<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended May 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-6566
THORN APPLE VALLEY, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-1964066
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
26999 CENTRAL PARK BOULEVARD, SUITE 300, SOUTHFIELD, MICHIGAN 48076
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 213-1000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this 10-K or any amendment
to this Form 10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD
BY NON-AFFILIATES OF THE REGISTRANT AS OF AUGUST 16, 1996, COMPUTED BY
REFERENCE TO THE NASDAQ NATIONAL MARKET CLOSING PRICE ON SUCH DATE, WAS
$40,853,509.
The number of outstanding shares of Registrant's common stock as of
August 16, 1996 was 5,790,804.
The following document (or portion thereof) has been incorporated by
reference in this Annual Report on Form 10-K: The definitive Proxy Statement
for the 1996 Annual Meeting of Shareholders to be held on October 28, 1996
(Part III).
================================================================================
As filed with the Securities and Exchange Commission on September 13, 1996.
<PAGE> 2
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
PART I
ITEM 1. BUSINESS
GENERAL
Thorn Apple Valley, Inc. (sometimes referred to hereinafter
collectively with its subsidiaries as the "Company") is a major producer of
processed meat and poultry products and is one of the largest slaughterers of
hogs in the United States. The Company was originally incorporated in 1959 as
a Michigan corporation. It reincorporated in Delaware in 1971 and
reincorporated in Michigan in 1977. The Company is engaged in the manufacture
and sale of bacon, hot dogs and lunch meats, hams, smoked sausages and turkey
products, as well as the slaughtering of hogs and the related sale of fresh
pork products. The Company markets its products under premium and other
proprietary brand labels including "Thorn Apple Valley," "Wilson Certified,"
"Corn King," "Colonial," "Triple M," "Royal Crown," "Olde Virginie" and
"Cavanaugh Lakeview Farms" and under customer-owned private labels. The Company
sells its products principally to wholesalers, supermarkets and other
manufacturers throughout the United States and in selected international
markets.
WILSON ACQUISITION
On May 30, 1995, the Company purchased certain assets from Foodbrands
America, Inc. and its subsidiaries ("Foodbrands"). The Company acquired
substantially all of Foodbrands' Wilson Retail Division ("Wilson") assets used
by Wilson in its business of producing and marketing retail meat products. The
acquired assets included three manufacturing facilities, machinery and
equipment, current assets and certain trademarks and tradenames. The aggregate
purchase price for the assets acquired and the assumption of certain
liabilities was approximately $64.6 million. During the five year period
following the date of the acquisition, Foodbrands has the right to receive from
the Company up to an additional $10 million in accordance with an Earnout
Agreement, in the event of increases in the market price of the Company's
Common Stock. During fiscal 1996, no amount was paid to Foodbrands under the
Earnout Agreement.
The Wilson acquisition was accounted for using the purchase method.
The tradenames and trademarks acquired are being amortized over their estimated
useful lives which was determined to be 40 years. The results of operations of
the Company for the fifty-three week period ending May 31, 1996, reflect a full
year of operations related to the acquired Wilson assets. Subsequent to the
Wilson acquisition, the Company closed two of the acquired plants which did not
fit with the Company's strategic objectives.
PRODUCTS, OPERATIONS AND MARKETING
The Company is engaged in a single segment business with two principal
product categories: processed meat and poultry products and fresh pork. The
following table shows for the fiscal periods indicated the net sales and
approximate pounds of products shipped for the Company's processed meats
operations and fresh pork operations.
<PAGE> 3
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
<TABLE>
<CAPTION>
Fiscal % of Fiscal % of Fiscal % of Fiscal % of Fiscal % of
1992 Sales 1993 Sales 1994 Sales 1995 Sales 1996 Sales
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (in dollars)
- ----------------------
Processed meat products $368.4 50% $386.7 53% $416.3 54% $415.4 56% $623.0 63%
Fresh pork products 365.7 49% 336.6 46% 349.1 45% 321.8 43% $355.0 36%
Products shipped (in lbs.)
- --------------------------
Processed meat products 320.3 - 337.8 - 351.7 - 378.2 - 507.7 -
Fresh pork products 458.8 - 415.6 - 419.6 - 422.2 - 394.6 -
</TABLE>
Due to market conditions, profit margins on sales of processed meat
and poultry products are usually more consistent than profit margins on sales
of fresh meats and by-products. Processed meat and poultry manufacturers
generally receive higher profit margins on premium labeled items. The
Company's emphasis in its sales and marketing programs is to expand sales of
higher margin products and develop new packaging concepts and product
innovations that will appeal to consumers.
The Company experiences some seasonality in its business.
Specifically, the Company's sales of smoked and spiral sliced hams are
typically at their highest levels during the Christmas and Easter holiday
seasons as a result of increased consumer demand. In order to accommodate the
increased holiday sales, the Company typically builds substantial inventories
of hams in anticipation of its future holiday business. Also, the Company's
sales of skinless smoked sausage, hot dogs and bacon products are generally
higher during the summer months.
PROCESSED MEAT PRODUCTS
The processed meat products operations of the Company's business
involve the production and sale of consumer- brand labeled, packaged meat and
poultry products, such as bacon, hot dogs and lunch meats, hams, smoked
sausages and turkey products. Shipments by category of these products for the
five most recent fiscal years were as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
Product Category 1992 1993 1994 1995 1996
- ---------------- ---- ---- ---- ---- ----
(in millions of pounds)
<S> <C> <C> <C> <C> <C>
Bacon . . . . . . . . . . . . . . . . 99.7 100 .6 100.7 111.3 123.1
Hot dogs and lunch meats . . . . . . 75.7 78.1 72.2 71.1 141.9
Hams . . . . . . . . . . . . . . . . 62.7 67.2 74.1 85.4 125.9
Smoked sausages . . . . . . . . . . . 45.1 51.6 61.3 64.3 65.2
Turkey products . . . . . . . . . . . 17.4 23.9 24.3 25.2 27.0
Other . . . . . . . . . . . . . . . . 19.7 16.4 19.1 20.9 24.6
----- ------ ----- ----- -----
Total . . . . . . . . . . . . . . . . 320.3 337.8 351.7 378.2 507.7
</TABLE>
The Company's processed meat products sales division, which has
regional offices, markets the Company's consumer packaged meat and poultry
products using a national sales force which calls on the Company's various
customers. Price lists, product availability, marketing programs and payment
terms,
2
<PAGE> 4
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
however, are determined by the corporate office. The Company's customer base is
generally comprised of wholesalers or large supermarket chains.
The Thorn Apple Valley-Grand Rapids division of the Company ("Grand
Rapids"), which is located in Grand Rapids, Michigan, is engaged in the
production and sale of approximately 50 varieties of packaged, table-ready meat
products such as hot dogs, lunch meats, corned beef and smoked sausage, under
brand names which include "Thorn Apple Valley," "Herrud" and "Colonial" and
other controlled and private label brands.
The Thorn Apple Valley-Deli & Smoked Meats division of the Company
("Smoked Meats"), which is located in Detroit, Michigan, is primarily engaged
in the production and sale of smoked hams, spiral sliced hams, cooked hams,
smoked loins, turkey breasts, deli products and related items. These products
are sold to supermarket chains under various brand names, including "Thorn
Apple Valley," "Herrud," "Royal Crown," "Colonial," "Olde Virginie" and
"Cavanaugh Lakeview Farms" and other controlled and private label brands.
The Thorn Apple Valley-Carolina division of the Company ("Carolina"),
which is located in Holly Ridge, North Carolina, produces bacon and related
by-products. These items are sold principally to supermarket chains under
brand names which include "Thorn Apple Valley," "Herrud," "Holly Ridge Farm,"
"Colonial" and "Olde Virginie" and other controlled and private label brands.
The Thorn Apple Valley-Dixie division of the Company ("Dixie"), which
is located in Forrest City, Arkansas, is primarily engaged in the
production of hot dogs. The products are sold to supermarket chains under
brand names which include "Wilson," "Corn King" and "Colonial" and other
controlled and private label brands.
The Thorn Apple Valley-Ponca City division of the Company ("Ponca
City"), which is located in Ponca City, Oklahoma, is primarily engaged in
the production of bone-in hams, spiral sliced hams, lunch meats and gourmet
meat products. The Ponca City facility is a newly-constructed processing plant
that was put into production in October 1995. Its products are sold to
supermarket chains under brand names which include "Thorn Apple Valley,"
"Wilson," "Corn King," "Olde Virginie," "Cavanaugh Lakeview Farms" and
"Colonial" and other controlled and private label brands.
During fiscal 1996, the Company closed its Thorn Apply
Valley-Concordia division ("Concordia") and its Thorn Apple Valley-Shreveport
division ("Shreveport"). The Concordia division had produced boneless hams and
related smoked meat products and the Shreveport division had produced specialty
products such as natural casing hot dogs. The production of these products was
moved primarily to the Company's Council Bluffs and Smoked Meats divisions.
The Thorn Apple Valley-Council Bluffs division of the Company
("Council Bluffs") is located in Council Bluffs, Iowa, is primarily engaged
in the production of a variety of boneless ham products. The Council Bluffs
facility is operated and managed by a major meat packing company pursuant to a
production agreement. See "Raw Materials" below for further discussion of such
production agreement.
3
<PAGE> 5
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
FRESH PORK PRODUCTS
The Thorn Apple Valley-Frederick division of the Company
("Frederick"), which is located in Detroit, Michigan, is engaged in the
slaughtering and cutting of hogs and the sale of primal cuts of fresh pork
products, including hams, shoulders, loins, ribs, butts and pork bellies, and
of related by-products, such as edible renderings and meat trimmings.
Approximately 3,339,000, 3,146,000 and 2,891,000 hogs were slaughtered by
Frederick in fiscal years 1996, 1995 and 1994, respectively. The Company's
Utah division, which was closed during fiscal 1995, slaughtered approximately
274,000 and 339,000 hogs during fiscal years 1995 and 1994, respectively.
Sales of products by the Frederick division are ordinarily initiated
and completed by telephone between buyers and Frederick sales personnel. Sales
are also made through brokers located throughout the United States and abroad.
Customers for primal cuts and trimmings are generally wholesalers, supermarket
chains, and outside processors. Most edible offal items are cleaned, boxed and
frozen for storage until delivery to the customer. Fat trimmings and some
inedible items are sold to renderers. The Company also further processes some
of its primal cuts into higher margin boneless products.
The supply of hogs, plant operating efficiencies, industry slaughter
capacity, prevailing prices for competing meat products and consumer demand all
affect the profitability of the Company's fresh pork operations. The profit
margins experienced by the Company and the fresh pork industry on sales of
fresh pork and by-products were lower during fiscal 1996 than the margins
experienced by the Company and the industry in recent years. The lower margins
resulted from increased costs to produce fresh pork products caused by
operating inefficiencies at the Company's Frederick facility (which resulted
from an extensive plant renovation project). The Company believes that it has
remedied most of the significant operating inefficiencies at the Frederick
facility.
TRADEMARKS AND LICENSES
The Company owns or has the right to use over 80 various trademarks,
including those described above and certain trademarks purchased from
Foodbrands. The trademarks are valuable to the Company because of the
significant market advantage that name recognition provides in the retail
market served by the Company. Most of the trademarks used by the Company are
registered with the appropriate administrative offices, and the Company intends
to renew each such registration as long as the related trademark is used with
respect to a current line of products.
DISTRIBUTION AND CUSTOMERS
During fiscal 1996 approximately 16% of the Company's products were
marketed in Michigan. This percentage was approximately 19% and 20% for fiscal
1995 and 1994, respectively. The balance of the products were marketed in each
of these years primarily in 46 other states, Washington, D.C., Canada and to
Pacific Rim countries. Sales to customers in foreign countries during fiscal
1996 totaled approximately $14,900,000. This total was approximately
$9,300,000 for fiscal 1995 and approximately $11,200,000 for fiscal 1994.
On a regular basis, the Company sells its fresh pork and manufactured
products to more than 1,000 customers. These customers consist primarily of
wholesalers, supermarket chains and, in the case of the Company's fresh pork
operations, other manufacturers of meat and poultry products. For fiscal 1996,
approximately 33% of the Company's sales were made to its 10 largest customers,
none of whom
4
<PAGE> 6
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
accounted for as much as 10% of the Company's sales. The Company does not have
any significant long-term sales commitments except for the sale of its inedible
rendering materials. See "Business-Long Term Royalty Agreement".
In April 1996, the Company opened a new distribution center in
Edwardsville, Kansas and closed a small distribution center in Clearfield,
Utah. The Company believes that this new distribution center, combined with
the Company's distribution center in Detroit, Michigan, will enable the Company
to provide a higher level of service to the Company's customers.
The Company owns and operates a fleet of refrigerated tractor-trailers
and additional trailers which are used for transporting a portion of its
products to customers and to the Company's manufacturing facilities. The
Company also engages the services of contract carriers, including Coast
Refrigerated Trucking Co., Inc., National Food Express, Inc. and Miller's
Transport Inc., all wholly-owned subsidiaries of the Company. Products are
shipped to supermarket chains, wholesalers and other meat processors. In
addition to its own delivery equipment, the Company utilizes non-affiliated
carriers or has customers make their own arrangements for delivery.
RAW MATERIALS
The Company's primary raw material is live hogs. The purchase of hogs
accounted for approximately 72% of the total purchases of raw materials made by
the Company during fiscal 1996. Purchases of live hogs are through a network
of buying stations, selected brokers and direct from hog producers mainly in
the states of Michigan, Ohio, Indiana and Illinois and in Ontario, Canada.
Pursuant to an agreement with Michigan Livestock Exchange ("MLE"), MLE supplied
approximately 65% of the total hogs purchased by the Company in fiscal 1996
(see "Purchase and Management Agreement" for further discussion of this
agreement). The transportation of hogs to the Frederick facility is primarily
in tractor- trailers owned and operated by independent contractors.
During fiscal 1996, Grand Rapids obtained 24% of all of the pork
required in its operations from Frederick, which constituted approximately 14%
of the cost of the total meat requirements of Grand Rapids. Approximately 68%
of the pork processed during fiscal 1996 at Smoked Meats was obtained from
Frederick, which constituted approximately 49% of its total meat requirements.
Approximately 38% of the pork requirements of Ponca City was obtained from
Frederick, which comprised approximately 22% of its total meat requirements.
The Company's Dixie plant received approximately 13% of its pork requirements
from Frederick, which represented approximately 3% of its total meat
requirements. Approximately 53% of the pork bellies processed by Carolina were
obtained from Frederick.
The Company purchases poultry, beef and other meats required for its
processed meat products and other materials such as seasonings, smoking and
curing agents, sausage casings and packaging materials from a number of
readily-available sources.
In connection with the Wilson acquisition, the Company assumed a
production agreement (the "Production Agreement") with a major meat packing
company (the "Producer"). Pursuant to the Production Agreement, the Producer
constructed a ham production facility and the Company furnished all of the
production equipment to be used in such facility. In addition, the Producer is
obligated to produce at such facility, on an exclusive basis, all boneless ham
products which the Company may require. In return, the Company has agreed to
pay and/or reimburse the Producer for all operating and fixed costs incurred at
the facility and to pay the Producer a fee of approximately $1,375,000 per year
during the term
5
<PAGE> 7
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
of the agreement and any extensions thereof. The Production Agreement has an
initial term (the "Initial Term") expiring on June 6, 2001 and may be renewed
by the Company for up to five successive three year terms (the "Option
Periods"). If the Company fails to renew the Production Agreement for each of
the five Option Periods, or if the Company terminates or breaches the
Production Agreement, the Company will be obligated to pay the $1,375,000
annual fee for the remainder of the Initial Term, if any, and an annual payment
of approximately $408,000 for each remaining year of each of the five Option
Periods. In such event, the Producer must use its best efforts to utilize the
vacated facility to mitigate costs to the Company.
In addition to the Production Agreement, the Company has also assumed
a supply agreement with the Producer. The Company has agreed to purchase and
the Producer has agreed to supply 400,000 pounds of boneless ham muscles on a
weekly basis at a pricing formula equal to or more favorable than prices
obtainable from other competitive suppliers. The term of such supply agreement
runs concurrent with the term of the Production Agreement described above.
COMPETITION
The meat packing and manufacturing industry is highly competitive.
The Company competes with large national, regional and local companies, some of
which have substantially greater sales volume, brand name recognition and
financial resources than the Company. Competition is encountered both in the
procurement of raw materials and in the sale of products. The Company's
products also compete with other meat, fish and poultry products. Competition
exists mainly with respect to product quality, name recognition, price and
service.
EMPLOYEES
The Company has approximately 4,000 employees, approximately 850 of
whom are engaged in slaughtering and cutting hogs, approximately 2,400 of whom
are engaged in the production of the processed meat and poultry products, and
approximately 750 of whom are employed in administration, sales or
transportation.
The majority of the Company's production workers are employed under
four union contracts. These contracts are generally for a period of two to four
years and have various expiration dates through the third quarter of fiscal
2000. The Company has historically maintained good labor relations. The
unexpired portions of the existing agreements contain no significant labor cost
increases.
REGULATION
Like other participants in the meat and poultry processing industry,
the Company is subject to various laws and regulations relating to the
construction and maintenance of facilities, production standards and pollution
control administered by federal, state and other government entities, including
the Environmental Protection Agency and corresponding state agencies such as
the Michigan Department of Natural Resources, the United States Department of
Agriculture, and the Occupational Safety and Health Administration. All of the
Company's existing fresh pork and processed meat and poultry products plants
are federally inspected by the United States Department of Agriculture under
the Federal Meat Inspection Act. The Company believes that it is in compliance
with all health, environmental and other laws and regulations in all material
respects and that continued compliance with existing standards will not have a
material effect on the Company's results of operations or financial condition.
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Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
LONG-TERM ROYALTY AGREEMENT
In December 1988, the Company sold substantially all of the assets of
its wholly owned subsidiary, Wayne By- Products Company, to an unrelated third
party. In connection with the sale of these assets, the Company entered into
an agreement requiring the Company to sell all its inedible rendering materials
to such third party through 1998. The Company believes that the terms and
conditions of the agreement are at least as favorable as are available from
others in the industry.
PURCHASE AND MANAGEMENT AGREEMENT
In November 1994, the Company entered into a 10 year agreement with
MLE. Under the terms of the agreement, MLE manages the Company's hog buying
stations and provides the Company with hogs in accordance with the Company's
quantity and quality specifications at MLE's hog costs plus certain expenses.
In consideration, the Company pays MLE $83,333 per month as a facilities and
use management fee. In accordance with the agreement, the Company has
purchased $2.0 million of preferred stock of MLE that pays a 6% dividend. The
Company has classified the investment in MLE in other long-term assets on its
consolidated balance sheet.
7
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Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
ITEM 2. PROPERTIES
The Company's principal plants, all of which are owned by the Company,
are located as follows:
<TABLE>
<CAPTION>
Approximate
Land Area Floor Space
Location Operation Acres (Sq. Ft.)
-------- --------- ----------- ---------------
<S> <C> <C> <C>
Detroit, Michigan Hog slaughtering and boning 3.2 218,000
operations
Detroit, Michigan Manufacture of smoked and 4.8 150,000
cooked hams, spiral sliced
hams, turkey products,
deli products and related
items
Grand Rapids, Michigan Manufacture of hot dogs, lunch 18.5 135,000
meats and smoked sausages
Holly Ridge, Manufacture of bacon products 179.0 150,000
North Carolina
Walker, Michigan Poultry boning and manufacture 27.0 45,000
of pork sausage and corned
beef products
Concordia, Missouri* Manufacture of boneless hams 17.2 45,000
and other related smoked meat
products
Forrest City, Arkansas Manufacture of hot dogs 11.3 70,000
Shreveport, Louisiana* Manufacture of specialty 3.6 30,400
products such as natural
casing hot dogs
Ponca City, Oklahoma Manufacture of bone-in hams, 42.0 171,000
spiral sliced hams, lunch
meats and gourmet meat
products
</TABLE>
- ----------------------
* The Company closed these facilities during fiscal 1996.
8
<PAGE> 10
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
In addition to the Company's plants, the Company owns and leases
various buildings in Michigan, North Carolina and Kansas. These buildings are
used for maintenance, storage, certain manufacturing, distribution and other
ancillary services, truck garages and as corporate headquarters.
The land on which each of these properties are located (excluding the
leased properties) is owned by the Company. The properties described above were
subject to mortgages collateralizing outstanding indebtedness in the aggregate
amount of approximately $6.5 million as of May 31, 1996. As of the date of
this Annual Report on Form 10-K, substantially all of the Company's assets are
subject to liens. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition."
The Company believes its plants and equipment are in good repair and
suitable for the present operation of its business. The production facilities
of the plants are being utilized on either a one-shift or two-shift basis.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various ordinary or routine litigation
incidental to its business, none of which, in the opinion of management, is
expected to have a material adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED SECURITY MATTERS
As of August 16, 1996 there were 533 shareholders of record of the
Company.
The shares of the Company's Common Stock are traded in the
over-the-counter market and their price is quoted on the Nasdaq National Market
under the symbol "TAVI." The table below sets forth the range of the highest
and the lowest sales prices and the cash dividends paid for the past two
fiscal years.
In October 1995, the Company's Board of Directors discontinued the
payment of dividends on the Company's Common Stock in order to conserve cash
for future operations. Since such date, the Company entered into agreements
with various lenders which restrict the Company's ability to pay dividends.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation--Financial Condition" below. The Company has no current plans of
paying dividends on its Common Stock.
9
<PAGE> 11
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
<TABLE>
<CAPTION>
1996 1995
--------------------------------------- -------------------------------------------
Sales Price Sales Price
------------------ --------------------
Fiscal Dividends Dividends
Quarter High Low Paid High Low Paid
------- ---- --- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
First $23.50 $18.00 $.07 $25.25 $22.00 $.07
Second $19.50 $15.12 - $30.25 $23.00 $.07
Third $17.75 $14.00 - $30.00 $20.00 $.07
Fourth $15.75 $10.25 - $20.00 $16.62 $.07
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended(1)
-----------------------------------------------------------------------------------------
May 29, 1992 May 28, 1993 May 27, 1994 May 26, 1995 May 31, 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $739,733,073 $729,909,723 $772,098,333 $744,542,466 $983,084,427
Net income
(loss) $ 21,054,846 $ 13,862,567 $ 14,083,373 $ 5,254,886 $(21,707,744)
Net income (loss)
per common
share $ 3.75 $ 2.36 $ 2.40 $ .91 $ (3.76)
Total assets $132,599,976 $143,948,845 $185,442,085 $204,296,365 $325,616,203
Total long-term
debt (excluding
current portion) $ 15,068,920 $ 8,844,391 $ 27,936,985 $ 35,464,669 $159,808,923
Cash dividends
per share $ .08 $ .20 $ .27 $ .28 $ .07
</TABLE>
(1) The Company's fiscal year consists of the 52- or 53-week period ending on
the last Friday in May of each year. Fiscal 1996 was a 53-week fiscal
year and all other years presented in this table were 52-week fiscal
years. Earnings per share figures have been restated for all periods
presented to reflect a three-for-two stock split, effected as a 50% stock
dividend paid on December 23, 1992 to all shareholders of record of the
Company as of the close of business on December l, 1992. The increases
in net sales, total assets and long-term debt from fiscal 1995 to fiscal
1996 are primarily the result of the Wilson acquisition. For additional
discussion of the differences in operating results in fiscal 1996 as
compared to fiscal 1995, see "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Results of Operations."
10
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Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Profitability in the hog slaughter industry is affected by the cost
and supply of hogs and pork product selling prices. The slaughtering industry
has generally been characterized by relatively narrow profit margins and a
trend toward larger, higher volume plants in order to reduce per unit costs.
Processed meat and poultry processors generally receive higher profit margins
on premium labeled items than on fresh pork and by-products.
Hog prices represent the principal production cost of pork
slaughterers and are an important element in the cost of certain processed meat
products as well. Hog prices and hog supply are determined by constantly
changing market forces. The ability of hog slaughterers and processors to
maintain satisfactory margins may be affected by market factors over which such
industry participants have limited control, including industry-wide slaughter
levels, competition, the relative price of substitute products, overall
domestic retail demand and the level of exports.
The following discussion analyzes material changes in the financial
information of the Company on a year to year basis.
RESULTS OF OPERATIONS
Fiscal 1996 as Compared to Fiscal 1995
--------------------------------------
(53 week fiscal year compared to 52 week fiscal year)
The Company's net loss for the fiscal year ended May 31, 1996 was
$21.7 million compared with net income of $5.3 million in fiscal 1995. The
Company's fiscal 1995 net income was negatively impacted by a restructuring
charge of approximately $5.0 million; see Note 12 to the Notes to the
Consolidated Financial Statements for additional information on the prior
year's restructuring charge. The decrease in profits is primarily attributable
to lower fresh pork and processed meat profit margins and higher overhead costs
in both the fresh and processed meat divisions. The LIFO (last in, first out)
method of accounting for inventories had the effect after taxes of decreasing
earnings for fiscal 1996 by approximately $8.9 million compared with an
increase to earnings of approximately $1.3 million in fiscal 1995.
Operating profits for the processed meat division were negatively
impacted by increased overhead costs associated with the manufacturing
facilities acquired as part of the Wilson acquisition, along with the start-up
costs associated with the Ponca City facility. The profit margins experienced
by the fresh pork division were lower during fiscal 1996 than the margins
experienced by the Company in recent years due to adverse industry pricing
conditions and inefficiencies at the Company's fresh pork plant. The fresh
pork plant's inefficiencies were due in part to the operational difficulties
encountered as a result of the complexities of the plant's operations and high
rate of speed at which the plant operates. In response, the Company began
assembling a new plant management team in September, 1995. While much work
remains to be done at the plant, the new management team has improved the
plant's revenues and reduced its costs of operations, bringing the plant closer
to realizing the benefits that had been planned.
11
<PAGE> 13
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
Net sales for fiscal 1996 increased by $238.5 million or 32.0%. Sales
volume and average selling prices in the Company's processed meat operations
increased by 34.2% and 11.8%, respectively. The Company's processed meat
operations sales volume increased primarily as a result of the Wilson
acquisition. The Company's fresh pork operation's net sales increased by
10.3%, due to an increase in average selling prices of 18.0%, offset in part by
a decrease in sales tonnage of 6.5%. The increase in average selling prices
was significantly less than the increase of approximately 25.7% in the cost of
live hogs, the Company's primary raw material. The Company's fresh pork sales
volume was down primarily due to the closing, during fiscal 1995, of the
Company's Tri-Miller facility and to an increase in fresh pork being retained
for use in the Company's processed meat operations.
Cost of goods sold (including delivery costs) increased by $263.0
million in fiscal 1996, or 39.3%, as compared to fiscal 1995, principally as a
result of the increase in sales volume related to the Wilson acquisition and as
a result of the increased cost of live hogs referred to above. As a percentage
of net sales, costs of goods sold increased from 89.8% in fiscal 1995 to 94.8%
in fiscal 1996, primarily as a result of overhead costs associated with the
integrated Wilson business and higher overhead costs associated with the
recently completed Frederick facility renovation, additional costs associated
with the Ponca City plant and lower margins in the Company's fresh pork
division. Although the Company believes that the Frederick and Ponca City
plants are now operating at acceptable levels, the Company is unable to predict
at this time if or when industry fresh pork margins will return to more
profitable levels.
Selling expenses increased by $12.2 million in fiscal 1996, or 47.9%,
as compared to fiscal 1995, principally as a result of the additional sales
employees, sales offices, and promotional programs associated with the Wilson
acquisition. As a percentage of net sales, selling expenses increased to 3.8%
in fiscal 1996 from 3.4% in fiscal 1995, mainly due to the factors discussed
above.
General and administrative expenses increased $3.6 million in fiscal
1996, or 15.7%, as compared to fiscal 1995. The increase is primarily due to
additional costs associated with the Wilson acquisition. As a percentage of
net sales, general and administrative expenses decreased to 2.7% in fiscal 1996
from 3.1% in fiscal 1995.
Interest expense increased $6.2 million in fiscal 1996, or 276.0%, as
compared to fiscal 1995. The increase is attributable to the significant
increase in long-term debt associated with the Wilson acquisition. In
addition, borrowings under the Company's revolving credit agreement were
significantly higher than prior year levels due to the Company's operating
losses, and to capital requirements associated with the construction of the
Ponca City plant.
The provision for income taxes decreased by $15.8 million in fiscal
1996, primarily due to the decrease in pre- tax income from operations of $42.8
million to a pre-tax loss of $34.6 million from pre-tax income of $8.2 million
in the comparable prior period, resulting from the factors discussed above.
The Company's effective tax rate decreased to (37.2%) in fiscal 1996 from 35.9%
in fiscal 1995.
Earnings per share of common stock decreased by $4.67 per share to a
net loss of $3.76 per share in fiscal 1996, due to decreased profitability
resulting from the factors discussed above.
12
<PAGE> 14
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
Fiscal 1995 as Compared to Fiscal 1994
--------------------------------------
(52 week fiscal year compared to 52 week fiscal year)
The Company's net income for fiscal 1995 decreased 62.7% to $5.3
million, as compared with net income of $14.1 million in fiscal 1994. The
Company accrued a restructuring charge primarily related to the closing of the
Company's Tri-Miller Packing facility in Hyrum, Utah. The restructuring charge
negatively impacted net income by approximately $5.0 million. (See Note 12 to
the Notes to the Consolidated Financial Statements for additional information
on the restructuring charge). The LIFO (last-in, first-out) method of
accounting for inventories had the effect after taxes of increasing earnings
for fiscal 1995 and fiscal 1994 by $1,282,000 and $538,000, respectively.
The Company's results (exclusive of the restructuring charge) during
1995 were negatively impacted from decreased operating margins in both the
manufactured and fresh pork operations. The manufactured products operations
margins decreased primarily from continued competitive industry pressures. The
fresh pork operations margins decreased as a result of higher operating costs
associated with the renovation and expansion project combined with continued
competitive industry margin pressures. The implementation of a very innovative
and complex processing floor at our main slaughter facility has been
significantly more involved and difficult than the Company anticipated. The
Company has worked through many of the problems and is presently building sales
and production levels to decrease per unit operating costs.
Net sales in fiscal 1995 decreased $27.6 million or 3.6%, as compared
with fiscal 1994 levels. The decrease was due primarily to decreases of 7.2%
and 8.3% in manufactured and fresh pork average selling prices, respectively.
Offsetting the lower average selling prices were increases of 7.5% and .6% in
manufactured and fresh pork tonnage shipped, respectively. The decrease in
selling prices was the result of a decrease in raw material costs combined with
increased competitive pressure on our manufactured products pricing structure.
The increases in the manufactured products unit volume was the result of the
continued emphasis on expanding the distribution of these products.
Cost of goods sold (including delivery costs) decreased $24.7 million
or 3.6%. The decrease was primarily the result of the decrease of
approximately 17.5% in the average cost of live hogs purchased which was
partially offset by additional costs associated with the increase in unit
volume. As a percentage of net sales, cost of goods sold remained at 89.9% for
fiscal 1995, as in fiscal 1994.
Selling expenses increased in fiscal 1995 by $1.2 million or 5.1%, as
a result of increased marketing expenditures to enhance the distribution of the
Company's products to more retail stores, particularly, in the southwestern and
western regions of the United States. As a percentage of net sales, selling
expenses increased to 3.4% in fiscal 1995 from 3.1% in fiscal 1994.
General and administrative expenses increased slightly by $.6 million
or 2.6% primarily due to inflationary cost increases. As a percentage of net
sales, general and administrative expenses increased to 3.1% from 2.9%.
Interest expense increased $.1 million or 5.0%, as a result of an
increase in the Company's average outstanding borrowings. The increase in debt
was primarily the result of increased long-term borrowings resulting from the
increase in capital expenditures.
13
<PAGE> 15
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
FINANCIAL CONDITION
The Company's business is characterized by high unit sales volume and
rapid turnover of inventories and accounts receivable. The demand for seasonal
borrowings usually peaks in early December when ham inventories and accounts
receivable are at their highest levels. These borrowings are generally repaid
in January when the accounts receivable generated by the sales of these hams
are collected.
Concurrent with the Wilson acquisition, on May 30, 1995 the Company
replaced its existing lines of credit with an $80 million unsecured revolving
credit agreement with four financial institutions. The commitments under the
revolving credit agreement expire on May 30, 1998. In early 1996, the Company
obtained a temporary additional $20 million line of credit from the four
participating institutions. At May 31, 1996, $5.3 million of the $100 million
in aggregate credit lines was unused. The lines of credit bore interest at
rates no higher than the prime rate. As part of the loan restructuring
described below, the four financial institutions agreed to replace the
temporary additional line of credit with a new seasonal line of credit expiring
January 31, 1997. The Company uses the lines of credit to fund working capital
needs.
At May 31, 1996, the Company had outstanding balances on three
separate issues of unsecured notes in private placements to institutional
investors. The first outstanding issue, issued on April 1, 1994, was in the
principal amount of $15,000,000 and bore interest at a fixed rate of 6.45% per
annum. The principal on the first issue is due in equal annual installments of
$1,666,666 beginning April 1, 1998, and ending April 1, 2005, with the
remaining principal payable at maturity on April 26, 2006. The second
outstanding issue, issued on October 1, 1994, was in the principal amount of
$8,000,000 and bore interest at a fixed rate of 8.42% per annum. The principal
on the second issue is due at maturity on October 1, 2003. Interest on the
first two issues is payable semi-annually on the first day of April and October
of each year. The third outstanding issue, issued on May 30, 1995, concurrent
with the Wilson acquisition, was in the principal amount of $42,500,000 and
bore interest at a fixed rate of 7.58% per annum. The principal on the third
issue is due in annual installments of $6,071,429 beginning May 15, 1999, and
ending May 15, 2004, with the remaining principal payable at maturity on May
15, 2005. Interest is payable semi-annually on the fifteenth day of May and
November of each year.
On May 31, 1996, the Company was in non-compliance with certain
financial covenants relating to its unsecured revolving credit agreement, its
private placement note agreements and a $5.5 million limited obligation revenue
bond agreement. On September 11, 1996 the Company entered into agreements with
the participating lenders to restructure the Company's revolving credit and note
agreement facilities and the Company's limited obligation revenue bond
agreement. As part of that restructuring, the lenders waived past
non-compliances with financial covenants and covenants were modified on a
going-forward basis. The following is a description of the significant changes
in the terms of the Company's borrowing agreements:
1. Under the revolving credit agreement the $80 million credit
limit has been increased to $90 million and the interest under
such agreement will be payable on a monthly basis at an
interest rate equal to prime plus one quarter percent.
2. The interest rate on the private placement note agreements has
been increased by two percentage points and accrued interest
is now required to be paid on a monthly basis.
14
<PAGE> 16
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
3. A $20 million short-term line of credit has been provided,
which expires on January 31, 1997, and bears interest at an
interest rate equal to prime plus two percent and which is
secured by a first lien on substantially all of the Company's
assets.
4. The Company has granted a second lien on substantially all of
the Company's assets which is shared on a pro-rata basis by
the $90 million revolving credit lenders, the $65.5 million
private placement note lenders and the $5.5 million limited
obligation lender.
5. The Chairman of the Board of Directors of the Company, who is
also a significant shareholder of the Company, has purchased
approximately $3.0 million of the Company's newly-issued
common stock from the Company at a price per share determined
by the average closing price of the Company's common stock for
the 20 trading days preceding the stock purchase. The
proceeds of such stock purchase will be used for working
capital needs.
6. Under the agreements, the Company is obligated to pursue and
obtain by April 30, 1997 a minimum of $15 million in
subordinated debt financing through private placement. If
such financing is obtained, of which there can be no
assurance, the proceeds from the subordinated debt issue will
be used to reduce the outstanding balance of the private
placement notes, revolving credit notes and limited obligation
revenue bonds.
7. The agreements contain financial covenants with respect to
consolidated net worth (as defined therein) and interest
coverage. The Company is also required to achieve a
prescribed level of consolidated earnings available for
interest expense. In addition, among other things, the
agreements limit borrowings, capital expenditures and
investments, and do not allow the payment of cash dividends
or repurchase of the Company's common stock.
The Company's two other revenue bond agreements contain restrictive
covenants that include the maintenance of a minimum level of consolidated net
worth (as defined therein) and of certain financial ratios. At May 31, 1996,
the Company was not in compliance with certain covenants contained in one of
its other revenue bond agreements and the Company has obtained unconditional
waivers of those violations from its lender through July 1, 1997.
Cash used in operations in fiscal 1996 was $26.4 million compared with
cash provided from operations of $21.7 million in fiscal 1995. In addition,
the Company obtained $122.5 million from both the issuance of long-term notes
and from borrowings under the Company's long-term revolving credit agreement.
The Company also obtained a net $8.7 million under its short-term lines of
credit. Cash available at the beginning of the year plus cash acquired from
financing activities was used principally to fund the Wilson acquisition
(assets acquired and the assumption of certain liabilities) of $64.6 million,
to fund capital investments, exclusive of the Wilson acquisition, of $38.6
million, to pay down net long-term debt of $6.2 million, to pay down borrowings
from officers of $1.3 million and to pay dividends of $.4 million.
15
<PAGE> 17
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
With the opening of the Company's Ponca City plant during the second
quarter, and some limited reconfiguring of some other facilities, the Company
closed two of the acquired Wilson operating facilities. Notification of the
plant closures was done in compliance with the federal Worker Adjustment and
Retraining Notification ("WARN") Act. The Company is presently leasing one of
the closed facilities and is actively marketing the other facility for sale.
The Company does not expect the final disposition of these facilities to have a
material adverse effect on its financial condition or results of operations.
The Company anticipates net capital expenditures during fiscal 1997 of
approximately $8.2 million, which will be used primarily to maintain and
upgrade equipment in the ordinary course of business. Management intends to
use funds provided from operations and borrowings under available lines of
credit to finance its current operations.
OTHER
The Company believes that the impact of inflation and changing prices
would not significantly affect the Company's net income reported on a
historical cost basis. This belief is based on the following:
1. Substantially all of the Company's inventories are stated on a
LIFO basis.
2. Any increase in depreciation expense as a result of increased
cost to replace property, plant and equipment is generally
offset by productivity gains and cost savings due to improved
efficiency resulting from technological improvements.
During calendar 1995, the Financial Accounting Standards Board issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" and SFAS No. 123 "Accounting for Stock-
Based Compensation." Both SFAS 121 and 123 are effective for fiscal years
commencing after December 15, 1995. The Company will adopt both SFAS No. 121
and 123 in the fiscal year beginning on June 1, 1996. The impact of these
pronouncements is not expected to be material to the Company's financial
position or results of operations. (See Note 1 to the Notes to the
Consolidated Financial Statements for additional information on the new SFAS
pronouncements).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(Pages immediately following signature page)
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
<PAGE> 18
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
Partially incorporated by reference pursuant to Rule 12b-23 from the
Company's 1996 Proxy Statement furnished in connection with the Company's
Annual Meeting of Shareholders to be held on October 28, 1996.
EXECUTIVE OFFICERS OF REGISTRANT
<TABLE>
<CAPTION>
Year First
Became
Name Age Officer Position
---- --- ------- --------
<S> <C> <C> <C>
Henry S Dorfman 74 1959 Chairman of the Board
Joel Dorfman 45 1978 President and Chief Executive Officer
Louis Glazier 47 1980 Executive Vice President Finance and Administration
Keith Jahnke 42 1987 Executive Vice President Processed Meats
Edward Boan 46 1987 Executive Vice President Pork and Human Resources
</TABLE>
The following is a brief account of the business experience of each of
the above-named persons during the past five years:
Henry S Dorfman, a founder of the Company, has served as Chairman of
the Board since 1959. Mr. Dorfman also served as Chief Executive Officer of
the Company from 1959 to 1994.
Joel Dorfman has served as President of the Company since 1985 and
Chief Executive Officer of the Company since 1995. Mr. Dorfman has also been a
director of the Company since 1978. Mr. Dorfman also served as Chief Operating
Officer of the Company from 1985 to 1994. Joel Dorfman is the son of Henry S
Dorfman.
Louis Glazier has been Executive Vice President Finance and
Administration of the Company since 1988. Mr. Glazier has also been a
director of the Company since 1988.
Keith Jahnke has been Executive Vice President Processed Meats since
May 1996. Mr. Jahnke also served as Executive Vice President Sales and
Marketing for the Company from 1987 to May 1996.
17
<PAGE> 19
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
Edward Boan became Vice President of Human Resources in 1985. In
1987, he also became General Manager and Vice President Fresh Pork. In 1991,
Mr. Boan became Executive Vice President Pork and Human Resources.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference pursuant to Rule 12b-23 from the Company's
1996 Proxy Statement furnished in connection with the Company's Annual Meeting
of Shareholders to be held on October 28, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference pursuant to Rule 12b-23 from the Company's
1996 Proxy Statement furnished in connection with the Company's Annual Meeting
of Shareholders to be held on October 28, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Incorporated by reference pursuant to Rule 12b-23 from the Company's
1996 Proxy Statement furnished in connection with the Company's Annual Meeting
of Shareholders to be held on October 28, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
14(a)(1) Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets at May 31, 1996 and May 26, 1995
Consolidated Statements of Operations for the years ended
May 31, 1996, May 26, 1995 and May 27, 1994
Consolidated Statements of Shareholders' Equity for the years
ended May 31, 1996, May 26, 1995 and May 27, 1994
Consolidated Statements of Cash Flows for the years ended
May 31, 1996, May 26, 1995, and May 27, 1994
Notes to Consolidated Financial Statements
Financial statements of subsidiaries of the Company
have been omitted because the Company is an operating company
and all material subsidiaries are wholly-owned and are not
indebted to any person other than the parent or the
consolidated subsidiaries in an amount which is material to
the total consolidated assets except indebtedness incurred in
18
<PAGE> 20
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
the ordinary course of business which is not overdue and which
matures within one year from the date of its creation.
14(a)(2) Financial Statement Schedule
Report of Independent Accountants on Financial Statement
Schedules (included in report of independent accountants on
financial statements) of Coopers & Lybrand L.L.P.
II - Valuation and qualifying accounts and reserves for
the years ended May 31, 1996, May 26, 1995 and May
27, 1994
Schedules other than those referred to are omitted
for the reason that they are not required or are not
applicable.
14(a)(3) Exhibits
(3)(a) Restated Articles of Incorporation Exhibit (3)(a)
is incorporated herein by reference to Exhibit 3.1
to the Company's Form 5-2 Registration Statement,
Registration No. 33-43287.
(b) Amendment to Restated Articles of Incorporation
Exhibit (3)(b) is incorporated herein by reference
to Exhibit (3)(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 28, 1993.
(c) By-laws, as amended to date Exhibit (3)(c) is
incorporated herein by reference to Exhibit (3)(b)
to the Company's Annual Report on Form 10-K for the
fiscal year ended May 29, 1981.
(10) Material Contracts
(a) Bond Purchase Agreement, dated as of July 1, 1984,
among The Onslow County Industrial Facilities and
Pollution Control Financing Authority, Branch
Banking and Trust Company and the Company.
Exhibit (10)(a) is incorporated herein by
reference to Exhibit (10)(f) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 31, 1991, as amended by its
Form 8 dated October 10, 1991.
(b) Loan Agreement, dated as of July 1, 1984, between
The Onslow County Industrial Facilities and
Pollution Control Financing Authority and the
Company.
Exhibit (10)(b) is incorporated herein by
reference to Exhibit (10)(g) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 31, 1991, as amended by its
Form 8 dated October 10, 1991.
19
<PAGE> 21
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
(c) Promissory Note in the principal amount of
$6,000,000, dated July 1, 1984, from the Company
payable to The Onslow County Industrial Facilities
and Pollution Control Financing Authority.
Exhibit (10)(c) is incorporated herein by
reference to Exhibit (10)(h) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 31, 1991, as amended by its
Form 8 dated October 10, 1991.
(d) Security Agreement, dated as of July 1, 1984,
between Branch Banking and Trust Company and the
Company.
Exhibit (10)(d) is incorporated herein by
reference to Exhibit (10)(i) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 31, 1991, as amended by its
Form 8 dated October 10, 1991.
(e) Guaranty Agreement, dated as of July 1, 1984, from
the Company to Branch Banking and Trust Company.
Exhibit (10)(e) is incorporated herein by
reference to Exhibit (10)(j) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 31, 1991, as amended by its
Form 8 dated October 10, 1991.
(f) Note Agreement dated as of April 1, 1994 by and
between the Company and Allstate Life Insurance
Company relating to $15,000,000 principal amount
6.45% Senior Notes due April 21, 2006.
Exhibit (10)(f) is incorporated herein by
reference to Exhibit (10)(ee) to the
Company's Annual Report on Form 10-K for the
fiscal year ended May 27, 1994.
(g) Loan Agreement dated as of December 1, 1993 by and
between Michigan Strategic Fund and the Company
relating to $5,500,000 Adjustable Rate Demand
Limited Obligation Revenue Bonds.
Exhibit (10)(g) is incorporated herein by
reference to Exhibit (10)(ff) to the
Company's Annual Report on Form 10-K for the
fiscal year ended May 27, 1994.
(h) Reimbursement Agreement dated as of December 1,
1993 by and between the Company and Old Kent Bank
relating to $5,500,000 Adjustable Rate Demand
Limited Obligation Revenue Bonds.
Exhibit (10)(h) is incorporated herein by
reference to Exhibit (10)(gg) to the
Company's Annual Report on Form 10-K for the
fiscal year ended May 27, 1994.
(i) Asset Purchase Agreement, dated as of April 29,
1995, by and among the Company and Doskocil
Companies Incorporated and Wilson Foods
Corporation, Concordia Foods Corporation, Dixie
Foods Company and Shreveport Foods Company.
20
<PAGE> 22
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
Exhibit (10)(i) is incorporated herein by
reference to Exhibit 2.1 to the Company's
Report on Form 8-K dated May 30, 1995, as
amended by its Form 8-K/A dated May 30, 1995.
(j) First Amendment to Asset Purchase Agreement, dated
as of May 26, 1995, by and among the Company,
Foodbrands America, Inc., successor by merger to
Doskocil Companies Incorporated, Wilson Foods
Corporation, Concordia Foods Corporation, Dixie
Foods Company and Shreveport Foods Company.
Exhibit (10)(j) is incorporated herein by
reference to Exhibit 2.2 to the Company's
Report on Form 8-K dated May 30, 1995, as
amended by its Form 8-K/A dated May 30, 1995.
(k) Noncompete Agreement, dated May 30, 1995, by
Foodbrands America, Inc., Wilson Foods Corporation,
Concordia Foods Corporation, Dixie Foods Company
and Shreveport Foods Company in favor of the
Company.
Exhibit (10)(k) is incorporated herein by
reference to Exhibit 10.1 to the Company's
Report on Form 8-K dated May 30, 1995, as
amended by its Form 8-K/A dated May 30, 1995.
(l) Supply Agreement, dated May 30, 1995, by and among
Wilson Foods Corporation and Foodbrands America,
Inc., Dixie Foods Company and the Company.
Exhibit (10)(l) is incorporated herein by
reference to Exhibit 10.2 to the Company's
Report on Form 8-K dated May 30, 1995, as
amended by its Form 8-K/A dated May 30, 1995.
(m) Transition Service Agreement, dated May 30, 1995,
by and between Foodbrands America, Inc. and the
Company.
Exhibit (10)(m) is incorporated herein by
reference to Exhibit 10.3 to the Company's
Report on Form 8-K dated May 30, 1995, as
amended by its Form 8-K/A dated May 30, 1995.
(n) Credit Agreement, dated as of May 30, 1995, among
Cooperatieve Centrale Raiffeisen- Boerenleen Bank
B.A., Old Kent Bank, National City Bank, Harris
Trust and Savings Bank and the Company.
Exhibit 10(n) is incorporated herein by
reference to Exhibit 10(s) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 26, 1995, as amended.
(o) Note Agreement, dated as of October 1, 1994, by and
between the Company and Allstate Life Insurance
Company relating to $8,000,000 principal amount
8.42% Senior Notes due October 1, 2003.
Exhibit 10(o) is incorporated herein by
reference to Exhibit 10(t) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 26, 1994, as amended.
21
<PAGE> 23
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
(p) Note Agreement, dated as of May 15, 1995, among the
Company, Allstate Life Insurance Company, Principal
Mutual Life Insurance Company and Great-West Life &
Annuity Insurance Company.
Exhibit 10(p) is incorporated herein by
reference to Exhibit 10(u) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 26, 1994, as amended.
(q) Marketing and Management Agreement dated November
2, 1994 by and among Michigan Livestock Exchange,
Indiana Livestock Exchange and the Company.
Exhibit 10(q) is incorporated herein by
reference to Exhibit 10(v) to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 26, 1994, as amended.
(r) Amended and Restated Credit Agreement, dated as of
September 11, 1996, among the Company, the lenders
party thereto, and Cooperatieve Centrale
Raiffeisen-Boerenleen Bank B.A., New York Branch,
as agent for the lenders.
(s) Senior Secured Seasonal Line of Credit Agreement,
dated as of September 11, 1996, among the Company,
the lenders party thereto, and Cooperatieve
Centrale Raiffeisen-Boerenleen Bank B.A., New York
Branch, as agent for the lenders.
(t) Amendment Agreement, dated as of September 11,
1996, between the Company and Allstate Life
Insurance Company relating to $15,000,000 principal
amount note due April 21, 2006.
(u) Amendment Agreement, dated as of September 11,
1996, between the Company and Allstate Life
Insurance Company relating to $8,000,000 principal
amount note due October 1, 2003.
22
<PAGE> 24
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
(v) Amendment Agreement, dated as of September 11,
1996, among the Company, Allstate Life Insurance
Company, Principal Mutual Life Insurance Company
and Great-West Life & Annuity Insurance Company.
(w) Amendment to Reimbursement Agreement, dated as of
September 11, 1996, between the Company and Old
Kent Bank.
(x) Intercreditor Agreement, dated as of September 11,
1996 among Cooperatieve Centrale
Raiffeisen-Boerenleen Bank B.A., New York Branch,
as Credit Agent, Seasonal Agent and Collateral
Agent, and the lenders party thereto, as
acknowledged and agreed to by the Company and its
subsidiaries.
(y) Security Agreement, dated as of September 11, 1996,
among the Company, the subsidiaries of the Company
party thereto, and Cooperatieve Centrale
Raiffeisen-Boerenleen Bank B.A., New York Branch,
as Collateral Agent and Credit Agent.
(21) Subsidiaries of the registrant.
(23) Consent of Coopers & Lybrand LLP.
(27) Financial Data Schedule.
14(b) The Company did not file any reports on Form 8-K during
the last quarter of the fiscal year covered by this
Report.
14(d)(5) Schedules (Pages following signature page)
23
<PAGE> 25
Report of Independent Accountants
To the Board of Directors and Shareholders
Thorn Apple Valley, Inc.
Southfield, Michigan
We have audited the consolidated financial statements and the financial
statement schedule of Thorn Apple Valley, Inc. and Subsidiaries listed in item
14(a) of this Form 10-K. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule 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 consolidated financial position of Thorn Apple
Valley, Inc. and Subsidiaries as of May 31, 1996 and May 26, 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Detroit, Michigan
August 26, 1996, except as to the information presented
as a subsequent event in Note 6, for which the date is
September 12, 1996
F-1
<PAGE> 26
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, May 26,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,809,559 $ 4,730,637
Short-term investments 627,560 531,064
Accounts receivable, net of
allowance for doubtful accounts
(1996, $621,800; 1995, $789,100) 62,371,990 40,083,861
Inventories (Note 2) 56,263,210 44,800,792
Refundable income taxes 11,490,330 1,366,231
Deferred income taxes (Note 7) 2,199,000 2,499,000
Prepaid expenses and other current assets 5,732,537 4,073,817
------------ ------------
Total current assets 144,494,186 98,085,402
------------ ------------
Property, plant and equipment:
Land 1,519,976 1,139,439
Buildings and improvements 61,640,117 37,694,988
Machinery and equipment 155,911,312 117,712,476
Transportation equipment 7,498,075 7,529,516
Property under capital leases 10,301,819 7,428,634
Construction in progress 4,475,987 22,206,233
------------ ------------
241,347,286 193,711,286
Less accumulated depreciation 98,938,159 95,643,621
------------ ------------
142,409,127 98,067,665
------------ ------------
Other assets:
Intangible assets, net of accumulated amortization of $839,300 32,732,700
Other 5,980,190 8,143,298
------------ ------------
Total other assets 38,712,890 8,143,298
------------ ------------
$325,616,203 $204,296,365
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,970,024 $ 32,474,150
Notes payable, banks (Note 3) 14,700,000 5,960,000
Notes payable, officer (Note 4) 121,366 1,415,241
Accrued liabilities (Note 5) 20,840,961 23,378,430
Current portion of long-term debt (Note 6) 2,818,444 3,100,310
------------ ------------
Total current liabilities 85,450,795 66,328,131
------------ ------------
Long-term debt (Note 6) 159,808,923 35,464,669
------------ ------------
Deferred income taxes (Note 7) 3,631,000 3,908,000
------------ ------------
Shareholders' equity:
Preferred stock: $1 par value; authorized 200,000 shares; issued none
Common nonvoting stock: $.10 par value; authorized 20,000,000 shares; issued none
Common voting stock: $.10 par value; authorized 20,000,000 shares; issued 5,786,129
shares in 1996 and 5,770,647 shares in 1995 578,613 577,065
Capital in excess of par value 7,011,361 6,771,071
Retained earnings 69,135,511 91,247,429
------------ ------------
76,725,485 98,595,565
------------ ------------
$325,616,203 $204,296,365
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 27
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------------------------
May 31, May 26, May 27,
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Net sales $ 983,084,427 $744,542,466 $772,098,333
------------- ------------ ------------
Operating costs and expenses:
Cost of goods sold, including delivery costs 932,130,906 669,068,064 693,784,481
Selling 37,533,477 25,377,029 24,155,852
General and administrative 26,515,629 22,911,735 22,339,197
Depreciation and amortization 15,378,777 9,830,100 8,262,515
Restructuring charge (Note 12) 7,857,319
------------- ------------ ------------
1,011,558,789 735,044,247 748,542,045
------------- ------------ ------------
Income (loss) from operations (28,474,362) 9,498,219 23,556,288
------------- ------------ ------------
Other expense (income):
Interest, net 8,491,769 2,258,674 2,151,359
Other, net (2,408,387) (960,341) (895,444)
------------- ------------ ------------
6,083,382 1,298,333 1,255,915
------------- ------------ ------------
Income (loss) before income taxes (34,557,744) 8,199,886 22,300,373
Provision (benefit) for income taxes (Note 7) (12,850,000) 2,945,000 8,217,000
------------- ------------ ------------
Net income (loss) ($21,707,744) $5,254,886 $14,083,373
============= ============ ============
Earnings (loss) per share of common stock ($3.76) $0.91 $2.40
============= ============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 28
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Capital in
--------------------- Excess of Retained
Shares Amount Par Value Earnings
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, May 28, 1993 5,920,106 $592,011 $7,405,250 $78,311,895
Net income 14,083,373
Cash dividends, $.27 per share (1,584,003)
Exercise of stock options including
related tax benefits (Note 8) 9,500 950 133,039
Purchase and retirement of common stock (126,533) (12,654) (2,759,791)
--------- -------- ---------- -----------
Balance, May 27, 1994 5,803,073 580,307 4,778,498 90,811,265
Net income 5,254,886
Cash dividends, $.28 per share (1,610,575)
Exercise of stock options including related tax
benefits and other stock plans (Note 8) 104,645 10,465 2,161,423
Purchase and retirement of common stock (137,071) (13,707) (168,850) (3,208,147)
--------- -------- ---------- -----------
Balance, May 26, 1995 5,770,647 577,065 6,771,071 91,247,429
Net loss (21,707,744)
Cash dividends, $.07 per share (404,174)
Shares issued under employee stock purchase
plan 15,482 1,548 240,290
--------- -------- ---------- -----------
Balance, May 31, 1996 5,786,129 $578,613 $7,011,361 $69,135,511
========= ======== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 29
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Years Ended
-----------------------------------------------------
May 31, May 26, May 27,
1996 1995 1994
------------ ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(21,707,744) $5,254,886 $14,083,373
------------ ---------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 14,539,477 9,830,100 8,262,515
Restructuring charge 6,915,646
Amortization of intangibles 839,300
Deferred income taxes 23,000 353,000 656,000
(Gain) loss on disposition of property, plant and equipment 13,568 (15,451) (813)
Provision for losses on accounts receivable 133,951 57,300 (100,500)
Gain on sale of long-term investments (627,802)
(INCREASE) DECREASE IN ASSETS:
Accounts receivable (12,724,100) 4,049,338 (6,800,467)
Inventories (2,949,079) (1,020,608) (5,610,119)
Refundable income taxes (10,124,099) (1,366,231) 528,574
Prepaid expenses and other assets (2,404,887) (2,425,749) (362,919)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable 14,495,874 (1,496,234) 7,289,671
Accrued liabilities (5,957,251) 2,094,826 3,452,205
Income taxes payable (526,722) 526,722
------------ ---------- -----------
Total adjustments (4,742,048) 16,449,215 7,840,869
------------ ---------- -----------
Net cash provided by (used in) operating activities (26,449,792) 21,704,101 21,924,242
------------ ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition of Wilson, net of cash acquired (Note 11) (64,630,873)
Proceeds from sale of long-term investments 4,484,005
Proceeds from sale of property, plant and equipment 2,712,129 412,926 2,311,269
Capital expenditures (38,604,784) (43,367,769) (30,197,956)
------------ ---------- -----------
Net cash used in investing activities (96,039,523) (42,954,843) (27,886,687)
------------ ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 122,500,000 8,000,000 20,500,000
Principal payments on long-term debt (6,215,552) (2,008,117) (1,940,256)
Net borrowings under lines of credit 8,740,000 5,960,000
Net borrowings from (payments to) officers (1,293,875) (582,788) 387,406
Dividends paid (404,174) (1,610,575) (1,584,003)
Proceeds from employee stock purchase plan 241,838
Purchase and retirement of common stock (3,390,704) (2,772,445)
Proceeds from stock options exercised including related
tax benefits 2,171,888 133,989
------------ ---------- -----------
Net cash provided by financing activities 123,568,237 8,539,704 14,724,691
------------ ---------- -----------
Net increase (decrease) in cash 1,078,922 (12,711,038) 8,762,246
Cash and cash equivalents, beginning of year 4,730,637 17,441,675 8,679,429
------------ ---------- -----------
Cash and cash equivalents, end of year $ 5,809,559 $4,730,637 $17,441,675
============ ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of amounts capitalized $ 10,877,142 $4,003,000 $ 2,336,000
============ ========== ===========
Income taxes paid (refunded), net $ (2,858,701) $3,991,000 $ 6,207,000
============ ========== ===========
Noncash investing activities:
Capital lease obligations $ 256,852 $2,935,020 $ 895,578
============ ========== ===========
ACQUISITION:
The Company purchased substantially all of the assets of Wilson (Note 11)
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ 75,571,743
Cash paid (64,630,873)
------------
Liabilities assumed $ 10,940,870
============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 30
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
1. Summary of significant accounting policies:
Nature of operations:
The Company is engaged in the manufacture and sale of bacon,
hot dogs, lunch meats, hams, smoked sausage and
turkey products, as well as the slaughtering of hogs
and the sale of related fresh meat products. The
Company sells its products principally to
wholesalers, supermarkets and other manufacturers
throughout the United States and in selected
international markets.
Principles of consolidation:
The consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant
intercompany accounts and transactions have been
eliminated.
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 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 period. Actual results could differ from
those estimates.
Cash and cash equivalents:
Cash and cash equivalents include cash on hand, demand
deposits and short-term investments with a maturity
of three months or less at the date of acquisition.
Short-term investments:
Short-term investments are those with a maturity in excess of
three months at the date of acquisition and are
valued at cost, which approximates market.
Inventories:
Substantially all inventories are stated at the lower of
last-in, first-out ("LIFO") cost or market.
Property, plant and equipment:
Property, plant and equipment are stated at cost. Upon
retirement or disposal of property, plant and
equipment, the cost and accumulated depreciation are
removed from the accounts, and any gain or loss is
included in other income. Depreciation is computed
for financial reporting purposes generally on the
straight-line basis over the estimated useful lives
of the assets. The cost of repairs and maintenance
is charged against results of operations as incurred.
Inactive assets held for sale are recorded at the
lower of net book value (cost less accumulated
depreciation) or net realizable value. The Company
capitalized interest incurred on debt during the
course of major projects which approximated
$1,092,000 and $1,048,000 during fiscal 1996 and
1995, respectively.
F-6
<PAGE> 31
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
1. Summary of significant accounting policies (continued):
Intangible assets:
The Company's intangible assets consist of trademarks and
tradenames and are amortized on a straight- line
basis over their estimated useful lives determined,
to be 40 years. Intangible assets are periodically
reviewed for impairment based on an assessment of
future operations.
Impairment of long-lived assets:
In March 1995, the Financial Accounting Standards Board issued
SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," which requires that carrying values of
long-lived assets and certain identifiable intangible
assets be evaluated based on the future (undiscounted
and without interest charges) cash flows expected to
be realized from the use of the asset and its
eventual disposition. If the sum of the expected
future cash flows from an asset is less than the
carrying value, an impairment loss must be
recognized. SFAS No. 121 is effective for fiscal
years commencing after December 15, 1995. The
Company will adopt SFAS No. 121 in the fiscal year
beginning on June 1, 1996, the impact is not expected
to be material to the Company's financial position or
results of operations.
Commodity options and forward contracts:
The Company has a variety of commodity option and forward
contracts. Realized gains and losses are recognized
currently in income and expenses. The Company
utilizes price risk management activities and hedging
procedures in an effort to minimize the potential
adverse effects from raw material market price level
changes. Risk management and hedging activities are
often utilized with forward sales contracting, with
forward raw material procurement and with margin
management. Hedging approaches are typically used to
protect margins on forward sales obligations and for
freezer inventories. The majority of the Company's
finished product sales are not hedged as they are
manufactured from raw material procured from current
production.
Earnings per share of common stock:
Earnings per share of common stock are based on the weighted
average number of common shares outstanding during
each year. The weighted average number of shares for
1996, 1995 and 1994 were 5,778,559, 5,754,726 and
5,877,789, respectively.
The potential dilution from shares issuable under employee
stock option plans is excluded from the computation
of the weighted average number of common shares
outstanding since it is not material.
Accounting for stock-based compensation:
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock- Based
Compensation." The Statement requires the Company
either to recognize an expense for stock compensation
in the financial statements using a fair-value-based
method or to continue to measure compensation expense
using the intrinsic value method prescribed in
Accounting Principles Board Opinion("APBO") No. 25,
"Accounting for Stock Issued to Employees," with
additional pro forma footnote disclosure regarding
the impact on net earnings and net earnings per share
as if the fair-value-based method of accounting had
been applied. SFAS No. 123 is effective for fiscal
years commencing after December 15, 1995. The
Company will adopt SFAS No. 123 in the fiscal year
beginning June 1, 1996.
F-7
<PAGE> 32
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
1. Summary of significant accounting policies (continued):
Fiscal year:
The Company's fiscal year is reported on a 52/53-week period
which ends on the last Friday in May. Fiscal year
ended May 31, 1996 is a 53-week period. Fiscal years
ended May 26, 1995 and May 27, 1994 are for 52-week
periods.
Reclassifications:
Certain amounts from prior years have been reclassified to
conform with the current year presentations.
2. Inventories:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
At lower of cost or market:
Supplies $ 9,559,537 $ 6,824,152
Raw materials 23,518,145 11,389,564
Work in process 3,588,512 4,914,163
Finished goods 36,281,016 24,622,913
----------- -----------
72,947,210 47,750,792
Less LIFO reserve 16,684,000 2,950,000
----------- ------------
$56,263,210 $44,800,792
=========== ===========
</TABLE>
The LIFO method of accounting for inventories had the effect
(after income taxes) of decreasing net income by approximately
$8,927,000 ($1.54 per share) for the year ended May 31, 1996 and
increasing net income by approximately $1,282,000 ($.22 per
share) and $538,000 ($.09 per share) for the years ended May 26,
1995 and May 27, 1994, respectively.
3. Lines of credit and short-term borrowings:
At May 31, 1996, the Company had $20 million in temporary unsecured
lines of credit with four participating banks, of which
$5,300,000 was unused. The temporary, short-term lines, with
interest at the prime rate of 8.25% at May 31, 1996, were used
to fund working capital needs and were set to expire on May 31,
1996, however, the financial institutions have agreed as part of
the debt amendments to replace these short-term lines with a new
seasonal line of credit expiring January 31, 1997 (see Note 6
for further discussion of long-term debt amendments).
4. Notes payable, officer, and other related party transactions:
Notes payable, officer, are due on demand, with interest payable
monthly at approximately 1 percent below the prime rate.
Interest expense on the notes payable, officer, amounted to
approximately $76,600, $226,400 and $150,600 for the years ended
1996, 1995 and 1994, respectively.
Accounts receivable include a noninterest-bearing note receivable
from a trust that has purchased life insurance policies for
certain officers and other employees. The balance of the note
was approximately $804,000 and $1,700,000 at May 31, 1996 and
May 26, 1995, respectively.
The Company leased its previous sales division office building from
entities controlled by certain officers/shareholders of the
Company. During 1996, 1995 and 1994, the Company paid rent of
approximately $165,500, $174,600 and $174,600, respectively, for
the use of this location.
F-8
<PAGE> 33
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
4. Notes payable, officer, and other related party transactions
(continued):
The Company maintains inventory at a freezer warehouse that is
75 percent owned by an officer and director of the Company.
Storage and handling expenses paid to this freezer warehouse
amounted to approximately $2,076,000, $2,311,000 and $1,071,000
for the years ended 1996, 1995 and 1994, respectively.
Additionally, the Company rents a portion of the freezer
warehouse for use as a distribution center. Currently, the
Company is operating under a one year lease option that expires
in January 1997. Freezer warehouse rent expense amounted to
$882,000 for the years ended 1996, 1995 and 1994.
5. Accrued liabilities:
Included within accrued liabilities are employee benefits representing
self insured programs of $4,588,849 and $3,842,068
at May 31, 1996 and May 26, 1995, respectively.
6. Long-term debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C> <C>
A. Revolving credit agreement $80,000,000
B. Private placements notes 65,500,000 $23,000,000
C. Revenue bonds 10,629,449 9,785,733
D. Obligations under capital leases 5,143,814 4,096,304
E. Other note 1,354,104 1,682,942
------------ -----------
162,627,367 38,564,979
Less current portion 2,818,444 3,100,310
------------ -----------
$159,808,923 $35,464,669
============ ===========
</TABLE>
A. The unsecured revolving credit agreement is with four financial
institutions at variable interest rates no higher than the prime
rate or its equivalent. The commitments under the revolving credit
agreement expire on May 30, 1998, but may be extended annually for
successive one-year periods with the consent of the financial
institutions. The commitment fee on the unused portion of the
facility is .25 percent per annum. The weighted average interest
rate at May 31, 1996 was 6.60 percent.
B. At May 31, 1996, the outstanding balance consisted of three separate
issues of unsecured notes in private placements to institutional
investors. The first outstanding issue, issued on April 1, 1994,
was in the principal amount of $15,000,000 and bore interest at a
fixed rate of 6.45 percent per annum. The principal on the first
issue is due in equal annual installments of $1,666,666 beginning
April 1, 1998, and ending April 1, 2005, with the remaining
principal payable at maturity on April 26, 2006. The second
outstanding issue, issued on October 1, 1994, was in the principal
amount of $8,000,000 and bore interest at a fixed rate of 8.42
percent per annum. The principal on the second issue is due at
maturity on October 1, 2003. Interest on the first two issues is
payable semi-annually on the first day of April and October of
each year. The third outstanding issue, issued on May 30, 1995,
was in the principal amount of $42,500,000, and bore interest at a
fixed rate of 7.58 percent per annum. The principal on the third
issue is due in annual installments of $6,071,429 beginning May 15,
1999, and ending May 15, 2004, with the remaining principal payable
at maturity on May 15, 2005. Interest is payable semi-annually on
the fifteenth day of May and November of each year.
F-9
<PAGE> 34
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
6. Long-term debt (continued):
C. At May 31, 1996, the outstanding principal balance of the revenue
bonds consisted of three separate bond issues. The first
outstanding issue, referred to as the industrial revenue bond,
is at $2,550,000 with varying quarterly principal payments due
July 1, 1996 through January 1, 2000, and quarterly interest at
81.1042 percent of the current prime rate (at May 31, 1996 the
interest rate was 6.69 percent).
The second outstanding issue, which is referred to as the limited
obligation revenue bond, is at $5,500,000 with monthly interest
payments at a variable rate and the principal due at maturity
on December 1, 2005. The variable rate of interest paid on the
second issue during the month of May 1996, averaged 4.21
percent.
The third outstanding issue referred to as the economic
development revenue bond, is at $2,579,449 with varying monthly
principal and interest at 6 percent per annum through maturity
on June 30, 2000.
The first and third issues are collateralized by property, plant
and equipment, while the second bond issue is collateralized by
a $5,600,000 letter of credit.
D. The obligations under capital leases are at fixed interest rates
ranging from 5.5 percent to 11 percent and are collateralized
by property, plant and equipment.
Property under capital leases consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Machinery and equipment $10,301,819 $7,428,634
Less accumulated amortization 3,408,120 2,752,543
----------- ----------
$ 6,893,699 $4,676,091
=========== ==========
</TABLE>
Future minimum rentals for property under capital leases are as follows:
<TABLE>
<CAPTION>
Year Ending Amount
----------- ----------
<S> <C>
1997 $1,768,780
1998 1,684,065
1999 1,601,654
2000 647,424
2001 161,811
----------
Total minimum lease obligation 5,863,734
Less interest 719,920
----------
Present value of total minimum lease obligation $5,143,814
==========
</TABLE>
E. The note is secured by a second lien on certain property, plant
and equipment. Principal and interest are due quarterly
through the date of maturity on September 13, 2000. The
interest is at a fixed rate of 7 percent per annum.
The aggregate maturities of long-term debt (excluding obligations under capital
leases) during the five years subsequent to May 31, 1996 are: 1997,
$1,390,889, 1998, $3,222,871, 1999, $83,331,020, 2000, $3,242,973, and 2001,
$1,962,465.
F-10
<PAGE> 35
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
6. Long-term debt (continued):
The fair value of the Company's long-term debt approximates the carrying
amount based on the current rates offered to the Company on similar debt.
Subsequent event-long-term debt amendments:
On May 31, 1996, the Company was in non-compliance with certain financial
covenants relating to its unsecured revolving credit agreement, its
private placement note agreements and a $5.5 million limited obligation
revenue bond agreement. On September 11, 1996 the Company entered into
agreements with the participating lenders to restructure the Company's
revolving credit and note agreement facilities and the Company's limited
obligation revenue bond agreement. As part of that restructuring, the
lenders waived past non-compliances with financial covenants and covenants
were modified on a going-forward basis. The following is a description of
the significant changes in the terms of the Company's borrowing
agreements:
1. Under the revolving credit agreement the $80 million credit
limit has been increased to $90 million and the interest
under such agreement will be payable on a monthly basis at
an interest rate equal to prime plus one quarter percent.
2. The interest rate on the private placement note agreements
has been increased by two percentage points and accrued
interest is now required to be paid on a monthly basis.
3. A $20 million short-term line of credit has been provided,
which expires on January 31, 1997, and bears interest at an
interest rate equal to prime plus two percent and which is
secured by a first lien on substantially all of the
Company's assets.
4. The Company has granted a second lien on substantially all
of the Company's assets which is shared on a pro-rata basis
by the $90 million revolving credit lenders, the $65.5
million private placement note lenders and the $5.5 million
limited obligation lender.
5. The Chairman of the Board of Directors of the Company, who
is also a significant shareholder of the Company, has
purchased approximately $3.0 million of the Company's
newly-issued common stock from the Company at a price per
share determined by the average closing price of the
Company's common stock for the 20 trading days preceding the
stock purchase. The proceeds of such stock purchase will be
used for working capital needs.
6. Under the agreements, the Company is obligated to pursue and
obtain by April 30, 1997 a minimum of $15 million in
subordinated debt financing through private placement. If
such financing is obtained, of which there can be no
assurance, the proceeds from the subordinated debt issue
will be used to reduce the outstanding balance of the
private placement notes, revolving credit notes and limited
obligation revenue bonds.
7. The agreements contain financial covenants with respect to
consolidated net worth (as defined therein) and interest
coverage. The Company is also required to achieve a
prescribed level of consolidated earnings available for
interest expense. In addition, among other things, the
agreements limit borrowings, capital expenditures and
investments, and do not allow the payment of cash dividends
or repurchase of the Company's common stock.
The Company's two other revenue bond agreements contain restrictive
covenants that include the maintenance of a minimum level of consolidated
net worth (as defined therein) and of certain financial ratios. At May
31, 1996, the Company was not in compliance with certain covenants
contained in one of its other revenue bond agreements and the Company has
obtained unconditional waivers of those violations from its lender through
July 1, 1997.
F-11
<PAGE> 36
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
7. Income taxes:
The Company's provision (benefit) for income taxes was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ---------- ----------
<S> <C> <C> <C>
Currently payable (benefit):
Federal $(9,939,000) $2,259,000 $6,874,000
State and local 333,000 638,000
------------ ---------- ----------
Total currently payable (benefit) (9,939,000) 2,592,000 7,512,000
Deferred:
Federal and state (2,911,000) 353,000 705,000
------------ ---------- ----------
Total provision $(12,850,000) $2,945,000 $8,217,000
============ ========== ==========
</TABLE>
Deferred income taxes reflect the estimated future tax effect of
temporary differences between the amounts of assets and
liabilities for financial reporting purposes and such amounts as
measured by tax laws and regulations. The components of deferred
income tax assets and liabilities as of May 31, 1996 and May 26, 1995
are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------- ---------------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Depreciation $5,799,195 $3,449,100
Employee benefit plans $1,720,818 $1,440,776
Bad debt expense 234,635 297,373
Capital leases 214,970 183,794
Restructuring charge 916,901
Estimated losses on assets
held for disposal 375,000
Amortization of intangibles 524,563
Credit carryforward 3,169,895
All other 39,512 433,132 33,062 464,218
---------- ----------- ---------- ----------
Total deferred taxes $5,539,860 $ 6,971,860 $2,688,112 $4,097,112
========== =========== ========== ==========
</TABLE>
A reconciliation of the provision for income taxes is shown below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ------------------- --------------------
Amount % Amount % Amount %
------------ ----- ---------- -- ---------- --
<S> <C> <C> <C> <C> <C> <C>
Federal income tax (benefit)
at statutory rate $(12,095,000) (35) $2,870,000 35 $7,805,000 35
State and local income taxes, net
of federal income tax benefit 232,000 3 445,000 2
Lower tax rate attributable to
foreign sales corporation (110,000) (138,000) (2) (202,000) (1)
Utilization of tax credits (873,000) (2.5)
Other 228,000 (19,000) 169,000 1
------------ ----- ---------- -- ---------- --
$(12,850,000) (37.5) $2,945,000 36 $8,217,000 37
============ ===== ========== == ========== ==
</TABLE>
The credit carryforward of $3,169,895, for which the tax benefit has been
recognized, consists of general business credits of $1,552,729, which
expire between the years 2008 and 2011, and alternative minimum tax
credit carryforwards of $1,617,166, which can be carried forward
indefinitely.
F-12
<PAGE> 37
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
8. Stock option plans:
The Company's 1990 Employee Stock Option Plan authorizes the Company's
Stock Option Committee to grant options for up to 787,500 shares of the
Company's common stock to present or prospective employees. At May 31,
1996, 505,300 options were granted but not exercised and 213,000 shares
remain to be granted under the 1990 Plan. At May 31, 1996, there were
141,000 options granted but not exercised under the 1982 Employee Stock
Option Plan. The Company's Stock Option Committee may designate any
requirements regarding option price, waiting period or an exercise date
for options granted under the Plans, except that incentive stock options
may not be exercised at less than the fair market value of the stock on
the date of grant, and no option may remain outstanding for more than 10
years.
The following is a summary of options granted under the Plans:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- ---------------------------- -------------------------
Option Option Option
Shares Price Shares Price Shares Price
------ --------------- -------- --------------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning 484,550 $ 2.56 - $26.00 465,000 $ 2.56 - $23.00 315,000 $ 2.56 - $23.00
Exercised (100,200) $ 2.56 - $26.00 (9,500) $ 2.56 - $17.00
Canceled or terminated (33,750) $17.00 - $26.00 (50,750) $17.00 - $26.00
Granted 195,500 $17.00 170,500 $26.00 159,500 $17.00
------- ------- -------
Balance, ending 646,300 $ 2.56 - $26.00 484,550 $ 2.56 - $26.00 465,000 $ 2.56 - $23.00
======= ======= =======
</TABLE>
At May 31, 1996, there were 11 participants in the 1982 Employee Stock
Option Plan and 30 participants in the 1990 Employee Stock Option Plan.
9. Pension plans:
The Company and its subsidiaries have several defined benefit pension plans
covering substantially all of their nonsalaried employees. Benefits
under these plans are based on the employee's years of service, and the
benefit obligations are based upon the employee's expected date of
retirement. Plan assets are invested in corporate and government bonds,
common stocks and a bank money market fund. The Company's general
funding policy is to contribute amounts deductible for federal income tax
purposes.
Net periodic pension cost for 1996, 1995 and 1994 includes the following
benefit and cost components:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Service cost $ 346,101 $332,840 $320,182
Interest cost 711,024 645,329 597,299
Actual return on plan assets (1,474,259) (885,195) (282,059)
Net amortization and deferral 738,998 250,402 (328,786)
--------- -------- --------
Net periodic pension cost $ 321,864 $343,376 $306,636
========= ======== ========
</TABLE>
As of May 31, 1996 and May 26, 1995, the funded status of the defined
benefit plans, using the actuarial present value of the benefit
obligation, is as follows:
F-13
<PAGE> 38
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
9. Pension plans (continued):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Vested benefit obligation $9,209,690 $8,338,358
Projected and accumulated
benefit obligation $9,750,990 $8,863,460
Plan assets at fair value 10,367,441 8,627,451
---------- ----------
Projected benefit obligation
(less than) greater than assets (616,451) 236,009
Unrecognized net gain (loss) 186,085 (365,170)
Unrecognized net transition asset 204,515 232,326
Unrecognized prior service cost (46,993) (51,592)
---------- ----------
(Prepaid) accrued pension cost $ (272,844) $ 51,573
========== ==========
</TABLE>
Actuarial assumptions used for 1996, 1995 and 1994 are:
Discount rate 8%
Expected rate of return on plan assets 8%
The Company also makes contributions to union-sponsored, multi-employer
plans in accordance with negotiated labor contracts. Information on the
actuarial present value of accumulated plan benefits and net assets
available for benefits relating to these plans is not available.
Contributions to all such plans were approximately $206,000, $207,000 and
$169,000 in 1996, 1995 and 1994, respectively.
10. Commitments:
Operating leases:
The Company leases transportation, manufacturing equipment and office space
under several operating leases expiring through 2005. The majority of
the leases contain purchase options at stated amounts or fair market
value. The Company also leases various office space, as well as freezer
storage space at a freezer warehouse (Note 4). Rent expense under all
operating leases amounted to approximately $8,203,000, $6,817,000 and
$5,338,000 for the years ended 1996, 1995 and 1994, respectively. Total
future minimum rentals under noncancelable operating leases as of May 31,
1996, including those discussed in Note 4, are:
<TABLE>
<CAPTION>
Year Ending Amount
----------- --------
<S> <C>
1997 $7,643,000
1998 6,061,000
1999 4,450,000
2000 2,018,000
2001 800,000
Thereafter 2,239,000
</TABLE>
Letters of credit:
At May 31, 1996, the Company had outstanding letters of credit totaling
approximately $8,040,000 which serve as collateral for an industrial
revenue bond issue, as discussed in Note 6, and various self-insured
agreements.
F-14
<PAGE> 39
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
10. Commitments (continued):
Purchase and management agreement:
In November, 1994 the Company entered into a 10-year agreement with
Michigan Livestock Exchange ("MLE"). Under the terms of the agreement,
MLE has agreed to manage and operate the Company's hog buying stations
and to provide the Company with hogs in accordance with the Company's
quantity and quality specifications at MLE's hog costs plus certain
operating expenses. The MLE supplied approximately 65% of the total hogs
purchased by the Company in fiscal 1996. In consideration the Company
will pay MLE $83,333 per month as a facilities use and management fee.
In accordance with the agreement, the Company has purchased $2.0 million
of preferred stock of MLE that pays a 6 percent dividend. The Company
has classified the investment in MLE in other long-term assets on its
consolidated balance sheet.
Ham purchase and production agreement:
In connection with the Wilson acquisition (see Note 11 to the Notes to the
Consolidated Financial Statements for further discussion related to the
acquisition), the Company assumed a production agreement (the
"Production Agreement") with a major meat packing company (the
"Producer"). Pursuant to the Production Agreement, the Producer
constructed a ham production facility and the Company furnished all of
the production equipment to be used in such facility. In addition, the
Producer is obligated to produce at such facility, on an exclusive basis,
all boneless ham products which the Company may require. In return, the
Company has agreed to pay and/or reimburse the Producer for all operating
and fixed costs incurred at the facility and to pay the Producer a fee of
approximately $1,375,000 per year during the term of the agreement and
any extensions thereof. The Production Agreement has an initial term
(the "Initial Term") expiring on June 6, 2001 and may be renewed by the
Company for up to five successive three year terms (the "Option
Periods"). If the Company fails to renew the Production Agreement for
each of the five Option Periods, or if the Company terminates or breaches
the Production Agreement, the Company will be obligated to pay the
$1,375,000 annual fee for the remainder of the Initial Term, if any, and
an annual payment of approximately $408,000 for each remaining year of
the five Option Periods. In such event, the Producer must use its best
efforts to utilize the vacated facility to mitigate costs to the Company.
In addition to the Production Agreement, the Company has also assumed a
supply agreement with the Producer. The Company has agreed to purchase
and the Producer has agreed to supply 400,000 pounds of boneless ham
muscles on a weekly basis at a pricing formula equal to or more favorable
than prices obtainable from other competitive suppliers. The term of
such supply agreement runs concurrent with the term of the Production
Agreement described above.
F-15
<PAGE> 40
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
11. Acquisition:
On May 30, 1995, the Company purchased certain assets from Foodbrands
America, Inc. and its subsidiaries ("Foodbrands"). The Company acquired
substantially all of Foodbrands' Retail Division ("Wilson") assets used
by Wilson in its business of producing and marketing retail meat
products. The aggregate purchase price for the assets acquired and the
assumption of certain liabilities was approximately $64.6 million.
During the next five years, Foodbrands has the right to receive from the
Company up to an additional $10 million in accordance with what is being
referred to as an Earnout Agreement, in the event of increases in the
market price of the Company's common stock. During fiscal 1996, no
amount was paid to Foodbrands under the Earnout Agreement. The
acquisition has been accounted for by the purchase method. The acquired
assets included three manufacturing facilities, machinery and equipment,
current assets, certain trademarks and tradenames. The tradename and
trademarks acquired will be amortized to expense over their estimated
useful lives, determined to be 40 years. The results of operations of
the Company for the 53 week period ending May 31, 1996 reflect a full
year of operation related to the acquired Wilson assets.
The following unaudited, pro forma, condensed, combined financial
information assumes the acquisition occurred at the beginning of fiscal
1995. The results do not purport to be indicative of what would have
occurred had the acquisition been made at the beginning of fiscal 1995,
or of the results which may occur in the future.
<TABLE>
<CAPTION>
Fiscal Year Ended
May 26, 1995
(In thousands, except per share data) (Unaudited)
------------------------------------- -----------------
<S> <C>
Net sales $965,780
Income from operations $11,192
Net income $2,377
Earnings per share $0.41
</TABLE>
12. Restructuring charges:
During the fourth quarter of fiscal 1995, the Company recorded a one-time,
pre-tax restructuring charge to operations of $7.9 million. The Company
closed its Tri-Miller Packing facility in Hyrum, Utah, in an effort to
eliminate duplicate facilities and excess personnel. The closing reduced
ongoing manufacturing costs and was made possible by the expansion of the
Company's Grand Rapids, Michigan, facility. Under the restructuring
plan, the Company identified approximately 400 employees, both production
and management, that were terminated. The shut down of this facility was
substantially completed by the end of May 1995. The restructuring charge
included $5.5 million related to the write-down of plant and equipment
that were sold. Another $1.4 million included other costs related to
shutdown of the Tri-Miller facility, which also included employee
severance payments. The remaining $1.0 million related to the write-down
of real property and equipment to estimated realizable value associated
with the relocation to a new corporate headquarters building and of the
Company's spiral sliced ham operation to the newly constructed production
facility in Ponca City, Oklahoma.
F-16
<PAGE> 41
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on September 13, 1996.
THORN APPLE VALLEY, INC.
(Registrant)
By: /s/ Louis Glazier
----------------------------------
Louis Glazier
Executive Vice President
Finance and Administration
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on September 13, 1996.
<TABLE>
<CAPTION>
Signature Capacity
- --------- --------
<S> <C>
Director
- -----------------------------------------------
John C. Canepa
/s/ Henry S Dorfman Director
- -----------------------------------------------
Henry S Dorfman
/s/ Joel Dorfman President and Director
- ----------------------------------------------- (principal executive officer)
Joel Dorfman
Director
- -----------------------------------------------
Burton D. Farbman
/s/ Louis Glazier Executive Vice President Finance
- ----------------------------------------------- and Administration and Director
Louis Glazier (principal financial and
accounting officer)
/s/ Moniek Milberger Director
- -----------------------------------------------
Moniek Milberger
/s/ Seymour Roberts Director
- -----------------------------------------------
Seymour Roberts
</TABLE>
<PAGE> 42
SCHEDULE II
THORN APPLE VALLEY, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED MAY 31, 1996, MAY 26, 1995 AND MAY 27, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COST AND OTHER ACCOUNTS- (A) AT END
Classification of period EXPENSES DESCRIBE DEDUCTIONS OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended May 31, 1996 $789,100 $ 38,673 $205,973 $621,800
Year ended May 26, 1995 $731,800 $293,810 $236,510 $789,100
Year ended May 27, 1994 $832,300 $321,868 $422,368 $731,800
</TABLE>
Note A. Write-off of uncollectible accounts, net of recoveries.
<PAGE> 43
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Page
----------- ----
<S> <C>
(3) (a) Restated Articles of Incorporation
(b) Amendment to Restated Articles of Incorporation
(c) By-laws, as amended to date
(10) Material Contracts
(a) Bond Purchase Agreement, dated as of July l, 1984, among The Onslow County Industrial Facilities and
Pollution Control Financing Authority, Branch Banking and Trust Company and the Company.
(b) Loan Agreement, dated as of July 1, 1984, between The Onslow County Industrial Facilities and
Pollution Control Financing Authority and the Company.
(c) Promissory Note in the principal amount of $6,000,000, dated July 1, 1984, from the Company payable
to The Onslow County Industrial Facilities and Pollution Control Financing Authority.
(d) Security Agreement, dated as of July 1, 1984, between Branch Banking and Trust Company and the
Company.
(e) Guaranty Agreement, dated as of July 1,1984, from the Company to Branch Banking and Trust Company.
(f) Note Agreement dated as of April 1, 1994 by and between the Company and Allstate Life Insurance
Company relating to $15,000,000 principal amount 6.45% Senior Notes due April 21, 2006.
(g) Loan Agreement dated as of December 1, 1993 by and between Michigan Strategic Fund and the Company
relating to $5,500,000 Adjustable Rate Demand Limited Obligation Revenue Bonds.
(h) Reimbursement Agreement dated as of December 1, 1993 by and between the Company and Old Kent Bank and
Trust Company relating to $5,500,000 Adjustable Rate Demand Limited Obligation Revenue Bonds.
(i) Asset Purchase Agreement, dated as of April 29, 1995, by and among the Company and Doskocil Companies
Incorporated and Wilson Foods Corporation, Concordia Foods Corporation, Dixie Foods Company and
Shreveport Foods Company.
(j) First Amendment to Asset Purchase Agreement, dated as of May 26, 1995, by and among the Company,
Foodbrands America, Inc., successor by merger to Doskocil Companies Incorporated, Wilson Foods
Corporation, Concordia Foods
</TABLE>
<PAGE> 44
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
<TABLE>
<S> <C>
Corporation, Dixie Foods Company and Shreveport Foods Company.
(k) Noncompete Agreement, dated May 30, 1995, by Foodbrands America, Inc., Wilson Foods Corporation,
Concordia Foods Corporation, Dixie Foods Company and Shreveport Foods Company in favor of the
Company.
(l) Supply Agreement, dated May 30, 1995, by and among Wilson Foods Corporation and Foodbrands America,
Inc., Dixie Foods Company and the Company.
(m) Transition Service Agreement, dated May 30, 1995, by and between Foodbrands America, Inc. and the
Company.
(n) Credit Agreement, dated as of May 30, 1995, among Cooperatieve Centrale Raiffeisen-Boerenleen Bank,
B.A., Old Kent Bank & Trust Co., National City Bank, Harris Trust and Savings Bank and the Company.
(o) Note Agreement, dated as of October 1, 1994, by and between the Company and Allstate Life Insurance
Company relating to $8,000,000 principal amount 8.42% Senior Notes due October 1, 2003.
(p) Note Agreement, dated as of May 15, 1995, among the Company, Allstate Life Insurance Company,
Principal Mutual Life Insurance Company and Great-West Life & Annuity Insurance Company.
(q) Marketing and Management Agreement dated November 2, 1994 by and among Michigan Livestock Exchange,
Indiana Livestock Exchange and the Company.
</TABLE>
<PAGE> 45
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
<TABLE>
<S> <C>
(r) Amended and Restated Credit Agreement, dated as of September 11, 1996, among the Company, the lenders
party thereto, and Cooperatieve Centrale Raiffeisen-Boerenleen Bank B.A., New York Branch,
as agent for the lenders.
(s) Senior Secured Seasonal Line of Credit Agreement, dated as of September 11, 1996, among the Company,
the lenders party thereto, and Cooperatieve Centrale Raiffeisen-Boerenleen Bank B.A., New York
Branch, as agent for the lenders.
(t) Amendment Agreement, dated as of September 11, 1996, between the Company and Allstate Life
Insurance Company relating to $15,000,000 principal amount note due April 21, 2006.
(u) Amendment Agreement, dated as of September 11, 1996, between the Company and Allstate Life
Insurance Company relating to $8,000,000 principal amount note due October 1, 2003.
(v) Amendment Agreement, dated as of September 11, 1996, among the Company, Allstate Life Insurance
Company, Principal Mutual Life Insurance Company and Great-West Life & Annuity Insurance Company.
(w) Amendment to Reimbursement Agreement, dated as of September 11, 1996, between the Company and Old
Kent Bank.
(x) Intercreditor Agreement, dated as of September 11, 1996 among Cooperatieve Centrale Raiffeisen-Boerenleen
Bank B.A., New York Branch, as Credit Agent, Seasonal Agent and Collateral Agent, and the lenders party
thereto, as acknowledged and agreed to by the Company and its subsidiaries.
(y) Security Agreement, dated as of September 11, 1996, among the Company, the subsidiaries of the Company
party thereto, and Cooperatieve Centrale Raiffeisen-Boerenleen Bank B.A., New York Branch, as Collateral
Agent and Credit Agent.
(21) Subsidiaries of the registrant.
(23) Consent of Coopers & Lybrand LLP.
(27) Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10(r)
U.S. $90,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of September 11, 1996
among
THORN APPLE VALLEY, INC.,
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Lenders,
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
New York Branch,
as the Agent for the Lenders
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
1.2. Intercreditor Agreement Definitions; Use of Defined Terms . . . . . . .. . . . . . 18
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 18
1.4. Accounting and Financial Determinations . . . . . . . . . . . . . . . .. . . . . . 18
II COMMITMENTS, BORROWING PROCEDURES AND NOTES . . . . . . . . . . . . . . . . . . . . . .. . . . . . 18
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 18
2.1.1. Commitment of Each Lender . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 18
2.1.2. Lenders Not Required To Make Loans . . . . . . . . . . . . . . . . . .. . . . . . 19
2.2. Reductions of Commitment Amount . . . . . . . . . . . . . . . . . . . .. . . . . . 19
2.3. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 19
2.4. Continuation and Conversion Elections . . . . . . . . . . . . . . . . .. . . . . . 20
2.5. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 20
2.6. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 20
2.7. The Letter of Credit Subfacility. . . . . . . . . . . . . . . . . . . .. . . . . . 21
2.8. Issuance, Amendment and Renewal of Letters of Credit . . . . . . . . .. . . . . . 21
2.9. Risk Participations, Drawings and Reimbursements . . . . . . . . . . .. . . . . . 23
2.10. Repayment of Participations . . . . . . . . . . . . . . . . . . . . . .. . . . . . 25
2.11. Role of the Issuing Lender . . . . . . . . . . . . . . . . . . . . . .. . . . . . 25
2.12. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 26
2.13. Cash Collateral Pledge . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 27
2.14. Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 28
2.15. Uniform Customs and Practice . . . . . . . . . . . . . . . . . . . . .. . . . . . 28
III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 28
3.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . .. . . . . . 28
3.2. Interest Provisions . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 30
3.2.1. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 30
3.2.2. Post-Maturity Rates . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 30
3.2.3. Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 30
3.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 31
3.3.1. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 31
3.3.2. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 31
3.3.3. Restructuring Fee . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 31
ARTICLE IV CERTAIN EURODOLLAR RATE AND OTHER PROVISIONS . . . . . . . . . . . . .. . . . . . 31
4.1. Eurodollar Rate Lending Unlawful . . . . . . . . . . . . . . . . . . .. . . . . . 31
4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 32
4.3. Increased Eurodollar Rate Loan Costs, etc. . . . . . . . . . . . . . .. . . . . . 32
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 32
4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 33
4.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 33
4.7. Payments, Computations, etc. . . . . . . . . . . . . . . . . . . . . .. . . . . . 35
4.8. Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 35
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4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
V CONDITIONS TO RESTATEMENT AND BORROWING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.1. Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.1.1. Equity Infusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.1.3. Delivery of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.1.4. Intercreditor Agreement; Other Financing Agreements . . . . . . . . . . . . . . . . . . . 37
5.1.5. Environmental Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.1.6. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.1.7. Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2. All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2.1. Compliance with Warranties, No Default, etc. . . . . . . . . . . . . . . . . . . . . . . 38
5.2.2. Borrowing Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
VI REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . . . . . . . . . . . . . . 39
6.3. Government Approval, Regulation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.4. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.5. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.7. Litigation, Labor Controversies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.9. Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.12. Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.13. Regulations G, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.14. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.15. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.16. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.17. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.18. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
VII COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.1. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
VIII EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1.3. Non-Performance of Certain Covenants and Obligations . . . . . . . . . . . . . . . . . . 45
8.1.4. Non-Performance of Other Covenants and Obligations . . . . . . . . . . . . . . . . . . . 46
8.1.5. Default on Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.1.6. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.1.7. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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8.1.8. Control of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1.10. Scheduled Cap[ital Infusion Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1.11 Security Documents
8.1.12. Subsidiaries Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
IX THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.4. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.5. Loans by RBN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.7. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
X MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.8. Execution in Counterparts, Effectiveness, etc; Waiver. . . . . . . . . . . . . . . . . 55
10.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.11. Sale and Transfer of Loans and Note; Participations in Loans and Note . . . . . . . . . 56
10.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.13. Waiver and Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.14. Forum Selection and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 61
10.15. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
APPENDIX A - Covenants Appendix
SCHEDULE I - Disclosure Schedule
SCHEDULE 10.2 - Notice Addresses
EXHIBIT A - Form of Note
EXHIBIT B - Form of Borrowing Base Certificate
EXHIBIT C - Form of Borrowing Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E - Form of Lender Assignment Agreement
EXHIBIT F - Form of Opinion of Counsel to the Borrower
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AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 11,
1996, among THORN APPLE VALLEY, INC., a Michigan corporation (the "Borrower"),
the various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), and COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., acting through its New York Branch ("RBN"), as
agent (the "Agent") for the Lenders,
W I T N E S E T H:
WHEREAS, the Borrower, the Lenders and the Agent are parties to the
Credit Agreement dated as of May 30, 1995, as heretofore amended (the
"Revolving Credit Agreement"), pursuant to which the Lenders have made
available loans to the Borrower; and
WHEREAS, the Borrower, the Lenders, the Agent, certain other lenders
to the Borrower (such lenders together with the Lenders being "Creditor
Parties") and RBN as collateral agent for the Creditor Parties (the "Collateral
Agent") are parties to the Intercreditor Agreement dated as of September 11,
1996 (as it may be amended from time to time in accordance with the terms
thereof, the "Intercreditor Agreement"), contemplating the provision of
collateral from the Borrower and its Subsidiaries and guaranties from its
Subsidiaries to secure certain obligations owing to the Creditor Parties and
providing for certain intercreditor matters among the Creditor Parties; and
WHEREAS, the Borrower, the Lenders and the Agent wish to amend and
restate the Revolving Credit Agreement in the form of and on the terms and
conditions of this Agreement, in order to, among other things, increase the
aggregate commitments by $10,000,000, reflect changes in pricing, the Borrowing
Base, and various covenants, the provision of collateral and guaranties in
connection with the Intercreditor Agreement, and certain required prepayment
provisions; and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its
<PAGE> 6
preamble and recitals, shall, except where the context otherwise requires, have
the following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"Affiliate" shall mean any Person:
(a) which directly or indirectly controls, or is
controlled by, the Borrower; or
(b) which beneficially owns or holds 5% or more of
any class of Voting Stock of the Borrower.
"Agent's Fee Letter" means the letter dated May 15, 1995 between the
Borrower and the Agent.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of:
(i) the rate of interest announced by the Agent from
time to time in New York, New York as its base rate; or
(ii) one percent (1%) per annum above the fluctuating
rate of interest that is the rate determined by RBN to be the opening
rate per annum paid or payable by it on the day in question in New
York, New York for federal funds purchased overnight from other
banking institutions (the " Federal Funds Rate").
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the RBN in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Agent will give notice promptly to the Borrower and the Lenders
of changes in the Alternate Base Rate.
"Amended Credit Agreements" means this Agreement and the New Seasonal
Line of Credit Agreement.
"Applicable Margin" means, with respect to Eurodollar Rate Loans after
the Scheduled Proceeds Application Date, a percentage determined as follows: a
percentage that, when added to the LIBOR Rate (Reserve Adjusted) for an
Interest Period of one month duration commencing on the Scheduled Proceeds
Application Date,
2
<PAGE> 7
equals the Alternate Base Rate on the Scheduled Proceeds Application Date minus
0.75%.
"Assignee Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to the Borrower, those of its
officers whose signatures and incumbency shall have been certified to the Agent
and the Lenders pursuant to Section 5.1.1.
"Available Borrowing Base" means, at any time, the excess (if any) of
the Borrowing Base, as calculated in the then most recently delivered Borrowing
Base Certificate, over the aggregate principal amount of all outstanding Other
Borrowing Base Debt.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Beneficial Ownership" has the meaning given to such term in Rule
13d-3 under the Securities Exchange Act of 1934, as amended, and as it may be
further amended from time to time.
"Borrower" is defined in the preamble.
"Borrowing" means the Loans of the same type and, in the case of
Eurodollar Rate Loans, having the same Interest Period made by all Lenders on
the same Business Day and pursuant to the same Borrowing Request in accordance
with Section 2.1.
"Borrowing Base" means at any time an amount equal to the sum of: (i)
85% of the unpaid principal amount of Eligible Receivables plus (ii) 85% of
Eligible Contract Inventory plus (iii) 65% (70% during the Borrower's Fiscal
Periods three through nine only if the cash price quoted in the "Wall Street
Journal" for Omaha hogs, as of the Borrowing Base calculation date, is greater
than $55.00 per hundredweight of live hogs) of the difference between (a)
Eligible Inventory (excluding Eligible Contract Inventory) and (b) Hog Payables
plus (iv) until the earlier of April 30, 1997 and the Scheduled Proceeds
Application Date, $10,000,000.
"Borrowing Base Certificate" means a certificate of an Authorized
Officer of the Borrower, substantially in the form of Exhibit B, or such other
form as the Agent may approve from time to time, setting forth a calculation of
the Borrowing Base.
"Borrowing Base Debt" means the Loans and the Other Borrowing Base
Debt.
3
<PAGE> 8
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
C hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed
in New York, New York and Chicago, Illinois; and
(b) relative to the making, continuing, prepaying or
repaying of any Eurodollar Rate Loans, any day on which dealings in
Dollars are carried on in the London interbank market.
"Capital Lease" means any lease of property which in accordance with
GAAP should be capitalized on the lessee's balance sheet, or for which the
amount of the asset and liability thereunder as if so capitalized should be
disclosed in a note to such balance sheet, and, for purposes of this Agreement
and each other Loan Document, the amount of such obligations shall be the
capitalized amount thereof, 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 upon which such lease may
be terminated by the lessee without payment of a penalty.
"Cash Collateralize" means to pledge and deposit with or deliver to
the Agent, for the benefit of the Agent, the Issuing Lender and the Lenders, as
additional collateral for the L/C Obligations, cash or deposit account balances
pursuant to documentation in form and substance satisfactory to the Agent and
the Issuing Lender (which documents are hereby consented to by the Lenders).
Derivatives of such term shall have corresponding meaning. The Borrower hereby
grants the Agent, for the benefit of the Agent, the Issuing Lender and the
Lenders, a security interest in all such cash and deposit account balances.
Cash collateral shall be maintained in blocked, non-interest bearing deposit
accounts at the Agent.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means
(a) the acquisition, through purchase or otherwise (including
the agreement to act in concert without more), by any Person (other
than Designated Persons) or group of Persons
4
<PAGE> 9
acting in concert (other than Designated Persons), directly or
indirectly, in one or more transactions, of Beneficial Ownership or
control of securities representing more than 30% of the combined voting
power of the Borrower's Voting Stock; or
(b) the distribution by the Borrower of cash, securities or
other properties (other than regular periodic cash dividends at a rate
which is substantially consistent with past practice, including with
respect to increases in dividends, and other than common stock of the
Borrower or rights to acquire common stock of the Borrower) to holders
of capital stock (including by means of dividend, reclassification,
recapitalization or otherwise) which, together with all other such
distributions during the 365-day period preceding the date of such
distribution, has an aggregate fair market value in excess of an
amount equal to 30% of the fair market value of the Voting Stock of
the Borrower outstanding on the date immediately prior to such
distribution.
A merger or consolidation pursuant to Section 2.7 of Appendix A with
respect to which the Voting Stock of the surviving corporation is more
than 30% owned by a Person or group of Persons acting in concert (other than
Designated Persons) who did not own such Voting Stock prior to such merger or
consolidation shall constitute a "Change of Control."
"Claims" is defined in Section 10.13.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Collateral Agent" is defined in the recitals.
"Commitment" means, relative to any Lender, such Lender's obligation
to make Loans pursuant to Section 2.1.1.
"Commitment Amount" means, on any date, $90,000,000, as such amount
may be reduced from time to time pursuant to Section 2.2.
"Commitment Termination Date" means May 30, 1998.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit D hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control
5
<PAGE> 10
which, together with the Borrower, are treated as a single employer under
Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
"Creditor Parties" is defined in the recitals.
"Default" means any condition, occurrence or event that after notice
or lapse of time or both would constitute on Event of Default.
"Designated Persons" means any of the following:
(a) (i) Henry S Dorfman, Marla Dorfman, Gayle Weiss, Carolyn
Dorfman and Joel Dorfman; (ii) the estates of the Persons set forth in
clause (i); and (iii) inter vivos or testamentary trusts the
beneficiaries of which are one or more Persons falling within the
scope of clauses (i) or (ii) above;
(b) Joel Dorfman, Henry S Dorfman, Louis Glazier, Michael
Rozzano, Keith Jahnke and Edward Boan;
(c) a group of Persons fifty percent or more of which are
comprised of Persons set forth in paragraphs (a) and/or (b) above; or
(d) an Employee Stock Ownership Plan as defined in Section
4975(e)(7) of the Code.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Agent and the Required
Lenders.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in a Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
"Effective Amount" means, with respect to any outstanding L/C
Obligations on any date, the amount of such L/C Obligations on such date after
giving effect to any Issuances of Letters of Credit occurring on such date and
any other changes in the aggregate amount of the L/C Obligations as of such
date, including as a result of any reimbursements of outstanding unpaid
drawings under any Letter of Credit or any reduction in the maximum amount
6
<PAGE> 11
available for drawing under Letters of Credit taking effect on such
date.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 10.8.
"Eligible Contract Inventory" means Eligible Inventory consisting of
deliverable hedged pork bellies, hedged on the Chicago Mercantile Exchange
which are owned Inventory in public warehouses, finished goods to be delivered
to food retailers pursuant to written fixed price contracts or written fixed
price purchase orders. The Agent, in its sole discretion or if directed by the
Required Lenders, may deem ineligible any item listed as Eligible Contract
Inventory based on the identity of the contract party or the form or substance
of a contract or purchase order.
"Eligible Inventory" means inventory of the Borrower, valued at the
lower of cost (on a first-in, first-out basis) or fair market value excluding
inventory which:
(i) consists of obsolete or unsaleable items;
(ii) is not subject to a perfected security interest in favor
of the Collateral Agent prior to all other Liens (other than Liens
under the Packers and Stockyards Act of 1921, as amended, and the
regulations thereunder and Liens permitted under Section 2.3(c) of
Appendix A);
(iii) is located at a location not owned by the Borrower and
for which the Borrower has failed to comply with its undertaking under
Section 1.8 of Appendix A to use its best efforts to deliver to the
Collateral Agent an appropriate landlord's, warehouseman's or bailee's
waiver which is in form and substance satisfactory to the Collateral
Agent;
(iv) consists of general supplies, packaging or labels; or
(v) is subject to a Lien in favor of any party other than the
Collateral Agent and other than a Lien under the Packers and
Stockyards Act of 1921, as amended, and the regulations thereunder.
"Eligible Receivable" at any time means a Receivable that meets each
of the following requirements:
(i) the obligor is not an Affiliate of the Borrower;
(ii) the obligor is a United States resident;
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(iii) is subject to a perfected security interest in favor of
the Collateral Agent prior to all other Liens (other than a Lien under
the Packers and Stockyards Act of 1921, as amended, and the
regulations thereunder);
(iv) (other than the fiscal 1996 federal tax refund
receivable) is not owed by the United States of America or any
department, agency, or instrumentality thereof unless the Federal
Assignment of Claims Act has been complied with;
(v) the obligor of which is not the obligor of any Receivable
as to which any payment or part thereof remains unpaid for more than
30 days from the original due date for such payment in an aggregate
amount of 20% or more of the aggregate unpaid principal amount of all
the Receivables of such obligor;
(vi) as to which any payment or part thereof is past due for
more than 30 days from the original due date for such payment;
(vii) with regard to which the obligor thereof is not
insolvent or the subject of any bankruptcy or insolvency proceeding or
which has made an assignment for the benefit of creditors, suspended
normal business operations, dissolved, liquidated, terminated its
existence, ceased to pay its debts as they become due or suffered a
receiver or trustee to be appointed for any of its assets or affairs;
(viii) which is denominated and payable only in Dollars; and
(ix) which is owned by the Borrower free and clear of any
Liens (other than the lien in favor of the Collateral Agent and other
than a Lien under the Packers and Stockyards Act of 1921, as amended,
and the regulations thereunder).
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Eurodollar Rate Loan" means a Loan bearing interest, at all times
during an Interest Period applicable to such Loan, at a fixed
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rate of interest determined by reference to the LIBOR Rate (Reserve Adjusted).
"Event of Default" is defined in Section 8.1.
"Existing Credit Agreements" means the Revolving Credit Agreement and
the Seasonal Line of Credit letter agreement dated March 11, 1996, as
heretofore amended, among the Borrower, the Lenders and the Agent.
"Federal Funds Rate" is defined in the definition of "Alternate Base
Rate".
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of fifty-two consecutive weeks ending
on, in the case of 1995, May 26, 1995 and, in the case of any other Fiscal
Year, the last Friday in May; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the "1994 Fiscal Year") refer to the
Fiscal Year ending in May of such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty" means all obligations (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection
or obligations incurred in the ordinary course of business in connection with
repurchase agreements) of a Person guaranteeing or, in effect, guaranteeing any
Indebtedness, dividend or other obligation, of any other Person in any manner,
whether directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any property or assets constituting
security therefor, (ii) to advance or supply funds (x) for the purchase or
payment of such Indebtedness or obligations, (y) to maintain working capital or
other balance sheet condition or otherwise to advance or make available funds
for the purchase or payment of such Indebtedness or obligation, (iii) to lease
property or to purchase securities or other property or services primarily for
the purpose of assuring
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<PAGE> 14
the owner of such Indebtedness, or (iv) otherwise to assure the owner of the
Indebtedness or obligation against loss in respect thereof. For the purposes
of all computations made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Hazardous Material" means:
(a) any "hazardous substance," as defined by CERCLA;
(b) any "hazardous waste," as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous
or toxic chemical, material or substance within the meaning of any
other applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"herein," "hereof," "hereto," "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Hog Payables" means at any time the aggregate amount payable by the
Borrower for purchases of livestock which are subject to the Packers and
Stockyards Act of 1921, as amended, and the regulations thereunder.
"Honor Date" is defined in Section 2.9.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this
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Agreement and each other Loan Document, the parties hereto agree that the rule
of ejusdem generis shall not be applicable to limit a general statement, which
is followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and
all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capital Leases;
(d) all other items which, in accordance with GAAP, would
be included as liabilities on the liability side of the balance sheet
of such Person as of the date at which Indebtedness is to be
determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay the
deferred purchase price of property or services, and indebtedness
(excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse; and
(g) all Guaranties of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
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"Insolvency Proceeding" means, without respect to any Person, (a) any
case, action or proceeding with respect to such Person before any court or
other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors (including any proceeding under the Bankruptcy Code) or (b) any general
assignment for the benefit of creditors, composition, marshalling of assets for
creditors, or other, similar arrangement in respect of such Person's creditors
generally or any substantial portion of such creditors.
"Intercreditor Agreement" is defined in the recitals.
"Interest Period" means, relative to any Eurodollar Rate Loan, the
period beginning on (and including) the date on which such Eurodollar Rate Loan
is made or continued as, or converted into, a Eurodollar Rate Loan pursuant to
Section 2.3 or 2.4, and shall end on (but exclude) the day which numerically
corresponds to such date one month thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such month), in
either case as the Borrower may select in its relevant notice pursuant to
Section 2.3 or 2.4; provided, however, that
(a) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have expiration
dates occurring on more than ten different dates;
(b) Interest Periods commencing on the same date for
Loans comprising part of the same Borrowing shall be of the same
duration;
(c) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next following Business Day (unless such next following Business Day
is the first Business Day of a calendar month, in which case such
Interest Period shall end on the Business Day next preceding such
numerically corresponding day); and
(d) no Interest Period may end later than the Commitment
Termination Date.
"Issuance Date" -- see subsection 2.7(a).
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Lender" means RBN in its capacity as issuer of one or more
Letters of Credit hereunder, together with any replacement letter of credit
issuer arising hereunder.
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"L/C Advance" means each Lender's participation in any L/C Borrowing
in accordance with its Percentage.
"L/C Amendment Application" means an application form for amendment of
an outstanding standby or commercial documentary letter of credit as shall at
any time be in use at the Issuing Lender, as the Issuing Lender shall request.
"L/C Application" means an application form for issuances of a standby
or commercial documentary letter of credit as shall at any time be in use at
the Issuing Lender, as the Issuing Lender shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date
when made nor converted into a Borrowing of Loans under subsection 2.9(c).
"L/C Fee Rate" means a rate per annum equal to (a) 3.00% prior to the
Scheduled Proceeds Application Date, and (b) 2.00% on such date and thereafter.
"L/C Obligations" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the amount
of all unreimbursed drawings under all Letters of Credit, including all
outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including any of the Issuing Lender's standard form
documents for letter of credit issuances.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit E hereto.
"Lenders" is defined in the preamble.
"Letters of Credit" means any letters of credit (whether standby
letters of credit or commercial documentary letters of credit) Issued by the
Issuing Lender pursuant to Section 2.7.
"LIBOR Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the
Lender Assignment Agreement or such other office of a Lender as designated from
time to time by notice from such Lender to the Borrower and the Agent, whether
or not outside the United States, which shall be making or maintaining
Eurodollar Rate Loans of such Lender hereunder.
"LIBOR Rate" means the rate with respect to the relevant Interest
Period to be determined on the basis of the offered rates
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for deposits in Dollars for the relevant Interest Period which appear on
Telerate Page 3750 (or, if such service or page is not available, such other
service or page as the Agent may determine as the appropriate service and page
for the purpose of displaying offered rates of leading reference banks in
London for interbank deposits in U.S. Dollars) as of 11:00 A.M. (London time)
on the day that is two (2) Business Days prior to the first day of the relevant
Interest Period.
"LIBOR Rate (Reserve Adjusted)" means, relative to any Loan to be
made, continued or maintained as, or converted into, a Eurodollar Rate Loan for
any Interest Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined pursuant to the following formula:
LIBOR Rate = LIBOR Rate
(Reserve Adjusted) -------------------------------
1.00 - LIBOR Reserve Percentage
The LIBOR Rate (Reserve Adjusted) for any Interest Period for
Eurodollar Rate Loans will be determined by the Agent on the basis of the LIBOR
Reserve Percentage in effect on, and the applicable rates furnished to and
received by the Agent from RBN, two Business Days before the first day of such
Interest Period.
"LIBOR Reserve Percentage" of RBN for the Interest Period for any
Eurodollar Rate Loan means the reserve percentage applicable during such
Interest Period (or if more than one such percentage shall be so applicable,
the daily average of such percentages for those days in such Interest Period
during which any such percentage shall be so applicable) under regulations
issued from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for such Lender with respect to liabilities or assets
consisting of or including "eurocurrency liabilities" (as such term is defined
in Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time) having a term equal to such Interest Period.
"Lien" shall mean with respect to any Person, any mortgage, lien,
pledge, adverse claim, charge, security interest or other encumbrance in or on,
or interest or title of any vendor, lessor, lender or other secured party to or
of such Person under a conditional sale or other title retention agreement or
Capital Lease with respect to, any property or asset of such Person, or the
signing or filing of a financing statement which names such Person as debtor,
or the signing of any security agreement authorizing any other party as the
secured party thereunder to file any financing statement.
"Loan" is defined in Section 2.1.1.
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"Loan Documents" means this Agreement, the Notes, the Agent's Fee
Letter, the Intercreditor Agreement, the Subsidiaries Guaranty and the Security
Documents.
"Material Adverse Effect" is defined in Section 6.1.
"Monthly Payment Date" means the first day of each month or, if any
such day is not a Business Day, the next succeeding Business Day.
"Note" means a promissory note of the Borrower payable to any Lender,
in the form of Exhibit A hereto (as such promissory note may be amended,
endorsed or otherwise modified from time to time), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding Loans,
and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower arising under or in connection with this Agreement, the Notes and each
other Loan Document.
"Organic Document" means, relative to the Borrower, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Other Borrowing Base Debt" means any Indebtedness outstanding under
the New Seasonal Line of Credit Agreement as in effect on the date hereof, or a
Replacement Seasonal Line of Credit Agreement.
"Participant" is defined in Section 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan," as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its signature hereto or set forth in the Lender Assignment
Agreement, as such percentage may be adjusted from time to time pursuant to
Lender Assignment Agreement(s) executed by such
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Lender and its Assignee Lender(s) and delivered pursuant to Section
10.11.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Ponca City Litigation" means an action entitled Facility
Constructors, Inc. v. Thorn Apple Valley, Inc. filed in February, 1996, in
District Court, Kay County, Oklahoma against the Borrower in connection with
the construction of the Borrower's plant in Ponca City, Oklahoma.
"Property" means any real or personal or tangible or intangible asset.
"RBN" is defined in the preamble.
"Receivable" means any right to payment of the Borrower from any
Person arising from the sale of goods or services by the Borrower in the
ordinary course of its business and the Borrower's right to receive any federal
income tax refund in respect of its 1996 tax return.
"Release" means a "release," as such term is defined in CERCLA.
"Released Parties" is defined in Section 10.13.
"Releasors" is defined in Section 10.13.
"Required Lenders" means, at any time, Lenders holding at least 66
2/3% of the then aggregate outstanding principal amount of the Loans and L/C
Obligations then held by the Lenders, or, if no such principal amount is then
outstanding, Lenders having at least 66 2/3% of the Commitments.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in effect
from time to time.
"Restructuring" is defined in Section 6.2.
"Revolving Credit Agreement" is defined in the recitals.
"Sale and Lease-Back Transaction" means any arrangement, directly or
indirectly, with any Person whereby a seller or a
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transferor shall sell or otherwise transfer any real or personal property and
then or thereafter lease (whether or not a Capitalized Lease), or repurchase
under any extended purchase contract, the same or similar property from the
purchaser or the transferee of such property.
"Scheduled Proceeds Application Date" means the last date on which the
Scheduled Subordinated Debt Proceeds are applied to Creditor Obligations in
accordance with the Intercreditor Agreement.
"Stated Maturity Date" means, with respect to the Loans of any Lender,
the Commitment Termination Date.
"Subsidiary" means any corporation of which the Borrower directly or
indirectly owns more than 50% of the outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency).
"Subsidiaries Guaranty" means the "Guaranty" as defined in the
Intercreditor Agreement.
"Taxes" is defined in Section 4.6.
"TAVFSC" means Thorn Apple Valley Foreign Sales Corporation, a U.S.
Virgin Islands corporation.
"Type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan, or a Eurodollar Rate Loan.
"United States" or "U.S." means the United States of America, its
fifty States and the District of Columbia.
"Voting Stock" shall mean capital stock of any class or classes of a
corporation having power under ordinary circumstances to vote for the election
of members of the board of directors of such corporation, or persons performing
similar functions (irrespective of whether or not at the time stock of any of
the class or classes shall have or might have special voting power or rights by
reason of the happening of any contingency).
"Welfare Plan" means a "welfare plan," as such term is defined in
section 3(1) of ERISA.
"Wilson Acquisition" means the purchase of assets consummated in
accordance with the Asset Purchase Agreement, dated as of April 29, 1995, as
amended, between the Borrower and Doskocil Companies
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Incorporated, Wilson Foods Corporation, Concordia Foods Corporation, Dixie
Foods Company and Shreveport Foods Company.
SECTION 1.2. Intercreditor Agreement Definitions; Use of Defined
Terms. Unless otherwise defined herein, capitalized terms defined in the
Intercreditor Agreement are used herein as defined therein. Unless otherwise
defined or the context otherwise requires, terms for which meanings are
provided in this Agreement shall have such meanings when used in the Disclosure
Schedule and in each Note, Borrowing Request, Continuation/Conversion Notice,
Loan Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Appendix A) shall be made, and all
financial statements required to be delivered hereunder or thereunder shall be
prepared in accordance with those generally accepted accounting principles
("GAAP") applied in the preparation of the financial statements referred to in
Section 6.5; provided, however, that for purposes of calculating compliance
with the covenants set forth in Appendix A, the effects of changes subsequent
to May 31, 1996 in the Borrower's LIFO inventory reserve shall be eliminated.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the
conditions of this Agreement (including Article V), each Lender severally
agrees to make Loans pursuant to the Commitments described in this Section 2.1.
SECTION 2.1.1. Commitment of Each Lender. From time to time on any
Business Day occurring prior to such Lender's Commitment Termination Date, each
Lender will make loans (relative to such Lender, and of any type, its "Loans")
to the Borrower equal to such Lender's Percentage of the aggregate amount of
the Borrowing requested by the Borrower to be made on such day. The commitment
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of each Lender described in this Section 2.1.1 is herein referred to as its
"Commitment." On the terms and subject to the conditions hereof, the Borrower
may from time to time borrow, prepay and reborrow Loans.
SECTION 2.1.2. Lenders Not Required To Make Loans. No Lender shall
be required to make any Loan (x) if, after giving effect thereto, the aggregate
outstanding principal amount of all Loans plus the Effective Amount of all L/C
Obligations
(a) of all Lenders would exceed the lesser of (i) the
Available Borrowing Base and (ii) the Commitment Amount, or
(b) of such Lender would exceed such Lender's Percentage
of the lesser of (i) the Available Borrowing Base and (ii) the
Commitment Amount, or
if, after giving effect thereto, any loans are outstanding under the Seasonal
(y) Line of Credit Agreement.
SECTION 2.2. Reductions of Commitment Amount. The Borrower may,
from time to time on any Business Day occurring after the time of the initial
Borrowing hereunder, voluntarily reduce the Commitment Amount; provided,
however, that all such reductions shall require at least five Business Days'
prior notice to the Agent and be permanent, and any partial reduction of the
Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral
multiple of $1,000,000. The Commitment Amount shall be permanently reduced
from time to time by the amount of each prepayment out of Scheduled Capital
Infusion Proceeds and Disposition Proceeds.
SECTION 2.3. Borrowing Procedure. By delivering a Borrowing
Request to the Agent on or before 12:00 Noon, New York City time, on a Business
Day, the Borrower may from time to time irrevocably request, on not less than
three Business Days' notice (in the case of a request for a Eurodollar Rate
Loan) or on the day of the requested Borrowing (in the case of a request for a
Base Rate Loan), that a Borrowing be made in a minimum amount of $500,000 and
an integral multiple of $100,000 or in the unused amount of the Commitments;
provided, however, that no Eurodollar Rate Loans shall be made prior to the
Subordinated Debt Application Date. The Agent shall promptly advise each
Lender of such Borrowing Request. On the terms and subject to the conditions
of this Agreement, each Borrowing shall be comprised of the type of Loans, and
shall be made on the Business Day, specified in such Borrowing Request. On or
before 12:00 Noon, New York City time, on such Business Day if the requested
Borrowing is for Eurodollar Rate Loans or on or before 2:00 p.m., New York City
time, if the requested Borrowing is for Base Rate Loans each Lender shall
deposit with the Agent same-day funds in an amount equal to such Lender's
Percentage of the
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requested Borrowing. Such deposit will be made to an account which the Agent
shall specify from time to time by notice to the Lenders. To the extent funds
are received from the Lenders, the Agent shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in
its Borrowing Request. No Lender's obligation to make any Loan shall be
affected by any other Lender's failure to make any Loan.
SECTION 2.4. Continuation and Conversion Elections. By delivering
a Continuation/Conversion Notice to the Agent on or before 11:00 a.m., New York
City time, on a Business Day, the Borrower may from time to time irrevocably
elect on not less than three Business Days' notice that the total amount, or
any portion in an aggregate minimum amount of $500,000 and an integral multiple
of $100,000, of any Loans be, in the case of Base Rate Loans, converted into
Eurodollar Rate Loans or, in the case of Eurodollar Rate Loans, be converted
into a Base Rate Loan or continued as a Eurodollar Rate Loan (in the absence of
delivery of a Continuation/Conversion Notice with respect to any Eurodollar
Rate Loan at least three Business Days before the last day of the then current
Interest Period with respect thereto, such Eurodollar Rate Loan shall, on such
last day, automatically convert to a Base Rate Loan); provided, however, that
(i) each such conversion or continuation shall be pro-rated among the
applicable outstanding Loans of all Lenders, and (ii) no portion of the
outstanding principal amount of any Loans may be continued as, or be converted
into, Eurodollar Rate Loans when any Default has occurred and is continuing or
prior to the Subordinated Debt Proceeds Application.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill
its obligation to make, continue or convert Eurodollar Rate Loans hereunder by
causing one of its foreign branches or Affiliates (or an international banking
facility created by such Lender) to make or maintain such Eurodollar Rate Loan;
provided, however, that such Eurodollar Rate Loan shall nonetheless be deemed
to have been made and to be held by such Lender, and the obligation of the
Borrower to repay such Eurodollar Rate Loan shall nevertheless be to such
Lender for the account of such foreign branch, Affiliate or international
banking facility. In addition, the Borrower hereby consents and agrees that,
for purposes of any determination to be made for purposes of Sections 4.1, 4.2,
4.3 or 4.4, it shall be conclusively assumed that each Lender elected to fund
all Eurodollar Rate Loans by purchasing, as the case may be, Dollar
certificates of deposit in the U.S. or Dollar deposits in its LIBOR Office's
interbank eurodollar market.
SECTION 2.6. Notes. Each Lender's Loans under its Commitment
shall be evidenced by a Note payable to the order of such Lender in a maximum
principal amount equal to such Lender's Percentage of the original Commitment
Amount. The Borrower hereby irrevocably authorizes each Lender to make (or
cause to be made)
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appropriate notations on the grid attached to such Lender's Note (or on any
continuation of such grid), which notations, if made, shall evidence, inter
alia, the date of, the outstanding principal of, and the interest rate and
Interest Period applicable to the Loans evidenced thereby. Such notations
shall be conclusive and binding on the Borrower absent manifest error;
provided, however, that the failure of any Lender to make any such notations
shall not limit or otherwise affect any Obligations of the Borrower.
SECTION 2.7. The Letter of Credit Subfacility. (a) On the terms
and conditions set forth herein (i) the Issuing Lender may, in its discretion
at the request of the Borrower, (A) from time to time on any Business Day prior
to the Commitment Termination Date, issue Letters of Credit for the account of
the Borrower, and amend or renew Letters of Credit previously issued by it, in
accordance with subsections 2.8(c) and 2.8(d), and (B) honor properly drawn
drafts under the Letters of Credit issued by it; and (ii) the Lenders severally
agree to participate in Letters of Credit Issued for the account of the
Borrower; provided that the Issuing Lender shall not be obligated to Issue, and
no Lender shall be obligated to participate in, any Letter of Credit if as of
the date of Issuance of such Letter of Credit (the "Issuance Date") the
Effective Amount of all L/C Obligations plus the aggregate amount of all Loans
exceeds the lesser of (x) the Commitment Amount and (y) the Available Borrowing
Base.
(b) The Issuing Lender shall be under no obligation to
Issue any Letter of Credit.
SECTION 2.8. Issuance, Amendment and Renewal of Letters of Credit.
(a) The Issuing Lender may in its discretion issue each Letter of Credit upon
the irrevocable written request of the Borrower received by the Agent (who
shall forward it to the Issuing Lender) at least four days (or such shorter
time as the Issuing Lender and the Agent may agree in a particular instance in
their sole discretion) prior to the proposed date of issuance. Each such
request for issuance of a Letter of Credit shall be made in an original writing
or by facsimile in the form of an L/C Application, and shall specify in form
and detail satisfactory to the Issuing Lender: (i) the proposed date of
issuance of the Letter of Credit (which shall be a Business Day); (ii) the face
amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit;
(iv) the name and address of the beneficiary thereof; (v) the documents to be
presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; and (vii) such other matters as
the Issuing Lender may require.
(b) Unless the Issuing Lender has received, on or before
the Business Day immediately preceding the date the Issuing Lender is to issue
a requested Letter of Credit, notice from the Agent
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directing the Issuing Lender not to issue such Letter of Credit because such
issuance is not then permitted under subsection 2.7(a) as a result of the
limitations set forth in clause (1) or (2) thereof, then subject to the terms
and conditions hereof, the Issuing Lender may, on the requested date, issue a
Letter of Credit for the account of the Borrower in accordance with the Issuing
Lender's usual and customary business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Commitment Termination Date, the Issuing Lender
may upon the written request of the Borrower received by the Agent (who shall
forward it to the Issuing Lender) at least five days (or such shorter time as
the Issuing Lender and the Agent may agree in a particular instance in their
sole discretion) prior to the proposed date of amendment, amend any Letter of
Credit issued by it. Each such request for amendment of a Letter of Credit
shall be made in an original writing or by facsimile, made in the form of an
L/C Amendment Application and shall specify in form and detail satisfactory to
the Issuing Lender: (i) the Letter of Credit to be amended; (ii) the proposed
date of amendment of such Letter of Credit (which shall be a Business Day);
(iii) the nature of the proposed amendment; and (iv) such other matters as the
Issuing Lender may require. The Issuing Lender shall have no obligation to
amend any Letter of Credit. The Agent will promptly notify the Lenders of the
receipt by it of any L/C Application or L/C Amendment Application.
(d) The Issuing Lender and the Lenders agree that, while
a Letter of Credit is outstanding and prior to the Commitment Termination Date,
upon the written request of the Borrower received by the Agent (who shall
forward it to the Issuing Lender) at least five days (or such shorter time as
the Issuing Lender and the Agent may agree in a particular instance in their
sole discretion) prior to the proposed date of notification of renewal, the
Issuing Lender shall be entitled to authorize the automatic renewal of any
Letter of Credit issued by it. Each such request for renewal of a Letter of
Credit shall be made in an original writing or by facsimile in the form of an
L/C Amendment Application, and shall specify in form and detail satisfactory to
the Issuing Lender: (i) the Letter of Credit to be renewed; (ii) the proposed
date of notification of renewal of such Letter of Credit (which shall be a
Business Day); (iii) the revised expiry date of such Letter of Credit (which,
unless all Lenders otherwise consent, shall be prior to the Commitment
Termination Date); and (iv) such other matters as the Issuing Lender may
require. The Issuing Lender shall be under no obligation to renew any Letter
of Credit. If any outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from the
Issuing Lender that such Letter of Credit shall not be renewed, and if at the
time of renewal the Issuing Lender would be entitled to authorize the automatic
renewal of such Letter of Credit in
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accordance with this subsection 2.8(d) upon the request of the Borrower but the
Issuing Lender shall not have received any L/C Amendment Application from the
Borrower with respect to such renewal or other written direction by the
Borrower with respect thereto, the Issuing Lender shall nonetheless be
permitted to allow such Letter of Credit to renew, and the Borrower and the
Lenders hereby authorize such renewal, and, accordingly, the Issuing Lender
shall be deemed to have received an L/C Amendment Application from the Borrower
requesting such renewal.
(e) The Issuing Lender may, at its election (or as
required by the Agent at the direction of the Required Lenders), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than the Commitment
Termination Date.
(f) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Lender will deliver to the Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or
amendment to or renewal of a Letter of Credit.
SECTION 2.9. Risk Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter of Credit,
each Lender shall be deemed to, and hereby irrevocably and unconditionally
agrees to, purchase from the Issuing Lender a participation in such Letter of
Credit and each drawing thereunder in an amount equal to the product of (i)
such Lender's Percentage times (ii) the maximum amount available to be drawn
under such Letter of Credit and the amount of such drawing, respectively.
(b) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Issuing Lender
will promptly notify the Borrower and the Agent. The Borrower shall reimburse
the Issuing Lender prior to 12:00 Noon, New York time, on each date that any
amount is paid by the Issuing Lender under any Letter of Credit (each such
date, an "Honor Date"), in an amount equal to the amount so paid by the Issuing
Lender. If the Borrower fails to reimburse the Issuing Lender for the full
amount of any drawing under any Letter of Credit by 12:00 Noon, New York time
on the Honor Date, the Issuing Lender will promptly notify the Agent and the
Agent will promptly
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notify each Lender thereof, and the Borrower shall be deemed to have requested
that Base Rate Loans be made by the Lenders to be disbursed on the Honor Date
under such Letter of Credit, subject to the amount of the unutilized portion of
the Commitment Amount and subject to the conditions set forth in Section 5.2.
Any notice given by the Issuing Lender or the Agent pursuant to this subsection
2.9(b) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(c) Each Lender shall upon any notice pursuant to subsection
2.9(b) make available to the Agent for the account of the Issuing Lender an
amount in Dollars and in immediately available funds equal to its Percentage of
the amount of the drawing, whereupon the participating Lenders shall (subject
to subsection 2.9(d)) each be deemed to have made a Loan consisting of a Base
Rate Loan to the Borrower in such amount. If any Lender so notified fails to
make available to the Agent for the account of the Issuing Lender the amount of
such Lender's Percentage of the amount of such drawing by no later than 2:00
p.m., New York time on the Honor Date, then interest shall accrue on such
Lender's obligation to make such payment, from the Honor Date to the date such
Lender makes such payment, at a rate per annum equal to the Federal Funds Rate
in effect from time to time during such period. The Agent will promptly give
notice of the occurrence of the Honor Date, but failure of the Agent to give
any such notice on the Honor Date or in sufficient time to enable any Lender to
effect such payment on such date shall not relieve such Lender from its
obligations under this Section 2.9.
(d) With respect to any unreimbursed drawing that is not
converted into Loans consisting of Base Rate Loans in whole or in part, because
of the Borrower's failure to satisfy the conditions set forth in Section 5.2 or
for any other reason, the Borrower shall be deemed to have incurred from the
Issuing Lender an L/C Borrowing in the amount of such drawing, which L/C
Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at a rate per annum equal to the Base Rate plus 2% per annum, and
each Lender's payment to the Issuing Lender pursuant to subsection 2.9(c) shall
be deemed payment in respect of its participation in such L/C Borrowing and
shall constitute an L/C Advance from such Lender in satisfaction of its
participation obligation under this Section 2.9.
(e) Each Lender's obligation in accordance with this
Agreement to make Loans or L/C Advances, as contemplated by this Section 2.9,
as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or
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other right which such Lender may have against the Issuing Lender, the Borrower
or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of an Event of Default, a Default or a material adverse event with
respect to the Borrower; or (iii) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided that each
Lender's obligation to make Loans under this Section 2.9 is subject to the
conditions set forth in Section 5.2.
SECTION 2.10. Repayment of Participations. (a) Upon (and only
upon) receipt by the Agent for the account of the Issuing Lender of immediately
available funds from the Borrower (i) in reimbursement of any payment made by
the Issuing Lender under a Letter of Credit with respect to which any Lender
has paid the Agent for the account of the Issuing Lender for such Lender's
participation in such Letter of Credit pursuant to Section 2.9 or (ii) in
payment of interest thereon, the Agent will pay to each Lender, in the same
funds as those received by the Agent for the account of the Issuing Lender, the
amount of such Lender's Percentage of such funds, and the Issuing Lender shall
receive the amount of the Percentage of such funds of any Lender that did not
so pay the Agent for the account of the Issuing Lender.
(b) If the Agent or the Issuing Lender is required at any
time to return to the Borrower or to a trustee, receiver, liquidator or
custodian, or to any official in any Insolvency Proceeding, any portion of any
payment made by the Borrower to the Agent for the account of the Issuing Lender
pursuant to subsection 2.10(a) in reimbursement of a payment made under a
Letter of Credit or interest or fee thereon, each Lender shall, on demand of
the Agent, forthwith return to the Agent or the Issuing Lender the amount of
its Percentage of any amount so returned by the Agent or the Issuing Lender
plus interest thereon from the date such demand is made to the date such amount
is returned by such Lender to the Agent or the Issuing Lender, at a rate per
annum equal to the Federal Funds Rate in effect from time to time.
SECTION 2.11. Role of the Issuing Lender. (a) Each Lender and the
Borrower agree that, in paying any drawing under a Letter of Credit, the
Issuing Lender shall not have any responsibility to obtain any document (other
than any sight draft and certificate expressly required by such Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such
document.
(b) Neither the Issuing Lender nor any of its respective
correspondents, participants or assignees shall be liable to any Lender for:
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Lenders (including the Required Lenders, as applicable);
(ii) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii)
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the due execution, effectiveness, validity or enforceability of any L/C-Related
Document.
(c) The Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided that this assumption is not intended to, and shall
not, preclude the Borrower's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement.
Neither the Issuing Lender nor any of its respective correspondents,
participants or assignees shall be liable or responsible for any of the matters
described in clauses (i) through (vii) of Section 2.12; provided that, anything
in such clauses to the contrary notwithstanding, the Borrower may have a claim
against the Issuing Lender, and the Issuing Lender may be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Borrower which the Borrower
proves were caused by the Issuing Lender's willful misconduct or gross
negligence or the Issuing Lender's willful failure to pay under any Letter of
Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of such Letter
of Credit. In furtherance and not in limitation of the foregoing: (i) the
Issuing Lender may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Lender shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason.
SECTION 2.12. Obligations Absolute. The obligations of the
Borrower under this Agreement and any L/C-Related Document to reimburse the
Issuing Lender for a drawing under a Letter of Credit, and to repay any L/C
Borrowing and any drawing under a Letter of Credit converted into Loans, shall
be unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
the Borrower in respect of any Letter of Credit or any other amendment
or waiver of or any consent to departure from all or any of the
L/C-Related Documents;
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(iii) the existence of any claim, set-off, defense
or other right that the Borrower may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting),
the Issuing Lender or any other Person, whether in connection with
this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or any loss or
delay in the transmission or otherwise of any document required in
order to make a drawing under any Letter of Credit;
(v) any payment by the Issuing Lender under any
Letter of Credit against presentation of a draft or certificate that
does not strictly comply with the terms of such Letter of Credit; or
any payment made by an Issuing Lender under any Letter of Credit to
any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the obligations of the
Borrower in respect of any Letter of Credit; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor.
SECTION 2.13. Cash Collateral Pledge. Subject in all cases to the
Intercreditor Agreement, if (i) any Letter of Credit remains outstanding and
partially or wholly undrawn as of the Commitment Termination Date or (ii) the
Borrower is required to Cash Collateralize Letters of Credit pursuant to
Section 3.1 or 8.3 then the Borrower shall immediately Cash Collateralize the
L/C Obligations in an amount equal to (a) in the case of clause (i) above, the
maximum amount then available to be drawn under all Letters of Credit and (b)
in the case of clause (ii) above, the amount required pursuant to Section 3.1
or 8.3.
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SECTION 2.14. Letter of Credit Fees. (a) The Borrower shall pay to
the Agent for the account of each Lender a letter of credit fee with respect to
each Letter of Credit equal to the L/C Fee Rate per annum of the average daily
maximum amount available to be drawn on such Letter of Credit, computed on a
quarterly basis in advance on the first Business Day of each calendar quarter.
The letter of credit fees shall be due and payable quarterly in advance on the
first Business Day of each calendar quarter during which Letters of Credit are
outstanding, commencing on the first such quarterly date to occur after the
date hereof, through the Commitment Termination Date (or such later date upon
which all outstanding Letters of Credit shall expire or be fully drawn).
(b) The Borrower shall pay to the Issuing Lender a letter
of credit fronting fee for each Letter of Credit issued by the Issuing Lender
on the date of Issuance at a rate per annum equal to 0.25% of the maximum
original stated amount of such Letter of Credit.
(c) The letter of credit fees payable under subsection
2.14(a) and the fronting fees payable under subsection 2.14(b) shall be due and
payable quarterly in advance on the last Business Day of each calendar quarter
during which Letters of Credit are outstanding, commencing on the first such
quarterly date to occur after the date hereof, through the Commitment
Termination Date (or such later date upon which all outstanding Letters of
Credit shall expire or be fully drawn).
(d) The Borrower shall pay to the Issuing Lender from
time to time on demand the normal issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of the Issuing Lender
relating to letters of credit as from time to time in effect.
SECTION 2.15. Uniform Customs and Practice. The Uniform Customs
and Practice for Documentary Credits as published by the International Chamber
of Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in such Letter of Credit) apply to each
Letter of Credit.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall repay
in full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower:
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(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Loans; provided, however, that
(i) any such prepayment shall be made pro rata
among Loans of the same type and, if applicable, having the
same Interest Period of all Lenders;
(ii) all voluntary prepayments of Eurodollar Loans
shall require at least five Business Days' prior written
notice to the Agent; and
(iii) all such voluntary partial prepayments shall be
in an aggregate minimum amount of $500,000 and an integral
multiple of $100,000;
(b) shall, on each date when any reduction in the
Commitment Amount shall become effective, including pursuant to
Section 2.2, make a mandatory prepayment of all Loans and/or Cash
Collateralize outstanding Letters of Credit in an amount equal to the
excess, if any, of (i) the sum of the aggregate outstanding principal
amount of all Loans and the Effective Amount of all L/C Obligations
over (iii) the Commitment Amount as so reduced;
(c) shall, if on any date the sum of aggregate principal
amount of outstanding Loans plus the Effective Amount of all L/C
Obligations exceeds the Available Borrowing Base, as calculated in the
then most recently delivered Borrowing Base Certificate, first make a
mandatory prepayment of all Loans in an amount equal to the lesser of
(i) such excess and (ii) the aggregate principal amount of all Loans
outstanding and second after all Loans are repaid, Cash Collateralize
the L/C Obligations in the remaining amount of such excess; and
(d) shall, on each date proceeds of Capital Infusion
Proceeds or Disposition Proceeds are received by the Borrower or any
Subsidiary, first make a mandatory prepayment of the Loans in an
amount equal to the lesser of (i) the amount as provided in the
Intercreditor Agreement and (ii) the aggregate principal amount of all
Loans outstanding; and second after all Loans are repaid, Cash
Collateralize the L/C Obligations in the remaining amount as provided
in the Intercreditor Agreement; provided that, with respect to
Scheduled Capital Infusion Proceeds, the Borrower shall make a
mandatory prepayment of the Obligations and the other Creditor
Obligations on or before April 30, 1997 in an amount equal to the
greater of (x) $15,000,000 and (y) 50% of such net Capital Infusion
Proceeds, to be applied among the Creditor Obligations as provided in
the Intercreditor Agreement; and
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(e) shall, immediately upon any acceleration of the
Stated Maturity Date of any Loans pursuant to Section 8.2 or Section
8.3, repay all Loans, unless, pursuant to Section 8.3, only a portion
of all Loans is so accelerated.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4. No voluntary
prepayment of principal of any Loans shall cause a reduction in the Commitment
Amount unless so specified.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
SECTION 3.2.1. Rates. Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, the Borrower may elect
that Loans comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a
Base Rate Loan, equal to (x) the sum of the Alternate Base Rate from
time to time in effect plus 0.25% prior to the Scheduled Proceeds
Application Date, or (y) the Alternate Base Rate from time to time in
effect on and after the Scheduled Proceeds Application Date; and
(b) on that portion maintained as a Eurodollar Rate Loan,
during each Interest Period applicable thereto, equal to the sum of
the LIBOR Rate (Reserve Adjusted) for such Interest Period, plus the
Applicable Margin then in effect.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal
amount of any Loan is due and payable (whether on the Stated Maturity Date,
upon acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to the rate which would otherwise be in
effect, plus a margin of 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall
be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) if the Borrower reduces the Commitment to zero, on
the date of any payment or prepayment, in whole, of the principal
outstanding on such Loan pursuant to Section 3.1(b);
(c) with respect to Base Rate Loans, on each Monthly
Payment Date occurring after the Effective Date;
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(d) with respect to Eurodollar Rate Loans, the last day
of each applicable Interest Period and if such Eurodollar Rate Loan is
prepaid prior to the last day of such Interest Period, on the date of
such prepayment; and
(e) on that portion of any Loans the Stated Maturity Date
of which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth
in this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Agent for the account of each Lender, for the period (including any portion
thereof when its Commitment is suspended by reason of the Borrower's inability
to satisfy any condition of Article V) commencing on the Effective Date and
continuing through such Lender's Commitment Termination Date, a commitment fee
at the rate of .25 of 1% per annum on such Lender's Percentage of the sum of
the average daily unused portion of the Commitment Amount. Such commitment
fees shall be payable by the Borrower in arrears on each Monthly Payment Date,
commencing with the first such day following the Effective Date and on such
Lender's Commitment Termination Date.
SECTION 3.3.2. Agent's Fee. The Borrower agrees to pay to the Agent
for its own account, the amounts set forth in the Agent's Fee Letter at the
times set forth therein for payment.
SECTION 3.3.3. Restructuring Fee. The Borrower agrees to pay to the
Agent for the account of each Lender on the Effective Date a restructuring fee
equal to 0.25% per annum on the principal amount of such Lender's Loans
outstanding under the Revolving Credit Agreement computed for the period from
and including August 1, 1996 to the Effective Date.
ARTICLE IV
CERTAIN EURODOLLAR RATE AND OTHER PROVISIONS
SECTION 4.1. Eurodollar Rate Lending Unlawful. If any Lender
shall determine (which determination shall, upon notice thereof to the Borrower
and the Lenders, be conclusive and binding on the Borrower) that the
introduction of or any change in or in the interpretation of any law makes it
unlawful, or any central
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bank or other governmental authority asserts that it is unlawful, for such
Lender to make, continue or maintain any Loan as, or to convert any Loan into,
a Eurodollar Rate Loan, the obligations of all Lenders to make, continue,
maintain or convert any such Loans shall, upon such determination, forthwith be
suspended until such Lender shall notify the Agent that the circumstances
causing such suspension no longer exist, and all Eurodollar Rate Loans shall
automatically convert into Base Rate Loans at the end of the then current
Interest Periods with respect thereto or sooner, if required by such law or
assertion.
SECTION 4.2. Deposits Unavailable. If the Agent shall have
determined that:
(a) Dollar certificates of deposit or Dollar deposits, as
the case may be, in the relevant amount and for the relevant Interest
Period are not available to RBN in its relevant market; or
(b) by reason of circumstances affecting RBN's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to Eurodollar Rate Loans of such type;
then, upon notice from the Agent to the Borrower and the Lenders, the
obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, Eurodollar Rate Loans
shall forthwith be suspended until the Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased Eurodollar Rate Loan Costs, etc. The
Borrower agrees to reimburse each Lender for any increase in the cost to such
Lender of, or any reduction in the amount of any sum receivable by such Lender
in respect of, making, continuing or maintaining (or of its obligation to make,
continue or maintain) any Loans as, or of converting (or of its obligation to
convert) any Loans into, Eurodollar Rate Loans. Such Lender shall promptly
notify the Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt of such
notice, and such notice shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any
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portion of the principal amount of any Loan as, or to convert any portion of
the principal amount of any Loan into, a Eurodollar Rate Loan) as a result of:
(a) any conversion or repayment or prepayment of the
principal amount of any Eurodollar Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether
pursuant to Section 3.1 or otherwise;
(b) any Loans not being made as Eurodollar Rate Loans in
accordance with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into,
Eurodollar Rate Loans in accordance with the Continuation/ Conversion
Notice therefor;
then, upon the written notice of such Lender to the Borrower (with a copy to
the Agent), the Borrower shall, within five days of its receipt thereof, pay
directly to such Lender such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or expense. Such written
notice (which shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitment or the Loans made by such Lender is reduced to a
level below that which such Lender or such controlling Person could have
achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by such Lender to the Borrower, the Borrower
shall immediately pay directly to such Lender additional amounts sufficient to
compensate such Lender or such controlling Person for such reduction in rate of
return. A statement of such Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In determining such
amount, such Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
SECTION 4.6. Taxes. All payments by the Borrower of principal of,
and interest on, the Loans and all other amounts payable hereunder shall be
made free and clear of and without
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deduction for any present or future income, excise, stamp or franchise taxes
and other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise taxes and
taxes imposed on or measured by any Lender's net income or receipts (such
non-excluded items being called "Taxes"). In the event that any withholding or
deduction from any payment to be made by the Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation, then
the Borrower will:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(c) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount
such Lender would have received had no such withholding or deduction
been required.
Moreover, if any Taxes are directly asserted against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder, the
Agent or such Lender may pay such Taxes and the Borrower will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such Person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had not such Taxes been
asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 4.6, a distribution hereunder by
the Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
Upon the request of the Borrower or the Agent, each Lender that is
organized under the laws of a jurisdiction other than the United States shall,
prior to the due date of any payments under the Notes, execute and deliver to
the Borrower and the Agent, on or about the first scheduled payment date in
each Fiscal Year, one or more (as the Borrower or the Agent may reasonably
request) United States Internal Revenue Service Forms 4224 or Forms 1001 or
such other forms or documents (or successor forms or documents),
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appropriately completed, as may be applicable to establish the extent, if any,
to which a payment to such Lender is exempt from withholding or deduction of
Taxes.
SECTION 4.7. Payments, Computations, etc. Unless otherwise
expressly provided, all payments by the Borrower pursuant to this Agreement,
the Notes or any other Loan Document shall be made by the Borrower to the Agent
for the pro rata account of the Lenders entitled to receive such payment. All
such payments required to be made to the Agent shall be made, without setoff,
deduction or counterclaim, not later than 11:00 a.m., New York City time, on
the date due, in same day or immediately available funds, to such account as
the Agent shall specify from time to time by notice to the Borrower. Funds
received after that time shall be deemed to have been received by the Agent on
the next succeeding Business Day. The Agent shall promptly remit in same day
funds to each Lender its share, if any, of such payments received by the Agent
for the account of such Lender. All interest and fees shall be computed on the
basis of the actual number of days (including the first day but excluding the
last day) occurring during the period for which such interest or fee is payable
over a year comprised of 360 days (or, in the case of interest on a Base Rate
Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made
shall otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (c) of the definition of the term
"Interest Period" with respect to Eurodollar Rate Loans) be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan (other than pursuant to the terms
of Sections 4.3, 4.4 and 4.5) in excess of its pro rata share of payments then
or therewith obtained by all Lenders, such Lender shall purchase from the other
Lenders such participations in Loans made by them as shall be necessary to
cause such purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and each Lender which has sold a
participation to the purchasing Lender shall repay to the purchasing Lender the
purchase price to the ratable extent of such recovery together with an amount
equal to such selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required
repayment to the purchasing Lender
to
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(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of
such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of
any Default described in clauses (a) through (d) of Section 8.19 or any other
Event of Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due), and (as security for such
Obligations) the Borrower hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter maintained with such Lender; provided, however,
that any such appropriation and application shall be subject to the provisions
of Section 4.8. Each Lender agrees promptly to notify the Borrower and the
Agent after any such setoff and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of each Lender under this Section are
in addition to other rights and remedies (including other rights of setoff
under applicable law or otherwise) which such Lender may have.
SECTION 4.10. Use of Proceeds. Proceeds of each Borrowing shall be
used for general corporate purposes and working capital purposes of the
Borrower and its Subsidiaries. Without limiting the foregoing, no proceeds of
any Loan will be used to acquire any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any
"margin stock," as defined in F.R.S. Board Regulation U.
ARTICLE V
CONDITIONS TO RESTATEMENT AND BORROWING
SECTION 5.1. Restatement. The effectiveness of the amendment and
restatement of the Revolving Credit Agreement by this
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Agreement shall be subject to the prior or concurrent satisfaction of each of
the conditions precedent set forth in this Section 5.1.
SECTION 5.1.1. Equity Infusion. The Borrower shall have received
cash proceeds of an additional $3,000,000 in capital contributions from one or
more of its shareholders upon terms and conditions satisfactory to the Lenders
and the Agent shall have received evidence satisfactory to the Agent of such
receipt.
SECTION 5.1.2. Resolutions, etc. The Agent shall have
received from the Borrower and each Subsidiary a certificate, dated a date
satisfactory to the Agent, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full
force and effect authorizing the execution, delivery and performance
of this Agreement, the Notes and each other Loan Document to be
executed by it; and
(b) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement, the Notes
and each other Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary or Assistant Secretary of the
Borrower or such Subsidiary, as the case may be, canceling or amending such
prior certificate.
SECTION 5.1.3. Delivery of Notes. The Agent shall have received,
for the account of each Lender, its Notes duly executed and delivered by the
Borrower.
SECTION 5.1.4. Intercreditor Agreement; Other Financing Agreements.
The Intercreditor Agreement shall have been executed by the parties thereto,
and the Borrower and its Subsidiaries shall have executed and delivered to the
Collateral Agent the Security Documents and the Subsidiaries shall have
executed and delivered to the Collateral Agent the Subsidiaries Guaranty. The
Financing Agreements (other than this Agreement) shall have been amended and/or
restated in form and substance satisfactory to the Lenders and consistent with
this Agreement.
SECTION 5.1.5. Environmental Report. The Agent shall have received
Phase I environmental assessments with respect to the properties of the
Borrower to be mortgaged under the Security Documents which assessments shall
be, in form and substance, satisfactory to the Lenders.
SECTION 5.1.6. Opinion of Counsel. The Agent shall have received
opinions, dated a date satisfactory to the Agent and addressed to the Agent and
all Lenders, from Honigman, Miller,
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Schwartz & Cohn, counsel to the Borrower, substantially in the form of Exhibit
F hereto.
SECTION 5.1.7. Closing Fees, Expenses, etc. The Agent shall have
received for its own account, or for the account of each Lender, as the case
may be, all fees, costs and expenses due and payable pursuant to Sections 3.3
and 10.3, if then invoiced.
SECTION 5.2. All Borrowings. The obligation of each Lender to
fund any Loan on the occasion of any Borrowing shall be subject to the
satisfaction of each of the conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to any Borrowing (but, if any Default of the
nature referred to in Section 8.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds thereof) the following statements shall be true and
correct:
(a) the representations and warranties set forth in
Article VI (excluding, however, those contained in Section 6.7) shall
be true and correct with the same effect as if then made (unless
stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such
earlier date);
(b) except as disclosed by the Borrower to the Agent and
the Lenders pursuant to Section 6.7:
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be pending
or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries which might materially
adversely affect the Borrower's consolidated business,
operations, assets, revenues, properties or prospects or which
purports to affect the legality, validity or enforceability of
this Agreement, the Notes or any other Loan Document; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 6.7
which might materially adversely affect the consolidated
businesses, operations, assets, revenues, properties or
prospects of the Borrower and its Subsidiaries;
(c) no Default shall have then occurred and be
continuing, and neither the Borrower nor any of its
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Subsidiaries are in material violation of any law or governmental
regulation or court order or decree;
(d) the sum of the aggregate outstanding principal amount of
the Loans plus the Effective Amount of all L/C Obligations shall not
exceed the Available Borrowing Base, as calculated in the then most
recently delivered Borrowing Base Certificate, and the Borrower shall
not be delinquent in the delivery of any Borrowing Base Certificate;
and
(e) no loans shall be outstanding under the Seasonal Line of
Credit Agreement.
SECTION 5.2.2. Borrowing Request. The Agent shall have received a
Borrowing Request for such Borrowing. Each of the delivery of a Borrowing
Request and the acceptance by the Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Borrowing (both immediately before and after giving effect to such
Borrowing and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this
Agreement and to make Loans hereunder, the Borrower represents and warrants
unto the Agent and each Lender as set forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the State of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification
(except where such failure to qualify could not reasonably be expected to have
a Material Adverse Effect on the condition (financial or otherwise) of the
Borrower and the Subsidiaries taken as a whole, or on the Borrower's ability to
perform its obligations under the Loan Documents (a "Material Adverse
Effect")), and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform
its Obligations under this Agreement, the Notes and each other Loan Document
and to own and hold under lease its property and to conduct its business
substantially as currently conducted by it.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower of this
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Agreement, the Notes and each other Loan Document executed or to be executed by
it, and the Borrower's participation in the consummation of the transactions
contemplated by the Intercreditor Agreement and the other Financing Agreements
(the "Restructuring") are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not:
(a) contravene the Borrower's Organic Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower except for such contraventions, which, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect; or
(c) result in, or require the creation or imposition of,
any Lien on any of the Borrower's properties.
SECTION 6.3. Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery or performance by the Borrower of this Agreement,
the Notes or any other Loan Document or for the Borrower's participation in the
consummation of the Restructuring (other than those required for the provision
and perfection of the Liens under the Security Documents and except for those
the failure to obtain or effect could not reasonably be expected to have a
Material Adverse Effect). Neither the Borrower nor any of its Subsidiaries is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the
Notes and each other Loan Document executed by the Borrower will, on the due
execution and delivery thereof, constitute, the legal, valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms.
SECTION 6.5. Financial Information. The balance sheets of the
Borrower and each of its Subsidiaries as at May 31, 1996, and the related
statements of earnings and cash flow of the Borrower and each of its
Subsidiaries, copies of which have been furnished to the Agent and each Lender,
have been prepared in accordance with GAAP consistently applied, and present
fairly the consolidated financial condition of the corporations covered thereby
as at the dates thereof and the results of their operations for the periods
then ended.
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SECTION 6.6. No Material Adverse Change. Since the date of the
financial statements described in Section 6.5, except as disclosed in Item 6.6
of the Disclosure Schedule there has been no material adverse change in the
financial condition, operations, assets, business, properties or prospects of
the Borrower and its Subsidiaries.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no
pending or, to the knowledge of the Borrower, threatened litigation, action,
proceeding, or labor controversy affecting the Borrower or any of its
Subsidiaries, or any of their respective properties, businesses, assets or
revenues, which may materially adversely affect the financial condition,
operations, assets, business, properties or prospects of the Borrower or any
Subsidiary or which purports to affect the legality, validity or enforceability
of this Agreement, the Notes or any other Loan Document, except as disclosed in
Item 6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries,
except those Subsidiaries:
(a) which are identified in Item 6.8 ("Existing
Subsidiaries") of the Disclosure Schedule; or
(b) which are permitted to have been acquired in
accordance with Section 2.5 or 2.10 of Appendix A.
SECTION 6.9. Ownership of Properties. Set forth on Item 6.9 of
the Disclosure Schedule is a complete and accurate list of all real property
owned by the Borrower, showing as of the Effective Date the street address,
county or other relevant jurisdiction, state, record owner and book value
thereof (other than certain parcels near the Frederick facility and other real
property having an aggregate fair market value of less than $500,000). The
Borrower and each of its Subsidiaries owns good and marketable title to all of
its properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights), free and clear of all Liens, charges or claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to Section 2.3 of Appendix A.
SECTION 6.10. Taxes. The Borrower and each of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing, except
any such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books.
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SECTION 6.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement and prior to the date of any Borrowing hereunder, no steps
have been taken to terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which might result in the incurrence
by the Borrower or any member of the Controlled Group of any material
liability, fine or penalty. Except as disclosed in Item 6.11 ("Employee
Benefit Plans") of the Disclosure Schedule, neither the Borrower nor any member
of the Controlled Group has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in
Item 6.12 ("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased by the
Borrower and its Subsidiaries in material compliance with all
Environmental Laws;
(b) there have been no past, and there are no pending or
threatened:
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law; or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential
liability under any Environmental Law;
(c) there have been no Releases of Hazardous Materials
at, on or under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a material adverse effect
on the financial condition, operations, assets, business, properties
or prospects of the Borrower and its Subsidiaries;
(d) the Borrower and its Subsidiaries have been issued
and are in material compliance with all permits, certificates,
approvals, licenses and other authorizations relating to environmental
matters and necessary or desirable for their businesses;
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(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing
(with respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably
be expected to have, a material adverse effect on the financial
condition, operations, assets, business, properties or prospects of
the Borrower and its Subsidiaries;
(g) neither Borrower nor any Subsidiary of the Borrower
has directly transported or directly arranged for the transportation
of any Hazardous Material to any location which is listed or proposed
for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural resources
or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower or any Subsidiary of the Borrower that, singly or in the
aggregate, have, or may reasonably be expected to have, a material
adverse effect on the financial condition, operations, assets,
business, properties or prospects of the Borrower and its
Subsidiaries; and
(i) no conditions exist at, on or under any property now
or previously owned or leased by the Borrower which, with the passage
of time, or the giving of notice or both, would give rise to liability
under any Environmental Law.
SECTION 6.13. Regulations G, U and X. The Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Loans will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation G, U or X.
Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section with such meanings.
SECTION 6.14. Liabilities. As of the Effective Date, except for
trade payables, payroll not yet due and payable, and real
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estate, personal property and other similar taxes not yet due and payable
arising in the ordinary course of the business of the Borrower, and except for
those capitalized lease obligations, operating leases and other Indebtedness of
the Borrower disclosed in Item 6.14(a) of the Disclosure Schedule, the Borrower
does not have any capitalized lease obligations, operating leases or other
Indebtedness except the Obligations. As of the Effective Date, except as
disclosed in Item 6.14(b) of the Disclosure Schedule, the Borrower is not
liable under any Guaranty with respect to the obligations of any other Person.
SECTION 6.15. Leases. Set forth in Item 6.15 to the Disclosure
Schedule is a complete and accurate list of all leases of real property under
which the Borrower is the lessee and having an annual rental cost of more than
$50,000, showing as of the Effective Date the street address, county or other
relevant jurisdiction, state, lessor, lessee, expiration date and annual rental
cost thereof. Each such lease is the legal, valid and binding obligation of
the lessor thereof, enforceable in accordance with its terms (subject to
limitations imposed by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity) and the
effect of applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws of general application relating to or affecting creditors'
rights).
SECTION 6.16. Material Contracts. Set forth in Item 6.16 to the
Disclosure Schedule is a complete and accurate list of all material contracts
of the Borrower showing as of the Effective Date the parties, subject matter
and term thereof. As of the Effective Date, each such material contract has
been duly authorized, executed and delivered by all parties thereto, has not
been amended or otherwise modified, is in full force and effect and is binding
upon and enforceable against all parties thereto in accordance with its terms
(subject to limitations imposed by general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity)
and the effect of applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws of general application relating to or affecting creditors'
rights), and, to the best knowledge of the Borrower, as of the Effective Date,
there exists no material default under any such material contract by any party
thereto.
SECTION 6.17. Intellectual Property. Set forth in Item 6.17 to the
Disclosure Schedule is a complete and accurate list of all patents, trademarks,
trade names, service marks and copyrights, and all applications therefor and
licenses thereof, of the Borrower, showing as of the Effective Date the
jurisdiction in which registered, the registration number, the date of
registration and the expiration date.
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SECTION 6.18. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of the Borrower to the Agent or
any Lender will be, true and accurate in every material respect on the date as
of which such information is dated or certified and as of the date of execution
and delivery of this Agreement by the Agent and such Lender, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. Covenants. The Borrower agrees with the Agent and
each Lender that, until all Commitments have terminated and all Obligations
have been paid and performed in full, the Borrower will perform the obligations
set forth in Appendix A.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default."
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall
default in the payment or prepayment when due of any principal of or interest
on any Loan or L/C Obligation, or in the payment when due of any commitment fee
or of any other Obligation and such default shall continue unremedied for two
Business Days.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty
of the Borrower or any Subsidiary made or deemed to be made hereunder, or in
any other Loan Document executed by it or any other writing or certificate
furnished by or on behalf of the Borrower or any Subsidiary to the Agent, the
Collateral Agent or any Lender for the purposes of or in connection with this
Agreement or any such other Loan Document (including any certificates delivered
pursuant to Article V), is or shall be incorrect when made in any material
respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower or any Subsidiary shall default in the
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due performance and observance of any of its obligations under Section 1.8 or
Section 2 of Appendix A.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.
The Borrower shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Agent or any Lender.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower or any of its Subsidiaries having a
principal amount, individually or in the aggregate, in excess of $1,000,000; or
a default shall occur in the performance or observance of any obligation or
condition with respect to such Indebtedness having a principal amount,
individually or in the aggregate, in excess of $1,000,000, if the effect of
such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time sufficient
to permit the holder or holders of such Indebtedness, or any trustee or agent
for such holders, to cause such Indebtedness to become due and payable prior to
its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $2,000,000 shall be rendered against the Borrower or any of
its Subsidiaries and there shall be any period during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect (other than a judgment in respect of the
Ponca City Litigation for an amount not greater than the sum of $6,000,000 plus
interest accrued thereon).
SECTION 8.1.7. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan:
(a) the institution of any steps by the Borrower, any
member of its Controlled Group or any other Person to terminate a
Pension Plan if, as a result of such termination, the Borrower or any
such member could be required to make a contribution to such
Pension Plan, or could reasonably expect to incur a liability or obligation to
such Pension Plan, in excess of $2,000,000; or
(b) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA.
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SECTION 8.1.8. Control of the Borrower. Any Change in Control shall
occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of
its Subsidiaries shall:
(a) become insolvent or generally fail to pay, or admit
in writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian
for the Borrower or any of its Subsidiaries or any property of any
thereof, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries or for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days; provided, that the Borrower
and each Subsidiary hereby expressly authorize the Agent and each
Lender to appear in any court conducting any relevant proceeding
during such 60-day period to preserve, protect and defend their rights
under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding in respect of the Borrower or any
of its Subsidiaries; and, if any such case or proceeding is not
commenced by the Borrower or such Subsidiary, such case or proceeding
shall be consented to or acquiesced in by the Borrower or such
Subsidiary or shall result in the entry of an order for relief or
shall remain for 60 days undismissed; provided, that the Borrower and
each Subsidiary hereby expressly authorize the Agent and each Lender
to appear in any court conducting any such case or proceeding during
such 60-day period to preserve, protect and defend their rights under
the Loan Documents; or
(e) take any action authorizing, or in furtherance of,
any of the foregoing.
SECTION 8.1.10. Scheduled Cap[ital Infusion Proceeds. The Borrower
shall fail to receive at least $15,000,000 of Scheduled Capital Infusion
Proceeds on or before April 30, 1997.
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SECTION 8.1.11. Security Documents. The Borrower or any Subsidiary
shall fail to comply in any material respect with any one or more of the
provisions or requirements contained in the Security Documents; or any of the
Security Documents shall cease for any reason to be in full force or effect or
is declared to be null and void or the Borrower or any Subsidiary shall disavow
its respective obligations thereunder, or shall contest the validity or
enforceability of any thereof or give notice to such effect; or any Lien
purported to be granted pursuant to any of the Security Documents for any
reason (other than a release or termination thereof by the Collateral Agent or
the Creditor Parties) shall cease to be a legal, valid or enforceable Lien on
the Property subject thereto with the priority purported to be granted pursuant
to such Security Documents (other than the failure of the Collateral Agent or
any Creditor Party to take any action solely within its control).
SECTION 8.1.12. Subsidiaries Guaranty. Any Subsidiary shall fail
to comply in any material respect with any one or more of the provisions or
requirements contained in the Subsidiaries Guaranty; or the Subsidiaries
Guaranty shall cease for any reason to be in full force or effect or is
declared to be null and void (other than in respect of TAVFSC) or any
Subsidiary shall disavow its respective obligations thereunder, or shall
contest the validity or enforceability thereof or gives notice to such effect.
SECTION 8.2. Action if Bankruptcy. If any Event of Default
described in clauses (a) through (d) of Section 8.1.9) shall occur, the
Commitments (if not theretofore terminated) shall automatically terminate and
the outstanding principal amount of all outstanding Loans and all other
Obligations shall automatically be and become immediately due and payable,
without notice or demand.
SECTION 8.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (a) through (d)
of Section 8.1.9) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Agent, upon the direction of the Required Lenders, shall
by notice to the Borrower declare all or any portion of the outstanding
principal amount of the Loans and other Obligations to be due and payable
and/or an amount equal to the maximum aggregate amount that is or at any time
thereafter may become available for drawing under any outstanding Letter of
Credit (whether or not any beneficiary shall have presented, or shall be
entitled at such time to present, the drafts or other documents required to
draw under such Letter of Credit) to be immediately due and payable, and/or the
Commitments (if not theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and other Obligations which shall be so
declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate. Subject in
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all cases to the Intercreditor Agreement, any payments made in respect of the
undrawn amounts of Letters of Credit shall be applied to Cash Collateralize
such L/C Obligations.
ARTICLE IX
THE AGENT
SECTION 9.1. Actions. (a) Each Lender hereby appoints RBN as its
Agent under and for purposes of this Agreement, the Notes and each other Loan
Document. Each Lender authorizes the Agent to act on behalf of such Lender
under this Agreement, the Notes and each other Loan Document and, in the
absence of other written instructions from the Required Lenders received from
time to time by the Agent (with respect to which the Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
the Agent, pro rata according to such Lender's Percentage, from and against any
and all liabilities, obligations, losses, damages, claims, costs or expenses of
any kind or nature whatsoever which may at any time be imposed on, incurred by,
or asserted against, the Agent in any way relating to or arising out of this
Agreement, the Notes and any other Loan Document, including reasonable
attorneys' fees, and as to which the Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, claims, costs or
expenses which are determined by a court of competent jurisdiction in a final
proceeding to have resulted solely from the Agent's gross negligence or wilful
misconduct. The Agent shall not be required to take any action hereunder,
under the Notes or under any other Loan Document, or to prosecute or defend any
suit in respect of this Agreement, the Notes or any other Loan Document, unless
it is indemnified hereunder to its satisfaction. If any indemnity in favor of
the Agent shall be or become, in the Agent's determination, inadequate, the
Agent may call for additional indemnification from the Lenders and cease to do
the acts indemnified against hereunder until such additional indemnity is
given.
(b) The Issuing Lender shall act on behalf of the Lenders with
respect to any Letters of Credit Issued by it and the documents associated
therewith; provided, however, that the Issuing Lender shall have all the
benefits and immunities (i) provided to the Agent in this Article IX with
respect to any acts taken or omissions suffered by the Issuing Lender in
connection with Letters
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of Credit Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully
as if the term "Agent", as used in this Article IX, included the Issuing Lender
with respect to such acts or omissions and (ii) as additionally provided in
this Agreement with respect to the Issuing Lender.
SECTION 9.2. Funding Reliance, etc. Unless the Agent shall have
been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m.,
New York City time, on the day prior to a Borrowing, in the case of a Borrowing
of Eurodollar Loans, that such Lender will not make available the amount which
would constitute its Percentage of such Borrowing on the date specified
therefor, the Agent may assume that such Lender has made such amount available
to the Agent and, in reliance upon such assumption, make available to the
Borrower a corresponding amount. If and to the extent that such Lender shall
not have made such amount available to the Agent, such Lender and the Borrower
severally agree to repay the Agent forthwith on demand such corresponding
amount, together with interest thereon, for each day from the date the Agent
made such amount available to the Borrower to the date such amount is repaid to
the Agent, at the interest rate applicable at the time to Loans comprising such
Borrowing in the case of a repayment by the Borrower and at the rate per annum
paid or payable by the Agent in New York, New York, for federal funds purchased
overnight from other banking institutions, in the case of a repayment by a
Lender.
SECTION 9.3. Exculpation. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other
Loan Document, or in connection herewith or therewith, except for its own
wilful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor to
make any inquiry respecting the performance by the Borrower of its obligations
hereunder or under any other Loan Document. Any such inquiry which may be made
by the Agent shall not obligate it to make any further inquiry or to take any
action. The Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which the Agent believes to be genuine and to have been presented by a proper
Person.
SECTION 9.4. Successor. The Agent may resign as such at any time
upon at least 30 days' prior notice to the Borrower and all Lenders. If the
Agent at any time shall resign, the Required Lenders may (with the written
consent of the Borrower which consent shall not be unreasonably withheld or
delayed) appoint another Lender as a successor Agent, which shall thereupon
become the Agent
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hereunder. If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving notice of resignation, then the retiring Agent may
(with the written consent of the Borrower which consent shall not be
unreasonably withheld or delayed), on behalf of the Lenders, appoint a
successor Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's resignation
hereunder as the Agent, the provisions of:
(a) this Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Agent
under this Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure
to its benefit.
SECTION 9.5. Loans by RBN. RBN shall have the same rights and
powers with respect to (x) the Loans made by it or any of its Affiliates, and
(y) the Notes held by it or any of its Affiliates as any other Lender and may
exercise the same as if it were not the Agent. RBN and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or Affiliate of the Borrower as if
RBN were not the Agent hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it
has, independently of the Agent and each other Lender, and based on such
Lender's review of the financial information of the Borrower, this Agreement,
the other Loan Documents (the terms and provisions of which being satisfactory
to such Lender) and such other documents, information and investigations as
such Lender has deemed appropriate, made its own credit decision to extend its
Commitment. Each Lender also acknowledges that it will, independently of the
Agent and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
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SECTION 9.7. Copies, etc. The Agent shall give prompt notice to
each Lender of each notice or request required or permitted to be given to the
Agent by the Borrower pursuant to the terms of this Agreement (unless
concurrently delivered to the Lenders by the Borrower). The Agent will
distribute to each Lender each document or instrument received for its account
and copies of all other communications received by the Agent from the Borrower
for distribution to the Lenders by the Agent in accordance with the terms of
this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, that
no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 10.1, change the definition of
"Required Lenders," increase the Commitment Amount or the Percentage
of any Lender, reduce any fees described in Article III, or extend the
Commitment Termination Date shall be made without the consent of each
Lender and each holder of a Note;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment or prepayment of principal of or interest on any
Loan (or reduce the principal amount of or rate of interest on any
Loan) shall be made without the consent of the holder of that Note
evidencing such Loan; or
(d) affect adversely the interests, rights or obligations
of the Agent or the Issuing Lender shall be made without consent of
the Agent or the Issuing Lender, as the case may be.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Borrower in any case shall entitle it to any notice or demand
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in similar or other circumstances. No waiver or approval by the Agent, any
Lender or the holder of any Note under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval,
be applicable to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.
SECTION 10.2. Notices. All notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by facsimile and addressed, delivered or transmitted to
such party at its address, or facsimile number set forth on Schedule 10.2 or
set forth in the Lender Assignment Agreement or at such other address, Telex or
facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any notice, if transmitted by facsimile, shall be deemed
given when transmitted.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees
to pay on demand all expenses of the Agent (including the fees and
out-of-pocket expenses of counsel to the Agent and of local counsel, if any,
who may be retained by counsel to the Agent) in connection with
(a) asset or collateral inspection and auditing and
financial consultants,
(b) the negotiation, preparation, execution and delivery
of this Agreement and of each other Loan Document, including
schedules and exhibits, and any amendments, waivers, consents,
supplements or other modifications to this Agreement or any other Loan
Document as may from time to time hereafter be required, whether or not
the transactions contemplated hereby are consummated, and
(c) the preparation and review of the form of any
document or instrument relevant to this Agreement or any other Loan
Document.
The Borrower further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Agreement, the borrowings
hereunder, or the issuance of the Notes or any other Loan Documents (but not
including, to the extent reimbursement is prohibited by applicable law, the
Oklahoma real estate mortgage tax). The Borrower also agrees to reimburse the
Agent and each Lender upon demand for all reasonable out-of-pocket expenses
(including Lenders' travel expenses, attorneys' fees and legal expenses)
incurred by the Agent or such Lender in connection with (x) the negotiation of
any restructuring (including the
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Restructuring) or "work-out," whether or not consummated, of any Obligations
and (y) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution
and delivery of this Agreement by each Lender and the extension of the
Commitments, the Borrower hereby indemnifies, exonerates and holds the Agent
and each Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action
for which indemnification hereunder is sought), including reasonable attorneys'
fees and disbursements (collectively, the "Indemnified Liabilities"), incurred
by the Indemnified Parties or any of them as a result of, or arising out of, or
relating to:
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement
and any other Loan Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Borrower as the
result of any determination by the Required Lenders pursuant to
Article V not to fund any Borrowing);
(c) any investigation, litigation or proceeding related
to any acquisition or proposed acquisition by the Borrower or any of
its Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the Agent or such Lender is party thereto;
(d) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter
relating to the protection of the environment or the Release by the
Borrower or any of its Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant
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Indemnified Party's gross negligence or wilful misconduct. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders
under Section 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Commitments.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc;
Waiver. This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be executed by the Borrower and the Agent and
be deemed to be an original and all of which shall constitute together but one
and the same agreement. This Agreement shall become effective (the "Effective
Date") when counterparts hereof executed on behalf of the Borrower and each
Lender (or notice thereof satisfactory to the Agent) shall have been received
by the Agent and notice thereof shall have been given by the Agent to the
Borrower and each Lender and the conditions set forth in Section 5.1 are met.
As of the Effective Date, the Agent and the Lenders hereby waive the Borrower's
non-compliance with Article VII of the Revolving Credit Agreement and any and
all Events of Default or Unmatured Events of Default arising from the
Borrower's non-compliance with Article VII of the Revolving Credit Agreement by
the Borrower for the period ending on the Effective Date.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This
Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and
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supersede any prior agreements, written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Agent
and all Lenders; and
(b) the rights of sale, assignment and transfer of the
Lenders are subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans and Note; Participations
in Loans and Note. Each Lender may assign, or sell participations in, its
Loans and Commitment to one or more other Persons in accordance with this
Section 10.11.
SECTION 10.11.1. Assignments. Any Lender,
(a) with the written consents of the Borrower and the
Agent (which consents shall not be unreasonably delayed or withheld
and which consent, in the case of the Borrower, shall be deemed to
have been given in the absence of a written notice delivered by the
Borrower to the Agent, on or before the fifth Business Day after
receipt by the Borrower of such Lender's request for consent, stating,
in reasonable detail, the reasons why the Borrower proposes to
withhold such consent), may at any time assign and delegate to one or
more commercial banks or other financial institutions, and
(b) with notice to the Borrower and the Agent, but
without the consent of the Borrower or the Agent, may assign and
delegate to any of its Affiliates, to any other Lender or to any
Federal Reserve Bank,
(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Lender's
total Loans and Commitment (which assignment and delegation shall be of a
constant, and not a varying, percentage of all the assigning Lender's Loans and
Commitment) in a minimum aggregate amount of $5,000,000; provided, however,
that any such Assignee Lender will comply, if applicable, with the provisions
contained in the penultimate sentence of Section 4.6; and further, provided,
however, that, the Borrower and the Agent shall be entitled to continue to deal
solely and directly with such Lender in connection with the interests so
assigned and delegated to an Assignee Lender until:
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(c) written notice of such assignment and delegation,
together with payment instructions, addresses and related information
with respect to such Assignee Lender, shall have been given to the
Borrower and the Agent by such Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and
delivered to the Borrower and the Agent a Lender Assignment Agreement,
accepted by the Agent; and
(e) the processing fees described below shall have been
paid.
From and after the date that the Agent accepts such Lender Assignment
Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to
have become a party hereto and, to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Lender in
connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Agent (for delivery to the relevant Assignee Lender)
a new Note evidencing such Assignee Lender's assigned Loans and Commitment and,
if the assignor Lender has retained Loans and a Commitment hereunder, a
replacement Note in the principal amount of the Loans and Commitment retained
by the assignor Lender hereunder (such Note to be in exchange for, but not in
payment of, that Note then held by such assignor Lender). Each such Note shall
be dated the date of the predecessor Note. The assignor Lender shall mark the
predecessor Note "exchanged" and deliver it to the Borrower. Accrued interest
on that part of the predecessor Note evidenced by the new Note, and accrued
fees, shall be paid as provided in the Lender Assignment Agreement. Accrued
interest on that part of the predecessor Note evidenced by the replacement Note
shall be paid to the assignor Lender. Accrued interest and accrued fees shall
be paid at the same time or times provided in the predecessor Note and in this
Agreement. Such assignor Lender or such Assignee Lender must also pay a
processing fee to the Agent upon delivery of any Lender Assignment Agreement in
the amount of $3,000. Any attempted assignment and delegation not made in
accordance with this Section 10.11.1 shall be null and void.
SECTION 10.11.2. Participations. Any Lender may at any time sell to
one or more commercial banks or other Persons (each of such commercial banks
and other Persons being herein called a
57
<PAGE> 62
"Participant") participating interests in any of the Loans, its Commitment, or
other interests of such Lender hereunder; provided, however, that:
(a) no participation contemplated in this Section 10.11
shall relieve such Lender from its Commitment or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitment and such other obligations;
(c) the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the other Loan
Documents;
(d) no Participant, unless such Participant is an
Affiliate of such Lender or is itself a Lender, shall be
entitled to require such Lender to take or refrain from taking any
action hereunder or under any other Loan Document, except that such
Lender may agree with any Participant that such Lender will not,
without such Participant's consent, take any actions of the type
described in clause (b) or (c) of Section 10.1; and
(e) the Borrower shall not be required to pay any amount
under Section 4.6 that is greater than the amount which it would have
been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a
Lender.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.13. Waiver and Release. For and in consideration of the
agreements contained in the Amended Credit Agreements, and other good and
valuable consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the Borrower, on its own behalf, and to the extent that it is
lawfully able to do so, on behalf of its predecessors, successors, assigns,
Subsidiaries, affiliates and agents and all of their respective past, present
and future officers, directors, shareholders, employees, contractors and
attorneys, and the predecessors, heirs, successors, and assigns of each of them
(collectively referred to in this Section 10.13 as
58
<PAGE> 63
the "Releasors") do hereby jointly and severally fully RELEASE, REMISE, ACQUIT,
IRREVOCABLY WAIVE and FOREVER DISCHARGE each of the Lenders and the Agent,
together with their respective predecessors, successors, assigns, subsidiaries,
affiliates and agents and all of their respective past, present and future
officers, directors, shareholders, employees, contractors and attorneys, and
the predecessors, heirs, successors and assigns of each of them (the Lenders,
the Agent and all of the foregoing being collectively referred to in this
Section 10.13 as the "Released Parties"), from and with respect to any and all
Claims (as defined below).
As used in this Section 10.13, the term "Claims" shall mean and include any and
all, and all manner of, action and actions, cause and causes of action, suits,
disputes, controversies, claims, debts, sums of money, offset rights, defenses
to payment, agreements, promises, notes, bonds, bills, covenants, losses,
damages, judgments, executions and demands of whatever nature, known or unknown,
whether in contract, in tort or otherwise, at law or in equity, for money
damages or dues, recovery of property, or specific performance, or any other
redress or recompense which have accrued or may ever accrue, may have been had,
may be now possessed, or may or shall be possessed in the future by or on behalf
of any one or more of the Releasors against any one or more of the Released
Parties for, upon, by reason of, on account of, or arising from or out of, or by
virtue of, any transaction, event or occurrence, duty or obligation,
indemnification, agreement, promise, warranty, covenant or representation,
breach of fiduciary duty, breach of any duty of fair dealing, breach of
confidence, breach of funding commitment, undue influence, duress, economic
coercion, conflict of interest, negligence, bad faith, malpractice, violations
of federal or state securities laws or the Racketeer Influenced and Corrupt
Organizations Act, intentional or negligent infliction of mental distress,
tortious interference with contractual relations, tortious interference with
corporate governance or prospective business advantage, breach of contract,
deceptive trade practices, libel, slander, usury, conspiracy, wrongful
acceleration of any indebtedness, wrongful foreclosure or attempt to foreclose
on any collateral relating to any indebtedness, action or inaction, relationship
or activity, service rendered, matter, cause or thing, whatsoever, express or
implied, transpiring, entered into, created or existing from the beginning of
time to the date of the execution of this Section 10.13 in respect of the
Existing Credit Agreements, and shall include, but not be limited to, any and
all Claims in connection with, as a result of, by reason of, or in any way
related to or arising from the existence of any relationships or communications
by and between the Releasors and the Released Parties with respect to the
Existing Credit Agreements, and all agreements, documents and instruments
related thereto, as presently constituted and as the same may from time to time
be amended.
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<PAGE> 64
The Releasors acknowledge that they may hereafter discover facts,
which exist or existed on or before the Effective Date, different from or in
addition to those they now know or believe to be true with respect to the
Claims herein released. Notwithstanding the foregoing, the Releasors agree
that this Section 10.13 shall survive the termination hereof and shall remain
effective in all respects and waive the right to make any new, different or
additional claim on account of such different or additional facts. The
Releasors acknowledge that no representation or warranty of any kind or
character has been made to the Releasors by any one or more of the Released
Parties or any agent, representative or attorney of the Released Parties to
induce the execution of this Agreement containing this Section 10.13.
The Releasors hereby represent and warrant unto the Released Parties
that
(a) the Releasors have the full right, power, and
authority to execute and deliver this Agreement containing this Section 10.13
without the necessity of obtaining the consent of any other party;
(b) the Releasors have received independent legal advice
from attorneys of their choice with respect to the advisability of granting the
release provided herein, and with respect to the advisability of executing this
Agreement containing this Section 10.13;
(c) the Releasors have not relied upon any statements,
representations or promises of any of the Released Parties in executing this
Agreement containing this Section 10.13, or in granting the release provided
herein;
(d) the Releasors have not entered into any other
agreements or understandings relating to the Claims;
(e) the terms of this Section 10.13 are contractual, not
a mere recital, and are the result of negotiation among all the parties; and
(f) this Section 10.13 has been carefully read by, and
the contents hereof are known and understood by, and it is signed freely by the
Releasors.
The Releasors covenant and agree not to bring any claim, action, suit
or proceeding regarding or related in any manner to the matters released
hereby, and the Releasors further covenant and agree that this Section 10.13 is
a bar to any such claim, action, suit or proceeding.
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<PAGE> 65
All prior discussions and negotiations regarding the Claims have been
and are merged and integrated into, and are superseded by, this Section 10.13.
The Releasors understand, agree and expressly assume the risk of any fact not
recited, contained or embodied in this Section 10.13 which may hereafter turn
out to be other than, different from, or contrary to, the facts now known to
the Releasors or believed by the Releasors to be true, and further agree that
this Section 10.13 shall not be subject to termination, modification, or
rescission, by reason of any such difference in facts.
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THE
BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
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<PAGE> 66
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
62
<PAGE> 67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
THORN APPLE VALLEY, INC.
By_________________________________
Title:
AMENDED AND RESTATED
CREDIT AGREEMENT
S-1
<PAGE> 68
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., acting
through its U.S. branches and agencies,
including initially its New York Branch,
as Agent
By_________________________________
Title:
By_________________________________
Title:
AMENDED AND RESTATED
CREDIT AGREEMENT
S-2
<PAGE> 69
PERCENTAGE LENDERS
---------- -------
31.25% COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A.,
New York Branch
By________________________________
Title:
By_________________________________
Title:
25.0% OLD KENT BANK
By________________________________
Title:
25.0% NATIONAL CITY BANK
By________________________________
Title:
18.75% HARRIS TRUST AND SAVINGS BANK
By________________________________
Title: Vice President
____
100%
----
AMENDED AND RESTATED
CREDIT AGREEMENT
S-3
<PAGE> 70
APPENDIX A
TEMPORARY COVENANTS(1)
SECTION 1. AFFIRMATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 1 and in Sections 6.3, 6.6(e), 6.6(f), 6.6(g),
6.6(h), 6.6(i), 6.8, 6.10, 6.11, and 6.12 of the Existing Note Agreement.
SECTION 1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower will furnish, or will cause to be furnished, to each Creditor Party
and the Agent copies of the following financial statements, reports, notices
and information:
(a) Weekly Reporting -- on the last Business Day of each
week,
(i) a Borrowing Base Certificate setting forth a
calculation of the Borrowing Base as of the last Business Day
of the preceding week; and
(ii) a Weekly P&L Statement in respect of the
preceding week;
(b) Fiscal Periodic Reporting --
(i) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year, consolidated balance sheets of
the Borrower and its Subsidiaries as of the end of such Fiscal
Period and consolidated statements of earnings and cash flow
of the Borrower and its Subsidiaries for such Fiscal Period
and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Period,
certified as true and correct by the chief financial
Authorized Officer of the Borrower (the parties hereto
acknowledge that such financial statements will not have been
audited, and that the annual audit of the Borrower may require
adjustments to the figures presented therein);
(ii) as soon as available and in any event within
26 days after the end of each Fiscal Period of each Fiscal
Year, a comparison of
(A) the actual consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and actual consolidated
statements of earnings and cash flow of the Borrower
and its Subsidiaries for such Fiscal Period and for
the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal
Period (the parties hereto acknowledge that such
financial statements will not have been audited, and
that the annual audit of the Borrower may require
adjustments to the figures presented therein), with
________________________
(1) Capitalized terms used in this Appendix A are defined
in Section 3 of this Appendix A.
Appendix A-1
<PAGE> 71
(B) the budgeted consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and the budgeted
consolidated statements of earnings and cash flow of
the Borrower and its Subsidiaries for such Fiscal
Period and for the period commencing at the end of
the previous Fiscal Year and ending with the end of
such Fiscal Period, in each case, contained in the
most recent Rolling Projection (defined below),
certified as true and correct by the chief financial
Authorized Officer of the Borrower;
(iii) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year and within 90 days after the end
of the last Fiscal Period of each Fiscal Year, a certificate,
executed by the chief financial Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to
the Agent and each Creditor Party) compliance with the
financial covenants set forth in Section 2.4; and
(iv) as soon as available and in any event within
30 days after the end of each Fiscal Period of each Fiscal
Year, a management report describing in detail the Company's
results of operations during such Fiscal Period and
explaining, among other things, (x) any material variances
demonstrated by the comparison delivered in respect of such
Fiscal Period pursuant to clause (ii) above and (y) any
failure to comply with financial covenants identified in the
certificate delivered in respect of such Fiscal Period
pursuant to clause (iii) above;
(c) Quarterly Reporting -- as soon as available and in
any event within 45 days after the end of each of Fiscal Quarter of
each Fiscal Year, a projection (each, a "Rolling Projection"), for
each of the thirteen Fiscal Periods next succeeding the last day of
such Fiscal Quarter, of the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of each such next succeeding Fiscal
Period and the budgeted consolidated statements of earnings and cash
flow of the Borrower and its Subsidiaries for each such next
succeeding Fiscal Period and for the period commencing at the end of
such Fiscal Quarter and ending with the end of each such next
succeeding Fiscal Period, certified as true and correct by the chief
financial Authorized Officer of the Borrower;
(d) Annual Reporting --
(i) as soon as available and in any event within
90 days after the end of each Fiscal Year of the Borrower, a
copy of the annual audit report (including, without
limitation, any accompanying or related auditor's letter and
the Borrower's responses thereto) for such Fiscal Year for the
Borrower and its Subsidiaries, including therein consolidated
balance sheets of the Borrower and its Subsidiaries as of the
end of such Fiscal Year and consolidated statements of
earnings and cash flow of the Borrower and its Subsidiaries
for such Fiscal Year, in each case certified (without any
Impermissible Qualification) in a manner acceptable to the
Agent and each of the Creditor Parties by Coopers & Lybrand or
other
Appendix A-2
<PAGE> 72
independent public accountants acceptable to the Agent and
each of the Creditor Parties, together with a certificate from
such accountants to the effect that, in making the examination
necessary for the signing of such annual report by such
accountants, they have not become aware of any Default or
Event of Default that has occurred and is continuing, or, if
they have become aware of such Default or Event of Default,
describing such Default or Event of Default and the steps, if
any, being taken to cure it; provided, however, that in the
case of the Company's financial statements for the Fiscal Year
ended May 31, 1996, such audit opinion shall be delivered not
later than September 13, 1996;
(ii) together with the financial reports delivered
pursuant to paragraph (i) of this Section 1.1(d), a
certificate of the independent certified public accountants
(i) stating that in making the examination necessary for
expressing an opinion on such financial statements, nothing
came to their attention that caused them to believe that there
is in existence or has occurred any Default or Event of
Default under any of the Financing Agreements (as defined in
the Intercreditor Agreement) or, if such accountants shall
have obtained knowledge of any such Default or Event of
Default, describing the nature thereof and the length of time
it has existed and (ii) acknowledging that the Creditor
Parties may rely on their opinion on such financial
statements;
(e) Defaults -- as soon as possible and in any event
within three days after the occurrence of each Default, a statement of
the chief financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(f) Litigation -- as soon as possible and in any event
within three days after (x) the occurrence of any adverse development
with respect to any litigation, action, proceeding, or labor
controversy described in Section 6.7 of the Bank Credit Agreement or
(y) the commencement of any labor controversy, litigation, action,
proceeding of the type described in Section 6.7 of the Bank Credit
Agreement, notice thereof and copies of all documentation relating
thereto;
(g) Securities Reports, etc. -- promptly after the
sending or filing thereof, copies of all reports which the Borrower
sends to any of its securityholders, and all reports and registration
statements which the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(h) Pension Plans -- immediately upon becoming aware of
the institution of any steps by the Borrower or any other Person to
terminate any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto; and
Appendix A-3
<PAGE> 73
(i) Other -- such other information respecting the
condition or operations, financial or otherwise, of the Borrower or
any of its Subsidiaries as any Creditor Party may from time to time
reasonably request.
SECTION 1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of
all taxes, assessments and governmental charges imposed upon it or
upon its Property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 1.3. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.
(a) The Borrower will maintain and preserve, and will
cause each Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and will use, and cause
each Subsidiary to use, its best efforts to maintain, preserve, renew
and extend all of its rights, powers, privileges and franchises
necessary to the proper conduct of its business.
(b) The Borrower will, and will cause each of its
Subsidiaries to, maintain, preserve, protect and keep its properties
in good repair, working order and condition, and make necessary and
proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly conducted at all times
unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically
desirable.
SECTION 1.4. INSURANCE. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts and with only such
deductibles as is customary in the case of similar businesses and will, upon
request of the Agent or any Creditor Party, furnish to each Creditor Party at
reasonable intervals a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section.
SECTION 1.5. BOOKS AND RECORDS. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Agent and each of
(i) the Noteholders as a group and (ii) the Lenders as a group, or any of their
respective representatives, at reasonable times and intervals, to visit all of
its offices, to discuss its financial matters with its officers and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with each Creditor Party
or its representatives whether or not any
Appendix A-4
<PAGE> 74
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
records. The Borrower shall pay any fees of such independent public accountant
incurred in connection with the Agent's or any Creditor Party's exercise of its
rights pursuant to this Section.
SECTION 1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to:
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and each Creditor Party
and provide copies upon receipt of all written claims, complaints,
notices or inquiries from governmental authorities relating to the
condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Agent and each Creditor Party any
actions and proceedings relating to compliance with Environmental
Laws; and
(c) provide such information and certifications which the
Agent or any Creditor Party may reasonably request from time to time
to evidence compliance with this Section 1.6.
SECTION 1.7. EQUITY OR SUBORDINATED DEBT.
(a) The Borrower shall receive at least $15,000,000 in
proceeds of Subordinated Debt on or before April 30, 1997.
(b) In the event that the Borrower shall fail to receive
at least $15,000,000 in proceeds of equity or Subordinated Debt on or
before January 31, 1997, the Borrower shall retain a
nationally-recognized investment advisor, who shall be acceptable to
the Creditor Parties, to set up and implement a plan (a copy of which
shall be provided to each Creditor Party) to raise such proceeds on or
before April 30, 1997.
SECTION 1.8. COLLATERAL MATTERS. The Borrower shall, and shall
cause each Subsidiary to, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments, and do
such further acts, as the Collateral Agent may reasonably request from time to
time in order:
(a) to ensure that
(i) the obligations of the Borrower hereunder and
under the other Financing Agreements (as defined in the
Intercreditor Agreement) are secured by substantially all
assets of the Borrower, subject to the exceptions set forth in
Appendix A-5
<PAGE> 75
Exhibit A-3 and guaranteed, pursuant to the Subsidiaries
Guaranty, by all Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary created or
acquired after the Effective Date), and
(ii) the obligations of each Subsidiary under the
Subsidiaries Guaranty are secured by substantially all of the
assets of such Subsidiary, and
(b) to perfect and maintain the validity, effectiveness
and priority of any of the Security Documents and the Liens intended
to be created thereby, subject to the exceptions set forth in Exhibit
A-3.
Without limiting the generality of the foregoing, the Borrower shall, and shall
cause each Subsidiary to, take the actions in respect of Collateral set forth
on Exhibit A-3 within the times set forth therein. Contemporaneously with the
execution and delivery of any document referred to above, the Borrower shall,
and shall cause each Subsidiary to, deliver all resolutions, opinions and
corporate documents as the Collateral Agent may reasonably request to confirm
the enforceability of such document and the perfection of the security interest
created thereby, if applicable.
SECTION 2. NEGATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 2.
SECTION 2.1. BUSINESS ACTIVITIES. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
the business of processing food and such activities as may be incidental or
related thereto.
SECTION 2.2. INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Creditor Obligations;
(b) Indebtedness existing as of the Effective Date which
is identified in Item 2.2(b) ("Ongoing Indebtedness") of the
Disclosure Schedule attached hereto;
(c) Indebtedness secured by Liens described in clause (h)
or (j) of Section 2.3;
(d) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and services,
but excluding Indebtedness incurred through the borrowing of money or
Guaranties);
(e) Hedging Obligations to a Lender;
(f) Subordinated Debt; or
(g) obligations in respect of Capital Leases in an
aggregate amount not to exceed $7,000,000 at any time.
Appendix A-6
<PAGE> 76
SECTION 2.3. LIENS. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens for taxes, assessments or governmental charges
not then due and delinquent and for which a penalty has not attached
or the validity of which is being contested in good faith and by
proper proceedings and with respect to which adequate reserves are
maintained in accordance with GAAP;
(b) Liens arising in connection with court proceedings,
provided that the execution of such Liens is effectively stayed, such
Liens are being contested in good faith and adequate reserves are
maintained with respect thereto in accordance with GAAP;
(c) Liens arising in the ordinary course of business and
not incurred in connection with the borrowing of money, including
encumbrances in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real Property, landlord's and
lessor's liens in the ordinary course of business, which do not,
individually or in the aggregate, materially interfere with the
conduct of the business of the Borrower and its Subsidiaries taken as
a whole and do not materially affect the value of the Property subject
to such Liens;
(d) Construction or materialmen's or mechanic's Liens
securing obligations not overdue or, if overdue, being contested in
good faith and by proper proceedings and with respect to which
adequate reserves are maintained in accordance with GAAP;
(e) Liens in connection with workers' compensation,
social security taxes or similar charges arising in the ordinary
course of business and not incurred in connection with the borrowing
of money;
(f) Liens existing on the Effective Date set forth in
Item 2.3(f) of the Disclosure Schedule attached hereto;
(g) Intercompany Liens (for purposes of intercompany
Liens, a Subsidiary shall mean any corporation of which the Borrower
directly or indirectly owns at least 80% of the Voting Stock);
(h) The extension, renewal or replacement of any Lien
permitted by the foregoing paragraph (f) in respect of the same
Property theretofore subject thereto or the extension, renewal or
replacement (without increase of principal amount of the Indebtedness
originally incurred);
(i) Liens incurred in connection with obtaining or
performing government contracts in the ordinary course of business and
not incurred in connection with the borrowing of money;
(j) (i) Any Lien in Property or in rights relating thereto to
secure any rights granted with respect to such Property in connection
with the provision of all or a part of the purchase price or cost of
the construction of such Property created
Appendix A-7
<PAGE> 77
contemporaneously with, or within 270 days after, such acquisition or
the completion of such construction (except Liens in connection with
the Ponca City Litigation shall not be permitted under this clause
(j)(i)), or (ii) any Lien in Property existing in such Property at the
time of acquisition thereof, whether or not the debt secured thereby
is assumed by the Borrower or such Subsidiary; provided, that the
Indebtedness secured by any such Lien referred to in clauses (i) and
(ii) above shall not exceed 100% of the fair market value on the
related Property at the time the Lien was originally created;
(k) the Shared Lien; and
(l) Liens created, in the ordinary course of the
Borrower's and each Subsidiary's business, under the Packers and
Stockyards Act of 1921, as amended, and the regulations promulgated
thereunder,
provided, that the creation and continued existence of any such Liens, either
individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Borrower and the Subsidiaries, taken as a whole, or
on the Borrower's ability to perform its obligations under any of the
Financing Agreements (as defined in the Intercreditor Agreement).
SECTION 2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) At any time during any period set forth in the table
below, Consolidated Adjusted Net Worth to be less than the amount set
forth opposite such period in such table:
<TABLE>
<CAPTION>
CONSOLIDATED ADJUSTED NET WORTH SHALL NEVER BE LESS
DURING THE PERIOD THAN
<S> <C>
From September 12, 1996 through and including $72,000,000
December 14, 1996
From December 15, 1996 through and including March $74,000,000
8, 1997
From March 9, 1997 through and including April 30, $76,000,000
1997
From May 1, 1997 through and including the date on $91,000,000 plus 50% of the Consolidated Net
which the Loans (under the Bank Credit Agreement Earnings for each Fiscal Year commencing with the
and the New Seasonal Line of Credit Agreement), 1997 Fiscal Year; provided, however, that if
-------- -------
other Obligations and the Insurance Notes shall Consolidated Net Earnings is less than zero in any
have been paid in full in cash Fiscal Year, Consolidated Net Earnings shall be
deemed to be zero in such Fiscal Year for purposes
of this Section 2.4(a).
</TABLE>
As of any date (prior to May 1, 1997) on which the Borrower receives
the proceeds of any Subordinated Debt, the amount set forth in the
table above opposite (i) the period
Appendix A-8
<PAGE> 78
containing such date and (ii) each subsequent period (other than the
last such period), shall be increased by the amount of such proceeds;
provided, however, that the aggregate amount of such increases shall
in no event exceed $15,000,000 in respect of any such period
regardless of the aggregate amount of such proceeds.
(b) As of the end of each Fiscal Period commencing with
the seventh Fiscal Period in the 1997 Fiscal Year and ending with the
seventh Fiscal Period in the 1998 Fiscal Year, the ratio of
Consolidated Earnings Available for Interest Expense to Consolidated
Interest Expense for the Relevant Period to be less than 1.65 to 1.
As of the end of each Fiscal Period commencing with the eighth Fiscal
Period in the 1998 Fiscal Year and ending with the twelfth Fiscal
Period in the 1998 Fiscal Year, the ratio of Consolidated Earnings
Available for Interest Expense to Consolidated Interest Expense for
the Relevant Period to be less than 1.85 to 1. As of the end of each
Fiscal Period commencing with the thirteenth Fiscal Period in the 1998
Fiscal Year, the ratio of Consolidated Earnings Available for Interest
Expense to Consolidated Interest Expense for the Relevant Period to be
less than 2.0 to 1. For purposes of this clause (b), "Relevant
Period" shall mean (i) in respect of any Fiscal Period ending on or
before May 30, 1997, the period commencing on May 31, 1996 and ending
on the last Business Day of such Fiscal Period, and (ii) in respect of
any other Fiscal Period (each, a "Testing Period"), the period
commencing on the first Business Day of the twelfth preceding Fiscal
Period and ending on the last Business Day of such Testing Period.
(c) At any time, the obligations of the Borrower and its
Subsidiaries for the payment of rental for any Property during the
next succeeding 365-day period under existing leases, subleases or
similar arrangements (other than Capital Leases) to exceed in the
aggregate $9,000,000.
(d) The aggregate amount of Consolidated Earnings
Available for Interest Expense in respect of the 1997 Fiscal Year to
be less than $24,630,880.
(e) (i) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first seven
(7) Fiscal Periods of the 1997 Fiscal Year to be less than
$2,000,000.
(ii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first ten
(10) Fiscal Periods of the 1997 Fiscal Year to be less than
--$1,000,000.
(iii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the 1997 Fiscal
Year to be less than --$3,000,000.
SECTION 2.5. INVESTMENTS. The Borrower will not, and will not
permit any Subsidiary to, make, incur, assume or suffer to exist any Investment
in any other Person, except:
(a) Investments existing on the Effective Date set forth
in Item 2.5(a) of the Disclosure Schedule attached hereto;
Appendix A-9
<PAGE> 79
(b) Investments in certificates of deposit, repurchase
agreements or bankers' acceptances, maturing within one year from the
date or origin, issued by a bank organized under the laws of the
United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000;
(c) Investments in commercial paper maturing in 270 days
or less from the date of issuance which, at the time of acquisition by
the Borrower or any Subsidiary, is accorded at least an "A-1" rating
by Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.;
(d) Investments in direct obligations of the United
States of America, or any agency thereof, the obligations of which are
guaranteed by the United States of America, maturing in twelve months
or less from the date of acquisition thereof;
(e) Investments in "money market" preferred stock rated
"A" or better by Standard & Poor's Corporation or "A2" by Moody's
Investors Service, Inc.;
(f) Investments in tax-exempt floating rate option tender
bonds backed by an irrevocable letter of credit issued by a bank the
long-term debt rating of which is at least "AA" by Standard & Poor's
Rating Group or "Aa2" by Moody's Investors Service, Inc.;
(g) Investments in Subsidiaries in existence on the
Effective Date and which operate principally in lines of business
similar to lines of business of the Borrower or its Subsidiaries
existing on the Effective Date; and
(h) Investments in or commitments to purchase foreign
currency; provided, that such Investment is made solely to the extent
that the Borrower and its Subsidiaries are obligated to make payments
to other Persons in such foreign currency.
In valuing any Investments for the purpose of applying the limitations
set forth above, such Investments shall be taken at the original cost thereof,
without allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered on account of capital or
principal.
For purposes of this Section 2.5 at any time when a corporation
becomes a Subsidiary, all investments of such corporation at such time shall be
deemed to have been made by such corporation, as a Subsidiary, at such time.
SECTION 2.6. RESTRICTED PAYMENTS, ETC. On and at all times after
the Effective Date, the Borrower will not:
(a) declare or pay any dividends, either in cash or
Property, on any shares of its capital stock of any class (except
dividends or other distributions payable solely in shares of capital
stock of the Borrower); or
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of Borrower's capital stock of
any class or any warrants, rights or options to purchase or acquire
any shares of the Borrower's capital stock; or
Appendix A-10
<PAGE> 80
(c) make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect of its
capital stock; or
(d) make any payment, either directly or indirectly or
through any Subsidiary, of principal of any Subordinated Debt other
than at the expressed maturity date thereof and scheduled mandatory
prepayments or redemptions thereof in accordance with the terms in
effect on the date of creation of such Subordinated Debt.
SECTION 2.7. CONSOLIDATION, MERGER, ETC. The Borrower will not,
and will not permit any Subsidiary to, liquidate or dissolve, consolidate with,
or merge into or with, any other corporation, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division
thereof) except any such Subsidiary may liquidate or dissolve voluntarily into,
and may merge with and into, the Borrower or any other Subsidiary, and the
assets or stock of any Subsidiary may be purchased or otherwise acquired by the
Borrower or any other Subsidiary.
SECTION 2.8. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any Subsidiary to, sell, lease, transfer or otherwise dispose
of any assets, including the disposition of the stock of any Subsidiary and
including any Sale and Lease-Back Transaction (collectively, a "Disposition"),
in one or a series of transactions to any Person other than the Borrower or a
Majority-Owned Subsidiary, other than:
(a) in the ordinary course of business (including,
without limitation, the disposition of tractors and trailers owned by
the Borrower in the ordinary course of business and consistent with
the Borrower's past practice);
(b) in the Frederick Disposition, provided that the
Borrower receives all cash consideration, and the net cash proceeds
therefrom are simultaneously paid to the Creditor Parties (in
accordance with the Intercreditor Agreement), in each case, on or
before November 30, 1997, or thereafter with the consent of each of
the Creditor Parties, which consent shall not be unreasonably
withheld; or
(c) the following Dispositions:
(i) the plant and equipment located in Concordia,
Missouri which is subject to a purchase option in favor of the
lessee of such facility (approximate balance of purchase
price: $2,000,000);
(ii) the Borrower's facility known as "Tri-Miller"
located in Hyrum, Utah, which has an approximate value of
$600,000;
(iii) A building known as the "H&R Building"
located in Detroit, Michigan, which has an approximate value
of $475,000; and
(iv) a condominium located in Bloomfield Hills, Mi
chigan (approximate balance of purchase price: $300,000);
Appendix A-11
<PAGE> 81
provided that the aggregate book value of all such assets sold,
leased, transferred or otherwise disposed of from time to time
pursuant to this Section 2.8(c) shall not exceed $4,000,000;
provided, however, that:
(x) the Borrower may, and may permit any Subsidiary to,
sell, lease, transfer or otherwise dispose of equipment if the cash
proceeds therefrom are utilized within one year after such Disposition
to purchase or are committed to the purchase of Property of a similar
nature and of at least equivalent value; and
(y) the Borrower may otherwise, and may permit any
Subsidiary otherwise to, sell, lease, transfer or otherwise dispose of
equipment so long as the aggregate amount of the book value of
equipment so disposed (as of the time of its disposition) does not
exceed $2,000,000 in any 365-day period.
SECTION 2.9. SALES AND LEASEBACKS. The Borrower will not, and
will not permit any Subsidiary to, effect any Sale and Lease-Back Transaction
with respect to:
(a) any Property of the Borrower or any Subsidiary which
Property was owned or leased by the Borrower or any Subsidiary on or
prior to September 12, 1996; or
(b) any other Property, if the aggregate book value of
all such other Property that is the subject of a Sale and Lease- Back
Transaction during any period of 365 consecutive days would exceed
$1,000,000.
SECTION 2.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction (including
the furnishing of goods or services) with an Affiliate except in the ordinary
course of business and on terms and conditions no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 2.11. COMPLIANCE WITH BORROWING BASE. The Borrower will
not incur any Borrowing Base Debt if, after giving effect to such incurrence,
and any concurrent repayment of Loans or Other Borrowing Base Debt, the
aggregate principal amount of Borrowing Base Debt would exceed the Borrowing
Base.
SECTION 2.12. HEDGING ACTIVITIES. The Borrower will not, and will
not permit any Subsidiary to, buy, sell, trade or otherwise deal in futures
contracts or options thereon or other derivatives thereof except pursuant to
transactions that represent substitutes for transactions to be made by the
Borrower or such Subsidiary at a later time in the physical pork or pork
products market and the purpose of which is solely to reduce the risk to the
Borrower or such Subsidiary of future fluctuations in the market prices of pork
or pork products.
Appendix A-12
<PAGE> 82
SECTION 2.13. NET CAPITAL EXPENDITURES.
(a) Net Capital Expenditures of the Borrower and its
Subsidiaries shall not exceed $8,200,000 in either the 1997 or the 1998
Fiscal Year. In each Fiscal Year thereafter, Net Capital Expenditures
shall not exceed the sum of $8,200,000 plus twenty-five percent (25%) of
Consolidated Net Earnings in respect of such Fiscal Year; provided,
however, that if Consolidated Net Earnings is less than zero in any
Fiscal Year, Consolidated Net Earnings shall be deemed to be zero in
such Fiscal Year for purposes of this Section 2.13(a).
(b) To the extent that the Net Capital Expenditures of
the Borrower during any Fiscal Year are less than the amount permitted
in respect of such Fiscal Year under Subsection 2.13(a) above, such
difference in respect of such period shall be available during the
first Fiscal Year succeeding such period to support capital
expenditures of the Borrower during such first succeeding Fiscal Year,
and, if such difference shall not be fully utilized by the end of such
first succeeding Fiscal Year, it shall not be available to support any
additional capital expenditures thereafter. With respect to the
utilization of the availability for the making of capital expenditures
by the Borrower in each Fiscal Year, any availability for such period
provided in Subsection 2.13(a) above shall be deemed utilized first to
support the capital expenditures to be made during such period, and
any availability carried forward from the previous Fiscal Year shall
be deemed utilized second to support the capital expenditures to be
made during such period.
(c) Up to an aggregate amount of $5,000,000 paid by the
Borrower in settlement of, or in satisfaction of a judgment against
the Borrower in respect of, the Ponca City Litigation shall not be
considered a Net Capital Expenditure for purposes of this Section
2.13.
SECTION 2.14. CERTAIN SALARIES. At no time will the Borrower, nor
will it permit any Subsidiary to, pay, directly or indirectly, any salary,
bonus, or other cash compensation to any person who, as of the date hereof, is
(i) the chairman of the Borrower's board of directors, (ii) the Borrower's
president and chief executive officer, or (iii) the Borrower's executive vice
president for finance and administration, if such payment or payments would
exceed, in the aggregate, 110% of the aggregate amount of salary, bonus and
other cash compensation paid to such person in the immediately preceding Fiscal
Year. Notwithstanding the foregoing, for each Fiscal Year after the 1998
Fiscal Year, the Borrower may compensate the persons described in this Section
2.14 in accordance with the bonus plan previously delivered to the Creditor
Parties.
SECTION 3. DEFINED TERMS. As used in this Exhibit A-2, the
following terms shall have the meanings set forth below or in the Section of
this document referenced below. The terms used herein and not defined herein
shall have the respective meanings ascribed to such terms in the Bank Credit
Agreement (as defined herein).
"Bank Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of September 11, 1996, among (i)
Thorn Apple Valley, Inc. and (ii) Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and
Harris Trust and Savings Bank, as in effect on the Effective Date.
Appendix A-13
<PAGE> 83
"Collateral" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Collateral Agent" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Consolidated Adjusted Net Worth" shall mean the sum of:
(a) (i) Consolidated Shareholders' Equity less
(ii) all goodwill, trade names, trademarks, patents,
organizational expense, unamortized debt discount and expense
and other intangible assets properly classified as intangibles
in accordance with GAAP and incurred after the date of
consummation of the Wilson Acquisition; plus
(b) Subordinated Debt.
"Consolidated Earnings Available for Interest Expense" shall
mean, for any period, the sum of:
(a) Consolidated Net Earnings for such period
before deduction of any amount which, in conformity with GAAP,
would be set forth opposite the caption "income tax expense"
(including deferred income taxes) (or any like caption) on a
consolidated income statement of Borrower for such period;
plus
(b) Consolidated Interest Expense for such
period; plus
(c) the amortization of any financing cost and of
any debt discount; plus
(d) an amount which, in conformity with GAAP,
would be set forth, opposite the caption "depreciation and
amortization expense" (or any like caption) (including,
without limitation, amortization of intangible assets) on such
income statement for such period, to the extent the same are
deducted from Borrower's net revenues, in conformity with
GAAP, in determining Consolidated Net Earnings for such
period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition costs including
agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Interest Expense" shall mean the interest
expense (including capitalized and non-capitalized interest, the
interest component of rentals under Capital
Appendix A-14
<PAGE> 84
Leases and any expense associated with the termination of a swap
arrangement) of the Borrower and its Subsidiaries on a consolidated
basis for any period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition closing costs
including agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Shareholders' Equity" shall mean consolidated
shareholders' equity of the Borrower and its Subsidiaries determined
in accordance with GAAP.
"Creditor Obligations" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Creditor Parties" shall mean, collectively and individually
(as the context requires) (i) the "Lenders" as defined in the Bank
Credit Agreement and (ii) the Noteholders.
"Disposition" is defined in Section 2.8.
"Fiscal Period" shall mean each period of four consecutive
weeks ending on (i) the last Friday in May in each Fiscal Year or (ii)
the Friday which is four weeks, or any even multiple of four weeks,
thereafter.
"Frederick Disposition" shall mean the sale of the plant,
property, inventory and equipment located at 1487 Farnsworth Avenue,
Detroit, Michigan, and the goodwill, licenses, permits, franchises,
patents, copyrights, trademarks, service marks and trade names
associated therewith.
"Fresh Meats Earnings Available for Interest Expense" shall
mean Consolidated Earnings Available for Interest Expense but only in
respect of the Borrower's fresh meats division, as regularly and
historically reported by the Borrower.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of the Borrower, any qualification or exception:
(a) which is of a "going concern" or similar
nature;
(b) which relates to the limited scope of
examination of relevant to such financial statement; or
(c) which relates to the treatment or
classification of any item in such financial statement and
which, as a condition to its removal, would require an
Appendix A-15
<PAGE> 85
adjustment to such item the effect of which would be to cause
the Borrower to be in default of its obligations under Section
2.4 of this Exhibit A-2.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed
money and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether
or not drawn, and banker's acceptances issued for the account
of such Person;
(c) all obligations of such Person as lessee
under leases which have been or should be, in accordance with
GAAP, recorded as Capital Leases;
(d) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side
of the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under all
Hedging Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of Property or services, and
indebtedness (excluding prepaid interest thereon) secured by a
Lien on Property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Guaranties of such Person in respect of
any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Insurance Note Agreements" shall mean, collectively, (i) that
certain Note Agreement, dated as of April 1, 1994, by and between the
Borrower and Allstate Life Insurance Company, pursuant to which the
Borrower issued Fifteen Million Dollars ($15,000,000) in aggregate
principal amount of its six and forty-five one-hundredths percent
(6.45%) Senior Notes due April 21, 2006, (ii) that certain Note
Agreement, dated as of October 1, 1994, by and between the Borrower
and Allstate Life Insurance Company, pursuant to which the Borrower
issued Eight Million Dollars ($8,000,000) in aggregate principal
amount of its eight and forty-two one-hundredths percent (8.42%)
Senior Notes due October 1, 2003, and (iii) that certain Note
Agreement, dated as of May 15 1995, by and among the Borrower,
Allstate Life Insurance Company, Principal Mutual Life Insurance
Company, and Great-West Life & Annuity Insurance Company, pursuant to
which the Borrower issued Forty-Two Million Five Hundred Thousand
Dollars
Appendix A-16
<PAGE> 86
($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15,
2005, in each case, as amended from time to time.
"Insurance Notes" shall mean those certain Notes, as amended
from time to time, issued pursuant to the Insurance Note Agreements.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated as of September 11, 1996 by and among
the Creditor Parties, and acknowledged and agreed to by the Borrower
and its Subsidiaries.
"Investment" shall mean, relative to any Person:
(a) any loan or advance made by such Person to
any other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary course
of business);
(b) any Guaranty of such Person; or
(c) any ownership or similar interest held by
such Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof, less all returns of principal or equity
thereon (and without adjustment by reason of the financial condition
of such Person) and shall, if made by the transfer or exchange of
Property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such
Property.
"Majority-Owned Subsidiary" shall mean, when applied to a
Subsidiary, any Subsidiary 80% or more of the Voting Stock of which is
owned by the Borrower or a Majority-Owned Subsidiary (other than
Voting Stock required to be held as directors' qualifying stock).
"Net Capital Expenditures" shall mean, in any period, the remainder of
(i) the aggregate cost of acquisition or
construction of all tangible assets acquired or constructed
during such period which at the time of acquisition or
construction have an expected useful life of more than one (1)
year and would be shown on a balance sheet of the acquiring or
constructing Person as an asset ("Capital Assets"), minus
(ii) the aggregate net proceeds of all sales or
other Dispositions of Capital Assets during such period, other
than proceeds which were used to permanently reduce Creditor
Obligations.
"New Seasonal Line of Credit Agreement" shall mean that
certain letter agreement regarding a Senior Secured Seasonal Line of
Credit for the Borrower dated as of September 11, 1996 by and among
(i) Thorn Apple Valley, Inc. and (ii) Cooperatieve
Appendix A-17
<PAGE> 87
Centrale Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank.
"Noteholders" shall mean the holders of the Insurance Notes
from time to time.
"Ongoing Indebtedness" is defined in Section 2.2(b).
"Ponca City Litigation" shall mean that certain action
entitled Facility Constructors, Inc. v. Thorn Apple Valley, Inc. filed
in February, 1996, in District Court, Kay County, Oklahoma against the
Company in connection with the construction of the Company's plant in
Ponca City, Oklahoma.
"Rolling Projection" is defined in Section 1.1(c).
"Section" unless otherwise specified, shall mean a Section of
this Exhibit A-2.
"Security Documents" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Shared Lien" shall mean the lien upon the Collateral (as
defined in the Intercreditor Agreement) created by the Security
Documents (as defined in the Intercreditor Agreement) in favor of the
Creditor Parties (as defined in the Intercreditor Agreement).
"Subordinated Debt" shall mean the principal of and premium,
if any, and interest on all indebtedness of the Borrower, whether
currently outstanding or hereafter created, for money borrowed, or any
indebtedness incurred in connection with an acquisition or lease of
Property or with a merger, consolidation, or acquisition of assets
which is expressly subordinated, on terms satisfactory to the Creditor
Parties, in right of payment pursuant to its terms to the Loans and
the Insurance Notes (regardless of whether it is subordinated to other
indebtedness of the Borrower).
"Subsidiaries Guaranty" shall have the meaning assigned to the
term "Guaranty" in the Intercreditor Agreement.
"Weekly P&L Statement" shall mean, in respect of any week, a
statement, in form acceptable to the Creditor Parties, setting forth,
for each of the Borrower's fresh meats and processed meats divisions,
the income and expenses of the Borrower during such week.
Appendix A-18
<PAGE> 88
DISCLOSURE SCHEDULE TO APPENDIX A
ITEM 2.2(B) - ONGOING INDEBTEDNESS:
Operating Leases. See Exhibit A to Disclosure Schedule to Exhibit A-2.
<TABLE>
<CAPTION>
BALANCE OUTSTANDING
@ 8/23/96
<S> <C>
Lines of Credit:
Combined $94,100,000
-----------
Notes Payable:
Corporate: Allstate Unsecured Notes 23,000,000
Corporate: Allstate Life Ins. Unsecured Notes 15,000,000
Principal Mutual Life Unsecured Notes 14,000,000
Great-West Life & Annuity Unsecured Notes 13,500,000
Dixie: Forrest City Note 1,282,222
---------
Subtotal 160,882,000
-----------
Industrial Revenue Bonds:
Corporate: (Branch Banking) 2,400,000
Dixie Plant: (Economic Development Revenue Bond) 2,442,000
Corporate: (Michigan Strategic Fund - Adjustable Rate Demand
Limited Obligation Revenue bond, Series 1993)
5,500,000
---------
Subtotal:
10,342,000
----------
Capital Leases:
Corporate 518,744
Frederick division 2,304,521
Smoked Meats division 314,296
Concordia & Shreveport division 93,018
Dixie division 1,913,235
---------
Subtotal 5,143,814
Total Outstanding Indebtedness $176,367,814
============
</TABLE>
Letters of Credit - See Exhibit B to Disclosure Schedule to Exhibit A-2.
Disclosure Schedule - 1
<PAGE> 89
ITEM 2.3(F) - EXISTING LIENS:
<TABLE>
<CAPTION>
DEBT DESCRIPTION OF COLLATERAL AMOUNT OF
LOCATION REFERENCE O/S DEBT
<S> <C> <C> <C> <C>
Industrial Revenue Bonds:
Corporate Branch Banking Carolina manufacturing
facility $2,400,000
Dixie division Dixie facility $2,442,000
Mich. Strat. Fund. Grand Rapids $5,500,000
Capital Leases:
Corporate, Frederick, Smoked Meats, Concordia, Various machinery and $5,143,814
Shreveport and Dixie divisions. equipment located at the
company's various divisions
and subsidiaries
<CAPTION>
All other Liens existing as of the Effective Date and permitted under Section 1.8 of Exhibit A-2.
ITEM 2.5(A) ONGOING INVESTMENTS:
-------------------
INVESTMENT BALANCE
FINANCIAL INSTITUTION TYPE @ 8/23/96
<S> <C> <C>
Short-Term Investments
United Carolina Bank CD 500,000
Providence TempCash 3,059,000
Chicago operation U.S. Treasury Bills 300,000
Subtotal $3,859,000
Michigan Livestock Exchange Preferred Stock 2,000,000
Total Investments $5,859,000
==========
</TABLE>
Disclosure Schedule - 2
<PAGE> 90
EXHIBIT A TO DISCLOSURE SCHEDULE TO APPENDIX A
Operating Leases
Disclosure Schedule - 3
<PAGE> 91
EXHIBIT B TO DISCLOSURE SCHEDULE TO APPENDIX A
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
<PAGE> 92
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1
<PAGE> 1
EXHIBIT 10(s)
Dated as of September 11, 1996
Thorn Apple Valley, Inc.
26999 Central Park Boulevard
Suite 300
Southfield, Michigan 48076-4178
Re: Senior Secured Seasonal Line of Credit
Gentlemen/Ladies:
Thorn Apple Valley, Inc. (hereinafter referred to as "Borrower"), the
undersigned Lenders (herein collectively called "Lenders" and individually
called "Lender") and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New
York Branch ("RBN") as Agent for the Lenders (the "Agent") hereby agree that
the Seasonal Line of Credit letter agreement dated March 11, 1996, as
heretofore amended (the "Existing Seasonal Line of Credit Agreement"), is
hereby amended and restated in its entirety as follows, effective as of the
Effective Date (such term and others being used herein as defined in Section 9
below):
1. COMMITMENTS, BORROWING PROCEDURES AND NOTES
1.1 Commitments. On the terms and subject to the conditions of
this Agreement (including Section 4), each Lender severally agrees to make
Loans pursuant to the Commitments described in this Section 1.1.
1.1.1 Commitment of Each Lender. From time to time on any Business
Day occurring prior to the Commitment Termination Date, each Lender will
make loans (relative to such Lender, its "Loans") to the Borrower equal to such
Lender's Percentage of the aggregate amount of the Borrowing requested by the
Borrower to be made on such day. The commitment of each Lender described in
this Section 1.1.1 is herein referred to as its "Commitment." On the terms and
subject to the conditions hereof, the Borrower may from time to time borrow,
prepay and reborrow Loans.
<PAGE> 2
1.1.2 Lenders Not Required To Make Loans. No Lender shall be required
to make any Loan (x) if, after giving effect thereto, the aggregate outstanding
principal amount of all Loans
(a) of all Lenders would exceed the lesser of (i) the
Available Borrowing Base and (ii) the Commitment Amount, or
(b) of such Lender would exceed such Lender's Percentage
of the lesser of (i) the Available Borrowing Base and (ii) the
Commitment Amount, or
(y) if, after giving effect thereto, any of the "Commitment Amount" as defined
in the Credit Agreement remains unused.
1.2 Reduction of Commitment Amount.
The Borrower may, from time to time on any Business Day occurring
after the time of the initial Borrowing hereunder, voluntarily reduce the
Commitment Amount; provided, however, that all such reductions shall require at
least five Business Days' prior notice to the Agent and be permanent, and any
partial reduction of the Commitment Amount shall be in a minimum amount of
$1,000,000 and in an integral multiple of $1,000,000.
1.3 Borrowing Procedure. By delivering a Borrowing Request to the
Agent on or before 12:00 Noon, New York City time, on a Business Day, the
Borrower may from time to time irrevocably request, on the day of the requested
Borrowing, that a Borrowing be made in a minimum amount of $500,000 and an
integral multiple of $100,000 or in the unused amount of the Commitments. The
Agent shall promptly advise each Lender of such Borrowing Request. On the
terms and subject to the conditions of this Agreement, each Borrowing shall be
comprised of Loans, and shall be made on the Business Day, specified in such
Borrowing Request. On or before 2:00 p.m., New York City time, each Lender
shall deposit with the Agent same-day funds in an amount equal to such Lender's
Percentage of the requested Borrowing. Such deposit will be made to an account
which the Agent shall specify from time to time by notice to the Lenders. To
the extent funds are received from the Lenders, the Agent shall make such funds
available to the Borrower by wire transfer to the accounts the Borrower shall
have specified in its Borrowing Request. No Lender's obligation to make any
Loan shall be affected by any other Lender's failure to make any Loan.
1.4 Notes. Each Lender's Loans under its Commitment shall be
evidenced by a Note payable to the order of such Lender in a maximum principal
amount equal to such Lender's Percentage of the original Commitment Amount.
The Borrower hereby irrevocably authorizes each Lender to make (or cause to be
made) appropriate notations on the grid attached to such Lender's Note (or on
any
-2-
<PAGE> 3
continuation of such grid), which notations, if made, shall evidence, inter
alia, the date of and the outstanding principal of the Loans evidenced thereby.
Such notations shall be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to make any such
notations shall not limit or otherwise affect any Obligations of the Borrower.
2. REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
2.1 Repayments and Prepayments. The Borrower shall repay in full
the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Loans; provided, however, that
(i) any such prepayment shall be made pro rata
among the Loans of all Lenders; and
(ii) all such voluntary partial prepayments shall be
in an aggregate minimum amount of $500,000 and an integral
multiple of $100,000;
(b) shall, if on any date the aggregate principal amount
of outstanding Loans exceeds the Available Borrowing Base, as
calculated in the then most recently delivered Borrowing Base
Certificate, make a mandatory prepayment of all Loans equal to such
excess;
(c) shall, on each date Excess Capital Infusion Proceeds
are received by the Borrower or any Subsidiary, make a mandatory
prepayment of the Loans in the amount as provided in the Intercreditor
Agreement; and
(d) shall, immediately upon any acceleration of the
Stated Maturity Date of any Loans pursuant to Section 7.2 or Section
7.3, repay all Loans, unless, pursuant to Section 7.3, only a portion
of all Loans is so accelerated.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 3.4. No mandatory
prepayment of principal under Section 2.1(c) or voluntary prepayment of
principal of any Loans shall cause a reduction in the Commitment Amount unless
so specified.
2.2 Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section
2.2.
-3-
<PAGE> 4
2.2.1 Rates. The Loans shall accrue interest at a rate per annum
equal to the Alternate Base Rate from time to time in effect plus 2.00%.
2.2.2 Post-Maturity Rates. After the date any principal amount of
any Loan is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to the rate which would otherwise be in
effect, plus a margin of 2%.
2.2.3 Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) if the Borrower reduces the Commitment to zero, on
the date of any payment or prepayment, in whole, of the principal
outstanding on such Loan pursuant to Section 2.1(a);
(c) on each Monthly Payment Date occurring after the
Effective Date; and
(d) on that portion of any Loans the Stated Maturity Date
of which is accelerated pursuant to Section 7.2 or Section 7.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Agreement Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
2.3 Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Lender, for the period (including any portion thereof when
its Commitment is suspended by reason of the Borrower's inability to satisfy
any condition of Section 4) commencing on the Effective Date and continuing
through such Lender's Commitment Termination Date, a commitment fee at the rate
of .25 of 1% per annum on such Lender's Percentage of the sum of the average
daily unused portion of the Commitment Amount. Such commitment fees shall be
payable by the Borrower in arrears on each Monthly Payment Date, commencing
with the first such day following the Effective Date and on such Lender's
Commitment Termination Date. All such fees shall be non-refundable.
2.4 Restructuring Fee. The Borrower agrees to pay to the Agent
for the account of each Lender on the Effective Date a
-4-
<PAGE> 5
restructuring fee equal to 2.00% per annum on the principal amount of such
Lender's Loans outstanding under the Existing Seasonal Line of Credit Agreement
computed for the period from and including August 1, 1996 to the Effective
Date. All such fees shall be non-refundable.
3. CERTAIN PROVISIONS
3.1 Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitment or the Loans made by such Lender is reduced to a
level below that which such Lender or such controlling Person could have
achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by such Lender to the Borrower, the Borrower
shall immediately pay directly to such Lender additional amounts sufficient to
compensate such Lender or such controlling Person for such reduction in rate of
return. A statement of such Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In determining such
amount, such Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
3.2 Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
-5-
<PAGE> 6
(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(c) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount
such Lender would have received had no such withholding or deduction
been required.
Moreover, if any Taxes are directly asserted against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder, the
Agent or such Lender may pay such Taxes and the Borrower will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such Person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had not such Taxes been
asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 3.2, a distribution hereunder by
the Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
Upon the request of the Borrower or the Agent, each Lender that is
organized under the laws of a jurisdiction other than the United States shall,
prior to the due date of any payments under the Notes, execute and deliver to
the Borrower and the Agent, on or about the first scheduled payment date in
each Fiscal Year, one or more (as the Borrower or the Agent may reasonably
request) United States Internal Revenue Service Forms 4224 or Forms 1001 or
such other forms or documents (or successor forms or documents), appropriately
completed, as may be applicable to establish the extent, if any, to which a
payment to such Lender is exempt from withholding or deduction of Taxes.
3.3 Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes or
any other Agreement Document shall be made by the Borrower to the Agent for the
pro rata account of the Lenders entitled to receive such payment. All such
payments required to be made to the Agent shall be made, without setoff,
deduction or counterclaim, not later than 11:00 a.m., New York City time, on
the date due, in same day or immediately available funds, to such account as
the Agent shall specify from time to
-6-
<PAGE> 7
time by notice to the Borrower. Funds received after that time shall be deemed
to have been received by the Agent on the next succeeding Business Day. The
Agent shall promptly remit in same day funds to each Lender its share, if any,
of such payments received by the Agent for the account of such Lender. All
interest and fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the
period for which such interest or fee is payable over a year comprised of 365
days or, if appropriate, 366 days. Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall be
included in computing interest and fees, if any, in connection with such
payment.
3.4 Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Section
3.1) in excess of its pro rata share of payments then or therewith obtained by
all Lenders, such Lender shall purchase from the other Lenders such
participations in Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase
price to the ratable extent of such recovery together with an amount equal to
such selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required
repayment to the purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 3.5) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of
such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, exercise
-7-
<PAGE> 8
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.
3.5 Setoff. Each Lender shall, upon the occurrence of any Default
described in clauses (a) through (d) of Section 8.1.9 of the Credit Agreement
or any other Event of Default, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due), and (as
security for such Obligations) the Borrower hereby grants to each Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with such
Lender; provided, however, that any such appropriation and application shall be
subject to the provisions of Section 3.4 and the Intercreditor Agreement. Each
Lender agrees promptly to notify the Borrower and the Agent after any such
setoff and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable
law or otherwise) which such Lender may have.
3.6 Use of Proceeds. Proceeds of each Borrowing shall be used for
general corporate purposes and working capital purposes of the Borrower and its
Subsidiaries. Without limiting the foregoing, no proceeds of any Loan will be
used to acquire any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934 or any "margin stock," as
defined in F.R.S. Board Regulation U.
4. CONDITIONS TO RESTATEMENT AND BORROWING
4.1 Restatement. The effectiveness of the amendment and
restatement of the Existing Seasonal Line of Credit Agreement by this Agreement
shall be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Section 4.1.
4.1.1 Equity Infusion. The Borrower shall have received cash proceeds
of an additional $3,000,000 in capital contributions from one or more of its
shareholders upon terms and conditions satisfactory to the Lenders, and the
Agent shall have received evidence satisfactory to the Agent of such receipt.
4.1.2 Resolutions, etc. The Agent shall have received from the
Borrower and each Subsidiary a certificate, dated a date satisfactory to the
Agent, of its Secretary or Assistant Secretary as to
-8-
<PAGE> 9
(a) resolutions of its Board of Directors then in full
force and effect authorizing the execution, delivery and performance
of this Agreement, the Notes and each other Agreement Document to be
executed by it; and
(b) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement, the Notes
and each other Agreement Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary or Assistant Secretary of the
Borrower or such Subsidiary, as the case may be, canceling or amending such
prior certificate.
4.1.3 Delivery of Notes. The Agent shall have received, for the
account of each Lender, its Notes duly executed and delivered by the Borrower.
4.1.4 Opinions of Counsel. The Agent shall have received opinions,
dated the date of the initial Borrowing and addressed to the Agent and all
Lenders, from Honigman, Miller, Schwartz & Cohn, counsel to the Borrower,
substantially in the form of Exhibit C hereto.
4.1.5 Intercreditor Agreement; Other Financing Agreements. The
Intercreditor Agreement shall have been executed and delivered by the parties
thereto and the restatement effected by the Credit Agreement shall have become
effective in accordance with the terms thereof. The Borrower and its
Subsidiaries shall have executed and delivered to the Collateral Agent the
Security Documents and the Subsidiaries shall have executed and delivered to
the Collateral Agent the Subsidiaries Guaranty. The Financing Agreements
(other than this Agreement) shall have been amended and/or restated in form and
substance satisfactory to the Lenders and consistent with this Agreement.
4.1.6 Environmental Report. The Agent shall have received Phase I
environmental assessments with respect to the properties of the Borrower to be
mortgaged under the Security Documents which assessments shall be, in form and
substance, satisfactory to the Lenders.
4.1.7 Closing Fees, Expenses, etc. The Agent shall have received
for its own account, or for the account of each Lender, as the case may be, all
fees, costs and expenses due and payable pursuant to Sections 2.4 and 10.2, if
then invoiced.
4.2 All Borrowings. The obligation of each Lender to fund any
Loan on the occasion of any Borrowing shall be subject to the satisfaction of
each of the conditions precedent set forth in this Section 4.2.
-9-
<PAGE> 10
4.2.1 Compliance with Warranties, No Default, etc. Both before and
after giving effect to any Borrowing (but, if any Default of the nature
referred to in Section 8.1.5 of the Credit Agreement shall have occurred with
respect to any other Indebtedness, without giving effect to the application,
directly or indirectly, of the proceeds thereof) the following statements shall
be true and correct:
(a) the representations and warranties set forth in
Section 5 hereof and in Article VI of the Credit Agreement (excluding,
however, those contained in Section 6.7 of the Credit Agreement) shall
be true and correct with the same effect as if then made (unless
stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such
earlier date);
(b) except as disclosed by the Borrower to the Agent and
the Lenders pursuant to Section 6.7 of the Credit Agreement:
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be pending
or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries which might materially
adversely affect the Borrower's consolidated business,
operations, assets, revenues, properties or prospects or which
purports to affect the legality, validity or enforceability of
this Agreement, the Notes or any other Agreement Document; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 6.7
which might materially adversely affect the consolidated
businesses, operations, assets, revenues, properties or
prospects of the Borrower and its Subsidiaries;
(c) no Default shall have then occurred and be
continuing, and neither the Borrower nor any of its Subsidiaries are
in material violation of any law or governmental regulation or court
order or decree; and
(d) the aggregate outstanding principal amount of the Loans
shall not exceed the Available Borrowing Base, as calculated in the
then most recently delivered Borrowing Base Certificate pursuant to
the Credit Agreement, and the Borrower shall not be delinquent in the
delivery of any Borrowing Base Certificate pursuant to the Credit
Agreement.
-10-
<PAGE> 11
4.2.2 Borrowing Request. The Agent shall have received a Borrowing
Request for such Borrowing. Each of the delivery of a Borrowing Request and
the acceptance by the Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing (both immediately before and after giving effect to such
Borrowing and the application of the proceeds thereof) the statements made in
Section 4.2.1 are true and correct.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Representations and Warranties. In order to induce the
Lenders and the Agent to enter into this Agreement and to make Loans hereunder,
the Borrower represents and warrants unto the Agent and each Lender as set
forth in this Section 5 and as set forth in Article VI of the Credit Agreement.
5.2 Organization, etc. The Borrower is a corporation validly
organized and existing and in good standing under the laws of the State of its
incorporation, and it has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform
its obligations under this Agreement and each other Agreement Document to which
it is a party.
5.3 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement and each other
Agreement Document executed or to be executed by it are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(i) contravene its Organic Documents;
(ii) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting it except for such contraventions, which, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect; or
(iii) result in, or require the creation or imposition of,
any lien on any of its properties other than pursuant to the Security
Documents.
5.4 Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Borrower of this Agreement or any other
Agreement Document to which it is a party or for the Borrower's participation
in the consummation of the Restructuring (other than those required for
-11-
<PAGE> 12
the provision and perfection of Liens under the Security Documents and those
the failure to obtain or effect could not reasonably be expected to have a
Material Adverse Effect.
5.5 Validity, etc. This Agreement constitutes, and each other
Agreement Document executed by the Borrower will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with their respective
terms.
6. Covenants; Security. The Borrower agrees to perform and comply
with each and every covenant and undertaking set forth in Appendix A hereto.
The Borrower shall cause all Obligations hereunder to be secured by the
Security Documents in accordance with the terms thereof and of the
Intercreditor Agreement.
7. Events of Default.
7.1 Listing of Events of Default. Each of the following events or
occurrences described in this Section 7.1 shall constitute an "Event of
Default".
(i) the Borrower shall default in the payment or
prepayment when due of any principal of or interest on any Loan, or in
the payment when due of any commitment fee or of any other Obligation
and such default shall continue unremedied for two Business Days; or
(ii) any Event of Default (as defined in the Credit
Agreement) shall occur, regardless of whether such Credit Agreement is
in full force and effect; or
(iii) the Credit Agreement shall terminate; or
(iv) the Borrower shall default in the due performance and
observance of any of its obligations under Section 1.8 or Section 2 of
Appendix A; or
(v) the Borrower shall default in the due performance and
observance of any other agreement contained herein or in any other
Agreement Document executed by it and such default shall continue
unremedied for a period of 30 days after notice thereof shall have
been given to the Borrower by the Agent or any Lender.
7.2 Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 8.1.9 of the Credit Agreement) shall occur,
the Commitments (if not theretofore terminated) shall automatically terminate
and the outstanding principal amount of all outstanding Loans and all
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<PAGE> 13
other Obligations shall automatically be and become immediately due and
payable, without notice or demand.
7.3 Action if Other Event of Default. If any Event of Default (other
than any Event of Default described in clauses (a) through (d) of Section 8.1.9
of the Credit Agreement) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable and/or Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which
shall be so declared due and payable shall be and become immediately due and
payable, without further notice, demand or presentment, and/or, as the case may
be, the Commitments shall terminate.
8. Agent.
8.1 Actions. Each Lender hereby appoints RBN as its Agent under and
for purposes of this Agreement, the Notes and each other Agreement Document.
Each Lender authorizes the Agent to act on behalf of such Lender under this
Agreement, the Notes and each other Agreement Document and, in the absence of
other written instructions from the Required Lenders received from time to time
by the Agent (with respect to which the Agent agrees that it will comply,
except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
the Agent, pro rata according to such Lender's Percentage, from and against any
and all liabilities, obligations, losses, damages, claims, costs or expenses of
any kind or nature whatsoever which may at any time be imposed on, incurred by,
or asserted against, the Agent in any way relating to or arising out of this
Agreement, the Notes and any other Agreement Document, including reasonable
attorneys' fees, and as to which the Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, claims, costs or
expenses which are determined by a court of competent jurisdiction in a final
proceeding to have resulted solely from the Agent's gross negligence or wilful
misconduct. The Agent shall not be required to take any action hereunder,
under the Notes or under any other Agreement Document, or to prosecute or
defend any suit in respect of this Agreement, the Notes or any other Agreement
Document, unless it is indemnified hereunder to its satisfaction. If any
indemnity in favor of the Agent shall be or become, in the Agent's
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<PAGE> 14
determination, inadequate, the Agent may call for additional indemnification
from the Lenders and cease to do the acts indemnified against hereunder until
such additional indemnity is given.
8.2 Exculpation. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action
taken or omitted to be taken by it under this Agreement or any other Agreement
Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Agreement Document, nor to make any
inquiry respecting the performance by the Borrower of its obligations hereunder
or under any other Agreement Document. Any such inquiry which may be made by
the Agent shall not obligate it to make any further inquiry or to take any
action. The Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which the Agent believes to be genuine and to have been presented by a proper
Person.
8.3 Successor. The Agent may resign as such at any time upon at
least 30 days' prior notice to the Borrower and all Lenders. If the Agent at
any time shall resign, the Required Lenders may (with the written consent of
the Borrower which consent shall not be unreasonably withheld or delayed)
appoint another Lender as a successor Agent, which shall thereupon become the
Agent hereunder. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Agent's giving notice of resignation, then the retiring
Agent may (with the written consent of the Borrower which consent shall not be
unreasonably withheld or delayed), on behalf of the Lenders, appoint a
successor Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's resignation
hereunder as the Agent, the provisions of:
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<PAGE> 15
(a) this Article VIII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was the Agent
under this Agreement; and
(b) Section 10.2 and Section 10.3 shall continue to inure
to its benefit.
8.4 Loans by RBN. RBN shall have the same rights and powers with
respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes
held by it or any of its Affiliates as any other Lender and may exercise the
same as if it were not the Agent. RBN and its Affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Borrower or any Subsidiary or Affiliate of the Borrower as if RBN were not the
Agent hereunder.
8.5 Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Agreement Documents (the terms and provisions of which being satisfactory to
such Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to extend its
Commitment. Each Lender also acknowledges that it will, independently of the
Agent and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other
Agreement Document.
8.6 Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrower pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by the Borrower). The Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Agent from the Borrower for distribution
to the Lenders by the Agent in accordance with the terms of this Agreement.
9. Definitions.
9.1 Definitions. The following definitions (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof and to all genders):
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<PAGE> 16
"Agent" has the meaning set forth in the introductory paragraph
hereto.
"Agreement" means, on any date, this Line of Credit as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Agreement Document" means this Agreement, the Notes, the
Intercreditor Agreement, the Security Documents, the Subsidiaries Guaranty and
each other relevant agreement, document or instrument delivered in connection
with this Agreement, as each such agreement, document or instrument may be
amended, supplemented, restated or otherwise modified from time to time.
"Alternate Base Rate" means, on any date a fluctuating rate of
interest per annum equal to the higher of:
(i) the rate of interest announced by the Agent from time to
time in New York, New York as its base rate; or
(ii) one percent (1%) per annum above the fluctuating rate of
interest that is the rate determined by RBN to be the opening rate per
annum paid or payable by it on the day in question in New York, New
York for federal funds purchased overnight from other banking
institutions.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the RBN in connection with extensions of credit.
Changes in the rate of interest on the Loans will take effect simultaneously
with each change in the Alternate Base Rate. The Agent will give notice
promptly to the Borrower and the Lenders of changes in the Alternate Base Rate.
"Authorized Officer" means, relative to the Borrower, those of its
officers whose signatures and incumbency shall have been certified to the Agent
and the Lenders pursuant to Section 4.1.2.
"Available Borrowing Base" means, at any time, the excess (if any) of
the Borrowing Base, as calculated in the then most recently delivered Borrowing
Base Certificate, over the aggregate principal amount of all outstanding Other
Borrowing Base Debt (including, without limitation, the Effective Amount of all
L/C Obligations).
"Borrower" means Thorn Apple Valley, Inc.
"Borrowing" means the Loans made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with Section 1.1.
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<PAGE> 17
"Borrowing Request" means an Borrowing Request and certificate signed
by an Authorized Officer of the Borrower substantially in the form of Exhibit
B, with appropriate insertions.
"Collateral Agent" is defined in the definition of "Intercreditor
Agreement" in this Section.
"Commitment" is defined in Section 1.1.1.
"Commitment Amount" means, on any date, $20,000,000 as such amount may
be reduced from time to time pursuant to Section 1.2.
"Commitment Termination Date" means January 31, 1997.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of September 11, 1996, among the Borrower, the Agent, the Lenders and
the other commercial lending institutions as or may become parties thereto, as
such agreement is amended, supplemented, restated or otherwise modified from
time to time.
"Default" means any Event of Default or any Unmatured Event of
Default.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 10.9.
"Event of Default" is defined in Section 7.1.
"Indemnified Parties" is defined in Section 10.3.
"Indemnified Liabilities" is defined in Section 10.3.
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of September _, 1996 among RBN as Collateral Agent (in such capacity, the
"Collateral Agent"), RBN as Agent, the Lenders and other lenders to the
Borrower, as such agreement is amended, supplemented, restated or otherwise
modified from time to time.
"Lender" has the meaning set forth in the introductory paragraph
hereto.
"Loans" is defined in Section 1.1.1.
"Note" means a promissory note of the Borrower payable to any Lender,
in the form of Exhibit A hereto (as such promissory note may be amended,
endorsed or otherwise modified from time to time), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding Loans,
and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
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<PAGE> 18
"Obligations" means all obligations (monetary or otherwise) of the
Borrower arising under or in connection with this Agreement, the Notes and each
other Agreement Document.
"Organic Document" means, relative to any Person, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Other Borrowing Base Debt" means any Indebtedness (including, without
limitation, the Effective Amount of all L/C Obligations) outstanding under the
Credit Agreement.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its signature hereto, as such Percentage may be adjusted from time to
time to reflect assignments made by such Lender of which the Agent has notice
and to which the Agent has consented.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"RBN" is defined in the introductory paragraph hereto.
"Required Lenders" means, at any time, Lenders holding at least
66-2/3% of the then aggregate outstanding principal amount of the Notes then
held by the Lenders, or, if no such principal amount is then outstanding,
Lenders having at least 66-2/3% of the Commitments.
"Security Documents" is defined in the Intercreditor Agreement.
"Stated Maturity Date" means January 31, 1997.
"Unmatured Event of Default" means any condition, occurrence or event
that after notice or lapse of time or both would constitute an Event of
Default.
9.2 Credit Agreement Definitions. Capitalized words used in this
Agreement which are not defined in Section 9.1 above shall have the meaning
ascribed to them in the Credit Agreement.
10. GENERAL.
10.1 Waivers, Amendments, etc. The provisions of this Agreement and
of each other Agreement Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and
consented to by the
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<PAGE> 19
Borrower and the Required Lenders; provided, however, that no such amendment,
modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 10.1, change the definition of
"Required Lenders," increase the Commitment Amount or the Percentage
of any Lender, reduce any fees described in Section 2, or extend the
Commitment Termination Date shall be made without the consent of each
Lender and each holder of a Note;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment or prepayment of principal of or interest on any
Loan (or reduce the principal amount of or rate of interest on any
Loan) shall be made without the consent of the holder of that Note
evidencing such Loan; or
(d) affect adversely the interests, rights or obligations
of the Agent shall be made without consent of the Agent.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other
Agreement Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Agent, any Lender
or the holder of any Note under this Agreement or any other Agreement Document
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
10.2 Expenses. The Borrower agrees to pay on demand all expenses of
the Agent (including the fees and out-of-pocket expenses of counsel to the
Agent and of local counsel, if any, who may be retained by counsel to the
Agent) in connection with:
(a) asset or collateral inspection and auditing and financial
consultants,
(b) the negotiation, preparation, execution and delivery of
this Agreement and of each other Agreement Document, including
schedules and exhibits, and any
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<PAGE> 20
amendments, waivers, consents, supplements or other modifications to
this Agreement or any other Agreement Document as may from time to
time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Agreement document.
The Borrower further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Agreement, the borrowings
hereunder, or the issuance of the Notes or any other Agreement Documents (but
not including, to the extent reimbursement is prohibited by applicable law, the
Oklahoma real estate mortgage tax). The Borrower also agrees to reimburse the
Agent and each Lender upon demand for all reasonable out-of-pocket expenses
(including Lenders' travel expenses, attorneys' fees and legal expenses)
incurred by the Agent or such Lender in connection with (x) the negotiation of
any restructuring (including the Restructuring) or "work-out," whether or not
consummated, of any Obligations and (y) the enforcement of any Obligations.
10.3 Responsibility and Indemnity. In consideration of the execution
and delivery of this Agreement by each Lender and the extension of the
Commitments, the Borrower hereby indemnifies, exonerates and holds the
Agent and each Lender and each of their respective officers, directors,
employees and agents (collectively, the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action, suits, losses,
costs, liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party or the action
for which indemnification hereunder is sought), including reasonable attorneys'
fees and disbursements (collectively, the "Indemnified Liabilities"), incurred
by the Indemnified Parties or any of them as a result of, or arising out of, or
relating to:
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement
and any other Agreement Document by any of the Indemnified Parties
(including any action by of on behalf of the Borrower as the result of
any determination by the Required Lenders pursuant to Section 4 not to
fund any Borrowing);
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<PAGE> 21
(c) any investigation, litigation or proceeding related
to any acquisition or proposed acquisition by the Borrower or any of
its Subsidiaries of all or any portion of the Stock or assets of any
Person, whether or not the Agent or such Lender is party thereto;
(d) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter
relating to the protection of the environment or the Release by the
Borrower or any of its Subsidiaries of any Hazardous Materials; or
(e) the presence on or under, or escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
10.4 Survival. The obligations of the Borrower under Sections 3.1,
10.2 and 10.3, and the obligations of the Lenders under Section 8.1, shall in
each case survive any termination of this Agreement, the payment in full of all
Obligations and the termination of all Commitments.
10.5 Notices. All notices and other communications provided to any
party hereto under this Agreement or any other Agreement Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such
party at its address, or facsimile number set forth on Schedule 10.5 or at such
other address, Telex or facsimile number as may be designated by such party in
a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by pre-paid courier
service, shall be deemed given when received; any notice, if transmitted by
facsimile, shall be deemed given when transmitted.
10.6 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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<PAGE> 22
prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
10.7 Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES
AND EACH OTHER AGREEMENT DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This
Agreement, the Notes and the other Agreement Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
10.8 Assigns. This Agreement shall be binding upon and shall inure to
the benefit of, the respective successors and assigns of the parties hereto,
except that the Borrower may not assign its rights or obligations hereunder.
10.9 Execution in Counterparts, Effectiveness, etc.; Waiver. This
Agreement may be executed by the parties hereto in several counterparts,
each of which shall be executed by the Borrower and the Agent and be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and the
conditions set forth in Section 4.1 are met. As of the Effective Date, the
Agent and the Lenders hereby waive the Borrower's non-compliance with Section 6
of the Existing Seasonal Line of Credit Agreement and any and all Events of
Default and Unmatured Events of Default arising from the Borrower's
non-compliance with Section 6 of the Existing Seasonal Line of Credit Agreement
by the Borrower for the period ending on the Effective Date.
10.10 Waiver of Jury Trial. The Agent, each Lender and the Borrower
each waives any right to a trial by jury in any action for proceeding to
enforce or defend any rights under or relating to this Agreement, or any
amendment, instrument, document or agreement delivered or which may in the
future be delivered in connection herewith or arising from any banking
relationship existing in connection with this Agreement, and agrees that any
such action or proceeding shall be tried before a court and not before a jury.
If the foregoing is acceptable to the Borrower, please indicate
agreement therewith by having an authorized officer execute this Agreement
where indicated below.
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<PAGE> 23
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., NEW YORK
BRANCH as Agent
By
-----------------------------------
Title:
By
-----------------------------------
Title:
SENIOR SECURED SEASONAL
LINE OF CREDIT AGREEMENT
S-1
<PAGE> 24
<TABLE>
<CAPTION>
PERCENTAGE LENDERS
-----------------------------------------------------------------
<S> <C>
25% COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., NEW YORK BRANCH
By
----------------------------------
Title:
By
----------------------------------
Title:
25% OLD KENT BANK
By
----------------------------------
Title:
25% NATIONAL CITY BANK
By
--------------------------
Title:
25% HARRIS TRUST AND SAVINGS BANK
By
--------------------------
Title:
____
100%
====
Agreed and Accepted:
THORN APPLE VALLEY, INC.
By
--------------------------
Title:
SENIOR SECURED SEASONAL
LINE OF CREDIT AGREEMENT
</TABLE>
S-2
<PAGE> 25
APPENDIX, SCHEDULE AND EXHIBITS
APPENDIX A Covenants Appendix
SCHEDULE 10.5 Notice Addresses
EXHIBIT A Note
EXHIBIT B Form of Borrowing Request
EXHIBIT C Form of Opinion of Messrs.
Honigman, Miller, Schwartz
& Cohn, counsel to the
Borrower (See Paragraph
4.1.4)
<PAGE> 26
APPENDIX A
TEMPORARY COVENANTS(1)
SECTION 1. AFFIRMATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 1 and in Sections 6.3, 6.6(e), 6.6(f), 6.6(g),
6.6(h), 6.6(i), 6.8, 6.10, 6.11, and 6.12 of the Existing Note Agreement.
SECTION 1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower will furnish, or will cause to be furnished, to each Creditor Party
and the Agent copies of the following financial statements, reports, notices
and information:
(a) Weekly Reporting -- on the last Business Day of each
week,
(i) a Borrowing Base Certificate setting forth a
calculation of the Borrowing Base as of the last Business Day
of the preceding week; and
(ii) a Weekly P&L Statement in respect of the
preceding week;
(b) Fiscal Periodic Reporting --
(i) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year, consolidated balance sheets of
the Borrower and its Subsidiaries as of the end of such Fiscal
Period and consolidated statements of earnings and cash flow
of the Borrower and its Subsidiaries for such Fiscal Period
and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Period,
certified as true and correct by the chief financial
Authorized Officer of the Borrower (the parties hereto
acknowledge that such financial statements will not have been
audited, and that the annual audit of the Borrower may require
adjustments to the figures presented therein);
(ii) as soon as available and in any event within
26 days after the end of each Fiscal Period of each Fiscal
Year, a comparison of
(A) the actual consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and actual consolidated
statements of earnings and cash flow of the Borrower
and its Subsidiaries for such Fiscal Period and for
the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal
Period (the parties hereto acknowledge that such
financial statements will not have been audited, and
that the annual audit of the Borrower may require
adjustments to the figures presented therein), with
________________________
(1) Capitalized terms used in this Appendix A are defined
in Section 3 of this Appendix A.
Appendix A-1
<PAGE> 27
(B) the budgeted consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and the budgeted
consolidated statements of earnings and cash flow of
the Borrower and its Subsidiaries for such Fiscal
Period and for the period commencing at the end of
the previous Fiscal Year and ending with the end of
such Fiscal Period, in each case, contained in the
most recent Rolling Projection (defined below),
certified as true and correct by the chief financial
Authorized Officer of the Borrower;
(iii) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year and within 90 days after the end
of the last Fiscal Period of each Fiscal Year, a certificate,
executed by the chief financial Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to
the Agent and each Creditor Party) compliance with the
financial covenants set forth in Section 2.4; and
(iv) as soon as available and in any event within
30 days after the end of each Fiscal Period of each Fiscal
Year, a management report describing in detail the Company's
results of operations during such Fiscal Period and
explaining, among other things, (x) any material variances
demonstrated by the comparison delivered in respect of such
Fiscal Period pursuant to clause (ii) above and (y) any
failure to comply with financial covenants identified in the
certificate delivered in respect of such Fiscal Period
pursuant to clause (iii) above;
(c) Quarterly Reporting -- as soon as available and in
any event within 45 days after the end of each of Fiscal Quarter of
each Fiscal Year, a projection (each, a "Rolling Projection"), for
each of the thirteen Fiscal Periods next succeeding the last day of
such Fiscal Quarter, of the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of each such next succeeding Fiscal
Period and the budgeted consolidated statements of earnings and cash
flow of the Borrower and its Subsidiaries for each such next
succeeding Fiscal Period and for the period commencing at the end of
such Fiscal Quarter and ending with the end of each such next
succeeding Fiscal Period, certified as true and correct by the chief
financial Authorized Officer of the Borrower;
(d) Annual Reporting --
(i) as soon as available and in any event within
90 days after the end of each Fiscal Year of the Borrower, a
copy of the annual audit report (including, without
limitation, any accompanying or related auditor's letter and
the Borrower's responses thereto) for such Fiscal Year for the
Borrower and its Subsidiaries, including therein consolidated
balance sheets of the Borrower and its Subsidiaries as of the
end of such Fiscal Year and consolidated statements of
earnings and cash flow of the Borrower and its Subsidiaries
for such Fiscal Year, in each case certified (without any
Impermissible Qualification) in a manner acceptable to the
Agent and each of the Creditor Parties by Coopers & Lybrand or
other
Appendix A-2
<PAGE> 28
independent public accountants acceptable to the Agent and
each of the Creditor Parties, together with a certificate from
such accountants to the effect that, in making the examination
necessary for the signing of such annual report by such
accountants, they have not become aware of any Default or
Event of Default that has occurred and is continuing, or, if
they have become aware of such Default or Event of Default,
describing such Default or Event of Default and the steps, if
any, being taken to cure it; provided, however, that in the
case of the Company's financial statements for the Fiscal Year
ended May 31, 1996, such audit opinion shall be delivered not
later than September 13, 1996;
(ii) together with the financial reports delivered
pursuant to paragraph (i) of this Section 1.1(d), a
certificate of the independent certified public accountants
(i) stating that in making the examination necessary for
expressing an opinion on such financial statements, nothing
came to their attention that caused them to believe that there
is in existence or has occurred any Default or Event of
Default under any of the Financing Agreements (as defined in
the Intercreditor Agreement) or, if such accountants shall
have obtained knowledge of any such Default or Event of
Default, describing the nature thereof and the length of time
it has existed and (ii) acknowledging that the Creditor
Parties may rely on their opinion on such financial
statements;
(e) Defaults -- as soon as possible and in any event
within three days after the occurrence of each Default, a statement of
the chief financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(f) Litigation -- as soon as possible and in any event
within three days after (x) the occurrence of any adverse development
with respect to any litigation, action, proceeding, or labor
controversy described in Section 6.7 of the Bank Credit Agreement or
(y) the commencement of any labor controversy, litigation, action,
proceeding of the type described in Section 6.7 of the Bank Credit
Agreement, notice thereof and copies of all documentation relating
thereto;
(g) Securities Reports, etc. -- promptly after the
sending or filing thereof, copies of all reports which the Borrower
sends to any of its securityholders, and all reports and registration
statements which the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(h) Pension Plans -- immediately upon becoming aware of
the institution of any steps by the Borrower or any other Person to
terminate any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto; and
Appendix A-3
<PAGE> 29
(i) Other -- such other information respecting the
condition or operations, financial or otherwise, of the Borrower or
any of its Subsidiaries as any Creditor Party may from time to time
reasonably request.
SECTION 1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of
all taxes, assessments and governmental charges imposed upon it or
upon its Property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 1.3. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.
(a) The Borrower will maintain and preserve, and will
cause each Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and will use, and cause
each Subsidiary to use, its best efforts to maintain, preserve, renew
and extend all of its rights, powers, privileges and franchises
necessary to the proper conduct of its business.
(b) The Borrower will, and will cause each of its
Subsidiaries to, maintain, preserve, protect and keep its properties
in good repair, working order and condition, and make necessary and
proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly conducted at all times
unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically
desirable.
SECTION 1.4. INSURANCE. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts and with only such
deductibles as is customary in the case of similar businesses and will, upon
request of the Agent or any Creditor Party, furnish to each Creditor Party at
reasonable intervals a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section.
SECTION 1.5. BOOKS AND RECORDS. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Agent and each of
(i) the Noteholders as a group and (ii) the Lenders as a group, or any of their
respective representatives, at reasonable times and intervals, to visit all of
its offices, to discuss its financial matters with its officers and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with each Creditor Party
or its representatives whether or not any
Appendix A-4
<PAGE> 30
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
records. The Borrower shall pay any fees of such independent public accountant
incurred in connection with the Agent's or any Creditor Party's exercise of its
rights pursuant to this Section.
SECTION 1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to:
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and each Creditor Party
and provide copies upon receipt of all written claims, complaints,
notices or inquiries from governmental authorities relating to the
condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Agent and each Creditor Party any
actions and proceedings relating to compliance with Environmental
Laws; and
(c) provide such information and certifications which the
Agent or any Creditor Party may reasonably request from time to time
to evidence compliance with this Section 1.6.
SECTION 1.7. EQUITY OR SUBORDINATED DEBT.
(a) The Borrower shall receive at least $15,000,000 in
proceeds of Subordinated Debt on or before April 30, 1997.
(b) In the event that the Borrower shall fail to receive
at least $15,000,000 in proceeds of equity or Subordinated Debt on or
before January 31, 1997, the Borrower shall retain a
nationally-recognized investment advisor, who shall be acceptable to
the Creditor Parties, to set up and implement a plan (a copy of which
shall be provided to each Creditor Party) to raise such proceeds on or
before April 30, 1997.
SECTION 1.8. COLLATERAL MATTERS. The Borrower shall, and shall
cause each Subsidiary to, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments, and do
such further acts, as the Collateral Agent may reasonably request from time to
time in order:
(a) to ensure that
(i) the obligations of the Borrower hereunder and
under the other Financing Agreements (as defined in the
Intercreditor Agreement) are secured by substantially all
assets of the Borrower, subject to the exceptions set forth in
Appendix A-5
<PAGE> 31
Exhibit A-3 and guaranteed, pursuant to the Subsidiaries
Guaranty, by all Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary created or
acquired after the Effective Date), and
(ii) the obligations of each Subsidiary under the
Subsidiaries Guaranty are secured by substantially all of the
assets of such Subsidiary, and
(b) to perfect and maintain the validity, effectiveness
and priority of any of the Security Documents and the Liens intended
to be created thereby, subject to the exceptions set forth in Exhibit
A-3.
Without limiting the generality of the foregoing, the Borrower shall, and shall
cause each Subsidiary to, take the actions in respect of Collateral set forth
on Exhibit A-3 within the times set forth therein. Contemporaneously with the
execution and delivery of any document referred to above, the Borrower shall,
and shall cause each Subsidiary to, deliver all resolutions, opinions and
corporate documents as the Collateral Agent may reasonably request to confirm
the enforceability of such document and the perfection of the security interest
created thereby, if applicable.
SECTION 2. NEGATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 2.
SECTION 2.1. BUSINESS ACTIVITIES. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
the business of processing food and such activities as may be incidental or
related thereto.
SECTION 2.2. INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Creditor Obligations;
(b) Indebtedness existing as of the Effective Date which
is identified in Item 2.2(b) ("Ongoing Indebtedness") of the
Disclosure Schedule attached hereto;
(c) Indebtedness secured by Liens described in clause (h)
or (j) of Section 2.3;
(d) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and services,
but excluding Indebtedness incurred through the borrowing of money or
Guaranties);
(e) Hedging Obligations to a Lender;
(f) Subordinated Debt; or
(g) obligations in respect of Capital Leases in an
aggregate amount not to exceed $7,000,000 at any time.
Appendix A-6
<PAGE> 32
SECTION 2.3. LIENS. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens for taxes, assessments or governmental charges
not then due and delinquent and for which a penalty has not attached
or the validity of which is being contested in good faith and by
proper proceedings and with respect to which adequate reserves are
maintained in accordance with GAAP;
(b) Liens arising in connection with court proceedings,
provided that the execution of such Liens is effectively stayed, such
Liens are being contested in good faith and adequate reserves are
maintained with respect thereto in accordance with GAAP;
(c) Liens arising in the ordinary course of business and
not incurred in connection with the borrowing of money, including
encumbrances in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real Property, landlord's and
lessor's liens in the ordinary course of business, which do not,
individually or in the aggregate, materially interfere with the
conduct of the business of the Borrower and its Subsidiaries taken as
a whole and do not materially affect the value of the Property subject
to such Liens;
(d) Construction or materialmen's or mechanic's Liens
securing obligations not overdue or, if overdue, being contested in
good faith and by proper proceedings and with respect to which
adequate reserves are maintained in accordance with GAAP;
(e) Liens in connection with workers' compensation,
social security taxes or similar charges arising in the ordinary
course of business and not incurred in connection with the borrowing
of money;
(f) Liens existing on the Effective Date set forth in
Item 2.3(f) of the Disclosure Schedule attached hereto;
(g) Intercompany Liens (for purposes of intercompany
Liens, a Subsidiary shall mean any corporation of which the Borrower
directly or indirectly owns at least 80% of the Voting Stock);
(h) The extension, renewal or replacement of any Lien
permitted by the foregoing paragraph (f) in respect of the same
Property theretofore subject thereto or the extension, renewal or
replacement (without increase of principal amount of the Indebtedness
originally incurred);
(i) Liens incurred in connection with obtaining or
performing government contracts in the ordinary course of business and
not incurred in connection with the borrowing of money;
(j) (i) Any Lien in Property or in rights relating thereto to
secure any rights granted with respect to such Property in connection
with the provision of all or a part of the purchase price or cost of
the construction of such Property created
Appendix A-7
<PAGE> 33
contemporaneously with, or within 270 days after, such acquisition or
the completion of such construction (except Liens in connection with
the Ponca City Litigation shall not be permitted under this clause
(j)(i)), or (ii) any Lien in Property existing in such Property at the
time of acquisition thereof, whether or not the debt secured thereby
is assumed by the Borrower or such Subsidiary; provided, that the
Indebtedness secured by any such Lien referred to in clauses (i) and
(ii) above shall not exceed 100% of the fair market value on the
related Property at the time the Lien was originally created;
(k) the Shared Lien; and
(l) Liens created, in the ordinary course of the
Borrower's and each Subsidiary's business, under the Packers and
Stockyards Act of 1921, as amended, and the regulations promulgated
thereunder,
provided, that the creation and continued existence of any such Liens, either
individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Borrower and the Subsidiaries, taken as a whole, or
on the Borrower's ability to perform its obligations under any of the
Financing Agreements (as defined in the Intercreditor Agreement).
SECTION 2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) At any time during any period set forth in the table
below, Consolidated Adjusted Net Worth to be less than the amount set
forth opposite such period in such table:
<TABLE>
<CAPTION>
CONSOLIDATED ADJUSTED NET WORTH SHALL NEVER BE LESS
DURING THE PERIOD THAN
<S> <C>
From September 12, 1996 through and including $72,000,000
December 14, 1996
From December 15, 1996 through and including March $74,000,000
8, 1997
From March 9, 1997 through and including April 30, $76,000,000
1997
From May 1, 1997 through and including the date on $91,000,000 plus 50% of the Consolidated Net
which the Loans (under the Bank Credit Agreement Earnings for each Fiscal Year commencing with the
and the New Seasonal Line of Credit Agreement), 1997 Fiscal Year; provided, however, that if
-------- -------
other Obligations and the Insurance Notes shall Consolidated Net Earnings is less than zero in any
have been paid in full in cash Fiscal Year, Consolidated Net Earnings shall be
deemed to be zero in such Fiscal Year for purposes
of this Section 2.4(a).
</TABLE>
As of any date (prior to May 1, 1997) on which the Borrower receives
the proceeds of any Subordinated Debt, the amount set forth in the
table above opposite (i) the period
Appendix A-8
<PAGE> 34
containing such date and (ii) each subsequent period (other than the
last such period), shall be increased by the amount of such proceeds;
provided, however, that the aggregate amount of such increases shall
in no event exceed $15,000,000 in respect of any such period
regardless of the aggregate amount of such proceeds.
(b) As of the end of each Fiscal Period commencing with
the seventh Fiscal Period in the 1997 Fiscal Year and ending with the
seventh Fiscal Period in the 1998 Fiscal Year, the ratio of
Consolidated Earnings Available for Interest Expense to Consolidated
Interest Expense for the Relevant Period to be less than 1.65 to 1.
As of the end of each Fiscal Period commencing with the eighth Fiscal
Period in the 1998 Fiscal Year and ending with the twelfth Fiscal
Period in the 1998 Fiscal Year, the ratio of Consolidated Earnings
Available for Interest Expense to Consolidated Interest Expense for
the Relevant Period to be less than 1.85 to 1. As of the end of each
Fiscal Period commencing with the thirteenth Fiscal Period in the 1998
Fiscal Year, the ratio of Consolidated Earnings Available for Interest
Expense to Consolidated Interest Expense for the Relevant Period to be
less than 2.0 to 1. For purposes of this clause (b), "Relevant
Period" shall mean (i) in respect of any Fiscal Period ending on or
before May 30, 1997, the period commencing on May 31, 1996 and ending
on the last Business Day of such Fiscal Period, and (ii) in respect of
any other Fiscal Period (each, a "Testing Period"), the period
commencing on the first Business Day of the twelfth preceding Fiscal
Period and ending on the last Business Day of such Testing Period.
(c) At any time, the obligations of the Borrower and its
Subsidiaries for the payment of rental for any Property during the
next succeeding 365-day period under existing leases, subleases or
similar arrangements (other than Capital Leases) to exceed in the
aggregate $9,000,000.
(d) The aggregate amount of Consolidated Earnings
Available for Interest Expense in respect of the 1997 Fiscal Year to
be less than $24,630,880.
(e) (i) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first seven
(7) Fiscal Periods of the 1997 Fiscal Year to be less than
$2,000,000.
(ii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first ten
(10) Fiscal Periods of the 1997 Fiscal Year to be less than
--$1,000,000.
(iii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the 1997 Fiscal
Year to be less than --$3,000,000.
SECTION 2.5. INVESTMENTS. The Borrower will not, and will not
permit any Subsidiary to, make, incur, assume or suffer to exist any Investment
in any other Person, except:
(a) Investments existing on the Effective Date set forth
in Item 2.5(a) of the Disclosure Schedule attached hereto;
Appendix A-9
<PAGE> 35
(b) Investments in certificates of deposit, repurchase
agreements or bankers' acceptances, maturing within one year from the
date or origin, issued by a bank organized under the laws of the
United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000;
(c) Investments in commercial paper maturing in 270 days
or less from the date of issuance which, at the time of acquisition by
the Borrower or any Subsidiary, is accorded at least an "A-1" rating
by Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.;
(d) Investments in direct obligations of the United
States of America, or any agency thereof, the obligations of which are
guaranteed by the United States of America, maturing in twelve months
or less from the date of acquisition thereof;
(e) Investments in "money market" preferred stock rated
"A" or better by Standard & Poor's Corporation or "A2" by Moody's
Investors Service, Inc.;
(f) Investments in tax-exempt floating rate option tender
bonds backed by an irrevocable letter of credit issued by a bank the
long-term debt rating of which is at least "AA" by Standard & Poor's
Rating Group or "Aa2" by Moody's Investors Service, Inc.;
(g) Investments in Subsidiaries in existence on the
Effective Date and which operate principally in lines of business
similar to lines of business of the Borrower or its Subsidiaries
existing on the Effective Date; and
(h) Investments in or commitments to purchase foreign
currency; provided, that such Investment is made solely to the extent
that the Borrower and its Subsidiaries are obligated to make payments
to other Persons in such foreign currency.
In valuing any Investments for the purpose of applying the limitations
set forth above, such Investments shall be taken at the original cost thereof,
without allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered on account of capital or
principal.
For purposes of this Section 2.5 at any time when a corporation
becomes a Subsidiary, all investments of such corporation at such time shall be
deemed to have been made by such corporation, as a Subsidiary, at such time.
SECTION 2.6. RESTRICTED PAYMENTS, ETC. On and at all times after
the Effective Date, the Borrower will not:
(a) declare or pay any dividends, either in cash or
Property, on any shares of its capital stock of any class (except
dividends or other distributions payable solely in shares of capital
stock of the Borrower); or
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of Borrower's capital stock of
any class or any warrants, rights or options to purchase or acquire
any shares of the Borrower's capital stock; or
Appendix A-10
<PAGE> 36
(c) make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect of its
capital stock; or
(d) make any payment, either directly or indirectly or
through any Subsidiary, of principal of any Subordinated Debt other
than at the expressed maturity date thereof and scheduled mandatory
prepayments or redemptions thereof in accordance with the terms in
effect on the date of creation of such Subordinated Debt.
SECTION 2.7. CONSOLIDATION, MERGER, ETC. The Borrower will not,
and will not permit any Subsidiary to, liquidate or dissolve, consolidate with,
or merge into or with, any other corporation, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division
thereof) except any such Subsidiary may liquidate or dissolve voluntarily into,
and may merge with and into, the Borrower or any other Subsidiary, and the
assets or stock of any Subsidiary may be purchased or otherwise acquired by the
Borrower or any other Subsidiary.
SECTION 2.8. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any Subsidiary to, sell, lease, transfer or otherwise dispose
of any assets, including the disposition of the stock of any Subsidiary and
including any Sale and Lease-Back Transaction (collectively, a "Disposition"),
in one or a series of transactions to any Person other than the Borrower or a
Majority-Owned Subsidiary, other than:
(a) in the ordinary course of business (including,
without limitation, the disposition of tractors and trailers owned by
the Borrower in the ordinary course of business and consistent with
the Borrower's past practice);
(b) in the Frederick Disposition, provided that the
Borrower receives all cash consideration, and the net cash proceeds
therefrom are simultaneously paid to the Creditor Parties (in
accordance with the Intercreditor Agreement), in each case, on or
before November 30, 1997, or thereafter with the consent of each of
the Creditor Parties, which consent shall not be unreasonably
withheld; or
(c) the following Dispositions:
(i) the plant and equipment located in Concordia,
Missouri which is subject to a purchase option in favor of the
lessee of such facility (approximate balance of purchase
price: $2,000,000);
(ii) the Borrower's facility known as "Tri-Miller"
located in Hyrum, Utah, which has an approximate value of
$600,000;
(iii) A building known as the "H&R Building"
located in Detroit, Michigan, which has an approximate value
of $475,000; and
(iv) a condominium located in Bloomfield Hills, Mi
chigan (approximate balance of purchase price: $300,000);
Appendix A-11
<PAGE> 37
provided that the aggregate book value of all such assets sold,
leased, transferred or otherwise disposed of from time to time
pursuant to this Section 2.8(c) shall not exceed $4,000,000;
provided, however, that:
(x) the Borrower may, and may permit any Subsidiary to,
sell, lease, transfer or otherwise dispose of equipment if the cash
proceeds therefrom are utilized within one year after such Disposition
to purchase or are committed to the purchase of Property of a similar
nature and of at least equivalent value; and
(y) the Borrower may otherwise, and may permit any
Subsidiary otherwise to, sell, lease, transfer or otherwise dispose of
equipment so long as the aggregate amount of the book value of
equipment so disposed (as of the time of its disposition) does not
exceed $2,000,000 in any 365-day period.
SECTION 2.9. SALES AND LEASEBACKS. The Borrower will not, and
will not permit any Subsidiary to, effect any Sale and Lease-Back Transaction
with respect to:
(a) any Property of the Borrower or any Subsidiary which
Property was owned or leased by the Borrower or any Subsidiary on or
prior to September 12, 1996; or
(b) any other Property, if the aggregate book value of
all such other Property that is the subject of a Sale and Lease- Back
Transaction during any period of 365 consecutive days would exceed
$1,000,000.
SECTION 2.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction (including
the furnishing of goods or services) with an Affiliate except in the ordinary
course of business and on terms and conditions no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 2.11. COMPLIANCE WITH BORROWING BASE. The Borrower will
not incur any Borrowing Base Debt if, after giving effect to such incurrence,
and any concurrent repayment of Loans or Other Borrowing Base Debt, the
aggregate principal amount of Borrowing Base Debt would exceed the Borrowing
Base.
SECTION 2.12. HEDGING ACTIVITIES. The Borrower will not, and will
not permit any Subsidiary to, buy, sell, trade or otherwise deal in futures
contracts or options thereon or other derivatives thereof except pursuant to
transactions that represent substitutes for transactions to be made by the
Borrower or such Subsidiary at a later time in the physical pork or pork
products market and the purpose of which is solely to reduce the risk to the
Borrower or such Subsidiary of future fluctuations in the market prices of pork
or pork products.
Appendix A-12
<PAGE> 38
SECTION 2.13. NET CAPITAL EXPENDITURES.
(a) Net Capital Expenditures of the Borrower and its
Subsidiaries shall not exceed $8,200,000 in either the 1997 or the 1998
Fiscal Year. In each Fiscal Year thereafter, Net Capital Expenditures
shall not exceed the sum of $8,200,000 plus twenty-five percent (25%) of
Consolidated Net Earnings in respect of such Fiscal Year; provided,
however, that if Consolidated Net Earnings is less than zero in any
Fiscal Year, Consolidated Net Earnings shall be deemed to be zero in
such Fiscal Year for purposes of this Section 2.13(a).
(b) To the extent that the Net Capital Expenditures of
the Borrower during any Fiscal Year are less than the amount permitted
in respect of such Fiscal Year under Subsection 2.13(a) above, such
difference in respect of such period shall be available during the
first Fiscal Year succeeding such period to support capital
expenditures of the Borrower during such first succeeding Fiscal Year,
and, if such difference shall not be fully utilized by the end of such
first succeeding Fiscal Year, it shall not be available to support any
additional capital expenditures thereafter. With respect to the
utilization of the availability for the making of capital expenditures
by the Borrower in each Fiscal Year, any availability for such period
provided in Subsection 2.13(a) above shall be deemed utilized first to
support the capital expenditures to be made during such period, and
any availability carried forward from the previous Fiscal Year shall
be deemed utilized second to support the capital expenditures to be
made during such period.
(c) Up to an aggregate amount of $5,000,000 paid by the
Borrower in settlement of, or in satisfaction of a judgment against
the Borrower in respect of, the Ponca City Litigation shall not be
considered a Net Capital Expenditure for purposes of this Section
2.13.
SECTION 2.14. CERTAIN SALARIES. At no time will the Borrower, nor
will it permit any Subsidiary to, pay, directly or indirectly, any salary,
bonus, or other cash compensation to any person who, as of the date hereof, is
(i) the chairman of the Borrower's board of directors, (ii) the Borrower's
president and chief executive officer, or (iii) the Borrower's executive vice
president for finance and administration, if such payment or payments would
exceed, in the aggregate, 110% of the aggregate amount of salary, bonus and
other cash compensation paid to such person in the immediately preceding Fiscal
Year. Notwithstanding the foregoing, for each Fiscal Year after the 1998
Fiscal Year, the Borrower may compensate the persons described in this Section
2.14 in accordance with the bonus plan previously delivered to the Creditor
Parties.
SECTION 3. DEFINED TERMS. As used in this Exhibit A-2, the
following terms shall have the meanings set forth below or in the Section of
this document referenced below. The terms used herein and not defined herein
shall have the respective meanings ascribed to such terms in the Bank Credit
Agreement (as defined herein).
"Bank Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of September 11, 1996, among (i)
Thorn Apple Valley, Inc. and (ii) Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and
Harris Trust and Savings Bank, as in effect on the Effective Date.
Appendix A-13
<PAGE> 39
"Collateral" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Collateral Agent" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Consolidated Adjusted Net Worth" shall mean the sum of:
(a) (i) Consolidated Shareholders' Equity less
(ii) all goodwill, trade names, trademarks, patents,
organizational expense, unamortized debt discount and expense
and other intangible assets properly classified as intangibles
in accordance with GAAP and incurred after the date of
consummation of the Wilson Acquisition; plus
(b) Subordinated Debt.
"Consolidated Earnings Available for Interest Expense" shall
mean, for any period, the sum of:
(a) Consolidated Net Earnings for such period
before deduction of any amount which, in conformity with GAAP,
would be set forth opposite the caption "income tax expense"
(including deferred income taxes) (or any like caption) on a
consolidated income statement of Borrower for such period;
plus
(b) Consolidated Interest Expense for such
period; plus
(c) the amortization of any financing cost and of
any debt discount; plus
(d) an amount which, in conformity with GAAP,
would be set forth, opposite the caption "depreciation and
amortization expense" (or any like caption) (including,
without limitation, amortization of intangible assets) on such
income statement for such period, to the extent the same are
deducted from Borrower's net revenues, in conformity with
GAAP, in determining Consolidated Net Earnings for such
period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition costs including
agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Interest Expense" shall mean the interest
expense (including capitalized and non-capitalized interest, the
interest component of rentals under Capital
Appendix A-14
<PAGE> 40
Leases and any expense associated with the termination of a swap
arrangement) of the Borrower and its Subsidiaries on a consolidated
basis for any period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition closing costs
including agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Shareholders' Equity" shall mean consolidated
shareholders' equity of the Borrower and its Subsidiaries determined
in accordance with GAAP.
"Creditor Obligations" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Creditor Parties" shall mean, collectively and individually
(as the context requires) (i) the "Lenders" as defined in the Bank
Credit Agreement and (ii) the Noteholders.
"Disposition" is defined in Section 2.8.
"Fiscal Period" shall mean each period of four consecutive
weeks ending on (i) the last Friday in May in each Fiscal Year or (ii)
the Friday which is four weeks, or any even multiple of four weeks,
thereafter.
"Frederick Disposition" shall mean the sale of the plant,
property, inventory and equipment located at 1487 Farnsworth Avenue,
Detroit, Michigan, and the goodwill, licenses, permits, franchises,
patents, copyrights, trademarks, service marks and trade names
associated therewith.
"Fresh Meats Earnings Available for Interest Expense" shall
mean Consolidated Earnings Available for Interest Expense but only in
respect of the Borrower's fresh meats division, as regularly and
historically reported by the Borrower.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of the Borrower, any qualification or exception:
(a) which is of a "going concern" or similar
nature;
(b) which relates to the limited scope of
examination of relevant to such financial statement; or
(c) which relates to the treatment or
classification of any item in such financial statement and
which, as a condition to its removal, would require an
Appendix A-15
<PAGE> 41
adjustment to such item the effect of which would be to cause
the Borrower to be in default of its obligations under Section
2.4 of this Exhibit A-2.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed
money and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether
or not drawn, and banker's acceptances issued for the account
of such Person;
(c) all obligations of such Person as lessee
under leases which have been or should be, in accordance with
GAAP, recorded as Capital Leases;
(d) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side
of the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under all
Hedging Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of Property or services, and
indebtedness (excluding prepaid interest thereon) secured by a
Lien on Property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Guaranties of such Person in respect of
any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Insurance Note Agreements" shall mean, collectively, (i) that
certain Note Agreement, dated as of April 1, 1994, by and between the
Borrower and Allstate Life Insurance Company, pursuant to which the
Borrower issued Fifteen Million Dollars ($15,000,000) in aggregate
principal amount of its six and forty-five one-hundredths percent
(6.45%) Senior Notes due April 21, 2006, (ii) that certain Note
Agreement, dated as of October 1, 1994, by and between the Borrower
and Allstate Life Insurance Company, pursuant to which the Borrower
issued Eight Million Dollars ($8,000,000) in aggregate principal
amount of its eight and forty-two one-hundredths percent (8.42%)
Senior Notes due October 1, 2003, and (iii) that certain Note
Agreement, dated as of May 15 1995, by and among the Borrower,
Allstate Life Insurance Company, Principal Mutual Life Insurance
Company, and Great-West Life & Annuity Insurance Company, pursuant to
which the Borrower issued Forty-Two Million Five Hundred Thousand
Dollars
Appendix A-16
<PAGE> 42
($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15,
2005, in each case, as amended from time to time.
"Insurance Notes" shall mean those certain Notes, as amended
from time to time, issued pursuant to the Insurance Note Agreements.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated as of September 11, 1996 by and among
the Creditor Parties, and acknowledged and agreed to by the Borrower
and its Subsidiaries.
"Investment" shall mean, relative to any Person:
(a) any loan or advance made by such Person to
any other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary course
of business);
(b) any Guaranty of such Person; or
(c) any ownership or similar interest held by
such Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof, less all returns of principal or equity
thereon (and without adjustment by reason of the financial condition
of such Person) and shall, if made by the transfer or exchange of
Property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such
Property.
"Majority-Owned Subsidiary" shall mean, when applied to a
Subsidiary, any Subsidiary 80% or more of the Voting Stock of which is
owned by the Borrower or a Majority-Owned Subsidiary (other than
Voting Stock required to be held as directors' qualifying stock).
"Net Capital Expenditures" shall mean, in any period, the remainder of
(i) the aggregate cost of acquisition or
construction of all tangible assets acquired or constructed
during such period which at the time of acquisition or
construction have an expected useful life of more than one (1)
year and would be shown on a balance sheet of the acquiring or
constructing Person as an asset ("Capital Assets"), minus
(ii) the aggregate net proceeds of all sales or
other Dispositions of Capital Assets during such period, other
than proceeds which were used to permanently reduce Creditor
Obligations.
"New Seasonal Line of Credit Agreement" shall mean that
certain letter agreement regarding a Senior Secured Seasonal Line of
Credit for the Borrower dated as of September 11, 1996 by and among
(i) Thorn Apple Valley, Inc. and (ii) Cooperatieve
Appendix A-17
<PAGE> 43
Centrale Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank.
"Noteholders" shall mean the holders of the Insurance Notes
from time to time.
"Ongoing Indebtedness" is defined in Section 2.2(b).
"Ponca City Litigation" shall mean that certain action
entitled Facility Constructors, Inc. v. Thorn Apple Valley, Inc. filed
in February, 1996, in District Court, Kay County, Oklahoma against the
Company in connection with the construction of the Company's plant in
Ponca City, Oklahoma.
"Rolling Projection" is defined in Section 1.1(c).
"Section" unless otherwise specified, shall mean a Section of
this Exhibit A-2.
"Security Documents" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Shared Lien" shall mean the lien upon the Collateral (as
defined in the Intercreditor Agreement) created by the Security
Documents (as defined in the Intercreditor Agreement) in favor of the
Creditor Parties (as defined in the Intercreditor Agreement).
"Subordinated Debt" shall mean the principal of and premium,
if any, and interest on all indebtedness of the Borrower, whether
currently outstanding or hereafter created, for money borrowed, or any
indebtedness incurred in connection with an acquisition or lease of
Property or with a merger, consolidation, or acquisition of assets
which is expressly subordinated, on terms satisfactory to the Creditor
Parties, in right of payment pursuant to its terms to the Loans and
the Insurance Notes (regardless of whether it is subordinated to other
indebtedness of the Borrower).
"Subsidiaries Guaranty" shall have the meaning assigned to the
term "Guaranty" in the Intercreditor Agreement.
"Weekly P&L Statement" shall mean, in respect of any week, a
statement, in form acceptable to the Creditor Parties, setting forth,
for each of the Borrower's fresh meats and processed meats divisions,
the income and expenses of the Borrower during such week.
Appendix A-18
<PAGE> 44
DISCLOSURE SCHEDULE TO APPENDIX A
ITEM 2.2(B) - ONGOING INDEBTEDNESS:
Operating Leases. See Exhibit A to Disclosure Schedule to Exhibit A-2.
<TABLE>
<CAPTION>
BALANCE OUTSTANDING
@ 8/23/96
<S> <C>
Lines of Credit:
Combined $94,100,000
-----------
Notes Payable:
Corporate: Allstate Unsecured Notes 23,000,000
Corporate: Allstate Life Ins. Unsecured Notes 15,000,000
Principal Mutual Life Unsecured Notes 14,000,000
Great-West Life & Annuity Unsecured Notes 13,500,000
Dixie: Forrest City Note 1,282,222
---------
Subtotal 160,882,000
-----------
Industrial Revenue Bonds:
Corporate: (Branch Banking) 2,400,000
Dixie Plant: (Economic Development Revenue Bond) 2,442,000
Corporate: (Michigan Strategic Fund - Adjustable Rate Demand
Limited Obligation Revenue bond, Series 1993)
5,500,000
---------
Subtotal:
10,342,000
----------
Capital Leases:
Corporate 518,744
Frederick division 2,304,521
Smoked Meats division 314,296
Concordia & Shreveport division 93,018
Dixie division 1,913,235
---------
Subtotal 5,143,814
Total Outstanding Indebtedness $176,367,814
============
</TABLE>
Letters of Credit - See Exhibit B to Disclosure Schedule to Exhibit A-2.
Disclosure Schedule - 1
<PAGE> 45
ITEM 2.3(F) - EXISTING LIENS:
<TABLE>
<CAPTION>
DEBT DESCRIPTION OF COLLATERAL AMOUNT OF
LOCATION REFERENCE O/S DEBT
<S> <C> <C> <C> <C>
Industrial Revenue Bonds:
Corporate Branch Banking Carolina manufacturing
facility $2,400,000
Dixie division Dixie facility $2,442,000
Mich. Strat. Fund. Grand Rapids $5,500,000
Capital Leases:
Corporate, Frederick, Smoked Meats, Concordia, Various machinery and $5,143,814
Shreveport and Dixie divisions. equipment located at the
company's various divisions
and subsidiaries
<CAPTION>
All other Liens existing as of the Effective Date and permitted under Section 1.8 of Exhibit A-2.
ITEM 2.5(A) ONGOING INVESTMENTS:
-------------------
INVESTMENT BALANCE
FINANCIAL INSTITUTION TYPE @ 8/23/96
<S> <C> <C>
Short-Term Investments
United Carolina Bank CD 500,000
Providence TempCash 3,059,000
Chicago operation U.S. Treasury Bills 300,000
Subtotal $3,859,000
Michigan Livestock Exchange Preferred Stock 2,000,000
Total Investments $5,859,000
==========
</TABLE>
Disclosure Schedule - 2
<PAGE> 46
EXHIBIT A TO DISCLOSURE SCHEDULE TO APPENDIX A
Operating Leases
Disclosure Schedule - 3
<PAGE> 47
EXHIBIT B TO DISCLOSURE SCHEDULE TO APPENDIX A
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
<PAGE> 48
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 10(t)
THORN APPLE VALLEY, INC.
__________________________________
AMENDMENT AGREEMENT
__________________________________
RE:
NOTE AGREEMENT DATED AS OF APRIL 1, 1994
AND
$15,000,000 6.45% SENIOR NOTES DUE APRIL 21, 2006
DATED AS OF SEPTEMBER 11, 1996
$15,000,000 SENIOR NOTES DUE APRIL 21, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "Agreement"), dated as of September 11,
1996, between THORN APPLE VALLEY, INC. (the "Company"), a Michigan corporation,
and ALLSTATE LIFE INSURANCE COMPANY (referred to herein as "Allstate" or the
"Noteholder").
RECITALS:
A. Pursuant to that certain Note Agreement, dated as of April 1,
1994 (as amended prior to the date hereof, the "Existing Note Agreement", and,
as amended and supplemented by this Agreement and the other agreements and
instruments to be executed in connection herewith and therewith, the "Amended
Note Agreement"), the Company issued Fifteen Million Dollars ($15,000,000) in
aggregate principal amount of its six and forty-five one-hundredths percent
(6.45%) Senior Notes due April 21, 2006 (as amended prior to the date hereof,
the "Existing Notes", and, as amended and supplemented by this Agreement and
the other agreements and instruments to be executed in connection herewith and
therewith, the "Amended Notes"). The Existing Notes are substantially in the
form of Exhibit A attached to the Existing Note Agreement.
B. The Company has requested that the Noteholder amend or waive
certain terms of the Existing Note Agreement, as more particularly set forth in
this Agreement.
C. Subject to the terms and conditions hereinafter set forth, the
Noteholder is willing to amend certain terms of the Existing Note Agreement and
the Existing Notes and waive other terms of the Existing Note Agreement, all as
more particularly set forth in this Agreement.
D. The Company and the Noteholder are desirous of entering into
this Agreement on the terms and conditions hereinafter set forth.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
As used herein, the following terms shall have the meanings set forth
below or in the document or the Section of this Agreement referenced below.
The terms used herein and not defined herein shall have the respective meanings
ascribed to such terms in the Amended Note Agreement.
"Agreement, this" -- introductory sentence hereof.
"Allstate" -- introductory sentence hereof.
"Amended Bank Credit Documents" -- Section 5.2(b).
1
<PAGE> 3
"Amended Note Agreement" -- Recital A hereof.
"Amended Note Documents" -- means, collectively, the Amended Note
Agreement, the Amended Notes, the Security Documents (as defined herein), the
Intercreditor Agreement (as defined herein), and the Subsidiary Guaranty (as
defined herein), as each may be amended from time to time.
"Amended Notes" -- Recital A hereof.
"Amendment Effective Date" -- introductory language to Section 5.
"Bank Credit Agreement" -- means, collectively, (i) that certain
Credit Agreement dated as of May 30, 1995 by and among the Company and the
Banks, pursuant to which the Banks agreed to provide the Company with an
$80,000,000 revolving credit facility and (ii) that certain letter agreement
dated March 11, 1996 by and among the Company and the Banks (or their
successors in interest), pursuant to which the Banks agreed to provide the
Company with a $20,000,000 revolving credit facility, in each case, as amended
to the date hereof.
"Banks" -- means, collectively, Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and Harris
Trust and Savings Bank.
"Collateral" -- shall have the meaning ascribed to such term in the
Intercreditor Agreement.
"Collateral Agent" -- shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Company" -- introductory sentence hereof.
"Covenant Reversion Date" -- means the later to occur of (i) the date
on which all of the obligations in respect of the Bank Credit Agreement shall
have been paid in full in cash and (ii) the date on which the Company shall
have obtained from a nationally recognized debt rating agency a rating in
respect of the Notes of BBB or better.
"Existing Note Agreement" -- Recital A hereof.
"Existing Notes" -- Recital A hereof.
"Intercreditor Agreement" -- Section 5.2(g).
"IRB Obligations" -- shall have the meaning ascribed to such term in the
Intercreditor Agreement.
"L/C Issuer" -- Old Kent Bank, in its capacity as issuer of the Old Kent
Letters of Credit.
"Noteholder" -- introductory sentence hereof.
"Old Kent L/C Documents" -- shall have the meaning ascribed to such
term in the Intercreditor Agreement.
2
<PAGE> 4
"Old Kent Letters of Credit" -- shall have the meaning ascribed to
such term in the Intercreditor Agreement.
"Other Note Agreements" -- means, collectively, (i) that certain Note
Agreement, dated as of May 15, 1995, by and among the Company, Allstate,
Principal Mutual Life Insurance Company and Great-West Life & Annuity Insurance
Company, pursuant to which the Company issued Forty- Two Million Five Hundred
Thousand Dollars ($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15, 2005 and
(ii) that certain Note Agreement, dated as of October 1, 1994, by and between
the Company and Allstate, pursuant to which the Company issued Eight Million
Dollars ($8,000,000) in aggregate principal amount of its eight and forty-two
one- hundredths percent (8.42%) Senior Notes due October 1, 2003, in each case,
as amended to the date hereof.
"Restated Notes" -- Section 5.2(a).
"Security Documents" -- Section 5.2(e).
"Subsidiary Guaranty" -- Section 5.2(f).
SECTION 2. AMENDMENTS TO EXISTING NOTE AGREEMENT AND EXISTING
NOTES.
2.1 GENERAL AMENDMENTS. The Company and, subject to the
satisfaction of the conditions set forth in Section 5 hereof, the Noteholder
hereby consent and agree to the amendments to the Existing Note Agreement and
the Existing Notes as set forth in Exhibit A-1 to this Agreement. Each such
amendment shall become effective on the Amendment Effective Date (as defined
herein) and is incorporated herein by reference as if set forth verbatim in
this Agreement.
2.2 TEMPORARY SUSPENSION AND AMENDMENTS TO COVENANTS. The Company
and, subject to the satisfaction of the conditions set forth in Section 5
hereof, the Noteholder hereby consent and agree as follows:
(a) During the period commencing on the Amendment
Effective Date and ending on the Covenant Reversion Date, the Company
(i) shall comply with the requirements of the covenants set forth in
Exhibit A-2 to this Agreement, and (ii) except as set forth in said
Exhibit A-2, shall not be required to comply with the requirements of
the covenants contained in Section 6 or Section 7 of the Existing Note
Agreement.
(b) During the period commencing on the Covenant
Reversion Date and ending on the date on which the Notes shall have
been paid in full in cash, the Company shall comply with all of the
requirements of the covenants contained in Section 6 and Section 7 of
the Amended Note Agreement.
3
<PAGE> 5
SECTION 3. WAIVER OF NON-COMPLIANCE.
Effective upon the satisfaction of the conditions set forth in Section
5 hereof, the Noteholder hereby irrevocably waives (a) non- compliance by the
Company with any provision of Section 7 of the Existing Note Agreement for the
period prior to the Amendment Effective Date and (b) any Default or Event of
Default during such period resulting from any such failure of the Company to be
in compliance with the provisions of Section 7 of the Existing Note Agreement.
SECTION 4. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholder to enter into this Agreement, the Company
warrants and represents to the Noteholder that, as of the Amendment Effective
Date:
4.1 ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a
corporation duly incorporated, validly existing and is in good standing under
the laws of the State of Michigan. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations under the Amended Note Documents.
4.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The execution
and delivery by the Company of this Agreement and the performance by the
Company of its obligations under the Amended Note Documents have been duly
authorized by all necessary action on the part of the Company. This Agreement
has been duly executed and delivered by the Company. Each of the Amended Note
Documents constitutes a valid and binding obligation of the Company,
enforceable in accordance with its respective terms, except that the
enforceability thereof may be:
(a) limited by bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
4.3 NO CONFLICTS OR DEFAULTS. Neither the execution and delivery
by the Company of this Agreement and the other Amended Note Documents, nor the
performance by the Company of its obligations under any of the Amended Note
Documents, conflicts with, results in any breach in any of the provisions of,
constitutes a default under, violates or results in the creation of any Lien
(other than pursuant to the Amended Note Documents) upon any Property of the
Company under the provisions of:
(a) any charter document, partnership agreement or bylaws
of the Company;
(b) assuming the contemporaneous execution and delivery
of an amendment to the Bank Credit Agreement and an amendment
(substantially similar to this Agreement) to the Other Note Agreements
(as such terms are defined herein), any agreement, instrument or
conveyance to which the Company or any Properties of the Company may
be bound or affected, except for such breaches, defaults and
violations that, in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or
on the Company's ability to perform its obligations under this
Agreement, the Amended
4
<PAGE> 6
Note Agreement and the Amended Notes; provided, however, that if the
granting of Liens pursuant to any of the Security Documents will
violate the terms of any of the IRB Obligations, no such Security
Documents which create Liens which violate the terms of any such IRB
Obligations will be filed or recorded by any Person unless and until
any required consents thereto shall have been obtained from the
appropriate secured parties; or
(c) any statute, rule or regulation or any order,
judgment or award of any court, tribunal or arbitrator by which the
Company or any Properties of the Company may be bound or affected,
except for such violations that, in the aggregate, could not
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or on the Company's ability to perform
its obligations under this Agreement, the Amended Note Agreement and
the Amended Notes.
4.4 GOVERNMENTAL CONSENT. Neither the execution and delivery by
the Company of this Agreement and the other Amended Note Documents nor the
performance by the Company of its obligations under each of the Amended Note
Documents, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority on the
part of the Company as a condition thereto under the circumstances and
conditions contemplated by this Agreement and each of the Amended Note
Documents.
4.5 NO DEFAULTS OR EVENTS OF DEFAULT. After giving effect to the
transactions contemplated by this Agreement, including the contemporaneous
execution and delivery of an amendment to the Bank Credit Agreement and an
amendment (substantially similar to this Agreement) to each of the Other Note
Agreements, no Default or Event of Default will exist under any of the Amended
Note Documents, the Bank Credit Agreement (as amended as of the date hereof) or
the Other Note Agreements (as amended as of the date hereof).
4.6 DISCLOSURE. The financial statements and certificates
delivered to the Noteholder by the Company or the Company's accountants, as the
case may be, pursuant to Section 6.6 of the Existing Note Agreement do not, nor
does this Agreement or any written statement furnished by the Company in
connection herewith, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. There is no fact existing as of the date hereof which the Company
has not disclosed to the Noteholder in writing which has had or, so far as the
Company can now reasonably foresee, could reasonably be expected to have, a
material adverse effect on the condition, financial or otherwise, of the
Company or its Subsidiaries, or the operations of any of them, or upon the
Company's ability to perform its obligations under this Agreement, the Amended
Note Agreement and the Amended Notes.
4.7 TRUE AND CORRECT COPIES. The Company has delivered to the
Noteholder true and correct copies of the Bank Credit Agreement, each of the
Old Kent L/C Documents, each of the Other Note Agreements, each of the Security
Documents (including, without limitation, all schedules and exhibits thereto
and all miscellaneous agreements and certificates delivered in connection
therewith), the Subsidiary Guaranty, and the Intercreditor Agreement, each as
in effect on the Amendment Effective Date.
5
<PAGE> 7
4.8 CERTAIN REPRESENTATIONS AND WARRANTIES. As supplemented by
the information set forth on Annex 1 hereto, all of the representations and
warranties contained in Section 3 of the Existing Note Agreement are true and
correct in all material respects as of the Amendment Effective Date as if such
representations and warranties were made on the Amendment Effective Date. All
of the representations and warranties contained in (i) the most recent
amendment to the Bank Credit Agreement, (ii) each of the Security Documents,
(iii) the Subsidiary Guaranty, and (iv) the Intercreditor Agreement, each as in
effect on the Amendment Effective Date, are true and correct in all respects.
4.9 NO UNDISCLOSED CONSIDERATION. Except as expressly set forth
in the documents described in Section 5.1 or Section 5.2 hereof, neither the
Company nor any Subsidiary has paid or will pay, directly or indirectly, any
fee, charge or other consideration to any Creditor Party (as defined in the
Intercreditor Agreement) as a condition to, or otherwise in connection with,
the amendments, modifications or restatements, as the case may be, to the Bank
Credit Agreement, the L/C Documents (as defined in the Intercreditor
Agreement), the Other Note Agreements or the Existing Note Agreement, in each
case, as described in the Intercreditor Agreement.
4.10 SOLVENCY.
(a) As of the date hereof, the fair value of all of the
Company's property (other than property that the Company could exempt
from its estate were it a debtor under the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq.) exceeds the aggregate amount of
the Company's debts.
(b) The Company has not transferred, concealed, or
removed any of its property with intent to hinder, delay, or defraud
any of the Company's creditors.
SECTION 5. CONDITIONS PRECEDENT.
The amendments set forth in Section 2 hereof and the waiver set forth
in Section 3 hereof shall not become effective unless all of the following
conditions precedent shall have been satisfied on or before September 12, 1996
(the date of such satisfaction being herein referred to as the "Amendment
Effective Date"):
5.1 EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company shall
have executed and delivered to the Noteholder a counterpart of this Agreement.
5.2 EXECUTION AND DELIVERY OF OTHER DOCUMENTS. The following
documents, each in form and substance satisfactory to the Noteholder and its
special counsel, shall have been duly executed and delivered by the parties
thereto, and shall be in full force and effect:
(a) an amendment and restatement of each of the Existing
Notes (collectively, the "Restated Notes") in the form set forth in
paragraph 10 of Exhibit A-1 hereto;
(b) an Amended and Restated Credit Agreement and a letter
agreement regarding a Senior Secured Seasonal Line of Credit for the
Company (collectively, the "Amended Bank Credit Documents"), in each
case among the Company and the Banks,
6
<PAGE> 8
which agreements, in each case, shall be in form and substance
satisfactory to the Noteholder;
(c) an amendment to each of the L/C Documents (including,
without limitation, a waiver of each default or event of default
existing thereunder as of the date hereof), in each case, dated as of
the date hereof and executed by each of the parties to such L/C
Document, which agreements, in each case, shall be in form and
substance satisfactory to the Noteholder;
(d) an amendment to each of the Other Note Agreements, in
each case, dated as of the date hereof and executed by each of the
parties to such Other Note Agreement, which agreements, in each case,
shall be in form and substance satisfactory to the Noteholder;
(e) those certain security agreements, mortgages and
other collateral documents more fully set forth on Schedule I to the
Intercreditor Agreement (collectively, the "Security Documents"),
which documents, in each case, shall be in form and substance
satisfactory to the Noteholder;
(f) a guaranty of the Amended Notes by each Subsidiary of
the Company (the "Subsidiary Guaranty"), which shall be in form and
substance satisfactory to the Noteholder; and
(g) an Intercreditor Agreement (the "Intercreditor
Agreement"), among Allstate, Principal Mutual Life Insurance Company,
Great-West Life & Annuity Insurance Company, the Banks, the L/C Issuer
and the Collateral Agent, and acknowledged and agreed to by the
Company and the Subsidiaries, which agreement shall be in form and
substance satisfactory to the Noteholder.
5.3 PRIVATE PLACEMENT NUMBER. The Company shall have obtained or
caused to be obtained a private placement number for the Restated Notes from
the CUSIP Service Bureau of Standard & Poor's, a division of McGraw-Hill, Inc.,
and the Noteholder shall have been informed of such private placement number.
5.4 COLLATERAL. The Security Documents shall be in full force and
effect and there shall be no Default or Event of Default thereunder and as
defined therein. Except in respect of those items of Collateral identified on
Exhibit A-3 hereto, all actions necessary to perfect the Liens of the
Collateral Agent created by the Security Documents (including, without
limitation, the filing of all appropriate financing statements and the
recording of all appropriate documents with appropriate public officials) shall
have been taken in accordance with the terms of the Security Documents and
confirmation thereof shall be received by the Noteholder. The Liens of the
Collateral Agent created by the Security Documents shall be valid, enforceable
and perfected (except as permitted by Section 1.8 of Exhibit A-2 hereto), and
the Property of the Company shall be subject to no other Lien not otherwise
permitted under Section 2.3 of Exhibit A-2 hereto.
7
<PAGE> 9
5.5 EQUITY INFUSION. The Company shall have received an
aggregate of not less than $3,000,000 in capital contributions from one or more
of its shareholders upon terms and conditions satisfactory to the Noteholder in
its sole discretion.
5.6 NO DEFAULT; REPRESENTATIONS AND WARRANTIES TRUE. The
warranties and representations set forth in Section 4 hereof shall be true and
correct on the Amendment Effective Date and no Default or Event of Default
shall exist which would not be waived by this Agreement and by an amendment to
each of the Other Note Agreements. The Noteholder shall have received a
certificate dated the Amendment Effective Date and signed by the President and
the Chief Financial Officer of the Company, in form and substance satisfactory
to the Noteholder, certifying to the conditions specified in the preceding
sentence.
5.7 AUTHORIZATION OF TRANSACTIONS.
(a) The Company shall have duly authorized the execution
and delivery of this Agreement and each of the documents executed and
delivered in connection herewith and the performance of all of its
obligations contemplated by this Agreement. The Noteholder shall have
received a certificate dated the Amendment Effective Date and signed
by the Secretary or an Assistant Secretary of the Company, in form and
substance satisfactory to the Noteholder, certifying as to the
resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of the Restated Notes and
this Agreement.
(b) Each Subsidiary shall have duly authorized the
execution, delivery and performance of its respective Subsidiary
Guaranty. The Noteholder shall have received a certificate dated the
Amendment Effective Date and signed by the Secretary or an Assistant
Secretary of each Subsidiary, certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Subsidiary Guaranty.
5.8 OPINION OF COUNSEL. The Noteholder shall have received from
Honigman Miller Schwartz and Cohn, counsel to the Company, a legal opinion, in
form and substance satisfactory to the Noteholder and its special counsel, with
respect to the transactions contemplated by this Agreement.
5.9 PAYMENT OF CERTAIN EXPENSES. The Company shall have paid all
reasonable costs and expenses of the Noteholder relating to this Agreement and
the other Amended Note Documents, including without limitation (i) the fees and
expenses of Hebb & Gitlin, the Noteholder's special counsel and (ii) the
out-of-pocket expenses of the Noteholder.
5.10 PAYMENT OF INTEREST. The Company shall have paid all accrued
and unpaid interest in respect of each Existing Note, at the rates specified
herein, to the Amendment Effective Date.
5.11 MINIMUM REVOLVER AVAILABILITY. The Company shall have
obtained commitments from the Banks, pursuant to the Amended Bank Credit
Documents, which shall be available to the Company as of the Amendment
Effective Date, in an amount equal to at least $110,000,000.
8
<PAGE> 10
5.12 PROCEEDINGS SATISFACTORY. All documents executed and
delivered, and actions and proceedings taken, in connection with this Agreement
shall be satisfactory to the Noteholder and its special counsel. The
Noteholder and its special counsel shall have received copies of such documents
and papers as they may reasonably request in connection therewith, in form and
substance satisfactory to them.
SECTION 6. NO PREJUDICE OR WAIVER; REAFFIRMATION.
6.1 NO PREJUDICE OR WAIVER. Except as provided herein, the terms
of this Agreement shall not operate as a waiver by the Noteholder of, or
otherwise prejudice the Noteholder's rights, remedies or powers under, the
Amended Note Documents or under applicable law. Except as expressly provided
herein:
(a) no terms and provisions of any agreement are modified
or changed by this Agreement; and
(b) the terms and provisions of the Existing Note
Agreement and the Existing Notes shall continue in full force and
effect.
6.2 REAFFIRMATION. The Company hereby acknowledges and reaffirms
all of its obligations and duties under the Amended Note Documents.
SECTION 7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
7.2 DUPLICATE ORIGINALS. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in one or more counterparts and shall be effective
when at least one counterpart shall have been executed by each party hereto,
and each set of counterparts which, collectively, show execution by each party
hereto shall constitute one duplicate original.
7.3 WAIVERS AND AMENDMENTS. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally, or by any
action or inaction, but only by an instrument in writing signed in accordance
with the amendment provisions set forth in the Existing Note Agreement.
7.4 SECTION HEADINGS. The titles of the sections hereof appear as
a matter of convenience only, do not constitute a part of this Agreement and
shall not affect the construction hereof.
9
<PAGE> 11
7.5 COSTS AND EXPENSES. On the Amendment Effective Date, the
Company shall pay all costs and expenses of the Noteholder relating to this
Agreement and the other Amended Note Documents, including, but not limited to,
(i) the statement for reasonable fees and disbursements of the Noteholder's
special counsel and (ii) the statement for reasonable out-of-pocket expenses of
the Noteholder, in each case, presented to the Company on the Amendment
Effective Date. The Company will also pay upon receipt of any statement
thereof, each additional statement for (i) reasonable fees and disbursements of
the Noteholder's special counsel or (ii) reasonable out-of-pocket expenses of
the Noteholder, rendered after the Amendment Effective Date in connection with
the Amended Note Documents.
7.6 SURVIVAL. All warranties, representations, certifications and
covenants made by or on behalf of the Company or any Subsidiary in the Amended
Note Documents or in any certificate or other instrument delivered pursuant to
the Amended Note Documents shall be considered to have been relied upon by the
Noteholder and shall survive the execution of the Amended Note Documents,
regardless of any investigation made by or on behalf of the Noteholder. All
statements in any such certificate or other instrument shall constitute
warranties and representations of the Company hereunder.
7.7 WAIVER AND RELEASE. For and in consideration of the
agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the Company, on its own behalf, and to the extent that it is
lawfully able to do so, on behalf of its predecessors, successors, assigns,
Subsidiaries, affiliates and agents and all of their respective past, present
and future officers, directors, shareholders, employees, contractors and
attorneys, and the predecessors, heirs, successors, and assigns of each of them
(collectively referred to in this Section 7.7 as the "RELEASORS") do hereby
jointly and severally fully RELEASE, REMISE, ACQUIT, IRREVOCABLY WAIVE and
FOREVER DISCHARGE the Noteholder, together with its predecessors, successors,
assigns, subsidiaries, affiliates and agents and all of their respective past,
present and future officers, directors, shareholders, employees, contractors
and attorneys, and the predecessors, heirs, successors and assigns of each of
them (the Noteholder and all of the foregoing being collectively referred to in
this Section 7.7 as the "RELEASED PARTIES"), from and with respect to any and
all Claims (as defined below).
As used in this Section 7.7, the term "CLAIMS" shall mean and include
any and all, and all manner of, action and actions, cause and causes of action,
suits, disputes, controversies, claims, debts, sums of money, offset rights,
defenses to payment, agreements, promises, notes, bonds, bills, covenants,
losses, damages, judgments, executions and demands of whatever nature, known or
unknown, whether in contract, in tort or otherwise, at law or in equity, for
money damages or dues, recovery of property, or specific performance, or any
other redress or recompense which have accrued or may ever accrue, may have
been had, may be now possessed, or may or shall be possessed in the future by
or on behalf of any one or more of the Releasors against any one or more of the
Released Parties for, upon, by reason of, on account of, or arising from or out
of, or by virtue of, any transaction, event or occurrence, duty or obligation,
indemnification, agreement, promise, warranty, covenant or representation,
breach of fiduciary duty, breach of any duty of fair dealing, breach of
confidence, breach of funding commitment, undue influence, duress, economic
coercion, conflict of interest, negligence, bad faith, malpractice, violations
of federal or state securities laws or the Racketeer Influenced and Corrupt
Organizations Act, intentional or negligent infliction of mental distress,
tortious interference with contractual relations, tortious interference with
corporate governance or
10
<PAGE> 12
prospective business advantage, breach of contract, deceptive trade practices,
libel, slander, usury, conspiracy, wrongful acceleration of any indebtedness,
wrongful foreclosure or attempt to foreclose on any collateral relating to any
indebtedness, action or inaction, relationship or activity, service rendered,
matter, cause or thing, whatsoever, express or implied, transpiring, entered
into, created or existing from the beginning of time to the date of the
execution of this Agreement in respect of the Existing Notes or the Existing
Note Agreement, and shall include, but not be limited to, any and all Claims in
connection with, as a result of, by reason of, or in any way related to or
arising from the existence of any relationships or communications by and
between the Releasors and the Released Parties with respect to the Existing
Notes, the agreements pursuant to which the Existing Notes were issued, and all
agreements, documents and instruments related thereto, as presently constituted
and as the same may from time to time be amended.
The Releasors acknowledge that they may hereafter discover facts,
which exist or existed on or before the date hereof, different from or in
addition to those they now know or believe to be true with respect to the
Claims herein released. Notwithstanding the foregoing, the Releasors agree
that this Section 7.7 shall survive the termination hereof and shall remain
effective in all respects and waive the right to make any new, different or
additional claim on account of such different or additional facts. The
Releasors acknowledge that no representation or warranty of any kind or
character has been made to the Releasors by any one or more of the Released
Parties or any agent, representative or attorney of the Released Parties to
induce the execution of this Agreement containing this Section 7.7.
The Releasors hereby represent and warrant unto the Released Parties
that:
(a) the Releasors have the full right, power, and
authority to execute and deliver this Agreement containing this
Section 7.7 without the necessity of obtaining the consent of any
other party;
(b) the Releasors have received independent legal advice
from attorneys of their choice with respect to the advisability of
granting the release provided herein, and with respect to the
advisability of executing this Agreement containing this Section 7.7;
(c) the Releasors have not relied upon any statements,
representations or promises of any of the Released Parties in
executing this Agreement containing this Section 7.7, or in granting
the release provided herein;
(d) the Releasors have not entered into any other
agreements or understandings relating to the Claims;
(e) the terms of this Section 7.7 are contractual, not a
mere recital, and are the result of negotiation among all the parties;
and
(f) this Section 7.7 has been carefully read by, and the
contents hereof are known and understood by, and it is signed freely
by the Releasors.
11
<PAGE> 13
The Releasors covenant and agree not to bring any claim, action, suit
or proceeding regarding or related in any manner to the matters released
hereby, and the Releasors further covenant and agree that this Section 7.7 is a
bar to any such claim, action, suit or proceeding.
All prior discussions and negotiations regarding the Claims have been
and are merged and integrated into, and are superseded by, this Section 7.7.
The Releasors understand, agree and expressly assume the risk of any fact not
recited, contained or embodied in this Section 7.7 which may hereafter turn out
to be other than, different from, or contrary to, the facts now known to the
Releasors or believed by the Releasors to be true, and further agree that this
Section 7.7 shall not be subject to termination, modification, or rescission,
by reason of any such difference in facts.
7.8 INDEMNIFICATION. The Company agrees to indemnify the
Noteholder and its directors, officers, employees, agents and attorneys from,
and hold each of them harmless against, any and all losses, liabilities,
claims, damages or expenses incurred by any of them arising out of or by reason
of any investigation or litigation or other proceedings (including any
threatened investigation, litigation or other proceedings) relating to, or in
connection with, the Existing Notes or the Amended Notes including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
[REMAINDER OF PAGE IS INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
12
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by a duly authorized officer or agent thereof, as
the case may be, as of the date first above written.
THORN APPLE VALLEY, INC.
By_________________________________
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
[AMENDMENT AGREEMENT IN RESPECT OF THORN APPLE VALLEY, INC.]
<PAGE> 15
ANNEX 1
INFORMATION AS TO COMPANY
[SUPPLEMENTAL INFORMATION WITH RESPECT TO
REPRESENTATIONS AND WARRANTIES IN EXISTING NOTE AGREEMENT]
Annex 1-1
<PAGE> 16
EXHIBIT A-1
AMENDMENTS TO EXISTING NOTE AGREEMENT AND TO EXISTING NOTES
1. AMENDMENTS TO SECTION 1.1 OF THE EXISTING NOTE AGREEMENT.
Section 1.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"1.1 Description of Notes. The Company has authorized the
issuance and sale of $15,000,000 aggregate principal amount of its
Senior Notes, to be dated the date of issuance thereof, to bear
interest
(a) from such date until June 20, 1996 at the rate of 6.45% per
annum;
(b) from June 21, 1996 through and including July 31, 1996 at the
Pre-Restructuring Rate; and
(c) from August 1, 1996 through the date of maturity at the
Post-Restructuring Rate,
payable monthly on the first day of each month, and at maturity, to
bear interest on overdue principal (including any overdue required or
optional prepayment), premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the greater of
(i) the rate of interest publicly announced from time to time by
Harris Trust and Savings Bank (or its successors or assigns) as its
prime rate plus two percent (2%) or (ii) the Post-Default Rate, to be
expressed to mature on April 21, 2006 and to be substantially in the
form attached as Exhibit A. The term "Notes" as used herein shall
include each Note delivered pursuant to this Note Agreement (the
"Agreement") and each Note delivered in substitution or exchange
therefor and, where applicable, shall include the singular number as
well as the plural. Any reference to you in this Agreement shall in
all instances be deemed to include any nominee of yours or any
separate account on whose behalf you are purchasing Notes. You are
sometimes referred to herein as the 'Purchaser'."
2. NEW SECTION 1.3 OF THE EXISTING NOTE AGREEMENT. A New Section
1.3 is hereby added to the Existing Note Agreement, after Section 1.2 thereof
and before Section 2 thereof, which shall read in its entirety as follows:
"1.3 Collateral Security. The obligations of the Company
hereunder and under the Notes are secured by the Shared Lien in the
Collateral."
3. AMENDMENTS TO SECTION 2.1 OF THE EXISTING NOTE AGREEMENT.
(a) The phrase "(a)" is hereby inserted in Section 2.1 of
the Existing Note Agreement after the heading of such Section and
before the first sentence thereof.
Exhibit A-1-1
<PAGE> 17
(b) A new Section 2.1(b), a new Section 2.1(c), and a new
Section 2.1(d) are hereby added to the Existing Note Agreement, after
the existing Section 2.1 and before Section 2.2 thereof, which shall
read in their entirety as follows:
"(b) In addition to all other prepayments of the
Notes permitted or required hereunder, the Company shall
prepay and there shall become due and payable on the tenth
Business Day after each Qualified Capital Infusion Date, a
principal amount of the Notes equal to the Qualified Capital
Infusion Amount. The Company shall notify the Noteholder of
its intent to make such prepayment on such Qualified Capital
Infusion Date. Such prepayment shall be at a price of (i)
100% of the principal amount prepaid, together with interest
accrued thereon to the date of payment, if the Reinvestment
Yield, on the applicable Determination Date, equals or exceeds
6.45% per annum, or (ii) 100% of the principal amount prepaid,
together with interest accrued thereon to the date of payment,
plus a premium, if the Reinvestment Yield, on such
Determination Date, is less than 6.45% per annum. The premium
shall equal (x) the aggregate present value of the amount of
principal being repaid (taking into account the manner of
application required by Section 2.2(c)) and the present value
of the amount of interest (exclusive of interest accrued to
the date of prepayment) which would have been payable in
respect of such principal (at the rate of 6.45% per annum)
absent such prepayment, determined by discounting
(semi-annually on the basis of a 360-day year composed of
twelve 30-day months) each such amount utilizing an interest
factor equal to the Reinvestment Yield, less (y) the principal
amount to be prepaid. Payment of such premium shall be
deferred until the earlier of (1) the date on which the
obligations in respect of the Amended Bank Credit Documents
shall have been paid in full, (2) the date on which the
Company shall have obtained from a nationally recognized debt
rating agency a rating in respect of the Notes of BBB or
better, (3) acceleration of the Notes, (4) bankruptcy of the
Company, or (5) May 31, 1998.
(c) In addition to all other prepayments of the
Notes permitted or required hereunder, the Company shall
prepay and there shall become due and payable on April 30,
1997, a principal amount of the Notes equal to the Scheduled
Amount. Such prepayment shall be at a price of (i) 100% of
the principal amount prepaid, together with interest accrued
thereon to the date of payment, if the Reinvestment Yield, on
the applicable Determination Date, equals or exceeds 6.45% per
annum, or (ii) 100% of the principal amount prepaid, together
with interest accrued thereon to the date of payment, plus a
premium, if the Reinvestment Yield, on such Determination
Date, is less than 6.45% per annum. The premium shall equal
(x) the aggregate present value of the amount of principal
being repaid (taking into account the manner of application
required by Section 2.2(c)) and the present value of the
amount of interest (exclusive of interest accrued to the date
of prepayment) which would have been payable in respect of
such principal (at the rate of 6.45% per annum) absent such
prepayment, determined by discounting (semi-annually on the
basis of a 360-day year composed of twelve 30-day months) each
such amount utilizing an interest factor equal to the
Reinvestment Yield, less (y) the principal amount to be
prepaid. Payment of such premium shall be deferred until the
earlier of (1) the date on
Exhibit A-1-2
<PAGE> 18
which the obligations in respect of the Amended Bank Credit Documents
shall have been paid in full, (2) the date on which the Company shall
have obtained from a nationally recognized debt rating agency a rating
in respect of the Notes of BBB or better, (3) acceleration of the
Notes, (4) bankruptcy of the Company, or (5) May 31, 1998.
(d) In addition to all other prepayments of the
Notes permitted or required hereunder, the Company shall
prepay and there shall become due and payable on the tenth
Business Day after each Unscheduled Amortization Date, a
principal amount of the Notes equal to the Unscheduled Amount.
The Company shall notify the Noteholder of its intent to make
such prepayment on such Unscheduled Amortization Date. Such
prepayment shall be at a price of (i) 100% of the principal
amount prepaid, together with interest accrued thereon to the
date of payment, if the Reinvestment Yield, on the applicable
Determination Date, equals or exceeds 6.45% per annum, or (ii)
100% of the principal amount prepaid, together with interest
accrued thereon to the date of payment, plus a premium, if the
Reinvestment Yield, on such Determination Date, is less than
6.45% per annum. The premium shall equal (x) the aggregate
present value of the amount of principal being repaid (taking
into account the manner of application required by Section
2.2(c)) and the present value of the amount of interest
(exclusive of interest accrued to the date of prepayment)
which would have been payable in respect of such principal (at
the rate of 6.45% per annum) absent such prepayment,
determined by discounting (semi-annually on the basis of a
360-day year composed of twelve 30-day months) each such
amount utilizing an interest factor equal to the Reinvestment
Yield, less (y) the principal amount to be prepaid Payment of
such premium shall be deferred until the earlier of (1) the
date on which the obligations in respect of the Amended Bank
Credit Documents shall have been paid in full, (2) the date on
which the Company shall have obtained from a nationally
recognized debt rating agency a rating in respect of the Notes
of BBB or better, (3) acceleration of the Notes, (4)
bankruptcy of the Company, or (5) May 31, 1998."
4. AMENDMENTS TO SECTION 2.2 OF THE EXISTING NOTE AGREEMENT.
(a) Section 2.2(a) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(a) Upon notice as provided in Section 2.3, the
Company may prepay the Notes, in whole or in part, at any
time, in an amount of not less than $1,000,000 or in integral
multiples of $100,000 in excess thereof (or the remaining
principal amount of the Notes) at a price of (i) 100% of the
principal amount prepaid, together with interest accrued
thereon to the date of payment, if the Reinvestment Yield, on
the applicable Determination Date, equals or exceeds 6.45% per
annum, or (ii) 100% of the principal amount prepaid, together
with interest accrued thereon to the date of payment, plus a
premium, if the Reinvestment Yield, on such Determination
Date, is less than 6.45% per annum. The premium shall equal
(x) the aggregate present value of the amount of principal
being repaid (taking into account the manner of application
required by
Exhibit A-1-3
<PAGE> 19
Section 2.2(c)) and the present value of the amount of
interest (exclusive of interest accrued to the date of
prepayment) which would have been payable in respect of such
principal (at the rate of 6.45% per annum) absent such
prepayment, determined by discounting (semi-annually on the
basis of a 360-day year composed of twelve 30-day months) each
such amount utilizing an interest factor equal to the
Reinvestment Yield, less (y) the principal amount to be
prepaid."
(b) Section 2.2(c) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(c) Any prepayment pursuant to Section 2.2(a) or
Section 2.2(b), any prepayment required by Sections 2.1(b),
2.1(c) or 2.1(d), or any optional repurchase of less than all
of the Notes outstanding shall be applied to reduce, on a pro
rata basis, the prepayments and payment at maturity required
by Section 2.1(a)."
5. AMENDMENTS TO SECTION 5.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 5.1 of the Existing Note Agreement is hereby
amended as follows:
(i) The definition of "Material Work Stoppage" is
hereby deleted.
(ii) (A) The word "and" is inserted at the
end of paragraph (g) of the definition of "Permitted Investments".
(B) Paragraph (h) of the definition of
"Permitted Investments" is hereby deleted.
(C) Paragraph (i) the definition of
"Permitted Investments" is hereby re-numbered as paragraph (h) thereof.
(b) Section 5.1 of the Existing Note Agreement is hereby
amended to modify in their entirety or add, each in their proper
alphabetical order, the following definitions:
Amended Bank Credit Documents
- (i) That certain Amended and Restated
Credit Agreement and (ii) that certain letter agreement re:
Senior Secured Seasonal Line of Credit, in each case, dated as
of September 11, 1996 and by and among the Company and the
Banks, in each case, as in effect on the Amendment Effective
Date (as defined in the Amendment Agreement).
Amendment Agreement - That certain Amendment
Agreement, dated as of September 11, 1996, by and among the
Company and the Noteholder.
Applicable Spread - An incremental rate of interest
equal to 200 basis points; provided, however, that, in the
event the Company shall make the prepayment in respect of the
Notes required by Section 2.1(c) hereof, Applicable Spread
shall mean an incremental rate of interest equal to 100 basis
points from
Exhibit A-1-4
<PAGE> 20
and after the date of such prepayment; provided further that if
the Company shall have complied with the requirements of the
immediately preceding proviso and shall have obtained from a
nationally recognized debt rating agency a rating in respect of
the Notes of BBB or better, Applicable Spread shall mean an
incremental rate of interest equal to 30 basis points from and
after the date of such rating.
Banks - Cooperatieve Centrale
Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank, collectively.
Capital Infusion Proceeds. - The net proceeds
received by the Company from any issuance of (i) debt of the
Company or (ii) equity of the Company, other than Scheduled
Equity Proceeds.
Collateral - Shall have the meaning ascribed to such
term in the Intercreditor Agreement
Collateral Agent - Shall have the meaning ascribed
to such term in the Intercreditor Agreement
Creditor Obligations - Shall have the meaning
ascribed to such term in the Intercreditor Agreement.
Creditor Parties - Shall have the meaning ascribed
to such term in the Intercreditor Agreement.
Determination Date - Either (i) the Business Day
which is two Business Days before the date fixed for a
prepayment pursuant to Section 2.1(b), Section 2.1(c), Section
2.1(d) or Section 2.2(a) or (ii) the date of any acceleration
pursuant to Section 8.2.
Intercreditor Agreement - That certain Intercreditor
Agreement dated as of September 11, 1996, by and among the
Banks, the Noteholder, Principal Mutual Life Insurance
Company, Great-West Life & Annuity Insurance Company, Old Kent
Bank, in its capacity as issuer of the Old Kent Letters of
Credit (as defined therein) and the Collateral Agent, and
acknowledged and agreed to by the Company and its
Subsidiaries.
May 1995 Series Notes - Shall mean the Company's
Senior Notes due May 15, 2005 and each note delivered in
substitution or exchange therefore, as the same may be
amended, restated or otherwise modified from time to time in
accordance with the terms of that certain Note Agreement dated
as of May 15, 1995, by and among the Company, the Noteholder,
Principal Mutual Life Insurance Company and Great-West Life &
Annuity Insurance Company, as such agreement may be amended,
restated or otherwise modified from time to time.
October 1994 Series Notes - Shall mean the Company's
Senior Notes due October 1, 2003 and each note delivered in
substitution or exchange therefore,
Exhibit A-1-5
<PAGE> 21
as the same may be amended, restated or otherwise modified
from time to time in accordance with the terms of that certain
Note Agreement dated as of October 1, 1994, by and between the
Company and Allstate Life Insurance Company, as such agreement
may be amended, restated or otherwise modified from time to
time.
Ponca City Litigation - An action entitled Facility
Constructors, Inc. v. Thorn Apple Valley, Inc. filed in
February, 1996, in District Court, Kay County, Oklahoma
against the Company in connection with the construction of the
Company's plant in Ponca City, Oklahoma.
Post-Default Rate - In respect of any Note, a rate of
interest equal to the sum of (i) the rate of interest
otherwise accruing in respect of the Notes under Section
1.1(a), Section 1.1(b) or Section 1.1(c), as the case may be,
plus (ii) 200 basis points.
Post-Restructuring Rate - In respect of any Note, a
rate of interest equal to the sum of (i) 6.45% plus (ii) the
Applicable Spread.
Pre-Restructuring Rate - In respect of any Note, a
rate of interest equal to the sum of (i) 6.45% plus (ii) 175
basis points.
Qualified Capital Infusion Amount - In respect of a
Qualified Capital Infusion Date, an amount equal to the
remainder of
(a) the product of
(i) (y) if the aggregate
amount of Qualified Capital Infusion
Proceeds received after July 31,
1996 and on or before such Qualified
Capital Infusion Date is greater
than or equal to $15,000,000, the
greater of (A) $15,000,000 and (B)
fifty percent (50%) of such
aggregate amount; or
(z) if the aggregate amount of
Qualified Capital Infusion Proceeds
received after July 31, 1996 and on
or before such Qualified Capital
Infusion Date is less than
$15,000,000, such aggregate amount,
times
(ii) a fraction the numerator of
which is the initial stated principal balance
of the Notes (on the date of initial issuance
thereof) and the denominator of which is
$162,500,000,
minus
Exhibit A-1-6
<PAGE> 22
(b) the aggregate principal amount of
the Notes prepaid with Qualified Capital Infusion
Proceeds pursuant to Section 2.1(b) prior to such
Qualified Capital Infusion Date.
Qualified Capital Infusion Date - Any date, other
than April 30, 1997, on which the Company shall receive any
Qualified Capital Infusion Proceeds.
Qualified Capital Infusion Proceeds - Any Capital
Infusion Proceeds which are received by the Company after July
31, 1996 and on or before April 30, 1997, in connection with
the issuance of (i) equity of the Company or (ii) debt of the
Company which is expressed to be subordinated to the Notes on
terms which are satisfactory to the Noteholder in its sole and
absolute discretion.
Scheduled Amount - An amount equal to the remainder of
(a) the product of
(i) the greater of (A) $15,000,000
and (B) fifty percent (50%) of the aggregate
amount of Qualified Capital Infusion
Proceeds,
times
(ii) a fraction the numerator of
which is the initial stated principal balance
of the Notes (on the date of initial issuance
thereof) and the denominator of which is
$162,500,000,
minus
(b) the aggregate principal amount of
the Notes prepaid with Qualified Capital Infusion
Proceeds pursuant to Section 2.1(b) prior to April
30, 1997.
Scheduled Equity Proceeds -- An amount equal to the
lesser of (i) $3,000,000 and (ii) the actual amount of cash
and cash equivalents received by the Company after July 31,
1996 and on or before September 12, 1996 in respect of equity
investments from one or more of its shareholders, which shall
be provided on terms and conditions satisfactory to the
Noteholder in its sole discretion.
Security Documents - Shall have the meaning ascribed
to such term in the Intercreditor Agreement.
Shared Lien -- The lien upon the Collateral created by
the Security Documents in favor of the Creditor Parties.
Subsidiaries Guaranty - Shall have the meaning
ascribed to the term "Guaranty" in the Intercreditor Agreement.
Exhibit A-1-7
<PAGE> 23
TAVFSC - Shall mean Thorn Apple Valley Foreign Sales Corporation,
a U.S. Virgin Islands corporation.
Unscheduled Amortization Date - Any date on which the Company
receives any Unscheduled Proceeds.
Unscheduled Amount - In respect of an Unscheduled Amortization
Date, an amount equal to the product of
(a) the amount of Unscheduled Proceeds received by the
Company on such Unscheduled Amortization Date,
times
(b) a fraction the numerator of which is the initial
stated principal balance of the Notes (on the date of initial issuance
thereof) and the denominator of which is $162,500,000.
Unscheduled Proceeds - On any date, means:
(a) with respect to the sale, transfer or other
disposition by the Company or any Subsidiary of any capital asset
(including the capital stock of any Subsidiary), the aggregate cash
proceeds (including cash proceeds received by way of deferred payment
of principal (together with interest thereon) pursuant to a note,
installment receivable or otherwise, but only as and when received)
received by the Company or any Subsidiary pursuant to such sale,
transfer or other disposition, other than (i) the proceeds of asset
sales as and to the extent permitted by Section 2.8(c), Section 2.8(x)
or Section 2.8(y) of Exhibit A-2 to the Amendment Agreement, (ii)
insurance proceeds permitted by the terms of the Security Documents to
be used to repair or replace damaged or destroyed Property, and (iii)
condemnation awards permitted by the terms of the Security Documents
to be used to replace any subject Property, in each case, net of (A)
the direct costs and expenses relating to such sale, transfer or other
disposition (including, without limitation, sales commissions and
legal, accounting and investment banking fees), (B) taxes paid or
reasonably estimated by the Company to be payable as a result thereof
(after taking into account any available tax credits or deductions and
any tax sharing arrangements) and (C) amounts required to be applied
to the repayment of any Indebtedness secured by a Lien on the asset
subject to such sale, transfer or other disposition (other than any
Creditor Obligations) that is senior to the Shared Lien; and
(b) with respect to any Capital Infusion Proceeds which
are received after April 30, 1997, the aggregate cash proceeds
received by the Company or any Subsidiary pursuant to such issuance,
net of the direct costs relating to such issuance (including, without
limitation, sales and
Exhibit A-1-8
<PAGE> 24
underwriter's commissions and legal, accounting and investment banking
fees).
6. AMENDMENTS TO SECTION 7 OF THE EXISTING NOTE AGREEMENT.
(a) Section 7.1 of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"7.1 Net Worth. The Company will not at any time permit
Consolidated Adjusted Net Worth to be less than the sum of
$70,000,000 plus forty percent (40%) of Consolidated Net Income for
each fiscal year of the Company commencing after May 30, 1996;
provided, however, that if Consolidated Net Income is less than zero
in any such fiscal year, Consolidated Net Income shall be deemed to
be zero in such fiscal year for purposes of this Section 7.1".
(b) Section 7.2(d) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(d) Funded Debt (including refinancings, refundings
or extensions of Funded Debt described in Annex II hereto and
Current Debt deemed to constitute Funded Debt pursuant to the
definition of Funded Debt in Section 5.1), so long as after
giving effect thereto and the application of the proceeds
thereof:
(i) at all times on or before May 31,
1998, the amount of total Funded Debt of the Company
and its Subsidiaries then outstanding would not
exceed sixty-two and one-half percent (62.5%) of
Consolidated Total Capitalization determined as of
the end of the Company's prior fiscal quarter; and
(ii) at all times after May 31, 1998, (x)
the amount of total Funded Debt of the Company and
its Subsidiaries (other than Subordinated Debt)
outstanding would not exceed fifty-five percent (55%)
of Consolidated Total Capitalization and (y) the
amount of total Funded Debt of the Company and its
Subsidiaries outstanding would not exceed sixty-five
percent (65%) of Consolidated Total Capitalization."
(c) Section 7.2(e) of the Existing Note Agreement is
hereby amended by deleting the phrase "twenty percent (20%)" contained
therein and replacing it with "ten percent (10%)".
(d) Section 7.3 of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"Fixed Charge Ratio. The Company will not, (a) as of
the end of any fiscal quarter from the date hereof to and
including May 31, 1996, permit the ratio of Consolidated Cash
Flow Available for Fixed Charges to Consolidated Fixed Charges
for the preceding twelve months to be less than 0.75 to 1.0,
and (b) as of the end of any fiscal quarter from and after
June 1, 1996, permit the ratio of
Exhibit A-1-9
<PAGE> 25
Consolidated Net Income Available for Fixed Charges to Consolidated
Fixed Charges for the preceding twelve months to be less than 1.5 to
1.0.
(e) Section 7.4 of the Existing Note Agreement is hereby
amended as follows:
(i) The word "and" at the end of Section 7.4(j) of the
Existing Note Agreement is hereby deleted.
(ii) The phrase "20%" contained in Section 7.4(k)
of the Existing Note Agreement is hereby deleted and replaced
with "10%".
(iii) The period at the end of Section 7.4(k) of
the Existing Note Agreement is hereby deleted and the phrase
"; and" is hereby inserted in its place.
(iv) A new Section 7.4(l) is hereby added to the
Existing Note Agreement, after Section 7.4(k) of the Existing
Note Agreement and before the final paragraph of Section 7.4
of the Existing Note Agreement, which shall read in its
entirety as follows:
"(l) the Shared Lien."
(v) A new sentence is hereby added at the end of
the last paragraph of Section 7.4 of the Existing Note
Agreement, which shall read in its entirety as follows:
"The creation, assumption, incurrence or permission
to exist of any such non-permitted Lien will
constitute an Event of Default hereunder, regardless
of whether any such provision is made in accordance
with the immediately preceding sentence."
(f) Section 7.5 of the Existing Note Agreement is hereby
amended as follows:
(i) The phrase "the Company could not incur an
additional $1.00 of Funded Debt pursuant to Section 7.2, (ii)"
contained in the text after paragraph (e) thereof and before
paragraph (x) thereof is hereby deleted.
(ii) The phrase "(iii)" contained in the text
after paragraph (e) thereof and before paragraph (x) thereof
is hereby deleted and replaced with "(ii)".
(iii) Each reference to "May 31, 1993" contained therein
is hereby deleted and replaced with "May 31, 1996".
(iv) The phrase "$15,000,000" appearing in paragraph (x)
thereof is hereby deleted and replaced with "$5,000,000".
Exhibit A-1-10
<PAGE> 26
(g) Section 7.6(a) of the Existing Note Agreement is
hereby amended as follows:
(i) The word "and" is hereby inserted at the end
of paragraph (i) thereof.
(ii) The phrase "; and" at the end of paragraph
(ii) thereof is hereby deleted and replaced with a period.
(iii) Paragraph (iii) thereof is hereby deleted in
its entirety.
7. AMENDMENTS TO SECTION 8.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 8.1(c) of the Existing Note Agreement is hereby amended
to read in its entirety as follows:
"(c) Default shall occur (i) in the payment of the principal of,
premium, or interest on any other Indebtedness of the Company or its
Subsidiaries, aggregating in excess of $1,000,000 in principal amount as
and when due and payable (whether by lapse of time, declaration, call
for redemption or otherwise), (ii) under any mortgage, agreement or
other instrument of the Company or any Subsidiary securing such
Indebtedness or under or pursuant to which such Indebtedness aggregating
in excess of $1,000,000 is issued, (iii) under any leases other than
Capitalized Leases of the Company or any Subsidiary, with aggregate
Rentals in excess of $1,000,000, (iv) with respect to any combination of
the foregoing involving Indebtedness and/or Rentals aggregating in
excess of $1,000,000, regardless of whether such defaults would be
Events of Default hereunder, or (v) in the performance or observance of
any obligation or condition with respect to any such Indebtedness and/or
Rentals aggregating in excess of $1,000,000, regardless of whether such
defaults would be Events of Default hereunder, if the effect of such
default is to accelerate the maturity of any such Indebtedness and/or
Rentals or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such
Indebtedness or the parties to such Capitalized Leases, or any trustee
or agent for such holders or parties, to cause such Indebtedness and/or
Rentals to become due and payable prior to its/their expressed
maturity."
(b) Section 8.1(d) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(d) (i) At any time prior to the Covenant
Reversion Date (as defined in the Amendment Agreement),
default in the observance or performance of any of the
provisions of Section 1.8 or Section 2 of Exhibit A-2 to
the Amendment Agreement or Section 8.7 of this Agreement.
(ii) At any time on or after the Covenant Reversion
Date (as defined in the Amendment Agreement), default in
the observance or
Exhibit A-1-11
<PAGE> 27
performance of any of the provisions of Sections 7.1 through
7.10 or Section 8.7 of this Agreement."
(c) Section 8.1(f) of the Existing Note Agreement is hereby amended
to read in its entirety as follows:
"(f) Any representation or warranty made by the Company
in this Agreement or the Amendment Agreement, or made by the
Company or any Subsidiary in any written statement or
certificate furnished by the Company or any Subsidiary in
connection with the issuance, or any amendment or restatement
of, the Notes, or furnished by the Company pursuant to this
Agreement or the Amendment Agreement, proves incorrect in any
material respect as of the date of the issuance or making
thereof;"
(d) Section 8.1(g) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(g) Any fines, penalties, judgments, writs or warrants
of attachment or any similar processes individually or in the
aggregate in excess of $2,000,000 shall be entered or filed
against the Company or any Subsidiary or against any Property or
assets of either and remain unpaid, unvacated, unbonded or
unstayed (through appeal or otherwise) for a period of 30 days
after the Company or any Subsidiary receives notice thereof;
provided, however, that this clause (g) shall not include any
judgment against the Company in respect of the Ponca City
Litigation for an amount not greater than the sum of $6,000,000
plus interest accrued thereon;"
(e) The word "or" at the end of Section 8.1(h) of the
Existing Note Agreement is hereby deleted.
(f) The period at the end of Section 8.1(i)(vii) of the
Existing Note Agreement is hereby deleted and a semi-colon is hereby inserted in
its place.
(g) Section 8.1(j) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(j) The Company shall fail to receive at least
$15,000,000 of Qualified Capital Infusion Proceeds on or before
April 30, 1997;"
(h) A new Section 8.1(k), a new Section 8.1(l) and a new
Section 8.1(m) are hereby added to the Existing Note Agreement, after Section
8.1(j) and before Section 8.2 thereof, which shall read in their entirety as
follows:
"(k) The Company or any Subsidiary shall fail to comply
in any material respect with any one or more of the provisions
or requirements contained in the Security Documents; or any of
the Security Documents shall cease for any reason to be in full
force or effect or is declared to be null and void or the
Company or any Subsidiary shall disavow its respective
obligations thereunder, or shall contest the validity or
enforceability of any thereof or gives notice to such effect; or
any
Exhibit A-1-12
<PAGE> 28
Lien purported to be granted pursuant to any of the Security
Documents for any reason (other than release or termination
thereof by the Collateral Agent or the Creditor Parties) shall
cease to be a legal, valid or enforceable Lien on the Property
subject thereto with the priority purported to be granted
pursuant to such Security Documents (other than as a result of
the failure of the Collateral Agent or any Creditor Party to
take any action solely within its control);
(l) Any Subsidiary shall fail to comply in any
material respect with any one or more of the provisions or
requirements contained in the Subsidiaries Guaranty; or the
Subsidiaries Guaranty shall cease for any reason to be in full
force or effect or is declared to be null and void (other than
in respect of TAVFSC) or any Subsidiary shall disavow its
respective obligations thereunder, or shall contest the
validity or enforceability thereof or gives notice to such
effect; or
(m) The Company shall make, or shall be required
by one or more final judgments to make, any payment or
payments in an aggregate amount greater than the sum of
$6,000,000 plus accrued interest in satisfaction of one or
more judgments against the Company in respect of the Ponca
City Litigation."
8. AMENDMENT TO SECTION 8.2 OF THE EXISTING NOTE AGREEMENT.
Section 8.2 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"8.2 Remedies on Default. When any Event of Default
described in paragraph (a) through paragraph (h), inclusive, or
paragraph (j) through paragraph (m), inclusive, of Section 8.1 has
happened and is continuing, the holder or holders of at least 66 2/3%
in aggregate principal amount of the Notes, the May 1995 Series Notes
and the October 1994 Series Notes (taken together and voting as one
class) then outstanding (exclusive of Notes, May 1995 Series Notes and
October 1994 Series Notes held in the name of, or owned beneficially
by, any one or more of the Company, any Subsidiary or any Affiliate)
may by notice to the Company declare the entire principal, together
with the premium set forth below, and all interest accrued on all
Notes to be, and such Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of
any kind, all of which are expressly waived. Notwithstanding the
foregoing, when
(i) any Event of Default described in paragraph
(a) or paragraph (b) of Section 8.1 has happened and is
continuing, any holder may by notice to the Company declare
the entire principal, together with the premium set forth
below, and all interest accrued on the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or
other notice of any kind, all of which are expressly waived,
and
(ii) any Event of Default described in paragraph
(i) of Section 8.1 has happened, then all outstanding Notes
shall immediately become due and payable without presentment,
demand or notice of any kind.
Exhibit A-1-13
<PAGE> 29
Upon the Notes or any of them becoming due and payable as aforesaid,
the Company will forthwith pay to the holders of such Notes the entire
principal of and interest accrued on such Notes, plus, to the extent
permitted by law, a premium in the event that the Reinvestment Yield
shall, on the Determination Date, be less than the interest rate
payable on or in respect of the Notes. Such premium shall equal (x)
the aggregate present value of the principal so accelerated and the
aggregate present value of the interest which would have been payable
in respect of such principal (at the rate of 6.45% per annum) absent
such accelerated payment, determined by discounting (semi-annually on
the basis of a 360-day year composed of twelve 30-day months) each
such amount utilizing an interest factor equal to the Reinvestment
Yield, less (y) the principal amount so accelerated."
9. AMENDMENT TO SECTION 8.3 OF THE EXISTING NOTE AGREEMENT.
Section 8.3 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"8.3 Annulment of Acceleration of Notes. The provisions
of Section 8.2 are subject to the condition that if the principal of
and accrued interest on the Notes have been declared immediately due
and payable by reason of the occurrence of any Event of Default
described in paragraph (c) through paragraph (h), inclusive, or
paragraph (j) through paragraph (m), inclusive, of Section 8.1, the
holder or holders of at least 70% in aggregate principal amount of the
Notes, the May 1995 Series Notes and the October 1994 Series Notes
(taken together and voting as one class) then outstanding (exclusive
of Notes, May 1995 Series Notes and October 1994 Series Notes held in
the name of, or owned beneficially by, any one or more of the Company,
any Subsidiary or any Affiliate) may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences
thereof; provided that (i) at the time such declaration is annulled
and rescinded no judgment or decree has been entered for the payment
of any monies due pursuant to the Notes or this Agreement, (ii) all
arrears of interest upon all the Notes and all other sums payable
under the notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable
solely by reason of such declaration under Section 8.2) shall have
been duly paid and (iii) each and every Event of Default shall have
been cured or waived; and provided further, that no such rescission
and annulment shall extend to or affect any subsequent Default or
Event of Default or impair any right consequent thereto."
10. AMENDMENT TO SECTION 8.4 OF THE EXISTING NOTE AGREEMENT.
Section 8.4 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"8.4 Remedies on Default. If an Event of Default shall be
continuing, any holder of Notes may enforce its rights by suit in
equity, by action at law, or by any other appropriate proceedings,
whether for the specific performance (to the extent permitted by law)
of any covenant or agreement contained in this Agreement, and may
enforce the payment of any Note held by such holder and any of its
other legal or equitable rights, provided that the maturity of such
holder's Notes may be accelerated only in accordance with Section
8.2."
Exhibit A-1-14
<PAGE> 30
11. AMENDMENTS TO SECTION 9.1 OF THE EXISTING NOTE AGREEMENT.
Section 9.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"9.1 Matters Subject to Modification. Any term, covenant,
agreement or condition of this Agreement may, with the consent of the
Company, be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in
writing of the holder or holders of at least 66 2/3% in aggregate
principal amount of the Notes, the May 1995 Series Notes and the
October 1994 Series Notes (taken together and voting as one class)
then outstanding;
provided, however, that, without the
written consent of the holder or holders of all of the Notes, May 1995
Series Notes and October 1994 Series Notes then outstanding, no such
waiver, modification, alteration or amendment shall be effective which
will (i) change the time of payment (including any required
prepayment) of the principal of or the interest on any Note, (ii)
reduce the principal amount thereof or the premium, if any, or change
the rate of interest thereon, (iii) change any provision of any
instrument affecting the preferences between holders of the Notes or
between holders of the Notes and other creditors of the Company, or
(iv) change any of the provisions of Section 6.10, Section 8 or this
Section 9.
For the purpose of determining whether the holder or holders
of all or any requisite principal amount of Notes, or of Notes, May
1995 Series Notes and October 1994 Series Notes, have made or
concurred in any waiver, consent, approval, notice or other
communication under this Agreement, any and all Notes, May 1995 Series
Notes and October 1994 Series Notes held in the name of, or owned
beneficially by, the Company, any Subsidiary or any Affiliate thereof,
shall not be deemed outstanding.
12. AMENDMENTS TO SECTION 9.2 OF THE EXISTING NOTE AGREEMENT.
Section 9.2 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"9.2 Solicitation of Holders of Notes. The Company will
not solicit, request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions of this Agreement or the
Notes unless each record holder of the Notes and each record holder of
May 1995 Series Notes and October 1994 Series Notes (irrespective of
the amount of Notes or May 1995 Series Notes or October 1994 Series
Notes then owned by it) shall concurrently be informed thereof by the
Company and shall be afforded the opportunity of considering the same
and shall be supplied by the Company with sufficient information to
enable it to make an informed decision with respect thereto. Executed
or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 9 shall be delivered by the Company
to each holder of outstanding Notes and each holder of May 1995 Series
Notes and October 1994 Series Notes forthwith following the date on
which the same shall have become effective in accordance with the
terms thereof and of this Section 9. The Company will not, directly
or indirectly, pay or cause to be paid any remuneration, whether by
way of supplemental or additional interest, fee or otherwise, to any
holder of Notes or any holder of May 1995 Series Notes or October 1994
Series Notes as consideration for or as an inducement to the entering
into by any holder of Notes or any holder of May 1995 Series Notes or
October 1994 Series Notes of any waiver or amendment of any of the
terms and provisions of this Agreement unless such remuneration is
concurrently paid, on the same
Exhibit A-1-15
<PAGE> 31
terms, ratably to the holders of all Notes, May 1995 Series Notes and
October 1994 Series Notes then outstanding. Any consent made pursuant
to this Section 9 by a holder of Notes that has transferred or has
agreed to transfer its Notes to the Company or any Affiliate or has
agreed to provide such written consent as a condition to such transfer
shall be void and of no force and effect except solely as to such
holder, and any amendments effected or waivers granted or to be
effected or granted that would not have been or would not be so
effected or granted but for such consent (and the consents of all
other holders of Notes and holders of May 1995 Series Notes and
October 1994 Series Notes that were acquired under the same or similar
conditions) shall be void and of no force and effect, retroactive to
the date such amendment or waiver initially took or takes effect,
except solely as to such holder.
13. AMENDMENT TO FORM OF NOTES AND AMENDMENT AND RESTATEMENT OF
NOTES. (i) Exhibit A to the Existing Note Agreement is hereby amended to read
in its entirety as set forth below and (ii) each of the Notes shall,
contemporaneously with the delivery of this Agreement, be amended and restated
in the form set forth below:
[Remainder of page intentionally left blank.]
Exhibit A-1-16
<PAGE> 32
"EXHIBIT A
THORN APPLE VALLEY, INC.
SENIOR NOTE
DUE APRIL 21, 2006
PPN: 885184 C* 0
_________________________
THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT
AND ACCORDINGLY ANY PROSPECTIVE PURCHASERS SHOULD FIRST VERIFY THE
UNPAID PRINCIPAL AMOUNT WITH THE COMPANY.
_________________________
Registered Note No. R-____ [Date]
$________________________
THORN APPLE VALLEY, INC., a Michigan corporation (the
"Company"), for value received, hereby promises to pay to
________________________ or registered assigns, on the twenty-first
day of April, 2006, the principal amount of _________________ Dollars
($________) and to pay interest (computed on the basis of a 360-day
year of twelve 30-day months) on the principal amount from time to
time remaining unpaid hereon at the rate set forth in the Note
Agreement hereinafter defined from the date hereof until maturity,
payable at the times set forth in the Note Agreement hereinafter
defined, and at maturity, and to pay interest on overdue principal,
premium and (to the extent legally enforceable) on any overdue
installment of interest at the rate set forth in the Note Agreement
hereinafter defined after maturity or the due date thereof, whether by
acceleration or otherwise, until paid. Payments of the principal of,
the premium, if any, and interest on this Note shall be made in lawful
money of the United States of America in the manner and at the place
provided in Section 2.5 of the Note Agreement hereinafter defined.
This Note is issued under and pursuant to the terms of a Note
Agreement, dated as of April 1, 1994, entered into by the Company with
the Purchaser named in Schedule I thereto (as amended from time to
time, the "Note Agreement"), and this Note and any holder hereof are
entitled to all of the benefits and are bound by the terms provided
for in such Note Agreement. The provisions of the Note Agreement are
incorporated in this Note to the same extent as if set forth at length
herein.
This Note has not been registered under the Securities Act as
provided in the Note Agreement, any transfer is subject to compliance
with the terms of the Note Agreement and upon surrender of this Note
for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder
hereof or its attorney duly authorized in writing, a new Note for a
like unpaid principal
Exhibit A-1-17
<PAGE> 33
amount will be issued to, and registered in the name of, the
transferee upon the payment of the taxes or other governmental
charges, if any, that may be imposed in connection therewith. The
Company may treat the person in whose name this Note is registered as
the owner hereof for the purpose of receiving payment for all other
purposes, and the Company shall not be affected by any notice to the
contrary.
Under certain circumstances, this Note may be declared due
prior to its expressed maturity date. Required prepayments must be
made hereon as set forth in the Note Agreement. Voluntary and other
prepayments may be made hereon in the events, on the terms and in the
manner as provided in the Note Agreement.
Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the Note
Agreement or be placed in the hands of attorneys for collection, the
Company agrees to pay, in addition to the principal, premium, if any,
and interest due and payable hereon, to the extent legally
enforceable, all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
This Note and the Note Agreement are governed by and construed
in accordance with the laws of the State of Illinois.
THORN APPLE VALLEY, INC.
By:_______________________
Its:"
Exhibit A-1-18
<PAGE> 34
EXHIBIT A-2
TEMPORARY COVENANTS(1)
SECTION 1. AFFIRMATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 1 and in Sections 6.3, 6.6(e), 6.6(f), 6.6(g),
6.6(h), 6.6(i), 6.8, 6.10, 6.11, and 6.12 of the Existing Note Agreement.
SECTION 1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower will furnish, or will cause to be furnished, to each Creditor Party
and the Agent copies of the following financial statements, reports, notices
and information:
(a) Weekly Reporting -- on the last Business Day of each
week,
(i) a Borrowing Base Certificate setting forth a
calculation of the Borrowing Base as of the last Business Day
of the preceding week; and
(ii) a Weekly P&L Statement in respect of the
preceding week;
(b) Fiscal Periodic Reporting --
(i) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year, consolidated balance sheets of
the Borrower and its Subsidiaries as of the end of such Fiscal
Period and consolidated statements of earnings and cash flow
of the Borrower and its Subsidiaries for such Fiscal Period
and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Period,
certified as true and correct by the chief financial
Authorized Officer of the Borrower (the parties hereto
acknowledge that such financial statements will not have been
audited, and that the annual audit of the Borrower may require
adjustments to the figures presented therein);
(ii) as soon as available and in any event within
26 days after the end of each Fiscal Period of each Fiscal
Year, a comparison of
(A) the actual consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and actual consolidated
statements of earnings and cash flow of the Borrower
and its Subsidiaries for such Fiscal Period and for
the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal
Period (the parties hereto acknowledge that such
financial statements will not have been audited, and
that the annual audit of the Borrower may require
adjustments to the figures presented therein), with
________________________
(1) Capitalized terms used in this Exhibit A-2 are defined
in Section 3 of this Exhibit A-2.
Exhibit A-2-1
<PAGE> 35
(B) the budgeted consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and the budgeted
consolidated statements of earnings and cash flow of
the Borrower and its Subsidiaries for such Fiscal
Period and for the period commencing at the end of
the previous Fiscal Year and ending with the end of
such Fiscal Period, in each case, contained in the
most recent Rolling Projection (defined below),
certified as true and correct by the chief financial
Authorized Officer of the Borrower;
(iii) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year and within 90 days after the end
of the last Fiscal Period of each Fiscal Year, a certificate,
executed by the chief financial Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to
the Agent and each Creditor Party) compliance with the
financial covenants set forth in Section 2.4; and
(iv) as soon as available and in any event within
30 days after the end of each Fiscal Period of each Fiscal
Year, a management report describing in detail the Company's
results of operations during such Fiscal Period and
explaining, among other things, (x) any material variances
demonstrated by the comparison delivered in respect of such
Fiscal Period pursuant to clause (ii) above and (y) any
failure to comply with financial covenants identified in the
certificate delivered in respect of such Fiscal Period
pursuant to clause (iii) above;
(c) Quarterly Reporting -- as soon as available and in
any event within 45 days after the end of each of Fiscal Quarter of
each Fiscal Year, a projection (each, a "Rolling Projection"), for
each of the thirteen Fiscal Periods next succeeding the last day of
such Fiscal Quarter, of the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of each such next succeeding Fiscal
Period and the budgeted consolidated statements of earnings and cash
flow of the Borrower and its Subsidiaries for each such next
succeeding Fiscal Period and for the period commencing at the end of
such Fiscal Quarter and ending with the end of each such next
succeeding Fiscal Period, certified as true and correct by the chief
financial Authorized Officer of the Borrower;
(d) Annual Reporting --
(i) as soon as available and in any event within
90 days after the end of each Fiscal Year of the Borrower, a
copy of the annual audit report (including, without
limitation, any accompanying or related auditor's letter and
the Borrower's responses thereto) for such Fiscal Year for the
Borrower and its Subsidiaries, including therein consolidated
balance sheets of the Borrower and its Subsidiaries as of the
end of such Fiscal Year and consolidated statements of
earnings and cash flow of the Borrower and its Subsidiaries
for such Fiscal Year, in each case certified (without any
Impermissible Qualification) in a manner acceptable to the
Agent and each of the Creditor Parties by Coopers & Lybrand or
other
Exhibit A-2-2
<PAGE> 36
independent public accountants acceptable to the Agent and
each of the Creditor Parties, together with a certificate from
such accountants to the effect that, in making the examination
necessary for the signing of such annual report by such
accountants, they have not become aware of any Default or
Event of Default that has occurred and is continuing, or, if
they have become aware of such Default or Event of Default,
describing such Default or Event of Default and the steps, if
any, being taken to cure it; provided, however, that in the
case of the Company's financial statements for the Fiscal Year
ended May 31, 1996, such audit opinion shall be delivered not
later than September 13, 1996;
(ii) together with the financial reports delivered
pursuant to paragraph (i) of this Section 1.1(d), a
certificate of the independent certified public accountants
(i) stating that in making the examination necessary for
expressing an opinion on such financial statements, nothing
came to their attention that caused them to believe that there
is in existence or has occurred any Default or Event of
Default under any of the Financing Agreements (as defined in
the Intercreditor Agreement) or, if such accountants shall
have obtained knowledge of any such Default or Event of
Default, describing the nature thereof and the length of time
it has existed and (ii) acknowledging that the Creditor
Parties may rely on their opinion on such financial
statements;
(e) Defaults -- as soon as possible and in any event
within three days after the occurrence of each Default, a statement of
the chief financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(f) Litigation -- as soon as possible and in any event
within three days after (x) the occurrence of any adverse development
with respect to any litigation, action, proceeding, or labor
controversy described in Section 6.7 of the Bank Credit Agreement or
(y) the commencement of any labor controversy, litigation, action,
proceeding of the type described in Section 6.7 of the Bank Credit
Agreement, notice thereof and copies of all documentation relating
thereto;
(g) Securities Reports, etc. -- promptly after the
sending or filing thereof, copies of all reports which the Borrower
sends to any of its securityholders, and all reports and registration
statements which the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(h) Pension Plans -- immediately upon becoming aware of
the institution of any steps by the Borrower or any other Person to
terminate any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto; and
Exhibit A-2-3
<PAGE> 37
(i) Other -- such other information respecting the
condition or operations, financial or otherwise, of the Borrower or
any of its Subsidiaries as any Creditor Party may from time to time
reasonably request.
SECTION 1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of
all taxes, assessments and governmental charges imposed upon it or
upon its Property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 1.3. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.
(a) The Borrower will maintain and preserve, and will
cause each Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and will use, and cause
each Subsidiary to use, its best efforts to maintain, preserve, renew
and extend all of its rights, powers, privileges and franchises
necessary to the proper conduct of its business.
(b) The Borrower will, and will cause each of its
Subsidiaries to, maintain, preserve, protect and keep its properties
in good repair, working order and condition, and make necessary and
proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly conducted at all times
unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically
desirable.
SECTION 1.4. INSURANCE. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts and with only such
deductibles as is customary in the case of similar businesses and will, upon
request of the Agent or any Creditor Party, furnish to each Creditor Party at
reasonable intervals a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section.
SECTION 1.5. BOOKS AND RECORDS. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Agent and each of
(i) the Noteholders as a group and (ii) the Lenders as a group, or any of their
respective representatives, at reasonable times and intervals, to visit all of
its offices, to discuss its financial matters with its officers and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with each Creditor Party
or its representatives whether or not any
Exhibit A-2-4
<PAGE> 38
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
records. The Borrower shall pay any fees of such independent public accountant
incurred in connection with the Agent's or any Creditor Party's exercise of its
rights pursuant to this Section.
SECTION 1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to:
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and each Creditor Party
and provide copies upon receipt of all written claims, complaints,
notices or inquiries from governmental authorities relating to the
condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Agent and each Creditor Party any
actions and proceedings relating to compliance with Environmental
Laws; and
(c) provide such information and certifications which the
Agent or any Creditor Party may reasonably request from time to time
to evidence compliance with this Section 1.6.
SECTION 1.7. EQUITY OR SUBORDINATED DEBT.
(a) The Borrower shall receive at least $15,000,000 in
proceeds of Subordinated Debt on or before April 30, 1997.
(b) In the event that the Borrower shall fail to receive
at least $15,000,000 in proceeds of equity or Subordinated Debt on or
before January 31, 1997, the Borrower shall retain a
nationally-recognized investment advisor, who shall be acceptable to
the Creditor Parties, to set up and implement a plan (a copy of which
shall be provided to each Creditor Party) to raise such proceeds on or
before April 30, 1997.
SECTION 1.8. COLLATERAL MATTERS. The Borrower shall, and shall
cause each Subsidiary to, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments, and do
such further acts, as the Collateral Agent may reasonably request from time to
time in order:
(a) to ensure that
(i) the obligations of the Borrower hereunder and
under the other Financing Agreements (as defined in the
Intercreditor Agreement) are secured by substantially all
assets of the Borrower, subject to the exceptions set forth in
Exhibit A-2-5
<PAGE> 39
Exhibit A-3 and guaranteed, pursuant to the Subsidiaries
Guaranty, by all Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary created or
acquired after the Effective Date), and
(ii) the obligations of each Subsidiary under the
Subsidiaries Guaranty are secured by substantially all of the
assets of such Subsidiary, and
(b) to perfect and maintain the validity, effectiveness
and priority of any of the Security Documents and the Liens intended
to be created thereby, subject to the exceptions set forth in Exhibit
A-3.
Without limiting the generality of the foregoing, the Borrower shall, and shall
cause each Subsidiary to, take the actions in respect of Collateral set forth
on Exhibit A-3 within the times set forth therein. Contemporaneously with the
execution and delivery of any document referred to above, the Borrower shall,
and shall cause each Subsidiary to, deliver all resolutions, opinions and
corporate documents as the Collateral Agent may reasonably request to confirm
the enforceability of such document and the perfection of the security interest
created thereby, if applicable.
SECTION 2. NEGATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 2.
SECTION 2.1. BUSINESS ACTIVITIES. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
the business of processing food and such activities as may be incidental or
related thereto.
SECTION 2.2. INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Creditor Obligations;
(b) Indebtedness existing as of the Effective Date which
is identified in Item 2.2(b) ("Ongoing Indebtedness") of the
Disclosure Schedule attached hereto;
(c) Indebtedness secured by Liens described in clause (h)
or (j) of Section 2.3;
(d) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and services,
but excluding Indebtedness incurred through the borrowing of money or
Guaranties);
(e) Hedging Obligations to a Lender;
(f) Subordinated Debt; or
(g) obligations in respect of Capital Leases in an
aggregate amount not to exceed $7,000,000 at any time.
Exhibit A-2-6
<PAGE> 40
SECTION 2.3. LIENS. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens for taxes, assessments or governmental charges
not then due and delinquent and for which a penalty has not attached
or the validity of which is being contested in good faith and by
proper proceedings and with respect to which adequate reserves are
maintained in accordance with GAAP;
(b) Liens arising in connection with court proceedings,
provided that the execution of such Liens is effectively stayed, such
Liens are being contested in good faith and adequate reserves are
maintained with respect thereto in accordance with GAAP;
(c) Liens arising in the ordinary course of business and
not incurred in connection with the borrowing of money, including
encumbrances in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real Property, landlord's and
lessor's liens in the ordinary course of business, which do not,
individually or in the aggregate, materially interfere with the
conduct of the business of the Borrower and its Subsidiaries taken as
a whole and do not materially affect the value of the Property subject
to such Liens;
(d) Construction or materialmen's or mechanic's Liens
securing obligations not overdue or, if overdue, being contested in
good faith and by proper proceedings and with respect to which
adequate reserves are maintained in accordance with GAAP;
(e) Liens in connection with workers' compensation,
social security taxes or similar charges arising in the ordinary
course of business and not incurred in connection with the borrowing
of money;
(f) Liens existing on the Effective Date set forth in
Item 2.3(f) of the Disclosure Schedule attached hereto;
(g) Intercompany Liens (for purposes of intercompany
Liens, a Subsidiary shall mean any corporation of which the Borrower
directly or indirectly owns at least 80% of the Voting Stock);
(h) The extension, renewal or replacement of any Lien
permitted by the foregoing paragraph (f) in respect of the same
Property theretofore subject thereto or the extension, renewal or
replacement (without increase of principal amount of the Indebtedness
originally incurred);
(i) Liens incurred in connection with obtaining or
performing government contracts in the ordinary course of business and
not incurred in connection with the borrowing of money;
(j) (i) Any Lien in Property or in rights relating thereto to
secure any rights granted with respect to such Property in connection
with the provision of all or a part of the purchase price or cost of
the construction of such Property created
Exhibit A-2-7
<PAGE> 41
contemporaneously with, or within 270 days after, such acquisition or
the completion of such construction (except Liens in connection with
the Ponca City Litigation shall not be permitted under this clause
(j)(i)), or (ii) any Lien in Property existing in such Property at the
time of acquisition thereof, whether or not the debt secured thereby
is assumed by the Borrower or such Subsidiary; provided, that the
Indebtedness secured by any such Lien referred to in clauses (i) and
(ii) above shall not exceed 100% of the fair market value on the
related Property at the time the Lien was originally created;
(k) the Shared Lien; and
(l) Liens created, in the ordinary course of the
Borrower's and each Subsidiary's business, under the Packers and
Stockyards Act of 1921, as amended, and the regulations promulgated
thereunder,
provided, that the creation and continued existence of any such Liens, either
individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Borrower and the Subsidiaries, taken as a whole, or
on the Borrower's ability to perform its obligations under any of the
Financing Agreements (as defined in the Intercreditor Agreement).
SECTION 2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) At any time during any period set forth in the table
below, Consolidated Adjusted Net Worth to be less than the amount set
forth opposite such period in such table:
<TABLE>
<CAPTION>
CONSOLIDATED ADJUSTED NET WORTH SHALL NEVER BE LESS
DURING THE PERIOD THAN
<S> <C>
From September 12, 1996 through and including $72,000,000
December 14, 1996
From December 15, 1996 through and including March $74,000,000
8, 1997
From March 9, 1997 through and including April 30, $76,000,000
1997
From May 1, 1997 through and including the date on $91,000,000 plus 50% of the Consolidated Net
which the Loans (under the Bank Credit Agreement Earnings for each Fiscal Year commencing with the
and the New Seasonal Line of Credit Agreement), 1997 Fiscal Year; provided, however, that if
-------- -------
other Obligations and the Insurance Notes shall Consolidated Net Earnings is less than zero in any
have been paid in full in cash Fiscal Year, Consolidated Net Earnings shall be
deemed to be zero in such Fiscal Year for purposes
of this Section 2.4(a).
</TABLE>
As of any date (prior to May 1, 1997) on which the Borrower receives
the proceeds of any Subordinated Debt, the amount set forth in the
table above opposite (i) the period
Exhibit A-2-8
<PAGE> 42
containing such date and (ii) each subsequent period (other than the
last such period), shall be increased by the amount of such proceeds;
provided, however, that the aggregate amount of such increases shall
in no event exceed $15,000,000 in respect of any such period
regardless of the aggregate amount of such proceeds.
(b) As of the end of each Fiscal Period commencing with
the seventh Fiscal Period in the 1997 Fiscal Year and ending with the
seventh Fiscal Period in the 1998 Fiscal Year, the ratio of
Consolidated Earnings Available for Interest Expense to Consolidated
Interest Expense for the Relevant Period to be less than 1.65 to 1.
As of the end of each Fiscal Period commencing with the eighth Fiscal
Period in the 1998 Fiscal Year and ending with the twelfth Fiscal
Period in the 1998 Fiscal Year, the ratio of Consolidated Earnings
Available for Interest Expense to Consolidated Interest Expense for
the Relevant Period to be less than 1.85 to 1. As of the end of each
Fiscal Period commencing with the thirteenth Fiscal Period in the 1998
Fiscal Year, the ratio of Consolidated Earnings Available for Interest
Expense to Consolidated Interest Expense for the Relevant Period to be
less than 2.0 to 1. For purposes of this clause (b), "Relevant
Period" shall mean (i) in respect of any Fiscal Period ending on or
before May 30, 1997, the period commencing on May 31, 1996 and ending
on the last Business Day of such Fiscal Period, and (ii) in respect of
any other Fiscal Period (each, a "Testing Period"), the period
commencing on the first Business Day of the twelfth preceding Fiscal
Period and ending on the last Business Day of such Testing Period.
(c) At any time, the obligations of the Borrower and its
Subsidiaries for the payment of rental for any Property during the
next succeeding 365-day period under existing leases, subleases or
similar arrangements (other than Capital Leases) to exceed in the
aggregate $9,000,000.
(d) The aggregate amount of Consolidated Earnings
Available for Interest Expense in respect of the 1997 Fiscal Year to
be less than $24,630,880.
(e) (i) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first seven
(7) Fiscal Periods of the 1997 Fiscal Year to be less than
$2,000,000.
(ii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first ten
(10) Fiscal Periods of the 1997 Fiscal Year to be less than
--$1,000,000.
(iii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the 1997 Fiscal
Year to be less than --$3,000,000.
SECTION 2.5. INVESTMENTS. The Borrower will not, and will not
permit any Subsidiary to, make, incur, assume or suffer to exist any Investment
in any other Person, except:
(a) Investments existing on the Effective Date set forth
in Item 2.5(a) of the Disclosure Schedule attached hereto;
Exhibit A-2-9
<PAGE> 43
(b) Investments in certificates of deposit, repurchase
agreements or bankers' acceptances, maturing within one year from the
date or origin, issued by a bank organized under the laws of the
United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000;
(c) Investments in commercial paper maturing in 270 days
or less from the date of issuance which, at the time of acquisition by
the Borrower or any Subsidiary, is accorded at least an "A-1" rating
by Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.;
(d) Investments in direct obligations of the United
States of America, or any agency thereof, the obligations of which are
guaranteed by the United States of America, maturing in twelve months
or less from the date of acquisition thereof;
(e) Investments in "money market" preferred stock rated
"A" or better by Standard & Poor's Corporation or "A2" by Moody's
Investors Service, Inc.;
(f) Investments in tax-exempt floating rate option tender
bonds backed by an irrevocable letter of credit issued by a bank the
long-term debt rating of which is at least "AA" by Standard & Poor's
Rating Group or "Aa2" by Moody's Investors Service, Inc.;
(g) Investments in Subsidiaries in existence on the
Effective Date and which operate principally in lines of business
similar to lines of business of the Borrower or its Subsidiaries
existing on the Effective Date; and
(h) Investments in or commitments to purchase foreign
currency; provided, that such Investment is made solely to the extent
that the Borrower and its Subsidiaries are obligated to make payments
to other Persons in such foreign currency.
In valuing any Investments for the purpose of applying the limitations
set forth above, such Investments shall be taken at the original cost thereof,
without allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered on account of capital or
principal.
For purposes of this Section 2.5 at any time when a corporation
becomes a Subsidiary, all investments of such corporation at such time shall be
deemed to have been made by such corporation, as a Subsidiary, at such time.
SECTION 2.6. RESTRICTED PAYMENTS, ETC. On and at all times after
the Effective Date, the Borrower will not:
(a) declare or pay any dividends, either in cash or
Property, on any shares of its capital stock of any class (except
dividends or other distributions payable solely in shares of capital
stock of the Borrower); or
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of Borrower's capital stock of
any class or any warrants, rights or options to purchase or acquire
any shares of the Borrower's capital stock; or
Exhibit A-2-10
<PAGE> 44
(c) make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect of its
capital stock; or
(d) make any payment, either directly or indirectly or
through any Subsidiary, of principal of any Subordinated Debt other
than at the expressed maturity date thereof and scheduled mandatory
prepayments or redemptions thereof in accordance with the terms in
effect on the date of creation of such Subordinated Debt.
SECTION 2.7. CONSOLIDATION, MERGER, ETC. The Borrower will not,
and will not permit any Subsidiary to, liquidate or dissolve, consolidate with,
or merge into or with, any other corporation, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division
thereof) except any such Subsidiary may liquidate or dissolve voluntarily into,
and may merge with and into, the Borrower or any other Subsidiary, and the
assets or stock of any Subsidiary may be purchased or otherwise acquired by the
Borrower or any other Subsidiary.
SECTION 2.8. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any Subsidiary to, sell, lease, transfer or otherwise dispose
of any assets, including the disposition of the stock of any Subsidiary and
including any Sale and Lease-Back Transaction (collectively, a "Disposition"),
in one or a series of transactions to any Person other than the Borrower or a
Majority-Owned Subsidiary, other than:
(a) in the ordinary course of business (including,
without limitation, the disposition of tractors and trailers owned by
the Borrower in the ordinary course of business and consistent with
the Borrower's past practice);
(b) in the Frederick Disposition, provided that the
Borrower receives all cash consideration, and the net cash proceeds
therefrom are simultaneously paid to the Creditor Parties (in
accordance with the Intercreditor Agreement), in each case, on or
before November 30, 1997, or thereafter with the consent of each of
the Creditor Parties, which consent shall not be unreasonably
withheld; or
(c) the following Dispositions:
(i) the plant and equipment located in Concordia,
Missouri which is subject to a purchase option in favor of the
lessee of such facility (approximate balance of purchase
price: $2,000,000);
(ii) the Borrower's facility known as "Tri-Miller"
located in Hyrum, Utah, which has an approximate value of
$600,000;
(iii) A building known as the "H&R Building"
located in Detroit, Michigan, which has an approximate value
of $475,000; and
(iv) a condominium located in Bloomfield Hills, Mi
chigan (approximate balance of purchase price: $300,000);
Exhibit A-2-11
<PAGE> 45
provided that the aggregate book value of all such assets sold,
leased, transferred or otherwise disposed of from time to time
pursuant to this Section 2.8(c) shall not exceed $4,000,000;
provided, however, that:
(x) the Borrower may, and may permit any Subsidiary to,
sell, lease, transfer or otherwise dispose of equipment if the cash
proceeds therefrom are utilized within one year after such Disposition
to purchase or are committed to the purchase of Property of a similar
nature and of at least equivalent value; and
(y) the Borrower may otherwise, and may permit any
Subsidiary otherwise to, sell, lease, transfer or otherwise dispose of
equipment so long as the aggregate amount of the book value of
equipment so disposed (as of the time of its disposition) does not
exceed $2,000,000 in any 365-day period.
SECTION 2.9. SALES AND LEASEBACKS. The Borrower will not, and
will not permit any Subsidiary to, effect any Sale and Lease-Back Transaction
with respect to:
(a) any Property of the Borrower or any Subsidiary which
Property was owned or leased by the Borrower or any Subsidiary on or
prior to September 12, 1996; or
(b) any other Property, if the aggregate book value of
all such other Property that is the subject of a Sale and Lease- Back
Transaction during any period of 365 consecutive days would exceed
$1,000,000.
SECTION 2.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction (including
the furnishing of goods or services) with an Affiliate except in the ordinary
course of business and on terms and conditions no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 2.11. COMPLIANCE WITH BORROWING BASE. The Borrower will
not incur any Borrowing Base Debt if, after giving effect to such incurrence,
and any concurrent repayment of Loans or Other Borrowing Base Debt, the
aggregate principal amount of Borrowing Base Debt would exceed the Borrowing
Base.
SECTION 2.12. HEDGING ACTIVITIES. The Borrower will not, and will
not permit any Subsidiary to, buy, sell, trade or otherwise deal in futures
contracts or options thereon or other derivatives thereof except pursuant to
transactions that represent substitutes for transactions to be made by the
Borrower or such Subsidiary at a later time in the physical pork or pork
products market and the purpose of which is solely to reduce the risk to the
Borrower or such Subsidiary of future fluctuations in the market prices of pork
or pork products.
Exhibit A-2-12
<PAGE> 46
SECTION 2.13. NET CAPITAL EXPENDITURES.
(a) Net Capital Expenditures of the Borrower and its
Subsidiaries shall not exceed $8,200,000 in either the 1997 or the 1998
Fiscal Year. In each Fiscal Year thereafter, Net Capital Expenditures
shall not exceed the sum of $8,200,000 plus twenty-five percent (25%) of
Consolidated Net Earnings in respect of such Fiscal Year; provided,
however, that if Consolidated Net Earnings is less than zero in any
Fiscal Year, Consolidated Net Earnings shall be deemed to be zero in
such Fiscal Year for purposes of this Section 2.13(a).
(b) To the extent that the Net Capital Expenditures of
the Borrower during any Fiscal Year are less than the amount permitted
in respect of such Fiscal Year under Subsection 2.13(a) above, such
difference in respect of such period shall be available during the
first Fiscal Year succeeding such period to support capital
expenditures of the Borrower during such first succeeding Fiscal Year,
and, if such difference shall not be fully utilized by the end of such
first succeeding Fiscal Year, it shall not be available to support any
additional capital expenditures thereafter. With respect to the
utilization of the availability for the making of capital expenditures
by the Borrower in each Fiscal Year, any availability for such period
provided in Subsection 2.13(a) above shall be deemed utilized first to
support the capital expenditures to be made during such period, and
any availability carried forward from the previous Fiscal Year shall
be deemed utilized second to support the capital expenditures to be
made during such period.
(c) Up to an aggregate amount of $5,000,000 paid by the
Borrower in settlement of, or in satisfaction of a judgment against
the Borrower in respect of, the Ponca City Litigation shall not be
considered a Net Capital Expenditure for purposes of this Section
2.13.
SECTION 2.14. CERTAIN SALARIES. At no time will the Borrower, nor
will it permit any Subsidiary to, pay, directly or indirectly, any salary,
bonus, or other cash compensation to any person who, as of the date hereof, is
(i) the chairman of the Borrower's board of directors, (ii) the Borrower's
president and chief executive officer, or (iii) the Borrower's executive vice
president for finance and administration, if such payment or payments would
exceed, in the aggregate, 110% of the aggregate amount of salary, bonus and
other cash compensation paid to such person in the immediately preceding Fiscal
Year. Notwithstanding the foregoing, for each Fiscal Year after the 1998
Fiscal Year, the Borrower may compensate the persons described in this Section
2.14 in accordance with the bonus plan previously delivered to the Creditor
Parties.
SECTION 3. DEFINED TERMS. As used in this Exhibit A-2, the
following terms shall have the meanings set forth below or in the Section of
this document referenced below. The terms used herein and not defined herein
shall have the respective meanings ascribed to such terms in the Bank Credit
Agreement (as defined herein).
"Bank Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of September 11, 1996, among (i)
Thorn Apple Valley, Inc. and (ii) Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and
Harris Trust and Savings Bank, as in effect on the Effective Date.
Exhibit A-2-13
<PAGE> 47
"Collateral" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Collateral Agent" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Consolidated Adjusted Net Worth" shall mean the sum of:
(a) (i) Consolidated Shareholders' Equity less
(ii) all goodwill, trade names, trademarks, patents,
organizational expense, unamortized debt discount and expense
and other intangible assets properly classified as intangibles
in accordance with GAAP and incurred after the date of
consummation of the Wilson Acquisition; plus
(b) Subordinated Debt.
"Consolidated Earnings Available for Interest Expense" shall
mean, for any period, the sum of:
(a) Consolidated Net Earnings for such period
before deduction of any amount which, in conformity with GAAP,
would be set forth opposite the caption "income tax expense"
(including deferred income taxes) (or any like caption) on a
consolidated income statement of Borrower for such period;
plus
(b) Consolidated Interest Expense for such
period; plus
(c) the amortization of any financing cost and of
any debt discount; plus
(d) an amount which, in conformity with GAAP,
would be set forth, opposite the caption "depreciation and
amortization expense" (or any like caption) (including,
without limitation, amortization of intangible assets) on such
income statement for such period, to the extent the same are
deducted from Borrower's net revenues, in conformity with
GAAP, in determining Consolidated Net Earnings for such
period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition costs including
agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Interest Expense" shall mean the interest
expense (including capitalized and non-capitalized interest, the
interest component of rentals under Capital
Exhibit A-2-14
<PAGE> 48
Leases and any expense associated with the termination of a swap
arrangement) of the Borrower and its Subsidiaries on a consolidated
basis for any period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition closing costs
including agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Shareholders' Equity" shall mean consolidated
shareholders' equity of the Borrower and its Subsidiaries determined
in accordance with GAAP.
"Creditor Obligations" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Creditor Parties" shall mean, collectively and individually
(as the context requires) (i) the "Lenders" as defined in the Bank
Credit Agreement and (ii) the Noteholders.
"Disposition" is defined in Section 2.8.
"Fiscal Period" shall mean each period of four consecutive
weeks ending on (i) the last Friday in May in each Fiscal Year or (ii)
the Friday which is four weeks, or any even multiple of four weeks,
thereafter.
"Frederick Disposition" shall mean the sale of the plant,
property, inventory and equipment located at 1487 Farnsworth Avenue,
Detroit, Michigan, and the goodwill, licenses, permits, franchises,
patents, copyrights, trademarks, service marks and trade names
associated therewith.
"Fresh Meats Earnings Available for Interest Expense" shall
mean Consolidated Earnings Available for Interest Expense but only in
respect of the Borrower's fresh meats division, as regularly and
historically reported by the Borrower.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of the Borrower, any qualification or exception:
(a) which is of a "going concern" or similar
nature;
(b) which relates to the limited scope of
examination of relevant to such financial statement; or
(c) which relates to the treatment or
classification of any item in such financial statement and
which, as a condition to its removal, would require an
Exhibit A-2-15
<PAGE> 49
adjustment to such item the effect of which would be to cause
the Borrower to be in default of its obligations under Section
2.4 of this Exhibit A-2.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed
money and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether
or not drawn, and banker's acceptances issued for the account
of such Person;
(c) all obligations of such Person as lessee
under leases which have been or should be, in accordance with
GAAP, recorded as Capital Leases;
(d) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side
of the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under all
Hedging Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of Property or services, and
indebtedness (excluding prepaid interest thereon) secured by a
Lien on Property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Guaranties of such Person in respect of
any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Insurance Note Agreements" shall mean, collectively, (i) that
certain Note Agreement, dated as of April 1, 1994, by and between the
Borrower and Allstate Life Insurance Company, pursuant to which the
Borrower issued Fifteen Million Dollars ($15,000,000) in aggregate
principal amount of its six and forty-five one-hundredths percent
(6.45%) Senior Notes due April 21, 2006, (ii) that certain Note
Agreement, dated as of October 1, 1994, by and between the Borrower
and Allstate Life Insurance Company, pursuant to which the Borrower
issued Eight Million Dollars ($8,000,000) in aggregate principal
amount of its eight and forty-two one-hundredths percent (8.42%)
Senior Notes due October 1, 2003, and (iii) that certain Note
Agreement, dated as of May 15 1995, by and among the Borrower,
Allstate Life Insurance Company, Principal Mutual Life Insurance
Company, and Great-West Life & Annuity Insurance Company, pursuant to
which the Borrower issued Forty-Two Million Five Hundred Thousand
Dollars
Exhibit A-2-16
<PAGE> 50
($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15,
2005, in each case, as amended from time to time.
"Insurance Notes" shall mean those certain Notes, as amended
from time to time, issued pursuant to the Insurance Note Agreements.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated as of September 11, 1996 by and among
the Creditor Parties, and acknowledged and agreed to by the Borrower
and its Subsidiaries.
"Investment" shall mean, relative to any Person:
(a) any loan or advance made by such Person to
any other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary course
of business);
(b) any Guaranty of such Person; or
(c) any ownership or similar interest held by
such Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof, less all returns of principal or equity
thereon (and without adjustment by reason of the financial condition
of such Person) and shall, if made by the transfer or exchange of
Property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such
Property.
"Majority-Owned Subsidiary" shall mean, when applied to a
Subsidiary, any Subsidiary 80% or more of the Voting Stock of which is
owned by the Borrower or a Majority-Owned Subsidiary (other than
Voting Stock required to be held as directors' qualifying stock).
"Net Capital Expenditures" shall mean, in any period, the remainder of
(i) the aggregate cost of acquisition or
construction of all tangible assets acquired or constructed
during such period which at the time of acquisition or
construction have an expected useful life of more than one (1)
year and would be shown on a balance sheet of the acquiring or
constructing Person as an asset ("Capital Assets"), minus
(ii) the aggregate net proceeds of all sales or
other Dispositions of Capital Assets during such period, other
than proceeds which were used to permanently reduce Creditor
Obligations.
"New Seasonal Line of Credit Agreement" shall mean that
certain letter agreement regarding a Senior Secured Seasonal Line of
Credit for the Borrower dated as of September 11, 1996 by and among
(i) Thorn Apple Valley, Inc. and (ii) Cooperatieve
Exhibit A-2-17
<PAGE> 51
Centrale Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank.
"Noteholders" shall mean the holders of the Insurance Notes
from time to time.
"Ongoing Indebtedness" is defined in Section 2.2(b).
"Ponca City Litigation" shall mean that certain action
entitled Facility Constructors, Inc. v. Thorn Apple Valley, Inc. filed
in February, 1996, in District Court, Kay County, Oklahoma against the
Company in connection with the construction of the Company's plant in
Ponca City, Oklahoma.
"Rolling Projection" is defined in Section 1.1(c).
"Section" unless otherwise specified, shall mean a Section of
this Exhibit A-2.
"Security Documents" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Shared Lien" shall mean the lien upon the Collateral (as
defined in the Intercreditor Agreement) created by the Security
Documents (as defined in the Intercreditor Agreement) in favor of the
Creditor Parties (as defined in the Intercreditor Agreement).
"Subordinated Debt" shall mean the principal of and premium,
if any, and interest on all indebtedness of the Borrower, whether
currently outstanding or hereafter created, for money borrowed, or any
indebtedness incurred in connection with an acquisition or lease of
Property or with a merger, consolidation, or acquisition of assets
which is expressly subordinated, on terms satisfactory to the Creditor
Parties, in right of payment pursuant to its terms to the Loans and
the Insurance Notes (regardless of whether it is subordinated to other
indebtedness of the Borrower).
"Subsidiaries Guaranty" shall have the meaning assigned to the
term "Guaranty" in the Intercreditor Agreement.
"Weekly P&L Statement" shall mean, in respect of any week, a
statement, in form acceptable to the Creditor Parties, setting forth,
for each of the Borrower's fresh meats and processed meats divisions,
the income and expenses of the Borrower during such week.
Exhibit A-2-18
<PAGE> 52
DISCLOSURE SCHEDULE TO EXHIBIT A-2
ITEM 2.2(B) - ONGOING INDEBTEDNESS:
Operating Leases. See Exhibit A to Disclosure Schedule to Exhibit A-2.
<TABLE>
<CAPTION>
BALANCE OUTSTANDING
@ 8/23/96
<S> <C>
Lines of Credit:
Combined $94,100,000
-----------
Notes Payable:
Corporate: Allstate Unsecured Notes 23,000,000
Corporate: Allstate Life Ins. Unsecured Notes 15,000,000
Principal Mutual Life Unsecured Notes 14,000,000
Great-West Life & Annuity Unsecured Notes 13,500,000
Dixie: Forrest City Note 1,282,222
---------
Subtotal 160,882,000
-----------
Industrial Revenue Bonds:
Corporate: (Branch Banking) 2,400,000
Dixie Plant: (Economic Development Revenue Bond) 2,442,000
Corporate: (Michigan Strategic Fund - Adjustable Rate Demand
Limited Obligation Revenue bond, Series 1993)
5,500,000
---------
Subtotal:
10,342,000
----------
Capital Leases:
Corporate 518,744
Frederick division 2,304,521
Smoked Meats division 314,296
Concordia & Shreveport division 93,018
Dixie division 1,913,235
---------
Subtotal 5,143,814
Total Outstanding Indebtedness $176,367,814
============
</TABLE>
Letters of Credit - See Exhibit B to Disclosure Schedule to Exhibit A-2.
Disclosure Schedule - 1
<PAGE> 53
ITEM 2.3(F) - EXISTING LIENS:
<TABLE>
<CAPTION>
DEBT DESCRIPTION OF COLLATERAL AMOUNT OF
LOCATION REFERENCE O/S DEBT
<S> <C> <C> <C> <C>
Industrial Revenue Bonds:
Corporate Branch Banking Carolina manufacturing
facility $2,400,000
Dixie division Dixie facility $2,442,000
Mich. Strat. Fund. Grand Rapids $5,500,000
Capital Leases:
Corporate, Frederick, Smoked Meats, Concordia, Various machinery and $5,143,814
Shreveport and Dixie divisions. equipment located at the
company's various divisions
and subsidiaries
<CAPTION>
All other Liens existing as of the Effective Date and permitted under Section 1.8 of Exhibit A-2.
ITEM 2.5(A) ONGOING INVESTMENTS:
-------------------
INVESTMENT BALANCE
FINANCIAL INSTITUTION TYPE @ 8/23/96
<S> <C> <C>
Short-Term Investments
United Carolina Bank CD 500,000
Providence TempCash 3,059,000
Chicago operation U.S. Treasury Bills 300,000
Subtotal $3,859,000
Michigan Livestock Exchange Preferred Stock 2,000,000
Total Investments $5,859,000
==========
</TABLE>
Disclosure Schedule - 2
<PAGE> 54
EXHIBIT A TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Operating Leases
Disclosure Schedule - 3
<PAGE> 55
EXHIBIT B TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
<PAGE> 56
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1
<PAGE> 1
EXHIBIT 10(u)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THORN APPLE VALLEY, INC.
__________________________________
AMENDMENT AGREEMENT
__________________________________
RE:
NOTE AGREEMENT DATED AS OF OCTOBER 1, 1994
AND
$8,000,000 8.42% SENIOR NOTES DUE OCTOBER 1, 2003
DATED AS OF SEPTEMBER 11, 1996
$8,000,000 SENIOR NOTES DUE OCTOBER 1, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "Agreement"), dated as of September 11,
1996, between THORN APPLE VALLEY, INC. (the "Company"), a Michigan corporation,
and ALLSTATE LIFE INSURANCE COMPANY (referred to herein as "Allstate" or the
"Noteholder").
RECITALS:
A. Pursuant to that certain Note Agreement, dated as of October
1, 1994 (as amended prior to the date hereof, the "Existing Note Agreement",
and, as amended and supplemented by this Agreement and the other agreements and
instruments to be executed in connection herewith and therewith, the "Amended
Note Agreement"), the Company issued Eight Million Dollars ($8,000,000) in
aggregate principal amount of its eight and forty-two one-hundredths percent
(8.42%) Senior Notes due October 1, 2003 (as amended prior to the date hereof,
the "Existing Notes", and, as amended and supplemented by this Agreement and
the other agreements and instruments to be executed in connection herewith and
therewith, the "Amended Notes"). The Existing Notes are substantially in the
form of Exhibit A attached to the Existing Note Agreement.
B. The Company has requested that the Noteholder amend or waive
certain terms of the Existing Note Agreement, as more particularly set forth in
this Agreement.
C. Subject to the terms and conditions hereinafter set forth, the
Noteholder is willing to amend certain terms of the Existing Note Agreement and
the Existing Notes and waive other terms of the Existing Note Agreement, all as
more particularly set forth in this Agreement.
D. The Company and the Noteholder are desirous of entering into
this Agreement on the terms and conditions hereinafter set forth.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
As used herein, the following terms shall have the meanings set forth
below or in the document or the Section of this Agreement referenced below.
The terms used herein and not defined herein shall have the respective meanings
ascribed to such terms in the Amended Note Agreement.
"Agreement, this" -- introductory sentence hereof.
"Allstate" -- introductory sentence hereof.
1
<PAGE> 3
"Amended Bank Credit Documents" -- Section 5.2(b).
"Amended Note Agreement" -- Recital A hereof.
"Amended Note Documents" -- means, collectively, the Amended Note
Agreement, the Amended Notes, the Security Documents (as defined herein), the
Intercreditor Agreement (as defined herein), and the Subsidiary Guaranty (as
defined herein), as each may be amended from time to time.
"Amended Notes" -- Recital A hereof.
"Amendment Effective Date" -- introductory language to Section 5.
"Bank Credit Agreement" -- means, collectively, (i) that certain
Credit Agreement dated as of May 30, 1995 by and among the Company and the
Banks, pursuant to which the Banks agreed to provide the Company with an
$80,000,000 revolving credit facility and (ii) that certain letter agreement
dated March 11, 1996 by and among the Company and the Banks (or their
successors in interest), pursuant to which the Banks agreed to provide the
Company with a $20,000,000 revolving credit facility, in each case, as amended
to the date hereof.
"Banks" -- means, collectively, Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and Harris
Trust and Savings Bank.
"Collateral" -- shall have the meaning ascribed to such term in the
Intercreditor Agreement.
"Collateral Agent" -- shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Company" -- introductory sentence hereof.
"Covenant Reversion Date" -- means the later to occur of (i) the date
on which all of the obligations in respect of the Bank Credit Agreement shall
have been paid in full in cash and (ii) the date on which the Company shall
have obtained from a nationally recognized debt rating agency a rating in
respect of the Notes of BBB or better.
"Existing Note Agreement" -- Recital A hereof.
"Existing Notes" -- Recital A hereof.
"Intercreditor Agreement" -- Section 5.2(g).
"IRB Obligations" -- shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"L/C Issuer" -- Old Kent Bank, in its capacity as issuer of the Old
Kent Letters of Credit.
"Noteholder" -- introductory sentence hereof.
2
<PAGE> 4
"Old Kent L/C Documents" -- shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Old Kent Letters of Credit" -- shall have the meaning ascribed to
such term in the Intercreditor Agreement.
"Other Note Agreements" -- means, collectively, (i) that certain Note
Agreement, dated as of May 15, 1995, by and among the Company, Allstate,
Principal Mutual Life Insurance Company and Great-West Life & Annuity Insurance
Company, pursuant to which the Company issued Forty-Two Million Five Hundred
Thousand Dollars ($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15, 2005 and
(ii) that certain Note Agreement, dated as of April 1, 1994, by and between the
Company and Allstate, pursuant to which the Company issued Fifteen Million
Dollars ($15,000,000) in aggregate principal amount of its six and forty-five
one-hundredths percent (6.45%) Senior Notes due April 21, 2006, in each case,
as amended to the date hereof.
"Restated Notes" -- Section 5.2(a).
"Security Documents" -- Section 5.2(e).
"Subsidiary Guaranty" -- Section 5.2(f).
SECTION 2. AMENDMENTS TO EXISTING NOTE AGREEMENT AND EXISTING
NOTES.
2.1 GENERAL AMENDMENTS. The Company and, subject to the
satisfaction of the conditions set forth in Section 5 hereof, the Noteholder
hereby consent and agree to the amendments to the Existing Note Agreement and
the Existing Notes as set forth in Exhibit A-1 to this Agreement. Each such
amendment shall become effective on the Amendment Effective Date (as defined
herein) and is incorporated herein by reference as if set forth verbatim in
this Agreement.
2.2 TEMPORARY SUSPENSION AND AMENDMENTS TO COVENANTS. The Company
and, subject to the satisfaction of the conditions set forth in Section 5
hereof, the Noteholder hereby consent and agree as follows:
(a) During the period commencing on the Amendment
Effective Date and ending on the Covenant Reversion Date, the Company
(i) shall comply with the requirements of the covenants set forth in
Exhibit A-2 to this Agreement, and (ii) except as set forth in said
Exhibit A-2, shall not be required to comply with the requirements of
the covenants contained in Section 6 or Section 7 of the Existing Note
Agreement.
(b) During the period commencing on the Covenant
Reversion Date and ending on the date on which the Notes shall have
been paid in full in cash, the Company shall comply with all of the
requirements of the covenants contained in Section 6 and Section 7 of
the Amended Note Agreement.
3
<PAGE> 5
SECTION 3. WAIVER OF NON-COMPLIANCE.
Effective upon the satisfaction of the conditions set forth in Section
5 hereof, the Noteholder hereby irrevocably waives (a) non-compliance by the
Company with any provision of Section 7 of the Existing Note Agreement for the
period prior to the Amendment Effective Date and (b) any Default or Event of
Default during such period resulting from any such failure of the Company to be
in compliance with the provisions of Section 7 of the Existing Note Agreement.
SECTION 4. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholder to enter into this Agreement, the Company
warrants and represents to the Noteholder that, as of the Amendment Effective
Date:
4.1 ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a
corporation duly incorporated, validly existing and is in good standing under
the laws of the State of Michigan. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations under the Amended Note Documents.
4.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The execution
and delivery by the Company of this Agreement and the performance by the
Company of its obligations under the Amended Note Documents have been duly
authorized by all necessary action on the part of the Company. This Agreement
has been duly executed and delivered by the Company. Each of the Amended Note
Documents constitutes a valid and binding obligation of the Company,
enforceable in accordance with its respective terms, except that the
enforceability thereof may be:
(a) limited by bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
4.3 NO CONFLICTS OR DEFAULTS. Neither the execution and delivery
by the Company of this Agreement and the other Amended Note Documents, nor the
performance by the Company of its obligations under any of the Amended Note
Documents, conflicts with, results in any breach in any of the provisions of,
constitutes a default under, violates or results in the creation of any Lien
(other than pursuant to the Amended Note Documents) upon any Property of the
Company under the provisions of:
(a) any charter document, partnership agreement or bylaws
of the Company;
(b) assuming the contemporaneous execution and delivery
of an amendment to the Bank Credit Agreement and an amendment
(substantially similar to this Agreement) to the Other Note Agreements
(as such terms are defined herein), any agreement, instrument or
conveyance to which the Company or any Properties of the Company may
be bound or affected, except for such breaches, defaults and
violations that, in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or
on the Company's ability to perform its obligations under this
Agreement, the Amended
4
<PAGE> 6
Note Agreement and the Amended Notes; provided, however, that if the
granting of Liens pursuant to any of the Security Documents will
violate the terms of any of the IRB Obligations, no such Security
Documents which create Liens which violate the terms of any such IRB
Obligations will be filed or recorded by any Person unless and until
any required consents thereto shall have been obtained from the
appropriate secured parties; or
(c) any statute, rule or regulation or any order,
judgment or award of any court, tribunal or arbitrator by which the
Company or any Properties of the Company may be bound or affected,
except for such violations that, in the aggregate, could not
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or on the Company's ability to perform
its obligations under this Agreement, the Amended Note Agreement and
the Amended Notes.
4.4 GOVERNMENTAL CONSENT. Neither the execution and delivery by
the Company of this Agreement and the other Amended Note Documents nor the
performance by the Company of its obligations under each of the Amended Note
Documents, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority on the
part of the Company as a condition thereto under the circumstances and
conditions contemplated by this Agreement and each of the Amended Note
Documents.
4.5 NO DEFAULTS OR EVENTS OF DEFAULT. After giving effect to the
transactions contemplated by this Agreement, including the contemporaneous
execution and delivery of an amendment to the Bank Credit Agreement and an
amendment (substantially similar to this Agreement) to each of the Other Note
Agreements, no Default or Event of Default will exist under any of the Amended
Note Documents, the Bank Credit Agreement (as amended as of the date hereof) or
the Other Note Agreements (as amended as of the date hereof).
4.6 DISCLOSURE. The financial statements and certificates
delivered to the Noteholder by the Company or the Company's accountants, as the
case may be, pursuant to Section 6.6 of the Existing Note Agreement do not, nor
does this Agreement or any written statement furnished by the Company in
connection herewith, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. There is no fact existing as of the date hereof which the Company
has not disclosed to the Noteholder in writing which has had or, so far as the
Company can now reasonably foresee, could reasonably be expected to have, a
material adverse effect on the condition, financial or otherwise, of the
Company or its Subsidiaries, or the operations of any of them, or upon the
Company's ability to perform its obligations under this Agreement, the Amended
Note Agreement and the Amended Notes.
4.7 TRUE AND CORRECT COPIES. The Company has delivered to the
Noteholder true and correct copies of the Bank Credit Agreement, each of the
Old Kent L/C Documents, each of the Other Note Agreements, each of the Security
Documents (including, without limitation, all schedules and exhibits thereto
and all miscellaneous agreements and certificates delivered in connection
therewith), the Subsidiary Guaranty, and the Intercreditor Agreement, each as
in effect on the Amendment Effective Date.
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<PAGE> 7
4.8 CERTAIN REPRESENTATIONS AND WARRANTIES. As supplemented by
the information set forth on Annex 1 hereto, all of the representations and
warranties contained in Section 3 of the Existing Note Agreement are true and
correct in all material respects as of the Amendment Effective Date as if such
representations and warranties were made on the Amendment Effective Date. All
of the representations and warranties contained in (i) the most recent
amendment to the Bank Credit Agreement, (ii) each of the Security Documents,
(iii) the Subsidiary Guaranty, and (iv) the Intercreditor Agreement, each as in
effect on the Amendment Effective Date, are true and correct in all respects.
4.9 NO UNDISCLOSED CONSIDERATION. Except as expressly set forth
in the documents described in Section 5.1 or Section 5.2 hereof, neither the
Company nor any Subsidiary has paid or will pay, directly or indirectly, any
fee, charge or other consideration to any Creditor Party (as defined in the
Intercreditor Agreement) as a condition to, or otherwise in connection with,
the amendments, modifications or restatements, as the case may be, to the Bank
Credit Agreement, the L/C Documents (as defined in the Intercreditor
Agreement), the Other Note Agreements or the Existing Note Agreement, in each
case, as described in the Intercreditor Agreement.
4.10 SOLVENCY.
(a) As of the date hereof, the fair value of all of the
Company's property (other than property that the Company could exempt
from its estate were it a debtor under the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq.) exceeds the aggregate amount of
the Company's debts.
(b) The Company has not transferred, concealed, or
removed any of its property with intent to hinder, delay, or defraud
any of the Company's creditors.
SECTION 5. CONDITIONS PRECEDENT.
The amendments set forth in Section 2 hereof and the waiver set forth
in Section 3 hereof shall not become effective unless all of the following
conditions precedent shall have been satisfied on or before September 12, 1996
(the date of such satisfaction being herein referred to as the "Amendment
Effective Date"):
5.1 EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company shall
have executed and delivered to the Noteholder a counterpart of this Agreement.
5.2 EXECUTION AND DELIVERY OF OTHER DOCUMENTS. The following
documents, each in form and substance satisfactory to the Noteholder and its
special counsel, shall have been duly executed and delivered by the parties
thereto, and shall be in full force and effect:
(a) an amendment and restatement of each of the Existing
Notes (collectively, the "Restated Notes") in the form set forth in
paragraph 10 of Exhibit A-1 hereto;
(b) an Amended and Restated Credit Agreement and a letter
agreement regarding a Senior Secured Seasonal Line of Credit for the
Company (collectively, the "Amended Bank Credit Documents"), in each
case among the Company and the Banks,
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<PAGE> 8
which agreements, in each case, shall be in form and substance
satisfactory to the Noteholder;
(c) an amendment to each of the L/C Documents (including,
without limitation, a waiver of each default or event of default
existing thereunder as of the date hereof), in each case, dated as of
the date hereof and executed by each of the parties to such L/C
Document, which agreements, in each case, shall be in form and
substance satisfactory to the Noteholder;
(d) an amendment to each of the Other Note Agreements, in
each case, dated as of the date hereof and executed by each of the
parties to such Other Note Agreement, which agreements, in each case,
shall be in form and substance satisfactory to the Noteholder;
(e) those certain security agreements, mortgages and
other collateral documents more fully set forth on Schedule I to the
Intercreditor Agreement (collectively, the "Security Documents"),
which documents, in each case, shall be in form and substance
satisfactory to the Noteholder;
(f) a guaranty of the Amended Notes by each Subsidiary of
the Company (the "Subsidiary Guaranty"), which shall be in form and
substance satisfactory to the Noteholder; and
(g) an Intercreditor Agreement (the "Intercreditor
Agreement"), among Allstate, Principal Mutual Life Insurance Company,
Great-West Life & Annuity Insurance Company, the Banks, the L/C Issuer
and the Collateral Agent, and acknowledged and agreed to by the
Company and the Subsidiaries, which agreement shall be in form and
substance satisfactory to the Noteholder.
5.3 PRIVATE PLACEMENT NUMBER. The Company shall have obtained or
caused to be obtained a private placement number for the Restated Notes from
the CUSIP Service Bureau of Standard & Poor's, a division of McGraw-Hill, Inc.,
and the Noteholder shall have been informed of such private placement number.
5.4 COLLATERAL. The Security Documents shall be in full force and
effect and there shall be no Default or Event of Default thereunder and as
defined therein. Except in respect of those items of Collateral identified on
Exhibit A-3 hereto, all actions necessary to perfect the Liens of the
Collateral Agent created by the Security Documents (including, without
limitation, the filing of all appropriate financing statements and the
recording of all appropriate documents with appropriate public officials) shall
have been taken in accordance with the terms of the Security Documents and
confirmation thereof shall be received by the Noteholder. The Liens of the
Collateral Agent created by the Security Documents shall be valid, enforceable
and perfected (except as permitted by Section 1.8 of Exhibit A-2 hereto), and
the Property of the Company shall be subject to no other Lien not otherwise
permitted under Section 2.3 of Exhibit A-2 hereto.
7
<PAGE> 9
5.5 EQUITY INFUSION. The Company shall have received an
aggregate of not less than $3,000,000 in capital contributions from one or more
of its shareholders upon terms and conditions satisfactory to the Noteholder in
its sole discretion.
5.6 NO DEFAULT; REPRESENTATIONS AND WARRANTIES TRUE. The
warranties and representations set forth in Section 4 hereof shall be true and
correct on the Amendment Effective Date and no Default or Event of Default
shall exist which would not be waived by this Agreement and by an amendment to
each of the Other Note Agreements. The Noteholder shall have received a
certificate dated the Amendment Effective Date and signed by the President and
the Chief Financial Officer of the Company, in form and substance satisfactory
to the Noteholder, certifying to the conditions specified in the preceding
sentence.
5.7 AUTHORIZATION OF TRANSACTIONS.
(a) The Company shall have duly authorized the execution
and delivery of this Agreement and each of the documents executed and
delivered in connection herewith and the performance of all of its
obligations contemplated by this Agreement. The Noteholder shall have
received a certificate dated the Amendment Effective Date and signed
by the Secretary or an Assistant Secretary of the Company, in form and
substance satisfactory to the Noteholder, certifying as to the
resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of the Restated Notes and
this Agreement.
(b) Each Subsidiary shall have duly authorized the
execution, delivery and performance of its respective Subsidiary
Guaranty. The Noteholder shall have received a certificate dated the
Amendment Effective Date and signed by the Secretary or an Assistant
Secretary of each Subsidiary, certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Subsidiary Guaranty.
5.8 OPINION OF COUNSEL. The Noteholder shall have received from
Honigman Miller Schwartz and Cohn, counsel to the Company, a legal opinion, in
form and substance satisfactory to the Noteholder and its special counsel, with
respect to the transactions contemplated by this Agreement.
5.9 PAYMENT OF CERTAIN EXPENSES. The Company shall have paid all
reasonable costs and expenses of the Noteholder relating to this Agreement and
the other Amended Note Documents, including without limitation (i) the fees and
expenses of Hebb & Gitlin, the Noteholder's special counsel and (ii) the
out-of-pocket expenses of the Noteholder.
5.10 PAYMENT OF INTEREST. The Company shall have paid all accrued
and unpaid interest in respect of each Existing Note, at the rates specified
herein, to the Amendment Effective Date.
5.11 MINIMUM REVOLVER AVAILABILITY. The Company shall have
obtained commitments from the Banks, pursuant to the Amended Bank Credit
Documents, which shall be available to the Company as of the Amendment
Effective Date, in an amount equal to at least $110,000,000.
8
<PAGE> 10
5.12 PROCEEDINGS SATISFACTORY. All documents executed and
delivered, and actions and proceedings taken, in connection with this Agreement
shall be satisfactory to the Noteholder and its special counsel. The
Noteholder and its special counsel shall have received copies of such documents
and papers as they may reasonably request in connection therewith, in form and
substance satisfactory to them.
SECTION 6. NO PREJUDICE OR WAIVER; REAFFIRMATION.
6.1 NO PREJUDICE OR WAIVER. Except as provided herein, the terms
of this Agreement shall not operate as a waiver by the Noteholder of, or
otherwise prejudice the Noteholder's rights, remedies or powers under, the
Amended Note Documents or under applicable law. Except as expressly provided
herein:
(a) no terms and provisions of any agreement are modified
or changed by this Agreement; and
(b) the terms and provisions of the Existing Note
Agreement and the Existing Notes shall continue in full force and
effect.
6.2 REAFFIRMATION. The Company hereby acknowledges and reaffirms
all of its obligations and duties under the Amended Note Documents.
SECTION 7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
7.2 DUPLICATE ORIGINALS. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in one or more counterparts and shall be effective
when at least one counterpart shall have been executed by each party hereto,
and each set of counterparts which, collectively, show execution by each party
hereto shall constitute one duplicate original.
7.3 WAIVERS AND AMENDMENTS. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally, or by any
action or inaction, but only by an instrument in writing signed in accordance
with the amendment provisions set forth in the Existing Note Agreement.
7.4 SECTION HEADINGS. The titles of the sections hereof appear as
a matter of convenience only, do not constitute a part of this Agreement and
shall not affect the construction hereof.
9
<PAGE> 11
7.5 COSTS AND EXPENSES. On the Amendment Effective Date, the
Company shall pay all costs and expenses of the Noteholder relating to this
Agreement and the other Amended Note Documents, including, but not limited to,
(i) the statement for reasonable fees and disbursements of the Noteholder's
special counsel and (ii) the statement for reasonable out-of-pocket expenses of
the Noteholder, in each case, presented to the Company on the Amendment
Effective Date. The Company will also pay upon receipt of any statement
thereof, each additional statement for (i) reasonable fees and disbursements of
the Noteholder's special counsel or (ii) reasonable out-of-pocket expenses of
the Noteholder, rendered after the Amendment Effective Date in connection with
the Amended Note Documents.
7.6 SURVIVAL. All warranties, representations, certifications and
covenants made by or on behalf of the Company or any Subsidiary in the Amended
Note Documents or in any certificate or other instrument delivered pursuant to
the Amended Note Documents shall be considered to have been relied upon by the
Noteholder and shall survive the execution of the Amended Note Documents,
regardless of any investigation made by or on behalf of the Noteholder. All
statements in any such certificate or other instrument shall constitute
warranties and representations of the Company hereunder.
7.7 WAIVER AND RELEASE. For and in consideration of the
agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the Company, on its own behalf, and to the extent that it is
lawfully able to do so, on behalf of its predecessors, successors, assigns,
Subsidiaries, affiliates and agents and all of their respective past, present
and future officers, directors, shareholders, employees, contractors and
attorneys, and the predecessors, heirs, successors, and assigns of each of them
(collectively referred to in this Section 7.7 as the "RELEASORS") do hereby
jointly and severally fully RELEASE, REMISE, ACQUIT, IRREVOCABLY WAIVE and
FOREVER DISCHARGE the Noteholder, together with its predecessors, successors,
assigns, subsidiaries, affiliates and agents and all of their respective past,
present and future officers, directors, shareholders, employees, contractors
and attorneys, and the predecessors, heirs, successors and assigns of each of
them (the Noteholder and all of the foregoing being collectively referred to in
this Section 7.7 as the "RELEASED PARTIES"), from and with respect to any and
all Claims (as defined below).
As used in this Section 7.7, the term "CLAIMS" shall mean and include
any and all, and all manner of, action and actions, cause and causes of action,
suits, disputes, controversies, claims, debts, sums of money, offset rights,
defenses to payment, agreements, promises, notes, bonds, bills, covenants,
losses, damages, judgments, executions and demands of whatever nature, known or
unknown, whether in contract, in tort or otherwise, at law or in equity, for
money damages or dues, recovery of property, or specific performance, or any
other redress or recompense which have accrued or may ever accrue, may have
been had, may be now possessed, or may or shall be possessed in the future by
or on behalf of any one or more of the Releasors against any one or more of the
Released Parties for, upon, by reason of, on account of, or arising from or out
of, or by virtue of, any transaction, event or occurrence, duty or obligation,
indemnification, agreement, promise, warranty, covenant or representation,
breach of fiduciary duty, breach of any duty of fair dealing, breach of
confidence, breach of funding commitment, undue influence, duress, economic
coercion, conflict of interest, negligence, bad faith, malpractice, violations
of federal or state securities laws or the Racketeer Influenced and Corrupt
Organizations Act, intentional or negligent infliction of mental distress,
tortious interference with contractual relations, tortious interference with
corporate governance or
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<PAGE> 12
prospective business advantage, breach of contract, deceptive trade practices,
libel, slander, usury, conspiracy, wrongful acceleration of any indebtedness,
wrongful foreclosure or attempt to foreclose on any collateral relating to any
indebtedness, action or inaction, relationship or activity, service rendered,
matter, cause or thing, whatsoever, express or implied, transpiring, entered
into, created or existing from the beginning of time to the date of the
execution of this Agreement in respect of the Existing Notes or the Existing
Note Agreement, and shall include, but not be limited to, any and all Claims in
connection with, as a result of, by reason of, or in any way related to or
arising from the existence of any relationships or communications by and
between the Releasors and the Released Parties with respect to the Existing
Notes, the agreements pursuant to which the Existing Notes were issued, and all
agreements, documents and instruments related thereto, as presently constituted
and as the same may from time to time be amended.
The Releasors acknowledge that they may hereafter discover facts,
which exist or existed on or before the date hereof, different from or in
addition to those they now know or believe to be true with respect to the
Claims herein released. Notwithstanding the foregoing, the Releasors agree
that this Section 7.7 shall survive the termination hereof and shall remain
effective in all respects and waive the right to make any new, different or
additional claim on account of such different or additional facts. The
Releasors acknowledge that no representation or warranty of any kind or
character has been made to the Releasors by any one or more of the Released
Parties or any agent, representative or attorney of the Released Parties to
induce the execution of this Agreement containing this Section 7.7.
The Releasors hereby represent and warrant unto the Released Parties
that:
(a) the Releasors have the full right, power, and
authority to execute and deliver this Agreement containing this
Section 7.7 without the necessity of obtaining the consent of any
other party;
(b) the Releasors have received independent legal advice
from attorneys of their choice with respect to the advisability of
granting the release provided herein, and with respect to the
advisability of executing this Agreement containing this Section 7.7;
(c) the Releasors have not relied upon any statements,
representations or promises of any of the Released Parties in
executing this Agreement containing this Section 7.7, or in granting
the release provided herein;
(d) the Releasors have not entered into any other
agreements or understandings relating to the Claims;
(e) the terms of this Section 7.7 are contractual, not a
mere recital, and are the result of negotiation among all the parties;
and
(f) this Section 7.7 has been carefully read by, and the
contents hereof are known and understood by, and it is signed freely
by the Releasors.
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<PAGE> 13
The Releasors covenant and agree not to bring any claim, action, suit
or proceeding regarding or related in any manner to the matters released
hereby, and the Releasors further covenant and agree that this Section 7.7 is a
bar to any such claim, action, suit or proceeding.
All prior discussions and negotiations regarding the Claims have been
and are merged and integrated into, and are superseded by, this Section 7.7.
The Releasors understand, agree and expressly assume the risk of any fact not
recited, contained or embodied in this Section 7.7 which may hereafter turn out
to be other than, different from, or contrary to, the facts now known to the
Releasors or believed by the Releasors to be true, and further agree that this
Section 7.7 shall not be subject to termination, modification, or rescission,
by reason of any such difference in facts.
7.8 INDEMNIFICATION. The Company agrees to indemnify the
Noteholder and its directors, officers, employees, agents and attorneys from,
and hold each of them harmless against, any and all losses, liabilities,
claims, damages or expenses incurred by any of them arising out of or by reason
of any investigation or litigation or other proceedings (including any
threatened investigation, litigation or other proceedings) relating to, or in
connection with, the Existing Notes or the Amended Notes including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
[REMAINDER OF PAGE IS INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by a duly authorized officer or agent thereof, as
the case may be, as of the date first above written.
THORN APPLE VALLEY, INC.
By_________________________________
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
[AMENDMENT AGREEMENT IN RESPECT OF THORN APPLE VALLEY, INC.]
<PAGE> 15
ANNEX 1
INFORMATION AS TO COMPANY
[SUPPLEMENTAL INFORMATION WITH RESPECT TO
REPRESENTATIONS AND WARRANTIES IN EXISTING NOTE AGREEMENT]
Annex 1-1
<PAGE> 16
EXHIBIT A-1
AMENDMENTS TO EXISTING NOTE AGREEMENT AND TO EXISTING NOTES
1. AMENDMENTS TO SECTION 1.1 OF THE EXISTING NOTE AGREEMENT.
Section 1.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"1.1 Description of Notes. The Company has authorized the
issuance and sale of $8,000,000 aggregate principal amount of its
Senior Notes, to be dated the date of issuance thereof, to bear
interest
(a) from such date until June 20, 1996 at the
rate of 8.42% per annum;
(b) from June 21, 1996 through and including July
31, 1996 at the Pre-Restructuring Rate; and
(c) from August 1, 1996 through the date of
maturity at the Post-Restructuring Rate,
payable monthly on the first day of each month, and at maturity, to
bear interest on overdue principal (including any overdue required or
optional prepayment), premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the greater of
(i) the rate of interest publicly announced from time to time by
Harris Trust and Savings Bank (or its successors or assigns) as its
prime rate plus two percent (2%) or (ii) the Post-Default Rate, to be
expressed to mature on October 1, 2003 and to be substantially in the
form attached as Exhibit A. The term "Notes" as used herein shall
include each Note delivered pursuant to this Note Agreement (the
"Agreement") and each Note delivered in substitution or exchange
therefor and, where applicable, shall include the singular number as
well as the plural. Any reference to you in this Agreement shall in
all instances be deemed to include any nominee of yours or any
separate account on whose behalf you are purchasing Notes. You are
sometimes referred to herein as the 'Purchaser'."
2. NEW SECTION 1.3 OF THE EXISTING NOTE AGREEMENT. A New Section
1.3 is hereby added to the Existing Note Agreement, after Section 1.2 thereof
and before Section 2 thereof, which shall read in its entirety as follows:
"1.3 Collateral Security. The obligations of the Company
hereunder and under the Notes are secured by the Shared Lien in the
Collateral."
3. AMENDMENTS TO SECTION 2.1 OF THE EXISTING NOTE AGREEMENT.
Section 2.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"2.1 Required Prepayments. (a) The Company shall pay all
of the outstanding principal of the Notes at maturity.
Exhibit A-1-1
<PAGE> 17
(b) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and there
shall become due and payable on the tenth Business Day after each
Qualified Capital Infusion Date, a principal amount of the Notes equal
to the Qualified Capital Infusion Amount. The Company shall notify
the Noteholder of its intent to make such prepayment on such Qualified
Capital Infusion Date. Such prepayment shall be at a price of (i)
100% of the principal amount prepaid, together with interest accrued
thereon to the date of payment, if the Reinvestment Yield, on the
applicable Determination Date, equals or exceeds 8.42% per annum, or
(ii) 100% of the principal amount prepaid, together with interest
accrued thereon to the date of payment, plus a premium, if the
Reinvestment Yield, on such Determination Date, is less than 8.42% per
annum. The premium shall equal (x) the aggregate present value of the
amount of principal being repaid (taking into account the manner of
application required by Section 2.2(c)) and the present value of the
amount of interest (exclusive of interest accrued to the date of
prepayment) which would have been payable in respect of such principal
(at the rate of 8.42% per annum) absent such prepayment, determined by
discounting (semi-annually on the basis of a 360-day year composed of
twelve 30-day months) each such amount utilizing an interest factor
equal to the Reinvestment Yield, less (y) the principal amount to be
prepaid. Payment of such premium shall be deferred until the earlier
of (1) the date on which the obligations in respect of the Amended
Bank Credit Documents shall have been paid in full, (2) the date on
which the Company shall have obtained from a nationally recognized
debt rating agency a rating in respect of the Notes of BBB or better,
(3) acceleration of the Notes, (4) bankruptcy of the Company, or (5)
May 31, 1998.
(c) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and there
shall become due and payable on April 30, 1997, a principal amount of
the Notes equal to the Scheduled Amount. Such prepayment shall be at
a price of (i) 100% of the principal amount prepaid, together with
interest accrued thereon to the date of payment, if the Reinvestment
Yield, on the applicable Determination Date, equals or exceeds 8.42%
per annum, or (ii) 100% of the principal amount prepaid, together with
interest accrued thereon to the date of payment, plus a premium, if
the Reinvestment Yield, on such Determination Date, is less than 8.42%
per annum. The premium shall equal (x) the aggregate present value of
the amount of principal being repaid (taking into account the manner
of application required by Section 2.2(c)) and the present value of
the amount of interest (exclusive of interest accrued to the date of
prepayment) which would have been payable in respect of such principal
(at the rate of 8.42% per annum) absent such prepayment, determined by
discounting (semi-annually on the basis of a 360-day year composed of
twelve 30-day months) each such amount utilizing an interest factor
equal to the Reinvestment Yield, less (y) the principal amount to be
prepaid. Payment of such premium shall be deferred until the earlier
of (1) the date on which the obligations in respect of the Amended
Bank Credit Documents shall have been paid in full, (2) the date on
which the Company shall have obtained from a nationally recognized
debt rating agency a rating in respect of the Notes of BBB or better,
(3) acceleration of the Notes, (4) bankruptcy of the Company, or (5)
May 31, 1998.
(d) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and there
shall become due and payable on the tenth Business Day after each
Unscheduled Amortization Date, a principal amount of the Notes equal
to the Unscheduled Amount. The Company shall notify the Noteholder of
Exhibit A-1-2
<PAGE> 18
its intent to make such prepayment on such Unscheduled Amortization
Date. Such prepayment shall be at a price of (i) 100% of the
principal amount prepaid, together with interest accrued thereon to
the date of payment, if the Reinvestment Yield, on the applicable
Determination Date, equals or exceeds 8.42% per annum, or (ii) 100% of
the principal amount prepaid, together with interest accrued thereon
to the date of payment, plus a premium, if the Reinvestment Yield, on
such Determination Date, is less than 8.42% per annum. The premium
shall equal (x) the aggregate present value of the amount of principal
being repaid (taking into account the manner of application required
by Section 2.2(c)) and the present value of the amount of interest
(exclusive of interest accrued to the date of prepayment) which would
have been payable in respect of such principal (at the rate of 8.42%
per annum) absent such prepayment, determined by discounting
(semi-annually on the basis of a 360-day year composed of twelve
30-day months) each such amount utilizing an interest factor equal to
the Reinvestment Yield, less (y) the principal amount to be prepaid
Payment of such premium shall be deferred until the earlier of (1) the
date on which the obligations in respect of the Amended Bank Credit
Documents shall have been paid in full, (2) the date on which the
Company shall have obtained from a nationally recognized debt rating
agency a rating in respect of the Notes of BBB or better, (3)
acceleration of the Notes, (4) bankruptcy of the Company, or (5) May
31, 1998."
4. AMENDMENTS TO SECTION 2.2 OF THE EXISTING NOTE AGREEMENT.
(a) Section 2.2(a) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(a) Upon notice as provided in Section 2.3, the
Company may prepay the Notes, in whole or in part, at any
time, in an amount of not less than $1,000,000 or in integral
multiples of $100,000 in excess thereof (or the remaining
principal amount of the Notes) at a price of (i) 100% of the
principal amount prepaid, together with interest accrued
thereon to the date of payment, if the Reinvestment Yield, on
the applicable Determination Date, equals or exceeds 8.42% per
annum, or (ii) 100% of the principal amount prepaid, together
with interest accrued thereon to the date of payment, plus a
premium, if the Reinvestment Yield, on such Determination
Date, is less than 8.42% per annum. The premium shall equal
(x) the aggregate present value of the amount of principal
being repaid (taking into account the manner of application
required by Section 2.2(c)) and the present value of the
amount of interest (exclusive of interest accrued to the date
of prepayment) which would have been payable in respect of
such principal (at the rate of 8.42% per annum) absent such
prepayment, determined by discounting (semi-annually on the
basis of a 360-day year composed of twelve 30-day months) each
such amount utilizing an interest factor equal to the
Reinvestment Yield, less (y) the principal amount to be
prepaid."
(b) Section 2.2(c) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(c) Any prepayment pursuant to Section 2.2(a) or
Section 2.2(b), any prepayment required by Sections 2.1(b),
2.1(c) or 2.1(d), or any optional
Exhibit A-1-3
<PAGE> 19
repurchase of less than all of the Notes outstanding shall be
applied to reduce the payment at maturity required by Section
2.1(a)."
5. AMENDMENTS TO SECTION 5.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 5.1 of the Existing Note Agreement is hereby
amended as follows:
(i) The definition of "Material Work Stoppage" is
hereby deleted.
(ii) (A) The word "and" is inserted at the
end of paragraph (g) of the definition of "Permitted
Investments".
(B) Paragraph (h) of the definition of
"Permitted Investments" is hereby deleted.
(C) Paragraph (i) the definition of
"Permitted Investments" is hereby re-numbered as
paragraph (h) thereof.
(b) Section 5.1 of the Existing Note Agreement is hereby
amended to modify in their entirety or add, each in their proper
alphabetical order, the following definitions:
Amended Bank Credit Documents - (i) That certain
Amended and Restated Credit Agreement and (ii) that certain
letter agreement re: Senior Secured Seasonal Line of Credit,
in each case, dated as of September 11, 1996 and by and among
the Company and the Banks, in each case, as in effect on the
Amendment Effective Date (as defined in the Amendment
Agreement).
Amendment Agreement - That certain Amendment
Agreement, dated as of September 11, 1996, by and among the
Company and the Noteholder.
Applicable Spread - An incremental rate of interest
equal to 200 basis points; provided, however, that, in the
event the Company shall make the prepayment in respect of the
Notes required by Section 2.1(c) hereof, Applicable Spread
shall mean an incremental rate of interest equal to 100 basis
points from and after the date of such prepayment; provided
further that if the Company shall have complied with the
requirements of the immediately preceding proviso and shall
have obtained from a nationally recognized debt rating agency
a rating in respect of the Notes of BBB or better, Applicable
Spread shall mean an incremental rate of interest equal to 30
basis points from and after the date of such rating.
April 1994 Series Notes - Shall mean the Company's
Senior Notes due April 21, 2006 and each note delivered in
substitution or exchange therefore, as the same may be
amended, restated or otherwise modified from time to time in
accordance with the terms of that certain Note Agreement dated
as of April 1, 1994, by and between the Company and Allstate
Life Insurance Company, as such agreement may be amended,
restated or otherwise modified from time to time.
Exhibit A-1-4
<PAGE> 20
Banks - Cooperatieve Centrale
Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank, collectively.
Capital Infusion Proceeds. - The net proceeds
received by the Company from any issuance of (i) debt of the
Company or (ii) equity of the Company, other than Scheduled
Equity Proceeds.
Collateral - Shall have the meaning ascribed to such
term in the Intercreditor Agreement
Collateral Agent - Shall have the meaning ascribed to
such term in the Intercreditor Agreement
Creditor Obligations - Shall have the meaning
ascribed to such term in the Intercreditor Agreement.
Creditor Parties - Shall have the meaning ascribed to
such term in the Intercreditor Agreement.
Determination Date - Either (i) the Business Day
which is two Business Days before the date fixed for a
prepayment pursuant to Section 2.1(b), Section 2.1(c), Section
2.1(d) or Section 2.2(a) or (ii) the date of any acceleration
pursuant to Section 8.2.
Intercreditor Agreement - That certain Intercreditor
Agreement dated as of September 11, 1996, by and among the
Banks, the Noteholder, Principal Mutual Life Insurance
Company, Great-West Life & Annuity Insurance Company, Old Kent
Bank, in its capacity as issuer of the Old Kent Letters of
Credit (as defined therein) and the Collateral Agent, and
acknowledged and agreed to by the Company and its
Subsidiaries.
May 1995 Series Notes - Shall mean the Company's
Senior Notes due May 15, 2005 and each note delivered in
substitution or exchange therefore, as the same may be
amended, restated or otherwise modified from time to time in
accordance with the terms of that certain Note Agreement dated
as of May 15, 1995, by and among the Company, the Noteholder,
Principal Mutual Life Insurance Company and Great-West Life &
Annuity Insurance Company, as such agreement may be amended,
restated or otherwise modified from time to time.
Ponca City Litigation - An action entitled Facility
Constructors, Inc. v. Thorn Apple Valley, Inc. filed in
February, 1996, in District Court, Kay County, Oklahoma
against the Company in connection with the construction of the
Company's plant in Ponca City, Oklahoma.
Post-Default Rate - In respect of any Note, a rate of
interest equal to the sum of (i) the rate of interest
otherwise accruing in respect of the Notes under Section
1.1(a), Section 1.1(b) or Section 1.1(c), as the case may be,
plus (ii) 200 basis points.
Exhibit A-1-5
<PAGE> 21
Post-Restructuring Rate - In respect of any Note, a
rate of interest equal to the sum of (i) 8.42% plus (ii) the
Applicable Spread.
Pre-Restructuring Rate - In respect of any Note, a
rate of interest equal to the sum of (i) 8.42% plus (ii) 175
basis points.
Qualified Capital Infusion Amount - In respect of a
Qualified Capital Infusion Date, an amount equal to the
remainder of
(a) the product of
(i) (y) if the aggregate
amount of Qualified Capital Infusion
Proceeds received after July 31,
1996 and on or before such Qualified
Capital Infusion Date is greater
than or equal to $15,000,000, the
greater of (A) $15,000,000 and (B)
fifty percent (50%) of such
aggregate amount; or
(z) if the aggregate amount of
Qualified Capital Infusion Proceeds
received after July 31, 1996 and on
or before such Qualified Capital
Infusion Date is less than
$15,000,000, such aggregate amount,
times
(ii) a fraction the numerator of
which is the initial stated principal balance
of the Notes (on the date of initial issuance
thereof) and the denominator of which is
$162,500,000,
minus
(b) the aggregate principal amount of
the Notes prepaid with Qualified Capital Infusion
Proceeds pursuant to Section 2.1(b) prior to such
Qualified Capital Infusion Date.
Qualified Capital Infusion Date - Any date, other
than April 30, 1997, on which the Company shall receive any
Qualified Capital Infusion Proceeds.
Qualified Capital Infusion Proceeds - Any Capital
Infusion Proceeds which are received by the Company after July
31, 1996 and on or before April 30, 1997, in connection with
the issuance of (i) equity of the Company or (ii) debt of the
Company which is expressed to be subordinated to the Notes on
terms which are satisfactory to the Noteholder in its sole and
absolute discretion.
Scheduled Amount - An amount equal to the remainder of
(a) the product of
Exhibit A-1-6
<PAGE> 22
(i) the greater of (A) $15,000,000
and (B) fifty percent (50%) of the aggregate
amount of Qualified Capital Infusion
Proceeds,
times
(ii) a fraction the numerator of
which is the initial stated principal balance
of the Notes (on the date of initial issuance
thereof) and the denominator of which is
$162,500,000,
minus
(b) the aggregate principal amount of
the Notes prepaid with Qualified Capital Infusion
Proceeds pursuant to Section 2.1(b) prior to April
30, 1997.
Scheduled Equity Proceeds -- An amount equal to the
lesser of (i) $3,000,000 and (ii) the actual amount of cash
and cash equivalents received by the Company after July 31,
1996 and on or before September 12, 1996 in respect of equity
investments from one or more of its shareholders, which shall
be provided on terms and conditions satisfactory to the
Noteholder in its sole discretion.
Security Documents - Shall have the meaning ascribed
to such term in the Intercreditor Agreement.
Shared Lien -- The lien upon the Collateral created
by the Security Documents in favor of the Creditor Parties.
Subsidiaries Guaranty - Shall have the meaning
ascribed to the term "Guaranty" in the Intercreditor Agreement.
TAVFSC - Shall mean Thorn Apple Valley Foreign Sales
Corporation, a U.S. Virgin Islands corporation.
Unscheduled Amortization Date - Any date on which
the Company receives any Unscheduled Proceeds.
Unscheduled Amount - In respect of an Unscheduled
Amortization Date, an amount equal to the product of
(a) the amount of Unscheduled Proceeds
received by the Company on such Unscheduled
Amortization Date,
times
Exhibit A-1-7
<PAGE> 23
(b) a fraction the numerator of which is
the initial stated principal balance of the Notes (on
the date of initial issuance thereof) and the
denominator of which is $162,500,000.
Unscheduled Proceeds - On any date, means:
(a) with respect to the sale, transfer
or other disposition by the Company or any Subsidiary
of any capital asset (including the capital stock of
any Subsidiary), the aggregate cash proceeds
(including cash proceeds received by way of deferred
payment of principal (together with interest thereon)
pursuant to a note, installment receivable or
otherwise, but only as and when received) received by
the Company or any Subsidiary pursuant to such sale,
transfer or other disposition, other than (i) the
proceeds of asset sales as and to the extent
permitted by Section 2.8(c), Section 2.8(x) or
Section 2.8(y) of Exhibit A-2 to the Amendment
Agreement, (ii) insurance proceeds permitted by the
terms of the Security Documents to be used to repair
or replace damaged or destroyed Property, and (iii)
condemnation awards permitted by the terms of the
Security Documents to be used to replace any subject
Property, in each case, net of (A) the direct costs
and expenses relating to such sale, transfer or other
disposition (including, without limitation, sales
commissions and legal, accounting and investment
banking fees), (B) taxes paid or reasonably estimated
by the Company to be payable as a result thereof
(after taking into account any available tax credits
or deductions and any tax sharing arrangements) and
(C) amounts required to be applied to the repayment
of any Indebtedness secured by a Lien on the asset
subject to such sale, transfer or other disposition
(other than any Creditor Obligations) that is senior
to the Shared Lien; and
(b) with respect to any Capital Infusion
Proceeds which are received after April 30, 1997, the
aggregate cash proceeds received by the Company or
any Subsidiary pursuant to such issuance, net of the
direct costs relating to such issuance (including,
without limitation, sales and underwriter's
commissions and legal, accounting and investment
banking fees).
6. AMENDMENTS TO SECTION 7 OF THE EXISTING NOTE AGREEMENT.
(a) Section 7.1 of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"7.1 Net Worth. The Company will not at any time
permit Consolidated Adjusted Net Worth to be less than the sum
of $70,000,000 plus forty percent (40%) of Consolidated Net
Income for each fiscal year of the Company commencing after
May 30, 1996; provided, however, that if Consolidated Net
Income is less than zero in any such fiscal year, Consolidated
Net Income shall be deemed to be zero in such fiscal year for
purposes of this Section 7.1".
Exhibit A-1-8
<PAGE> 24
(b) Section 7.2(d) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(d) Funded Debt (including refinancings,
refundings or extensions of Funded Debt described in Annex II
hereto and Current Debt deemed to constitute Funded Debt
pursuant to the definition of Funded Debt in Section 5.1), so
long as after giving effect thereto and the application of the
proceeds thereof:
(i) at all times on or before May 31,
1998, the amount of total Funded Debt of the Company
and its Subsidiaries then outstanding would not
exceed sixty-two and one-half percent (62.5%) of
Consolidated Total Capitalization determined as of
the end of the Company's prior fiscal quarter; and
(ii) at all times after May 31, 1998, (x)
the amount of total Funded Debt of the Company and
its Subsidiaries (other than Subordinated Debt)
outstanding would not exceed fifty-five percent (55%)
of Consolidated Total Capitalization and (y) the
amount of total Funded Debt of the Company and its
Subsidiaries outstanding would not exceed sixty-five
percent (65%) of Consolidated Total Capitalization."
(c) Section 7.2(e) of the Existing Note Agreement is
hereby amended by deleting the phrase "twenty percent (20%)" contained
therein and replacing it with "ten percent (10%)".
(d) Section 7.3 of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"Fixed Charge Ratio. The Company will not, (a) as of
the end of any fiscal quarter from the date hereof to and
including May 31, 1996, permit the ratio of Consolidated Cash
Flow Available for Fixed Charges to Consolidated Fixed Charges
for the preceding twelve months to be less than 0.75 to 1.0,
and (b) as of the end of any fiscal quarter from and after
June 1, 1996, permit the ratio of Consolidated Net Income
Available for Fixed Charges to Consolidated Fixed Charges for
the preceding twelve months to be less than 1.5 to 1.0.
(e) Section 7.4 of the Existing Note Agreement is hereby
amended as follows:
(i) The word "and" at the end of Section 7.4(j)
of the Existing Note Agreement is hereby deleted.
(ii) The phrase "20%" contained in Section 7.4(k)
of the Existing Note Agreement is hereby deleted and replaced
with "10%".
(iii) The period at the end of Section 7.4(k) of
the Existing Note Agreement is hereby deleted and the phrase
"; and" is hereby inserted in its place.
Exhibit A-1-9
<PAGE> 25
(iv) A new Section 7.4(l) is hereby added to the
Existing Note Agreement, after Section 7.4(k) of the Existing
Note Agreement and before the final paragraph of Section 7.4
of the Existing Note Agreement, which shall read in its
entirety as follows:
"(i) the Shared Lien."
(v) A new sentence is hereby added at the end of
the last paragraph of Section 7.4 of the Existing Note
Agreement, which shall read in its entirety as follows:
"The creation, assumption, incurrence or permission
to exist of any such non-permitted Lien will
constitute an Event of Default hereunder, regardless
of whether any such provision is made in accordance
with the immediately preceding sentence."
(f) Section 7.5 of the Existing Note Agreement is hereby
amended as follows:
(i) The phrase "the Company could not incur an
additional $1.00 of Funded Debt pursuant to Section 7.2, (ii)"
contained in the text after paragraph (e) thereof and before
paragraph (x) thereof is hereby deleted.
(ii) The phrase "(iii)" contained in the text
after paragraph (e) thereof and before paragraph (x) thereof
is hereby deleted and replaced with "(ii)".
(iii) Each reference to "May 31, 1993" contained
therein is hereby deleted and replaced with "May 31, 1996".
(iv) The phrase "$15,000,000" appearing in
paragraph (x) thereof is hereby deleted and replaced with
"$5,000,000".
(g) Section 7.6(a) of the Existing Note Agreement is
hereby amended as follows:
(i) The word "and" is hereby inserted at the end
of paragraph (i) thereof.
(ii) The phrase "; and" at the end of paragraph
(ii) thereof is hereby deleted and replaced with a period.
(iii) Paragraph (iii) thereof is hereby deleted in
its entirety.
7. AMENDMENTS TO SECTION 8.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 8.1(c) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
Exhibit A-1-10
<PAGE> 26
"(c) Default shall occur (i) in the payment of the
principal of, premium, or interest on any other Indebtedness
of the Company or its Subsidiaries, aggregating in excess of
$1,000,000 in principal amount as and when due and payable
(whether by lapse of time, declaration, call for redemption or
otherwise), (ii) under any mortgage, agreement or other
instrument of the Company or any Subsidiary securing such
Indebtedness or under or pursuant to which such Indebtedness
aggregating in excess of $1,000,000 is issued, (iii) under any
leases other than Capitalized Leases of the Company or any
Subsidiary, with aggregate Rentals in excess of $1,000,000,
(iv) with respect to any combination of the foregoing
involving Indebtedness and/or Rentals aggregating in excess of
$1,000,000, regardless of whether such defaults would be
Events of Default hereunder, or (v) in the performance or
observance of any obligation or condition with respect to any
such Indebtedness and/or Rentals aggregating in excess of
$1,000,000, regardless of whether such defaults would be
Events of Default hereunder, if the effect of such default is
to accelerate the maturity of any such Indebtedness and/or
Rentals or such default shall continue unremedied for any
applicable period of time sufficient to permit the holder or
holders of such Indebtedness or the parties to such
Capitalized Leases, or any trustee or agent for such holders
or parties, to cause such Indebtedness and/or Rentals to
become due and payable prior to its/their expressed maturity."
(b) Section 8.1(d) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(d) (i) At any time prior to the Covenant
Reversion Date (as defined in the Amendment
Agreement), default in the observance or performance
of any of the provisions of Section 1.8 or Section 2
of Exhibit A-2 to the Amendment Agreement or Section
8.7 of this Agreement.
(ii) At any time on or after the Covenant
Reversion Date (as defined in the Amendment
Agreement), default in the observance or performance
of any of the provisions of Sections 7.1 through 7.10
or Section 8.7 of this Agreement."
(c) Section 8.1(f) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(f) Any representation or warranty made by the
Company in this Agreement or the Amendment Agreement, or made
by the Company or any Subsidiary in any written statement or
certificate furnished by the Company or any Subsidiary in
connection with the issuance, or any amendment or restatement
of, the Notes, or furnished by the Company pursuant to this
Agreement or the Amendment Agreement, proves incorrect in any
material respect as of the date of the issuance or making
thereof;"
Exhibit A-1-11
<PAGE> 27
(d) Section 8.1(g) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(g) Any fines, penalties, judgments, writs or
warrants of attachment or any similar processes individually
or in the aggregate in excess of $2,000,000 shall be entered
or filed against the Company or any Subsidiary or against any
Property or assets of either and remain unpaid, unvacated,
unbonded or unstayed (through appeal or otherwise) for a
period of 30 days after the Company or any Subsidiary receives
notice thereof; provided, however, that this clause (g) shall
not include any judgment against the Company in respect of the
Ponca City Litigation for an amount not greater than the sum
of $6,000,000 plus interest accrued thereon;"
(e) The word "or" at the end of Section 8.1(h) of the
Existing Note Agreement is hereby deleted.
(f) The period at the end of Section 8.1(i)(vii) of the
Existing Note Agreement is hereby deleted and a semi-colon is hereby
inserted in its place.
(g) Section 8.1(j) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(j) The Company shall fail to receive at least
$15,000,000 of Qualified Capital Infusion Proceeds on or
before April 30, 1997;"
(h) A new Section 8.1(k), a new Section 8.1(l) and a new
Section 8.1(m) are hereby added to the Existing Note Agreement, after
Section 8.1(j) and before Section 8.2 thereof, which shall read in
their entirety as follows:
"(k) The Company or any Subsidiary shall fail to
comply in any material respect with any one or more of the
provisions or requirements contained in the Security
Documents; or any of the Security Documents shall cease for
any reason to be in full force or effect or is declared to be
null and void or the Company or any Subsidiary shall disavow
its respective obligations thereunder, or shall contest the
validity or enforceability of any thereof or gives notice to
such effect; or any Lien purported to be granted pursuant to
any of the Security Documents for any reason (other than
release or termination thereof by the Collateral Agent or the
Creditor Parties) shall cease to be a legal, valid or
enforceable Lien on the Property subject thereto with the
priority purported to be granted pursuant to such Security
Documents (other than as a result of the failure of the
Collateral Agent or any Creditor Party to take any action
solely within its control);
(l) Any Subsidiary shall fail to comply in any
material respect with any one or more of the provisions or
requirements contained in the Subsidiaries Guaranty; or the
Subsidiaries Guaranty shall cease for any reason to be in full
force or effect or is declared to be null and void (other than
in respect of TAVFSC) or any Subsidiary shall disavow its
respective obligations thereunder, or shall contest the
validity or enforceability thereof or gives notice to such
effect; or
Exhibit A-1-12
<PAGE> 28
(m) The Company shall make, or shall be required
by one or more final judgments to make, any payment or
payments in an aggregate amount greater than the sum of
$6,000,000 plus accrued interest in satisfaction of one or
more judgments against the Company in respect of the Ponca
City Litigation."
8. AMENDMENT TO SECTION 8.2 OF THE EXISTING NOTE AGREEMENT.
Section 8.2 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"8.2 Remedies on Default. When any Event of Default
described in paragraph (a) through paragraph (h), inclusive, or
paragraph (j) through paragraph (m), inclusive, of Section 8.1 has
happened and is continuing, the holder or holders of at least 66 2/3%
in aggregate principal amount of the Notes, the May 1995 Series Notes
and the April 1994 Series Notes (taken together and voting as one
class) then outstanding (exclusive of Notes, May 1995 Series Notes and
April 1994 Series Notes held in the name of, or owned beneficially by,
any one or more of the Company, any Subsidiary or any Affiliate) may
by notice to the Company declare the entire principal, together with
the premium set forth below, and all interest accrued on all Notes to
be, and such Notes shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind,
all of which are expressly waived. Notwithstanding the foregoing,
when
(i) any Event of Default described in paragraph
(a) or paragraph (b) of Section 8.1 has happened and is
continuing, any holder may by notice to the Company declare
the entire principal, together with the premium set forth
below, and all interest accrued on the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or
other notice of any kind, all of which are expressly waived,
and
(ii) any Event of Default described in paragraph
(i) of Section 8.1 has happened, then all outstanding Notes
shall immediately become due and payable without presentment,
demand or notice of any kind.
Upon the Notes or any of them becoming due and payable as aforesaid,
the Company will forthwith pay to the holders of such Notes the entire
principal of and interest accrued on such Notes, plus, to the extent
permitted by law, a premium in the event that the Reinvestment Yield
shall, on the Determination Date, be less than the interest rate
payable on or in respect of the Notes. Such premium shall equal (x)
the aggregate present value of the principal so accelerated and the
aggregate present value of the interest which would have been payable
in respect of such principal (at the rate of 8.42% per annum) absent
such accelerated payment, determined by discounting (semi-annually on
the basis of a 360-day year composed of twelve 30-day months) each
such amount utilizing an interest factor equal to the Reinvestment
Yield, less (y) the principal amount so accelerated."
9. AMENDMENT TO SECTION 8.3 OF THE EXISTING NOTE AGREEMENT.
Section 8.3 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
Exhibit A-1-13
<PAGE> 29
"8.3 Annulment of Acceleration of Notes. The provisions
of Section 8.2 are subject to the condition that if the principal of
and accrued interest on the Notes have been declared immediately due
and payable by reason of the occurrence of any Event of Default
described in paragraph (c) through paragraph (h), inclusive, or
paragraph (j) through paragraph (m), inclusive, of Section 8.1, the
holder or holders of at least 70% in aggregate principal amount of the
Notes, the May 1995 Series Notes and the April 1994 Series Notes
(taken together and voting as one class) then outstanding (exclusive
of Notes, May 1995 Series Notes and April 1994 Series Notes held in
the name of, or owned beneficially by, any one or more of the Company,
any Subsidiary or any Affiliate) may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences
thereof; provided that (i) at the time such declaration is annulled
and rescinded no judgment or decree has been entered for the payment
of any monies due pursuant to the Notes or this Agreement, (ii) all
arrears of interest upon all the Notes and all other sums payable
under the notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable
solely by reason of such declaration under Section 8.2) shall have
been duly paid and (iii) each and every Event of Default shall have
been cured or waived; and provided further, that no such rescission
and annulment shall extend to or affect any subsequent Default or
Event of Default or impair any right consequent thereto."
10. AMENDMENT TO SECTION 8.4 OF THE EXISTING NOTE AGREEMENT.
Section 8.4 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"8.4 Remedies on Default. If an Event of Default shall be
continuing, any holder of Notes may enforce its rights by suit in
equity, by action at law, or by any other appropriate proceedings,
whether for the specific performance (to the extent permitted by law)
of any covenant or agreement contained in this Agreement, and may
enforce the payment of any Note held by such holder and any of its
other legal or equitable rights, provided that the maturity of such
holder's Notes may be accelerated only in accordance with Section
8.2."
11. AMENDMENTS TO SECTION 9.1 OF THE EXISTING NOTE AGREEMENT.
Section 9.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"9.1 Matters Subject to Modification. Any term, covenant,
agreement or condition of this Agreement may, with the consent of the
Company, be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in
writing of the holder or holders of at least 66 2/3% in aggregate
principal amount of the Notes, the May 1995 Series Notes and the April
1994 Series Notes (taken together and voting as one class) then
outstanding; provided, however, that, without the written consent of
the holder or holders of all of the Notes, May 1995 Series Notes and
April 1994 Series Notes then outstanding, no such waiver,
modification, alteration or amendment shall be effective which will
(i) change the time of payment (including any required prepayment) of
the principal of or the interest on any Note, (ii) reduce the
principal amount thereof or the premium, if any, or change the rate of
interest thereon, (iii) change any provision of any instrument
affecting the preferences between holders of
Exhibit A-1-14
<PAGE> 30
the Notes or between holders of the Notes and other creditors of the
Company, or (iv) change any of the provisions of Section 6.10, Section
8 or this Section 9.
For the purpose of determining whether the holder or holders
of all or any requisite principal amount of Notes, or of Notes, May
1995 Series Notes and April 1994 Series Notes, have made or concurred
in any waiver, consent, approval, notice or other communication under
this Agreement, any and all Notes, May 1995 Series Notes and April
1994 Series Notes held in the name of, or owned beneficially by, the
Company, any Subsidiary or any Affiliate thereof, shall not be deemed
outstanding.
12. AMENDMENTS TO SECTION 9.2 OF THE EXISTING NOTE AGREEMENT.
Section 9.2 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"9.2 Solicitation of Holders of Notes. The Company will
not solicit, request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions of this Agreement or the
Notes unless each record holder of the Notes and each record holder of
May 1995 Series Notes and April 1994 Series Notes (irrespective of the
amount of Notes or May 1995 Series Notes or April 1994 Series Notes
then owned by it) shall concurrently be informed thereof by the
Company and shall be afforded the opportunity of considering the same
and shall be supplied by the Company with sufficient information to
enable it to make an informed decision with respect thereto. Executed
or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 9 shall be delivered by the Company
to each holder of outstanding Notes and each holder of May 1995 Series
Notes and April 1994 Series Notes forthwith following the date on
which the same shall have become effective in accordance with the
terms thereof and of this Section 9. The Company will not, directly
or indirectly, pay or cause to be paid any remuneration, whether by
way of supplemental or additional interest, fee or otherwise, to any
holder of Notes or any holder of May 1995 Series Notes or April 1994
Series Notes as consideration for or as an inducement to the entering
into by any holder of Notes or any holder of May 1995 Series Notes or
April 1994 Series Notes of any waiver or amendment of any of the terms
and provisions of this Agreement unless such remuneration is
concurrently paid, on the same terms, ratably to the holders of all
Notes, May 1995 Series Notes and April 1994 Series Notes then
outstanding. Any consent made pursuant to this Section 9 by a holder
of Notes that has transferred or has agreed to transfer its Notes to
the Company or any Affiliate or has agreed to provide such written
consent as a condition to such transfer shall be void and of no force
and effect except solely as to such holder, and any amendments
effected or waivers granted or to be effected or granted that would
not have been or would not be so effected or granted but for such
consent (and the consents of all other holders of Notes and holders of
May 1995 Series Notes and April 1994 Series Notes that were acquired
under the same or similar conditions) shall be void and of no force
and effect, retroactive to the date such amendment or waiver initially
took or takes effect, except solely as to such holder.
13. AMENDMENT TO FORM OF NOTES AND AMENDMENT AND RESTATEMENT OF
NOTES. (i) Exhibit A to the Existing Note Agreement is hereby amended to read
in its entirety as set forth below and (ii) each of the Notes shall,
contemporaneously with the delivery of this Agreement, be amended and restated
in the form set forth below:
Exhibit A-1-15
<PAGE> 31
[Remainder of page intentionally left blank.]
Exhibit A-1-16
<PAGE> 32
"EXHIBIT A"
THORN APPLE VALLEY, INC.
SENIOR NOTE
DUE OCTOBER 1, 2003
PPN: 885184 B@ 9
_________________________
THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT
AND ACCORDINGLY ANY PROSPECTIVE PURCHASERS SHOULD FIRST VERIFY THE
UNPAID PRINCIPAL AMOUNT WITH THE COMPANY.
_________________________
Registered Note No. R-____
[Date]
$________________________
THORN APPLE VALLEY, INC., a Michigan corporation (the
"Company"), for value received, hereby promises to pay to
________________________ or registered assigns, on the first day of
October, 2003, the principal amount of _________________ Dollars
($________) and to pay interest (computed on the basis of a 360-day
year of twelve 30-day months) on the principal amount from time to
time remaining unpaid hereon at the rate set forth in the Note
Agreement hereinafter defined from the date hereof until maturity,
payable at the times set forth in the Note Agreement hereinafter
defined, and at maturity, and to pay interest on overdue principal,
premium and (to the extent legally enforceable) on any overdue
installment of interest at the rate set forth in the Note Agreement
hereinafter defined after maturity or the due date thereof, whether by
acceleration or otherwise, until paid. Payments of the principal of,
the premium, if any, and interest on this Note shall be made in lawful
money of the United States of America in the manner and at the place
provided in Section 2.5 of the Note Agreement hereinafter defined.
This Note is issued under and pursuant to the terms of a Note
Agreement, dated as of October 1, 1994, entered into by the Company
with the Purchaser named in Schedule I thereto (as amended from time
to time, the "Note Agreement"), and this Note and any holder hereof
are entitled to all of the benefits and are bound by the terms
provided for in such Note Agreement. The provisions of the Note
Agreement are incorporated in this Note to the same extent as if set
forth at length herein.
This Note has not been registered under the Securities Act as
provided in the Note Agreement, any transfer is subject to compliance
with the terms of the Note Agreement and upon surrender of this Note
for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder
hereof or its attorney duly authorized in writing, a new Note for a
like unpaid principal
Exhibit A-1-17
<PAGE> 33
amount will be issued to, and registered in the name of, the
transferee upon the payment of the taxes or other governmental
charges, if any, that may be imposed in connection therewith. The
Company may treat the person in whose name this Note is registered as
the owner hereof for the purpose of receiving payment for all other
purposes, and the Company shall not be affected by any notice to the
contrary.
Under certain circumstances, this Note may be declared due
prior to its expressed maturity date. Required prepayments must be
made hereon as set forth in the Note Agreement. Voluntary and other
prepayments may be made hereon in the events, on the terms and in the
manner as provided in the Note Agreement.
Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the Note
Agreement or be placed in the hands of attorneys for collection, the
Company agrees to pay, in addition to the principal, premium, if any,
and interest due and payable hereon, to the extent legally
enforceable, all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
This Note and the Note Agreement are governed by and construed
in accordance with the laws of the State of Illinois.
THORN APPLE VALLEY, INC.
By:_______________________
Its:
Exhibit A-1-18
<PAGE> 34
EXHIBIT A-2
TEMPORARY COVENANTS(1)
SECTION 1. AFFIRMATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 1 and in Sections 6.3, 6.6(e), 6.6(f), 6.6(g),
6.6(h), 6.6(i), 6.8, 6.10, 6.11, and 6.12 of the Existing Note Agreement.
SECTION 1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower will furnish, or will cause to be furnished, to each Creditor Party
and the Agent copies of the following financial statements, reports, notices
and information:
(a) Weekly Reporting -- on the last Business Day of each
week,
(i) a Borrowing Base Certificate setting forth a
calculation of the Borrowing Base as of the last Business Day
of the preceding week; and
(ii) a Weekly P&L Statement in respect of the
preceding week;
(b) Fiscal Periodic Reporting --
(i) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year, consolidated balance sheets of
the Borrower and its Subsidiaries as of the end of such Fiscal
Period and consolidated statements of earnings and cash flow
of the Borrower and its Subsidiaries for such Fiscal Period
and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Period,
certified as true and correct by the chief financial
Authorized Officer of the Borrower (the parties hereto
acknowledge that such financial statements will not have been
audited, and that the annual audit of the Borrower may require
adjustments to the figures presented therein);
(ii) as soon as available and in any event within
26 days after the end of each Fiscal Period of each Fiscal
Year, a comparison of
(A) the actual consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and actual consolidated
statements of earnings and cash flow of the Borrower
and its Subsidiaries for such Fiscal Period and for
the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal
Period (the parties hereto acknowledge that such
financial statements will not have been audited, and
that the annual audit of the Borrower may require
adjustments to the figures presented therein), with
- ------------------
(1) Capitalized terms used in this Exhibit A-2 are defined in Section
3 of this Exhibit A-2.
Exhibit A-2-1
<PAGE> 35
(B) the budgeted consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and the budgeted
consolidated statements of earnings and cash flow of
the Borrower and its Subsidiaries for such Fiscal
Period and for the period commencing at the end of
the previous Fiscal Year and ending with the end of
such Fiscal Period, in each case, contained in the
most recent Rolling Projection (defined below),
certified as true and correct by the chief financial
Authorized Officer of the Borrower;
(iii) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year and within 90 days after the end
of the last Fiscal Period of each Fiscal Year, a certificate,
executed by the chief financial Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to
the Agent and each Creditor Party) compliance with the
financial covenants set forth in Section 2.4; and
(iv) as soon as available and in any event within
30 days after the end of each Fiscal Period of each Fiscal
Year, a management report describing in detail the Company's
results of operations during such Fiscal Period and
explaining, among other things, (x) any material variances
demonstrated by the comparison delivered in respect of such
Fiscal Period pursuant to clause (ii) above and (y) any
failure to comply with financial covenants identified in the
certificate delivered in respect of such Fiscal Period
pursuant to clause (iii) above;
(c) Quarterly Reporting -- as soon as available and in
any event within 45 days after the end of each of Fiscal Quarter of
each Fiscal Year, a projection (each, a "Rolling Projection"), for
each of the thirteen Fiscal Periods next succeeding the last day of
such Fiscal Quarter, of the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of each such next succeeding Fiscal
Period and the budgeted consolidated statements of earnings and cash
flow of the Borrower and its Subsidiaries for each such next
succeeding Fiscal Period and for the period commencing at the end of
such Fiscal Quarter and ending with the end of each such next
succeeding Fiscal Period, certified as true and correct by the chief
financial Authorized Officer of the Borrower;
(d) Annual Reporting --
(i) as soon as available and in any event within
90 days after the end of each Fiscal Year of the Borrower, a
copy of the annual audit report (including, without
limitation, any accompanying or related auditor's letter and
the Borrower's responses thereto) for such Fiscal Year for the
Borrower and its Subsidiaries, including therein consolidated
balance sheets of the Borrower and its Subsidiaries as of the
end of such Fiscal Year and consolidated statements of
earnings and cash flow of the Borrower and its Subsidiaries
for such Fiscal Year, in each case certified (without any
Impermissible Qualification) in a manner acceptable to the
Agent and each of the Creditor Parties by Coopers & Lybrand or
other
Exhibit A-2-2
<PAGE> 36
independent public accountants acceptable to the Agent and each of the
Creditor Parties, together with a certificate from such accountants to
the effect that, in making the examination necessary for the signing
of such annual report by such accountants, they have not become aware
of any Default or Event of Default that has occurred and is
continuing, or, if they have become aware of such Default or Event of
Default, describing such Default or Event of Default and the steps, if
any, being taken to cure it; provided, however , that in the case of
the Company's financial statements for the Fiscal Year ended May 31,
1996, such audit opinion shall be delivered not later than September
13, 1996;
(ii) together with the financial reports delivered
pursuant to paragraph (i) of this Section 1.1(d), a
certificate of the independent certified public accountants
(i) stating that in making the examination necessary for
expressing an opinion on such financial statements, nothing
came to their attention that caused them to believe that there
is in existence or has occurred any Default or Event of
Default under any of the Financing Agreements (as defined in
the Intercreditor Agreement) or, if such accountants shall
have obtained knowledge of any such Default or Event of
Default, describing the nature thereof and the length of time
it has existed and (ii) acknowledging that the Creditor
Parties may rely on their opinion on such financial
statements;
(e) Defaults -- as soon as possible and in any event
within three days after the occurrence of each Default, a statement of
the chief financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(f) Litigation -- as soon as possible and in any event
within three days after (x) the occurrence of any adverse development
with respect to any litigation, action, proceeding, or labor
controversy described in Section 6.7 of the Bank Credit Agreement or
(y) the commencement of any labor controversy, litigation, action,
proceeding of the type described in Section 6.7 of the Bank Credit
Agreement, notice thereof and copies of all documentation relating
thereto;
(g) Securities Reports, etc. -- promptly after the
sending or filing thereof, copies of all reports which the Borrower
sends to any of its securityholders, and all reports and registration
statements which the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(h) Pension Plans -- immediately upon becoming aware of
the institution of any steps by the Borrower or any other Person to
terminate any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto; and
Exhibit A-2-3
<PAGE> 37
(i) Other -- such other information respecting the
condition or operations, financial or otherwise, of the Borrower or
any of its Subsidiaries as any Creditor Party may from time to time
reasonably request.
SECTION 1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of
all taxes, assessments and governmental charges imposed upon it or
upon its Property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 1.3. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.
(a) The Borrower will maintain and preserve, and will
cause each Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and will use, and cause
each Subsidiary to use, its best efforts to maintain, preserve, renew
and extend all of its rights, powers, privileges and franchises
necessary to the proper conduct of its business.
(b) The Borrower will, and will cause each of its
Subsidiaries to, maintain, preserve, protect and keep its properties
in good repair, working order and condition, and make necessary and
proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly conducted at all times
unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically
desirable.
SECTION 1.4. INSURANCE. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts and with only such
deductibles as is customary in the case of similar businesses and will, upon
request of the Agent or any Creditor Party, furnish to each Creditor Party at
reasonable intervals a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section.
SECTION 1.5. BOOKS AND RECORDS. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Agent and each of
(i) the Noteholders as a group and (ii) the Lenders as a group, or any of their
respective representatives, at reasonable times and intervals, to visit all of
its offices, to discuss its financial matters with its officers and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with each Creditor Party
or its representatives whether or not any
Exhibit A-2-4
<PAGE> 38
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
records. The Borrower shall pay any fees of such independent public accountant
incurred in connection with the Agent's or any Creditor Party's exercise of its
rights pursuant to this Section.
SECTION 1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to:
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and each Creditor Party
and provide copies upon receipt of all written claims, complaints,
notices or inquiries from governmental authorities relating to the
condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Agent and each Creditor Party any
actions and proceedings relating to compliance with Environmental
Laws; and
(c) provide such information and certifications which the
Agent or any Creditor Party may reasonably request from time to time
to evidence compliance with this Section 1.6.
SECTION 1.7. EQUITY OR SUBORDINATED DEBT.
(a) The Borrower shall receive at least $15,000,000 in
proceeds of Subordinated Debt on or before April 30, 1997.
(b) In the event that the Borrower shall fail to receive
at least $15,000,000 in proceeds of equity or Subordinated Debt on or
before January 31, 1997, the Borrower shall retain a
nationally-recognized investment advisor, who shall be acceptable to
the Creditor Parties, to set up and implement a plan (a copy of which
shall be provided to each Creditor Party) to raise such proceeds on or
before April 30, 1997.
SECTION 1.8. COLLATERAL MATTERS. The Borrower shall, and shall
cause each Subsidiary to, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments, and do
such further acts, as the Collateral Agent may reasonably request from time to
time in order:
(a) to ensure that
(i) the obligations of the Borrower hereunder and
under the other Financing Agreements (as defined in the
Intercreditor Agreement) are secured by substantially all
assets of the Borrower, subject to the exceptions set forth in
Exhibit A-2-5
<PAGE> 39
Exhibit A-3 and guaranteed, pursuant to the Subsidiaries
Guaranty, by all Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary created or
acquired after the Effective Date), and
(ii) the obligations of each Subsidiary under the
Subsidiaries Guaranty are secured by substantially all of the
assets of such Subsidiary, and
(b) to perfect and maintain the validity, effectiveness
and priority of any of the Security Documents and the Liens intended
to be created thereby, subject to the exceptions set forth in Exhibit
A-3.
Without limiting the generality of the foregoing, the Borrower shall, and shall
cause each Subsidiary to, take the actions in respect of Collateral set forth
on Exhibit A-3 within the times set forth therein. Contemporaneously with the
execution and delivery of any document referred to above, the Borrower shall,
and shall cause each Subsidiary to, deliver all resolutions, opinions and
corporate documents as the Collateral Agent may reasonably request to confirm
the enforceability of such document and the perfection of the security interest
created thereby, if applicable.
SECTION 2. NEGATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 2.
SECTION 2.1. BUSINESS ACTIVITIES. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
the business of processing food and such activities as may be incidental or
related thereto.
SECTION 2.2. INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Creditor Obligations;
(b) Indebtedness existing as of the Effective Date which
is identified in Item 2.2(b) ("Ongoing Indebtedness") of the
Disclosure Schedule attached hereto;
(c) Indebtedness secured by Liens described in clause (h)
or (j) of Section 2.3;
(d) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and services,
but excluding Indebtedness incurred through the borrowing of money or
Guaranties);
(e) Hedging Obligations to a Lender;
(f) Subordinated Debt; or
(g) obligations in respect of Capital Leases in an
aggregate amount not to exceed $7,000,000 at any time.
Exhibit A-2-6
<PAGE> 40
SECTION 2.3. LIENS. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens for taxes, assessments or governmental charges
not then due and delinquent and for which a penalty has not attached
or the validity of which is being contested in good faith and by
proper proceedings and with respect to which adequate reserves are
maintained in accordance with GAAP;
(b) Liens arising in connection with court proceedings,
provided that the execution of such Liens is effectively stayed, such
Liens are being contested in good faith and adequate reserves are
maintained with respect thereto in accordance with GAAP;
(c) Liens arising in the ordinary course of business and
not incurred in connection with the borrowing of money, including
encumbrances in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real Property, landlord's and
lessor's liens in the ordinary course of business, which do not,
individually or in the aggregate, materially interfere with the
conduct of the business of the Borrower and its Subsidiaries taken as
a whole and do not materially affect the value of the Property subject
to such Liens;
(d) Construction or materialmen's or mechanic's Liens
securing obligations not overdue or, if overdue, being contested in
good faith and by proper proceedings and with respect to which
adequate reserves are maintained in accordance with GAAP;
(e) Liens in connection with workers' compensation,
social security taxes or similar charges arising in the ordinary
course of business and not incurred in connection with the borrowing
of money;
(f) Liens existing on the Effective Date set forth in
Item 2.3(f) of the Disclosure Schedule attached hereto;
(g) Intercompany Liens (for purposes of intercompany
Liens, a Subsidiary shall mean any corporation of which the Borrower
directly or indirectly owns at least 80% of the Voting Stock);
(h) The extension, renewal or replacement of any Lien
permitted by the foregoing paragraph (f) in respect of the same
Property theretofore subject thereto or the extension, renewal or
replacement (without increase of principal amount of the Indebtedness
originally incurred);
(i) Liens incurred in connection with obtaining or
performing government contracts in the ordinary course of business and
not incurred in connection with the borrowing of money;
(j) (i) Any Lien in Property or in rights relating thereto to
secure any rights granted with respect to such Property in connection
with the provision of all or a part of the purchase price or cost of
the construction of such Property created
Exhibit A-2-7
<PAGE> 41
contemporaneously with, or within 270 days after, such acquisition or
the completion of such construction (except Liens in connection with
the Ponca City Litigation shall not be permitted under this clause
(j)(i)), or (ii) any Lien in Property existing in such Property at the
time of acquisition thereof, whether or not the debt secured thereby
is assumed by the Borrower or such Subsidiary; provided, that the
Indebtedness secured by any such Lien referred to in clauses (i) and
(ii) above shall not exceed 100% of the fair market value on the
related Property at the time the Lien was originally created;
(k) the Shared Lien; and
(l) Liens created, in the ordinary course of the
Borrower's and each Subsidiary's business, under the Packers and
Stockyards Act of 1921, as amended, and the regulations promulgated
thereunder, provided, that the creation and continued existence of any
such Liens, either individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) of the Borrower and the
Subsidiaries, taken as a whole, or on the Borrower's ability to
perform its obligations under any of the Financing Agreements (as
defined in the Intercreditor Agreement).
SECTION 2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) At any time during any period set forth in the table
below, Consolidated Adjusted Net Worth to be less than the amount set
forth opposite such period in such table:
NEVER BE LESS CONSOLIDATED ADJUSTED NET WORTH SHALL
<TABLE>
<CAPTION>
DURING THE PERIOD THAN
<S> <C>
From September 12, 1996 through and including $72,000,000
December 14, 1996
From December 15, 1996 through and including March $74,000,000
8, 1997
From March 9, 1997 through and including April 30, $76,000,000
1997
From May 1, 1997 through and including the date on $91,000,000 plus 50% of the Consolidated Net
which the Loans (under the Bank Credit Agreement Earnings for each Fiscal Year commencing with the
and the New Seasonal Line of Credit Agreement), 1997 Fiscal Year; provided, however, that if
other Obligations and the Insurance Notes shall Consolidated Net Earnings is less than zero in any
have been paid in full in cash Fiscal Year, Consolidated Net Earnings shall be
deemed to be zero in such Fiscal Year for purposes
of this Section 2.4(a).
</TABLE>
As of any date (prior to May 1, 1997) on which the Borrower receives
the proceeds of any Subordinated Debt, the amount set forth in the
table above opposite (i) the period
Exhibit A-2-8
<PAGE> 42
containing such date and (ii) each subsequent period (other than the
last such period), shall be increased by the amount of such proceeds;
provided, however, that the aggregate amount of such increases shall
in no event exceed $15,000,000 in respect of any such period
regardless of the aggregate amount of such proceeds.
(b) As of the end of each Fiscal Period commencing with
the seventh Fiscal Period in the 1997 Fiscal Year and ending with the
seventh Fiscal Period in the 1998 Fiscal Year, the ratio of
Consolidated Earnings Available for Interest Expense to Consolidated
Interest Expense for the Relevant Period to be less than 1.65 to 1.
As of the end of each Fiscal Period commencing with the eighth Fiscal
Period in the 1998 Fiscal Year and ending with the twelfth Fiscal
Period in the 1998 Fiscal Year, the ratio of Consolidated Earnings
Available for Interest Expense to Consolidated Interest Expense for
the Relevant Period to be less than 1.85 to 1. As of the end of each
Fiscal Period commencing with the thirteenth Fiscal Period in the 1998
Fiscal Year, the ratio of Consolidated Earnings Available for Interest
Expense to Consolidated Interest Expense for the Relevant Period to be
less than 2.0 to 1. For purposes of this clause (b), "Relevant
Period" shall mean (i) in respect of any Fiscal Period ending on or
before May 30, 1997, the period commencing on May 31, 1996 and ending
on the last Business Day of such Fiscal Period, and (ii) in respect of
any other Fiscal Period (each, a "Testing Period"), the period
commencing on the first Business Day of the twelfth preceding Fiscal
Period and ending on the last Business Day of such Testing Period.
(c) At any time, the obligations of the Borrower and its
Subsidiaries for the payment of rental for any Property during the
next succeeding 365-day period under existing leases, subleases or
similar arrangements (other than Capital Leases) to exceed in the
aggregate $9,000,000.
(d) The aggregate amount of Consolidated Earnings
Available for Interest Expense in respect of the 1997 Fiscal Year to
be less than $24,630,880.
(e) (i) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first seven
(7) Fiscal Periods of the 1997 Fiscal Year to be less than
$2,000,000.
(ii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first ten
(10) Fiscal Periods of the 1997 Fiscal Year to be less than
--$1,000,000.
(iii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the 1997 Fiscal
Year to be less than --$3,000,000.
SECTION 2.5. INVESTMENTS. The Borrower will not, and will not
permit any Subsidiary to, make, incur, assume or suffer to exist any Investment
in any other Person, except:
(a) Investments existing on the Effective Date set forth
in Item 2.5(a) of the Disclosure Schedule attached hereto;
Exhibit A-2-9
<PAGE> 43
(b) Investments in certificates of deposit, repurchase
agreements or bankers' acceptances, maturing within one year from the
date or origin, issued by a bank organized under the laws of the
United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000;
(c) Investments in commercial paper maturing in 270 days
or less from the date of issuance which, at the time of acquisition by
the Borrower or any Subsidiary, is accorded at least an "A-1" rating
by Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.;
(d) Investments in direct obligations of the United
States of America, or any agency thereof, the obligations of which are
guaranteed by the United States of America, maturing in twelve months
or less from the date of acquisition thereof;
(e) Investments in "money market" preferred stock rated
"A" or better by Standard & Poor's Corporation or "A2" by Moody's
Investors Service, Inc.;
(f) Investments in tax-exempt floating rate option tender
bonds backed by an irrevocable letter of credit issued by a bank the
long-term debt rating of which is at least "AA" by Standard & Poor's
Rating Group or "Aa2" by Moody's Investors Service, Inc.;
(g) Investments in Subsidiaries in existence on the
Effective Date and which operate principally in lines of business
similar to lines of business of the Borrower or its Subsidiaries
existing on the Effective Date; and
(h) Investments in or commitments to purchase foreign
currency; provided, that such Investment is made solely to the extent
that the Borrower and its Subsidiaries are obligated to make payments
to other Persons in such foreign currency.
In valuing any Investments for the purpose of applying the limitations
set forth above, such Investments shall be taken at the original cost thereof,
without allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered on account of capital or
principal.
For purposes of this Section 2.5 at any time when a corporation becomes
a Subsidiary, all investments of such corporation at such time shall be deemed
to have been made by such corporation, as a Subsidiary, at such time.
SECTION 2.6. RESTRICTED PAYMENTS, ETC. On and at all times after
the Effective Date, the Borrower will not:
(a) declare or pay any dividends, either in cash or
Property, on any shares of its capital stock of any class (except
dividends or other distributions payable solely in shares of capital
stock of the Borrower); or
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of Borrower's capital stock of
any class or any warrants, rights or options to purchase or acquire
any shares of the Borrower's capital stock; or
Exhibit A-2-10
<PAGE> 44
(c) make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect of its
capital stock; or
(d) make any payment, either directly or indirectly or
through any Subsidiary, of principal of any Subordinated Debt other
than at the expressed maturity date thereof and scheduled mandatory
prepayments or redemptions thereof in accordance with the terms in
effect on the date of creation of such Subordinated Debt.
SECTION 2.7. CONSOLIDATION, MERGER, ETC. The Borrower will not,
and will not permit any Subsidiary to, liquidate or dissolve, consolidate with,
or merge into or with, any other corporation, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division
thereof) except any such Subsidiary may liquidate or dissolve voluntarily into,
and may merge with and into, the Borrower or any other Subsidiary, and the
assets or stock of any Subsidiary may be purchased or otherwise acquired by the
Borrower or any other Subsidiary.
SECTION 2.8. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any Subsidiary to, sell, lease, transfer or otherwise dispose
of any assets, including the disposition of the stock of any Subsidiary and
including any Sale and Lease-Back Transaction (collectively, a "Disposition"),
in one or a series of transactions to any Person other than the Borrower or a
Majority-Owned Subsidiary, other than:
(a) in the ordinary course of business (including,
without limitation, the disposition of tractors and trailers owned by
the Borrower in the ordinary course of business and consistent with
the Borrower's past practice);
(b) in the Frederick Disposition, provided that the
Borrower receives all cash consideration, and the net cash proceeds
therefrom are simultaneously paid to the Creditor Parties (in
accordance with the Intercreditor Agreement), in each case, on or
before November 30, 1997, or thereafter with the consent of each of
the Creditor Parties, which consent shall not be unreasonably
withheld; or
(c) the following Dispositions:
(i) the plant and equipment located in Concordia,
Missouri which is subject to a purchase option in favor of the
lessee of such facility (approximate balance of purchase
price: $2,000,000);
(ii) the Borrower's facility known as "Tri-Miller"
located in Hyrum, Utah, which has an approximate value of
$600,000;
(iii) A building known as the "H&R Building"
located in Detroit, Michigan, which has an approximate value
of $475,000; and
(iv) a condominium located in Bloomfield Hills,
Michigan (approximate balance of purchase price: $300,000);
Exhibit A-2-11
<PAGE> 45
provided that the aggregate book value of all such assets sold,
leased, transferred or otherwise disposed of from time to time
pursuant to this Section 2.8(c) shall not exceed $4,000,000;
provided, however, that:
(x) the Borrower may, and may permit any Subsidiary to,
sell, lease, transfer or otherwise dispose of equipment if the cash
proceeds therefrom are utilized within one year after such Disposition
to purchase or are committed to the purchase of Property of a similar
nature and of at least equivalent value; and
(y) the Borrower may otherwise, and may permit any
Subsidiary otherwise to, sell, lease, transfer or otherwise dispose of
equipment so long as the aggregate amount of the book value of
equipment so disposed (as of the time of its disposition) does not
exceed $2,000,000 in any 365-day period.
SECTION 2.9. SALES AND LEASEBACKS. The Borrower will not, and
will not permit any Subsidiary to, effect any Sale and Lease-Back Transaction
with respect to:
(a) any Property of the Borrower or any Subsidiary which
Property was owned or leased by the Borrower or any Subsidiary on or
prior to September 12, 1996; or
(b) any other Property, if the aggregate book value of
all such other Property that is the subject of a Sale and Lease- Back
Transaction during any period of 365 consecutive days would exceed
$1,000,000.
SECTION 2.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction (including
the furnishing of goods or services) with an Affiliate except in the ordinary
course of business and on terms and conditions no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 2.11. COMPLIANCE WITH BORROWING BASE. The Borrower will
not incur any Borrowing Base Debt if, after giving effect to such incurrence,
and any concurrent repayment of Loans or Other Borrowing Base Debt, the
aggregate principal amount of Borrowing Base Debt would exceed the Borrowing
Base.
SECTION 2.12. HEDGING ACTIVITIES. The Borrower will not, and will
not permit any Subsidiary to, buy, sell, trade or otherwise deal in futures
contracts or options thereon or other derivatives thereof except pursuant to
transactions that represent substitutes for transactions to be made by the
Borrower or such Subsidiary at a later time in the physical pork or pork
products market and the purpose of which is solely to reduce the risk to the
Borrower or such Subsidiary of future fluctuations in the market prices of pork
or pork products.
Exhibit A-2-12
<PAGE> 46
SECTION 2.13. NET CAPITAL EXPENDITURES.
(a) Net Capital Expenditures of the Borrower and its
Subsidiaries shall not exceed $8,200,000 in either the 1997 or the
1998 Fiscal Year. In each Fiscal Year thereafter, Net Capital
Expenditures shall not exceed the sum of $8,200,000 plus twenty-five
percent (25%) of Consolidated Net Earnings in respect of such Fiscal
Year; provided, however, that if Consolidated Net Earnings is less
than zero in any Fiscal Year, Consolidated Net Earnings shall be
deemed to be zero in such Fiscal Year for purposes of this Section
2.13(a).
(b) To the extent that the Net Capital Expenditures of
the Borrower during any Fiscal Year are less than the amount permitted
in respect of such Fiscal Year under Subsection 2.13(a) above, such
difference in respect of such period shall be available during the
first Fiscal Year succeeding such period to support capital
expenditures of the Borrower during such first succeeding Fiscal Year,
and, if such difference shall not be fully utilized by the end of such
first succeeding Fiscal Year, it shall not be available to support any
additional capital expenditures thereafter. With respect to the
utilization of the availability for the making of capital expenditures
by the Borrower in each Fiscal Year, any availability for such period
provided in Subsection 2.13(a) above shall be deemed utilized first to
support the capital expenditures to be made during such period, and
any availability carried forward from the previous Fiscal Year shall
be deemed utilized second to support the capital expenditures to be
made during such period.
(c) Up to an aggregate amount of $5,000,000 paid by the
Borrower in settlement of, or in satisfaction of a judgment against
the Borrower in respect of, the Ponca City Litigation shall not be
considered a Net Capital Expenditure for purposes of this Section
2.13.
SECTION 2.14. CERTAIN SALARIES. At no time will the Borrower, nor
will it permit any Subsidiary to, pay, directly or indirectly, any salary,
bonus, or other cash compensation to any person who, as of the date hereof, is
(i) the chairman of the Borrower's board of directors, (ii) the Borrower's
president and chief executive officer, or (iii) the Borrower's executive vice
president for finance and administration, if such payment or payments would
exceed, in the aggregate, 110% of the aggregate amount of salary, bonus and
other cash compensation paid to such person in the immediately preceding Fiscal
Year. Notwithstanding the foregoing, for each Fiscal Year after the 1998
Fiscal Year, the Borrower may compensate the persons described in this Section
2.14 in accordance with the bonus plan previously delivered to the Creditor
Parties.
SECTION 3. DEFINED TERMS. As used in this Exhibit A-2, the
following terms shall have the meanings set forth below or in the Section of
this document referenced below. The terms used herein and not defined herein
shall have the respective meanings ascribed to such terms in the Bank Credit
Agreement (as defined herein).
"Bank Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of September 11, 1996, among (i)
Thorn Apple Valley, Inc. and (ii) Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and
Harris Trust and Savings Bank, as in effect on the Effective Date.
Exhibit A-2-13
<PAGE> 47
"Collateral" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Collateral Agent" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Consolidated Adjusted Net Worth" shall mean the sum of:
(a) (i) Consolidated Shareholders' Equity less
(ii) all goodwill, trade names, trademarks, patents,
organizational expense, unamortized debt discount and expense
and other intangible assets properly classified as intangibles
in accordance with GAAP and incurred after the date of
consummation of the Wilson Acquisition; plus
(b) Subordinated Debt.
"Consolidated Earnings Available for Interest Expense" shall
mean, for any period, the sum of:
(a) Consolidated Net Earnings for such period
before deduction of any amount which, in conformity with GAAP,
would be set forth opposite the caption "income tax expense"
(including deferred income taxes) (or any like caption) on a
consolidated income statement of Borrower for such period;
plus
(b) Consolidated Interest Expense for such
period; plus
(c) the amortization of any financing cost and of
any debt discount; plus
(d) an amount which, in conformity with GAAP,
would be set forth, opposite the caption "depreciation and
amortization expense" (or any like caption) (including,
without limitation, amortization of intangible assets) on such
income statement for such period, to the extent the same are
deducted from Borrower's net revenues, in conformity with
GAAP, in determining Consolidated Net Earnings for such
period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition costs including
agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Interest Expense" shall mean the interest
expense (including capitalized and non-capitalized interest, the
interest component of rentals under Capital
Exhibit A-2-14
<PAGE> 48
Leases and any expense associated with the termination of a swap
arrangement) of the Borrower and its Subsidiaries on a consolidated
basis for any period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition closing costs
including agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Shareholders' Equity" shall mean consolidated
shareholders' equity of the Borrower and its Subsidiaries determined
in accordance with GAAP.
"Creditor Obligations" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Creditor Parties" shall mean, collectively and individually
(as the context requires) (i) the "Lenders" as defined in the Bank
Credit Agreement and (ii) the Noteholders.
"Disposition" is defined in Section 2.8.
"Fiscal Period" shall mean each period of four consecutive
weeks ending on (i) the last Friday in May in each Fiscal Year or (ii)
the Friday which is four weeks, or any even multiple of four weeks,
thereafter.
"Frederick Disposition" shall mean the sale of the plant,
property, inventory and equipment located at 1487 Farnsworth Avenue,
Detroit, Michigan, and the goodwill, licenses, permits, franchises,
patents, copyrights, trademarks, service marks and trade names
associated therewith.
"Fresh Meats Earnings Available for Interest Expense" shall
mean Consolidated Earnings Available for Interest Expense but only in
respect of the Borrower's fresh meats division, as regularly and
historically reported by the Borrower.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of the Borrower, any qualification or exception:
(a) which is of a "going concern" or similar
nature;
(b) which relates to the limited scope of
examination of relevant to such financial statement; or
(c) which relates to the treatment or
classification of any item in such financial statement and
which, as a condition to its removal, would require an
Exhibit A-2-15
<PAGE> 49
adjustment to such item the effect of which would be to cause the
Borrower to be in default of its obligations under Section 2.4 of this
Exhibit A-2.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed
money and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether
or not drawn, and banker's acceptances issued for the account
of such Person;
(c) all obligations of such Person as lessee
under leases which have been or should be, in accordance with
GAAP, recorded as Capital Leases;
(d) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side
of the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under all
Hedging Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of Property or services, and
indebtedness (excluding prepaid interest thereon) secured by a
Lien on Property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Guaranties of such Person in respect of
any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Insurance Note Agreements" shall mean, collectively, (i) that
certain Note Agreement, dated as of April 1, 1994, by and between the
Borrower and Allstate Life Insurance Company, pursuant to which the
Borrower issued Fifteen Million Dollars ($15,000,000) in aggregate
principal amount of its six and forty-five one-hundredths percent
(6.45%) Senior Notes due April 21, 2006, (ii) that certain Note
Agreement, dated as of October 1, 1994, by and between the Borrower
and Allstate Life Insurance Company, pursuant to which the Borrower
issued Eight Million Dollars ($8,000,000) in aggregate principal
amount of its eight and forty-two one-hundredths percent (8.42%)
Senior Notes due October 1, 2003, and (iii) that certain Note
Agreement, dated as of May 15 1995, by and among the Borrower,
Allstate Life Insurance Company, Principal Mutual Life Insurance
Company, and Great-West Life & Annuity Insurance Company, pursuant to
which the Borrower issued Forty-Two Million Five Hundred Thousand
Dollars
Exhibit A-2-16
<PAGE> 50
($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15,
2005, in each case, as amended from time to time.
"Insurance Notes" shall mean those certain Notes, as amended
from time to time, issued pursuant to the Insurance Note Agreements.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated as of September 11, 1996 by and among
the Creditor Parties, and acknowledged and agreed to by the Borrower
and its Subsidiaries.
"Investment" shall mean, relative to any Person:
(a) any loan or advance made by such Person to
any other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary course
of business);
(b) any Guaranty of such Person; or
(c) any ownership or similar interest held by
such Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof, less all returns of principal or equity
thereon (and without adjustment by reason of the financial condition
of such Person) and shall, if made by the transfer or exchange of
Property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such
Property.
"Majority-Owned Subsidiary" shall mean, when applied to a
Subsidiary, any Subsidiary 80% or more of the Voting Stock of which is
owned by the Borrower or a Majority-Owned Subsidiary (other than
Voting Stock required to be held as directors' qualifying stock).
"Net Capital Expenditures" shall mean, in any period, the
remainder of
(i) the aggregate cost of acquisition or
construction of all tangible assets acquired or constructed
during such period which at the time of acquisition or
construction have an expected useful life of more than one (1)
year and would be shown on a balance sheet of the acquiring or
constructing Person as an asset ("Capital Assets"), minus
(ii) the aggregate net proceeds of all sales or
other Dispositions of Capital Assets during such period, other
than proceeds which were used to permanently reduce Creditor
Obligations.
"New Seasonal Line of Credit Agreement" shall mean that
certain letter agreement regarding a Senior Secured Seasonal Line of
Credit for the Borrower dated as of September 11, 1996 by and among
(i) Thorn Apple Valley, Inc. and (ii) Cooperatieve
Exhibit A-2-17
<PAGE> 51
Centrale Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank.
"Noteholders" shall mean the holders of the Insurance Notes
from time to time.
"Ongoing Indebtedness" is defined in Section 2.2(b).
"Ponca City Litigation" shall mean that certain action
entitled Facility Constructors, Inc. v. Thorn Apple Valley, Inc. filed
in February, 1996, in District Court, Kay County, Oklahoma against the
Company in connection with the construction of the Company's plant in
Ponca City, Oklahoma.
"Rolling Projection" is defined in Section 1.1(c).
"Section" unless otherwise specified, shall mean a Section of
this Exhibit A-2.
"Security Documents" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Shared Lien" shall mean the lien upon the Collateral (as
defined in the Intercreditor Agreement) created by the Security
Documents (as defined in the Intercreditor Agreement) in favor of the
Creditor Parties (as defined in the Intercreditor Agreement).
"Subordinated Debt" shall mean the principal of and premium,
if any, and interest on all indebtedness of the Borrower, whether
currently outstanding or hereafter created, for money borrowed, or any
indebtedness incurred in connection with an acquisition or lease of
Property or with a merger, consolidation, or acquisition of assets
which is expressly subordinated, on terms satisfactory to the Creditor
Parties, in right of payment pursuant to its terms to the Loans and
the Insurance Notes (regardless of whether it is subordinated to other
indebtedness of the Borrower).
"Subsidiaries Guaranty" shall have the meaning assigned to the
term "Guaranty" in the Intercreditor Agreement.
"Weekly P&L Statement" shall mean, in respect of any week, a
statement, in form acceptable to the Creditor Parties, setting forth,
for each of the Borrower's fresh meats and processed meats divisions,
the income and expenses of the Borrower during such week.
Exhibit A-2-18
<PAGE> 52
DISCLOSURE SCHEDULE TO EXHIBIT A-2
ITEM 2.2(B) - ONGOING INDEBTEDNESS:
Operating Leases. See Exhibit A to Disclosure Schedule to Exhibit A-2.
<TABLE>
<CAPTION>
BALANCE OUTSTANDING
@ 8/23/96
<S> <C>
Lines of Credit:
Combined $94,100,000
-----------
Notes Payable:
Corporate: Allstate Unsecured Notes 23,000,000
Corporate: Allstate Life Ins. Unsecured Notes 15,000,000
Principal Mutual Life Unsecured Notes 14,000,000
Great-West Life & Annuity Unsecured Notes 13,500,000
Dixie: Forrest City Note 1,282,222
---------
Subtotal 160,882,000
-----------
Industrial Revenue Bonds:
Corporate: (Branch Banking) 2,400,000
Dixie Plant: (Economic Development Revenue Bond) 2,442,000
Corporate: (Michigan Strategic Fund - Adjustable Rate Demand
Limited Obligation Revenue bond, Series 1993)
5,500,000
---------
Subtotal:
10,342,000
----------
Capital Leases:
Corporate 518,744
Frederick division 2,304,521
Smoked Meats division 314,296
Concordia & Shreveport division 93,018
Dixie division 1,913,235
---------
Subtotal 5,143,814
Total Outstanding Indebtedness $176,367,814
============
Letters of Credit - See Exhibit B to Disclosure Schedule to Exhibit A-2.
</TABLE>
Disclosure Schedule - 1
<PAGE> 53
ITEM 2.3(f) - EXISTING LIENS:
<TABLE>
<CAPTION>
DEBT DESCRIPTION OF COLLATERAL AMOUNT OF
LOCATION REFERENCE O/S DEBT
<S> <C> <C>
Industrial Revenue Bonds:
Corporate Branch Banking Carolina manufacturing
facility $2,400,000
Dixie division Dixie facility $2,442,000
Mich. Strat. Fund. Grand Rapids $5,500,000
Capital Leases:
Corporate, Frederick, Smoked Meats, Concordia, Various machinery and $5,143,814
Shreveport and Dixie divisions. equipment located at the
company's various divisions
and subsidiaries
</TABLE>
All other Liens existing as of the Effective Date and permitted under Section
1.8 of Exhibit A-2.
ITEM 2.5(A) ONGOING INVESTMENTS:
<TABLE>
<CAPTION>
INVESTMENT BALANCE
FINANCIAL INSTITUTION TYPE @ 8/23/96
<S> <C> <C>
Short-Term Investments
United Carolina Bank CD 500,000
Providence TempCash 3,059,000
Chicago operation U.S. Treasury Bills 300,000
Subtotal $3,859,000
Michigan Livestock Exchange Preferred Stock 2,000,000
Total Investments $5,859,000
==========
</TABLE>
Disclosure Schedule - 2
<PAGE> 54
EXHIBIT A TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Operating Leases
Disclosure Schedule - 3
<PAGE> 55
EXHIBIT B TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
Disclosure Schedule - 4
<PAGE> 56
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1
<PAGE> 1
================================================================================
EXHIBIT 10(v)
THORN APPLE VALLEY, INC.
__________________________________
AMENDMENT AGREEMENT
__________________________________
RE:
NOTE AGREEMENT DATED AS OF MAY 15, 1995
AND
$42,500,000 7.58% SENIOR NOTES DUE MAY 15, 2005
DATED AS OF SEPTEMBER 11, 1996
$42,500,000 SENIOR NOTES DUE MAY 15, 2005
================================================================================
<PAGE> 2
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "Agreement"), dated as of September 11, 1996,
among THORN APPLE VALLEY, INC. (the "Company"), a Michigan corporation,
ALLSTATE LIFE INSURANCE COMPANY ("Allstate"), PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY ("Principal"), and GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
("Great-West"; Allstate, Principal and Great-West are herein collectively
referred to as the "Noteholders").
RECITALS:
A. Pursuant to that certain Note Agreement, dated as of May 15, 1995
(as amended prior to the date hereof, the "Existing Note Agreement", and, as
amended and supplemented by this Agreement and the other agreements and
instruments to be executed in connection herewith and therewith, the "Amended
Note Agreement"), the Company issued Forty-Two Million Five Hundred Thousand
Dollars ($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15, 2005 (as
amended prior to the date hereof, the "Existing Notes", and, as amended and
supplemented by this Agreement and the other agreements and instruments to be
executed in connection herewith and therewith, the "Amended Notes"). The
Existing Notes are substantially in the form of Exhibit A attached to the
Existing Note Agreement.
B. The Company has requested that the Noteholders amend or waive
certain terms of the Existing Note Agreement, as more particularly set forth in
this Agreement.
C. Subject to the terms and conditions hereinafter set forth, the
Noteholders are willing to amend certain terms of the Existing Note Agreement
and the Existing Notes and waive other terms of the Existing Note Agreement,
all as more particularly set forth in this Agreement.
D. The Company and each of the Noteholders are desirous of entering
into this Agreement on the terms and conditions hereinafter set forth.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
As used herein, the following terms shall have the meanings set forth
below or in the document or the Section of this Agreement referenced below.
The terms used herein and not defined herein shall have the respective meanings
ascribed to such terms in the Amended Note Agreement.
"Agreement, this" -- introductory sentence hereof.
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<PAGE> 3
"Allstate" -- introductory sentence hereof.
"Amended Bank Credit Documents" -- Section 5.2(b).
"Amended Note Agreement" -- Recital A hereof.
"Amended Note Documents" -- means, collectively, the Amended Note
Agreement, the Amended Notes, the Security Documents (as defined herein), the
Intercreditor Agreement (as defined herein), and the Subsidiary Guaranty (as
defined herein), as each may be amended from time to time.
"Amended Notes" -- Recital A hereof.
"Amendment Effective Date" -- introductory language to Section 5.
"Bank Credit Agreement" -- means, collectively, (i) that certain Credit
Agreement dated as of May 30, 1995 by and among the Company and the Banks,
pursuant to which the Banks agreed to provide the Company with an $80,000,000
revolving credit facility and (ii) that certain letter agreement dated March
11, 1996 by and among the Company and the Banks (or their successors in
interest), pursuant to which the Banks agreed to provide the Company with a
$20,000,000 revolving credit facility, in each case, as amended to the date
hereof.
"Banks" -- means, collectively, Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and Harris
Trust and Savings Bank.
"Collateral" -- shall have the meaning ascribed to such term in the
Intercreditor Agreement.
"Collateral Agent" -- shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Company" -- introductory sentence hereof.
"Covenant Reversion Date" -- means the later to occur of (i) the date
on which all of the obligations in respect of the Bank Credit Agreement shall
have been paid in full in cash and (ii) the date on which the Company shall
have obtained from a nationally recognized debt rating agency a rating in
respect of the Notes of BBB or better.
"Existing Note Agreement" -- Recital A hereof.
"Existing Notes" -- Recital A hereof.
"Intercreditor Agreement" -- Section 5.2(g).
"IRB Obligations" -- shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"L/C Issuer" -- Old Kent Bank, in its capacity as issuer of the Old
Kent Letters of Credit.
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<PAGE> 4
"Noteholders" -- introductory sentence hereof.
"Old Kent L/C Documents" -- shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Old Kent Letters of Credit" -- shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Other Note Agreements" -- means, collectively, (i) that certain Note
Agreement, dated as of April 1, 1994, by and between the Company and Allstate,
pursuant to which the Company issued Fifteen Million Dollars ($15,000,000) in
aggregate principal amount of its six and forty-five one-hundredths percent
(6.45%) Senior Notes due April 21, 2006 and (ii) that certain Note Agreement,
dated as of October 1, 1994, by and between the Company and Allstate, pursuant
to which the Company issued Eight Million Dollars ($8,000,000) in aggregate
principal amount of its eight and forty-two one-hundredths percent (8.42%)
Senior Notes due October 1, 2003, in each case, as amended to the date hereof.
"Restated Notes" -- Section 5.2(a).
"Security Documents" -- Section 5.2(e).
"Subsidiary Guaranty" -- Section 5.2(f).
SECTION 2. AMENDMENTS TO EXISTING NOTE AGREEMENT AND EXISTING NOTES.
2.1 GENERAL AMENDMENTS. The Company and, subject to the satisfaction
of the conditions set forth in Section 5 hereof, each of the Noteholders hereby
consents and agrees to the amendments to the Existing Note Agreement and the
Existing Notes as set forth in Exhibit A-1 to this Agreement. Each such
amendment shall become effective on the Amendment Effective Date (as defined
herein) and is incorporated herein by reference as if set forth verbatim in
this Agreement.
2.2 TEMPORARY SUSPENSION AND AMENDMENTS TO COVENANTS. The Company
and, subject to the satisfaction of the conditions set forth in Section 5
hereof, each of the Noteholders hereby consents and agrees as follows:
(a) During the period commencing on the Amendment Effective Date and
ending on the Covenant Reversion Date, the Company (i) shall
comply with the requirements of the covenants set forth in Exhibit
A-2 to this Agreement, and (ii) except as set forth in said
Exhibit A-2, shall not be required to comply with the requirements
of the covenants contained in Section 6 or Section 7 of the
Existing Note Agreement.
(b) During the period commencing on the Covenant Reversion Date and
ending on the date on which the Notes shall have been paid in
full in cash, the Company shall comply with all of the
requirements of the covenants contained in Section 6 and Section 7
of the Amended Note Agreement.
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<PAGE> 5
SECTION 3. WAIVER OF NON-COMPLIANCE.
Effective upon the satisfaction of the conditions set forth in Section
5 hereof, the Noteholders hereby irrevocably waive (a) non-compliance by the
Company with any provision of Section 7 of the Existing Note Agreement for the
period prior to the Amendment Effective Date and (b) any Default or Event of
Default during such period resulting from any such failure of the Company to be
in compliance with the provisions of Section 7 of the Existing Note Agreement.
SECTION 4. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholders to enter into this Agreement, the Company
warrants and represents to the Noteholders that, as of the Amendment Effective
Date:
4.1 ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a
corporation duly incorporated, validly existing and is in good standing under
the laws of the State of Michigan. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations under the Amended Note Documents.
4.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The execution and
delivery by the Company of this Agreement and the performance by the Company of
its obligations under the Amended Note Documents have been duly authorized by
all necessary action on the part of the Company. This Agreement has been duly
executed and delivered by the Company. Each of the Amended Note Documents
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its respective terms, except that the enforceability thereof
may be:
(a) limited by bankruptcy, insolvency or other similar laws
affecting the enforceability of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
4.3 NO CONFLICTS OR DEFAULTS. Neither the execution and delivery by
the Company of this Agreement and the other Amended Note Documents, nor the
performance by the Company of its obligations under any of the Amended Note
Documents, conflicts with, results in any breach in any of the provisions of,
constitutes a default under, violates or results in the creation of any Lien
(other than pursuant to the Amended Note Documents) upon any Property of the
Company under the provisions of:
(a) any charter document, partnership agreement or bylaws of the
Company;
(b) assuming the contemporaneous execution and delivery of an
amendment to the Bank Credit Agreement and an amendment
(substantially similar to this Agreement) to the Other Note Agreements
(as such terms are defined herein), any agreement, instrument or
conveyance to which the Company or any Properties of the Company may be
bound or affected, except for such breaches, defaults and violations
that, in the aggregate, could not reasonably be expected to have a
material adverse effect on the condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or on the Company's
ability to perform its obligations under this Agreement, the Amended
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<PAGE> 6
Note Agreement and the Amended Notes; provided, however, that
if the granting of Liens pursuant to any of the Security Documents will
violate the terms of any of the IRB Obligations, no such Security
Documents which create Liens which violate the terms of any such IRB
Obligations will be filed or recorded by any Person unless and until
any required consents thereto shall have been obtained from the
appropriate secured parties; or
(c) any statute, rule or regulation or any order, judgment or
award of any court, tribunal or arbitrator by which the Company
or any Properties of the Company may be bound or affected, except for
such violations that, in the aggregate, could not reasonably be
expected to have a material adverse effect on the condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a whole, or
on the Company's ability to perform its obligations under this
Agreement, the Amended Note Agreement and the Amended Notes.
4.4 GOVERNMENTAL CONSENT. Neither the execution and delivery by the
Company of this Agreement and the other Amended Note Documents nor the
performance by the Company of its obligations under each of the Amended Note
Documents, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority on the
part of the Company as a condition thereto under the circumstances and
conditions contemplated by this Agreement and each of the Amended Note
Documents.
4.5 NO DEFAULTS OR EVENTS OF DEFAULT. After giving effect to the
transactions contemplated by this Agreement, including the contemporaneous
execution and delivery of an amendment to the Bank Credit Agreement and an
amendment (substantially similar to this Agreement) to each of the Other Note
Agreements, no Default or Event of Default will exist under any of the Amended
Note Documents, the Bank Credit Agreement (as amended as of the date hereof) or
the Other Note Agreements (as amended as of the date hereof).
4.6 DISCLOSURE. The financial statements and certificates delivered
to the Noteholders by the Company or the Company's accountants, as the case may
be, pursuant to Section 6.6 of the Existing Note Agreement do not, nor does
this Agreement or any written statement furnished by the Company in connection
herewith, contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading. There is no fact existing as of the date hereof which the Company
has not disclosed to the Noteholders in writing which has had or, so far as the
Company can now reasonably foresee, could reasonably be expected to have, a
material adverse effect on the condition, financial or otherwise, of the
Company or its Subsidiaries, or the operations of any of them, or upon the
Company's ability to perform its obligations under this Agreement, the Amended
Note Agreement and the Amended Notes.
4.7 TRUE AND CORRECT COPIES. The Company has delivered to each of the
Noteholders true and correct copies of the Bank Credit Agreement, each of the
Old Kent L/C Documents, each of the Other Note Agreements, each of the Security
Documents (including, without limitation, all schedules and exhibits thereto
and all miscellaneous agreements and certificates delivered in connection
therewith), the Subsidiary Guaranty, and the Intercreditor Agreement, each as
in effect on the Amendment Effective Date.
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<PAGE> 7
4.8 CERTAIN REPRESENTATIONS AND WARRANTIES. As supplemented by the
information set forth on Annex 1 hereto, all of the representations and
warranties contained in Section 3 of the Existing Note Agreement are true and
correct in all material respects as of the Amendment Effective Date as if such
representations and warranties were made on the Amendment Effective Date. All
of the representations and warranties contained in (i) the most recent
amendment to the Bank Credit Agreement, (ii) each of the Security Documents,
(iii) the Subsidiary Guaranty, and (iv) the Intercreditor Agreement, each as in
effect on the Amendment Effective Date, are true and correct in all respects.
4.9 NO UNDISCLOSED CONSIDERATION. Except as expressly set forth in
the documents described in Section 5.1 or Section 5.2 hereof, neither the
Company nor any Subsidiary has paid or will pay, directly or indirectly, any
fee, charge or other consideration to any Creditor Party (as defined in the
Intercreditor Agreement) as a condition to, or otherwise in connection with,
the amendments, modifications or restatements, as the case may be, to the Bank
Credit Agreement, the L/C Documents (as defined in the Intercreditor
Agreement), the Other Note Agreements or the Existing Note Agreement, in each
case, as described in the Intercreditor Agreement.
4.10 SOLVENCY.
(a) As of the date hereof, the fair value of all of the
Company's property (other than property that the Company could
exempt from its estate were it a debtor under the United States
Bankruptcy Code, 11 U.S.C. Section 101 et seq.) exceeds the aggregate
amount of the Company's debts.
(b) The Company has not transferred, concealed, or removed any
of its property with intent to hinder, delay, or defraud any of
the Company's creditors.
SECTION 5. CONDITIONS PRECEDENT.
The amendments set forth in Section 2 hereof and the waiver set forth
in Section 3 hereof shall not become effective unless all of the following
conditions precedent shall have been satisfied on or before September 12, 1996
(the date of such satisfaction being herein referred to as the "Amendment
Effective Date"):
5.1 EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company shall have
executed and delivered to each of the Noteholders a counterpart of this
Agreement.
5.2 EXECUTION AND DELIVERY OF OTHER DOCUMENTS. The following
documents, each in form and substance satisfactory to the Noteholders and their
special counsel, shall have been duly executed and delivered by the parties
thereto, and shall be in full force and effect:
(a) an amendment and restatement of each of the Existing Notes
(collectively, the "Restated Notes") in the form set forth in
paragraph 10 of Exhibit A-1 hereto;
(b) an Amended and Restated Credit Agreement and a letter agreement
regarding a Senior Secured Seasonal Line of Credit for the
Company (collectively, the "Amended Bank Credit Documents"), in each
case among the Company and the Banks,
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<PAGE> 8
which agreements, in each case, shall be in form and substance
satisfactory to the Noteholders;
(c) an amendment to each of the L/C Documents (including, without
limitation, a waiver of each default or event of default
existing thereunder as of the date hereof), in each case, dated as of
the date hereof and executed by each of the parties to such L/C
Document, which agreements, in each case, shall be in form and
substance satisfactory to the Noteholders;
(d) an amendment to each of the Other Note Agreements, in each
case, dated as of the date hereof and executed by each of the
parties to such Other Note Agreement, which agreements, in each case,
shall be in form and substance satisfactory to the Noteholders;
(e) those certain security agreements, mortgages and other
collateral documents more fully set forth on Schedule I to the
Intercreditor Agreement (collectively, the "Security Documents"), which
documents, in each case, shall be in form and substance satisfactory to
the Noteholders;
(f) a guaranty of the Amended Notes by each Subsidiary of the
Company (the "Subsidiary Guaranty"), which shall be in form and
substance satisfactory to the Noteholders; and
(g) an Intercreditor Agreement (the "Intercreditor Agreement"),
among the Noteholders, the Banks, the L/C Issuer and the Collateral
Agent, and acknowledged and agreed to by the Company and the
Subsidiaries, which agreement shall be in form and substance
satisfactory to the Noteholders.
5.3 PRIVATE PLACEMENT NUMBER. The Company shall have obtained or
caused to be obtained a private placement number for the Restated Notes from
the CUSIP Service Bureau of Standard & Poor's, a division of McGraw-Hill, Inc.,
and each Noteholder shall have been informed of such private placement number.
5.4 COLLATERAL. The Security Documents shall be in full force and
effect and there shall be no Default or Event of Default thereunder and as
defined therein. Except in respect of those items of Collateral identified on
Exhibit A-3 hereto, all actions necessary to perfect the Liens of the
Collateral Agent created by the Security Documents (including, without
limitation, the filing of all appropriate financing statements and the
recording of all appropriate documents with appropriate public officials) shall
have been taken in accordance with the terms of the Security Documents and
confirmation thereof shall be received by the Noteholders. The Liens of the
Collateral Agent created by the Security Documents shall be valid, enforceable
and perfected (except as permitted by Section 1.8 of Exhibit A-2 hereto), and
the Property of the Company shall be subject to no other Lien not otherwise
permitted under Section 2.3 of Exhibit A-2 hereto.
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<PAGE> 9
5.5 EQUITY INFUSION. The Company shall have received an aggregate of
not less than $3,000,000 in capital contributions from one or more of its
shareholders upon terms and conditions satisfactory to the Noteholders in their
sole discretion.
5.6 NO DEFAULT; REPRESENTATIONS AND WARRANTIES TRUE. The warranties
and representations set forth in Section 4 hereof shall be true and correct on
the Amendment Effective Date and no Default or Event of Default shall exist
which would not be waived by this Agreement and by an amendment to each of the
Other Note Agreements. The Noteholders shall have received a certificate dated
the Amendment Effective Date and signed by the President and the Chief
Financial Officer of the Company, in form and substance satisfactory to the
Noteholders, certifying to the conditions specified in the preceding sentence.
5.7 AUTHORIZATION OF TRANSACTIONS.
(a) The Company shall have duly authorized the execution and
delivery of this Agreement and each of the documents executed and
delivered in connection herewith and the performance of all of its
obligations contemplated by this Agreement. The Noteholders shall have
received a certificate dated the Amendment Effective Date and signed by
the Secretary or an Assistant Secretary of the Company, in form and
substance satisfactory to the Noteholders, certifying as to the
resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of the Restated Notes and
this Agreement.
(b) Each Subsidiary shall have duly authorized the execution,
delivery and performance of its respective Subsidiary Guaranty. The
Noteholders shall have received a certificate dated the Amendment
Effective Date and signed by the Secretary or an Assistant Secretary of
each Subsidiary, certifying as to the resolutions attached thereto and
other corporate proceedings relating to the authorization, execution
and delivery of the Subsidiary Guaranty.
5.8 OPINION OF COUNSEL. The Noteholders shall have received from
Honigman Miller Schwartz and Cohn, counsel to the Company, a legal opinion, in
form and substance satisfactory to the Noteholders and their special counsel,
with respect to the transactions contemplated by this Agreement.
5.9 PAYMENT OF CERTAIN EXPENSES. The Company shall have paid all
reasonable costs and expenses of the Noteholders relating to this Agreement and
the other Amended Note Documents, including without limitation (i) the fees and
expenses of Hebb & Gitlin, the Noteholder's special counsel and (ii) the
out-of-pocket expenses of the Noteholders.
5.10 PAYMENT OF INTEREST. The Company shall have paid all accrued and
unpaid interest in respect of each Existing Note, at the rates specified
herein, to the Amendment Effective Date.
5.11 MINIMUM REVOLVER AVAILABILITY. The Company shall have obtained
commitments from the Banks, pursuant to the Amended Bank Credit Documents,
which shall be available to the Company as of the Amendment Effective Date, in
an amount equal to at least $110,000,000.
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<PAGE> 10
5.12 PROCEEDINGS SATISFACTORY. All documents executed and delivered,
and actions and proceedings taken, in connection with this Agreement shall be
satisfactory to the Noteholders and their special counsel. The Noteholders and
their special counsel shall have received copies of such documents and papers
as they may reasonably request in connection therewith, in form and substance
satisfactory to them.
SECTION 6. NO PREJUDICE OR WAIVER; REAFFIRMATION.
6.1 NO PREJUDICE OR WAIVER. Except as provided herein, the terms of
this Agreement shall not operate as a waiver by the Noteholders of, or
otherwise prejudice the Noteholders' rights, remedies or powers under, the
Amended Note Documents or under applicable law. Except as expressly provided
herein:
(a) no terms and provisions of any agreement are modified or
changed by this Agreement; and
(b) the terms and provisions of the Existing Note Agreement and
the Existing Notes shall continue in full force and effect.
6.2 REAFFIRMATION. The Company hereby acknowledges and reaffirms all
of its obligations and duties under the Amended Note Documents.
SECTION 7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
7.2 DUPLICATE ORIGINALS. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in one or more counterparts and shall be effective
when at least one counterpart shall have been executed by each party hereto,
and each set of counterparts which, collectively, show execution by each party
hereto shall constitute one duplicate original.
7.3 WAIVERS AND AMENDMENTS. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally, or by any
action or inaction, but only by an instrument in writing signed in accordance
with the amendment provisions set forth in the Existing Note Agreement.
7.4 SECTION HEADINGS. The titles of the sections hereof appear as a
matter of convenience only, do not constitute a part of this Agreement and
shall not affect the construction hereof.
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<PAGE> 11
7.5 COSTS AND EXPENSES. On the Amendment Effective Date, the Company
shall pay all costs and expenses of the Noteholders relating to this Agreement
and the other Amended Note Documents, including, but not limited to, (i) the
statement for reasonable fees and disbursements of the Noteholders' special
counsel and (ii) the statement for reasonable out-of-pocket expenses of the
Noteholders, in each case, presented to the Company on the Amendment Effective
Date. The Company will also pay upon receipt of any statement thereof, each
additional statement for (i) reasonable fees and disbursements of the
Noteholders' special counsel or (ii) reasonable out-of-pocket expenses of the
Noteholders, rendered after the Amendment Effective Date in connection with the
Amended Note Documents.
7.6 SURVIVAL. All warranties, representations, certifications and
covenants made by or on behalf of the Company or any Subsidiary in the Amended
Note Documents or in any certificate or other instrument delivered pursuant to
the Amended Note Documents shall be considered to have been relied upon by the
Noteholders and shall survive the execution of the Amended Note Documents,
regardless of any investigation made by or on behalf of the Noteholders. All
statements in any such certificate or other instrument shall constitute
warranties and representations of the Company hereunder.
7.7 WAIVER AND RELEASE. For and in consideration of the agreements
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of all of which are hereby acknowledged, the Company,
on its own behalf, and to the extent that it is lawfully able to do so, on
behalf of its predecessors, successors, assigns, Subsidiaries, affiliates and
agents and all of their respective past, present and future officers,
directors, shareholders, employees, contractors and attorneys, and the
predecessors, heirs, successors, and assigns of each of them (collectively
referred to in this Section 7.7 as the "RELEASORS") do hereby jointly and
severally fully RELEASE, REMISE, ACQUIT, IRREVOCABLY WAIVE and FOREVER
DISCHARGE each of the Noteholders, together with their respective predecessors,
successors, assigns, subsidiaries, affiliates and agents and all of their
respective past, present and future officers, directors, shareholders,
employees, contractors and attorneys, and the predecessors, heirs, successors
and assigns of each of them (the Noteholders and all of the foregoing being
collectively referred to in this Section 7.7 as the "RELEASED PARTIES"), from
and with respect to any and all Claims (as defined below).
As used in this Section 7.7, the term "CLAIMS" shall mean and include
any and all, and all manner of, action and actions, cause and causes of action,
suits, disputes, controversies, claims, debts, sums of money, offset rights,
defenses to payment, agreements, promises, notes, bonds, bills, covenants,
losses, damages, judgments, executions and demands of whatever nature, known or
unknown, whether in contract, in tort or otherwise, at law or in equity, for
money damages or dues, recovery of property, or specific performance, or any
other redress or recompense which have accrued or may ever accrue, may have
been had, may be now possessed, or may or shall be possessed in the future by
or on behalf of any one or more of the Releasors against any one or more of the
Released Parties for, upon, by reason of, on account of, or arising from or out
of, or by virtue of, any transaction, event or occurrence, duty or obligation,
indemnification, agreement, promise, warranty, covenant or representation,
breach of fiduciary duty, breach of any duty of fair dealing, breach of
confidence, breach of funding commitment, undue influence, duress, economic
coercion, conflict of interest, negligence, bad faith, malpractice, violations
of federal or state securities laws or the Racketeer Influenced and Corrupt
Organizations Act, intentional or negligent infliction of mental distress,
tortious
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<PAGE> 12
interference with contractual relations, tortious interference with corporate
governance or prospective business advantage, breach of contract, deceptive
trade practices, libel, slander, usury, conspiracy, wrongful acceleration of
any indebtedness, wrongful foreclosure or attempt to foreclose on any
collateral relating to any indebtedness, action or inaction, relationship or
activity, service rendered, matter, cause or thing, whatsoever, express or
implied, transpiring, entered into, created or existing from the beginning of
time to the date of the execution of this Agreement in respect of the Existing
Notes or the Existing Note Agreement, and shall include, but not be limited to,
any and all Claims in connection with, as a result of, by reason of, or in any
way related to or arising from the existence of any relationships or
communications by and between the Releasors and the Released Parties with
respect to the Existing Notes, the agreements pursuant to which the Existing
Notes were issued, and all agreements, documents and instruments related
thereto, as presently constituted and as the same may from time to time be
amended.
The Releasors acknowledge that they may hereafter discover facts, which
exist or existed on or before the date hereof, different from or in addition to
those they now know or believe to be true with respect to the Claims herein
released. Notwithstanding the foregoing, the Releasors agree that this Section
7.7 shall survive the termination hereof and shall remain effective in all
respects and waive the right to make any new, different or additional claim on
account of such different or additional facts. The Releasors acknowledge that
no representation or warranty of any kind or character has been made to the
Releasors by any one or more of the Released Parties or any agent,
representative or attorney of the Released Parties to induce the execution of
this Agreement containing this Section 7.7.
The Releasors hereby represent and warrant unto the Released Parties
that:
(a) the Releasors have the full right, power, and authority to
execute and deliver this Agreement containing this Section 7.7 without
the necessity of obtaining the consent of any other party;
(b) the Releasors have received independent legal advice from
attorneys of their choice with respect to the advisability of granting
the release provided herein, and with respect to the advisability of
executing this Agreement containing this Section 7.7;
(c) the Releasors have not relied upon any statements,
representations or promises of any of the Released Parties in executing
this Agreement containing this Section 7.7, or in granting the release
provided herein;
(d) the Releasors have not entered into any other agreements or
understandings relating to the Claims;
(e) the terms of this Section 7.7 are contractual, not a mere
recital, and are the result of negotiation among all the parties; and
(f) this Section 7.7 has been carefully read by, and the
contents hereof are known and understood by, and it is signed freely by
the Releasors.
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<PAGE> 13
The Releasors covenant and agree not to bring any claim, action, suit
or proceeding regarding or related in any manner to the matters released
hereby, and the Releasors further covenant and agree that this Section 7.7 is a
bar to any such claim, action, suit or proceeding.
All prior discussions and negotiations regarding the Claims have been
and are merged and integrated into, and are superseded by, this Section 7.7.
The Releasors understand, agree and expressly assume the risk of any fact not
recited, contained or embodied in this Section 7.7 which may hereafter turn out
to be other than, different from, or contrary to, the facts now known to the
Releasors or believed by the Releasors to be true, and further agree that this
Section 7.7 shall not be subject to termination, modification, or rescission,
by reason of any such difference in facts.
7.8 INDEMNIFICATION. The Company agrees to indemnify the Noteholders
and their respective directors, officers, employees, agents and attorneys from,
and hold each of them harmless against, any and all losses, liabilities,
claims, damages or expenses incurred by any of them arising out of or by reason
of any investigation or litigation or other proceedings (including any
threatened investigation, litigation or other proceedings) relating to, or in
connection with, the Existing Notes or the Amended Notes including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
[REMAINDER OF PAGE IS INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by a duly authorized officer or agent thereof, as the
case may be, as of the date first above written.
THORN APPLE VALLEY, INC.
By
-----------------------------
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY
By
-----------------------------
Name:
Title:
By
-----------------------------
Name:
Title:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By
-----------------------------
Name:
Title:
By
-----------------------------
Name:
Title:
[AMENDMENT AGREEMENT IN RESPECT OF THORN APPLE VALLEY, INC.]
<PAGE> 15
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By
-----------------------------
Name:
Title:
By
-----------------------------
Name:
Title:
[AMENDMENT AGREEMENT IN RESPECT OF THORN APPLE VALLEY, INC.]
<PAGE> 16
ANNEX 1
INFORMATION AS TO COMPANY
[SUPPLEMENTAL INFORMATION WITH RESPECT TO
REPRESENTATIONS AND WARRANTIES IN EXISTING NOTE AGREEMENT]
<PAGE> 17
EXHIBIT A-1
AMENDMENTS TO EXISTING NOTE AGREEMENT AND TO EXISTING NOTES
1. AMENDMENTS TO SECTION 1.1 OF THE EXISTING NOTE AGREEMENT. Section
1.1 of the Existing Note Agreement is hereby amended to read in its entirety as
follows:
"1.1 Description of Notes. The Company has authorized the
issuance and sale of $42,500,000 aggregate principal amount of its
Senior Notes, to be dated the date of issuance thereof, to bear interest
(a) from such date until June 20, 1996 at the rate of
7.58% per annum;
(b) from June 21, 1996 through and including July 31, 1996
at the Pre-Restructuring Rate; and
(c) from August 1, 1996 through the date of maturity at the
Post-Restructuring Rate,
payable monthly on the first day of each month, and at maturity,
to bear interest on overdue principal (including any overdue required or
optional prepayment), premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the greater of
(i) the rate of interest publicly announced from time to time by Harris
Trust and Savings Bank (or its successors or assigns) as its prime rate
plus two percent (2%) or (ii) the Post-Default Rate, to be expressed to
mature on May 15, 2005 and to be substantially in the form attached as
Exhibit A. The term "Notes" as used herein shall include each Note
delivered pursuant to this Note Agreement (the "Agreement") and each
Note delivered in substitution or exchange therefor and, where
applicable, shall include the singular number as well as the plural. Any
reference to you in this Agreement shall in all instances be deemed to
include any nominee of yours or any separate account on whose behalf you
are purchasing Notes. You are sometimes referred to herein as the
'Purchaser' and, together with the other Purchasers, as the
'Purchasers'."
2. NEW SECTION 1.3 OF THE EXISTING NOTE AGREEMENT. A New Section 1.3
is hereby added to the Existing Note Agreement, after Section 1.2 thereof and
before Section 2 thereof, which shall read in its entirety as follows:
"1.3 Collateral Security. The obligations of the Company
hereunder and under the Notes are secured by the Shared Lien in the
Collateral."
3. AMENDMENTS TO SECTION 2.1 OF THE EXISTING NOTE AGREEMENT.
(a) The phrase "(a)" is hereby inserted in Section 2.1 of the
Existing Note Agreement after the heading of such Section and before the
first sentence thereof.
Exhibit A-1-1
<PAGE> 18
(b) A new Section 2.1(b), a new Section 2.1(c), and a new
Section 2.1(d) are hereby added to the Existing Note Agreement, after
the existing Section 2.1 and before Section 2.2 thereof, which shall
read in their entirety as follows:
"(b) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and there
shall become due and payable on the tenth Business Day after each
Qualified Capital Infusion Date, a principal amount of the Notes
equal to the Qualified Capital Infusion Amount. The Company shall
notify the Noteholders of its intent to make such prepayment on
such Qualified Capital Infusion Date. Such prepayment shall be at
a price of (i) 100% of the principal amount prepaid, together with
interest accrued thereon to the date of payment, if the
Reinvestment Yield, on the applicable Determination Date, equals or
exceeds 7.58% per annum, or (ii) 100% of the principal amount
prepaid, together with interest accrued thereon to the date of
payment, plus a premium, if the Reinvestment Yield, on such
Determination Date, is less than 7.58% per annum. The premium
shall equal (x) the aggregate present value of the amount of
principal being repaid (taking into account the manner of
application required by Section 2.2(c)) and the present value of
the amount of interest (exclusive of interest accrued to the date
of prepayment) which would have been payable in respect of such
principal (at the rate of 7.58% per annum) absent such prepayment,
determined by discounting (semi-annually on the basis of a 360-day
year composed of twelve 30-day months) each such amount utilizing
an interest factor equal to the Reinvestment Yield, less (y) the
principal amount to be prepaid. Payment of such premium shall be
deferred until the earlier of (1) the date on which the obligations
in respect of the Amended Bank Credit Documents shall have been
paid in full, (2) the date on which the Company shall have obtained
from a nationally recognized debt rating agency a rating in respect
of the Notes of BBB or better, (3) acceleration of the Notes, (4)
bankruptcy of the Company, or (5) May 31, 1998.
(c) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and
there shall become due and payable on April 30, 1997, a principal
amount of the Notes equal to the Scheduled Amount. Such prepayment
shall be at a price of (i) 100% of the principal amount prepaid,
together with interest accrued thereon to the date of payment, if
the Reinvestment Yield, on the applicable Determination Date,
equals or exceeds 7.58% per annum, or (ii) 100% of the principal
amount prepaid, together with interest accrued thereon to the date
of payment, plus a premium, if the Reinvestment Yield, on such
Determination Date, is less than 7.58% per annum. The premium
shall equal (x) the aggregate present value of the amount of
principal being repaid (taking into account the manner of
application required by Section 2.2(c)) and the present value of
the amount of interest (exclusive of interest accrued to the date
of prepayment) which would have been payable in respect of such
principal (at the rate of 7.58% per annum) absent such prepayment,
determined by discounting (semi-annually on the basis of a 360-day
year composed of twelve 30-day months) each such amount utilizing
an interest factor equal to the Reinvestment Yield, less (y) the
principal amount to be prepaid. Payment of such premium shall be
deferred until the earlier of (1) the date on
Exhibit A-1-2
<PAGE> 19
which the obligations in respect of the Amended Bank Credit
Documents shall have been paid in full, (2) the date on which the
Company shall have obtained from a nationally recognized debt
rating agency a rating in respect of the Notes of BBB or better,
(3) acceleration of the Notes, (4) bankruptcy of the Company, or
(5) May 31, 1998.
(d) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and
there shall become due and payable on the tenth Business Day after
each Unscheduled Amortization Date, a principal amount of the Notes
equal to the Unscheduled Amount. The Company shall notify the
Noteholders of its intent to make such prepayment on such
Unscheduled Amortization Date. Such prepayment shall be at a price
of (i) 100% of the principal amount prepaid, together with interest
accrued thereon to the date of payment, if the Reinvestment Yield,
on the applicable Determination Date, equals or exceeds 7.58% per
annum, or (ii) 100% of the principal amount prepaid, together with
interest accrued thereon to the date of payment, plus a premium, if
the Reinvestment Yield, on such Determination Date, is less than
7.58% per annum. The premium shall equal (x) the aggregate present
value of the amount of principal being repaid (taking into account
the manner of application required by Section 2.2(c)) and the
present value of the amount of interest (exclusive of interest
accrued to the date of prepayment) which would have been payable in
respect of such principal (at the rate of 7.58% per annum) absent
such prepayment, determined by discounting (semi-annually on the
basis of a 360-day year composed of twelve 30-day months) each such
amount utilizing an interest factor equal to the Reinvestment
Yield, less (y) the principal amount to be prepaid Payment of such
premium shall be deferred until the earlier of (1) the date on
which the obligations in respect of the Amended Bank Credit
Documents shall have been paid in full, (2) the date on which the
Company shall have obtained from a nationally recognized debt
rating agency a rating in respect of the Notes of BBB or better,
(3) acceleration of the Notes, (4) bankruptcy of the Company, or
(5) May 31, 1998."
4. AMENDMENTS TO SECTION 2.2 OF THE EXISTING NOTE AGREEMENT.
(a) Section 2.2(a) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(a) Upon notice as provided in Section 2.3, the Company may
prepay the Notes, in whole or in part, at any time, in an amount of
not less than $1,000,000 or in integral multiples of $100,000 in
excess thereof (or the remaining principal amount of the Notes) at
a price of (i) 100% of the principal amount prepaid, together with
interest accrued thereon to the date of payment, if the
Reinvestment Yield, on the applicable Determination Date, equals or
exceeds 7.58% per annum, or (ii) 100% of the principal amount
prepaid, together with interest accrued thereon to the date of
payment, plus a premium, if the Reinvestment Yield, on such
Determination Date, is less than 7.58% per annum. The premium
shall equal (x) the aggregate present value of the amount of
principal being repaid (taking into account the manner of
application required by
Exhibit A-1-3
<PAGE> 20
Section 2.2(c)) and the present value of the amount of interest
(exclusive of interest accrued to the date of prepayment) which
would have been payable in respect of such principal (at the rate
of 7.58% per annum) absent such prepayment, determined by
discounting (semi-annually on the basis of a 360-day year composed
of twelve 30-day months) each such amount utilizing an interest
factor equal to the Reinvestment Yield, less (y) the principal
amount to be prepaid."
(b) Section 2.2(c) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(c) Any prepayment pursuant to Section 2.2(a) or Section
2.2(b), any prepayment required by Sections 2.1(b), 2.1(c) or
2.1(d), or any optional repurchase of less than all of the Notes
outstanding shall be applied to reduce, on a pro rata basis, the
prepayments and payment at maturity required by Section 2.1(a)."
(c) Section 2.2(d) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(d) Except as provided in Section 2.1 and this Section 2.2,
the Notes shall not be prepayable in whole or in part."
5. AMENDMENTS TO SECTION 5.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 5.1 of the Existing Note Agreement is hereby amended
as follows:
(i) The definition of "Material Work Stoppage" is hereby
deleted.
(ii) (A) The word "and" is inserted at the end of paragraph
(g) of the definition of "Permitted Investments".
(B) Paragraph (h) of the definition of "Permitted
Investments" is hereby deleted.
(C) Paragraph (i) the definition of "Permitted
Investments" is hereby re-numbered as paragraph (h) thereof.
(b) Section 5.1 of the Existing Note Agreement is hereby amended
to modify in their entirety or add, each in their proper alphabetical
order, the following definitions:
Amended Bank Credit Documents - (i) That certain Amended and
Restated Credit Agreement and (ii) that certain letter agreement
re: Senior Secured Seasonal Line of Credit, in each case, dated as
of September 11, 1996 and by and among the Company and the Banks,
in each case, as in effect on the Amendment Effective Date (as
defined in the Amendment Agreement).
Exhibit A-1-4
<PAGE> 21
Amendment Agreement - That certain Amendment Agreement, dated as of
September 11, 1996, by and among the Company and the Noteholders.
Applicable Spread - An incremental rate of interest equal to 200 basis
points; provided, however, that, in the event the Company shall make the
prepayment in respect of the Notes required by Section 2.1(c) hereof, Applicable
Spread shall mean an incremental rate of interest equal to 100 basis points from
and after the date of such prepayment; provided further that if the Company
shall have complied with the requirements of the immediately preceding proviso
and shall have obtained from a nationally recognized debt rating agency a rating
in respect of the Notes of BBB or better, Applicable Spread shall mean an
incremental rate of interest equal to 30 basis points from and after the date of
such rating.
April 1994 Series Notes - Shall mean the Company's Senior Notes due
April 21, 2006 and each note delivered in substitution or exchange therefore, as
the same may be amended, restated or otherwise modified from time to time in
accordance with the terms of that certain Note Agreement dated as of April 1,
1994, by and between the Company and Allstate Life Insurance Company, as such
agreement may be amended, restated or otherwise modified from time to time.
Banks - Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., Old Kent
Bank, National City Bank and Harris Trust and Savings Bank, collectively.
Capital Infusion Proceeds. - The net proceeds received by the Company
from any issuance of (i) debt of the Company or (ii) equity of the Company,
other than Scheduled Equity Proceeds.
Collateral - Shall have the meaning ascribed to such term in the
Intercreditor Agreement
Collateral Agent - Shall have the meaning ascribed to such term in the
Intercreditor Agreement
Creditor Obligations - Shall have the meaning ascribed to such term in
the Intercreditor Agreement.
Creditor Parties - Shall have the meaning ascribed to such term in the
Intercreditor Agreement.
Determination Date - Either (i) the Business Day which is two Business
Days before the date fixed for a prepayment pursuant to Section 2.1(b), Section
2.1(c), Section 2.1(d) or Section 2.2(a) or (ii) the date of any acceleration
pursuant to Section 8.2.
Exhibit A-1-5
<PAGE> 22
Intercreditor Agreement - That certain Intercreditor Agreement dated as
of September 11, 1996, by and among the Banks, the Noteholders, Old Kent, in
its capacity as issuer of the Old Kent Letters of Credit (as defined therein),
and the Collateral Agent, and acknowledged and agreed to by the Company and its
Subsidiaries.
October 1994 Series Notes - Shall mean the Company's Senior Notes due
October 1, 2003 and each note delivered in substitution or exchange therefore,
as the same may be amended, restated or otherwise modified from time to time in
accordance with the terms of that certain Note Agreement dated as of October 1,
1994, by and between the Company and Allstate Life Insurance Company, as such
agreement may be amended, restated or otherwise modified from time to time.
Ponca City Litigation - An action entitled Facility Constructors, Inc.
v. Thorn Apple Valley, Inc. filed in February, 1996, in District Court, Kay
County, Oklahoma against the Company in connection with the construction of the
Company's plant in Ponca City, Oklahoma.
Post-Default Rate - In respect of any Note, a rate of interest equal to
the sum of (i) the rate of interest otherwise accruing in respect of the Notes
under Section 1.1(a), Section 1.1(b) or Section 1.1(c), as the case may be, plus
(ii) 200 basis points.
Post-Restructuring Rate - In respect of any Note, a rate of interest
equal to the sum of (i) 7.58% plus (ii) the Applicable Spread.
Pre-Restructuring Rate - In respect of any Note, a rate of interest
equal to the sum of (i) 7.58% plus (ii) 175 basis points.
Qualified Capital Infusion Amount - In respect of a Qualified Capital
Infusion Date, an amount equal to the remainder of
(a) the product of
(i) (y) if the aggregate amount of Qualified Capital
Infusion Proceeds received after July 31, 1996 and on or
before such Qualified Capital Infusion Date is greater than
or equal to $15,000,000, the greater of (A) $15,000,000 and
(B) fifty percent (50%) of such aggregate amount; or
(z) if the aggregate amount of Qualified Capital
Infusion Proceeds received after July 31, 1996 and on or
before such Qualified Capital Infusion Date is less than
$15,000,000, such aggregate amount,
times
Exhibit A-1-6
<PAGE> 23
(ii) a fraction the numerator of which is the initial
stated principal balance of the Notes (on the date of
initial issuance thereof) and the denominator of which is
$162,500,000,
minus
(b) the aggregate principal amount of the Notes prepaid
with Qualified Capital Infusion Proceeds pursuant to Section
2.1(b) prior to such Qualified Capital Infusion Date.
Qualified Capital Infusion Date - Any date, other than
April 30, 1997, on which the Company shall receive any Qualified
Capital Infusion Proceeds.
Qualified Capital Infusion Proceeds - Any Capital Infusion
Proceeds which are received by the Company after July 31, 1996
and on or before April 30, 1997, in connection with the issuance of (i)
equity of the Company or (ii) debt of the Company which is expressed to
be subordinated to the Notes on terms which are satisfactory to the
Noteholders in their sole and absolute discretion.
Scheduled Amount - An amount equal to the remainder of
(a) the product of
(i) the greater of (A) $15,000,000 and (B) fifty
percent (50%) of the aggregate amount of Qualified
Capital Infusion Proceeds,
times
(ii) a fraction the numerator of which is the initial
stated principal balance of the Notes (on the date of
initial issuance thereof) and the denominator of which
is $162,500,000,
minus
(b) the aggregate principal amount of the Notes prepaid
with Qualified Capital Infusion Proceeds pursuant to Section
2.1(b) prior to April 30, 1997.
Scheduled Equity Proceeds -- An amount equal to the lesser of
(i) $3,000,000 and (ii) the actual amount of cash and cash equivalents
received by the Company after July 31, 1996 and on or before September
12, 1996 in respect of equity investments from one or more of its
shareholders, which shall be provided on terms and conditions
satisfactory to the Noteholders in their sole discretion.
Security Documents - Shall have the meaning ascribed to such
term in the Intercreditor Agreement.
Exhibit A-1-7
<PAGE> 24
Shared Lien -- The lien upon the Collateral created by the
Security Documents in favor of the Creditor Parties.
Subsidiaries Guaranty - Shall have the meaning ascribed to the
term "Guaranty" in the Intercreditor Agreement.
TAVFSC - Shall mean Thorn Apple Valley Foreign Sales
Corporation, a U.S. Virgin Islands corporation.
Unscheduled Amortization Date - Any date on which the Company
receives any Unscheduled Proceeds.
Unscheduled Amount - In respect of an Unscheduled Amortization
Date, an amount equal to the product of
(a) the amount of Unscheduled Proceeds received by the
Company on such Unscheduled Amortization Date,
times
(b) a fraction the numerator of which is the initial
stated principal balance of the Notes (on the date of initial
issuance thereof) and the denominator of which is $162,500,000.
Unscheduled Proceeds - On any date, means:
(a) with respect to the sale, transfer or other
disposition by the Company or any Subsidiary of any capital
asset (including the capital stock of any Subsidiary), the
aggregate cash proceeds (including cash proceeds received by way
of deferred payment of principal (together with interest
thereon) pursuant to a note, installment receivable or
otherwise, but only as and when received) received by the
Company or any Subsidiary pursuant to such sale, transfer or
other disposition, other than (i) the proceeds of asset sales as
and to the extent permitted by Section 2.8(c), Section 2.8(x) or
Section 2.8(y) of Exhibit A-2 to the Amendment Agreement, (ii)
insurance proceeds permitted by the terms of the Security
Documents to be used to repair or replace damaged or destroyed
Property, and (iii) condemnation awards permitted by the terms
of the Security Documents to be used to replace any subject
Property, in each case, net of (A) the direct costs and expenses
relating to such sale, transfer or other disposition (including,
without limitation, sales commissions and legal, accounting and
investment banking fees), (B) taxes paid or reasonably estimated
by the Company to be payable as a result thereof (after taking
into account any available tax credits or deductions and any tax
sharing arrangements) and (C) amounts required to be applied to
the repayment of any Indebtedness secured by a Lien on the asset
subject to such sale, transfer or other disposition (other than
any Creditor Obligations) that is senior to the Shared Lien; and
Exhibit A-1-8
<PAGE> 25
(b) with respect to any Capital Infusion Proceeds which
are received after April 30, 1997, the aggregate cash proceeds
received by the Company or any Subsidiary pursuant to such
issuance, net of the direct costs relating to such issuance
(including, without limitation, sales and underwriter's
commissions and legal, accounting and investment banking fees).
6. AMENDMENTS TO SECTION 7 OF THE EXISTING NOTE AGREEMENT.
(a) Section 7.1 of the Existing Note Agreement is hereby amended
to read in its entirety as follows:
"7.1 Net Worth. The Company will not at any time permit
Consolidated Adjusted Net Worth to be less than the sum of
$70,000,000 plus forty percent (40%) of Consolidated Net Income for
each fiscal year of the Company commencing after May 30, 1996;
provided, however, that if Consolidated Net Income is less than
zero in any such fiscal year, Consolidated Net Income shall be
deemed to be zero in such fiscal year for purposes of this Section
7.1".
(b) Section 7.2(d) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(d) Funded Debt (including refinancings, refundings
or extensions of Funded Debt described in Annex II hereto and
Current Debt deemed to constitute Funded Debt pursuant to the
definition of Funded Debt in Section 5.1), so long as after giving
effect thereto and the application of the proceeds thereof:
(i) at all times on or before May 31, 1998, the amount
of total Funded Debt of the Company and its Subsidiaries then
outstanding would not exceed sixty-two and one-half percent
(62.5%) of Consolidated Total Capitalization determined as of
the end of the Company's prior fiscal quarter; and
(ii) at all times after May 31, 1998, (x) the amount of
total Funded Debt of the Company and its Subsidiaries (other
than Subordinated Debt) outstanding would not exceed fifty-five
percent (55%) of Consolidated Total Capitalization and (y) the
amount of total Funded Debt of the Company and its Subsidiaries
outstanding would not exceed sixty-five percent (65%) of
Consolidated Total Capitalization."
(c) Section 7.3 of the Existing Note Agreement is hereby amended
by deleting the phrase "twenty percent (20%)" contained therein and
replacing it with "ten percent (10%)".
Exhibit A-1-9
<PAGE> 26
(d) Section 7.4 of the Existing Note Agreement is hereby amended
to read in its entirety as follows:
"Fixed Charge Ratio. The Company will not, (a) as of the end
of any fiscal quarter from the date hereof to and including May
31, 1996, permit the ratio of Consolidated Cash Flow Available for
Fixed Charges to Consolidated Fixed Charges for the preceding
twelve months to be less than 0.75 to 1.0, and (b) as of the end of
any fiscal quarter from and after June 1, 1996, permit the ratio of
Consolidated Net Income Available for Fixed Charges to Consolidated
Fixed Charges for the preceding twelve months to be less than 1.5
to 1.0.
(e) Section 7.5 of the Existing Note Agreement is hereby amended
as follows:
(i) The word "and" at the end of Section 7.5(j) of the
Existing Note Agreement is hereby deleted.
(ii) The phrase "20%" contained in Section 7.5(k) of the
Existing Note Agreement is hereby deleted and replaced with "10%".
(iii) The period at the end of Section 7.5(k) of the Existing
Note Agreement is hereby deleted and the phrase "; and" is hereby
inserted in its place.
(iv) A new Section 7.5(l) is hereby added to the Existing Note
Agreement, after Section 7.5(k) of the Existing Note Agreement and
before the final paragraph of Section 7.5 of the Existing Note
Agreement, which shall read in its entirety as follows:
"(I) the Shared Lien."
(v) A new sentence is hereby added at the end of the last
paragraph of Section 7.5 of the Existing Note Agreement, which
shall read in its entirety as follows:
"The creation, assumption, incurrence or permission to
exist of any such non-permitted Lien will constitute an Event
of Default hereunder, regardless of whether any such provision
is made in accordance with the immediately preceding sentence."
(f) Section 7.6 of the Existing Note Agreement is hereby amended
as follows:
(i) The phrase "the Company could not incur an additional
$1.00 of Funded Debt pursuant to Section 7.2, (ii)" contained in
the text after paragraph (e) thereof and before paragraph (x)
thereof is hereby deleted.
(ii) The phrase "(iii)" contained in the text after paragraph
(e) thereof and before paragraph (x) thereof is hereby deleted and
replaced with "(ii)".
Exhibit A-1-10
<PAGE> 27
(iii) Each reference to "May 31, 1994" contained therein is
hereby deleted and replaced with "May 31, 1996".
(iv) The phrase "$22,000,000" appearing in paragraph (x)
thereof is hereby deleted and replaced with "$5,000,000".
(g) Section 7.7(a) of the Existing Note Agreement is hereby
amended as follows:
(i) The word "and" is hereby inserted at the end of paragraph
(i) thereof.
(ii) The phrase "; and" at the end of paragraph (ii) thereof
is hereby deleted and replaced with a period.
(iii) Paragraph (iii) thereof is hereby deleted in its
entirety.
7. AMENDMENTS TO SECTION 8.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 8.1(c) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(c) Default shall occur (i) in the payment of the principal
of, premium, or interest on any other Indebtedness of the Company
or its Subsidiaries, aggregating in excess of $1,000,000 in
principal amount as and when due and payable (whether by lapse of
time, declaration, call for redemption or otherwise), (ii) under
any mortgage, agreement or other instrument of the Company or any
Subsidiary securing such Indebtedness or under or pursuant to
which such Indebtedness aggregating in excess of $1,000,000 is
issued, (iii) under any leases other than Capitalized Leases of
the Company or any Subsidiary, with aggregate Rentals in excess of
$1,000,000, (iv) with respect to any combination of the foregoing
involving Indebtedness and/or Rentals aggregating in excess of
$1,000,000, regardless of whether such defaults would be Events of
Default hereunder, or (v) in the performance or observance of any
obligation or condition with respect to any such Indebtedness
and/or Rentals aggregating in excess of $1,000,000, regardless of
whether such defaults would be Events of Default hereunder, if the
effect of such default is to accelerate the maturity of any such
Indebtedness and/or Rentals or such default shall continue
unremedied for any applicable period of time sufficient to permit
the holder or holders of such Indebtedness or the parties to such
Capitalized Leases, or any trustee or agent for such holders or
parties, to cause such Indebtedness and/or Rentals to become due
and payable prior to its/their expressed maturity."
(b) Section 8.1(d) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(d) (i) At any time prior to the Covenant Reversion
Date (as defined in the Amendment Agreement), default in the
observance or
Exhibit A-1-11
<PAGE> 28
performance of any of the provisions of Section 1.8 or
Section 2 of Exhibit A-2 to the Amendment Agreement or Section
8.7 of this Agreement.
(ii) At any time on or after the Covenant Reversion
Date (as defined in the Amendment Agreement), default in the
observance or performance of any of the provisions of Sections
7.1 through 7.11 or Section 8.7 of this Agreement."
(c) Section 8.1(f) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(f) Any representation or warranty made by the Company in
this Agreement or the Amendment Agreement, or made by the Company
or any Subsidiary in any written statement or certificate
furnished by the Company or any Subsidiary in connection with the
issuance, or any amendment or restatement of, the Notes, or
furnished by the Company pursuant to this Agreement or the
Amendment Agreement, proves incorrect in any material respect as
of the date of the issuance or making thereof;"
(d) Section 8.1(g) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(g) Any fines, penalties, judgments, writs or warrants of
attachment or any similar processes individually or in the
aggregate in excess of $2,000,000 shall be entered or filed
against the Company or any Subsidiary or against any Property or
assets of either and remain unpaid, unvacated, unbonded or
unstayed (through appeal or otherwise) for a period of 30 days
after the Company or any Subsidiary receives notice thereof;
provided, however, that this clause (g) shall not include any
judgment against the Company in respect of the Ponca City
Litigation for an amount not greater than the sum of $6,000,000
plus interest accrued thereon;"
(e) The word "or" at the end of Section 8.1(h) of the Existing
Note Agreement is hereby deleted.
(f) The period at the end of Section 8.1(i)(vii) of the
Existing Note Agreement is hereby deleted and a semi-colon is hereby
inserted in its place.
(g) Section 8.1(j) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(j) The Company shall fail to receive at least $15,000,000 of
Qualified Capital Infusion Proceeds on or before April 30, 1997;"
(h) A new Section 8.1(k), a new Section 8.1(l) and a new
Section 8.1(m) are hereby added to the Existing Note Agreement, after
Section 8.1(j) and before Section 8.2 thereof, which shall read in
their entirety as follows:
Exhibit A-1-12
<PAGE> 29
"(k) The Company or any Subsidiary shall fail to comply in any
material respect with any one or more of the provisions or
requirements contained in the Security Documents; or any of the
Security Documents shall cease for any reason to be in full force
or effect or is declared to be null and void or the Company or any
Subsidiary shall disavow its respective obligations thereunder, or
shall contest the validity or enforceability of any thereof or
gives notice to such effect; or any Lien purported to be granted
pursuant to any of the Security Documents for any reason (other
than release or termination thereof by the Collateral Agent or the
Creditor Parties) shall cease to be a legal, valid or enforceable
Lien on the Property subject thereto with the priority purported
to be granted pursuant to such Security Documents (other than as a
result of the failure of the Collateral Agent or any Creditor
Party to take any action solely within its control);
(l) Any Subsidiary shall fail to comply in any material
respect with any one or more of the provisions or requirements
contained in the Subsidiaries Guaranty; or the Subsidiaries
Guaranty shall cease for any reason to be in full force or effect
or is declared to be null and void (other than in respect of
TAVFSC) or any Subsidiary shall disavow its respective obligations
thereunder, or shall contest the validity or enforceability
thereof or gives notice to such effect; or
(m) The Company shall make, or shall be required by one or
more final judgments to make, any payment or payments in an
aggregate amount greater than the sum of $6,000,000 plus accrued
interest in satisfaction of one or more judgments against the
Company in respect of the Ponca City Litigation."
8. AMENDMENT TO SECTION 8.2 OF THE EXISTING NOTE AGREEMENT. Section
8.2 of the Existing Note Agreement is hereby amended to read in its entirety as
follows:
"8.2 Remedies on Default. When any Event of Default described
in paragraph (a) through paragraph (h), inclusive, or paragraph (j)
through paragraph (m), inclusive, of Section 8.1 has happened and is
continuing, the holder or holders of at least 66 2/3% in aggregate
principal amount of the Notes, the April 1994 Series Notes and the
October 1994 Series Notes (taken together and voting as one class) then
outstanding (exclusive of Notes, April 1994 Series Notes and October
1994 Series Notes owned by one or more of the Company, any Subsidiary
or any Affiliate) may by notice to the Company declare the entire
principal, together with the premium set forth below, and all interest
accrued on all Notes to be, and such Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or
other notice of any kind, all of which are expressly waived.
Notwithstanding the foregoing, when
(i) any Event of Default described in paragraph (a) or
paragraph (b) of Section 8.1 has happened and is continuing, any
holder may by notice to the Company declare the entire principal,
together with the premium set forth below, and all interest
accrued on the Notes then held by such holder to be, and such
Notes shall thereupon become, forthwith due and payable, without
any presentment, demand, protest or other notice of any kind, all
of which are expressly waived, and
Exhibit A-1-13
<PAGE> 30
(ii) any Event of Default described in paragraph (i) of
Section 8.1 has happened, then all outstanding Notes shall
immediately become due and payable without presentment, demand or
notice of any kind.
Upon the Notes or any of them becoming due and payable as
aforesaid, the Company will forthwith pay to the holders of such Notes
the entire principal of and interest accrued on such Notes, plus, to
the extent permitted by law, a premium in the event that the
Reinvestment Yield shall, on the Determination Date, be less than the
interest rate payable on or in respect of the Notes. Such premium shall
equal (x) the aggregate present value of the principal so accelerated
and the aggregate present value of the interest which would have been
payable in respect of such principal (at the rate of 7.58% per annum)
absent such accelerated payment, determined by discounting
(semi-annually on the basis of a 360-day year composed of twelve 30-day
months) each such amount utilizing an interest factor equal to the
Reinvestment Yield, less (y) the principal amount so accelerated."
9. AMENDMENT TO SECTION 8.3 OF THE EXISTING NOTE AGREEMENT. Section
8.3 of the Existing Note Agreement is hereby amended to read in its entirety as
follows:
"8.3 Annulment of Acceleration of Notes. The provisions of Section
8.2 are subject to the condition that if the principal of and accrued
interest on the Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraph
(c) through paragraph (h), inclusive, or paragraph (j) through paragraph
(m), inclusive, of Section 8.1, the holder or holders of at least 70% in
aggregate principal amount of the Notes, the April 1994 Series Notes and
the October 1994 Series Notes (taken together and voting as one class)
then outstanding (exclusive of Notes, April 1994 Series Notes and
October 1994 Series Notes held in the name of, or owned beneficially by,
any one or more of the Company, any Subsidiary or any Affiliate) may, by
written instrument filed with the Company, rescind and annul such
declaration and the consequences thereof; provided that (i) at the time
such declaration is annulled and rescinded no judgment or decree has
been entered for the payment of any monies due pursuant to the Notes or
this Agreement, (ii) all arrears of interest upon all the Notes and all
other sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under Section 8.2) shall
have been duly paid and (iii) each and every Event of Default shall have
been cured or waived; and provided further, that no such rescission and
annulment shall extend to or affect any subsequent Default or Event of
Default or impair any right consequent thereto."
10. AMENDMENT TO SECTION 8.4 OF THE EXISTING NOTE AGREEMENT. Section
8.4 of the Existing Note Agreement is hereby amended to read in its entirety as
follows:
"8.4 Remedies on Default. If an Event of Default shall be
continuing, any holder of Notes may enforce its rights by suit in
equity, by action at law, or by any other appropriate proceedings,
whether for the specific performance (to the extent permitted by law)
of any covenant or agreement contained in this Agreement, and may
enforce the payment of any Note held by such holder and any of its
other legal or equitable rights, provided that the maturity of such
holder's Notes may be accelerated only in accordance with Section 8.2."
11. AMENDMENTS TO SECTION 9.1 OF THE EXISTING NOTE AGREEMENT. Section
9.1 of the Existing Note Agreement is hereby amended to read in its entirety as
follows:
"9.1 Matters Subject to Modification. Any term, covenant,
agreement or condition of this Agreement may, with the consent of the
Company, be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in
writing of the holder or holders of at least 66 2/3% in aggregate
principal amount of the Notes, the April 1994 Series Notes and the
October 1994 Series Notes (taken together and voting as one class) then
outstanding; provided, however, that, without the written consent of
the holder or holders of all of the Notes, April 1994 Series Notes and
October 1994 Series Notes then outstanding, no such waiver,
modification, alteration or amendment shall be effective which will (i)
change the time of payment (including any required prepayment) of the
principal of or the interest on any Note, (ii) reduce the principal
amount thereof or the premium, if any, or change the rate of interest
thereon,
Exhibit A-1-14
<PAGE> 31
(iii) change any provision of any instrument affecting the
preferences between holders of the Notes or between holders of the
Notes and other creditors of the Company, or (iv) change any of the
provisions of Section 6.10, Section 8 or this Section 9.
For the purpose of determining whether the holder or holders of
all or any requisite principal amount of Notes, or of Notes, April 1994
Series Notes and October 1994 Series Notes, have made or concurred in
any waiver, consent, approval, notice or other communication under this
Agreement, any and all Notes, April 1994 Series Notes and October 1994
Series Notes held in the name of, or owned beneficially by, the
Company, any Subsidiary or any Affiliate thereof, shall not be deemed
outstanding.
12. AMENDMENTS TO SECTION 9.2 OF THE EXISTING NOTE AGREEMENT. Section
9.2 of the Existing Note Agreement is hereby amended to read in its entirety as
follows:
"9.2 Solicitation of Holders of Notes. The Company will not
solicit, request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions of this Agreement or the
Notes unless each record holder of the Notes and each record holder of
April 1994 Series Notes and October 1994 Series Notes (irrespective of
the amount of Notes or April 1994 Series Notes or October 1994 Series
Notes then owned by it) shall concurrently be informed thereof by the
Company and shall be afforded the opportunity of considering the same
and shall be supplied by the Company with sufficient information to
enable it to make an informed decision with respect thereto. Executed
or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 9 shall be delivered by the Company
to each holder of outstanding Notes and each holder of April 1994
Series Notes and October 1994 Series Notes forthwith following the date
on which the same shall have become effective in accordance with the
terms thereof and of this Section 9. The Company will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of
Notes or any holder of April 1994 Series Notes or October 1994 Series
Notes as consideration for or as an inducement to the entering into by
any holder of Notes or any holder of April 1994 Series Notes or October
1994 Series Notes of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently
paid, on the same terms, ratably to the holders of all Notes, April
1994 Series Notes and October 1994 Series Notes then outstanding. Any
consent made pursuant to this Section 9 by a holder of Notes that has
transferred or has agreed to transfer its Notes to the Company or any
Affiliate or has agreed to provide such written consent as a condition
to such transfer shall be void and of no force and effect except solely
as to such holder, and any amendments effected or waivers granted or to
be effected or granted that would not have been or would not be so
effected or granted but for such consent (and the consents of all other
holders of Notes and holders of April 1994 Series Notes and October
1994 Series Notes that were acquired under the same or similar
conditions) shall be void and of no force and effect, retroactive to
the date such amendment or waiver initially took or takes effect,
except solely as to such holder.
13. AMENDMENT TO FORM OF NOTES AND AMENDMENT AND RESTATEMENT OF NOTES.
(i) Exhibit A to the Existing Note Agreement is hereby amended to read in its
entirety as set forth
Exhibit A-1-15
<PAGE> 32
below and (ii) each of the Notes shall, contemporaneously with the delivery of
this Agreement, be amended and restated in the form set forth below:
[Remainder of page intentionally left blank.]
Exhibit A-1-16
<PAGE> 33
"EXHIBIT A
THORN APPLE VALLEY, INC.
SENIOR NOTE
DUE MAY 15, 2005
PPN: 885184 B# 7
_________________________
THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT AND
ACCORDINGLY ANY PROSPECTIVE PURCHASERS SHOULD FIRST VERIFY THE UNPAID PRINCIPAL
AMOUNT WITH THE COMPANY.
_________________________
Registered Note No. R-____
[Date]
$________________________
THORN APPLE VALLEY, INC., a Michigan corporation (the "Company"), for
value received, hereby promises to pay to ________________________ or
registered assigns, on the fifteenth day of May, 2005, the principal amount of
_________________ Dollars ($________) and to pay interest (computed on the
basis of a 360-day year of twelve 30-day months) on the principal amount from
time to time remaining unpaid hereon at the rate set forth in the Note
Agreement hereinafter defined from the date hereof until maturity, payable at
the times set forth in the Note Agreement hereinafter defined, and at maturity,
and to pay interest on overdue principal, premium and (to the extent legally
enforceable) on any overdue installment of interest at the rate set forth in
the Note Agreement hereinafter defined after maturity or the due date thereof,
whether by acceleration or otherwise, until paid. Payments of the principal
of, the premium, if any, and interest on this Note shall be made in lawful
money of the United States of America in the manner and at the place provided
in Section 2.5 of the Note Agreement hereinafter defined.
This Note is issued under and pursuant to the terms of a Note
Agreement, dated as of May 15, 1995, entered into by the Company with the
Purchasers named in Schedule I thereto (as amended from time to time, the "Note
Agreement"), and this Note and any holder hereof are entitled to all of the
benefits and are bound by the terms provided for in such Note Agreement. The
provisions of the Note Agreement are incorporated in this Note to the same
extent as if set forth at length herein.
This Note has not been registered under the Securities Act as provided
in the Note Agreement, any transfer is subject to compliance with the terms of
the Note Agreement and upon surrender of this Note for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder hereof or its attorney duly authorized in
writing, a new Note for a like unpaid principal
Exhibit A-1-17
<PAGE> 34
amount will be issued to, and registered in the name of, the transferee
upon the payment of the taxes or other governmental charges, if any, that may
be imposed in connection therewith. The Company may treat the person in whose
name this Note is registered as the owner hereof for the purpose of receiving
payment for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Under certain circumstances, this Note may be declared due prior to its
expressed maturity date. Required prepayments must be made hereon as set forth
in the Note Agreement. Voluntary and other prepayments may be made hereon in
the events, on the terms and in the manner as provided in the Note Agreement.
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Note Agreement or be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition
to the principal, premium, if any, and interest due and payable hereon, to the
extent legally enforceable, all costs of collecting this Note, including
reasonable attorneys' fees and expenses.
This Note and the Note Agreement are governed by and construed in
accordance with the laws of the State of Illinois.
THORN APPLE VALLEY, INC.
By:
-----------------------------
Its:"
Exhibit A-1-18
<PAGE> 35
EXHIBIT A-2
TEMPORARY COVENANTS(1)
SECTION 1. AFFIRMATIVE COVENANTS. The Borrower agrees with the Agent
and each Creditor Party that the Borrower will perform the obligations set
forth in this Section 1 and in Sections 6.3, 6.6(e), 6.6(f), 6.6(g), 6.6(h),
6.6(i), 6.8, 6.10, 6.11, and 6.12 of the Existing Note Agreement.
SECTION 1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower will furnish, or will cause to be furnished, to each Creditor Party
and the Agent copies of the following financial statements, reports, notices
and information:
(a) Weekly Reporting -- on the last Business Day of each week,
(i) a Borrowing Base Certificate setting forth a calculation
of the Borrowing Base as of the last Business Day of the preceding
week; and
(ii) a Weekly P&L Statement in respect of the preceding week;
(b) Fiscal Periodic Reporting --
(i) as soon as available and in any event within 26 days after
the end of each of the first twelve Fiscal Periods of each Fiscal
Year, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Period and consolidated
statements of earnings and cash flow of the Borrower and its
Subsidiaries for such Fiscal Period and for the period commencing
at the end of the previous Fiscal Year and ending with the end of
such Fiscal Period, certified as true and correct by the chief
financial Authorized Officer of the Borrower (the parties hereto
acknowledge that such financial statements will not have been
audited, and that the annual audit of the Borrower may require
adjustments to the figures presented therein);
(ii) as soon as available and in any event within 26 days
after the end of each Fiscal Period of each Fiscal Year, a
comparison of
(A) the actual consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such Fiscal
Period and actual consolidated statements of earnings and cash
flow of the Borrower and its Subsidiaries for such Fiscal
Period and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal
Period (the parties hereto acknowledge that such financial
statements will not have been audited, and that the annual
audit of the Borrower may require adjustments to the figures
presented therein), with
________________________
(1) Capitalized terms used in this Exhibit A-2 are defined in Section 3
of this Exhibit A-2.
Exhibit A-2-1
<PAGE> 36
(B) the budgeted consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such Fiscal
Period and the budgeted consolidated statements of earnings
and cash flow of the Borrower and its Subsidiaries for such
Fiscal Period and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal
Period, in each case, contained in the most recent Rolling
Projection (defined below),
certified as true and correct by the chief financial Authorized
Officer of the Borrower;
(iii) as soon as available and in any event within 26 days
after the end of each of the first twelve Fiscal Periods of each
Fiscal Year and within 90 days after the end of the last Fiscal
Period of each Fiscal Year, a certificate, executed by the chief
financial Authorized Officer of the Borrower, showing (in
reasonable detail and with appropriate calculations and
computations in all respects satisfactory to the Agent and each
Creditor Party) compliance with the financial covenants set forth
in Section 2.4; and
(iv) as soon as available and in any event within 30 days
after the end of each Fiscal Period of each Fiscal Year, a
management report describing in detail the Company's results of
operations during such Fiscal Period and explaining, among other
things, (x) any material variances demonstrated by the comparison
delivered in respect of such Fiscal Period pursuant to clause (ii)
above and (y) any failure to comply with financial covenants
identified in the certificate delivered in respect of such Fiscal
Period pursuant to clause (iii) above;
(c) Quarterly Reporting -- as soon as available and in any
event within 45 days after the end of each of Fiscal Quarter of each
Fiscal Year, a projection (each, a "Rolling Projection"), for each of
the thirteen Fiscal Periods next succeeding the last day of such Fiscal
Quarter, of the consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of each such next succeeding Fiscal Period
and the budgeted consolidated statements of earnings and cash flow of
the Borrower and its Subsidiaries for each such next succeeding Fiscal
Period and for the period commencing at the end of such Fiscal Quarter
and ending with the end of each such next succeeding Fiscal Period,
certified as true and correct by the chief financial Authorized Officer
of the Borrower;
(d) Annual Reporting --
(i) as soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower, a copy of the annual
audit report (including, without limitation, any accompanying or
related auditor's letter and the Borrower's responses thereto) for
such Fiscal Year for the Borrower and its Subsidiaries, including
therein consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and consolidated
statements of earnings and cash flow of the Borrower and its
Subsidiaries for such Fiscal Year, in each case certified (without
any Impermissible Qualification) in a manner acceptable to the
Agent and each of the Creditor Parties by Coopers & Lybrand or
other
Exhibit A-2-2
<PAGE> 37
independent public accountants acceptable to the Agent and each
of the Creditor Parties, together with a certificate from such
accountants to the effect that, in making the examination
necessary for the signing of such annual report by such
accountants, they have not become aware of any Default or Event of
Default that has occurred and is continuing, or, if they have
become aware of such Default or Event of Default, describing such
Default or Event of Default and the steps, if any, being taken to
cure it; provided, however, that in the case of the Company's
financial statements for the Fiscal Year ended May 31, 1996, such
audit opinion shall be delivered not later than September 13,
1996;
(ii) together with the financial reports delivered pursuant to
paragraph (i) of this Section 1.1(d), a certificate of the
independent certified public accountants (i) stating that in
making the examination necessary for expressing an opinion on such
financial statements, nothing came to their attention that caused
them to believe that there is in existence or has occurred any
Default or Event of Default under any of the Financing Agreements
(as defined in the Intercreditor Agreement) or, if such
accountants shall have obtained knowledge of any such Default or
Event of Default, describing the nature thereof and the length of
time it has existed and (ii) acknowledging that the Creditor
Parties may rely on their opinion on such financial statements;
(e) Defaults -- as soon as possible and in any event within
three days after the occurrence of each Default, a statement of the
chief financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower has taken and
proposes to take with respect thereto;
(f) Litigation -- as soon as possible and in any event within
three days after (x) the occurrence of any adverse development with
respect to any litigation, action, proceeding, or labor controversy
described in Section 6.7 of the Bank Credit Agreement or (y) the
commencement of any labor controversy, litigation, action, proceeding
of the type described in Section 6.7 of the Bank Credit Agreement,
notice thereof and copies of all documentation relating thereto;
(g) Securities Reports, etc. -- promptly after the sending or
filing thereof, copies of all reports which the Borrower sends to any
of its securityholders, and all reports and registration statements
which the Borrower or any of its Subsidiaries files with the Securities
and Exchange Commission or any national securities exchange;
(h) Pension Plans -- immediately upon becoming aware of the
institution of any steps by the Borrower or any other Person to
terminate any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto; and
Exhibit A-2-3
<PAGE> 38
(i) Other -- such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Creditor Party may from time to time reasonably
request.
SECTION 1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate existence
and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of all
taxes, assessments and governmental charges imposed upon it or upon its
Property except to the extent being diligently contested in good faith
by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.
SECTION 1.3. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.
(a) The Borrower will maintain and preserve, and will cause
each Subsidiary to maintain and preserve, its corporate existence and
right to carry on its business and will use, and cause each Subsidiary
to use, its best efforts to maintain, preserve, renew and extend all of
its rights, powers, privileges and franchises necessary to the proper
conduct of its business.
(b) The Borrower will, and will cause each of its Subsidiaries
to, maintain, preserve, protect and keep its properties in good repair,
working order and condition, and make necessary and proper repairs,
renewals and replacements so that its business carried on in connection
therewith may be properly conducted at all times unless the Borrower
determines in good faith that the continued maintenance of any of its
properties is no longer economically desirable.
SECTION 1.4. INSURANCE. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts and with only such
deductibles as is customary in the case of similar businesses and will, upon
request of the Agent or any Creditor Party, furnish to each Creditor Party at
reasonable intervals a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section.
SECTION 1.5. BOOKS AND RECORDS. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Agent and each of
(i) the Noteholders as a group and (ii) the Lenders as a group, or any of their
respective representatives, at reasonable times and intervals, to visit all of
its offices, to discuss its financial matters with its officers and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with each Creditor Party
or its representatives whether or not any
Exhibit A-2-4
<PAGE> 39
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
records. The Borrower shall pay any fees of such independent public accountant
incurred in connection with the Agent's or any Creditor Party's exercise of its
rights pursuant to this Section.
SECTION 1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to:
(a) use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and each Creditor Party and
provide copies upon receipt of all written claims, complaints, notices
or inquiries from governmental authorities relating to the condition of
its facilities and properties or compliance with Environmental Laws,
and shall promptly cure and have dismissed with prejudice to the
satisfaction of the Agent and each Creditor Party any actions and
proceedings relating to compliance with Environmental Laws; and
(c) provide such information and certifications which the Agent
or any Creditor Party may reasonably request from time to time to
evidence compliance with this Section 1.6.
SECTION 1.7. EQUITY OR SUBORDINATED DEBT.
(a) The Borrower shall receive at least $15,000,000 in proceeds
of Subordinated Debt on or before April 30, 1997.
(b) In the event that the Borrower shall fail to receive at
least $15,000,000 in proceeds of equity or Subordinated Debt on or
before January 31, 1997, the Borrower shall retain a
nationally-recognized investment advisor, who shall be acceptable to
the Creditor Parties, to set up and implement a plan (a copy of which
shall be provided to each Creditor Party) to raise such proceeds on or
before April 30, 1997.
SECTION 1.8. COLLATERAL MATTERS. The Borrower shall, and shall cause
each Subsidiary to, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register, any and all acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments, and do
such further acts, as the Collateral Agent may reasonably request from time to
time in order:
(a) to ensure that
(i) the obligations of the Borrower hereunder and
under the other Financing Agreements (as defined in the
Intercreditor Agreement) are secured by substantially all
assets of the Borrower, subject to the exceptions set forth in
Exhibit A-2-5
<PAGE> 40
Exhibit A-3 and guaranteed, pursuant to the
Subsidiaries Guaranty, by all Subsidiaries (including,
promptly upon the acquisition or creation thereof, any
Subsidiary created or acquired after the Effective Date), and
(ii) the obligations of each Subsidiary under the
Subsidiaries Guaranty are secured by substantially all of the
assets of such Subsidiary, and
(b) to perfect and maintain the validity, effectiveness and
priority of any of the Security Documents and the Liens intended to be
created thereby, subject to the exceptions set forth in Exhibit A-3.
Without limiting the generality of the foregoing, the Borrower shall, and shall
cause each Subsidiary to, take the actions in respect of Collateral set forth
on Exhibit A-3 within the times set forth therein. Contemporaneously with the
execution and delivery of any document referred to above, the Borrower shall,
and shall cause each Subsidiary to, deliver all resolutions, opinions and
corporate documents as the Collateral Agent may reasonably request to confirm
the enforceability of such document and the perfection of the security interest
created thereby, if applicable.
SECTION 2. NEGATIVE COVENANTS. The Borrower agrees with the Agent and
each Creditor Party that the Borrower will perform the obligations set forth in
this Section 2.
SECTION 2.1. BUSINESS ACTIVITIES. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
the business of processing food and such activities as may be incidental or
related thereto.
SECTION 2.2. INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Creditor Obligations;
(b) Indebtedness existing as of the Effective Date which is
identified in Item 2.2(b) ("Ongoing Indebtedness") of the Disclosure
Schedule attached hereto;
(c) Indebtedness secured by Liens described in clause (h) or
(j) of Section 2.3;
(d) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but excluding
Indebtedness incurred through the borrowing of money or Guaranties);
(e) Hedging Obligations to a Lender;
(f) Subordinated Debt; or
(g) obligations in respect of Capital Leases in an aggregate
amount not to exceed $7,000,000 at any time.
Exhibit A-2-6
<PAGE> 41
SECTION 2.3. LIENS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of
its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens for taxes, assessments or governmental charges not
then due and delinquent and for which a penalty has not attached or the
validity of which is being contested in good faith and by proper
proceedings and with respect to which adequate reserves are maintained
in accordance with GAAP;
(b) Liens arising in connection with court proceedings,
provided that the execution of such Liens is effectively stayed, such
Liens are being contested in good faith and adequate reserves are
maintained with respect thereto in accordance with GAAP;
(c) Liens arising in the ordinary course of business and not
incurred in connection with the borrowing of money, including
encumbrances in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real Property, landlord's and
lessor's liens in the ordinary course of business, which do not,
individually or in the aggregate, materially interfere with the conduct
of the business of the Borrower and its Subsidiaries taken as a whole
and do not materially affect the value of the Property subject to such
Liens;
(d) Construction or materialmen's or mechanic's Liens
securing obligations not overdue or, if overdue, being
contested in good faith and by proper proceedings and with respect to
which adequate reserves are maintained in accordance with GAAP;
(e) Liens in connection with workers' compensation, social
security taxes or similar charges arising in the ordinary course of
business and not incurred in connection with the borrowing of money;
(f) Liens existing on the Effective Date set forth in Item
2.3(f) of the Disclosure Schedule attached hereto;
(g) Intercompany Liens (for purposes of intercompany Liens,
a Subsidiary shall mean any corporation of which the Borrower directly
or indirectly owns at least 80% of the Voting Stock);
(h) The extension, renewal or replacement of any Lien
permitted by the foregoing paragraph (f) in respect of the same
Property theretofore subject thereto or the extension, renewal or
replacement (without increase of principal amount of the Indebtedness
originally incurred);
(i) Liens incurred in connection with obtaining or
performing government contracts in the ordinary course of business and
not incurred in connection with the borrowing of money;
(j) (i) Any Lien in Property or in rights relating thereto to
secure any rights granted with respect to such Property in connection
with the provision of all or a part of the purchase price or cost of
the construction of such Property created
Exhibit A-2-7
<PAGE> 42
contemporaneously with, or within 270 days after, such
acquisition or the completion of such construction (except Liens in
connection with the Ponca City Litigation shall not be permitted under
this clause (j)(i)), or (ii) any Lien in Property existing in such
Property at the time of acquisition thereof, whether or not the debt
secured thereby is assumed by the Borrower or such Subsidiary;
provided, that the Indebtedness secured by any such Lien referred to in
clauses (i) and (ii) above shall not exceed 100% of the fair market
value on the related Property at the time the Lien was originally
created;
(k) the Shared Lien; and
(l) Liens created, in the ordinary course of the Borrower's and
each Subsidiary's business, under the Packers and Stockyards Act of
1921, as amended, and the regulations promulgated thereunder, provided,
that the creation and continued existence of any such Liens, either
individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Borrower and the Subsidiaries, taken as a whole, or
on the Borrower's ability to perform its obligations under any of the
Financing Agreements (as defined in the Intercreditor Agreement).
SECTION 2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) At any time during any period set forth in the table below,
Consolidated Adjusted Net Worth to be less than the amount set forth
opposite such period in such table:
<TABLE>
<CAPTION>
CONSOLIDATED ADJUSTED NET WORTH SHALL
DURING THE PERIOD NEVER BE LESS THAN
==========================================================================================================
<S> <C>
From September 12, 1996 through and including $72,000,000
December 14, 1996
----------------------------------------------------------------------------------------------------------
From December 15, 1996 through and including March $74,000,000
8, 1997
----------------------------------------------------------------------------------------------------------
From March 9, 1997 through and including April 30, $76,000,000
1997
----------------------------------------------------------------------------------------------------------
From May 1, 1997 through and including the date $91,000,000 plus 50% of the Consolidated Net
on which the Loans (under the Bank Credit Agreement Earnings for each Fiscal Year commencing with the
and the New Seasonal Line of Credit Agreement), 1997 Fiscal Year; provided, however, that if
other Obligations and the Insurance Notes shall Consolidated Net Earnings is less than zero in any
have been paid in full in cash Fiscal Year, Consolidated Net Earnings shall be
deemed to be zero in such Fiscal Year for purposes
of this Section 2.4(a).
==========================================================================================================
</TABLE>
As of any date (prior to May 1, 1997) on which the Borrower
receives the proceeds of any Subordinated Debt, the amount set forth in
the table above opposite (i) the period
Exhibit A-2-8
<PAGE> 43
containing such date and (ii) each subsequent period (other than
the last such period), shall be increased by the amount of such
proceeds; provided, however, that the aggregate amount of such increases
shall in no event exceed $15,000,000 in respect of any such period
regardless of the aggregate amount of such proceeds.
(b) As of the end of each Fiscal Period commencing with the
seventh Fiscal Period in the 1997 Fiscal Year and ending with the
seventh Fiscal Period in the 1998 Fiscal Year, the ratio of Consolidated
Earnings Available for Interest Expense to Consolidated Interest Expense
for the Relevant Period to be less than 1.65 to 1. As of the end of
each Fiscal Period commencing with the eighth Fiscal Period in the 1998
Fiscal Year and ending with the twelfth Fiscal Period in the 1998 Fiscal
Year, the ratio of Consolidated Earnings Available for Interest Expense
to Consolidated Interest Expense for the Relevant Period to be less than
1.85 to 1. As of the end of each Fiscal Period commencing with the
thirteenth Fiscal Period in the 1998 Fiscal Year, the ratio of
Consolidated Earnings Available for Interest Expense to Consolidated
Interest Expense for the Relevant Period to be less than 2.0 to 1. For
purposes of this clause (b), "Relevant Period" shall mean (i) in respect
of any Fiscal Period ending on or before May 30, 1997, the period
commencing on May 31, 1996 and ending on the last Business Day of such
Fiscal Period, and (ii) in respect of any other Fiscal Period (each, a
"Testing Period"), the period commencing on the first Business Day of
the twelfth preceding Fiscal Period and ending on the last Business Day
of such Testing Period.
(c) At any time, the obligations of the Borrower and its
Subsidiaries for the payment of rental for any Property during the next
succeeding 365-day period under existing leases, subleases or similar
arrangements (other than Capital Leases) to exceed in the aggregate
$9,000,000.
(d) The aggregate amount of Consolidated Earnings Available for
Interest Expense in respect of the 1997 Fiscal Year to be less than
$24,630,880.
(e) (i) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first seven (7)
Fiscal Periods of the 1997 Fiscal Year to be less than
$2,000,000.
(ii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first ten (10)
Fiscal Periods of the 1997 Fiscal Year to be less than
--$1,000,000.
(iii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the 1997 Fiscal
Year to be less than --$3,000,000.
SECTION 2.5. INVESTMENTS. The Borrower will not, and will not
permit any Subsidiary to, make, incur, assume or suffer to exist any Investment
in any other Person, except:
(a) Investments existing on the Effective Date set forth in Item
2.5(a) of the Disclosure Schedule attached hereto;
Exhibit A-2-9
<PAGE> 44
(b) Investments in certificates of deposit, repurchase
agreements or bankers' acceptances, maturing within one year from the
date or origin, issued by a bank organized under the laws of the United
States or any state thereof, having capital, surplus and undivided
profits aggregating at least $100,000,000;
(c) Investments in commercial paper maturing in 270 days or less
from the date of issuance which, at the time of acquisition by the
Borrower or any Subsidiary, is accorded at least an "A-1" rating by
Standard & Poor's Ratings Group or "P-1" by Moody's Investors Service,
Inc.;
(d) Investments in direct obligations of the United States of
America, or any agency thereof, the obligations of which are guaranteed
by the United States of America, maturing in twelve months or less from
the date of acquisition thereof;
(e) Investments in "money market" preferred stock rated "A" or
better by Standard & Poor's Corporation or "A2" by Moody's Investors
Service, Inc.;
(f) Investments in tax-exempt floating rate option tender bonds
backed by an irrevocable letter of credit issued by a bank the long-term
debt rating of which is at least "AA" by Standard & Poor's Rating Group
or "Aa2" by Moody's Investors Service, Inc.;
(g) Investments in Subsidiaries in existence on the Effective
Date and which operate principally in lines of business similar to lines
of business of the Borrower or its Subsidiaries existing on the
Effective Date; and
(h) Investments in or commitments to purchase foreign currency;
provided, that such Investment is made solely to the extent that the
Borrower and its Subsidiaries are obligated to make payments to other
Persons in such foreign currency.
In valuing any Investments for the purpose of applying the limitations
set forth above, such Investments shall be taken at the original cost thereof,
without allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered on account of capital or
principal.
For purposes of this Section 2.5 at any time when a corporation becomes
a Subsidiary, all investments of such corporation at such time shall be deemed
to have been made by such corporation, as a Subsidiary, at such time.
SECTION 2.6. RESTRICTED PAYMENTS, ETC. On and at all times after
the Effective Date, the Borrower will not:
(a) declare or pay any dividends, either in cash or Property,
on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of capital stock of the
Borrower); or
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of Borrower's capital stock of
any class or any warrants, rights or options to purchase or acquire any
shares of the Borrower's capital stock; or
Exhibit A-2-10
<PAGE> 45
(c) make any other payment or distribution, either directly or
indirectly or through any Subsidiary, in respect of its capital stock;
or
(d) make any payment, either directly or indirectly or through
any Subsidiary, of principal of any Subordinated Debt other than at the
expressed maturity date thereof and scheduled mandatory prepayments or
redemptions thereof in accordance with the terms in effect on the date
of creation of such Subordinated Debt.
SECTION 2.7. CONSOLIDATION, MERGER, ETC. The Borrower will not, and
will not permit any Subsidiary to, liquidate or dissolve, consolidate with, or
merge into or with, any other corporation, or purchase or otherwise acquire all
or substantially all of the assets of any Person (or of any division thereof)
except any such Subsidiary may liquidate or dissolve voluntarily into, and may
merge with and into, the Borrower or any other Subsidiary, and the assets or
stock of any Subsidiary may be purchased or otherwise acquired by the Borrower
or any other Subsidiary.
SECTION 2.8. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any Subsidiary to, sell, lease, transfer or otherwise dispose
of any assets, including the disposition of the stock of any Subsidiary and
including any Sale and Lease-Back Transaction (collectively, a "Disposition"),
in one or a series of transactions to any Person other than the Borrower or a
Majority-Owned Subsidiary, other than:
(a) in the ordinary course of business (including, without
limitation, the disposition of tractors and trailers owned by the
Borrower in the ordinary course of business and consistent with the
Borrower's past practice);
(b) in the Frederick Disposition, provided that the Borrower
receives all cash consideration, and the net cash proceeds therefrom
are simultaneously paid to the Creditor Parties (in accordance with the
Intercreditor Agreement), in each case, on or before November 30, 1997,
or thereafter with the consent of each of the Creditor Parties, which
consent shall not be unreasonably withheld; or
(c) the following Dispositions:
(i) the plant and equipment located in Concordia,
Missouri which is subject to a purchase option in favor of the
lessee of such facility (approximate balance of purchase price:
$2,000,000);
(ii) the Borrower's facility known as "Tri-Miller"
located in Hyrum, Utah, which has an approximate value of
$600,000;
(iii) A building known as the "H&R Building" located
in Detroit, Michigan, which has an approximate value of
$475,000; and
(iv) a condominium located in Bloomfield Hills,
Michigan (approximate balance of purchase price: $300,000);
Exhibit A-2-11
<PAGE> 46
provided that the aggregate book value of all such assets sold,
leased, transferred or otherwise disposed of from time to time pursuant
to this Section 2.8(c) shall not exceed $4,000,000;
provided, however, that:
(x) the Borrower may, and may permit any Subsidiary to, sell,
lease, transfer or otherwise dispose of equipment if the cash proceeds
therefrom are utilized within one year after such Disposition to
purchase or are committed to the purchase of Property of a similar
nature and of at least equivalent value; and
(y) the Borrower may otherwise, and may permit any Subsidiary
otherwise to, sell, lease, transfer or otherwise dispose of equipment
so long as the aggregate amount of the book value of equipment so
disposed (as of the time of its disposition) does not exceed $2,000,000
in any 365-day period.
SECTION 2.9. SALES AND LEASEBACKS. The Borrower will not, and will
not permit any Subsidiary to, effect any Sale and Lease-Back Transaction with
respect to:
(a) any Property of the Borrower or any Subsidiary
which Property was owned or leased by the Borrower or any Subsidiary on
or prior to September 12, 1996; or
(b) any other Property, if the aggregate book value of all
such other Property that is the subject of a Sale and Lease-Back
Transaction during any period of 365 consecutive days would exceed
$1,000,000.
SECTION 2.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction (including
the furnishing of goods or services) with an Affiliate except in the ordinary
course of business and on terms and conditions no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 2.11. COMPLIANCE WITH BORROWING BASE. The Borrower will not
incur any Borrowing Base Debt if, after giving effect to such incurrence, and
any concurrent repayment of Loans or Other Borrowing Base Debt, the aggregate
principal amount of Borrowing Base Debt would exceed the Borrowing Base.
SECTION 2.12. HEDGING ACTIVITIES. The Borrower will not, and will not
permit any Subsidiary to, buy, sell, trade or otherwise deal in futures
contracts or options thereon or other derivatives thereof except pursuant to
transactions that represent substitutes for transactions to be made by the
Borrower or such Subsidiary at a later time in the physical pork or pork
products market and the purpose of which is solely to reduce the risk to the
Borrower or such Subsidiary of future fluctuations in the market prices of pork
or pork products.
Exhibit A-2-12
<PAGE> 47
SECTION 2.13. NET CAPITAL EXPENDITURES.
(a) Net Capital Expenditures of the Borrower and its
Subsidiaries shall not exceed $8,200,000 in either the 1997 or the 1998
Fiscal Year. In each Fiscal Year thereafter, Net Capital Expenditures
shall not exceed the sum of $8,200,000 plus twenty-five percent (25%)
of Consolidated Net Earnings in respect of such Fiscal Year; provided,
however, that if Consolidated Net Earnings is less than zero in any
Fiscal Year, Consolidated Net Earnings shall be deemed to be zero in
such Fiscal Year for purposes of this Section 2.13(a).
(b) To the extent that the Net Capital Expenditures of the
Borrower during any Fiscal Year are less than the amount permitted in
respect of such Fiscal Year under Subsection 2.13(a) above, such
difference in respect of such period shall be available during the
first Fiscal Year succeeding such period to support capital
expenditures of the Borrower during such first succeeding Fiscal Year,
and, if such difference shall not be fully utilized by the end of such
first succeeding Fiscal Year, it shall not be available to support any
additional capital expenditures thereafter. With respect to the
utilization of the availability for the making of capital expenditures
by the Borrower in each Fiscal Year, any availability for such period
provided in Subsection 2.13(a) above shall be deemed utilized first to
support the capital expenditures to be made during such period, and any
availability carried forward from the previous Fiscal Year shall be
deemed utilized second to support the capital expenditures to be made
during such period.
(c) Up to an aggregate amount of $5,000,000 paid by the
Borrower in settlement of, or in satisfaction of a judgment against the
Borrower in respect of, the Ponca City Litigation shall not be
considered a Net Capital Expenditure for purposes of this Section 2.13.
SECTION 2.14. CERTAIN SALARIES. At no time will the Borrower, nor
will it permit any Subsidiary to, pay, directly or indirectly, any salary,
bonus, or other cash compensation to any person who, as of the date hereof, is
(i) the chairman of the Borrower's board of directors, (ii) the Borrower's
president and chief executive officer, or (iii) the Borrower's executive vice
president for finance and administration, if such payment or payments would
exceed, in the aggregate, 110% of the aggregate amount of salary, bonus and
other cash compensation paid to such person in the immediately preceding Fiscal
Year. Notwithstanding the foregoing, for each Fiscal Year after the 1998 Fiscal
Year, the Borrower may compensate the persons described in this Section 2.14 in
accordance with the bonus plan previously delivered to the Creditor Parties.
SECTION 3. DEFINED TERMS. As used in this Exhibit A-2, the following
terms shall have the meanings set forth below or in the Section of this
document referenced below. The terms used herein and not defined herein shall
have the respective meanings ascribed to such terms in the Bank Credit
Agreement (as defined herein).
"Bank Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of September 11, 1996, among (i)
Thorn Apple Valley, Inc. and (ii) Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and
Harris Trust and Savings Bank, as in effect on the Effective Date.
Exhibit A-2-13
<PAGE> 48
"Collateral" shall have the meaning ascribed to such term in the
Intercreditor Agreement.
"Collateral Agent" shall have the meaning ascribed to such term in the
Intercreditor Agreement.
"Consolidated Adjusted Net Worth" shall mean the sum of:
(a) (i) Consolidated Shareholders' Equity less (ii) all
goodwill, trade names, trademarks, patents, organizational expense,
unamortized debt discount and expense and other intangible assets
properly classified as intangibles in accordance with GAAP and incurred
after the date of consummation of the Wilson Acquisition; plus
(b) Subordinated Debt.
"Consolidated Earnings Available for Interest Expense" shall mean, for
any period, the sum of:
(a) Consolidated Net Earnings for such period before deduction
of any amount which, in conformity with GAAP, would be set forth
opposite the caption "income tax expense" (including deferred income
taxes) (or any like caption) on a consolidated income statement of
Borrower for such period; plus
(b) Consolidated Interest Expense for such period; plus
(c) the amortization of any financing cost and of any debt
discount; plus
(d) an amount which, in conformity with GAAP, would be set
forth, opposite the caption "depreciation and amortization expense" (or
any like caption) (including, without limitation, amortization of
intangible assets) on such income statement for such period, to the
extent the same are deducted from Borrower's net revenues, in
conformity with GAAP, in determining Consolidated Net Earnings for such
period.
"Consolidated Net Earnings" shall mean the net earnings of the Borrower
and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary gains and
losses, and including acquisition costs including agents' fees); and
(b) any equity interest of the Borrower on the unremitted
earnings of any corporation not a Subsidiary.
"Consolidated Interest Expense" shall mean the interest expense
(including capitalized and non-capitalized interest, the interest component of
rentals under Capital
Exhibit A-2-14
<PAGE> 49
Leases and any expense associated with the termination of a swap arrangement)
of the Borrower and its Subsidiaries on a consolidated basis for any period.
"Consolidated Net Earnings" shall mean the net earnings of the Borrower
and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary gains and
losses, and including acquisition closing costs including agents'
fees); and
(b) any equity interest of the Borrower on the unremitted
earnings of any corporation not a Subsidiary.
"Consolidated Shareholders' Equity" shall mean consolidated
shareholders' equity of the Borrower and its Subsidiaries determined in
accordance with GAAP.
"Creditor Obligations" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Creditor Parties" shall mean, collectively and individually (as the
context requires) (i) the "Lenders" as defined in the Bank Credit Agreement and
(ii) the Noteholders.
"Disposition" is defined in Section 2.8.
"Fiscal Period" shall mean each period of four consecutive weeks ending
on (i) the last Friday in May in each Fiscal Year or (ii) the Friday which is
four weeks, or any even multiple of four weeks, thereafter.
"Frederick Disposition" shall mean the sale of the plant, property,
inventory and equipment located at 1487 Farnsworth Avenue, Detroit, Michigan,
and the goodwill, licenses, permits, franchises, patents, copyrights,
trademarks, service marks and trade names associated therewith.
"Fresh Meats Earnings Available for Interest Expense" shall mean
Consolidated Earnings Available for Interest Expense but only in respect of the
Borrower's fresh meats division, as regularly and historically reported by the
Borrower.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the Borrower, any qualification or exception:
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an
Exhibit A-2-15
<PAGE> 50
adjustment to such item the effect of which would be to cause
the Borrower to be in default of its obligations under Section 2.4 of
this Exhibit A-2.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capital Leases;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of Property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on Property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse; and
(g) all Guaranties of such Person in respect of any of the
foregoing.
For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer.
"Insurance Note Agreements" shall mean, collectively, (i) that certain
Note Agreement, dated as of April 1, 1994, by and between the Borrower and
Allstate Life Insurance Company, pursuant to which the Borrower issued Fifteen
Million Dollars ($15,000,000) in aggregate principal amount of its six and
forty-five one-hundredths percent (6.45%) Senior Notes due April 21, 2006, (ii)
that certain Note Agreement, dated as of October 1, 1994, by and between the
Borrower and Allstate Life Insurance Company, pursuant to which the Borrower
issued Eight Million Dollars ($8,000,000) in aggregate principal amount of its
eight and forty-two one-hundredths percent (8.42%) Senior Notes due October 1,
2003, and (iii) that certain Note Agreement, dated as of May 15 1995, by and
among the Borrower, Allstate Life Insurance Company, Principal Mutual Life
Insurance Company, and Great-West Life & Annuity Insurance Company, pursuant to
which the Borrower issued Forty-Two Million Five Hundred Thousand Dollars
Exhibit A-2-16
<PAGE> 51
($42,500,000) in aggregate principal amount of its seven and fifty-eight
one-hundredths percent (7.58%) Senior Notes due May 15, 2005, in each case, as
amended from time to time.
"Insurance Notes" shall mean those certain Notes, as amended from time
to time, issued pursuant to the Insurance Note Agreements.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated as of September 11, 1996 by and among the Creditor Parties, and
acknowledged and agreed to by the Borrower and its Subsidiaries.
"Investment" shall mean, relative to any Person:
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business);
(b) any Guaranty of such Person; or
(c) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original principal or capital
amount thereof, less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such Person) and shall, if
made by the transfer or exchange of Property other than cash, be deemed to have
been made in an original principal or capital amount equal to the fair market
value of such Property.
"Majority-Owned Subsidiary" shall mean, when applied to a Subsidiary,
any Subsidiary 80% or more of the Voting Stock of which is owned by the
Borrower or a Majority-Owned Subsidiary (other than Voting Stock required to be
held as directors' qualifying stock).
"Net Capital Expenditures" shall mean, in any period, the remainder of
(i) the aggregate cost of acquisition or construction of all
tangible assets acquired or constructed during such period which at the
time of acquisition or construction have an expected useful life of
more than one (1) year and would be shown on a balance sheet of the
acquiring or constructing Person as an asset ("Capital Assets"), minus
(ii) the aggregate net proceeds of all sales or other
Dispositions of Capital Assets during such period, other than proceeds
which were used to permanently reduce Creditor Obligations.
"New Seasonal Line of Credit Agreement" shall mean that certain letter
agreement regarding a Senior Secured Seasonal Line of Credit for the Borrower
dated as of September 11, 1996 by and among (i) Thorn Apple Valley, Inc. and
(ii) Cooperatieve
Exhibit A-2-17
<PAGE> 52
Centrale Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City Bank and
Harris Trust and Savings Bank.
"Noteholders" shall mean the holders of the Insurance Notes from time
to time.
"Ongoing Indebtedness" is defined in Section 2.2(b).
"Ponca City Litigation" shall mean that certain action entitled
Facility Constructors, Inc. v. Thorn Apple Valley, Inc. filed in February,
1996, in District Court, Kay County, Oklahoma against the Company in connection
with the construction of the Company's plant in Ponca City, Oklahoma.
"Rolling Projection" is defined in Section 1.1(c).
"Section" unless otherwise specified, shall mean a Section of this
Exhibit A-2.
"Security Documents" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Shared Lien" shall mean the lien upon the Collateral (as defined in
the Intercreditor Agreement) created by the Security Documents (as defined in
the Intercreditor Agreement) in favor of the Creditor Parties (as defined in
the Intercreditor Agreement).
"Subordinated Debt" shall mean the principal of and premium, if any,
and interest on all indebtedness of the Borrower, whether currently outstanding
or hereafter created, for money borrowed, or any indebtedness incurred in
connection with an acquisition or lease of Property or with a merger,
consolidation, or acquisition of assets which is expressly subordinated, on
terms satisfactory to the Creditor Parties, in right of payment pursuant to its
terms to the Loans and the Insurance Notes (regardless of whether it is
subordinated to other indebtedness of the Borrower).
"Subsidiaries Guaranty" shall have the meaning assigned to the term
"Guaranty" in the Intercreditor Agreement.
"Weekly P&L Statement" shall mean, in respect of any week, a statement,
in form acceptable to the Creditor Parties, setting forth, for each of the
Borrower's fresh meats and processed meats divisions, the income and expenses
of the Borrower during such week.
Exhibit A-2-18
<PAGE> 53
DISCLOSURE SCHEDULE TO EXHIBIT A-2
ITEM 2.2(B) - ONGOING INDEBTEDNESS:
Operating Leases. See Exhibit A to Disclosure Schedule to Exhibit A-2.
<TABLE>
<CAPTION>
BALANCE OUTSTANDING
@ 8/23/96
<S> <C>
Lines of Credit:
Combined $94,100,000
-----------
Notes Payable:
Corporate: Allstate Unsecured Notes 23,000,000
Corporate: Allstate Life Ins. Unsecured Notes 15,000,000
Principal Mutual Life Unsecured Notes 14,000,000
Great-West Life & Annuity Unsecured Notes 13,500,000
Dixie: Forrest City Note 1,282,222
---------
Subtotal 160,882,000
-----------
Industrial Revenue Bonds:
Corporate: (Branch Banking) 2,400,000
Dixie Plant: (Economic Development Revenue Bond) 2,442,000
Corporate: (Michigan Strategic Fund - Adjustable Rate Demand Limited
Obligation Revenue bond, Series 1993)
5,500,000
---------
Subtotal:
10,342,000
----------
Capital Leases:
Corporate 518,744
Frederick division 2,304,521
Smoked Meats division 314,296
Concordia & Shreveport division 93,018
Dixie division 1,913,235
---------
Subtotal 5,143,814
Total Outstanding Indebtedness $176,367,814
============
Letters of Credit - See Exhibit B to Disclosure Schedule to Exhibit A-2.
</TABLE>
Disclosure Schedule - 1
<PAGE> 54
ITEM 2.3(F) - EXISTING LIENS:
<TABLE>
<CAPTION>
DEBT DESCRIPTION OF COLLATERAL AMOUNT OF
LOCATION REFERENCE O/S DEBT
<S> <C> <C> <C>
Industrial Revenue Bonds:
Corporate Branch Banking Carolina manufacturing
facility $2,400,000
Dixie division Dixie facility $2,442,000
Mich. Strat. Fund. Grand Rapids $5,500,000
Capital Leases:
Corporate, Frederick, Smoked Meats, Concordia, Various machinery and $5,143,814
Shreveport and Dixie divisions. equipment located at the
company's various divisions
and subsidiaries
</TABLE>
All other Liens existing as of the Effective Date and permitted under
Section 1.8 of Exhibit A-2.
ITEM 2.5(A) ONGOING INVESTMENTS:
<TABLE>
<CAPTION>
INVESTMENT BALANCE
FINANCIAL INSTITUTION TYPE @ 8/23/96
<S> <C> <C>
Short-Term Investments
United Carolina Bank CD 500,000
Providence TempCash 3,059,000
Chicago operation U.S. Treasury Bills 300,000
Subtotal $3,859,000
Michigan Livestock Exchange Preferred Stock 2,000,000
Total Investments $5,859,000
==========
</TABLE>
Disclosure Schedule - 2
<PAGE> 55
EXHIBIT A TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Operating Leases
Disclosure Schedule - 3
<PAGE> 56
EXHIBIT B TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
<PAGE> 57
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1
<PAGE> 1
EXHIBIT 10(w)
AMENDMENT TO REIMBURSEMENT AGREEMENT
THIS AMENDMENT TO REIMBURSEMENT AGREEMENT (the "Amendment") is
made as of September 11, 1996, between THORN APPLE VALLEY, INC., a Michigan
corporation (the "Customer") and OLD KENT BANK (formerly Old Kent Bank and
Trust Company), a Michigan banking corporation (the "Bank").
R E C I T A L S :
A. Customer and Bank are parties to a Reimbursement Agreement,
dated as of December 1, 1993 (the "Reimbursement Agreement"), pursuant to which
Bank issued its Irrevocable Transferable Letter of Credit No. 8934, dated
December 8, 1993, in favor of PNC Bank, Ohio, a national association (the
"Trustee"), to secure payment of the Bonds; and
B. Customer and Bank wish to amend the Reimbursement Agreement on
the terms and conditions set forth in this Amendment.
NOW, THEREFORE, CUSTOMER AND BANK AGREE AS FOLLOWS:
1. DEFINITIONS. In addition to the terms provided in the
Recitals to this Amendment, the following terms shall have the following
meanings:
"Bonds" means the Michigan Strategic Fund Adjustable Rate
Demand Limited Obligation Revenue Bonds (Thorn Apple Valley Project),
Series 1993, dated December 8, 1993, in the original principal amount
of $5,500,000.
"Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of September 11, 1996, by and among Customer,
certain commercial lending institutions, as lenders, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., New York Branch ("RBN"),
which provides for lenders to extend credit facilities of up to
$90,000,000 to Customer.
"Seasonal Credit Agreement" means the Agreement, dated
September 11, 1996, by and among Customer, certain lenders, and RBN
as agent, that provides for lenders to extend to Customer a Senior
Secured Seasonal Line of Credit of up to $20,000,000.
"Intercreditor Agreement" means that Intercreditor Agreement,
dated September 11, 1996, by and among RBN as credit agent, as
seasonal agent, and as collateral agent, Bank, National City Bank,
Harris Trust and Savings Bank, Allstate Life Insurance Company,
Principal Mutual Life Insurance Company and Great West Life and
Annuity Insurance Company.
2. INCREASE IN LETTER OF CREDIT FEE. Effective on the date of
this Agreement, the annual Letter of Credit fee of 1/2 of one percent (1/2%)
per annum set forth in Section 3.01 of the Reimbursement Agreement is hereby
increased to 1 percent (1%) per annum.
<PAGE> 2
3. WAIVER OF COMPLIANCE WITH AND DELETION OF CERTAIN COVENANTS.
All of the covenants set forth in Section 6 of the Reimbursement Agreement are
hereby deleted in their entirety from the Reimbursement Agreement. Bank hereby
waives any default by Customer previously existing or existing as of the date
of this Amendment in complying with these covenants that are now deleted from
the Reimbursement Agreement.
4. ADDITION OF NEW COVENANTS.
(a) All covenants set forth in Section 7.1 and Exhibit A
of the Credit Agreement are hereby incorporated into the Reimbursement
Agreement. Customer shall on and after the date of this Amendment
comply fully with all of the terms and conditions of those covenants
as if they were set forth herein in this Amendment and in the
Reimbursement Agreement in their entirety.
(b) As an additional affirmative covenant, Customer
agrees that if any proceeds are paid to RBN under Section 6(c) of the
Intercreditor Agreement, Customer will, within ten (10) days after
written notice from Bank, take those actions required that are
necessary to cause an optional redemption of the Bonds in amounts
equal to the proceeds deposited with RBN for the account of Bank under
Section 6(c) of the Intercreditor Agreement (rounded up or down to the
nearest $5,000).
5. ADDITION OF NEW EVENTS OF DEFAULT. The following Events of
Default are added to Section 7.01 of the Reimbursement Agreement:
G. The occurrence of an Event of Default under Section
8.1 of the Credit Agreement; and
H. The occurrence of an Event of Default under Section 7
of the Seasonal Credit Agreement; and
I. Failure by Customer to provide written notice to the
Trustee directing an optional redemption of the
Bonds, as required by Section 4(b) of this Amendment,
within 10 days after Bank has provided Customer with
a written direction that Customer direct an optional
redemption of the Bonds as provided in Section 4(b)
of this Amendment.
6. ACCELERATION OF PRINCIPAL OF BONDS. Bank agrees that it will
not direct the Trustee to accelerate the unpaid principal of the Bonds if
Customer defaults in the performance of the covenants incorporated into the
Reimbursement Agreement under Section 4(a) of this Agreement unless and until
the unpaid principal of the loans provided for under the Credit Agreement is
accelerated or otherwise declared by RBN, as agent, to be immediately due and
payable. The provisions of this paragraph shall not preclude Bank from
directing the Trustee to accelerate the unpaid principal of the Bonds as a
result of any other default by Company under the Reimbursement Agreement,
including, but not limited to, any failure by Company to pay any fees due to
Bank under the Reimbursement Agreement or to reimburse Bank for any draws under
the Letter of Credit.
-2-
<PAGE> 3
7. NO OTHER AMENDMENTS OR MODIFICATIONS. Except for the
amendments and modifications contained in this Amendment, all other provisions
of the Reimbursement Agreement shall remain in full force and effect without
amendment or modification.
THORN APPLE VALLEY, INC.
By _______________________________
Its __________________________
OLD KENT BANK
By _______________________________
Its __________________________
-3-
<PAGE> 1
EXHIBIT 10(x)
================================================================================
INTERCREDITOR AGREEMENT
among
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
NEW YORK BRANCH
as Credit Agent, Seasonal Agent and Collateral Agent,
OLD KENT BANK,
NATIONAL CITY BANK,
HARRIS TRUST AND SAVINGS BANK,
ALLSTATE LIFE INSURANCE COMPANY,
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
and
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Dated as of September 11, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
R E C I T A L S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
SECTION 1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
SECTION 2. APPOINTMENT OF COLLATERAL AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 3. PRIORITY OF SECURITY INTERESTS AND LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 4. ORDINARY COURSE REPAYMENT OF REVOLVER BORROWINGS . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 5. DECISIONS RELATING TO ADMINISTRATION
AND EXERCISE OF REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 6. PRO RATA SHARING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
SECTION 7. INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
SECTION 8. DISCLAIMERS, INDEMNITY, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
SECTION 9. INVALIDATED PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 10. CERTAIN AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
</TABLE>
<PAGE> 3
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT (as amended, restated or otherwise
modified from time to time, this "Agreement") dated as of September 11, 1996
is among COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., NEW YORK BRANCH
("Rabobank"), as Credit Agent, as Seasonal Agent, and as Collateral Agent, Old
Kent Bank ("Old Kent"), National City Bank, Harris Trust and Savings Bank,
Allstate Life Insurance Company ("Allstate"), Principal Mutual Life Insurance
Company ("Principal Mutual"), and Great-West Life & Annuity Insurance Company
("Great-West") (each of such insurance companies, a "Noteholder", and such
insurance companies collectively, the "Noteholders").
R E C I T A L S
WHEREAS, pursuant to the Note Agreement dated as of April 1, 1994, the
Note Agreement dated as of October 1, 1994 and the Note Agreement dated as of
May 15, 1995 (collectively, in each case as amended or otherwise modified from
time to time, the "Note Agreements") between the Noteholders and Thorn Apple
Valley, Inc. (the "Company"), Allstate has purchased certain 6.45% senior notes
of the Company in the aggregate principal amount of $15,000,000 (as amended or
otherwise modified from time to time, the "6.45% Notes"), Allstate has
purchased certain 8.42% senior notes of the Company in the aggregate principal
amount of $8,000,000 (as amended or otherwise modified from time to time, the
"8.42% Notes") and the Noteholders have purchased certain 7.58% senior notes of
the Company in the aggregate principal amount of $42,500,000 (as amended or
otherwise modified from time to time, the "7.58% Notes", and, together with the
6.45% Notes and the 8.42% Notes, the "Notes");
WHEREAS, the Company has entered into a Credit Agreement dated as of
May 30, 1995 (as amended or otherwise modified from time to time, the "Credit
Agreement") with Rabobank, Old Kent, National City Bank, and Harris Trust and
Savings Bank, as lenders (collectively, together with their respective
successors and assigns, the "Banks" and each individually a "Bank"), and
Rabobank, as agent (together with its successors and assigns in such capacity,
the "Credit Agent") pursuant to which the Banks agreed to provide the Company
with an $80,000,000 revolving credit facility;
WHEREAS, the Company has entered into a letter agreement dated March
11, 1996 (as amended or otherwise modified from time to time, the "Original
Seasonal Line of Credit Agreement") with the Banks, and Rabobank, as agent
(together with its successors and assigns in such capacity, the "Original
Seasonal Agent"), pursuant to which the Banks agreed to provide the Company
with a $20,000,000 revolving credit facility;
WHEREAS, the Company has entered into a Reimbursement Agreement dated
as of December 1, 1993 (as amended or otherwise modified from time to time, the
"Old Kent IRB Reimbursement Agreement") with Old Kent relating to that certain
Irrevocable Transferable Letter of Credit No. 8934 (as amended or otherwise
modified from time to time, the "Old Kent IRB Letter of Credit") dated December
8, 1993 issued by Old Kent to PNC Bank, Ohio, National Association, as trustee;
<PAGE> 4
WHEREAS, the Company has entered into Reimbursement Agreements dated
as of August 25, 1995, May 25, 1995, July 25, 1995 and July 28, 1988,
respectively, (as amended or otherwise modified from time to time, collectively
the "Old Kent Workers Compensation Reimbursement Agreements") with Old Kent
relating to that certain Irrevocable Transferable Letter of Credit No. 10064
dated August 28, 1995 issued by Old Kent to United Pacific Insurance Company,
that certain Irrevocable Transferable Letter of Credit No. 9911 dated May 26,
1995 issued by Old Kent to the Louisiana Department of Labor Office of Worker's
Compensation, that certain Irrevocable Transferable Letter of Credit No. 10009
dated July 26, 1995 issued by Old Kent to United Pacific Insurance Company, and
that certain Irrevocable Transferable Letter of Credit No. 5993 dated September
21, 1988 issued by Old Kent to the Bureau of Worker's Disability Compensation,
Office of the Director (together with the Old Kent IRB Letter of Credit,
collectively the "Old Kent Letters of Credit" and each individually an "Old
Kent Letter of Credit") dated;
WHEREAS, as part of a restructuring of various obligations owing by
the Company, the Original Seasonal Line of Credit Agreement and the Credit
Agreement have been amended and restated into a $20 million borrowing-base
revolving credit facility (the "New Seasonal Line of Credit Agreement") and a
$90 million borrowing-base revolving credit facility (the "Amended Credit
Agreement");
WHEREAS, as part of such restructuring, the Notes have been amended
and restated and the Note Agreements have been amended pursuant to Amendment
Agreements dated as of the date hereof (the "Amendment Agreements");
WHEREAS, as part of such restructuring, the Old Kent IRB Reimbursement
Agreement has been amended and restated;
WHEREAS, as part of such restructuring, the Old Kent Workers
Compensation Reimbursement Agreement has been amended and restated;
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to, and this Agreement is being executed concurrently with, each of
the amendments and/or restatements described in the previous Recitals;
WHEREAS, as part of such restructuring, Mr. Henry S Dorfman has agreed
to make an equity contribution in the Company of at least $3,000,000 (the
"Dorfman Equity Proceeds");
WHEREAS, the Banks, the Seasonal Lenders, the Credit Agent, the
Original Seasonal Agent, Old Kent, the Noteholders, and the Company (together
with any other party which from time to time may be a party hereto, the
"Parties") have agreed that (i) the Creditor Obligations shall be secured by a
first security interest and lien on the Collateral (as hereinafter defined)
pursuant to the Security Documents (as hereinafter defined) (the "Shared Lien")
except that, with respect to the IRB Collateral, such security interest and
lien is to be a second security interest and lien, second only to the security
interest and lien securing the IRB Obligations, and (ii)(x) the Seasonal Line
of Credit Obligations shall have first priority with respect to the Shared Lien
and (y) the Bank Obligations (as hereinafter defined), the Note Obligations (as
hereinafter defined) and the Old Kent L/C Obligations (as hereinafter defined)
shall have second priority equally and ratably with respect to the Shared Lien;
-2-
<PAGE> 5
WHEREAS, the Parties desire that Rabobank shall be the collateral
agent (in such capacity, together with its successors and assigns in such
capacity, the "Collateral Agent") to act on behalf of all Creditor Parties (as
hereinafter defined) regarding the Collateral (as hereinafter defined), all as
more fully provided herein; and the Parties are entering into this Agreement
to, among other things, further define the rights, duties, authority and
responsibilities of the Collateral Agent and the relationship between the
Creditor Parties regarding their interests in the Collateral and certain
monies; and
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the Parties and the Collateral Agent hereby agree as follows:
SECTION 1. DEFINED TERMS.
As used in this Agreement, and unless the context requires a different
meaning, the following terms have the meanings indicated below, all such
definitions to be equally applicable to the singular and plural forms of the
terms defined:
"Amendment Agreements" See the Recitals.
"Affiliate", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person. For the purposes of this definition, "control" (including with
correlative meanings the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" - see the Preamble.
"Amended Credit Agreement" - see the Recitals.
"Bank" - see the Preamble.
"Bank Documents" means the Amended Credit Agreement, any note issued
to any Bank under the Amended Credit Agreement and any document delivered
pursuant to any of the foregoing.
"Bank Obligations" means all outstanding and unpaid obligations of
every nature, contingent or otherwise, of the Company from time to time owed to
the Credit Agent or any Bank under the Bank Documents.
"Bankruptcy Proceeding" means, with respect to any Person, a general
assignment by such Person for the benefit of its creditors, or the institution
by or against such Person of any proceeding seeking relief as debtor, or
seeking to adjudicate such Person as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of such Person or its
debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, custodian or
other similar official for such Person or for any substantial part of its
property.
-3-
<PAGE> 6
"Base Pro Rata Share" means, (i) in respect of the Noteholders, a
percentage obtained by dividing 15,000,000 by 162,500,000 with respect to the
holders of the 6.45% Notes, 8,000,000 by 162,500,000 with respect to the
holders of the 8.42% Notes, and 42,500,000 by 162,500,000 with respect to the
holders of the 7.58% Notes, (ii) in respect of the Banks, a percentage obtained
by dividing 90,000,000 by 162,500,000, and (iii) in respect of Old Kent in its
capacity as an L/C Issuer, a percentage obtained by dividing 7,000,000 by
162,500,000.
"Benefitted Party" means any one or more of the following: (i) the
holders of the 6.45% Notes, collectively, (ii) the holders of the 8.42% Notes,
collectively, (iii) the holders of the 7.58% Notes, collectively, (iv) the
Banks, collectively, or (v) Old Kent in its capacity as an L/C Issuer, which at
the time of the determination of any Catch-Up Amount shall hold a principal
amount of Creditor Obligations which, when divided by the total principal
amount of the Creditor Obligations outstanding at such time, shall result in a
percentage that is greater than its Base Pro Rata Share.
"Capital Infusion Proceeds" means the proceeds received by the Company
from any issuance of Subordinated Debt or equity (other than the Dorfman Equity
Proceeds).
"Catch-Up Amount" means, at any time, in respect of any Benefitted
Party, the smallest amount which, if paid to such Benefitted Party, would be
sufficient to cause such Benefitted Party to cease to be a Benefitted Party at
such time.
"Catch-up Termination Date" means:
(a) August 31, 1997 provided that:
(i) no Trigger Event shall have occurred on or before such date;
(ii) Consolidated Earnings Available for Interest Expense (as
defined in the Credit Agreement as in effect on the date hereof, or as amended
as permitted by Subsection 10(b)) for the Company's fiscal year ended May 31,
1997 shall be equal to or greater than $29,000,000; and
(iii) on such date a Seasonal Line of Credit Agreement shall be in
effect with a commitment which extends through March 31, 1998;
(b) if clause (a) above is not satisfied, March 12, 1998
so long as on March 12, 1998 a Trigger Event shall not have occurred
and be continuing; provided, however, that if the financial statements
required to be delivered by the Company with respect to the ninth
Fiscal Period of the fiscal year of the Company ending May 31, 1998
are not delivered to the Creditor Parties by March 5, 1998, then the
Catch-up Termination Date shall be the date seven days after the date
that such financial statements are in fact delivered so long as such
delivery date occurs on or before March 31, 1998; it being understood
that if such financial statements are not delivered on or before March
31, 1998 then a Trigger Event shall be deemed to have occurred on
March 31, 1998; and
(c) if either clause (a) or (b) above is not satisfied,
such date as shall be agreed to by the Creditor Parties.
-4-
<PAGE> 7
"Code" means the Uniform Commercial Code as the same may from time to
time be in effect in the State of Illinois.
"Collateral" means all property and interests in property of each
Grantor in which a lien has been or is in the future created under the Security
Documents.
"Collateral Agent" - see the Recitals.
"Company" - see the Recitals.
"Credit Agent" - see the Recitals.
"Creditor Obligations" means (a) all Bank Obligations, (b) all Note
Obligations, (c) all Old Kent L/C Obligations and (d) all Seasonal Line of
Credit Obligations.
"Creditor Parties" means the holders, from time to time, of the
Creditor Obligations.
"Directing Event Date" means, with respect to any Payment Default, the
first date on which all of the following shall be true:
(a) more than one of clauses (i), (ii), (iii), or (iv) of clause
(a) of the definition of Directing Parties shall be satisfied;
(b) one or more (but not all) of the Creditor Parties set forth in
such satisfied clauses described in clause (a) above shall have requested in
writing that the Collateral Agent commence Enforcement;
(c) ten business days shall have passed since the date on which
the Collateral Agent received a written request pursuant to clause (b) above
that it commence Enforcement; and
(d) an Enforcement shall not have been commenced.
"Directing Parties" means (a) if a Payment Default has occurred and is
continuing, (i) the Required Holders if the payment is owing to the
Noteholders, (ii) the Required Banks if the payment is owing under the Amended
Credit Agreement, (iii) the Required Seasonal Lenders if the payment is owing
under the Seasonal Line of Credit Agreement, or (iv) Old Kent if the payment is
owing with respect to the Old Kent L/C Obligations , provided that if more than
one of clauses (i), (ii), (iii) or (iv) are satisfied then (x) prior to the
occurrence of a Directing Event Date with respect to any such Payment Default,
the Directing Parties shall be the Creditor Parties set forth in each such
clause that is so satisfied and (y) following the occurrence of a Directing
Event Date but prior to the commencement of an Enforcement, any of the Creditor
Parties set forth in any such clause that is so satisfied; (b) if an
Enforcement has been commenced, Creditor Parties holding an aggregate
outstanding principal amount of Creditor Obligations constituting 66 2/3% or
more of the aggregate outstanding principal amount of all Creditor Obligations
held by all Creditor Parties voting in connection with any proposal made
pursuant to the terms of this Agreement; and (c) in the case of any other type
of Event of Default, in the case of the resignation or removal of the
Collateral Agent pursuant to subsection 8(g) hereof, in the case of a
notification pursuant to subsection 8(k) hereof, in
-5-
<PAGE> 8
the case of any amendment or modification to the Security Documents or the
Guaranty, or in the case that no Event of Default exists, the Required Holders,
the Required Banks and (so long as the Seasonal Line of Credit Agreement is in
effect) the Required Seasonal Lenders.
"Disposition Proceeds" means
(a) with respect to the sale, transfer, or other disposition by the
Company or any Subsidiary of any asset (including any stock of any Subsidiary),
the aggregate cash proceeds (including cash proceeds received by way of
deferred payment of principal (together with interest thereon) pursuant to a
note, installment receivable or otherwise, but only as and when received)
received by the Company or any Subsidiary pursuant to such sale, transfer or
other disposition (other than (i) the proceeds of asset sales as and to the
extent permitted by Section 2.8(c), Section 2.8(x) or Section 2.8(y) of
Appendix A to the Amended Credit Agreement, (ii) insurance proceeds permitted
by the terms of the Security Documents to be used to repair or replace damaged
or destroyed property, and (iii) condemnation awards permitted by the terms of
the Security Documents to be used to replace any subject property), net of (i)
the direct costs and expenses relating to such sale, transfer or other
disposition (including, without limitation, sales commissions and legal,
accounting and investment banking fees), (ii) taxes paid or reasonably
estimated by the Company to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements) and (iii) amounts required to be applied to the repayment of any
Indebtedness secured by a lien on the asset subject to such sale, transfer or
other disposition (other than any Creditor Obligations) that is senior to the
Shared Lien; and
(b) with respect to any Capital Infusion Proceeds which are received
after April 30, 1997, the aggregate cash proceeds received by the Company or
any Subsidiary pursuant to such issuance, net of the direct costs relating to
such issuance (including, without limitation, sales and underwriter's
commissions and legal, accounting and investment banking fees).
"Dorfman Equity Proceeds" - see the Recitals.
"Enforcement" means the commencement of a Bankruptcy Proceeding
against any Grantor, seeking to appoint a receiver for any Grantor or its
property, making demand for payment under any guaranty or the commencement of
enforcement, collection (including judicial or non-judicial foreclosure) or any
similar proceeding with respect to the Collateral or the set off of any deposit
account or amount owing to the Company by any Creditor Party as a result of any
default in respect of any Financing Agreement.
"Event of Default" means an "Event of Default", but not an "Unmatured
Event of Default" or a "Default", as defined in any Financing Agreement.
"Excess Capital Infusion Proceeds" means the amount of the net Capital
Infusion Proceeds received by the Company on or before April 30, 1997 in excess
of the Scheduled Capital Infusion Proceeds.
"Fees and Charges" means any fees, indemnities or other expenses
(including breakage costs, yield maintenance obligations and other similar
obligations and attorneys' fees or other professional expenses) the payment of
which is required by the Amended Credit Agreement, the Note Agreements,
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the Seasonal Line of Credit Agreement, the Old Kent IRB Reimbursement
Agreement, or the Old Kent Workers Compensation Reimbursement Agreement.
"Financing Agreements" means the Bank Documents, the Note Documents,
Seasonal Line of Credit Documents, the Old Kent L/C Documents, the Security
Documents, the Guaranty, this Agreement and any other instrument, document or
agreement entered into in connection with any Creditor Obligation or any of the
foregoing Financing Agreements.
"Fiscal Period" has the meaning assigned to such term in the Amended
Credit Agreement.
"Grantors" means the Company, the Subsidiaries of the Company and any
other Person who guaranties payment of the Creditor Obligations and/or grants
any Collateral to the Collateral Agent or any Creditor Party as security for
the Creditor Obligations.
"Guaranty" means the Guaranty dated as of September 11, 1996 of each
of the Subsidiaries of the Company in favor of the Creditor Parties, as it may
be amended or otherwise modified from time to time.
"IRB Collateral" means the collateral mortgaged, pledged or otherwise
encumbered to secure the IRB Obligations pursuant to (i) that certain Deed of
Trust dated as of July 1, 1984 granting security interest in certain real
property located in Holly Ridge, Onslow County, North Carolina; (ii) that
certain Security Agreement dated as of July 1, 1984 granting security interests
in certain tangible personal property and fixtures then or thereafter located
at the Company's facility in Holly Ridge, North Carolina; (iii) that certain
Mortgage dated July 13, 1993 granting a security interest in certain real
property located in the City of Forrest City, St. Francis County, Arkansas,
(iv) that certain Financing Statement and Security Agreement granting security
interests in certain equipment, machinery, furnishings, fixtures and personalty
then owned or thereafter acquired with the proceeds of certain of the IRB
Obligations, and (v) that certain Mortgage and Security Agreement dated as of
July 1, 1993 granting security interests in certain real property located in
the City of Forrest City, St. Francis County, Arkansas and in certain specified
items of machinery and equipment.
"IRB Obligations" means the obligations of the Company and/or its
Affiliates set forth in (i) various documents and instruments, including but
not limited to a promissory note, a loan agreement, a guaranty agreement and
security documents, each dated as of July 1, 1984 and as subsequently amended,
pursuant to which the Company or its predecessor in interest borrowed the
proceeds of The Onslow County Industrial Facilities and Pollution Control
Financing Authority Industrial Revenue Bond (Frederick & Herrud, Inc. Project
No. 2) issued in the original principal amount of $6,000,000; (ii) various
documents and instruments, including but not limited to a promissory note, a
loan agreement, a corporate guaranty agreement and security documents, each
dated July 13, 1993 and as subsequently amended, pursuant to which the Company
or its predecessor in interest borrowed $1,775,845 from the City of Forrest
City, Arkansas; and (iii) various documents and instruments, including but not
limited to a promissory note, a loan agreement, a bond guaranty agreement and a
security document, each dated as of July 1, 1993, pursuant to which the Company
or its predecessor in interest borrowed the proceeds of Arkansas Development
Finance Authority Economic Development Revenue Bonds (Dixie Foods Company
Project) Taxable Series A and Taxable Series B issued in the original principal
amounts of $2,000,000 with respect to Taxable Series A and $2,000,000 with
respect to Taxable Series B.
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"L/C Issuer" means an issuer of any Letter of Credit.
"Letter of Credit" means any Old Kent Letter of Credit and any letter
of credit issued by Rabobank pursuant to the Amended Credit Agreement.
"Letters of Credit Usage" means, with respect to any Letter of Credit,
as at any date of determination, the sum of (i) the Maximum Available Amount
plus (ii) the aggregate amount of all drawings under such Letter of Credit
honored by the issuer thereof prior to such date and not theretofore reimbursed
by the Company.
"Lien" means any lien, mortgage, pledge, security interest, or
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"Maximum Available Amount" means, with respect to any Letter of
Credit, as of any date of determination, the maximum amount that may be drawn
under such Letter of Credit on or after such date (whether or not the
beneficiary thereof shall have presented, or shall be entitled at such time to
present, the drafts or other documents required to draw under such Letter of
Credit).
"New Seasonal Line of Credit Agreement" - see the Recitals.
"Non-Benefitted Party" means, at any time, any one or more of the
following: (i) the holders of the 6.45% Notes, collectively, (ii) the holders
of the 8.42% Notes, collectively, (iii) the holders of the 7.58% Notes,
collectively, (iv) the Banks, collectively, or (v) Old Kent in its capacity
as an L/C Issuer, which shall not be a Benefitted Party at such time.
"Non-Directing Party" means, with respect to any particular
instruction given to the Collateral Agent, each Party (and each Creditor Party
represented by such Party) that has not given or agreed with such instruction
given to the Collateral Agent.
"Note Agreements" - see the Recitals.
"Note Documents" means the Note Agreements, the Notes, the Amendment
Agreements and any document delivered pursuant to any of the foregoing.
"Noteholders" -- see the Recitals.
"Note Obligations" means all outstanding and unpaid obligations of
every nature, contingent or otherwise, of the Company from time to time owed to
the Noteholders under the Note Documents.
"Notes" - see the Recitals.
"Old Kent IRB Letter of Credit" - see the Recitals.
"Old Kent IRB Reimbursement Agreement" - see the Recitals.
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"Old Kent L/C Documents" means the Old Kent IRB Reimbursement
Agreement, the Old Kent Workers Compensation Reimbursement Agreement and any
document delivered pursuant to any of the foregoing.
"Old Kent L/C Obligations" means all outstanding and unpaid
obligations of every nature, contingent or otherwise, of the Company from time
to time to Old Kent under the Old Kent L/C Documents.
"Old Kent Letters of Credit" - see the Recitals.
"Old Kent Workers Compensation Reimbursement Agreement" - see the
Recitals.
"Opinion of Counsel" means a written opinion of an attorney or firm of
attorneys, which may be outside counsel engaged or retained by a Person or
internal counsel in the employ of a Person, a copy of which opinion is
furnished to each Creditor Party.
"Original Seasonal Agent" - see the Recitals.
"Original Seasonal Line of Credit Agreement" - see the Recitals.
"Party" - see the Recitals.
"Payment Default" means the failure of the Company to make any payment
when due whether scheduled, by acceleration, or otherwise (subject to any
applicable grace period) of any principal of or interest on any amount owing to
any Creditor Party under any Financing Agreement.
"Permitted Investment" means, at any time:
(a) any evidence of indebtedness, maturing not more than one year
after such time, issued or guaranteed by the United States Government or any
agency thereof;
(b) commercial paper, maturing not more than nine months from the
date of issue, or corporate demand notes, in each case issued by:
(i) a corporation (other than the Company or an Affiliate
thereof) organized under the laws of any state of the United States or
of the District of Columbia and rated at least A-1 by Standard &
Poor's Ratings Services or P-1 by Moody's Investors Service, Inc.; or
(ii) any Bank (or its holding company);
(c) any certificate of deposit (or time deposits represented by
such certificates of deposit) or bankers acceptance, maturing not more than one
year after such time, or overnight Federal funds transactions that are issued
or sold by either:
(i) a commercial banking institution that is a member of
the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than
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<PAGE> 12
$500,000,000 and a long-term unsecured and noncredit-enhanced senior
debt rating of at least A by Standard & Poor's Rating Group or A2 by
Moody's Investors Service, Inc; or
(ii) any Bank; or
(d) any repurchase agreement entered into with any Bank (or other
commercial banking institution satisfying the requirements of clause (c)(i))
which
(i) is secured by a fully perfected security interest in
any obligation of the type described in any of clauses (a) through
(c); and
(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase
obligation of such bank (or other commercial banking institution)
thereunder.
"Person" means any individual, corporation, partnership, trust or
other entity.
"Proceeds" has the meaning assigned to it under the Code and, in any
event, includes, but is not limited to, (i) with respect to Collateral, (a) any
and all proceeds of any collection, sale or other disposition of any of the
Collateral, (b) any and all amounts from time to time paid or payable under or
in connection with any of the Collateral and (c) amounts collected by any
Creditor Party by way of set-off, deduction or counterclaim and (ii) with
respect to the Guaranty, all amounts paid by any Grantor under the Guaranty.
"Rabobank" - see the Preamble.
"Repayment Event" - see Section 9.
"Replacement Seasonal Line of Credit Agreement" means the agreement or
agreements documenting a credit line or other facility providing for borrowings
not in excess of $25,000,000 (provided that if such facility provides for
borrowings of less than $25,000,000, the Company shall have certified to the
Creditor Parties that a facility of such lesser amount shall be sufficient to
meet the Company's projected borrowing needs for the next Seasonal Period) for
a period of less than one year (but in any event for the full duration of the
next Seasonal Period) when the New Seasonal Line of Credit Agreement shall have
expired, such replacement facility being between the Company and
(i) a Bank or Banks, on substantially the same terms and
conditions as the New Seasonal Line of Credit Agreement or, if on
terms more favorable to such Bank or Banks, with the consent of the
Required Holders and the Required Banks; or
(ii) any other Person who is reasonably satisfactory to the
Required Holders and the Required Banks and who becomes a party to
this Agreement; provided that (x) in the case of any Person other than
a Bank, the Company shall have offered to each Bank to enter into such
credit line or other facility on the same terms with such Bank and
each Bank shall have rejected such offer and (y) to the extent such
agreement has terms and conditions (but excluding any terms or
conditions regarding pricing (including interest rate payable)) more
favorable to such other Person(s) than to the Banks under the New
Seasonal Line of Credit
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Agreement, the Financing Agreements are amended to provide the
Creditor Parties under the respective Financing Agreements with
correspondingly more favorable terms and conditions.
"Required Banks" has the meaning assigned to the term "Required
Lenders" in the Amended Credit Agreement.
"Required Holders" means (i) in the case of a Payment Default with
respect to the 6.45% Notes, the 8.42% Notes or the 7.58% Notes, the Noteholders
which, under the applicable Note Agreement, have power to accelerate or make a
demand for payment under the applicable Notes, and (ii) at all other times,
Noteholders holding 66 2/3% or more of the aggregate outstanding principal
amount of the Note Obligations.
"Required Seasonal Lenders" means (i) so long as the New Seasonal Line
of Credit Agreement is in effect, the "Required Lenders" as defined in the New
Seasonal Line of Credit Agreement and (ii) at any time that a Replacement
Seasonal Line of Credit Agreement is in effect, the "Required Lenders" or such
other similarly defined term as defined in such Replacement Seasonal Line of
Credit Agreement.
"Scheduled Capital Infusion Proceeds" means the net Capital Infusion
Proceeds received by the Company on or before April 30, 1997 equal to the
greater of (x) $15,000,000 and (y) 50% of the net Capital Infusion Proceeds by
the Company.
"Seasonal Agent" means (i) so long as the New Seasonal Line of Credit
Agreement is in effect, the Original Seasonal Agent, and (ii) so long as any
Replacement Seasonal Line of Credit Agreement is in effect, the agent under
such Replacement Seasonal Line of Credit Agreement.
"Seasonal Lenders" means (i) so long as the New Seasonal Line of
Credit Agreement is in effect, the Banks, and (ii) so long as any Replacement
Seasonal Line of Credit Agreement is in effect, the lenders party to such
Replacement Seasonal Line of Credit Agreement.
"Seasonal Line of Credit Agreement" means (i) on the date hereof, the
New Seasonal Line of Credit Agreement and (ii) after the expiration of the New
Seasonal Line of Credit Agreement, any Replacement Seasonal Line of Credit
Agreement.
"Seasonal Line of Credit Documents" means the Seasonal Line of Credit
Agreement, any note issued to any Seasonal Lender under the Seasonal Line of
Credit Agreement and any document delivered pursuant to any of the foregoing.
"Seasonal Line of Credit Obligations" means all outstanding and unpaid
obligations of every nature, contingent or otherwise, of the Company from time
to time owed to the Seasonal Agent or any Seasonal Lender under the Seasonal
Line of Credit Documents.
"Seasonal Period" means, with respect to any fiscal year of the
Company, the period beginning with the fourth Fiscal Period and ending with the
ninth Fiscal Period of such fiscal year.
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"Security Documents" means each document listed on Schedule I hereto,
together with any other document from time to time securing the Creditor
Obligations, in each case as amended or otherwise modified from time to time.
"Subordinated Debt" means all unsecured indebtedness of the Company
for money borrowed which is subject to, and is only entitled to the benefits
of, terms and provisions (including maturity, amortization, acceleration,
interest rate, sinking fund, covenant, default and subordination provisions)
satisfactory in form and substance to the Creditor Parties, in each case as
evidenced by their written approval thereof.
"Trigger Event" means any one or more of the following: (i) a Payment
Default, (ii) the commencement of Enforcement against the Company or any other
Grantor, (iii) the Banks' refusal to advance under the Amended Credit Agreement
other than because the Company has fully drawn the availability under the
Amended Credit Agreement, (iv) the Seasonal Lenders' refusal to advance under
the Seasonal Line of Credit Agreement other than because the Company has fully
drawn the availability under the Seasonal Line of Credit Agreement, (v) the
commencement of Bankruptcy Proceedings in respect of the Company or any other
Grantor or (vi) the failure of the Company to deliver, on or before March 31,
1998, the financial statements with respect to the ninth Fiscal Period of the
fiscal year of the Company ending May 31, 1998, as more fully set forth in
clause (b) of the definition of Catch-up Termination Date.
SECTION 2. APPOINTMENT OF COLLATERAL AGENT.
Each of the Credit Agent, the Seasonal Agent, each Bank, each Seasonal
Lender, each L/C Issuer and each Noteholder hereby designates and appoints
Rabobank to serve as the Collateral Agent under this Agreement, the Security
Documents and the Guaranty. Each of the Credit Agent, the Seasonal Agent,
each Bank, each Seasonal Lender, each L/C Issuer and each Noteholder hereby
authorizes the Collateral Agent to act as agent for the Creditor Parties for
the purposes of executing and delivering on behalf of the Creditor Parties the
Security Documents and, subject to the provisions of this Agreement, enforcing
the Creditor Parties' rights in respect of the Collateral and the Guaranty and
the obligations of the Grantors under the Security Documents and the Guaranty,
together with such other powers as are reasonably incidental thereto.
SECTION 3. PRIORITY OF SECURITY INTERESTS AND LIENS.
The Parties hereby acknowledge that the security interest and liens
granted to the Collateral Agent in the Collateral (except with respect to the
IRB Collateral) pursuant to the Security Documents secure, first and foremost,
the Seasonal Line of Credit Obligations and, second and subordinate, but
equally and ratably, the Bank Obligations, the Note Obligations, and the Old
Kent L/C Obligations. The Parties hereby further acknowledge that, with
respect to the IRB Collateral, such collateral secures, first and foremost, the
IRB Obligations; second, the Seasonal Line of Credit Obligations, and third and
subordinate, but equally and ratably, the Bank Obligations, the Note
Obligations, and the Old Kent L/C Obligations. Nothing herein shall be deemed
to constitute a waiver by any Creditor Party of any right it may have to
challenge the perfection or priority of the security interest of the holders of
the IRB Obligations in the IRB Collateral.
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<PAGE> 15
SECTION 4. ORDINARY COURSE REPAYMENT OF REVOLVER BORROWINGS.
Nothing contained in this Agreement is intended to prohibit borrowings
under the Seasonal Line of Credit Agreement or the Amended Credit Agreement
from being repaid (and reborrowed pursuant to the terms thereof), whether from
the proceeds of the ordinary course sale of the Company's inventory and
collections on receivables prior to the commencement of Enforcement or from
Excess Capital Infusion Proceeds.
SECTION 5. DECISIONS RELATING TO ADMINISTRATION
AND EXERCISE OF REMEDIES.
(a) Except as set forth in subsection 5(g), the Collateral Agent
agrees that it will not (i) release Liens or Collateral or the Guaranty
without the consent of the Required Banks, the Required Holders and (so long as
the Seasonal Line of Credit Agreement is in effect) the Required Seasonal
Lenders or (ii) commence Enforcement without the direction of the Directing
Parties. The Collateral Agent agrees to administer the Security Documents, the
Guaranty and the Collateral and to make such demands and give such notices
under the Security Documents and the Guaranty as the Directing Parties may
request, and to take such action to enforce the Security Documents and the
Guaranty and to realize upon, collect and dispose of the Collateral or any
portion thereof as may be directed by the Directing Parties. The Collateral
Agent shall not be required to take any action that is in the Opinion of
Counsel contrary to law or to the terms of this Agreement or any Security
Document or the Guaranty or that would in the Opinion of Counsel subject the
Collateral Agent or any of its officers, employees, agents or directors to
liability, and the Collateral Agent shall not be required to take any action
under this Agreement or any Security Document or the Guaranty unless and until
the Collateral Agent shall be indemnified to its reasonable satisfaction by one
or more of the Creditor Parties against any and all loss, cost, expense or
liability in connection therewith.
(b) Each Creditor Party agrees that, except as set forth in
subsection 5(a) above, the Collateral Agent shall act as the Directing Parties
may request (regardless of whether any individual Creditor Party agrees,
disagrees or abstains with respect to such request), that the Collateral Agent
shall have no liability for acting in accordance with such request (provided
such action does not conflict with the express terms of this Agreement, the
Security Documents or the Guaranty) and that no Directing Party or
Non-Directing Party shall have any liability to any other Non-Directing Party
or Directing Party, respectively, for any such request. The Collateral Agent
shall give prompt notice to the Non-Directing Parties of action taken pursuant
to the instructions of the Directing Parties; provided, however, that the
failure to give any such notice shall not impair the right of the Collateral
Agent to take any such action or the validity of the action so taken.
(c) Each Party agrees that the Non-Directing Parties shall be
bound by the directions of the Directing Parties and that the Non- Directing
Parties shall have no right of dissent or any other similar rights under the
Security Documents or the Guaranty other than that the Creditor Obligations
held by such Non-Directing Party shall be secured by the Collateral for the
period and to the extent provided therein and in this Agreement and to receive
a share of the proceeds of the Collateral and of demands made under the
Guaranty, if any, to the extent and at the time provided in the respective
Security Documents and the Guaranty and in this Agreement.
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(d) The Collateral Agent may at any time request directions from
the Directing Parties as to any course of action or other matter relating
hereto or relating to the Collateral. Except as otherwise provided in this
Agreement, directions given by the Directing Parties to the Collateral Agent
hereunder shall be binding on all Creditor Parties, including all Non-Directing
Parties, for all purposes.
(e) Nothing contained in this Agreement shall affect the right of
any Creditor Party to give the Company or any other Grantor notice of any
default or to accelerate or make demand for payment of its Creditor Obligations
under the Financing Agreements; provided that each Creditor Party agrees not to
take any action to realize upon the Collateral or under the Guaranty except
through the Collateral Agent in accordance with this Agreement; provided
further, that nothing herein shall affect the right of any Creditor Party to be
heard as a party in interest in any bankruptcy proceeding regarding any matter
relating to or affecting the Collateral.
(f) Any Creditor Party which has actual knowledge of an Event of
Default or facts which indicate that an Event of Default has occurred, shall
use reasonable efforts to deliver to the Collateral Agent a written statement
describing such Event of Default or facts. Any Creditor Party which requests
in writing that the Collateral Agent commence an Enforcement shall send a copy
of such request by overnight courier to each of the other Creditor Parties.
The Credit Agent and the Seasonal Agent shall use reasonable efforts to deliver
to the Collateral Agent written notice of any failure by the Banks or the
Seasonal Lenders, as the case may be, to refuse to advance under the Amended
Credit Agreement or the Seasonal Line of Credit Agreement, as the case may be,
other than because the Company has fully drawn the availability under the
Amended Credit Agreement or the Seasonal Line of Credit Agreement, as the case
may be. Failure to deliver such written notice, however, shall not constitute
a waiver of any Event of Default by any Creditor Party nor prejudice the rights
of any Creditor Party in any manner. Upon receipt of a notice from a Creditor
Party of the occurrence of an Event of Default or of such a failure to advance,
the Collateral Agent shall promptly (and in any event no later than three
business days after receipt of such notice in the manner provided in subsection
11(a)) give notice of such Event of Default or of such a failure to advance to
all Creditor Parties. The Collateral Agent shall not be deemed to have actual
or constructive knowledge or notice of the occurrence of any Event of Default
or of such a failure to advance until it has received written notice thereof
stating that it is a "Notice of Default" or a "Notice of Failure to Advance",
as the case may be.
(g) Consistent with, but not in limitation of, the provisions of
Section 4 hereof, unless a Trigger Event has occurred or an Event of Default
has occurred and is continuing, the Collateral Agent may, without the approval
of the Creditor Parties as required herein, release any Collateral under any
Security Document which is permitted to be sold or disposed of pursuant to all
of the Financing Agreements and execute and deliver such releases as may be
necessary to terminate of record the Collateral Agent's security interest (for
the benefit of the Creditor Parties) in such Collateral. In determining
whether any such release is permitted, the Collateral Agent may rely upon (i)
certificates from the Company with respect to compliance by the Company with
the provisions of the Financing Agreements regarding permitted transfers of
assets, (ii) instructions from the Required Holders with respect to the Note
Agreements, (iii) the Required Banks with respect to the Bank Documents, (iv)
the Required Seasonal Lenders with respect to the Seasonal Line of Credit
Documents, and (v) Old Kent with respect to the Old Kent L/C Documents. The
Collateral Agent
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shall notify each of the Creditor Parties of any request made by the Company
for the release of any Collateral pursuant to this subsection 5(g).
SECTION 6. PRO RATA SHARING.
(a) Notwithstanding anything contained in any Financing Document
to the contrary, any and all amounts received by the Collateral Agent in its
capacity as Collateral Agent (including any and all Proceeds received by the
Collateral Agent pursuant to any Enforcement) shall be shared among all
Creditor Parties in the order and manner set forth below:
(i) In the case of Scheduled Capital Infusion Proceeds or
Disposition Proceeds, to the ratable payment (and permanent reduction)
of (x) the amount of the outstanding commitments under the Amended
Credit Agreement, (y) the outstanding principal amount of the Note
Obligations and (z) the outstanding principal amount of the Old Kent
L/C Obligations; provided, however, that excluded from such ratable
determination shall be the amount of any and all breakage costs, yield
maintenance obligations, and other similar obligations under any
Financing Agreement.
(ii) In the case of Excess Capital Infusion Proceeds:
FIRST: To the ratable payment of the outstanding
principal amount of (but not in the permanent reduction of the
Seasonal Lenders' commitments under the Seasonal Line of Credit
Agreement) the Seasonal Line of Credit Obligations.
SECOND: To the ratable payment of the outstanding
principal amount of (but not in the permanent reduction of the Banks'
commitments under the Amended Credit Agreement) the Bank Obligations.
(iii) In the case of Proceeds received in connection with
or after the commencement of an Enforcement, and after the payment of
any Catch-Up Amount (if the payment of a Catch-Up Amount is required
pursuant to subsection 6(g) hereof):
FIRST: To the payment of the reasonable out-of-pocket
costs and expenses of the Collateral Agent in its capacity as such,
including the reasonable out-of-pocket costs and expenses of sale or
collection of, or other realization on, the Collateral, the agency fee
to be paid to the Collateral Agent pursuant to subsection 10(e), the
reasonable fees and charges of counsel to the Collateral Agent, the
reasonable fees and expenses of consultants or other professionals
retained by the Collateral Agent before or after any Enforcement, the
reasonable Fees and Charges of counsel, consultants or other
professionals retained by any of the Creditor Parties prior to or
after commencement of any Enforcement upon the agreement of all of the
Creditor Parties and all reasonable advances made or liabilities
incurred by the Collateral Agent in connection herewith.
SECOND: To the ratable payment of interest and
non-use fees then payable under the Seasonal Line of Credit Agreement
(if any).
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THIRD: To the ratable payment (and permanent
reduction of commitments) of principal then payable under the Seasonal
Line of Credit Agreement (if any).
FOURTH: To the ratable payment (and permanent
reduction of commitments) of (i) the outstanding principal amount of
the Creditor Obligations, excluding from such ratable determination
the amount of any and all breakage costs, yield maintenance
obligations, and other similar obligations under any Financing
Agreement, (ii) interest on all Creditor Obligations, (iii) non-use
fees under the Amended Credit Agreement, and (iv) letter of credit
fees (other than administrative fees) under the Amended Credit
Agreement and the Old Kent L/C Documents.
FIFTH: To the ratable payment of all Fees and
Charges and all other Creditor Obligations.
SIXTH: After payment in full of all Creditor
Obligations, to the payment to or upon the order of the Grantors, or
to whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds.
Notwithstanding the foregoing, so long as no Enforcement has commenced
and is continuing, no Payment Default exists under any Financing Agreement and
no amounts are due and payable under clause FIRST above of this Section
6(a)(iii), each Creditor Party may receive and retain reimbursement from the
Company for reasonable costs and expenses of its counsel in connection with
this Agreement and the other Financing Agreements to the extent payable under
the Financing Agreements.
(b) For purposes of determining the principal amount of the
Creditor Obligations, the principal amount outstanding under any Letter of
Credit shall be the sum of (v) the amount of all unreimbursed drawings
thereunder and (y) the Maximum Available Amount thereof.
(c) Any amount which would be applied pursuant to Subsection 6(a)
to a contingent obligation under any Letter of Credit shall be delivered to, if
applicable, and held by the Collateral Agent as Collateral hereunder (and the
Collateral Agent shall from time to time invest such amount in such Permitted
Investments as directed by the applicable L/C Issuer or, if such L/C Issuer has
not so directed the Collateral Agent, in a money market or sweep account at
Rabobank in accordance with the investment policies of Rabobank for similar
accounts). If any Letter of Credit is drawn upon, the Collateral Agent shall
pay to the applicable L/C Issuer an amount equal to the lesser of such draw and
the amount of cash and Permitted Investments held as Collateral for such Letter
of Credit. If and to the extent that any Letter of Credit expires or
terminates (or the Maximum Available Amount thereof is otherwise reduced), the
provisions of subsection 6(f) shall apply.
(d) Payments by the Collateral Agent in respect of (i) the Bank
Obligations shall be made as directed in writing by the Credit Agent, (ii) the
Seasonal Line of Credit Obligations shall be made as directed in writing by the
Seasonal Agent, (iii) the Old Kent L/C Obligations shall be made as directed in
writing by Old Kent and (iv) the Note Obligations shall be made as directed in
writing by the respective Noteholders.
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(e) If at any time any Creditor Party shall receive any payment or
distribution (whether voluntary, involuntary, or otherwise, but excluding any
payment received through the exercise of any right of set-off or from the
Proceeds of the Collateral or in respect of the Guaranty after the commencement
of or in connection with an Enforcement) in excess of the payments or
distributions such Creditor Party would have received through the operation of
subsection 6(a); such Creditor Party shall not be obligated to hold such excess
payments or distributions in trust for the benefit of the other Creditor
Parties and shall not be obligated to pay over such excess payments or
distributions in the form received to the Collateral Agent for distribution to
the other Creditor Parties pursuant to subsection 6(a); but instead, any such
disparity in collateral collections shall be addressed, if at all, solely
pursuant to subsection 6(g) hereof; provided, however, that if any Creditor
Party receives any such distribution in excess of the maximum amount of the
Creditor Obligations owed to such party under the Financing Agreements to which
it is a party or receives any payment through the exercise of any right of
set-off or from the Proceeds of the Collateral or in respect of the Guaranty
after the commencement of or in connection with an Enforcement, such amounts
shall be held by such Creditor Party in trust for the other Creditor Parties
and shall be paid over to the Collateral Agent for distribution to the other
Creditor Parties or the Grantors pursuant to subsection 6(a).
(f) If at any time an amount originally included in the Creditor
Obligations with respect to any Letter of Credit ceases to be an obligation of
the applicable Creditor Party because such Letter of Credit expires, is
reduced, is cancelled or otherwise (but excluding as a result of a drawing
under any Letter of Credit), with the result that the total Creditor
Obligations of such Creditor Party are reduced, then the Collateral Agent shall
distribute all amounts held by the Collateral Agent pursuant to subsection 6(c)
in respect of such Letter of Credit and (if necessary) such Creditor Party
shall pay over an amount, within five business days of notification by the
Collateral Agent, to the Collateral Agent for distribution to the other
Creditor Parties, such that, after giving effect to distribution(s) by the
Collateral Agent, all Creditor Parties shall have received such portion of the
payments or distributions pursuant to subsection 6(a) as they would have
received had such expired, reduced or cancelled obligations with respect to
such Letter of Credit not been included in the calculation of the pro rata
share of each Creditor Party with respect to prior distributions.
(g) Upon the occurrence of a Trigger Event, each Benefitted Party
shall immediately and automatically be entitled, notwithstanding anything in
any Financing Agreement to the contrary, to payment of such Benefitted Party's
Catch-Up Amount before any Non-Benefitted Party shall be entitled to any
further payment in respect of its Creditor Obligations pursuant to subsection
6(a)(iii) hereof (so that, after giving effect to such Catch-Up Amount, all
Creditor Parties shall have received their ratable share of all payments of the
Creditor Obligations); provided, however, that such payment shall be solely
from Proceeds of the Collateral or in respect of the Guaranty. Once a Catch-Up
Amount has been paid, all further payments (whether from Proceeds of the
Collateral or in respect of the Guaranty or otherwise) shall be made in
accordance with subsection 6(a)(iii). No Benefitted Party shall be entitled to
receive any Catch-Up Amount after the Catch-Up Termination Date, other than
payments of Catch-Up Amounts with respect to a Trigger Event which occurred
prior to such Catch-Up Termination Date. Nothing in this subsection 6(g) shall
be interpreted to include any amounts received with respect to the Seasonal
Line of Credit Obligations in the calculation of any Catch-Up Amount.
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SECTION 7. INFORMATION.
If the Collateral Agent proceeds to collect, sell, otherwise dispose
of or take any other action with respect to the Collateral or any portion
thereof or proposes to take any other action pursuant to or contemplated by
this Agreement, the Parties hereto agree as follows:
(a) The Credit Agent shall (i) promptly from time to time, upon
the written request of the Collateral Agent, notify the Collateral Agent of the
outstanding Bank Obligations as at such date as the Collateral Agent may
specify and (ii) promptly from time to time, upon the written request of the
Collateral Agent, notify the Collateral Agent of any payment received by the
Credit Agent to be applied to satisfy Bank Obligations. The Credit Agent shall
certify as to such amounts and the Collateral Agent shall be entitled to rely
conclusively upon such certification.
(b) The Seasonal Agent shall (i) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of the
outstanding Seasonal Line of Credit Obligations as at such date as the
Collateral Agent may specify and (ii) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of any
payment received by the Seasonal Agent to be applied to satisfy Seasonal Line
of Credit Obligations. The Seasonal Agent shall certify as to such amounts and
the Collateral Agent shall be entitled to rely conclusively upon such
certification.
(c) Each Noteholder shall (i) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of the
outstanding Note Obligations of such Noteholder as at such date as the
Collateral Agent may specify and (ii) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of any
payment received thereafter by such Noteholder to be applied to the principal
of or interest on the Note Obligations of such Noteholder. Each Noteholder
shall certify as to such amounts and the Collateral Agent shall be entitled to
rely conclusively upon such certification.
(d) Each L/C Issuer shall (i) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of the
Letter of Credit Usage applicable to any Letter of Credit and any termination,
expiration or reduction of any Letter of Credit and (ii) promptly from time to
time, upon the written request of the Collateral Agent, notify the Collateral
Agent of any payment received by such L/C Issuer to be applied to amounts due
under any Letter of Credit issued by such L/C Issuer. Each L/C Issuer shall
certify as to such amounts and the Collateral Agent shall be entitled to rely
conclusively upon such certification.
(e) Each Creditor Party shall, upon reasonable request, be
entitled to receive from the Collateral Agent a copy of any communications
provided to the Collateral Agent pursuant to this Section 7.
SECTION 8. DISCLAIMERS, INDEMNITY, ETC.
(a) The Collateral Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Security Documents.
The Collateral Agent shall not by reason of this Agreement, the Security
Documents or the Guaranty be a trustee for any Creditor Party or have any other
fiduciary obligation to any Creditor Party (including any obligation under the
Trust Indenture
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Act of 1939, as amended). The Collateral Agent shall not be responsible to any
Creditor Party for any recitals, statements, representations or warranties
contained in any Financing Agreement or in any certificate or other document
referred to or provided for in, or received by any of them under, any Financing
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any Financing Agreement or any other document
referred to or provided for therein or any Lien under any of the Security
Documents or the perfection or priority of any such Lien or for any failure by
the Company, any Grantor, any Creditor Party or any other Person to perform any
of its respective obligations under any Financing Agreement. Without limiting
the foregoing, the Collateral Agent shall not be required to take any action
under any Security Document or the Guaranty, including, without limitation, any
action to perfect any security interests granted in the Collateral pursuant to
the Security Documents, or to administer any Collateral unless instructed to do
so by the Directing Parties. The Collateral Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or
securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Neither the Collateral Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for any action
taken or omitted to be taken by it or them hereunder or in connection herewith,
except for the gross negligence or willful misconduct of such Person.
(b) The Collateral Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, facsimile, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper
Person or Persons, and upon advice and statements of independent legal counsel,
independent accountants and other experts selected by the Collateral Agent. As
to any matters not expressly provided for by this Agreement, the Collateral
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder in accordance with instructions signed by the Directing
Parties, and such instructions of the Directing Parties, and any action taken
or failure to act pursuant thereto, shall be binding on all Creditor Parties,
whether Directing Parties or Non-Directing Parties.
(c) The Creditor Parties agree that they will indemnify the
Collateral Agent, in its capacity as the Collateral Agent, ratably in
accordance with the amount of the Creditor Obligations held by such Creditor
Parties, to the extent the Collateral Agent is not reimbursed by the Grantors
or reimbursed pursuant to clause FIRST of subsection 6(a)(iii) or subsection
11(o), for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against the
Collateral Agent in any way relating to or arising out of this Agreement, any
Security Document or the Guaranty or the enforcement of any of the terms of any
thereof, including fees and expenses of counsel (including the allocated cost
of internal counsel); provided, however, that no Creditor Party shall be liable
for any such payment to the extent the obligation to make such payment is found
in a final judgment by a court of competent jurisdiction to have arisen solely
from the Collateral Agent's gross negligence or willful misconduct. The
obligations of the Creditor Parties under this subsection 8(c) shall survive
the payment in full of the Creditor Obligations and the termination of this
Agreement.
(d) Except for action expressly required of the Collateral Agent
hereunder, the Collateral Agent shall, notwithstanding subsection 8(c), in all
cases be fully justified in failing or refusing to act hereunder unless it
shall be further indemnified to its reasonable satisfaction by the Creditor
Parties
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against any and all liability and expense that may be incurred by it by reason
of taking or continuing to take any such action.
(e) The Collateral Agent may deem and treat the payee of any
promissory note or other evidence of indebtedness or obligation relating to any
Creditor Obligation as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof, signed by such
payee and in form reasonably satisfactory to the Collateral Agent, shall have
been filed with the Collateral Agent. Any request, authority or consent of any
Person who at the time of making such request or giving such authority or
consent is the holder of any such note or other evidence of indebtedness or
obligation shall be conclusive and binding on any subsequent holder, transferee
or assignee of such note or other evidence of indebtedness or obligation and of
any note or notes or other evidences of indebtedness or obligation issued in
exchange therefor.
(f) Except as expressly provided herein and in the Security
Documents, the Collateral Agent shall have no duty to take any affirmative
steps with respect to the administration or collection of amounts payable in
respect of the Security Documents or the Collateral. The Collateral Agent
shall incur no liability (except to the extent the actions or omissions of the
Collateral Agent in connection therewith constitute gross negligence or willful
misconduct) as a result of any sale of any Collateral, whether at any public or
private sale.
(g) (i) The Collateral Agent may resign at any time by giving at
least 30 days' notice thereof to the Parties (such resignation to take effect
upon the acceptance by a successor Collateral Agent of any appointment as the
Collateral Agent hereunder) and the Collateral Agent may be removed as the
Collateral Agent at any time by the Directing Parties. In the event of any
such resignation or removal of the Collateral Agent, the Directing Parties
shall thereupon have the right to appoint a successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed by the Directing
Parties and shall have accepted such appointment within 30 days after the
notice of the intent of the Collateral Agent to resign or the removal of the
Collateral Agent, then the retiring Collateral Agent may, on behalf of the
other Parties, appoint a successor Collateral Agent. Any successor Collateral
Agent appointed pursuant to this clause shall be a commercial bank or other
financial institution organized or having a branch or agency under the laws of
the United States of America or any state thereof and having (1) a combined
capital and surplus of at least $500,000,000 and (2) a rating upon its
long-term senior unsecured indebtedness of "A-2" or better by Moody's Investors
Service, Inc. or "A" or better by Standard & Poor's Ratings Services. After
any retiring Collateral Agent's resignation or removal hereunder, the
provisions of Section 5 and this Section 8 shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Collateral Agent.
(ii) Upon the acceptance by a successor Collateral Agent of any
appointment as the Collateral Agent hereunder, such successor Collateral Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Collateral Agent, and the
retiring or removed Collateral Agent shall thereupon be discharged from its
duties and obligations hereunder.
(h) In no event shall the Collateral Agent or any other Creditor
Party be liable or responsible for any funds or investments of funds held by
the Company or any of its Affiliates.
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<PAGE> 23
(i) With respect to its pro rata share of the Creditor
Obligations, Rabobank and its Affiliates shall have and may exercise the same
rights and powers hereunder as, and shall be subject to the same obligations
and liabilities as and to the extent set forth herein for, any other Creditor
Party, all as if Rabobank were not the Collateral Agent. The term "Creditor
Parties" or any similar term shall, unless the context clearly otherwise
indicates, include Rabobank or any Affiliate of Rabobank in its individual
capacity as a Creditor Party. Rabobank and its Affiliates may lend money to,
and generally engage in any kind of business with, any Grantor as if Rabobank
were not acting as the Collateral Agent and without any duty to account
therefor to the Creditor Parties. Without limiting the foregoing, each
Creditor Party acknowledges that (i) Rabobank is the Collateral Agent under the
Security Documents, the Credit Agent, the Original Seasonal Agent, a Bank, and
a Seasonal Lender, (ii) the corporate finance department of Rabobank is acting
as an investment advisor to the Company with respect to the proposed sale by
the Company of the property of the Company located at 1487 Farnsworth Avenue,
Detroit, Michigan, and (iii) Rabobank and its Affiliates may continue to engage
in any credit decision with respect to the Amended Credit Agreement or the
Seasonal Line of Credit Agreement without any duty to account therefor to any
other Creditor Party by reason of its appointment as the Collateral Agent.
(j) Each Creditor Party acknowledges that it has, independently
and without reliance upon the Collateral Agent or any other Creditor Party and
based upon such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and the other
Financing Agreements to which it is a party. Each Creditor Party also
acknowledges that it will, independently and without reliance upon the
Collateral Agent or any other Creditor Party and based upon 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 Financing Agreements
to which it is a party.
(k) If, with respect to any proposed action to be taken by it, the
Collateral Agent shall determine in good faith that the provisions of this
Agreement relating to the functions or discretionary powers of the Collateral
Agent are or may be ambiguous or inconsistent, the Collateral Agent shall
notify the Creditor Parties identifying the proposed action and the provisions
it considers to be ambiguous or inconsistent, and may decline either to perform
such function or responsibility or to exercise such discretionary power unless
it has received the written confirmation of the Directing Parties that the
Directing Parties concur that the action proposed to be taken by the Collateral
Agent is consistent with the terms of this Agreement or is otherwise
appropriate. The Collateral Agent shall be fully protected in acting or
refraining from acting upon the confirmation of the Directing Parties in this
respect, and such confirmation shall be binding upon all Parties, subject to
subsection 11(b).
SECTION 9. INVALIDATED PAYMENTS.
If the Collateral Agent receives any amount (an "Avoidance Amount")
pursuant to this Agreement that is subsequently required to be returned or
repaid by the Collateral Agent to the Company, any Grantor or any Affiliate
thereof or their respective representatives or successors in interest, whether
by court order, settlement or otherwise (a "Repayment Event"), then each
Creditor Party to which such amount was distributed shall, forthwith upon its
receipt of a notice thereof from the Collateral Agent, pay the Collateral Agent
an amount equal to its ratable share (based on the Avoidance Amount actually
distributed to such Creditor Party) of the amount required to be returned or
repaid relating to such Repayment Event, it being understood that if any
Creditor Party shall fail to
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<PAGE> 24
promptly pay any such amount to the Collateral Agent, the Collateral Agent may
deduct such amount from any amounts payable thereafter to such Creditor Party
under this Agreement, although the Collateral Agent's ability or inability to
so deduct such amount in no manner limits the obligations of any Creditor Party
pursuant to this Section 9.
SECTION 10. CERTAIN AGREEMENTS OF THE PARTIES.
(a) Each Creditor Party agrees that it will not accept any
guaranty or Lien or other support or security (including, without limitation,
the establishment of any sweep account or similar account) for any Creditor
Obligations for its own benefit, but any guaranty or Lien or other support or
security (including, without limitation, the establishment of any sweep account
or similar account) for the Creditor Obligations shall be taken for the benefit
of all Creditor Parties (and, to the extent applicable, in the name of the
Collateral Agent).
(b) The Noteholders agree that they will not amend or otherwise
modify any provision of any Note Agreement without the written consent of the
Required Banks and (so long as the Seasonal Line of Credit Agreement is in
effect) the Required Seasonal Lenders (which consent will not be unreasonably
withheld), the Banks agree that they will not amend or otherwise modify any
provision of any Bank Document or waive the restriction of Section 2.1.2(y) of
the Amended Credit Agreement without the written consent of the Required
Noteholders and (so long as the Seasonal Line of Credit Agreement is in effect)
the Required Seasonal Lenders (which consent will not be unreasonably
withheld), the Seasonal Lenders agree that they will not amend or otherwise
modify any provision of any Seasonal Line of Credit Document or waive the
restriction of Section 1.1.2(y) of the New Seasonal Line of Credit Agreeement
without the written consent of the Required Noteholders and the Required Banks
(which consent will not be unreasonably withheld), and Old Kent agrees that it
will not amend any Old Kent L/C Document without the written consent of the
Required Banks, the Required Holders and (so long as the Seasonal Line of
Credit Agreement is in effect) the Required Seasonal Lenders (which consent
will not be unreasonably withheld).
(c) Each Creditor Party agrees that it will not enter into any
assignment, participation or transfer with respect to any Creditor Obligations
until such assignee, participant or transferee has agreed to be subject to and
bound by the provisions of this Agreement and that, in the event that a
Creditor Party enters into such an assignment, participation, or transfer in
violation of the preceding clause of this subsection 10(c), such assignee,
participant or transferee nonetheless will take such assignment, participation,
or transfer subject to and will be bound by the provisions of this Agreement.
(d) The Parties agree that the Security Documents and the Guaranty
will not be amended or otherwise modified without the written consent of the
Required Holders, the Required Banks and (so long as the Seasonal Line of
Credit Agreement is in effect) the Required Seasonal Lenders.
(e) The Company agrees to pay the Collateral Agent an annual
agency fee payable in advance on the date of this Agreement and on each
anniversary thereof in amounts equal to $62,500 for the first year, $50,000 for
the second year and $25,000 per annum thereafter.
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<PAGE> 25
SECTION 11. MISCELLANEOUS.
(a) All notices and other communications provided for herein shall
be in writing and may be sent by overnight air courier, facsimile communication
or United States mail and shall be deemed to have been given when delivered by
overnight air courier, upon receipt of facsimile communication or four business
days after deposit in the United States mail, registered or certified, with
postage prepaid and properly addressed. For the purposes hereof, the addresses
of the parties hereto (until notice of a change thereof is delivered as
provided in this subsection 11(a)) shall be as set forth on Schedule II hereto.
(b) This Agreement may be amended, modified or waived only by an
instrument or instruments in writing signed by all of the Creditor Parties and
the Collateral Agent.
(c) This Agreement shall be binding upon and inure to the benefit
of the Collateral Agent, each Creditor Party and their respective successors
and assigns. In the event that the holder of any note constituting a Creditor
Obligation shall transfer such note, it shall promptly so advise the Collateral
Agent. Each transferee of any such note shall take such note subject to the
provisions of this Agreement and to any request made, waiver or consent given
or other action taken or authorized hereunder, by each previous holder of such
note, prior to the receipt by the Collateral Agent of written notice of such
transfer. Upon the written request of any Party, the Collateral Agent will
provide such Party with copies of any written notices of transfer received
pursuant hereto.
(d) This Agreement shall continue to be effective among the
Parties even though a Bankruptcy Proceeding shall be instituted with respect to
the Company or any other Grantor, or any portion of the property or assets of
the Company or any other Grantor, and all actions taken by the Collateral Agent
with regard to such proceeding shall be by the Directing Parties; provided,
however, that nothing herein shall be interpreted to preclude any Creditor
Party from filing a proof of claim with respect to its Creditor Obligations or
from casting its vote, or abstaining from voting, for or against confirmation
of a plan of reorganization in a case of bankruptcy, insolvency or similar law
or otherwise seeking or opposing any relief, motion or action under the
Bankruptcy Code in its sole discretion or providing in its sole discretion and
upon any terms permitted by the Bankruptcy Code post-petition financing to the
Company's bankruptcy estate.
(e) Each Party hereto agrees to do such further acts and things
and to execute and deliver such additional agreements, powers and instruments
as any other party hereto may reasonably request to carry into effect the
terms, provisions and purposes of this Agreement or to better assure and
confirm unto such other party hereto its respective rights, powers and remedies
hereunder.
(f) This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. A facsimile of the signature of any party on any counterpart
shall be effective as the signature of the party executing such counterpart for
purposes of effectiveness of this Agreement.
(g) This Agreement shall become effective immediately upon
execution by the Parties and the Collateral Agent and shall continue in full
force and effect until one year following the date upon which all Creditor
Obligations are irrevocably paid in full, all commitments under the Amended
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Credit Agreement and the Seasonal Line of Credit Agreement have been
terminated, and the security interests and other liens securing the Creditor
Obligations have been released.
(h) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
(i) Headings of sections of this Agreement have been included
herein for convenience only and should not be considered in interpreting this
Agreement.
(j) Nothing in this Agreement, the Security Documents or the
Guaranty, expressed or implied, is intended or shall be construed to confer
upon or give to the Company, any Grantor or any other Person, other than the
Creditor Parties, any right, remedy or claim under or by reason of any such
agreement or any covenant, condition or stipulation herein or therein
contained.
(k) In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(l) The Company agrees to promptly deliver to the Collateral Agent
and each Creditor Party a copy of any amendment, modification or supplement to
any Financing Agreement.
(m) At any time after the date of this Agreement, upon the request
of the Company, one or more Seasonal Lenders may become parties hereto by
executing and delivering to the Collateral Agent a counterpart of this
Agreement and such other documentation as shall be required by the Collateral
Agent or its counsel. Immediately upon such execution and delivery (and
without any further action), each such Seasonal Lender will become a party to,
and will be bound by all of the terms of, this Agreement.
(n) In the event of any conflict between the terms of this
Agreement and the terms of any Financing Agreement, the provisions of this
Agreement shall govern to the extent necessary to remove the conflict.
(o) By countersigning this Agreement, the Grantors jointly and
severally agree (a) to reimburse the Collateral Agent, on demand, for any
unpaid fees for acting as Collateral Agent hereunder and any expenses incurred
by the Collateral Agent, including counsel fees, other charges and
disbursements and compensation of agents, arising out of, in any way connected
with, or as a result of, the execution or delivery (or compliance therewith) of
this Agreement, any Security Document or the Guaranty or any agreement or
instrument contemplated hereby or thereby or the performance by the parties
hereto or thereto of their respective obligations hereunder or thereunder or in
connection with the enforcement or protection of the rights of the Collateral
Agent and Creditor Parties under this Agreement, the Security Documents and the
Guaranty and (b) to indemnify and hold harmless the Collateral Agent and its
directors, officers, employees and agents, on demand, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Collateral Agent in its
capacity as the Collateral Agent or any of
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<PAGE> 27
them in any way relating to or arising out of this Agreement, any Security
Document or the Guaranty or any action taken or omitted by them under this
Agreement, any Security Document or the Guaranty, provided that no Grantor
shall be liable to the Collateral Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
have arisen solely from the gross negligence or wilful misconduct of the
Collateral Agent or any of its directors, officers, employees or agents.
(p) Nothing in this Agreement, the Security Documents or the
Guaranty, expressed or implied, is intended or shall be construed to confer
upon or give to any Person other than the Creditor Parties, any right, remedy
or claim under or by reason of any such agreement, condition or stipulation
herein or therein contained.
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<PAGE> 28
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
NEW YORK BRANCH, individually and
as Collateral Agent
By:_____________________________
Title:__________________________
By:_____________________________
Title:__________________________
OLD KENT BANK, individually and as an L/C Issuer
By:_____________________________
Title:__________________________
NATIONAL CITY BANK
By:_____________________________
Title:__________________________
HARRIS TRUST AND SAVINGS BANK
By:_____________________________
Title:__________________________
INTERCREDITOR AGREEMENT
S-1
<PAGE> 29
ALLSTATE LIFE INSURANCE COMPANY
By:_______________________________
Title:____________________________
By:_______________________________
Title:____________________________
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By:_______________________________
Title:____________________________
By:_______________________________
Title:____________________________
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
By:_______________________________
Title:____________________________
By:_______________________________
Title:____________________________
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<PAGE> 30
Acknowledged and Agreed:
THORN APPLE VALLEY, INC.
By:____________________________
Title:_________________________
THORN APPLE VALLEY FOREIGN SALES CORPORATION
By:____________________________
Title:_________________________
COAST REFRIGERATED TRUCKING CO., INC.
By:____________________________
Title:_________________________
CAVANAUGH LAKEVIEW FARMS, LTD.
By:____________________________
Title:_________________________
TILLMAN HOLDINGS, INC.
By:____________________________
Title:_________________________
TRI-MILLER TRANSPORTATION COMPANY, INC.
By:____________________________
Title:_________________________
FREDERICK HOLDINGS, INC.
By:____________________________
Title:_________________________
GUNSBERG CORNED BEEF COMPANY
By:____________________________
Title:_________________________
MILLER TRANSPORT, INC.
By:____________________________
Title:_________________________
S-3
<PAGE> 31
CROWN WEST, INC.
By:____________________________
Title:_________________________
NATIONAL FOOD EXPRESS, INC.
By:____________________________
Title:_________________________
PONCA HOLDINGS, INC.
By:____________________________
Title:_________________________
TAV BRANDS, INC.
By:____________________________
Title:_________________________
THORN APPLE HOLDINGS OF INDIANA, INC.
By:____________________________
Title:_________________________
TAV SWINE BUYING STATIONS, INC.
By:____________________________
Title:_________________________
TRI-MILLER PACKING CO.
By:____________________________
Title:_________________________
The undersigned is executing a counterpart hereof for purposes of becoming a
party hereto.
_______________________________
By:____________________________
Title:_________________________
S-4
<PAGE> 1
EXHIBIT 10(y)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") dated as of September 11, 1996
is among THORN APPLE VALLEY, INC. (the "Company"), the Subsidiaries of the
Company listed on the signature pages hereto, such other persons or entities
which from time to time may become parties hereto (collectively, including
without limitation the Company, the "Debtors" and individually each a
"Debtor"), and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., NEW YORK
BRANCH, as collateral agent for the Creditor Parties referred to below (in such
capacity, the "Collateral Agent") and as Credit Agent for certain of the
Creditor Parties (in such capacity, the "Credit Agent").
W I T N E S S E T H:
WHEREAS, each of the Debtors has acknowledged and agreed to an
Intercreditor Agreement, dated as of September 11, 1996 (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "Intercreditor Agreement"), among Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., New York Branch, in its individual capacity and
as Credit Agent, Seasonal Agent and Collateral Agent (in its capacity as
Collateral Agent, the "Collateral Agent"), Old Kent Bank, National City Bank,
Harris Trust and Savings Bank, Allstate Life Insurance Company, Principal
Mutual Life Insurance Company, and Great-West Life & Annuity Insurance Company
(each, together with any other holder of Creditor Obligations as defined in the
Intercreditor Agreement and each of their respective successors, transferees
and assigns, a "Creditor Party"), which Intercreditor Agreement relates to the
provision and administration of collateral being provided by the Debtors; and
WHEREAS, as a condition precedent to the restructuring to be effected
by the Financing Agreements referred to in the Intercreditor Agreement, each
Debtor is required to execute and deliver this Agreement; and
WHEREAS, each Debtor has duly authorized the execution, delivery and
performance of this Agreement; and
WHEREAS, it is in the best interests of each Debtor to execute this
Agreement inasmuch as such Debtor will derive substantial direct and indirect
benefits from the loans made and letters of credit issued from time to time to
or for the account of the Company by the Creditor Parties pursuant to the
Financing Agreements; and
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WHEREAS, the Company and the Credit Agent are parties to a Security
Agreement dated as of July 31, 1996 (the "Prior Security Agreement"), which the
Company and the Credit Agent wish to amend and restate in this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Company by the
Creditor Parties or any of them, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. When used herein, (a) the terms Certificated
Security, Chattel Paper, Deposit Account, Document, Equipment, Farm Products,
Fixture, Goods, Inventory, Instrument, Security and Uncertificated Security
shall have the respective meanings assigned to such terms in the Uniform
Commercial Code (as defined below), (b) terms used herein and not otherwise
defined herein (including Creditor Obligations and Financing Agreements) shall
have the meanings assigned to such terms in the Intercreditor Agreement, and
(c) the following terms have the following meanings (such definitions to be
applicable to both the singular and plural forms of such terms):
Account Debtor means the party who is obligated on or under any
Account Receivable, Contract Right or General Intangible.
Account Receivable means, with respect to any Debtor, any right of
such Debtor to payment for goods sold or leased or for services rendered.
Assignee Deposit Account - see Section 4.
Collateral means, with respect to any Debtor, all property and rights
of such Debtor in which a security interest is granted hereunder.
Computer Hardware and Software means, with respect to any Debtor, all
of the following property of such Debtor, in each case whether now or hereafter
owned, licensed or leased by such Debtor, (i) all computer and other electronic
data processing hardware, including without limitation all integrated computer
systems, central processing units, memory units, display terminals, printers,
computer elements, card readers, tape drives, hard and soft disk drives,
cables, electrical supply hardware, generators, power equalizers, accessories,
peripheral devices and other related computer hardware; (ii) all software
programs designed for use on the computers and electronic data processing
hardware described in clause (i) above, including without limitation all
operating system software, utilities and application programs in whatsoever
form (source code and object code in magnetic tape, disk or hard copy format or
any other listings whatsoever); (iii) all firmware
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associated therewith; and (iv) all documentation for the hardware, software and
firmware described in clauses (i), (ii) and (iii) above, including without
limitation flow charts, logic diagrams, manuals, specifications, training
materials, charts and pseudo codes.
Contract Right means, with respect to any Debtor, any right of such
Debtor to payment under a contract for the sale or lease of goods or the
rendering of services, which right is at the time not yet earned by
performance.
Default means the occurrence of any of the following events: (a) any
Event of Default; or (b) any warranty of any Debtor herein is untrue or
misleading in any material respect; or (c) any Debtor fails to comply or
perform any covenant or other agreement under this Agreement.
Excluded Assets means (a) the IRB Collateral, to the extent and so
long as the grant of a security interest therein violates an agreement existing
on the date hereof of the related Debtor in respect of the IRB Obligations, and
(b) any Computer Hardware and Software, to the extent and so long as the grant
of a security interest therein violates an agreement of the related Debtor
relating to such Computer Hardware and Software which existed on the date such
Debtor acquired its interest in such Computer Hardware and Software.
General Intangibles means, with respect to any Debtor, all of such
Debtor's "general intangibles" as defined in Uniform Commercial Code and, in
any event, includes all of such Debtor's trademarks, trade names, patents,
copyrights, trade secrets, customer lists, inventions, designs, software
programs, mask works, goodwill, registrations, licenses, franchises, tax refund
claims, guarantee claims, security interests and rights to indemnification.
Intellectual Property shall mean all past, present and future: trade
secrets and other proprietary information; trademarks, service marks, business
names, designs, logos, indicia, and/or other source and/or business identifiers
and the goodwill of the business relating thereto and all registrations or
applications for registrations which have heretofore been or may hereafter be
issued thereon throughout the world; copyrights (including without limitation
copyrights for computer programs) and copyright registrations or applications
for registrations which have heretofore been or may hereafter be issued
throughout the world and all tangible property embodying such copyrights;
unpatented inventions (whether or not patentable); patent applications and
patents; industrial designs, industrial design applications and registered
industrial designs; license agreements related to any of the foregoing and
income therefrom; books, records, writings, computer tapes or disks, flow
diagrams, specification sheets,
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source codes, object codes and other physical manifestations, embodiments or
incorporations of any of the foregoing; the right to sue for all past, present
and future infringements of any of the foregoing; and all common law and other
rights throughout the world in and to all of the foregoing.
Non-Tangible Collateral shall mean, with respect to any Debtor,
collectively, such Debtor's Accounts Receivable, Contract Rights and General
Intangibles.
Permitted Liens - see Section 3.
Senior Obligations means, as to each Debtor, all obligations (monetary
or otherwise) of such Debtor to the Creditor Parties and/or the Collateral
Agent arising under the Financing Agreements (including without limitation all
Creditor Obligations).
Uniform Commercial Code shall mean the Uniform Commercial Code as in
effect in the State of Illinois on the date of this Agreement; provided,
however, as used in Section 7 hereof, "Uniform Commercial Code" shall mean the
Uniform Commercial Code as in effect from time to time in the applicable
jurisdiction.
2. Grant of Security Interest. As security for the payment of
all Senior Obligations, each Debtor hereby assigns to the Collateral Agent for
the benefit of the Creditor Parties, and grants to the Collateral Agent for the
benefit of the Creditor Parties a continuing security interest in, the
following, whether now or hereafter existing or acquired:
All of such Debtor's:
(i) Accounts Receivable;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with
respect thereto, including without limitation any and
all licenses, options, warranties, service contracts,
program services, test rights, maintenance rights,
support rights, improvement rights, renewal rights
and indemnifications, and any substitutions,
replacements, additions or model conversions of any
of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
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(vii) Documents;
(viii) General Intangibles (including without limitation any right of
such Debtor arising from time to time to receive payment under
a billing to a Person representing such Person's obligation to
reimburse such Debtor for indebtedness paid or to be paid by
such Debtor for the account of such Person);
(ix) Goods (including without limitation all of its Equipment,
Fixtures and Inventory, Farm Products, and livestock,
including without limitation cattle, hogs, sheep and other
animals and any of the foregoing in gestation), together with
all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
(x) Instruments;
(xi) Intellectual Property;
(xii) money (of every jurisdiction whatsoever);
(xiii) tax refunds;
(xiv) Uncertificated Securities; and
(xv) to the extent not included in the foregoing, other personal
property of any kind or description;
together with all books, records, writings, data bases, information
and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to any of the
foregoing, and all proceeds, products, offspring, rents, issues,
profits and returns of and from any of the foregoing; but excluding
any Excluded Assets.
3. Warranties. Each Debtor warrants that: (i) no financing statement
(other than any which may have been filed on behalf of the Collateral Agent or
in respect of Permitted Liens) covering any of the Collateral is on file in any
public office; (ii) such Debtor is and will be the lawful owner of all
Collateral, free of all liens and claims whatsoever, other than the security
interest hereunder and liens permitted under Section 2.3 of Appendix A to the
Amended Credit Agreement ("Permitted Liens"), with full power and authority to
execute this Agreement and perform such Debtor's obligations hereunder, and to
subject the Collateral to the security interest hereunder; (iii) all
information with respect to Collateral and Account Debtors set forth in any
schedule, certificate or other writing at any time heretofore or hereafter
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furnished by such Debtor to the Collateral Agent or any Creditor Party, and all
other written information heretofore or hereafter furnished by such Debtor to
the Collateral Agent or any Creditor Party, is and will be true and correct in
all material respects as of the date furnished; (iv) such Debtor's chief
executive office and principal place of business are as set forth on Schedule I
hereto (and such Debtor has not maintained its chief executive office and
principal place of business at any other location at any time after January 1,
1995); (v) each other location where such Debtor maintains a place of business
is set forth on Schedule II hereto; (vi) except as set forth on Schedule III,
such Debtor is not now known and has not previously been known by any trade
name; (vii) except as set forth on Schedule III, such Debtor has not been known
by any legal name different from the one set forth on the signature page of
this Agreement, nor has such Debtor been the subject of any merger or other
corporate reorganization; (viii) Schedule IV hereto contains a complete listing
of all of such Debtor's Intellectual Property which is subject to registration
statutes; (ix) Schedule V hereto contains a complete listing of all of such
Debtor's interests in capital stock, partnership interests, limited liability
company membership interests and other equity interests and indebtedness, (x)
this Agreement is a legal, valid and binding obligation of such Debtor,
enforceable in accordance with its terms; (xi) such Debtor is in compliance
with the requirements of all applicable laws (including without limitation the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every governmental authority, the non-compliance with which would materially
adversely affect the business, properties, assets, operations or condition
(financial or otherwise) of such Debtor, the value of the Collateral or the
worth of the Collateral as collateral security; (xii) to the knowledge of such
Debtor, all of such Debtor's Intellectual Property is subsisting and none has
been adjudged invalid or unenforceable, in whole or in part; and (xiii) to the
best of such Debtor's knowledge, all of such Debtor's Intellectual Property
which is material to such Debtor's business is valid and enforceable.
4. Collections, etc. Until such time during the existence of a Default
as the Collateral Agent shall notify such Debtor of the revocation of such
power and authority, each Debtor (a) may, in the ordinary course of its
business, at its own expense, sell, lease or furnish under contracts of service
any of the Inventory normally held by such Debtor for such purpose, and use and
consume, in the ordinary course of its business, any raw materials, work in
process or materials normally held by such Debtor for such purpose, (b) will,
at its own expense, endeavor to collect, as and when due, all amounts due under
any of the Non-Tangible Collateral, including without limitation the taking of
such action with respect to such collection as the Collateral Agent may
reasonably request or, in the absence of such request, as such Debtor may deem
advisable, and (c) may grant, in the ordinary course of business, to any party
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obligated on any of the Non-Tangible Collateral, any rebate, refund or
allowance to which such party may be lawfully entitled, and may accept, in
connection therewith, the return of Goods, the sale or lease of which shall
have given rise to such Non-Tangible Collateral. The Collateral Agent,
however, may, at any time that a Default exists, whether before or after any
revocation of such power and authority or the maturity of any of the Senior
Obligations, notify any parties obligated on any of the Non-Tangible Collateral
to make payment to the Collateral Agent of any amount due or to become due
thereunder and enforce collection of any of the Non-Tangible Collateral by suit
or otherwise and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder or evidenced thereby. Upon
request of the Collateral Agent during the existence of a Default, each Debtor
will, at its own expense, notify any parties obligated on any of the
Non-Tangible Collateral to make payment to the Collateral Agent of any amount
due or to become due thereunder.
Upon request by the Collateral Agent during the existence of a Default,
each Debtor will forthwith, upon receipt, transmit and deliver to the
Collateral Agent, in the form received, all cash, checks, drafts and other
instruments or writings for the payment of money (properly endorsed, where
required, so that such items may be collected by the Collateral Agent) which
may be received by such Debtor at any time in full or partial payment or
otherwise as proceeds of any of the Collateral. Except as the Collateral Agent
may otherwise consent in writing, any such items which may be so received by
any Debtor will not be commingled with any other of its funds or property, but
will be held separate and apart from its own funds or property and upon express
trust for the Collateral Agent until delivery is made to the Collateral Agent.
Each Debtor will comply with the terms and conditions of any consent given by
the Collateral Agent pursuant to the foregoing sentence.
During the existence of a Default, all items or amounts which are
delivered by any Debtor to the Collateral Agent on account of partial or full
payment or otherwise as proceeds of any of the Collateral shall be deposited to
the credit of a deposit account (each an "Assignee Deposit Account") of such
Debtor with the Collateral Agent, as security for payment of the Senior
Obligations. No Debtor shall have any right to withdraw any funds deposited in
the applicable Assignee Deposit Account. The Collateral Agent may, from time
to time, in its discretion, and shall upon request of the applicable Debtor
made not more than once in any week, apply all or any of the then balance,
representing collected funds, in the Assignee Deposit Account toward payment of
the Senior Obligations, whether or not then due, in such order of application
as the Collateral Agent may determine in accordance with the Intercreditor
Agreement, and the Collateral Agent may,
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from time to time, in its discretion in accordance with the Intercreditor
Agreement, release all or any of such balance to the applicable Debtor.
During the existence of a Default, the Collateral Agent is authorized to
endorse, in the name of the applicable Debtor, any item, howsoever received by
the Collateral Agent, representing any payment on or other proceeds of any of
the Collateral.
5. Agreements of the Debtors. Each Debtor (a) will, upon request of the
Collateral Agent, execute such financing statements and other documents (and
pay the cost of filing or recording the same in all public offices deemed
appropriate by the Collateral Agent) and do such other acts and things
(including without limitation delivery to the Collateral Agent of any
Instruments or Certificated Securities which constitute Collateral with any
endorsements thereon or accompanying stock powers as the Collateral Agent may
request), all as the Collateral Agent may from time to time reasonably request,
to establish and maintain a valid security interest in the Collateral (free of
all other liens, claims and rights of third parties whatsoever, other than
Permitted Liens) to secure the payment of the Senior Obligations; (b) will keep
all its Inventory at, and will not maintain any place of business at any
location other than, its address(es) shown on Schedules I and II hereto or at
such other addresses of which such Debtor shall have given the Collateral Agent
not less than 30 days' prior written notice; (c) will keep, at its addresses
shown on Schedules I and II hereto, its records concerning the Non-Tangible
Collateral, which records will be of such character as will enable the
Collateral Agent or its designees to determine at any time the status of the
Non-Tangible Collateral, and no Debtor will, unless the Collateral Agent shall
otherwise consent in writing, duplicate any such records at any other address;
(d) will furnish the Collateral Agent such information concerning such Debtor,
the Collateral and the Account Debtors as the Collateral Agent may from time to
time reasonably request; (e) will permit the Collateral Agent and its
designees, from time to time, to inspect such Debtor's Inventory and other
Goods, and to inspect, audit and make copies of and extracts from all records
and all other papers in the possession of such Debtor or its agents pertaining
to the Collateral and the Account Debtors, and will, upon request of the
Collateral Agent during the existence of a Default, deliver to the Collateral
Agent all of such records and papers; (f) will, upon request of the Collateral
Agent, stamp on its records concerning the Collateral, and add on all Chattel
Paper constituting a portion of the Collateral, a notation, in form
satisfactory to the Collateral Agent, of the security interest of the
Collateral Agent hereunder; (g) except for the sale or lease of Inventory in
the ordinary course of its business, will not sell, lease, assign or permit to
exist any lien on or security interest in any Collateral other than Permitted
Liens and liens and security interests in favor of the
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Collateral Agent or as permitted under Section 2.3 of Appendix A to the Amended
Credit Agreement; (h) will at all times keep all its Inventory and other Goods
insured under policies maintained with reputable insurance companies against
loss, damage, theft and other risks to such extent, and with only such
deductibles, as is customarily maintained by companies similarly situated (and,
in any event, as is required by applicable law), and cause all such policies to
provide that loss thereunder shall be payable to the Collateral Agent as its
interest may appear (it being understood that (A) so long as no Default shall
be existing, the Collateral Agent shall deliver any proceeds of such insurance
which may be received by it to such Debtor and (B) whenever a Default shall be
existing, the Collateral Agent may apply any proceeds of such insurance which
may be received by it toward payment of the Senior Obligations, whether or not
due, in such order of application as the Collateral Agent may determine in
accordance with the Intercreditor Agreement) and such policies or certificates
thereof shall, if the Collateral Agent so requests, be deposited with or
furnished to the Collateral Agent; (i) will take such actions as are reasonably
necessary to keep its Inventory in the condition such Debtor has customarily
maintained Inventory; (j) will take such actions as are reasonably necessary to
keep its Equipment in good repair and condition and in good working or running
order; (k) will upon request of the Collateral Agent, cause to be noted on the
applicable certificate, in the event any of its Equipment is covered by a
certificate of title, the security interest of the Collateral Agent in the
Equipment covered thereby; (l) will prosecute diligently all applications now
pending for trademarks, patents or copyrights which are material to its
business; (m) will protect, preserve and maintain all rights in the Collateral
which are material to its business, including without limitation the duty to
prosecute and/or defend against any and all suits contesting infringement or
dilution of any Intellectual Property which is material to its business, any
other suits containing allegations respecting the validity of the Collateral or
any material portion thereof, and any suits claiming injury to the goodwill
associated with any trademark which is material to its business; and (n) will
reimburse the Collateral Agent for all expenses, including without limitation
reasonable attorneys' fees and legal expenses, incurred by the Collateral Agent
in seeking to collect or enforce any rights in respect of such Debtor's
Collateral.
Any expenses incurred in protecting, preserving and maintaining any
Collateral shall be borne by the applicable Debtor. Whenever a Default shall
be existing, the Collateral Agent shall have the right to bring suit to enforce
any or all of the Intellectual Property or licenses thereunder, in which event
the applicable Debtor shall at the request of the Collateral Agent do any and
all lawful acts and execute any and all proper documents required by the
Collateral Agent in aid of such enforcement and such Debtor shall promptly,
upon demand, reimburse and indemnify
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the Collateral Agent for all costs and expenses incurred by the Collateral
Agent in the exercise of its rights under this Section 5. Notwithstanding the
foregoing, the Collateral Agent shall have no obligation or liability regarding
the Collateral or any thereof by reason of, or arising out of, this Agreement.
6. Default. Whenever a Default exists, the Collateral Agent may exercise
from time to time any rights and remedies available to it under applicable law.
Each Debtor agrees, during the existence of a Default, at the Collateral
Agent's request, (i) to assemble, at its expense, all its Inventory and other
Goods (other than Fixtures) at a convenient place or places acceptable to the
Collateral Agent, and (ii) to execute all such documents and do all such other
things which may be necessary or desirable in order to enable the Collateral
Agent or its nominee to be registered as owner of the Intellectual Property
with any competent registration authority. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least ten days before such disposition. Any
proceeds of any disposition by the Collateral Agent of any of the Collateral
may be applied by the Collateral Agent to payment of expenses in connection
with the Collateral, including without limitation reasonable attorneys' fees
and legal expenses, and any balance of such proceeds may be applied by the
Collateral Agent toward the payment of such of the Senior Obligations, and in
such order of application, as the Collateral Agent may from time to time elect
in accordance with the Intercreditor Agreement.
7. General. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as any applicable Debtor
requests in writing, but failure of the Collateral Agent to comply with any
such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Collateral Agent to preserve or protect any rights
with respect to such Collateral against prior parties, or to do any act with
respect to the preservation of such Collateral not so requested by any Debtor,
shall be deemed a failure to exercise reasonable care in the custody or
preservation of such Collateral.
Any notice from the Collateral Agent or any Creditor Party to any Debtor,
if mailed, shall be deemed given five days after the date mailed, postage
prepaid, addressed to such Debtor either at such Debtor's address shown on
Schedule I hereto or at such other address as such Debtor shall have specified
in writing to the Collateral Agent as its address for notices hereunder.
Each of the Debtors agrees to pay all expenses (including without
limitation reasonable attorney's fees and legal expenses) paid or incurred by
the Collateral Agent or any Creditor Party in endeavoring to collect the Senior
Obligations of such Debtor, or
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any part thereof, and in enforcing this Agreement against such Debtor, and such
obligations will themselves be Senior Obligations.
No delay on the part of the Collateral Agent in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial exercise
by the Collateral Agent of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy.
This Security Agreement shall remain in full force and effect until all
Senior Obligations have been paid in full and all commitments to extend credit
under the Financing Agreements have terminated. If at any time all or any part
of any payment theretofore applied by the Collateral Agent or any Creditor
Party to any of the Senior Obligations is or must be rescinded or returned by
the Collateral Agent or such Creditor Party for any reason whatsoever
(including without limitation the insolvency, bankruptcy or reorganization of
any Debtor), such Senior Obligations shall, for the purposes of this Agreement,
to the extent that such payment is or must be rescinded or returned, be deemed
to have continued in existence, notwithstanding such application by the
Collateral Agent or such Creditor Party, and this Agreement shall continue to
be effective or be reinstated, as the case may be, as to such Senior
Obligations, all as though such application by the Collateral Agent or such
Creditor Party had not been made.
This Agreement has been delivered at Chicago, Illinois, and shall be
construed in accordance with and governed by the internal laws of the State of
Illinois, subject, however, to the applicability of the Uniform Commercial Code
of any jurisdiction in which any Goods of any Debtor may be located at any
given time. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
The rights and privileges of the Collateral Agent hereunder shall inure to
the benefit of its successors and assigns.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Agreement. At any time after the date of this
Agreement, one or more additional Persons may become parties hereto by
executing and delivering to the Collateral Agent a counterpart of this
Agreement. Immediately upon such execution and delivery (and without any
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further action), each such Person will become a party to, and will be bound by
the terms of, this Agreement.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT, MAY BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH DEBTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.
EACH DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH ON SCHEDULE I HERETO
(OR SUCH OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE COLLATERAL
AGENT AS ITS ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR
OUTSIDE OF THE STATE OF ILLINOIS. EACH DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
EACH OF EACH DEBTOR, THE COLLATERAL AGENT AND (BY ACCEPTING THE BENEFITS
HEREOF) EACH SECURED CREDITOR HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY
NOTE, ANY OTHER FINANCING DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
8. Restatement of Prior Security Agreement. The parties hereto agree
that the Prior Security Agreement is amended and restated in its entirety by
this Agreement, with the Collateral Agent succeeding to all rights of the
Credit Agent thereunder as restated hereby.
9. Release of Security Interest. Upon payment in full of all Senior
Obligations and the termination of all commitments to extend credit under the
Financing Agreements, the Collateral Agent shall, at the Debtors' expense,
execute and deliver to the related Debtors all instruments and other documents
as may be necessary or proper to release the lien on and security interest in
the Collateral which has been granted hereunder. Subject to Section 5(g) of
the Intercreditor Agreement, the Collateral Agent shall, at the request
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of the related Debtor and at the Debtors' expense, execute and deliver to the
related Debtor all instruments and other documents as may be necessary or
proper to release the lien on and security interest in any Collateral of such
Debtor which has been granted hereunder in connection with a disposition of
such Collateral permitted under the Financing Agreements, subject to the
Collateral Agent receiving evidence reasonably satisfactory to the Collateral
Agent that such disposition is so permitted.
-13-
<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., NEW YORK
BRANCH, as Collateral Agent
By:
------------------------------
Title:
------------------------
By:
------------------------------
Title:
------------------------
S-1
SECURITY AGREEMENT
<PAGE> 15
THORN APPLE VALLEY, INC.
By:
------------------------------
Title:
------------------------
THORN APPLE VALLEY FOREIGN SALES
CORPORATION
By:
------------------------------
Title:
------------------------
COAST REFRIGERATED TRUCKING CO., INC.
By:
------------------------------
Title:
------------------------
CAVANAUGH LAKEVIEW FARMS, LTD.
By:
------------------------------
Title:
------------------------
TILLMAN HOLDINGS, INC.
By:
------------------------------
Title:
------------------------
TRI-MILLER TRANSPORTATION COMPANY,
INC.
By:
------------------------------
Title:
------------------------
FREDERICK HOLDINGS, INC.
By:
------------------------------
Title:
------------------------
S-2
SECURITY AGREEMENT
<PAGE> 16
GUNSBERG CORNED BEEF COMPANY
By:
------------------------------
Title:
------------------------
MILLER TRANSPORT, INC.
By:
------------------------------
Title:
------------------------
CROWN WEST, INC.
By:
------------------------------
Title:
------------------------
NATIONAL FOOD EXPRESS, INC.
By:
------------------------------
Title:
------------------------
PONCA HOLDINGS, INC.
By:
------------------------------
Title:
------------------------
TAV BRANDS, INC.
By:
------------------------------
Title:
------------------------
THORN APPLE HOLDINGS OF INDIANA, INC.
By:
------------------------------
Title:
------------------------
S-3
SECURITY AGREEMENT
<PAGE> 17
TRI-MILLER PACKING, INC.
By:
------------------------------
Title:
------------------------
TAV SWINE BUYING STATIONS, INC.
By:
------------------------------
Title:
------------------------
S-4
SECURITY AGREEMENT
<PAGE> 18
The undersigned is executing
a counterpart hereof for purposes
of becoming a party hereto:
-----------------------------
By:
------------------------------
Title:
------------------------
-----------------------------
By:
------------------------------
Title:
------------------------
S-5
SECURITY AGREEMENT
<PAGE> 19
SCHEDULE I
TO SECURITY AGREEMENT
Chief Executive Offices and Principal Place of Business
<PAGE> 20
SCHEDULE II
TO SECURITY AGREEMENT
Addresses
<PAGE> 21
SCHEDULE III
TO SECURITY AGREEMENT
Trade Names
Other Legal Names
Mergers and Other Corporate Reorganizations
<PAGE> 22
SCHEDULE IV
TO SECURITY AGREEMENT
Intellectual Property
<PAGE> 23
SCHEDULE V
TO SECURITY AGREEMENT
Equity Interests and Indebtedness
S-2
<PAGE> 1
EXHIBIT 21
Year Ended
Form 10-K THORN APPLE VALLEY, INC. May 31, 1996
EXHIBIT (21)
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
Coast Refrigerated Trucking Co., Inc. North Carolina
Cavanaugh Lakeview Farms, Ltd. Michigan
Crown West, Inc. Michigan
Frederick Holdings, Inc. Michigan
Gunsberg Corned Beef Company Michigan
Millers Transport Inc. Utah
National Food Express, Inc. Michigan
Ponca Holdings, Inc. Michigan
Thorn Apple Valley Foreign Sales Corporation Virgin Islands (U.S.)
Thorn Apple Valley Holdings of Indiana, Inc. Michigan
Tillman Holdings, Inc. Michigan
Tri-Miller Packing Co. Utah
Tri-Miller Transportation Company Inc.* Utah
TAV Brands, Inc. Michigan
TAV Swine Buying Stations, Inc. Michigan
</TABLE>
* 100% of the stock is owned by Tri-Miller Packing Co. and Millers Transport
Inc.
<PAGE> 1
EXHIBIT (23)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Thorn Apple Valley, Inc. and Subsidiaries on Form S-8 of our report dated
August 26, 1996, except as to the information presented as a subsequent event
in Note 6, for which the date is September 12, 1996, on our audits of the
consolidated financial statements and the financial statement schedule of Thorn
Apple Valley, Inc. and Subsidiaries as of May 31, 1996 and May 26, 1995, and
for each of the three years in the period ended May 31, 1996, which report is
included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Detroit, Michigan
September 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 6,437,119
<SECURITIES> 0
<RECEIVABLES> 62,993,790
<ALLOWANCES> 621,800
<INVENTORY> 56,263,210
<CURRENT-ASSETS> 144,494,186
<PP&E> 241,347,286
<DEPRECIATION> 98,938,159
<TOTAL-ASSETS> 325,616,203
<CURRENT-LIABILITIES> 85,450,795
<BONDS> 159,808,923
0
0
<COMMON> 578,613
<OTHER-SE> 76,146,872
<TOTAL-LIABILITY-AND-EQUITY> 325,616,203
<SALES> 983,084,427
<TOTAL-REVENUES> 983,084,427
<CGS> 932,130,906
<TOTAL-COSTS> 932,130,906
<OTHER-EXPENSES> 79,427,883
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,491,769
<INCOME-PRETAX> (34,557,744)
<INCOME-TAX> (12,850,000)
<INCOME-CONTINUING> (21,707,744)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,707,744)
<EPS-PRIMARY> (3.76)
<EPS-DILUTED> (3.76)
</TABLE>
