
|_| The Depository Trust Company
(Check if Old Notes will be
tendered by book-entry transfer)
- -------------------------------------------------------------------------------
THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED
- 2 -
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, being a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office in the United
States, hereby guarantees (a) that the above named person(s) "own(s)" the Old
Notes tendered hereby within the meaning of Rule 14e-4 ("Rule 14e-4") under the
Securities Exchange Act of 1934, as amended, (b) that such tender of such Old
Notes complies with Rule 14e-4, and (c) to deliver to the Exchange Agent the
certificates representing the Old Notes tendered hereby or confirmation of
book-entry of such Old Notes into the Exchange Agent's account at The Depository
Trust Company, in proper form for transfer, together with the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, within three
New York Stock Exchange trading days after the Expiration Date.
- -------------------------------------------------------------------------------
Name(s) of Firm:________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Area Code & Telephone No.:______________________________________________________
Authorized Signature:___________________________________________________________
Name:___________________________________________________________________________
Title___________________________________________________________________________
Dated:__________________________________________________________________________
- -------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF
OLD NOTES SHOULD BE SENT ONLY WITH A LETTER OF TRANSMITTAL.
- 3 -
