<PAGE> 1
As filed with the Securities and Exchange Commission on March 6, 1997
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
WSMP, INC.
(Exact name of Registrant as specified in its charter)
North Carolina 33-0213512
-------------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1 WSMP Drive
P.O. Box 399
Claremont, NC 28610
Telephone: (704) 459-7626
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------
Mr. Matthew V. Hollifield
Vice President of Finance
WSMP, Inc.
1 WSMP Drive
P.O. Box 399
Claremont, NC 28610
Telephone: (704) 459-7626
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
J.R. Simpson, Esq. Patrick Daugherty, Esq.
Simpson Aycock, P.A. Nelson Mullins Riley & Scarborough, L.L.P.
204 E. McDowell Street NationsBank Corporate Center
Morganton, NC 28655 Charlotte, NC 28202-4000
Telephone: (704) 437-9744 Telephone: (704) 417-3101
Telecopier: (704) 433-7708 Telecopier: (704) 377-4814
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective.
<PAGE> 2
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Title of each class Amount Proposed Proposed Amount of
of securities to be to be maximum maximum aggregate registration
registered registered offering price offering price fee
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Common Stock,
$1.00 par value 223,611 shares $9.00 per share (1) $2,012,499 (1) $629
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee and
based upon the average of the high and low prices for the Common Stock
on March 5, 1997, as reported by NASDAQ, in accordance with Rule
457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION
DATED MARCH 6, 1997
WSMP, INC.
COMMON STOCK
This Prospectus relates to the offer and sale from time to time of up
to 223,611 shares (the "Shares") of common stock, par value $1.00 per share (the
"Common Stock"), of WSMP, Inc. (the "Company") by certain shareholders of the
Company named herein (the "Selling Shareholders"). See "Selling Shareholders"
and "Plan of Distribution."
The Shares may be sold from time to time by the Selling Shareholders on
the NASDAQ National Market System ("NASDAQ") on terms to be determined at the
time of each sale. The Selling Shareholders also may make private sales from
time to time directly or through a broker or brokers. Alternatively, the Selling
Shareholders may offer Shares from time to time to or through underwriters,
dealers or agents, who may receive consideration in the form of discounts and
commissions. Such compensation, which may exceed ordinary brokerage commissions,
may be paid by the Selling Shareholders and/or the purchasers of the Shares for
whom such underwriters, dealers and agents may act. See "Selling Shareholders"
and "Plan of Distribution."
The Selling Shareholders and any dealers or agents that participate in
the distribution of the Shares may be considered "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any profit on the sale of Shares offered by them and any discounts, commission
or concessions received by any such dealers or agents may be considered
underwriting discounts and commissions under the Securities Act.
The Company will receive no proceeds from the sale of the Shares by the
Selling Shareholders hereunder, but the Company will pay the expenses that it
incurs in connection with the registration of the Shares with the Securities and
Exchange Commission (the "SEC"). See "Plan of Distribution" for indemnification
arrangements between the Company and the Selling Shareholders.
The Common Stock is quoted on NASDAQ under the symbol "WSMP." On March
5, 1997, the closing price per share of the Common Stock, as reported by NASDAQ,
was $9.00.
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THE SHARES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS," COMMENCING ON PAGE 3.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is ______, 1997.
<PAGE> 4
ADDITIONAL INFORMATION
The Company is subject to the informational and reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the SEC. The Registration Statement and exhibits and schedules thereto, as well
as such reports, proxy statements and other information, may be inspected and
copied at the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at 7
World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part of such
materials may be obtained from any such office upon payment of the fees
prescribed by the SEC. The SEC maintains a World Wide Web site
(http://www.sec.gov), which contains reports, proxy and information statements
and other information filed electronically through the SEC's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"). The Common Stock is
currently quoted on NASDAQ; such reports, statements and other information also
can be inspected at the offices of NASDAQ Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the SEC a Registration Statement on Form S-3
under the Securities Act with respect to the Shares (the "Registration
Statement"). As permitted by the rules of the SEC, this Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Shares, reference is made to the Registration Statement,
including the exhibits and schedules filed as part thereof. Statements contained
in this Prospectus, and in any document incorporated herein by reference, as to
the contents of any contract or any other document are not necessarily complete,
and, in each instance, reference is hereby made to the copy of the contract or
document filed as an exhibit to the Registration Statement or such document,
each such statement being qualified in all respects by this reference thereto.
The Registration Statement has been filed through EDGAR and is also publicly
available through the SEC's Web site (http://www.sec.gov).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the SEC by the Company and
are hereby incorporated by reference into this Prospectus: (i) the Company's
Annual Report on Form 10-K for its fiscal year ended February 23, 1996; (ii) the
Company's Quarterly Reports on Form 10-Q for its fiscal quarters ended May 17,
1996, August 9, 1996 and November 1, 1996; (iii) the Company's Current Reports
on Form 8-K dated June 27, 1996 and January 10, 1997; and (iv) the description
of the Common Stock contained in the Company's Registration Statement on Form
8-A filed with the SEC pursuant to Section 12 of the Exchange Act and any
amendment or report filed by the Company for the purpose of updating such
description. All other documents filed pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and shall be deemed to be a part hereof from the date of filing thereof.
Any statement contained in a document incorporated or deemed
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that is also deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a Prospectus is delivered, upon written or oral request of such person,
a copy of any document incorporated herein by reference (not including exhibits
to documents that have been incorporated herein by reference unless such
exhibits are specifically incorporated by reference in the document which this
Prospectus incorporates). Requests should be directed to Mr. Matthew V.
Hollifield, Vice President of Finance, WSMP, Inc., 1 WSMP Drive, P.O. Box 399,
Claremont, NC 28610, telephone (704) 459-7626.
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<PAGE> 5
RISK FACTORS
Prospective investors should carefully consider the following factors,
in addition to the other information presented in this Prospectus, before
purchasing the Shares.
GROWTH STRATEGY
The Company has no immediate plans to open additional restaurants in
its current fiscal year, but may acquire additional restaurants from franchisees
who are not interested in continuing operations. The Company may acquire three
to five restaurants in this manner in its current fiscal year. Its ability to
achieve this schedule will depend upon the availability of suitable locations,
the ability to hire and train skilled management personnel, the availability of
adequate financing and other factors, some of which are beyond its control.
There can be no assurance that the Company will be able to continue to open all
of its planned new restaurants or that, if opened, such restaurants can be
operated profitably or as profitably as the Company's existing restaurants. The
opening of additional restaurants in the same market areas could have the effect
of attracting customers from existing restaurants located in that area.
COMPETITION
The restaurant and food manufacturing businesses are highly competitive
and are often affected by changes in tastes and eating habits of the public,
economic conditions affecting spending habits, population and traffic patterns.
Company-operated restaurants and Western Steer(R) and Prime Sirloin(R)
restaurants operated by franchisees generally compete with national and regional
family-oriented restaurant chains, local establishments and fast food
restaurants. In marketing franchises, the Company competes with numerous other
family steakhouse and restaurant franchisors, many of which have substantially
greater financial resources and higher sales volume than the Company. In its
production of retail and institutional ham products, the Company faces strong
price competition from a variety of large meat processing concerns and smaller
local and regional operations. In sales of biscuit and yeast roll products, the
Company competes with a number of large bakeries in various parts of the
country, as well as national frozen meal manufacturers, with competition
strongest for sales to institutional food vendors.
DEPENDENCE UPON KEY PERSONNEL
The success of the Company's business will continue to depend upon
Messrs. Richardson, Clark, Howard, Templeton and Hollifield. The loss of the
services of one or more of these executives could have material adverse effects
on the Company.
GOVERNMENT REGULATION
The Company's food service businesses are subject to extensive state
and local government regulation, including measures relating to the preparation
and sale of food and building and zoning requirements. Also, the Company and its
franchisees are subject to laws governing relationships with employees,
including minimum wage requirements, overtime, working conditions and
citizenship requirements. The Company also is subject to federal regulation and
state laws governing the offer and sale of franchises. Many state laws impose
substantive requirements on franchise agreements, including limitations on
non-competition provisions and on termination or non-renewal of franchises. Some
states require that certain materials be registered before franchises can be
offered or sold therein. Bills also have been introduced in Congress that would
provide for federal regulation of substantive aspects of the
franchisor-franchisee relationship. Such legislation could limit, among other
things, the duration and scope of non-competition provisions, the ability of the
franchisor to terminate or refuse to renew the franchise and the ability of the
franchisor to designate sources of supply. The failure to obtain or retain food
licenses or approvals to sell franchises, or further increases in the minimum
wage rate, employee benefit costs or other costs associated with employees,
could adversely affect the Company. At the federal level, there also have been
proposals to introduce a system of mandated health insurance. These proposals,
if implemented, could adversely affect the Company as well as the restaurant and
food service industries in general.
3
<PAGE> 6
STOCK PRICE VOLATILITY
Quarterly financial results of the Company or of other food service
companies, changes in general conditions in the economy, in the restaurant
industry or in the capital markets or other developments affecting the company,
its competitors or the capital markets could cause, in any such case, the market
price of the Common Stock to fluctuate significantly. In addition, NASDAQ has
recently experienced extreme price and volume fluctuations. Such broad market
fluctuations also may adversely affect the price of the Common Stock.
THE COMPANY
Certain statements made below and incorporated herein by reference are
forward-looking in nature and reflect the Company's current expectations and
plans. Such statements involve various risks and uncertainties that could cause
actual results to differ materially from those currently expected by the
Company. Meaningful factors that might cause such differences include, but are
not limited to, the factors described as "Risk Factors" elsewhere in this
Prospectus and other factors discussed in the Company's SEC filings.
The Company is a North Carolina-based food manufacturing and restaurant
company. Since the mid-1960s it has grown from humble origins in the foothills
of the Blue Ridge Mountains to become nationally recognized in the food service
industry with nearly $85 million in estimated revenues for its fiscal year ended
in February 1997. The Company is comprised of two separate food processing
divisions and a division that develops, owns, operates and franchises
restaurants.
The Bakery Division is the larger of the Company's food processing
operations and includes the largest single-site microwaveable sandwich
manufacturing facility in the United States. Situated in Claremont, N.C., such
facility has the capacity to produce more than four million sandwiches per week.
In addition to manufacturing a wide variety of sandwiches, including meat-filled
biscuits, under private and company labels, the division also produces
buttermilk biscuits, yeast rolls and other items for institutional and retail
sales.
The Company's Ham Curing Division is one of the largest country ham
producers in the United States, with the capacity to cure more than 500,000 hams
annually. This division traces its roots to the earliest days of the Company and
in the last two decades its products have regularly won top national and
regional prizes as being among the best in the nation. Its products are sold
under the Mom 'n' Pop's(R) brand label to both institutional and retail markets
and are provided whole and in sliced portions for both retail and restaurant
usage and in closely-controlled sliced portions for the restaurant and fast-food
industry.
Giving effect to the acquisition of the Franchised Restaurants referred
to below, the Company's restaurant operations comprise 32 Company-owned and 53
franchised units, primarily in the Southeast. A majority of these restaurants
are Western Steer(R) units, including the traditional Western Family Restaurant
and new or remodeled Western Steer Steak, Buffet and Bakery restaurants. Prime
Sirloin(R) and Bennett's(TM) are the other two main segments of the Company's
restaurant division. Large-scale Prime Sirloin Buffet, Bakery and Steak
restaurants are being built to compete directly with recognized leaders in the
economy steak and buffet restaurant segment. Bennett's Smokehouse and Saloon
restaurants are the result of a partnership between the Company and Bennett's
Bar-B-Que, Inc., of Denver, Colorado; these Texas-style roadhouse-themed
restaurants represent the Company's entry into the casual dining market.
The Company's principal executive offices are located at 1 WSMP Drive,
Claremont, North Carolina 28610, telephone (704) 459-7626.
RECENT DEVELOPMENTS
AGREEMENT TO ACQUIRE CERTAIN FRANCHISED RESTAURANTS
Effective March 1, 1997, the Company agreed to acquire fourteen
franchised Western Steer -- Steaks, Buffet & Bakery restaurants (the "Franchised
Restaurants") from the Selling Shareholders and Northwest Food Systems, Inc.
(collectively, the "Sellers") in exchange for $3,767,500 in value, payable as
follows: $500 in cash; $954,500 in assumed liabilities (the "Assumed
Liabilities"); $2,012,500 in Shares, which were considered to have a value of
$9.00 per Share; and a total of $800,000 pursuant to promissory notes (the
"Notes") issued to two of the Sellers. Eleven of the Franchised Restaurants are
located in North Carolina, two are located in Virginia, and one is located in
Tennessee. The consummation of the purchase and sale of the Franchise
Restaurants occurred on March 3, 1997.
4
<PAGE> 7
The Assumed Liabilities include, in addition to other borrowings,
certain current accounts payable of the Franchised Restaurants not to exceed
$309,500 in the aggregate, as well as certain indebtedness incurred by all the
Sellers, owed by Hash, Howard and Associates to the Company, not to exceed
$125,000 in principal and interest in the aggregate. The Notes are unsecured,
are due and payable as to both principal and interest on March 1, 1999 and bear
interest at the rate of 5% per annum until paid.
In their Agreement of Purchase and Sale relating to the Franchised
Restaurants (the "Purchase Agreement"), the Sellers made various representations
and warranties to the Company touching upon subjects such as corporate
existence, power and authority, enforceability of the Agreement, the absence of
subsidiaries, the lack of any material adverse change since January 1, 1997,
payment of taxes, delineation of contracts and commitments, compliance with
environmental laws, the ability of the Sellers to fend for themselves and their
intention not to resell the Shares in an unregistered distribution. For its
part, the Company made representations and warranties to the Sellers pertaining
to matters such as corporate existence, power and authority, enforceability, the
Company's capitalization, the integrity of this Prospectus, the lack of any
material adverse change since December 31, 1996 and the exempt quality of the
offer, issuance and sale of the Shares to the Sellers.
The Company and the Sellers also made certain covenants with one
another in the Purchase Agreement. Among other things, the Sellers promised to
conduct the businesses of the Franchised Restaurants in the ordinary and usual
course of business, to use their reasonable best efforts to maintain
satisfactory relationships with licensors, suppliers, etc., to incur no further
indebtedness for borrowed money (other than deferred taxes) and to maintain
current compensation practices and standard policies of comprehensive general
liability insurance. Pending its purchase of the Franchised Restaurants, the
Company promised, among other things, not to declare or pay any dividend except
as contemplated by this Prospectus (including the documents incorporated herein
by reference); not to take any action that would reasonably be expected to cause
a material decrease in the value of its businesses taken as a whole; and to
maintain its corporate existence, rights and franchises. Each of the Sellers and
the Company agreed to use its best efforts to consummate the transactions
contemplated by the Purchase Agreement.
The Purchase Agreement stated several conditions to the obligation of
the Sellers to sell the Franchised Restaurants to the Company, including the
continued truth and correctness of the Company's representations and warranties,
the performance by the Company of its covenants and other obligations, the lack
of any material adverse change with respect to the Company, the absence of any
litigation that would restrain or prohibit such sale and the obtaining of
certain routine corporate approvals on behalf of the Company. The obligation of
the Company to purchase the Franchised Restaurants was subject to similar
conditions and also was subject to the following: Cecil R. Hash ("Hash") having
executed and delivered his Non-Competition Agreement with the Company (the
"Noncompetition Agreement") and his Guaranty Agreement relating to certain
Seller obligations (the "Guaranty Agreement"); the absence of any material
adverse change with respect to the Sellers or the Franchised Restaurants, to be
determined following the completion of a "due diligence" review conducted by the
Company; and the filing of the Registration Statement with the SEC. The Company
agreed to utilize its best efforts to have the Registration Statement declared
effective by the SEC at the earliest practicable date and to maintain the
effectiveness of the Registration Statement for one year thereafter.
Hash owns the Sellers and has been the major contributor to the success
of the Franchised Restaurants. He and the Company entered into the
Noncompetition Agreement, therefore, to preserve the good will, proprietary
rights and "going business" value of the Franchised Restaurants for the benefit
of the Company as their new owner. Pursuant to the Noncompetition Agreement,
Hash has agreed that, until after March 1, 2012, he will not, directly or
indirectly, own, operate, manage or otherwise have control or interest in the
operation of any restaurant or food service business similar to the Franchised
Restaurants, food service business similar thereto or food service business
currently operated by the Company, other than as a passive investor, in any
states in which the Company presently operates restaurants or franchises, nor
will he assist others in engaging in any such activities or induce employees of
the Company to engage in any such activities or to terminate their employment
with the Company. Specifically excluded from such covenant are any activities of
Hash on behalf of the Company or in any capacity in the restaurants and
restaurant franchisees in which he currently has such activities.
5
<PAGE> 8
In consideration for Hash's covenant not to compete, the Company issued
to Hash 98,750 shares of Common Stock. Such shares are "restricted securities"
within the meaning of Rule 144 under the Securities Act and are not part of the
Shares registered for offer and sale pursuant to this Prospectus. The shares
issued to Hash under the Noncompetition Agreement are subject to recovery by the
Company for no consideration upon the death of Hash or upon his breach of the
Noncompetition Agreement. The number of shares subject to recovery in either of
such circumstances declines in a straight line from 98,750 to zero over the
15-year term of the Noncompetition Agreement. Should a sufficient number of
shares no longer be available for recovery at the time of Hash's death or breach
of the Noncompetition Agreement, the Company is entitled to recover an amount in
cash equal to the product of $9.00 and the number of shares subject to recovery.
Pursuant to the Guaranty Agreement, Hash has guaranteed the full and
punctual payment of each and every payment due from the Sellers under the
Purchase Agreement, as well as the full and prompt performance and observance of
each and all of the other covenants, warranties, indemnities and agreements
required to be performed, observed or defended by the Sellers under the Purchase
Agreement, together with payment of all costs and expenses incurred in the
protection or enforcement of any right or privilege of the Company under the
Purchase Agreement. Such guaranty is stated to be a continuing, absolute,
unconditional and irrevocable guaranty of payment and performance as aforesaid,
to remain in full force and effect until the obligations of the Sellers shall
have been fully and satisfactorily discharged in accordance with the terms and
provisions of the Purchase Agreement.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
DETERMINATION OF OFFERING PRICE
This Prospectus may be used from time to time by the Selling
Shareholders who offer the Shares for sale. The offering price of the Shares
will be determined by the Selling Shareholders and may be based on market prices
prevailing at the time of sale, at prices relating to such prevailing market
prices or at negotiated prices.
SELLING SHAREHOLDERS
The following table provides certain information with respect to Common
Stock beneficially owned by each Selling Shareholder as of the dates indicated.
The securities offered in this Prospectus by the Selling Shareholders are the
Shares. Except as set forth in the footnotes to the table and elsewhere in this
Prospectus (including in the documents incorporated herein by reference), within
the past three years none of the Selling Shareholders has had a material
relationship with the Company or with any of the Company's predecessors or
affiliates other than as a result of ownership of the securities of the Company.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Number of shares Percentage of
of Common Stock Number of shares shares of Common
Beneficially Number of of Common Stock Stock Beneficially
Owned Prior to Shares Beneficially Owned Owned After
Name the Offering (1) Offered After the Offering the Offering (2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
F&H Companies, Inc. 53,324 53,324 -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------
Western Steer of North 57,681 57,681 -0- -0-
Carolina, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Davidson Food 23,963 23,963 -0- -0-
Systems, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Mocksville Food 48,840 48,840 -0- -0-
Systems, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
CFR Foods, Inc. 39,803 39,803 -0- -0-
==============================================================================================================================
</TABLE>
6
<PAGE> 9
(1) Represents all shares of Common Stock beneficially owned as of March 3,
1997. Hash owns all of the Selling Shareholders. The amounts and percentages
shown for each Selling Shareholder include only those shares owned of record and
beneficially by such Selling Shareholder and specifically exclude all shares
owned of record by other Selling Shareholders or Hash.
(2) Represents all shares of Common Stock shown as beneficially owned after the
offering made hereby (assuming the sale of all of the Shares) as a percentage of
the Common Stock outstanding as of March 3, 1997.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholders on
NASDAQ on terms to be determined at the time of each sale. The Selling
Shareholders also may make private sales directly or through a broker or
brokers. Alternatively, the Selling Shareholders may offer Shares from time to
time to or through underwriters, dealers or agents, who may receive
consideration in the form of discounts and commissions. Such compensation, which
may exceed ordinary brokerage commissions, may be paid by the Selling
Shareholders and/or the purchasers of the Shares offered hereby for whom such
underwriters, dealers and agents may act.
The Selling Shareholders and any dealers or agents that participate in
the distribution of the Shares may be considered "underwriters" within the
meaning of the Securities Act, and any profit on the sale of such Shares offered
by them and any discounts, commissions or concessions received by any such
dealer or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. The aggregate proceeds to the Selling Shareholders
from sales of the Shares offered hereby will be the purchase price of such
Shares less any brokers' commissions required to be paid by the Selling
Shareholders.
To the extent required, the specific Shares to be sold, the names of
the Selling Shareholders, the respective purchase prices and public offering
prices, the names of any such agents, dealers and underwriters and any
applicable commissions or discounts with respect to a particular offer will be
set forth in a supplement to this Prospectus.
The Shares may be sold from time to time in one or more transactions at
a fixed offering price, which may be changed, at varying prices determined at
the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold by Selling Shareholders in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirements is available and is satisfied.
Under applicable Exchange Act rules and regulations, any person engaged
in the distribution of the Shares may not simultaneously engage in market making
activities with respect to the Common Stock for a period of two business days
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Shareholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-2, 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of Common Stock by them.
The Company will pay the expenses that it incurs in connection with the
registration of the Shares with the SEC.
The Company and each Selling Shareholder have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is First
Citizens Bank, Raleigh, North Carolina.
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<PAGE> 10
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by Simpson
Aycock, P.A., Morganton, North Carolina.
EXPERTS
The financial statements incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended February 23,
1996 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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<PAGE> 11
--------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Selling
Shareholder. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, to any person in any jurisdiction in which such
offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof.
-----------------
Table of Contents
-----------------
Page
Additional Information............................ 2
Incorporation of Certain Information
by Reference.................................... 2
Risk Factors...................................... 3
The Company....................................... 4
Recent Developments............................... 4
Use of Proceeds................................... 6
Determination of Offering Price................... 6
Selling Shareholders.............................. 6
Plan of Distribution.............................. 7
Registrar and Transfer Agent...................... 7
Legal Matters..................................... 8
Experts........................................... 8
--------------------------------
--------------------------------
WSMP, INC.
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
_______________, 1997
--------------------------------
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in
connection with the Offering, all of which are to be borne by the Registrant.
<TABLE>
<S> <C>
SEC registration fee............................... $ 629
Accounting fees and expenses*...................... 5,000
Legal fees and expenses*........................... 20,000
Miscellaneous*..................................... 2,371
Total*......................................... $28,000
=======
</TABLE>
- ---------------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the provisions of Section 55-8-57 of the North
Carolina Business Corporation Act (the "Act"), the Company has by resolution of
its Board of Directors provided that, in addition to the indemnification of
directors and officers otherwise provided by the Act, the Company shall, under
certain circumstances, indemnify its directors, executive officers and certain
other designated officers against any and all liability and litigation expense,
including reasonable attorneys' fees, arising out of their status or activities
as directors or officers, except for liability or litigation expense incurred on
account of activities that were at the time known or reasonably should have been
known by such director or officer to be clearly in conflict with the best
interests of the Company. As authorized by such statute, the Company also
maintains insurance on behalf of its directors and officers against liability
asserted against such persons in such capacity whether or not such directors or
officers have the right to indemnification pursuant to statute, resolution or
otherwise.
In addition, Sections 55-8-50 through 55-8-58 of the Act contain
provisions prescribing the extent to which directors and officers shall or may
be indemnified. Section 55-8-51 of the Act permits a corporation, with certain
exceptions, to indemnify a present or former director against liability if (i)
he conducted himself in good faith, (ii) he reasonably believed (x) that his
conduct in his official capacity with the corporation was in its best interests
and (y) in all other cases his conduct was at least not opposed to the
corporation's best interests, and (iii) in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. A corporation
may not indemnify a current or former director in connection with a proceeding
by or in the right of the corporation in which the director was adjudged liable
to the corporation or in connection with a proceeding charging improper personal
benefit to him. The above standard of conduct is determined by the Board of
Directors, by a committee thereof or by special legal counsel or the
shareholders as prescribed in Section 55-8-55.
Sections 55-8-52 and 55-8-56 of the Act require a corporation to
indemnify a director or officer in the defense of any proceeding to which he was
a party because of his capacity as a director or officer against reasonable
expenses when he is wholly successful in his defense, unless the articles of
incorporation provide otherwise. Upon application, the court may order
indemnification of the director or officer if he is adjudged fairly and
reasonably so entitled under Section 55-8-54. Section 55-8-56 allows a
corporation to indemnify and advance expenses to an officer, employee or agent
who is not a director to the same extent as a director or as otherwise set forth
in the corporation's articles of incorporation or bylaws or by resolution of the
Board of Directors.
II-1
<PAGE> 13
ITEM 16. EXHIBITS.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4 Agreement of Purchase and Sale dated as of March 1, 1997 among WSMP, Inc., F & H
Companies, Inc., Western Steer of North Carolina, Inc., Northwest Food Systems, Inc.,
Davidson Food Systems, Inc., Mocksville Food Systems, Inc. and CFR Foods, Inc.
5 Opinion of Simpson Aycock, P.A. as to the legality of the securities being registered
23.A Consent of Simpson Aycock, P.A. (included in Exhibit 5 to this Registration Statement)
23.B Consent of Deloitte & Touche LLP
24 Power of Attorney (included on the signature page of this Registration Statement)
99.A Loan Agreement dated as of January 10, 1997 between WSMP, Inc. and SouthTrust Bank of
North Carolina, pertaining to a term loan not to exceed $5,000,000 in aggregate principal
amount
99.B Amendment to Loan Agreement dated as of January 17, 1997 between WSMP, Inc. and
SouthTrust Bank of North Carolina
99.C Financing and Security Agreement dated as of November 22, 1996 between WSMP, Inc. and
National Bank of Canada, pertaining to a revolving credit not to exceed $6,000,000 in
aggregate principal amount
99.D Note dated December 31, 1996, made by WSMP, Inc. in favor of First Century Bank,
pertaining to a loan in the principal amount of $1,900,000
99.E Security Agreement dated December 31, 1996 between WSMP, Inc. and First Century Bank
99.F Non-Competition Agreement dated March 1, 1997 between Cecil R. Hash and WSMP,
Inc.
99.G Guaranty Agreement dated as of March 1, 1997 between Cecil R. Hash and WSMP, Inc.
99.H Promissory Note dated March 1, 1997, made by WSMP, Inc. in favor of Western Steer of
North Carolina, Inc. in the principal amount of $700,000
99.I Promissory Note dated March 1, 1997, made by WSMP, Inc. in favor of Davidson Food
Systems, Inc. in the principal amount of $100,000
</TABLE>
II-2
<PAGE> 14
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement to include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
(b) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(c) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim or indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Claremont, State of North Carolina, on March 6, 1997.
WSMP, INC.
By: /s/ James C. Richardson, Jr.
----------------------------------
James C. Richardson, Jr.
Chief Executive Officer
<PAGE> 16
POWER OF ATTORNEY
We, the undersigned directors and officers of WSMP, Inc., do hereby
constitute and appoint each of Messrs. James C. Richardson, Jr., David R. Clark
and Matthew V. Hollifield, each with full power of substitution, our true and
lawful attorney-in-fact and agent to do any and all acts and things in our names
and on our behalf in our capacitates stated below, which acts and things either
or them may deem necessary or advisable to enable WSMP, Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but not limited to, power and authority to
sign for any or all of us in our names, in the capacities stated below, any and
all amendments (including post-effective amendments) thereto; and we do hereby
ratify and confirm all that they shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard F. Howard Chairman of the Board of Directors March 6, 1997
- ----------------------------- and Secretary
Richard F. Howard
/s/ James C. Richardson, Jr. Chief Executive Officer March 6, 1997
- ----------------------------- (principal executive officer)
James C. Richardson, Jr. and Vice Chairman of the
Board of Directors
/s/ David R. Clark President and Chief Operating March 6, 1997
- ----------------------------- Officer and Director
David R. Clark
/s/ Matthew V. Hollifield Vice President of Finance March 6, 1997
- ----------------------------- (principal financial officer and
Matthew V. Hollifield principal accounting officer)
/s/ James M. Templeton Senior Vice President of Real Estate March 6, 1997
- ----------------------------- and Director
James M. Templeton
/s/ Bobby G. Holman Director March 6, 1997
- -----------------------------
Bobby G. Holman
/s/ Lewis C. Lanier Director March 6, 1997
- -----------------------------
Lewis C. Lanier
/s/ William R. McDonald Director March 6, 1997
- -----------------------------
William R. McDonald
/s/ Richard F. Hendrickson Director March 6, 1997
- -----------------------------
Richard F. Hendrickson
/s/ E. Edwin Bradford Director March 6, 1997
- -----------------------------
E. Edwin Bradford
</TABLE>
<PAGE> 1
EXHIBIT 4
AGREEMENT OF PURCHASE
AND SALE
THIS AGREEMENT, made and entered into as of this the 1st day of
March, 1997, by and among WSMP, INC., a North Carolina corporation,
(hereinafter "WSMP"); and F & H COMPANIES, INC., a North Carolina corporation
("F&H"), WESTERN STEER OF NORTH CAROLINA, INC., a North Carolina corporation
("Western"), NORTHWEST FOOD SYSTEMS, INC., a North Carolina corporation
("Northwest"), DAVIDSON FOOD SYSTEMS, INC., a North Carolina corporation
("Davidson"), MOCKSVILLE FOOD SYSTEMS, INC., a North Carolina corporation
("Mocksville"), and CFR FOODS, INC., a North Carolina corporation ("CFR") (F&H,
Western, Northwest, Davidson, Mocksville, and CFR are sometimes collectively
hereinafter referred to as the "Sellers");
W I T N E S S E T H:
WHEREAS, WSMP owns, operates and franchises Western Steer - Steaks,
Buffet & Bakery restaurants and Prime Sirloin - Buffet, Bakery & Steaks
throughout the Southeast, and
WHEREAS, the Sellers are franchisees of WSMP, and own and operate
certain restaurants in North Carolina, Virginia and Tennessee; and
WHEREAS, the Sellers have agreed to sell, and WSMP has agreed to
purchase, certain of the Sellers' restaurants, by the purchase of certain assets
of the Sellers and by accepting assignment of certain leases, upon the terms and
conditions herein set forth;
Page 1
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
-----------
"Affiliates" means as to any Person, any other Person that, directly or
indirectly, along or through others, controls, is controlled by or is under
common control with such Person. For purposes of this definition "controls"
(including with correlative meanings, the terms "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 that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agreement" means this Agreement of Purchase and Sale.
"Business" means the provision of restaurant services like or similar
to Western Steer - Steaks, Buffet & Bakery restaurants, Western Steer Family
Restaurants, Prime Sirloin - Buffet, Bakery & Steaks restaurants and Bennett's
Smokehouse & Saloon Restaurants.
"Closing" means the consummation of the transactions contemplated by
this Agreement, as provided in Articles II and III, which shall occur at
9:00 a.m. (local time) on March 3, 1997 at the executive offices of WSMP, or at
such other time, date and place or may be agreeable to the parties.
"Closing Date" means the date on which the Closing takes place.
"Effective Time" means the time and date the Agreement of Purchase and
Sale is effective pursuant to the provisions of Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America, consistently applied throughout the indicated periods.
"Interest" means any equity ownership of any kind of any Person,
including without limitation, equity ownership represented by common stock,
preferred stock, securities convertible into or exercisable for the purchase or
other acquisition of common stock (including convertible debentures, warrants
and options), trust certificates, general or limited partnership interests or
limited liability company member interests.
Page 2
<PAGE> 3
"Investment" in any Person means any purchase or other acquisition of
any Interest in such Person, any capital contribution to such Person or any
other investment in such Person.
"Employees" means employees, officers or consultants of any Person.
"Material Adverse Change" with respect to any Person means a material
adverse change in the financial condition, business, assets, results of
operations or prospects of such Person.
"Material Adverse Effect" with respect to any Person means a material
adverse effect on the financial condition, business, assets, results of
operations or prospects of such Person.
"Noncompetition Agreement" means the Noncompetition Agreement dated as
of the Closing Date between Cecil R. Hash and WSMP, Inc., relating to the
limitations on Hash from engaging in the Business, substantially in the form
attached hereto as Exhibit A.
"Permits" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings under all federal,
state, local or foreign laws with governmental or regulatory bodies.
"Permitted Liens" mean (i) liens reflected in the WSMP Financial
Statement or Sellers Balance Sheet, as applicable, (ii) liens granted in
connection with the Convertible Note, (iii) liens consisting of zoning or
planning restrictions, easements, permits or other restrictions or limitations
on the use of the Real Estate or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such Real Estate in
the operation of the Business, (iv) unrecorded liens arising by operation of
law, and (v) liens for current property taxes and assessments which are not yet
due and payable.
"Person" means any individual, partnership, corporation, trust,
unincorporated organization, limited liability company, association, joint
venture or other entity or a government, agency, political subdivision,
instrumentality or division thereof.
"Prospectus" refers to the Prospectus included in the WSMP Registration
Statement when the WSMP Registration Statement is first declared effective under
the Securities Act.
"Real Estate" means real property, including roof tops, and
improvements, which is the subject of the Leases.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Page 3
<PAGE> 4
"Restaurants" mean the F & H Restaurants, the Western Restaurants, the
Northwest Restaurants, the Davidson Restaurant, the Mocksville Restaurant and
the CFR Restaurant.
"F & H Restaurants" mean the following restaurants:
1. Unit 116
751 W. Elk Avenue
Elizabethton, Tennessee 37643
(The "Elizabethton Restaurant")
2. Unit 162
955 Stewart Drive East
Galax, Virginia 24333
(the "Galax Restaurant")
3. Unit 190
RR 2, Box 571-A
Wytheville, Virginia 24382
(the "Wytheville Restaurant")
4. Unit 193
North Bridge Street
Elkin, North Carolina 28621
(the "Elkin Restaurant")
5. Unit 313
825 E. Main Street
Jefferson, North Carolina 28640
(the "Jefferson Restaurant")
6. Unit 317
Corner U.S. 621 & U.S. 421
Yadkinville, North Carolina 27055
(the "Yadkinville Restaurant")
7. Unit 320
King - Tobaccoville Road
King, North Carolina 27021
(the "King Restaurant")
"Western Restaurants" mean the following restaurants:
1. Unit 152
800 South Main Street
Graham, North Carolina 27253
(the "Graham Restaurant")
2. Unit 255
1018 Rockford Street
Mt. Airy, North Carolina 27030
(the "Mt. Airy Restaurant")
Page 4
<PAGE> 5
"Northwest Restaurants" mean the following restaurants:
1. Unit 73
5920 University Parkway
Winston-Salem, North Carolina 27105
(the "Winston-Salem Restaurant")
2. Unit 74
835 South Main Street
Kernersville, North Carolina 27284
(the "Kernersville Restaurant")
"Davidson Restaurant" means the restaurant located at:
Unit 46
RR 20, Box 106
Lexington, North Carolina 27292
"Mocksville Restaurant" means the restaurant located at:
Unit 258
Route 5, Box 101
Mocksville, North Carolina 27028
"CFR Restaurant" means the restaurant located at:
Unit 361
630 Randolph Mall
Asheboro, North Carolina 27203
"Assumed Liabilities" means the following:
1. That certain indebtedness incurred by F & H for the benefit
of the Galax Restaurant and the Wytheville Restaurant to First Century
Bank of Wytheville, Virginia in an amount not to exceed $205,000,
principal and interest (the "First Century Indebtedness");
2. That certain indebtedness incurred by F & H for the benefit
of the Elkin Restaurant to Riverview Enterprises in an amount not to
exceed $35,000, principal and interest (the "Riverview Indebtedness");
3. That certain indebtedness incurred by Northwest for the
benefit of the Kernersville Restaurant to Peoples Bank of Newton, North
Carolina in amount not to exceed $280,000, principal and interest (the
"Peoples Indebtedness")
4. That certain indebtedness incurred by all the Sellers, owed
by Hash, Howard and Associates to WSMP, in the total amount not to
exceed $125,000, principal and interest (the "WSMP Indebtedness"); and
Page 5
<PAGE> 6
5. The current accounts payable of all of the Restaurants
which are owing at closing but are less than 90 days old, and accrued
liabilities, in the total amount not to exceed $309,500 (the "Current
Payables").
"Leases" shall mean the following:
1. Elizabethton - That certain lease dated February 17, 1982,
between Seville Development, lessor, and J. C. Faw, Lessee, assigned to
F & H by Faw by assignment dated _______________, 1985.
2. Galax - That certain lease dated May 1, 1980, between EOS
Corporation, lessor, and Southwest Foods of Virginia, Inc., lessee,
assigned to F & H by Assignment dated ______________, 1985.
3. Wytheville - That certain lease dated January 16, 1980,
between Interstate Development, lessor and EOS Corporation, lessee,
assigned to F & H by addendum to lease dated December 3, 1993.
4. Elkin - That certain lease dated May 15, 1981, between J.C.
Faw, lessor and WISCO Diversified of America, Inc., assigned to F & H
by assignment dated ________________, 1985.
5. Jefferson - That certain lease dated July 12, 1983, between
Jefferson/Ray Associates and J. C. Faw, assigned to F & H from Faw by
assignment dated ________________, 1985.
6. Yadkinville - That certain lease dated March 26, 1984,
between Jefferson/Ray Associates, lessor, and Kansas City Family
Steakhouse, Inc., lessee, and assigned from Kansas City Family
Steakhouse, Inc. to F & H by assignment dated March 1, 1986.
7. King - That certain lease dated February __, 1986, between
J.C. Faw and Cecil R. Hash, lessors and F & H.
8. Graham - That certain lease to be executed as part of the
transactions herein, to be between Cecil R. Hash as lessor and WSMP
as lessee, dated March 1, 1997.
9. Mt. Airy - That certain lease dated May 31, 1983, between
E.D. Bray, Jr. and Judy Bray, lessors and Western dated May 31, 1993.
10. Winston-Salem - That certain lease dated November 1, 1978,
by and between J.F. Enterprises, Inc., lessor, (subsequently assigned
to George A. Vlahes and Olga Vlahes) and Northwest as lessee.
11. Kernersville - That certain lease dated October 1, 1978,
between J.C. Faw, lessor, and Northwest as lessee.
Page 6
<PAGE> 7
12. Davidson - That certain lease dated March 21, 1978,
between James E. Thacker, et al., lessors and Davidson as lessee.
13. Mocksville - That certain lease to be executed as
part of the transactions herein, to be between Cecil R. Hash as lessor
and WSMP as lessee, dated March 1, 1997.
14. CFR - That certain lease to be executed as part of
the transactions herein, to be between Cecil R. Hash as lessor and WSMP
as lessee, dated March 1, 1997.
"WSMP Financial Statements" are the consolidated financial statements
of WSMP as of February 23, 1996, and for the fiscal year then ended.
"WSMP Registration Statement" is the Registration Statement on Form S-3
covering offers and sales by the Sellers of the WSMP Stock.
"WSMP Stock" is the authorized but unissued common stock of WSMP which
is to be issued and delivered to the Sellers pursuant to Articles II and III of
this Agreement in consideration for purchase of the Restaurants.
ARTICLE II
THE SALE
--------
2.1 SALE. Effective as of Closing, the Sellers hereby sell, and WSMP
hereby purchases free of all liabilities and encumbrances except for the Assumed
Liabilities, certain assets of the Sellers associated with the operation of the
Restaurants, including all of the furnishings, furniture, fixtures, equipment,
leasehold improvements, smallwares, signage, supplies and food inventory, stock
in trade, merchandise; the Western Steer Business owned and operated by the
Sellers or any of them at the Restaurants, including Sellers' rights under and
to all contracts, Permits, and deposits, made by or granted to the Sellers in
connection with such business, including the Western Steer franchise; and all
other property owned and used by the Sellers in the Business.
2.2 ASSIGNMENT. Effective as of Closing, the Sellers hereby assign and
WSMP hereby accepts assignment of all right, title and interest of the Sellers
as lessee in and to the Leases, and the leasehold estates created thereby; and
all of Sellers' interest in and to Western Steer franchises for the Restaurants;
and any and all of the Sellers' interests in and to their Restaurant employees,
managers, and supervisors, including the right to continue their employment or
not as WSMP determines.
2.3 EXCLUSIONS. The following are hereby excluded from this Agreement:
a. The Sellers' Accounts Payable generated by the
Page 7
<PAGE> 8
Restaurants, or otherwise, except as included in the Assumed
Liabilities;
b. The Sellers' Accounts Receivable, which shall remain the
property of the respective Seller; and
c. The petty cash fund of each Restaurant, which shall remain
the property of the Seller owning the Restaurant.
2.4 PRICE. The purchase price for the Restaurants is Three Million
Seven Hundred Sixty-Seven Thousand Five Hundred Dollars ($3,767,500) payable as
follows:
<TABLE>
<S> <C>
- Cash $ 500
- Assumption of the Assumed Liabilities - 954,500
- Issuance of 223,611 shares of WSMP Stock
subject to subsequent registration under
Article XI, at $9.00 per share - 2,012,500
- The Promissory Notes, as described in
Section 2.6: - 800,000
----------
TOTAL $3,767,500
</TABLE>
The parties agree that for purposes of this transaction, the WSMP Stock
is valued at $9.00 per share, irrespective of the market price of the WSMP Stock
at the Closing Date or upon sale of the WSMP Stock. The risk of gain or loss
shall be the Sellers'.
2.5 ALLOCATION AMONG SELLERS. The Purchase Price shall be paid over to
the Sellers in the following allocations:
<TABLE>
<S> <C>
a. F & H $ 874,800
b. Western $ 1,263,600
c. Northwest $ 324,500
d. Davidson $ 338,000
e. Mocksville $ 461,600
f. CFR $ 505,000
TOTAL $ 3,767,500
</TABLE>
2.6 ALLOCATION AMONG ASSETS. The Purchase Price to be paid to the
Sellers shall be allocated among its different elements to the Sellers as
follows:
<TABLE>
<S> <C>
a. F & H: Cash $ 300
Assumed Liabilities $ 394,783
WSMP Stock $ 479,917
TOTAL $ 874,800
</TABLE>
Page 8
<PAGE> 9
<TABLE>
<S> <C>
b. Western: Cash $ 100
Assumed Liabilities $ 44,371
WSMP Stock $ 519,129
Promissory Note $ 700,000
TOTAL $1,263,600
c. Northwest: Cash $ 100
Assumed Liabilities $ 324,400
TOTAL $ 324,500
d. Davidson: Cash $ 100
Assumed Liabilities $ 22,233
WSMP Stock $ 215,667
Promissory Note $ 100,000
TOTAL $ 338,000
e. Mocksville: Cash $ 100
Assumed Liabilities $ 21,940
WSMP Stock $ 439,560
TOTAL $ 461,600
f. CFR: Assumed Liabilities $ 146,773
WSMP Stock $ 338,227
TOTAL $ 505,000
</TABLE>
2.7 PROMISSORY NOTES. As partial consideration, WSMP shall issue its
Promissory Notes (the "Promissory Notes") to the Sellers. The Promissory Notes
shall be unsecured, shall be due and payable as to both accrued interest and
principal on the date two (2) years from the date of issuance, and shall bear
interest at the rate of five percent (5%) per annum until paid.
The Promissory Notes shall be issued in the following denominations to
the following Sellers:
<TABLE>
<CAPTION>
Denomination Seller
------------ ------
<S> <C>
$700,000 Western
$100,000 Davidson
</TABLE>
The Promissory Notes shall be in substantially the form set out in Exhibit
B hereto.
Page 9
<PAGE> 10
2.8 CURRENT PAYABLES. The Current Payables, which form part of the
Assumed Liabilities, are not to exceed $309,500. WSMP shall choose the Current
Payables it intends to pay, and inform the Sellers of those it does not intend
to pay. As used herein, Current Payables included any payable incurred on or
before February 28, 1997, or any current payment due on or before that date. It
shall also include any accrued liabilities that WSMP may pay on behalf of the
Sellers, such as accrued property taxes which are Sellers' responsibility under
a Lease, accrued payroll and accrued vacation pay.
The parties acknowledge that certain short-term assets of the Sellers,
such as pre-paid rent or gift certificates on hand, may be transferred from
Sellers to Buyer. If Sellers transfer such to WSMP and WSMP accepts them, then
WSMP shall increase the amount of Current Payables it shall assume by the fair
market value of such short-term assets.
The parties acknowledge that Sellers have currently accrued liability
for vacation pay totalling approximately $51,000. If WSMP should agree to assume
such liability on behalf of the Sellers, it shall also be considered as making
up a portion of the total Current Payables being assumed by WSMP.
Within six (6) months of the Closing Date, WSMP shall calculate the
total amount of Current Payables or Assumed Liabilities it has paid or assumed
on behalf of the Sellers. If such exceed $309,500, WSMP will give Sellers 30
days' written notice, to repay the excess amount. If Sellers fail to pay within
this period, WSMP may reduce the amount of the Promissory Notes by such amount.
If the Current Payables or the Assumed Liabilities are less than the amount
assumed, then the amount of the Promissory Note shall be increased by such
amount.
Should the Sellers or related parties fail or refuse to pay any sum
incurred or owing to WSMP, WSMP may offset such sum against any amount due under
the Promissory Notes, irrespective of the fact that the Seller which incurred
the debt may not be the Seller that holds the Promissory Note. The Sellers agree
to determine and settle among themselves any questions of offset among the
parties.
2.9 ASSUMED LIABILITIES. Other than the Assumed Liabilities and the
Leases, WSMP has assumed no other obligation, payment, debt, or contract of the
Sellers or affecting the Sellers, including but not limited to any obligation of
the Sellers to their employees, any health insurance obligation, or any workers
compensation liability.
In allocating the purchase price, the parties have attempted to
allocate among the Sellers that amount of Assumed Liabilities that WSMP shall
assume on behalf of each of them. Should this allocation become inaccurate for
any reason, including but not
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limited to assumptions or refusals to assume obligations under Section 2.8,
WSMP shall have no obligation as among the Sellers to pay anything further to
any Seller who may have received less than allocated, or who holds a Promissory
Note against which certain payments were offset. Sellers shall settle among
themselves all such discrepancies, and proof by WSMP, of having paid or assumed
Assumed Liabilities in an amount equal to $954,500 shall be a complete defense
to any such claim.
ARTICLE III
DELIVERY OF CONSIDERATION
-------------------------
On the Closing Date, WSMP shall deliver to the appropriate Sellers
certificates representing 223,611 shares of WSMP, Inc. common stock. These
shares shall be restricted in the hands of the recipients.
The shares of WSMP Stock shall be distributed at the Closing as
follows:
F & H 53,324 Davidson 23,963
Western 57,681 Mocksville 48,840
Northwest -0- CFR 39,803
On the Closing Date, WSMP shall deliver to the appropriate Sellers cash
in the total sum of $500.00, and shall issue and deliver to the appropriate
Sellers Promissory Notes in the total face amount of $800,000.
ARTICLE IV
REPRESENTATIONS OF THE SELLERS
------------------------------
Section 4 REPRESENTATIONS OF SELLERS. The Sellers represent, warrant
and agree, jointly and severally, as follows:
Section 4.1 CORPORATE EXISTENCE. Sellers are corporations duly
incorporated, validly existing and in good standing under the laws of North
Carolina and are duly qualified to do business as foreign corporations and are
in good standing in each jurisdiction in which the ownership or use of their
assets or properties, or the conduct or nature of their business, makes such
qualification necessary (except for jurisdictions in which the failure to so
qualify or be in good standing would not be reasonably likely to have a Material
Adverse Effect). The Sellers have all requisite corporate power
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and authority to conduct their businesses and own their properties as now
conducted and owned.
Section 4.2 POWER AND AUTHORITY. The Sellers have all requisite
corporate power and authority, and have taken all required corporate and other
action necessary, to execute, deliver and perform this Agreement and consummate
the transactions contemplated hereto. None of the foregoing actions will (i)
violate any provision of the Bylaws or Certificate of Incorporation of the
Sellers, (ii) result in the breach of or constitute under any contract,
agreement or instrument to which any of the Sellers is a party or by which it is
bound, (iii) result in the creation or imposition of any lien, claim or
encumbrance on any assets of the Sellers, (iv) give any Person rights to
terminate any contracts or agreement with the Sellers or otherwise to exercise
rights against the Sellers, or (v) violate any order, writ, judgment,
injunction, decree, statute, rule or regulation of any court, tribunal or
governmental entity applicable to or bearing upon the Sellers or any of their
assets or businesses, except, as to (ii), (iii), and (iv) above, as would not
have a Material Adverse Effect upon the Restaurants.
Section 4.3 ENFORCEABILITY. This Agreement and all agreements and
documents executed and delivered in connection herewith by the Sellers have
been, or will be as of the Closing Date, duly executed and delivered by the
Sellers and, assuming that this Agreement is duly executed and delivered by, and
is within the power and authority of WSMP, constitutes, or will constitute, the
legal, valid and binding obligation of the Sellers enforceable against each of
them in accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting creditors' rights generally and subject to general
principles of equity (regardless of whether considered in a proceeding in
equity or at law).
Section 4.4 SUBSIDIARIES AND INVESTMENTS. The Sellers do not own,
directly or indirectly, of record or beneficially, any capital stock or other
Interest in any Person.
Section 4.5 CONSENTS, APPROVALS AND NON-CONTRAVENTION. Neither the
execution, delivery and performance of this Agreement by the Sellers, nor the
consummation of any transaction contemplated hereunder, will:
(a) require any consent or approval of, filing or taking of
any other action with, or notice to, any Person;
(b) violate any contract, agreement, instrument or other
arrangement to which the Sellers are parties by which they are bound;
(c) violate (i) any order, writ, judgment, injunction or
decree or (ii) any statute, law, rule or regulation of any
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court, tribunal or governmental entity or authority applicable to or
bearing upon the Sellers or any of their assets or business.
Section 4.6 BOOKS AND RECORDS. The Sellers have made and kept (and on
or before the Closing Date, have given WSMP access to) books and records and
accounts, which, in all material respects, accurately and fairly reflect the
activities of the Sellers concerning the Restaurants. To the best knowledge of
the Sellers, the signatures appearing on all documents contained therein are the
true signatures of the Persons purporting to have signed the same. All actions
reflected in said books and records were duly and validly taken in compliance
with applicable laws.
Section 4.7 MATERIAL ADVERSE CHANGE. Since January 1, 1997, concerning
the Restaurants (i) there has been no Material Adverse Change and (ii) there has
been no Material Adverse Effect on the business, prospects, financial condition,
operations, property or affairs of the Sellers, whether or not insured against.
Section 4.8 EVENTS SUBSEQUENT TO JANUARY 1, 1997. Since January 1, 1997
except as contemplated by this Agreement, the Sellers have not (i) borrowed any
amount or incurred or become subject to any liability (absolute, accrued or
contingent), except current liabilities incurred and liabilities under contracts
entered into in the ordinary course of business, (ii) mortgaged, pledged or
subjected to any lien or encumbrance any of its assets, tangible or intangible,
other than liens on current real property taxes not yet due and payable, (iii)
sold, assigned or transferred any of its tangible assets except in the ordinary
course of business, (iv) suffered any substantial loss of property or waived
any right of substantial value other than in the ordinary course of business,
(v) made any material change in the manner of business or operations of the
Sellers, (vi) changed the accounting methods or practices of the Sellers except
as required or permitted by GAAP, (vii) entered into any transaction except in
the ordinary course of business or as otherwise contemplated hereby or (viii)
entered into any commitment, obligation, understanding or other arrangement,
contingent or otherwise, to effect, directly or indirectly, any of the
foregoing.
Section 4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Since January 1, 1997,
the Sellers have had no material liabilities (matured or unmatured, fixed or
contingent), which are not fully disclosed to WSMP and stated herein, or any
material loss contingency (as defined in Statement of Financial Accounting
Standards No. 5) whether or not required by GAAP to be shown on the Sellers'
Financial Statements, except (i) obligations to perform under commitments
incurred in the ordinary course of business, and (ii) tax and related
liabilities which have been disclosed pursuant to Section 4.10 below.
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Section 4.10 TAXES. The Sellers have accurately completed and filed or
will file within the time prescribed by law (including extensions of time
approved by the appropriate taxing authority) all tax returns and reports
required to be filed with the Internal Revenue Service, the State of North
Carolina, any other states or governmental subdivisions and all foreign
countries except, in the case of state, local and foreign tax returns, where the
failure to file would not have a Material Adverse Effect; have paid all taxes,
interest, penalties, assessments or deficiencies shown to be due (or, to the
knowledge of the Sellers, claimed by such authority or jurisdiction to be due)
on or in respect of such tax returns and reports; and has established adequate
reserves for all taxes accrued but not yet payable. Sellers know of (i) no
federal, state, county, municipal or foreign taxes (or other liabilities in
respect thereof) which are due and payable by Sellers which have not been so
paid, (ii) no federal, North Carolina, state, county, municipal or foreign tax
returns or reports which are required to be filed which have not been filed,
(iii) no unpaid assessment for, or any fact which would constitute grounds for
the assessment of, additional taxes or penalties for any fiscal period or any
basis, thereof and (iv) no material tax lien, whether imposed by any federal,
state, county, municipal or foreign taxing authority, outstanding against the
assets or business of any of the Sellers. Neither the federal nor state income
tax returns of the Sellers have been audited. Proper and accurate amounts have
been withheld by the Sellers from their employees for all periods in compliance
with the tax, social security and any employment withholding provisions of
applicable federal and state law, and proper and accurate federal and state
returns have been filed by all of the Sellers for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full or provision therefor included on the books of the Sellers in
accordance with and to the extent required by GAAP.
Section 4.11 LITIGATION. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the best of Sellers' knowledge,
threatened against or affecting their assets or businesses or any of their
directors or employees, at law or in equity, before any court, arbitration
panel, tribunal or governmental department, commission, board, bureau, agency or
instrumentality which could have a Material Adverse Effect. Sellers are not in
default with respect to any judgment, order writ, injunction or decree of any
court or governmental agency, except where such default will not have a Material
Adverse Effect, and there are no unsatisfied judgments against Sellers or the
business or activities of Sellers other than any as to which the time for
payment has not elapsed, including by reason of any appeal.
The parties acknowledge that Sellers and Hash Management, Inc. are in
litigation concerning the Sellers' workers' compensation
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Insurance coverage with Travellers, with the amount in dispute in excess of
$175,000. Sellers shall be solely responsible for this and any other litigation
concerning the Sellers or Hash Management, Inc., and shall hold WSMP harmless
from any liability thereunder.
Section 4.12 INSURANCE. Sellers hold valid policies in full force and
effect covering all of the insurance required to be maintained by it pursuant to
Section 6.17 hereof. There are currently no claims pending against Sellers under
any insurance policies currently in effect and covering the property business or
employees of Sellers, and all premiums with respect to the policies maintained
by Sellers have been maintained to date.
Section 4.13 CONFLICTS OF INTERESTS. Neither Sellers nor any officer,
employee, agent or any other person acting on behalf of them have, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency or instrumentality of any government
(domestic or foreign) or other Person who was, is or may be in a position to
help or hinder the business of Sellers (or assist in connection with any actual
or proposed transaction) which (i) might subject Sellers to any damage or
penalty in any civil, criminal or governmental litigation or proceeding (ii) if
not given in the past, might have had a Material Adverse Effect on Sellers, or
(iii) if not continued in the future, might have a Material Adverse Effect.
Section 4.14 PERMITS; COMPLIANCE WITH LAWS; OTHER AGREEMENTS. All
material Permits which are necessary or required for the conduct of the business
of Sellers' Restaurants as currently conducted and as contemplated to be
conducted, are validly issued and in full force and effect, and no Seller is in
violation of any such Permit. The Sellers and the conduct of their businesses
are in compliance with all applicable laws, statutes, ordinances, rules,
regulations and orders of any federal, foreign, state or local government and
any other governmental department or agency, and any judgment, decision, decree
or order of any court or governmental department or authority except where the
failure to comply would not have a material Adverse Effect on Sellers. Sellers
have not received any written notice to the effect that it is not in compliance
with any such statute, regulation, order, ordinance or other law or judgments,
decisions or decrees where the failure to comply would have a Material Adverse
Effect on Sellers.
Section 4.15 INVESTMENT COMPANY ACT. None of the Sellers is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
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Section 4.16 BROKERS. No Seller is obligated to pay any fee or
commission in connection with, any broker, finder or other similar Person in
connection with any of the transactions contemplated by this Agreement.
Section 4.17 DISCLOSURE. This Agreement and the other items delivered
in connection with this Agreement do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. There is no fact which Sellers have not
disclosed to WSMP in writing and of which any of its officers, directors or
executive employees is aware (other than general economic conditions) and which
has had or would reasonably be expected to have a Material Adverse Effect upon
the existing or expected financial condition, operating results, assets,
customer or supplier relations, employee relations or business prospects of
Sellers.
Section 4.18 CONTRACTS AND COMMITMENTS.
(a) Sellers are not parties to, or otherwise bound by, (i) any
written or oral contract or instrument or other restriction which
individually or in the aggregate could have a Material Adverse Effect
on the Restaurants' business, financial condition, operations,
property or affairs of Sellers or (ii) any written or oral:
(1) agreement or indenture relating to the borrowing of money
or the mortgaging, pledging or otherwise placing a lien on any
material asset or material group of assets of Sellers
concerning the Restaurants;
(2) lease or agreement concerning the assets being sold as
part of this Agreement, under which Sellers are lessees of or
hold or operate any property, real or personal, owned by any
other party, except for the Leases;
(3) lease or agreement under which a Seller is lessor of or
permits any third party to hold or operate any property, real
or personal, owned or controlled by a Seller and being sold as
part of this Agreement;
(4) agreement concerning the Restaurants with a term of more
than six (6) months which is not terminable by Sellers upon
less than thirty (30) days' notice without penalty;
(5) contract for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment by the
Restaurants in excess of their normal operating requirements;
(6) guaranty of any obligation for borrowed money or
otherwise, voting trust or agreement, stockholders agreement,
pledge agreement, buy-sell agreement or first refusal or
preemptive rights agreement relating to any
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securities of Sellers;
(7) any other agreement which is material to the operations of
the Restaurants and the Restaurants' business prospects.
(b) Concerning the Leases and any other contracts assigned to
WSMP, all of the Leases, contracts, agreements and instruments are
valid, binding and enforceable against Sellers in accordance with their
respective terms; Sellers have performed all material obligations
required to be performed by them under such Leases, contracts,
agreements and instruments and Sellers are not in default under or in
breach of, nor in receipt of any claim of default or breach under, any
such Lease, contract, agreement or instrument to which Sellers are
subject. No event has occurred which with the passage of time or the
giving of notice or both would result in a material default, breach or
event of noncompliance under any such Lease, contract, agreement or
instrument; Sellers have no present expectation or intention of not
fully performing all such obligations; Sellers do not have any
knowledge of any breach or anticipated breach by the other parties to
any Lease, contract or commitment to which Sellers are parties;
and Sellers are not parties to any contract requiring any of them to
purchase or sell goods or services or lease property above or below (as
the case may be) prevailing market prices and rates.
Section 4.19 SUPPLIERS. As of the date hereof, no supplier to the
Restaurants which was significant to Sellers during the period ending December
31, 1996 or which has been significant to Sellers thereafter, has terminated,
materially reduced or threatened to terminate or materially reduce its provision
of products or services to Sellers' Restaurants as the case may be.
Section 4.20 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Definitions. The following terms, when used in this
Section 4.20, shall have the following meanings. Any of these terms
may, unless the context otherwise requires, be used in the singular or
the plural depending on the reference.
(i) "Sellers". For purposes of this Section, the term the
"Sellers" shall include (i) all affiliates and subsidiaries of
the Sellers, (ii) all partnerships, joint ventures and other
entities or organizations in which any of the Sellers were at
any time or are parties, joint venturers, members or
participants, (iii) all predecessor or former corporations,
partnerships, joint ventures, organizations, businesses or
other entities, whether in existence as of the date hereof or
at any time prior to the date hereof, the assets or
obligations of which have been acquired or assumed by any of
the Sellers or to which any of the Sellers have succeeded, and
(iv) all
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Real Estate which is the subject of the Leases operated by
such entities, either currently or in the past.
(ii) "Release" shall mean and include any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment
or the workplace of any Hazardous Substance, and otherwise as
defined in any Environmental Law.
(iii) "Hazardous Substance" shall mean any quantity of
asbestos in any form, urea formaldehyde, PCBs, radon gas,
crude oil or any fraction thereof, all forms of natural gas,
petroleum products or by-products, any radioactive substance,
any toxic, carcinogenic, infectious, reactive, corrosive,
ignitible or flammable chemical or chemical compound and any
other hazardous substance, material or waste subject to
regulation, control or remediation under the Environmental
Laws.
(iv) "Environmental Laws" shall mean all federal, state, local
or foreign laws, statutes, ordinances, regulations, rules,
judgments, orders, notice requirements, court decisions,
agency guidelines or principles of law, restrictions, and
Permits which regulate or relate to the protection or
clean-up of the environment, the use, treatment, storage,
transportation, handling or disposal of Hazardous Substances,
the preservation or protection of waterways, groundwater,
drinking water, air, wildlife, plants or other natural
resources, or the health and safety of persons or property,
including, without limitation, protection of the health and
safety of employees.
(b) Compliance with Environmental Laws. Sellers are in
substantial compliance with all applicable Environmental Laws.
Environmental Laws shall include without limitation Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), Occupational
Safety and Health Act (29 U.S.C. Section 651 et seq.), Federal Water
Pollution Control Act (33 U.S.C. Section 1251 et seq.), Resource
Conservation & Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA"),
Safe Drinking Water Act (21 U.S.C. Section 349, 42 U.S.C. Section
201.300f), Toxic Substances Control Act (15 U.S.C. Section 2601 et
seq.), Clean Air Act (42 U.S.C. Section 7401 et seq.) and Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.)("CERCLA"), or any other similar federal, state or
local law of similar effect, each as amended.
(c) Permits Required. The consummation of any of the
transactions contemplated by this Agreement will not require an
application for issuance, renewal, transfer or extension of, or any
other administrative action regarding, any Permit required under any
Environmental Law.
(d) Notice of Violation. There is not now pending or
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threatened any action against the Sellers, nor have the Sellers
received any notice at any time, alleging that any of them are or were
responsible or potentially responsible for a Release of Hazardous
Substances pursuant to any Environmental Law.
(e) Judgments. There are no consent decrees, judgments,
judicial or administrative orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate or bind the Sellers or any
Real Estate or Real Estate formerly owned or leased by the Sellers.
(f) Environmental Conditions. There are no present or past
Environmental Conditions (as defined below) in any way relating to the
Sellers. "Environmental Conditions" means the Release or threatened
Release of any Hazardous Substance (whether or not upon the Real
Property which is the subject of the Leases which is owned or leased
by the Sellers or other property of the Sellers and whether or not
such pollution constituted at the time thereof a violation of any
Environmental Law) as a result of which the Sellers have or
reasonably may become liable to any person or by reason of which the
Real Property which is owned or leased by the Sellers or any of their
assets reasonably may suffer or be subjected to any lien.
(g) Environmental Audits or Assessments. True, complete and
correct copies of the written reports, and all parts thereof, including
any drafts of such reports if such drafts are in the possession or
control of the Sellers, of all environmental audits or assessments
which have been conducted on the Real Estate by the Sellers within the
past five years, either by the Sellers or any attorney, environmental
consultant or engineer engaged for such purpose, have been delivered to
WSMP.
(h) Indemnification Agreements. The Sellers are not parties,
whether as direct signatory or as successor, assign or third party
beneficiary, or otherwise bound, to any lease or other contract under
which the Sellers are obligated, directly or indirectly, by any
representation, warranty, indemnification, covenant, restriction or
other undertaking concerning any material Environmental Condition
concerning any of the Real Estate.
(i) Releases or Waivers. The Sellers have not released any
other Person from any claim under any Environmental Law or waived any
rights concerning any Environmental Condition.
Section 4.21 PROPERTIES. Sellers own their leasehold interests under
the Leases free and clear of any liens, claims, pledges, mortgages,
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charges, options or other encumbrances, and the right to possession of, all
of the Real Estate leased under the Leases of Sellers and the material tangible
and intangible property purchased and sold hereunder. The Leases and the
personal property owned or leased by Sellers constitutes all of the real or
personal property that is material to and necessary for the operation of the
business of the Restaurants purchased and sold hereunder. The Real Estate,
which is subject of the Leases, is in a state of repair and maintenance
sufficient for its intended use, reasonable wear and tear excepted.
Section 4.22 ACCREDITED INVESTORS.
(a) Each of the Sellers (i) is an "accredited investor" within
the meaning of Rule 501 under the Securities Act and was not organized
for the specific purpose of acquiring the WSMP Stock or (ii) has
sufficient knowledge and experience in investing in companies similar
to WSMP so as to be able to evaluate the risks and merits of its
investment in WSMP and it is able financially to bear the risks
thereof;
(b) Each of the Sellers is a resident of, and is domiciled in,
the State of North Carolina; the transactions contemplated by this
Agreement have been negotiated solely in the State of North Carolina;
and, without limiting the generality of the foregoing, WSMP's offer to
sell the WSMP Stock to the Sellers (i) originated within the State of
North Carolina, (ii) was directed to and received by each Seller within
the State of North Carolina, and (iii) has been accepted by
communications to WSMP made solely in the State of North Carolina.
(c) Each of the Sellers has had an opportunity to discuss the
business, management and financial affairs of WSMP with WSMP's
management and has received (or had made available to it) any financial
and business documents requested by it;
(d) The WSMP Stock being purchased by each of the Sellers is
being acquired for its own account, for investment, and not with a view
to or for sale in connection with any unregistered distribution thereof
in violation of the Securities Act or any state securities act;
(e) Each of the Sellers understands that unless sold pursuant
to Section 11.1 hereunder (i) the WSMP Stock must be held for two
years unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (ii) the WSMP
Stock will bear a legend to such effect and (iii) WSMP will make or
cause to be made a notation on its transfer books to such effect;
(f) None of the Sellers has any contract, arrangement or
understanding with any broker, finder or similar agent with respect to
the transactions contemplated by this Agreement.
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Section 4.23 EMPLOYEES.
(a) Hiring of Sellers' Employees. As part of this Agreement,
WSMP will become the employer of such of the employees involved in the
operation or supervision of the Restaurants that it desires to hire.
None of the employees of the Sellers involved in the operation or
supervision of the Restaurants has an employment agreement or
understanding, whether oral or written, with Sellers which is not
terminable on notice by Sellers without cost or other liability to
Sellers. The parties agree that Walt Hash and Jim Howard will be
retained by WSMP. Although they are employees of Hash Management,
Inc., Sellers represent there are no employment agreements or
understandings, whether oral or written between those persons and
any employer. WSMP shall have no liability for any accrued or unpaid
benefits or vacation pay owed to the employees of Sellers of Hash
Management by their present employer.
(b) Health Insurance. Sellers presently maintain health
insurance for their employees. It is WSMP's intent to allow employees
who it hires to become covered under WSMP's health insurance policy;
however, Sellers shall be solely responsible for any claims made by
Sellers' employees at any time prior to their becoming covered under
WSMP's health insurance policy.
(c) 401(k) Plan. Sellers presently maintain a 401(k) plan for
the benefit of their employees. WSMP may, at WSMP's option, merge the
Sellers' Plan into its own plan, or may otherwise assimilate the
Sellers' plan into its own. WSMP shall have no liability for Sellers'
plan or for any employee contribution prior to such time, if any, as it
assimilates such plan, and shall have no liability for any
administration or trustee error or any payment, penalty or interest
associated therewith, if such occurred prior to the time of such
assimilation. WSMP may also choose not to merge the plans, and if so,
Sellers will terminate their 401(k) plan prior to the Closing, so that
Sellers' employees will be eligible to receive distributions hereunder
and rollover those proceeds into WSMP's plan.
(d) Workers' Compensation Benefits. WSMP shall have no
liability for any injury to any of Sellers' employees, or any Workers'
Compensation claim or benefit arising therefrom, for any event
occurring prior to the time of WSMP assuming such coverage.
Section 4.24 TAX CONSEQUENCES. Sellers are completely responsible for
determing the tax consequences to them of this sale. WSMP has not evaluated this
for the Sellers or their shareholders, either directly or indirectly through its
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accountants, and Sellers are solely responsible for determining their tax
consequences.
ARTICLE V
REPRESENTATIONS OF WSMP
-----------------------
Section 5 REPRESENTATIONS WITH RESPECT TO WSMP. WSMP represents,
warrants and agrees as follows:
Section 5.1 CORPORATE EXISTENCE. WSMP is a corporation duly
incorporated, validly existing and in good standing under the laws of North
Carolina and is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or use of its assets
or properties, or the conduct or nature of its business, makes such
qualification necessary (except for jurisdictions in which the failure to so
qualify or be in good standing would not be reasonably likely to have a Material
Adverse Effect.) WSMP has all requisite corporate power and authority to conduct
its business and own its properties as now conducted and owned.
Section 5.2 POWER AND AUTHORITY. WSMP has all requisite corporate power
and authority, and has taken all required corporate and other action necessary,
to execute, deliver and perform this Agreement and consummate the transactions
contemplated hereto. WSMP has all requisite corporate power and authority, and
has taken all required corporate and other action necessary to issue and sell
the WSMP Stock to the Sellers as herein provided. None of the foregoing actions
will (i) violate any provision of the Bylaws or Certificate of Incorporation of
WSMP, (ii) result in the breach of or constitute a default under any contract,
agreement or instrument to which WSMP is a party or by which it is bound, (iii)
result in the creation or imposition of any lien, claim or encumbrance on any
assets of WSMP, (iv) give any Person rights to terminate any contracts or
agreements with WSMP or otherwise to exercise rights against WSMP, or (v)
violate any order, writ, judgment, injunction, decree, statute, rule or
regulation of any court, tribunal or governmental entity applicable to or
bearing upon WSMP or any of its assets or businesses, except, as to (ii), (iii)
and (iv) above, as would not have a Material Adverse Effect.
Section 5.3 ENFORCEABILITY. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be as
of the Closing Date, duly executed and delivered by WSMP and, assuming that this
Agreement is duly executed and delivered by, and is within the power and
authority of the Sellers, constitutes, or will constitute, the legal valid and
binding obligation of WSMP enforceable against WSMP in accordance with its
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respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally and subject to general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
Section 5.4 CAPITALIZATION. Upon issuance and delivery to the Sellers
hereunder, the WSMP Stock will be duly authorized, validly issued, fully paid
and non-assessable and will be free and clear of any liens, encumbrances,
preemptive rights, escrows, options, rights of first refusal or other
agreements, arrangements, commitments, understandings or obligations, whether
written or oral, or any other restrictions affecting rights and other incidents
of record and beneficial ownership, other than (i) as set forth herein and (ii)
restrictions on transferability imposed generally under the Securities Act and
under the securities laws of the several states and the rules and regulations
issued in respect thereto (such state laws, rules and regulations being,
collectively, ""Blue Sky Laws"). Assuming the accuracy of the representations
and warranties and the compliance with the covenants made by Sellers herein,
the issuance and delivery of the shares of WSMP Stock is exempt from the
registration requirements of the Securities Act and the Blue Sky Laws.
Section 5.5 CONSENTS, APPROVALS AND NON-CONTRAVENTION. Neither the
execution, delivery and performance of this Agreement by WSMP, nor the
consummation of any transaction contemplated hereunder, nor the issuance, sale
or delivery of the WSMP Stock to the Sellers as contemplated herein will:
(a) require any consent or approval of, filing or taking of
any other action with, or notice to, any Person;
(b) violate any contract, agreement, instrument or other
arrangement to which WSMP is a party or by which any of them
is bound;
(c) violate (i) any order, writ, judgment, injunction or
decree or (ii) any statute, law, rule or regulation of any
court, tribunal or governmental entity or authority applicable
to or bearing upon WSMP or any of their respective assets or
business;
except, as to clauses (a), (b) and (c)(ii) above, as would not
have a Material Adverse Effect.
Section 5.6 SEC FILINGS. The WSMP Registration Statement, the
Prospectus and any document incorporated by reference therein (i) will be, at
the time of filing with the SEC, and will conform, when it becomes effective or
is filed with the SEC, as the case may be, in all material respects with the
requirements of the Securities Act and (ii) did not at the time they were filed,
or will not, when it becomes effective or is filed with the SEC, as the case may
be, contain any untrue statement of a material fact or omit to state a
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material fact required to be stated therein, or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Section 5.7 MATERIAL ADVERSE CHANGE. Since December 31, 1996,
(i) there has been no Material Adverse Change and (ii) there has been no
Material Adverse Effect on the business, prospects, financial condition,
operations, property or affairs of WSMP, whether or not insured against.
Section 5.8 PERMITS; COMPLIANCE WITH LAWS; OTHER AGREEMENTS. All
material Permits which are necessary or required for the conduct of the business
of WSMP as currently conducted and as contemplated to be conducted (pursuant to
the WSMP Registration Statements) have been validly issued and are in full force
and effect, and WSMP is not in violation of any such Permit. WSMP and the
conduct of its businesses are in compliance with all applicable laws, statutes,
ordinances, rules, regulations and orders of any federal, foreign, state or
local government and any other governmental department or agency, and any
judgment, decision, decree or order of any court or governmental agency,
department or authority except where the failure to comply would not have a
Material Adverse Effect on WSMP. WSMP has not received any written notice to the
effect that it is not in compliance with any such statute, regulation, order,
ordinance or other law or judgments, decisions or decrees where the failure to
comply would have a Material Adverse Effect on WSMP.
Section 5.9 INTELLECTUAL PROPERTY RIGHTS. WSMP owns all material
trademarks, service marks, trade names, copyrights, rights or licenses to use
the same, and any and all applications therefore, presently held by WSMP or of
which WSMP is a licensor or licensee, and all intellectual property and similar
proprietary information (the "WSMP Intellectual Property") necessary to permit
WSMP to conduct its businesses as currently conducted and as contemplated to be
conducted pursuant to the WSMP Registration Statement. No claim is pending or,
to the best of WSMP's knowledge, threatened to the effect that the operations of
WSMP infringe upon or conflict with the asserted rights of any other Person
under the WSMP Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that the WSMP Intellectual Property owned or licensed by WSMP, or which
WSMP otherwise has the right to use, is invalid or unenforceable by WSMP, and
there is no known basis for any such claim (whether or not pending or
threatened). To the best of WSMP's knowledge, all proprietary trade secrets
developed by or belonging to WSMP have been kept confidential.
Section 5.10 INVESTMENT COMPANY ACT. WSMP is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
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Section 5.11 BROKERS. WSMP is not obligated to pay any fee or
commission in connection with, any broker, finder or other similar Person in
connection with the offer or sale of the WSMP Stock to the Sellers as
contemplated herein or any of the transactions contemplated by this Agreement.
Section 5.12 NO INTEGRATION. WSMP has not, either directly or through
any agent, offered any equity securities of WSMP to, or solicited any offers to
acquire any equity securities of WSMP from, or otherwise approached, negotiated
or communicated in respect of any equity securities with, any Person in such a
manner as to require that the offer or sale of the WSMP Stock to the Sellers be
registered pursuant to the Securities Act or any Blue Sky Laws.
Section 5.13 DISCLOSURE. There is no fact which WSMP has not disclosed
to the Sellers in writing and of which any of their officers, directors or
executive employees are aware (other than general economic conditions) and which
has had or would reasonably be expected to have a Material Adverse Effect upon
the existing or expected financial condition, operating results, assets,
customer or supplier relations, employee relations or business prospects of WSMP
taken as a whole.
Section 5.14 OFFERING OF THE WSMP STOCK. Neither WSMP nor any person
authorized or employed by WSMP as agent, broker, dealer or otherwise in
connection with the offering or sale of the WSMP Stock or any security of WSMP
similar to the WSMP Stock has offered the WSMP Stock or any such similar
security for sale to or solicited any offer to buy the WSMP Stock or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither WSMP nor any person acting on
its behalf has taken or will take any other action (including, without
limitation, any offer, issuance or sale of any securities of WSMP under
circumstances which might require the integration of such security with the WSMP
Stock under the Securities Act or the rules and regulations of the SEC
thereunder), in either case so as to subject the offering, issuance or sale of
the WSMP Stock to the registration provisions of the Securities Act.
ARTICLE VI
COVENANTS
---------
Section 6.1 CONDUCT OF BUSINESS OF THE SELLERS. During the period from
the date of this Agreement to the Closing Date or the termination of this
Agreement, whichever first occurs, each of the Sellers shall conduct their
operations and business according to its ordinary and usual course of business
and use its reasonable best efforts to preserve intact its business
organizations and
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maintain satisfactory relationships with licensors, suppliers, distributors,
clients and others having material business relationships with it. Each of the
Sellers shall promptly notify (but in any event within two (2) business days)
WSMP of any emergency or other change in the normal course of any of their
businesses or in the operation of their Restaurants (including any default
under any material agreement) or of any other Material Adverse Change (or event
or occurrence reasonably expected to result in a Material Adverse Change)
affecting such Seller or Sellers (including, without limitation, governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or adjudicatory proceedings involving any of the
parties, their businesses or any of their Restaurants or Restaurant assets).
Each of the Sellers shall give WSMP written notification of any material change
taking place after the delivery of this Agreement and other documents which
would have been reflected in such documents had such changes occurred prior to
the time such documents were first delivered.
Section 6.2 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of the Closing Date or termination of this Agreement,
each of the Sellers shall refrain from taking any action to, directly or
indirectly, encourage, initiate or engage in discussions or negotiations with,
or provide any information to, any other Person, concerning any purchase of any
Interest in any of the Sellers or any merger, sale of substantial assets (other
than as contemplated by this Agreement) or similar transaction involving the
Sellers.
Section 6.3 RESTRICTIVE AGREEMENTS PROHIBITED. None of the Sellers
shall become a party to any Agreement, which by its terms restricts such party's
performance of this Agreement or the consummation of the transactions
contemplated hereunder.
Section 6.4 INDEBTEDNESS. Except as expressly permitted by the terms of
this Agreement, none of the Sellers shall create, incur, assume or permit to
exist any indebtedness for borrowed money having any effect whatsoever upon the
Restaurants, except (i) all deferred taxes, and (ii) the Assumed Indebtedness.
Section 6.5 DIVIDENDS AND DISTRIBUTIONS; ACQUISITION OF CAPITAL STOCK.
Except as contemplated by the WSMP Registration Statement, neither the Sellers
nor WSMP shall declare, pay or make any dividend or distribution with respect
to, or purchase, redeem, retire, decease or otherwise acquire for value any
Interest in any of the Sellers or WSMP, as the case may be.
Section 6.6 BYLAWS, CERTIFICATE OF INCORPORATION. Neither the Sellers
nor WSMP shall modify or amend in any respect their Bylaws or Certificate of
Incorporation.
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Section 6.7 ADDITIONAL NEGATIVE COVENANTS OF THE SELLERS. From the date
hereof until the Closing Date, the Sellers covenant and agree, jointly and
severally that they shall not:
(a) amend, modify, terminate, waive or otherwise alter the
contracts of Section 4.18;
(b) enter into any written employment agreement with any
Person;
(c) knowingly take any action or omit to take any action which
would result in the material violation by the Sellers of any
law applicable to this transaction or cause a breach in any
material respect by the Sellers of any of the representations
and warranties of the Sellers set forth in this Agreement;
(d) enter into any covenant or agreement other than such
agreements or contracts entered into in the ordinary course
that are reasonably required to preserve, protect, or advance
Sellers' rights or interests in the business of Sellers; or
(e) take any other action which would reasonably be expected
to cause a material decrease in the value of the Sellers'
Restaurants business.
Section 6.8 ADDITIONAL NEGATIVE COVENANTS OF WSMP. From the date hereof
until the Closing Date, WSMP covenants and agrees that it shall not:
(a) knowingly take any action or omit to take any action which
would result in the material violation of any law applicable
to this transaction or cause a breach in any material respect
of any of the representations and warranties of WSMP set forth
in this Agreement; or
(b) take any other action which would reasonably be expected
to cause a material decrease in the value of the businesses of
WSMP taken as a whole.
Section 6.9 CORPORATE EXISTENCE. The Sellers and WSMP shall maintain
their respective corporate existence, rights and franchises in full
force and effect.
Section 6.10 COMPENSATION. The Sellers shall not increase their
restaurant management and employees' compensation in excess of that compensation
customarily paid to management in companies of similar size, of similar
maturity, and in similar businesses.
Section 6.11 NONCOMPETITION AGREEMENT AND PERSONAL GUARANTEE. The
Sellers and WSMP shall obtain the Noncompetition Agreement from Cecil R. Hash.
Sellers and WSMP shall also obtain Hash's personal guaranty in favor of WSMP
concerning the obligations, representations, warranties, covenants, indemnities,
and liabilities of the Sellers and each of them in arising out of, or pursuant
to this Agreement, (the "Personal Guarantee"), in
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substantially the form attached hereto as Exhibit C.
Section 6.12 ADDITIONAL AFFIRMATIVE COVENANTS. Each of the Sellers
shall use its best efforts to:
(a) maintain and keep its properties in good repair, working
order and condition, reasonable wear and teat excepted, and
from time to time make all necessary repairs, renewals and
replacements, so that its Restaurants' businesses may be
properly conducted at all times, except where the failure to
maintain and preserve such properties would not have a
Material Adverse Effect;
(b) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon the Real Estate or the
Restaurants or upon the income or profits therefrom (in each
case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or
supplies to the extent to which the failure to pay or
discharge such obligations would reasonably be expected to
have a Material Adverse Effect, unless and to the extent that
the same are being contested in good faith and by appropriate
proceedings;
(c) comply with all other material obligations which it incurs
pursuant to any contract or agreement as such obligations
become due to the extent to which the failure to so comply
would reasonably be expected to have a Material Adverse
Effect, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings; and
(d) comply with all applicable laws, rules, regulations and
orders of all governmental authorities, the violation of which
would reasonably be expected to have a Material Adverse
Effect.
Section 6.13 BEST EFFORTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Section 6.14 DISCLOSURE TO PARTIES. Sellers and WSMP covenant and agree
that if any party should become aware, prior to Closing, that any of its
representations, warranties or covenants is inaccurate or incapable of being
performed, written notice of such inaccuracy or incapability shall be promptly
given to the other parties. Nothing contained in this Section 7.14 shall relieve
the party bound by such representation, warranty or covenant from complying
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with all terms and conditions of this Agreement applicable to it.
Section 6.15 PUBLIC ANNOUNCEMENTS. The Sellers and WSMP will mutually
agree as to timing, form and content before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated herein and shall not issue any such press release or make any such
public statement prior to reaching such mutual agreement, except as may be
required by law (as determined by counsel to WSMP). In the event prior to the
Closing Date any party hereto is required by law or by obligations pursuant to
any listing agreement with any securities exchange on which their shares are
traded, after consultation with counsel, to make a statement with respect to the
transactions contemplated herein, such party shall notify in writing the other
party or parties hereto as to the timing, form and content of such statement.
Section 6.16 CONFIDENTIALITY. Whether or not the transactions
contemplated hereby are consummated, each of the parties hereto agrees to use
its best efforts to keep confidential this Agreement and any and all information
with respect to the other party which it has received as a result of any
investigation made in connection with this Agreement which is not otherwise
available to the parties. Notwithstanding the foregoing, however, each of the
Sellers and WSMP shall be entitled to disclose any such information (a) to their
respective existing lenders in connection with obtaining consents required in
order to consummate the transactions contemplated hereby; (b) to the extent
required by applicable law (as determined by counsel to WSMP), (c) as is
necessary to obtain consents to the consummation of the transactions
contemplated hereby, (d) as if necessary in connection with filings, approvals
or rulings to be obtained from any government agency, including, but not limited
to, the SEC and the Internal Revenue Service, and (e) during the course of or in
connection with any litigation, arbitration or other proceeding based upon or in
connection with the subject matter of this Agreement, including, without
limitation, the failure of the transactions contemplated hereby to be
consummated. If this Agreement is required to be filed as an exhibit to filings
made by WSMP with the SEC, it may be so filed without an application for an
order of confidential treatment. In the event that the transactions contemplated
hereunder are not consummated, the parties shall return all information received
from the other party upon such party's request.
Section 6.17 LIABILITY INSURANCE. Each of the Sellers will maintain in
full force and effect a policy or policies of standard comprehensive general
liability insurance underwritten by a U.S. insurance company (having an A.M.
Best rating of A-XII or better at the time of issuance of any such policy)
insuring its Restaurants, Real Estate and properties, business against such
losses and risks, and in such amounts, as are adequate for its business and as
are customarily carried by entities of similar size engaged in the same
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or similar business. Such policies shall include property loss insurance
policies, with extended coverage, sufficient in amount to allow the replacement
of any of its tangible properties which might be damaged or destroyed by the
risks or perils normally covered by such policies. Sellers shall not allow or
permit any assignment or change in beneficiary and shall not borrow against
such policy or policies.
ARTICLE VII
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
Section 7 CONDITIONS TO SELLERS' OBLIGATIONS. Each and every obligation
of the Sellers under this Agreement shall be subject to the satisfaction, at or
before the Closing Date, of each of the following conditions:
Section 7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of WSMP contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date.
Section 7.2 PERFORMANCE. Each and all of the agreements, obligations,
covenants, or conditions required by this Agreement to be performed or complied
with by WSMP on or before the Closing Date pursuant to the terms hereof shall
have been duly performed or complied with in all material respects.
Section 7.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and
except as otherwise permitted or required by this Agreement, there shall not
have occurred any Material Adverse Change with respect to WSMP, including,
without limitation, whether as a result of any revocation of any Permit or right
to do business, fire, explosion, accident, casualty, flood, drought, riot,
storm, condemnation or act of God or otherwise.
Section 7.4 NO LITIGATION THREATENED. No action or proceedings shalL
have been instituted or, to the knowledge of WSMP, shall have been threatened
before a court or other government body or by any public authority to restrain
or prohibit any of the transactions contemplated hereby.
Section 7.5 WSMP APPROVALS. This Agreement and the transactions
contemplated hereby shall have been duly approved by the Board of Directors of
WSMP in accordance with North Carolina law.
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ARTICLE VIII
CONDITIONS TO WSMP'S OBLIGATIONS
--------------------------------
Section 8 CONDITIONS TO THE WSMP OBLIGATIONS. Each and every obligation
of WSMP under this Agreement shall be subject to the satisfaction, at or before
the Closing Date, of each of the following conditions:
Section 8.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date.
Section 8.2 PERFORMANCE. Each and all of the agreements, obligations,
covenants, or conditions required by this Agreement to be performed or complied
with by Sellers on or before the Closing Date pursuant to the terms hereof shall
have been duly performed or complied with in all material respects.
Section 8.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date and
except as otherwise permitted or required by this Agreement, there shall not
have occurred any Material Adverse Change with respect to the Sellers,
including, without limitation, whether as a result of any revocation of any
Permit or right to do business, fire, explosion, accident, casualty, flood,
drought, riot, storm, condemnation or act of God or otherwise.
Section 8.4 NO LITIGATION THREATENED. No action or proceeding shall
have been instituted or, to the best of the Sellers' knowledge, information and
belief shall have been threatened before a court or other governmental body or
by any public authority to restrain or prohibit any of the transactions
contemplated hereby, except for the Graham slip and fall action made known to
WSMP.
Section 8.5 SELLERS' APPROVALS. This Agreement and the transactions
contemplated hereby shall have been duly approved by the Board of Directors and
shareholders of each of the Sellers in accordance with North Carolina law.
Section 8.6 NONCOMPETITION AGREEMENT AND PERSONAL GUARANTEE. Cecil R.
Hash shall have executed and delivered at Closing the Noncompetition Agreement
and the Personal Guarantee.
Section 8.7 DUE DILIGENCE REVIEW. By the Effective Date, WSMP shall
have completed a due diligence review of the business, operations and financial
statements of the Sellers and the Restaurants, and the results of such review
shall not reveal any Material Adverse Change with respect to the Sellers or the
Restaurants from that
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disclosed in the WSMP Registration Statement.
Section 8.8 EQUITY OFFERING. The WSMP Registration Statement shall have
been filed with the SEC; no stop order shall have been ordered by the SEC; and
no proceedings for that purpose shall have been commenced or threatened.
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1 INDEMNIFICATION BY WSMP.
(a) WSMP agrees, in accordance with the procedures set forth
in this Article IX, to indemnify and hold each of Sellers and each of
their respective directors, officers and Affiliates harmless from and
against any and all demands, claims, actions, suits, liabilities,
damages, losses, judgments, costs and expenses (including reasonable
attorneys' fees) (collectively, the "Indemnifiable Damages") relating
to, resulting from or arising out of (i) any breach or inaccuracy of
the representations or warranties of WSMP set forth in this Agreement,
(ii) any untrue statement or alleged untrue statement of a material
fact contained in the WSMP Registration Statement, the Prospectus or
any amendment or supplement thereto, (iii) the omission or alleged
omission to state in the WSMP Registration Statement, the Prospectus or
any amendment or supplement thereto a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided, however, that WSMP shall not be liable pursuant
to Section 9.1(a)(ii) or (iii) above to the extent that such
Indemnifiable Damages arise out of, or are based upon, any untrue
statement or alleged untrue statement or omission or alleged omission
made in the WSMP Registration Statement or the Prospectus or in any
such amendment or supplement in reliance upon and in conformity with
information furnished to WSMP by or on behalf of the Sellers or any of
them.
(b) The indemnification obligations of WSMP under Section
9.1(a) above shall expire and terminate one year after the Effective
Time, unless prior to such termination Sellers shall have provided
written notice to WSMP of an assertion by Sellers of a right to
indemnification under such Section 9.1(a) above (an "Indemnification
Claim"). The Indemnification Claim shall set forth a brief description
of the facts giving rise to such claim and the amount (or a reasonable
estimate) of the Indemnifiable Damages suffered, or which may be
suffered, by the Sellers. If the Sellers provide such Indemnification
Claim prior to the expiration of the applicable period, the obligations
of WSMP with respect to the
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asserted right to indemnification under Section 9.1(a) above shall
continue until the appropriate amount of indemnification, if any, is
determined, paid and satisfied in full.
Section 9.2 INDEMNIFICATION BY SELLERS.
(a) Each of the Sellers agrees, jointly and severally, in
accordance with the procedures set forth in this Article IX, to
indemnify and hold WSMP and its directors, officers and Affiliates
harmless from and against any and all Indemnifiable Damages relating
to, resulting from or arising out of (i) any breach or inaccuracy of
the representations or warranties of the Sellers set forth in this
Agreement, and any additional costs to WSMP that arise in any matter
from this sale, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the WSMP Registration Statement, the
Prospectus or in any amendment or supplement thereto, (iii) the
omission or alleged omission to state in the WSMP Registration
Statement, the Prospectus or any amendment or supplement thereto a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that each of
Sellers shall only be liable pursuant to Section 9.2(a)(ii) and (iii)
above to the extent that such Indemnifiable Damages arise out of or,
are based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the WSMP Registration Statement,
the Prospectus or any such amendment or supplement in reliance upon and
in conformity with information furnished by any Seller specifically for
inclusion therein.
(b) The indemnification obligations of each of the Sellers
under Section 9.2(a) above shall expire and terminate one year after
the Effective Time, unless prior to such termination WSMP shall have
provided written notice to each of the Sellers of an assertion by WSMP
of an Indemnification Claim under such Section 9.2(a) above. The
Indemnification Claim shall set forth a brief description of the
facts giving rise to such claim and the amount (or a reasonable
estimate) of the Indemnifiable Damages suffered, or which may be
suffered, by WSMP. If WSMP provides such Indemnification Claim prior
to the expiration of the applicable period, the obligations of each of
the Sellers with respect to the asserted right to indemnification
under Section 9.2(a) above shall continue until the appropriate amount
of indemnification, if any, is determined, paid and satisfied in full.
Section 9.3 THIRD PARTY CLAIMS.
(a) If any claim, action, suit or proceeding (an
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"Action") shall be instituted or asserted against a party hereto
(an "Indemnified Party") in respect of which either the Sellers, on
the one hand, or WSMP, on the other hand (the "Indemnifying Party"),
shall have an obligation of indemnification hereunder, then the
Indemnified Party may, prior to the expiration date of such
obligation of indemnification, give prompt written notice of such
Action to the Indemnifying Party by an Indemnification Claim.
Upon receipt of such Indemnification Claim, the Indemnifying Party
shall be entitled at its expense to defend such Action by counsel of
its own choosing, either in the Indemnifying Party's name, or in the
Indemnified Party's name, and the Indemnified Party agrees to
cooperate with such counsel. If the Indemnifying Party shall not,
within thirty (30) days after the date of the Indemnification Claim,
serve a return notice indicating or stating that the Indemnifying
Party shall take over the defense of such Action as hereinabove
provided, such failure to give notice within the time specified shall
be deemed an election by the Indemnifying Party not to take over the
defense of such Action. The Indemnified Party shall be entitled at any
time to participate, at its own expense, in any and all aspects of
such Action (regardless of the parties named therein) with counsel of
its own choosing, and the Indemnifying Party agrees to cooperate with
such counsel. The Indemnifying Party shall keep the Indemnified Party
reasonably apprised of the course of any negotiations or proceedings
with respect to such Action and, without regard to the Indemnified
Party's participation therein, will notify the Indemnified Party prior
to the submission to the claiming party of any proposed settlement or
compromise of such Action.
(b) If the Indemnifying Party elects or is deemed to have
elected not to take over the defense of such Action, the Indemnified
Party shall have the right to defend, compromise and settle such Action
on such terms as the Indemnified Party in its discretion may determine,
subject to the prior consent of the Indemnifying Party, which consent
shall not be unreasonably withheld, and the Indemnifying Party
as the case may be shall continue to be bound to indemnify the
Indemnified Party in accordance with the terms of this Article IX.
Notwithstanding the foregoing, to the extent that the Action involves
or could result in claims against, or potential liability of, the
Indemnifying Party the extent or nature of which were not known by the
Indemnifying Party as of the date it elects or is deemed to have
elected not to take over the defense of such Action, the Indemnified
Party shall promptly notify the Indemnifying Party and the procedure
described in Section 9.3(a) above shall once again apply to the
Action.
Section 9.4 NOTICE OF DIRECT CLAIMS. In the event an Indemnified Party
should have a direct claim under this Agreement against the Indemnifying Party
which does not involve a claim or demand being asserted against or sought to be
collected from the Indemnified
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Party by a third party, the Indemnified Party shall give prompt written notice
thereof to the Indemnifying Party by an Indemnification Claim.
Section 9.5 PERSONAL GUARANTEE. Sellers' sole shareholder, Cecil R.
Hash, in order to induce WSMP to enter into this Agreement, will personally
guarantee to WSMP the obligations, representations, warranties, covenants,
indemnity and liability of the Sellers and each of them arising in, out of, or
pursuant to this Agreement. This Personal Guarantee shall be in substantially
the form attached hereto as Exhibit C.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
Section 10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject tO the
provisions of Article IX hereof, each and every representation and warranty
contained in this Agreement shall expire on the date, that is three years after
the Closing Date, and not be terminated and extinguished by the Closing or the
termination of this Agreement pursuant to Section 12.10 hereof, and thereafter,
except and to the extent expressly provided in Article IX hereof. After the
expiration of three years from the Closing Date, none of WSMP, the Sellers or
any partner, officer, director or representative thereof shall be under any
liability whatsoever with respect to any such representation and warranty.
ARTICLE XI
OFFER, SALE AND RESALE OF WSMP STOCK
------------------------------------
Section 11.1 REGISTRATION. WSMP covenants and agrees with each of the
Sellers that, upon execution and delivery of this Agreement, it will (i) take
all necessary steps promptly to file the WSMP Registration Statement so as to
permit a public offering of the WSMP Stock by Sellers as and to the extent
contemplated by this Agreement; (ii) file promptly with the SEC any amendment or
amendments to the WSMP Registration Statement, the Prospectus or any supplement
or supplements thereto, as in any such case may, in the judgment of WSMP,
required by the Securities Act or requested by the SEC; (iii) prior to filing
any such amendment or supplement with the SEC, furnish a copy thereof to Sellers
and obtain the consent of Sellers to the filing (which consent shall not be
unreasonably withheld); (iv) utilize its best efforts to
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<PAGE> 36
have the Registration Statement, as the same may be amended, declared effective
at the earliest practicable date under the Securities Act by the SEC and under
all applicable Blue Sky Laws; and (v) maintain the effectiveness of the WSMP
Registration Statement for one year following its initial effective date
thereof.
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.1 EXPENSES. WSMP shall pay all expenses incurred on its
behalf in connection with the transaction contemplated by this Agreement,
including, without limitation, all fees and expenses of its counsel and
financial advisors. Sellers shall pay, or after Closing reimburse, all of the
expenses of Sellers relating to the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of Frank Williams of
Deloitte & Touche, financial advisor.
Section 12.2 GOVERNING LAW. The interpretation and construction of
this Agreement, and all matters relating hereto, shall be governed
by the laws of the State of North Carolina.
Section 12.3 CAPTIONS. The Article and Section captions used herein are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 12.4 NOTICES. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person or
sent by facsimile transmission or by registered or certified mail, postage
prepaid, addressed as follows (or such other address for a party as shall be
specified by like notice; provided that notice of change of address shall be
effective only upon receipt thereof):
If to WSMP: WSMP, Inc.
P. O. Box 399
One WSMP Drive
Claremont, N. C. 28610
Attention: David R. Clark, President
and a copy to: James R. Simpson II
Simpson Aycock, P.A.
P. O. Drawer 1329
Morganton, N. C. 28680
If to Sellers: F & H Companies, Inc.
Western Steer of North Carolina, Inc.
Northwest Food Systems, Inc.
Davidson Food Systems, Inc.
Mocksville Food Systems, Inc.
CFR Foods, Inc.
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<PAGE> 37
c/o Cecil R. Hash
3536 Vest Mill Road
Winston-Salem, N.C. 27103
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; when receipt
confirmed, if sent by facsimile; and the next business day after timely delivery
to the courier, if sent by an overnight air courier service guaranteeing next
day delivery.
Section 12.5 PARTIES IN INTEREST. Neither this Agreement nor any of the
rights of the parties hereunder, may be transferred, assigned, pledged or
hypothecated by any party hereto, in whole or in part, other than by operation
of law, and any attempted assignment prohibited hereunder shall be void. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
Section 12.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
Section 12.7 ENTIRE AGREEMENT. This Agreement, including the other
documents referred to herein which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
Section 12.8 AMENDMENTS. No provision of this Agreement may be waived,
amended, supplemented or modified orally, but only by an agreement in writing
signed by each of WSMP and the Sellers.
Section 12.9 THIRD PARTY BENEFICIARIES. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
Section 12.10 TERMINATION AND ABANDONMENT.
(a) Notwithstanding any other provision contained to the
contrary, this Agreement may be terminated at any time prior to the
Effective Time (i) by the mutual consent of WSMP and each of the
Sellers; (ii) by the Sellers, if the covenants set forth in this
Agreement shall not have been complied with or performed by WSMP and
such noncompliance and nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by WSMP on
or before the twentieth (20th) day following written notice thereof
from the Sellers; provided that the Sellers shall not have defaulted in
any material respect with respect to any of the obligations hereunder;
(iii) by WSMP, if the covenants set forth in this Agreement shall not
have been complied with or performed by Sellers, and such noncompliance
and nonperformance shall not
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<PAGE> 38
have been cured or eliminated (or by its nature cannot be cured or
eliminated) by Sellers on or before the twentieth (20th) day following
written notice thereof from WSMP; provided that WSMP shall not have
defaulted in any material respect with respect to any of their
obligations hereunder; or (iv) by Sellers or by WSMP if, without fault
of such terminating party, the Closing shall not have occurred on or
before the later of (i) nine (9) months after the date of this
Agreement and (ii) ten (10) business days after the expiration of any
cure period then in effect.
(b) In the event of termination and abandonment of the
transactions contemplated by this Agreement pursuant to this Section
12.10, written notice thereof shall forthwith be given to the other
parties hereto and this Agreement shall terminate and such transactions
shall be abandoned without further action. In the event of such
termination and abandonment pursuant to Section 12.10(a)(i) or 12.10
(a)(iv), no party hereto (or any of their respective directors,
officers, or management) shall have any liability or further obligation
to any other party to this Agreement.
(c) In the event of termination and abandonment of the
transactions contemplated by this Agreement pursuant to Section
12.10(a)(ii) or (a)(iii) above, the terminating party shall be entitled
to recover from the other party hereto all damages, losses, costs and
expenses (including reasonable attorneys' fees) provided by law.
IN WITNESS WHEREOF, each of the Sellers and WSMP has caused this
Agreement to be executed in its name by one of its duly authorized officers, all
as of the day and year first above written.
WSMP, INC.
BY: /s/ James C. Richardson, Jr.
-------------------------------
ATTEST:
/s/ Matthew V. Hollifield
- ----------------------------------
Asst. Secretary
(corporate seal)
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<PAGE> 39
SELLERS:
F & H COMPANIES, INC.
By: /s/ Cecil Hash
-------------------------------
President
ATTEST:
/s/ Richard F. Howard
- ----------------------------------
Asst. Secretary
(corporate seal)
WESTERN STEER OF NORTH CAROLINA,
INC.
By: /s/ Cecil Hash
-------------------------------
President
ATTEST:
/s/ Richard F. Howard
- ----------------------------------
Asst. Secretary
(corporate seal)
NORTHWEST FOOD SYSTEMS, INC.
By: /s/ Cecil Hash
-------------------------------
President
ATTEST:
/s/ Richard F. Howard
- ----------------------------------
Asst. Secretary
(corporate seal)
Page 39
<PAGE> 40
DAVIDSON FOOD SYSTEMS, INC.
By: /s/ Cecil Hash
-------------------------------
President
ATTEST:
/s/ Richard F. Howard
- ----------------------------------
Asst. Secretary
(corporate seal)
MOCKSVILLE FOOD SYSTEMS, INC.
By: /s/ Cecil Hash
-------------------------------
President
ATTEST:
/s/ Richard F. Howard
- ----------------------------------
Asst. Secretary
(corporate seal)
CFR FOODS, INC.
By: /s/ Cecil Hash
-------------------------------
President
ATTEST:
/s/ Richard F. Howard
- ----------------------------------
Asst. Secretary
(corporate seal)
Page 40
<PAGE> 1
EXHIBIT 5
SIMPSON AYCOCK, P.A.
Attorneys at Law
204 East McDowell Street
Morganton, NC 28680
March 6, 1997
Board of Directors
WSMP, Inc.
Claremont, North Carolina 28610
Dear Sirs:
We are acting as counsel to WSMP, Inc., a North Carolina corporation (the
"Company"), in connection with the preparation, execution and filing with the
Securities and Exchange Commission (the "Commission"), under the Securities Act
of 1933, as amended (the "Act"), of a Registration Statement on Form S-3 (the
"Registration Statement") and the offer, issuance and sale pursuant to the
Registration Statement of up to 223,611 shares (the "Shares") of Common Stock,
par value $1.00 per share, of the Company (the "Common Stock") by the Selling
Shareholders identified in the Registration Statement. The Shares are issuable
to the Selling Shareholders pursuant to a certain Agreement of Purchase and Sale
dated as of February 28, 1997 among the Company and the Selling Shareholders
(the "Agreement"). This opinion letter is furnished to you for filing with the
Commission pursuant to Item 601 of Regulation S-K promulgated under the Act.
In our representation of the Company, we have examined the Registration
Statement, the Agreement and the charter and bylaws of the Company, each as
amended to date, and such other documents as we have considered necessary for
purposes of rendering the opinions expressed below. We have assumed the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies of originals.
Based upon the foregoing, it is our opinion that the Company is a corporation
duly incorporated and validly existing under the laws of the State of North
Carolina and that, under the laws of the State of North Carolina, upon issuance,
sale and delivery to the Selling Shareholders in accordance with the terms and
conditions of the Agreement, the Shares will have been duly and validly issued
and will be fully paid and nonassessable.
We hereby consent to the use of this opinion letter as Exhibit 5 to the
Registration Statement and to the use of our name under the heading "Legal
Matters" therein. In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission promulgated thereunder.
Very truly yours,
Simpson Aycock, P.A.
By: /s/ J.R. Simpson
--------------------------
J.R. Simpson
<PAGE> 1
EXHIBIT 23.B
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement of WSMP, Inc. on Form S-3 of our report dated May 22, 1996, appearing
in and incorporated by reference in the Annual Report on Form 10-K of WSMP, Inc.
for the year ended February 23, 1996 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Hickory, North Carolina
March 6, 1997
<PAGE> 1
EXHIBIT 99.A
SOUTHTRUST BANK OF NORTH CAROLINA
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into this 10th day of January,
1996, by and between WSMP, Inc., a North Carolina corporation, with its
principal place of business at WSMP Drive, Claremont, North Carolina,
hereinafter called the "Borrower" and SouthTrust Bank of North Carolina, a North
Carolina banking association organized and existing under the laws of the United
States of America with an office in Concord, North Carolina, hereinafter called
the "Bank" or "Lender".
WITNESSETH:
WHEREAS, the Borrower has applied to the Bank for a loan to be used
primarily to refinance existing indebtedness on certain of its properties or
properties of its subsidiaries and has agreed that such loan shall be secured by
first lien deeds of trust or mortgages (referred to collectiveily herein as
"Deeds of Trust") on the respective properties listed on Exhibit A annexed
hereto, together with a first priority security interest in all furniture,
supplies, fixtures, machinery and equipment used in the operation of the
Properties located as described on Exhibit A annexted hereto. Exhibit A is
incorporated herein by reference and the real estate described therein is
hereinafter referred to as the "Property"; and
WHEREAS, in reliance upon the representations made by the Borrower, the
Bank has agreed to make a loan in the principal amount of up to $5,000,000.00
for such purposes and upon such terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the premises and the terms,
provisions, conditions and covenants hereinafter set forth, the parties hereto
agree as follows:
1. LOAN. The Bank agrees to lend to the Borrower the sum of up to Five
Million Dollars ($5,000,000.00) (the "Loan"), to be used in connection with the
refinancing of existing indebtedness, for other corporate purposes and closing
costs and for no other purpose.
2. DEFINITIONS. The following terms as used herein are defined as
follows:
A. "Collateral" means all of the real property owned by the
Borrower or the Borrower's subsidiaries at the locations more particularly
described in Exhibit A annexed hereto, together with a first priority security
interest in all furniture, supplies, fixtures, machinery and equipment used in
the operation of the facilities located on such real estate.
B. "Current Assets" means all items which, according to Generally
Accepted Accounting Principles, would be classified as current assets on a
balance sheet of the Borrower.
<PAGE> 2
C. "Current Liabilities" means all items which, according to
Generally Accepted Accounting Principles, would be classified as current
liabilities on a balance sheet of the Borrower.
D. "EBIT" means, for the applicable period, the Borrower's net
income before taxes and Interest Expense as determined in accordance with
Generally Accepted Accounting Principles.
E. "Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial Accounting
standards Board, the American Institute of Certified Public Accountants, as such
principles are from time to time supplemented and amended, applied for the
period on a basis comparable in all material respects to those applied in the
most recent preceding period.
F. "Interest Expense" means, for the applicable period, interest
expense incurred during such period by the Borrower, determined in accordance
with Generally Accepted Accounting Principles.
G. "Obligations" shall mean all loans and advances from time to
time made by Lender to the Borrower and to others at the Borrower's request or
for the Borrower's account, and all other existing and future indebtedness and
liabilities which may be owing from time to time by the Borrower to Lender under
this Agreement or any other agreement which may now or hereafter be entered into
by the Borrower with Lender, whether absolute or contingent, joint or several,
matured or unmatured, direct or indirect, whether primary or secondary,
including, but not by way of limitation, (i) all indebtedness and liabilities of
the Borrower to Lender under any applications for letters of credit now or
hereafter executed by the Borrower in favor of Lender and (ii) the Lender's
charges in connection herewith, all charges and fees Lender may incur in filing
public notices and any local taxes relating thereto, the charge of any attorneys
whom Lender may engage in preparing and filing documents, making title searches
and rendering opinion letters, all costs and expenses (including reasonable
attorney's fees) incurred by Lender to enforce payment or to otherwise effect
collection of any Receivables, as well as all expenses incurred in protecting,
maintaining, preserving, enforcing or foreclosing the pledge, lien and security
interest in Collateral granted to Lender herein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or relating to Lender's transactions with the
Borrower.
H. "Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, assocition, turst or other
enterprise (whether or not incorporated) or any governmental authority.
2
<PAGE> 3
I. "Tangible Net Worth" means at any time, the Borrower's net
stockholders' equity, determined in accordance with Generally Accepted
Accounting Principles, plus indebtedness of the Borrower which is subordinated
to indebtedness of the Borrower to Lender on terms and conditions approved by
Lender, minus the book value of assets which would be treated as intangibles
under Generally Accepted Accounting Principles, including, but not limited to
goodwill, trade names, trademarks, copyright, patents and unamortized debt
discount and expenses.
J. "Total Liabilities" means all obligations of Borrower required
by Generally Accepted Accounting Principles to be reported as liabilities
(including defered taxes) on the balance sheet of the Borrower.
K. "Working Capital" means Current Assets minus Current
Liabilities as defined by Generally Accepted Accounting Principles.
L. The terms "furniture", "fixtures", "supplies", "machinery",
"equipment", and "proceeds" as used herein, shall have the same meanings as they
have in the Uniform Commercial Code as in effect in North Carolina.
2. NOTE. The sums advanced hereunder shall be evidenced by that certain
Promissory Note (hereinafter referred to as the "Note") executed by Borrower and
payable to the order of the Bank in the principal amount of Five Million Dollars
($5,000,000.00). The Borrower will pay interest on the principal balance from
time to time outstanding as provided in the Note. In the event Borrower shall
report net income before tax of at least $1,750,000.00 for the fiscal year of
the Borrower ending February 28, 1997, then the interest rate shall be reduced
to Lender's prime rate on March 1, 1997, plus three-fourth's (3/4) of one
percent (1%).
3. SECURITY. As security for the Obligations, including without
limitation all loans and advances made and to be made by Lender to Borower
hereunder, Borrower does hereby grant to Lender a first lien on and a first
security interest in and to the Collateral. Payment of the Note and the
performance of the obligations contained herein (as well as the obligations
contained in the Deeds of Trust) shall be secured by the Deeds of Trust and
Security Agreements constituting a first lien on the real property described
therein, together with all buildings and other improvements of any type located
thereon, all building materials and supplies delivered to or at any time located
thereon and such other personal property as may be described in the Deeds of
Trust. The Bank's first priority security interest must be properly perfected
and the Borrower agrees to execute all security agreements and financing
statements and other documents to effectuate the perfection thereof. This Loan
Agreement, the Note, the Deeds of Trust, the Security Agreements, any other
document or instrument described in this Loan Agreement, or any other current or
future document or instrument evidencing, securing or otherwise relating to the
Loan, are collectively known as the "Loan Documents."
3
<PAGE> 4
4. CONDITIONS OF LENDING. The obligation of the Bank to make the loan
herein described or any advance thereunder is subject to the following
conditions precedent:
(a) COMMITMENT FEE. In consideration of Lender's commitment to
make loans and advances hereunder, Borrower agrees to pay to Lender on the date
of this Agreement a commitment fee of $50,000.00, $15,000.00 of which has been
received by Lender.
(b) (i) TITLE INSURANCE. On or prior to the date of the first
advance hereunder, the Borrower shall provide, at its own expense, mortgagee
title insurance policies in an ALTA Form satisfactory to the Bank issued by
title insurance companies approved by the Bank covering the real estate
described on Exhibit B annexed hereto. The title policies are to be issued
without exceptions, except those which are acceptable to counsel of the Bank,
insuring the Bank's lien as a valid first and permanent lien upon the real
property described in the Deeds of Trust and insuring against loss or change in
priority as a result of the filing of any lien or special assessment for
material or work under construction. At its option, the Bank may require a
subordination agreement.
(ii) ATTORNEYS' OPINIONS. On or prior to the date of the first
advance hereunder, the Borrower will furnish to the Lender a certificate by
Attorneys satisfactory to Lender and its counsel that the Deeds of Trust on the
properties described on Exhibit C annexed hereto constitute a first lien thereon
and are subject to no exceptions other than those approved by the lenders.
Neither title insurance nor attorneys' certificates will be required as to the
properties described on Exhibit D annexed hereto.
(c) PLAT. The Borrower shall provide a copy of the plat of the
Properties listed on Exhibit B annexed hereto to Bank and to the title insurer,
showing all easements (existing and proposed, labeled accordingly), rights of
way, availability of utilities, means of ingress and egress, setback lines and
encroachments, if any.
(d) AUTHORITY. The Bank may require certified documents relating
to the power or authority of Borrower and its subsidiaries to enter into this
loan transaction and may require the legal opinion of Borrower's counsel as to
the validity thereof.
(e) TITLE ASSURANCE. Upon request by the Bank, the Borrower must
furnish evidence satisfactory to the Bank that it has at all times during the
term of this loan title to the Property described in the Deeds of Trust, free
and clear of all encumbrances.
4
<PAGE> 5
(f) ASSIGNMENT OF CONTRACTS. At the time of the execution of this
Agreement, the Lender will require assignment to it of Offer to Purchase
contracts covering the land and improvements located at 1109 Lenoir Rhyne
Boulevard, SE, Hickory, North Carolina, and at 3302 South I-85 Service Road,
Charlotte, North Carolina, showing a total sales price for both properties of at
least $2,000,000.00. At that time, the Borrower must also furnish evidence to
Lender that such Offer to Purchase contracts have been approved in writing by
Borrower's Board of Directors. In the event the Borrower does not exceed its
projection of net income before tax of $1,750,000.00 for the fiscal year ending
February 28, 1997, then the Borrower shall sell both properties in accordance
with the terms of the Offer to Purchase contracts and apply $2,000,000.00 of the
net proceeds from the sale of those properties to reduce the principal balance
of this loan, or alternatively, pay the loan down by $2,000,000.00 out of cash
escrowed by the Borrower from the sale of the real estate collateral described
on Exhibits B and C. In the event the Borrower meets or exceeds its projection
of net income before tax of $1,750,000.00 for the fiscal year ending February
28, 1997, then upon receipt by the Lender of information satisfactory to it that
that level of net income before tax has been met, the Lender will permanently
release all of its right, title and interest in and to the assignment of the
Offer to Purchase contracts as described in this subparagraph. The proof that
the Borrower has met the required projection of net income before tax must be
furnished to the Lender within ninety (90) days following the end of the
Borrower's fiscal year or upon the filing of the Borrower's 10 K with the
Securities Exchange Commission, whichever event shall first occur.
(g) ENVIRONMENTAL ASSURANCES. The Borrower must provide evidence
satisfactory to the Bank as to whether or not the Property is an area designated
as a hazardous waste site by any federal, state or local authority, and whether
any hazardous waste or any other regulated, controlled or prohibited materials
are stored or exist on the Property. In the event such evidence is not
satisfactory to the Bank, then the terms of the Commitment Letter described
herein shall be null and void.
(h) APPRAISAL OF THE PROPERTY. The Bank shall have received an
appraisal of the Property by an appraiser satisfactory to the Bank showing a
market value satisfactory to the Bank.
(i) EXPENSES OF CLOSING. All expenses incurred by the Bank in
connection with the closing of the loan are to be paid by the Borrower whether
or not the loan is closed. If the loan is closed, all such expenses shall be
paid at the time the first draw is made on the loan.
(j) FLOOD PLAIN. Borrower will furnish to the Bank evidence
satisfactory to the Bank that the real properties described in the Deeds of
Trust and Mortgages are not located in a designated Flood Plain Hazard area, or
if so located that adequate insurance satisfactory to the Bank has been
obtained.
(k) OTHER LOANS AND FINANCIAL CONDITIONS. The Borrower will
furnish to the Bank prior to the closing of this loan or simultaneously with the
closing, evidence of the existence of the following:
(i) The existing letter of credit issued to the Borrower by
NationsBank shall be renewed through July 25, 1998;
5
<PAGE> 6
(ii) The outstanding secured loan of the Borrower from
Aetna/Phoenix shall be satisfied and canceled of record at the closing;
(iii) The Borrower shall have closed a two-year loan with
First Century Corporation in the amount of $1,900,000.00;
(iv) The Borrower shall have closed a two-year revolving line
of credit with National Bank of Canada in the amount of $6,000,000.00,
having financial covenants similar or parallel to the financial
covenants contained herein and secured by a first lien on accounts
receivable and inventory of the Borrower;
(v) The Lender shall have received a commitment from a Bank
acceptable to the Lender to participate in this loan to the extent of
$1,500,000.00. The participating lender shall be entitled to thirty
(30%) percent of the commitment fee paid by the Borrower to the Lender
in accordance with the terms of this Agreement and the Lender and such
participating lender shall share pro-rata in any and all payments and
other benefits received under the terms of the loan.
(l) In the event the Borrower does not report net income before
tax of at least $1,200,000.00 for the fiscal year of the Borrower ending
February 28, 1997, then and in such event, James C. Richardson, Jr., Richard F.
Howard and David R. Clark shall execute and deliver separate Guaranties of the
loan in forms annnexed hereto as Exhibits E, F, and G within ten (10) days after
determination that the Borrower has failed to meet that net income projection.
The proof in respect to whether or not the Borrower has met the required
projection of net income before tax must be furnished to the Lender within
ninety (90) days following the end of the Borrower's fiscal year on February 28,
1997, or upon the filing of the Borrower's 10 K with the Securities and Exchange
Commission, whichever event shall first occur. In the event the Borrower reports
net income before tax of at least $1,200,000.00 for the fiscal year ending
February 28, 1997, then the Bank will not require execution of the Guaranty
Agreements by the Guarantors. In the event net income before tax shall exceed
$1,200,000.00 for the fiscal year of the Borrower ending February 28, 1998, then
the Guarantors shall be released at that time from the Guaranties executed in
accordance with this provision.
(m) Prior to closing, the Lender shall be furnished a survey of
each of the Properties prepared for the Borrower showing the boundaries of the
land and the location of any improvements thereon. An Appropriate officer shall
warrant that the survey and the state of facts shown thereon are accurate as to
the date of closing and the description of the collateral is accurate, the
improvements are properly located and are not in violation of the applicable
laws, regulations, easements or restrictions.
6
<PAGE> 7
(n) In the event of default by the Borrower, Lender may, at its
option, require deposits payable with each installment of principal and interest
in an amount sufficient, as determined by Lender, to pay, when they become due,
ad valorem property taxes on the collateral and the insurance premiums. Such
deposits may be commingled with the funds of the Lender or others applied to the
delinquent indebtedness or applied to any delinquent indebtedness and they shall
not bear interest.
5. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
that:
i. (a) VALIDITY OF CORPORATION. The Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the state of
its incorporation.
(b) CORPORATE OR OTHER POWER. Borrower and its subsidiaries have the
corporate power and authority to own its properties and assets and to carry on
its business as now being conducted, and has the corporate power and authority
to execute and perform this Loan Agreement, to borrow hereunder and to execute
and deliver this Agreement and all other certificates, instruments and documents
with respect to the indebtedness of the Borrower hereunder.
(c) When executed and delivered, this Agreement and all documents
executed in connection therewith (the "Loan Documents") will be valid and
binding obligations of the Borrower and will be subject to applicable
bankruptcy, moratorium, insolvency, reorganization and other similar laws
affecting the enforcement of creditors' rights generally and to the availability
of equitable remedies, enforceable in accordance with their respective terms;
(d) The Borrower has no subsidiaries except as set forth on Exhibit
H. Each of the subsidiaries listed on Exhibit H is a duly organized corporation
authorized to transact business in the jurisdiction in which its assets are
located and each such subsidiary has by action of its Board of Directors
authorized the execution and delivery by such subsidiary of all of any and all
Deeds of Trust, Mortgages and other documents required for delivery by such
subsidiary in accordance with the terms of this Agreement.
(e) the Borrower does not own an interest in any Person except as
set forth on Exhibit I.
ii. The execution, delivery and performance of the Loan Documents:
(a) have been duly authorized by all requisite corporate action of
the Borrower required for the lawful creation and issuance thereof.
(b) do not violate any provisions of law, any order of any court or
other agency of government, and do not violate the charter documents or by-laws
of the Borrower or any provisions of any material agreement or instrument to
which the Borrower is a party.
7
<PAGE> 8
(c) will not be in conflict with, result in a breach of, or
constitute an event of default nor an event which, upon giving of notice or
lapse of time, or both, would constitute such an event of default under any
material agreement or instrument to which the Borrower is a party;
(d) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of the Borrower other than liens in favor of Lender.
(iii) Other than as previously disclosed to Lender, there is no action,
suit or proceeding at law or in equity or by or before any governmental
instrumentality or agency or arbitral body now pending, or to the knowledge of
the Borrower, threatened by or against or affecting the Borrower or its
subsidiaries or any properties or rights of the Borrower or its subsidiaries
which, if adversely determined, would materially be expected to impair the right
of the Borrower or its subsidiaries to carry on its business substantially as
now conducted or would have a material adverse effect on the financial
condition, business or result of operations of the Borrower or its subsidiaries.
(iv) The Borrower has filed or caused to be filed all federal, state
and local tax returns which are required to be filed and have paid or caused to
be paid all taxes as shown on said returns or on any assessment received by it,
to the extent that such taxes have become due, except taxes being contested in
good faith and against which adequate reserves have been maintained under
Generally Accepted Accounting Principles.
(v) The Borrower is not:
(a) a party to any judgment, order, decree or any agreement or
instrument or subject to corporate restrictions which would have a material
adverse effect on the financial condition, business or results of operations of
the Borrower;
(b) in material default in the performance, observance or
fulfillment of any of the material obligations, covenants or conditions
contained in any material agreement or instrument to which it is a party.
(vi) Neither the nature of the Borrower nor its business or properties,
nor any relationship between the Borrower, and any other person, nor any
circumstance in connection with the offer, issue, sale or delivery of this
Agreement 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 borrower as a condition to the execution and delivery of this
Agreement.
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<PAGE> 9
(vii) the Borrower has not inurred any accumulated unfunded deficiency
within the meaning of the Employee Retirement Income Security Act of 1974
("ERISA") or incurred any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") established under such Act (or any successor thereto under
such Act) in connection with any employee benefit plant established or
maintained by the Borrower.
(viii) the business of the Borrower has been operated in compliance in
all respects with all applicable federal, state and local laws, regulations,
orders, ordinances, judgments and decrees (including, for example, matters
relating to the environment, discrimination, employment and health and safety),
except for such matters, if any, as may have been previously disclosed by the
Borrower to the Lender in writing and for violations which do not and will not
have a material adverse effect on the financial conditions, business or results
of operations of the Borrower. All material permits, certificates, licenses,
approvals, and other authorizations that are required in connection with the
operation of the respective businesses of the Borrower has been issued, and, as
of the date hereof and immediately thereafter the Borrower will have all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of its business.
(ix) as of the date of each extension of credit under this Agreement,
the representations and warranties made by the Borrower in this Paragraph 5 or
which are contained in any certificate furnished at any time under or in
connection with this Agreement shall be true and correct in all material
respects on and as of the date of such extensions of credit as if made on and as
of such date.
(x) FINANCIAL CONDITION OF BORROWER. The financial statements which the
Borrower has submitted to the Bank to induce it to make this loan are correct
and complete, and accurately present the financial condition of the Borrower on
the dates thereof and the results of their operations for the periods then
ended.
(xi) LABOR AND MATERIAL. No material has been furnished or placed upon
the Property or labor performed in connection with the erection and construction
of any improvements or other lienable work performed with respect to the
Property except as disclosed in writing to the Bank and the title insurer and
for which lien waivers have been obtained.
(xii) MISCELLANEOUS. Perform any and all steps requested by Lender to
perfect Lender's lien on and security interest in the Collateral. Borrower will
execute and deliver to Lender from time to time upon demand, such supplemental
agreements, documents, or instruments of indebtedness, in order that the full
intent and purpose of this Agreement may be carried into effect.
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<PAGE> 10
6. The Borrower hereby covenants with Lender and warrants that, from
the date hereof until such later date as all of the Obligations are paid and
satisfied in full and this Agreement is terminated in accordance with its terms,
it will:
(i) As soon as practical and in any event not later than ninety (90)
days after the end of each accounting period, deliver to Lender audited
financial reports of the Borrower, including a balance sheet of the Borrower as
at the end of such fiscal year, and the notes thereto, and the related
statements of income and retained earnings and the notes thereto and statement
of cash flow for such fiscal year, setting forth in each case comparative
financial statements for the corresponding period in the preceding year, all
prepared in accordance with Generally Accepted Accounting Principles, and
containing an unqualified opinion of independent certified public accountants
selected by Borrower and acceptable to Lender.
(ii) As soon as practical and in any event not later than within thirty
(30) days after the end of each fiscal year, deliver to Lender financial
reports, including a balance sheet of Borrower as at the end of such accounting
period and statements of income and retained earnings of Borrower at at the end
of such accounting period, setting forth in each case comparative financial
statements for the corresponding accounting period in the preceding year, in a
form acceptable to Lender, and approved and signed by a duly authorized officer
of the Borrower as presenting fairly the financial condition of the Borrower.
(iii) Deliver with each financial statement required in (i) and (ii)
above a certificate from the Borrower's duly authorized officer stating, on
behalf of the Borrower, that there exists no default under this Agreement.
(iv) As soon as practical and in any event not later than within
forty-five (45) days after the end of each quarter, deliver to Lender a
compliance certificate in the form attached hereto as Exhibit J.
(v) As soon as practicable and in no event later than the end of each
fiscal year, a forecast for the twelve (12) month period commencing on the first
day after the end of such fiscal year, of the financial statements of Borrower,
including balance sheets, income statements, statements of cash flow, and cash
flow projections, and an annual capital expenditures budget of Borrower for such
twelve (12) month period, all in reasonable detail and form satisfactory to
Lender.
(vi) Promptly, from time to time, deliver to Lender such other
information regarding Borrower's operations, business affairs and financial
condition as Lender may reasonably request. Lender is hereby authorized to
deliver a copy of any such financial information delivered hereunder to Lender
to any regulatory authority having jurisdiction over Lender.
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<PAGE> 11
(vii) Maintain all personal property in good working order and
condition and make all needed repairs, replacemtns and renewals as is necessary
to conduct its business in accordance with prudent business practices.
(viii) Do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence.
(ix) Comply with or contest in good faith all statutes and governmental
regulations (including all federal, state and local requirements relating to
protection of health or the environment) in connection with the operation of
Borrower's businesses.
(x) Pay all taxes, assessments, governmental charges, claims for labor,
supplies, rent and any other obligation which, if unpaid, might become a lien
against any of its properties except liabilities being contested in good faith
and against which, if requested, by Lender, reserves in accordance with
Generally Accepted Accounting Principles will be established.
(xi) At all times keep its insurable properties insured, to such extent
and against such risks, including, without limitation, public liability
insurance, worker's compensation and other insurance required by law, as is
customary with companies of comparable size in the same or similar business and
as required by the Loan Documents.
(xii) Maintain insurance coverning real property and tangible personal
property subject to a lien or security interest in favor of Lender that shall
provide that, in case of each separate loss, the full amount of insurance
proceeds with respect thereto shall be payable to the Lender as mortgagee,
secured party, or otherwise as its interests may appear, all as required by the
Loan Documents.
(xiii) Preserve, protect, retain and maintain free from encumbrances,
all patents, licenses, trademarks, trademark rights, tradenames, tradename
rights and copyrights used or useful in the conduct of its businesses and
maintain all other properties and assets used or useful in the conduct of its
businesses in good repair, working order and condition and from time to time
cause to be made all proper replacements, betterments and improvements thereto.
(xiv) Keep true books of records and accounts in accordance with
Generally Accepted Accounting Principles, and in which full, true and correct
entries will be made of all of Borrower's dealings and transactions.
(xv) Permit any officer, employee or agent of Lender designated in
writing by Lender, to visit and inspect the Borrower's properties and records,
at such times as Lender may reasonably request upon reasonable notice and during
ordinary business hours.
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<PAGE> 12
(xvi) (a) Make prompt payment of all contributions required under all
employee benefit plans ("Plans") and required to meet the minimum funding
standard set forth in ERISA with respect to its Plans; (b) upon the request of
Lender furnish to Lender copies of each annual report/return (Form 550 Series),
as well as all schedules and attachments required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to ERISA, and
the regulatons promulgated thereunder, in conection with each of its Plans for
each Plan year; (c) notify Lender immediately of any fact, including, but not
limited to, any Reportable Event (as defined in ERISA) arising in connection
with any of its Plans, which might constitute grounds for termination thereof by
the PBGC or for the appointment by the appropriate United States District Court
of a trustee to administer such Plan, (d) provide Lender with a statement, if
requested by Lender, as to the reason therefor and the action, if any, proposed
to be taken with respect thereto, together with a copy of the notice of such
Reportable Event given to the PBGC or a statement that said notice will be filed
with the annual report to the United States Department of Labor with respect to
such Plan if such filing has been authorized, (e) promptly after receipt
thereof, provide Lender with a copy of any material notice to Borrower or any of
the Controlled Group may receive from the United States Department of Labor, the
Internal Revenue Service or the PBGC with respect to such Plan; and (f) furnish
to Lender, upon its request, such additional information concerning any of its
Plansas may be reasonably requested.
(xvii) Maintain its place of business, or if has more than one place of
business its chief executive office at WSMP Drive, Claremont, North Carolina
28610.
(xviii) Maintain Tangible Net Worth of at least (a) $15,000,000.00 on
February 28, 1997, and (b) for each fiscal year thereafter an amount equal to
the prior fiscal year's Tangible Net Worth requirement plus fifty percent (50%)
of the Borrower's after-tax profits for the fiscal year then ended.
(xiv) Maintain a ratio of Total Liabilities to Tangible Net Worth of
not more than 2.0 to 1.0 on February 28, 1997, and on each fiscal quarter
thereafter.
(xx) Maintain Working Capital of at least $400,000.00 on February 28,
1997 and on each fiscal quarter thereafer.
(xxi) Maintain a ratio of EBIT to Interest Expense of 1.35 to 1.00 for
the twelve month period ending on February 28, 1997 and on each fiscal quarter
thereafter.
7. Borrower hereby covenants with Lender and warrants that, from the
date hereof until such later date as all of the Obligations are paid and
satisfied in full and this Agreement is terminated in accordance with its
terms,it will not, without the prior consent of Lender:
(i) Incur, create, assume or permit to exist any indebtedness for
borrowed money, howsoever evidenced, or its equivalent (including, but not
limited to, capitalized lease indebtedness) other than (a) indebtedness incurred
to Lender, (b) purchase money indebtedness, (c) indebtedness in excess of
$1,000,000.00 in any fiscal year and (d) indebtedness as set forth on Exhibit K
annexed hereto.
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<PAGE> 13
(ii) Incur, create or permit to exist any pledge, security interest,
lien, charge or other encumbrance of any nature whatsoever on the Borrower's
Property (including the Collateral), whether now owned or hereafter acquired,
other than (a) the liens and security interests in favor of Lender (b) liens and
security interests on property other than the Collateral not in excess of
$1,000,000.00 in any fiscal year and (c) liens incurred in connection with the
indebtedness set forth on Exhibit K.
(iii) Repurchase, redeem or retire any of its capital stock for an
amount in excess of $200,000.00 in any fiscal year.
(iv) Guarantee, assume, sell with recourse, endorse, contingently agree
to repurchase, become surety for, or otherwise become liable upon the obligation
of any other Person, firm or corporation in excess of $500,000.00 in any fiscal
year other than by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
(v) Make or permit any change in the (i) control of the Borrower by
HERTH Management, Inc., or (ii) control of HERTH Management, Inc. by James C.
Richardson, Jr., Richard F. Howard and David R. Clark.
8. If Borrower fails to pay when due any balances owing in the loan
account or under any promissory note executed in connection herewith, or fails
to pay any other amounts owing to Lender under this or any other agreement
between Lender and Borrower or under any other promissory note or instrument
given to Lender, including without limitation, the failure to pay any Obligation
when due and such default is not remedied within ten (10) business days after
receipt of written notice of the default from Lender to Borrower; or Borrower
breaches any of the provisions of this Agreement (including any of the covenants
set forth in Paragraphs 5, 6 and 7 hereof) or any other agreement between the
parties and such default is not remedied within thirty (30) days after receipt
of written notice of the default from Lender to Borrower; or Borrower fails to
furnish promptly any financial or Collateral reports requested by Lender from
time to time and such default is not remedied within thirty (30) days after
receipt of written notice of the default from Lender to Borrower; or any
statements furnished by Borrower relating to the operations and financial
condition of Borrower or any other representation or warranty made by Borrower
in this Agreement or any document, certificate, statement or report heretofore
or hereafter made by Borrower to Lender proves to be false in any material
respect; or if Borrower fails to give immediate notice to Lender of the
occurrence of any event of default described herein; or if the Borrower becomes
insolvent, or is unable to meet its debts as they mature, or suspend operations
or discontinue its businesses as a going concern; or make an
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<PAGE> 14
assignment for the benefit of creditors; or there is filed by or against the
Borrower a petition under the Bankruptcy Code and if filed against Borrower such
peition is not set aside within sixty (60) days after such filing or any
proceeding is commenced by or against the Borrower under any insolvency laws; or
a receiver or trustee is appointed to administer the assets or affairs of the
Borrower; or a judgment is entered or an attachement is levied against the
assets of the Borrower which in the sole opinion of Lender will adversely affect
the Borrower's ability to perform this Agreement or which in Lender's judgment
will impair the enforceability of Lender's lien upon and security interest in
the Collateral and such judgment or lien is not removed or satisfied or a bond
posted in the amount of such lien within forty-five (45) days after such lien is
filed or judgment is entered; or any creditor of the Borrower forecloses upon or
takes possession of any assets of the Borrower under any claim of lien or
security interest; or if any event occurs which materially adversely affects the
value of the Collateral; or if the Borrower should default in the performance of
any obligation with respect to any money borrowed from another lender (including
capitalized lease obligations); or then upon any one of such events, Lender may
declare this Agreement in default and all amounts owing under this Agreement and
all other Obligations owing by the Borrower to Lender shall, without demand or
notice, immediately become due and payable (notwithstanding that the maturity
date or dates expressed in any evidence of such indebtedness may be otherwise)
and Lender may foreclose Lender's lien or security interest in the Collateral in
any way permitted by law, and Lender shall have, without limitation, the
remedies of a secured party under the Uniform Commercial Code. Lender may
thereupon enter the Borrower's premises without legal process and without
incurring liability to the Borrower and remove the same to such place as Lender
may deem advisable, or Lender may require the Borrower to make the Collateral
available to Lender at a convenient place and, with or without having the
Collateral at the time or place of sale, Lender may sell or otherwise dispose of
all or any part of the Collateral whether in its then condition or afture
further preparation or processing, either at public or private sale or at any
broker's board, with or without notice or with or without advertiesement, in
lots or in bulk, for cash or for credit, at any time or place, in one or more
sales, and upon such terms and conditions as Lender may elect. At any such sale
Lender may be the purchaser. If any Inventory shall require rebuilding,
repairing, maintenance, preparation, or is in process or other infinished state,
Lender shall have the right at Lender's option to do such rebuilding, repairing,
preparation, processing or completing of manufacturing, for the purpose of
putting the Inventory in such saleable form as Lender shall deem appropriate
subject to the concurrence of the Borrower and the liability insurance provider,
such concurrence not to be unreasonably withheld.
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<PAGE> 15
9. To the extent that any of Borrower's Obligations to Lender are now
or hereafter secured by property other than the Collateral, or by a guarantee,
endorsement or property of any other person, firm or corporation, then Lender
shall have the right to proceed against such other property, guarantee, or
endorsement upon Borrower's default in the payment of any Obligation or in any
of the terms, covenants or conditions contained herein, and Lender shall have
the right in Lender's sole discretion to determine which righrs, security,
liens, security interests or emedies Lender shall at any tiem pursue, relinquish
subordinate, modify or take any other action with respect thereto, without in
any way modifying or affecting any of them or any of Lender's rights or
Borrower's Obligations hereunder.
10. The lien, rights and security interest granted to Lender herein are
to continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that the principal account maintained in Borrower's name
on Lender's books may from time to time be temporarily in a credit position,
until the final payment to Lender in full of all Obligations and indebtedness
due Lender by Borrower, together with interest thereon. Lender's delay or
omission to exercise any right shall not be deemed to waiver thereof or of any
other right, unless such waiver be in writing. A waiver on one occasion shall
not be construed as a bar to or waiver of any rights or remedies on any future
occasion.
11. During the term of this Agreement, none of the collateral will be
pledged, assigned or granted as security to any other person.
12. This Agreement shall be governed and interpreted according to the
laws of the State of North Carolina. Borrower and Lender hereby irrevocably
submit to the jurisdiction of any State of North Carolina or federal court
sitting in Mecklenburg County, North Carolina, for any action or proceeding
arising out of or relating to this Agreement or any other agreement between
Lender and the Borrower or extended by the Borrower to Lender, and Borrower and
Lender hereby irrevocably agree that all claims in respect of any such action or
proceeding may be heard and determined in such State of North Carolina court or,
to the extent permitted by law, in such federal court. Borrower and Lender
hereby irrevocably waive, to the fullest extent that they may effectively do so,
the defense of an inconvenient forum to the maintenance of any such action or
proceeding. Borrower agrees to accept service of process out of the
before-mentioned courts in any such action or proceeding by registered or
certified mail addressed to Borrower at the addresses set forth in the
introductory paragraph of this Agreement. Borrower further agrees that the
foregoing provisions of this Section shall be in addition to, and not in
substitution for, any other rights available to Lender pursuant to applicable
law.
13. This Agreement shall inure to the benefit of and be binding upon
the parties hereto, their heirs, personal representatives, successors and
assigns and shall not be modified or altered except in writing, signed by the
party to be charged.
14. EVENTS OF DEFAULT. In case of the happening of any of the following
events (hereinafter called "Events of Default"):
(a) Any representation or warranty made herein shall prove to be false
or misleading in any material respect;
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<PAGE> 16
(b) Any report, certificate, financial statement or other instrument
furnished in connection with this Loan Agreement or the borrowing hereunder
shall prove to be false or misleading in any material respect;
(c) Default in the payment of the principal or interest on the Note, as
and when due and payable and failure to cure within applicable grace period;
(d) Default shall be made with respect to any indebtedness (other than
the Note) of the Borrower when due or the performance of any other obligation
incurred in connection with any indebtedness for borrowed money of the Borrower,
if the effect of such default is to accelerate the maturity of such
indebtedness;
(e) Default in the due observance or performance of any non-monetary
covenant, condition, or agreement on the part of the Borrower to be observed or
performed pursuant to the terms of this Loan Agreement, the Note, the other Loan
Documents or the Deed of Trust and failure to cure such default within thirty
(30) days after receipt of notice thereof from the Lender, provided that if the
time to cure such default shall reasonably require more than thirty (30) days,
then the Borrower shall promptly commence to cure such default and proceed with
all due diligence to cure that default;
(f) Borrower shall voluntarily file a petition under the Federal
Bankruptcy Act, as such Act may from time to time be amended, or under any
similar or successor Federal Statute relating to bankruptcy, insolvency,
arrangements or reorganizations, or under any state bankruptcy or insolvency
act, or file an answer in an involuntary proceeding admitting insolvency or
inability to pay debts, or if Borrower shall fail to obtain a vacation or stay
of involuntary proceedings brought for the reorganization, dissolution or
liquidation of Borrower, or if Borrower shall be adjudged a bankrupt, or if a
trustee or receiver shall be appointed for Borrower or Borrower's Property, or
if the Property shall become subject to the jurisdiction of a Federal bankruptcy
court or similar state court, or if Borrower shall make an assignment for the
benefit of Borrower's creditors, or if there is an attachment, execution, or
other judicial seizure of any portion of Borrower's assets and such seizure is
not discharged within ten days;
(g) Final judgment for the payment of money in an amount of $50,000.00
or greater shall be effectively rendered against the Borrower or a Guarantor,
and the same shall remain undischarged for a period of 30 days during which
execution shall not be effectively stayed.
Then, at any time thereafter during the continuance of any such event,
the Bank may, at its option, take any or all of the following actions, at the
same or different times:
(i) Declare the Note to be forthwith due and payable, whereupon
the Note shall become forthwith due and payable, both as to principal and
interest, without presentment, demand, protest, or other notice of any kind, all
of which are hereby expressly waived, anything contained herein or in the Note
to the contrary notwithstanding, and/or
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<PAGE> 17
(ii) Take immediate possession of the real property and personal
property encumbered by the Deed of Trust, and/or
(iii) Have a receiver appointed as a matter of right without
regard to the solvency of the Borrower, for the purpose of preserving the
Property securing this loan preventing waste, to protect the rights accruing to
the Bank by virtue of this Loan Agreement, the Note, and the Deed of Trust, and
to perform such activities referred to in sub-paragraph ii above.
Any sums expended by the Bank pursuant to the provisions of this
Paragraph __ shall become part of the indebtedness secured by the Deed of Trust,
shall bear interest from date of disbursement at the rate provided in the Note,
shall be payable upon demand and shall be secured by the Deed of Trust even
though such sums, when added to previous advances to Borrower, shall exceed the
face amount of the Note. The remedies provided in this Paragraph shall be in
addition to other remedies provided by law and provided in this Loan Agreement,
the Note, the Deed of Trust, or other Loan documents.
15. NO THIRD PARTY BENEFICIARIES. The terms, provisions, conditions and
requirements made and set forth herein are for the benefit of the parties hereto
and to better define the terms of the Loan, and in no event shall the Bank be
construed to be Borrowers' agent, and in no event is the Bank assuming
Borrowers' responsibility for proper payments to contractors and others. It is
specifically farther intended that no party shall be a third party beneficiary
hereunder except and unless it is specifically provided herein that any
provision shall operate or inure to the use and benefit of a third party, i.e.,
no contractor, sub-contractor or material supplier shall have any rights
hereunder against the Bank, or be entitled to the protection of any of the
covenants herein contained, although such parties may have recourse to the
Borrower.
16. ATTORNEYS FEES. Borrower shall be responsible for such attorney
fees as are set forth in the Deed of Trust or in the Loan Documents.
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<PAGE> 18
17. MISCELLANEOUS PROVISIONS.
(a) In the event that Lender shall have determined that the adoption of
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or by any court, or compliance
by Lender (or any lending office of Lender) with any request or directive
regarding capital adequacy (whether or not having the forece of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on Lender's capital as a consequence of its
obligations hereunder to a level below that which Lender could have achieved but
for such adoption, change or compliance (taking into consideration Lender's
policies, as the case may be, with respect to capital adequacy) by an amount
deemed by Lender to be material, then from time to time Borrower shall pay to
Lender such additional amount or amounts as will compensate Lender for any such
reduction suffered. Within a reasonable time after making a request for such
additional amount hereunder, Lender will furnish to Borrower a statement
certifying the amount of such reduction and describing the event giving rise to
such reduction, which determination shall be conclusive absent manifest error.
(b) If any one or more of the provisions contained in this Loan
Agreement, the Note or the Deed of Trust shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained in the Note, and the Deed of Trust, shall not in
any way be affected or impaired thereby, and this Loan Agreement shall otherwise
remain in full force and effect.
(c) Any notice shall be conclusively deemed to have been received by a
party hereto and be effective on the day on which delivered to such party at the
address set forth below (or at such other address as such party shall specify to
the other party in writing) or if sent by registered mail, on the third business
day after the day on which mailed, addressed to such party at said address:
Mailing Address
---------------
i. If to the Bank at: SouthTrust Bank of North Carolina
40 Cabarrus Avenue, East
Concord, NC 28206
Attention: Darren Radson, Vice President
ii. If to the Borrower at: WSMP,Inc.
WSMP Drive
Claremont, NC 28610
Attention: Bobby G. Holman, Chief Financial
Officer & Treasurer
(d) All expenses incurred in connection with the making of the loan
(including but not limited to a commitment fee in the amount of $50,000.00)
shall be borne by the Borrower; such expenses to include, but are not limited
to, expenses of fire insurance, hazard insurance, liability insurance, survey
expenses, attorney's fees, ad valorem taxes, special assessments and recording
fees. If any documentary or recording tax should be assessed or the affixing of
any stamps be required by local, state or Federal governments, the Borrower will
pay the tax and cost of such stamps.
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<PAGE> 19
(e) This Loan Agreement, the Note, the Deed of Trust, and other Loan
Documents shall be construed in accordance with and governed by the laws of the
State of North Carolina.
(f) Neither any failure nor any delay on the part of the Bank in
exercising any right, power or privilege hereunder or under the Note, Deed of
Trust, or other Loan Documents, shall operate as a waiver thereon nor shall a
single or partial exercise thereof preclude any other or further exercise or the
exercise of any other right, power or privilege.
(g) No modification, amendment or waiver of any provision of this Loan
Agreement, the Note or the Deed of Trust, nor consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Bank and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in the same, similar or other
circumstances.
(h) The obligations, rights, and remedies provided herein shall be in
addition to those contained in the Note, the Deed of Trust and other Loan
Documents.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Loan
Agreement to be duly executed, signed and sealed, all as of the day and year
above written.
BORROWER:
WSMP, INC. (SEAL)
By: /s/ Bobby G. Holman (SEAL)
---------------------------------------
Bobby G. Holman, Chief Financial
Officer & Treasurer
LENDER:
SOUTHTRUST BANK OF NORTH CAROLINA (SEAL)
By: /s/ Darren Radson (SEAL)
---------------------------------------
Vice President
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<PAGE> 1
EXHIBIT 99.B
SOUTHTRUST BANK OF NORTH CAROLINA
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT, made and entered into this the 17th
day of January, 1997, between WSMP, INC., hereinafter the "Borrower"; and
SOUTHTRUST BANK OF NORTH CAROLINA, hereinafter the "Lender";
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender entered into a Loan Agreement
dated January 10, 1997, (the "Loan Agreement") pursuant to which the Lender
loaned to the Borrower $5,000,000 (the "Loan"); and
WHEREAS, the parties inadvertently omitted a term from the Loan
Agreement, which term was contained in the parties' commitment letter dated
November 27, 1996;
NOW, THEREFORE, in consideration of the premises, the parties hereto
are agreed as follows:
1. Section 11 of the Loan Agreement is hereby amended by the addition of
the following sentence:
In the event any of the real estate collateral identified as "Secondary
Collateral" in Exhibit A hereto is sold by the Borrower to an unrelated
entity, the Lender will release the deed of trust on such property
without requiring principal debt reduction at that time.
2. As herein amended, the Loan Agreement shall remain in full force and
effect.
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IN WITNESS WHEREOF, the Borrower and the lender have caused this
Amendment to Loan Agreement to be duly executed, signed and sealed, all as of
the day and year first above written.
BORROWER:
WSMP, INC.
By: /s/ Bobby G. Holman
--------------------------------------
Bobby G. Holman
Chief Financial Officer and Treasurer
(Corporate seal)
LENDER:
SOUTHTRUST BANK OF NORTH CAROLINA
By: /s/ Darren Radson
--------------------------------------
Vice President
(Corporate Seal)
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EXHIBIT 99.C
FINANCING AND SECURITY AGREEMENT
AGREEMENT made as of November 22, 1996, by and between
WSMP,INC., a corporation duly organized under the laws of the State of
North Carolina having a principal place of business at WSMP Drive, Claremont,
North Carolina (the "Borrower") and NATIONAL BANK OF CANADA, a Canadian
chartered bank (the "Lender").
Borrower desires to obtain loans from Lender from time to time on a
revolving basis on the security of, inter alia, the Collateral, as herein
defined, upon the following terms and conditions:
1. Lender agrees to extend credit and/or make loans to Borrower from
time to time in Lender's discretion up to (a) 85% of the outstanding amount of
"Eligible Receivables", as herein defined, in each case which have been
assigned, pledged or transferred to Lender or in which Lender holds a security
interest, plus (b) 45% of "Eligible Inventory", as herein defined, valued at the
lower of cost (determined on a first-in, first-out basis) or market value, less
such reserves as Lender in its reasonable discretion elects to establish;
provided, however, (i) in no event shall the aggregate principal balance of such
extensions of credit and/or loans at any time outstanding exceed $6,000,000.00
(the "Committed Amount") and (ii) in no event shall advances against Eligible
Inventory exceed an aggregate principal amount of $3,000,000.00. Lender may, in
its reasonable discretion, at and from time to time, increase or decrease the
advance percentages to be applied to Eligible Receivables and Eligible Inventory
which are contained herein and, in the event such percentages were decreased,
such decrease shall become effective immediately for the purpose of calculating
the amount which Lender may be willing to advance, or allow to remain
outstanding, against Eligible Receivables and Eligible Inventory. Lender may
make additional loans, in its sole discretion, based upon its own estimate of
the valuation of the total Collateral. All such loans shall bear interest at the
rate agreed on from time to time by the parties and at the option of Lender
shall be evidenced by notes in form satisfactory to Lender. All loans shall be
charged to a loan account in Borrower's name on Lender's books. Lender shall
render to Borrower each month a statement of the loan account which shall be
deemed to be correct and accepted
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by and binding upon Borrower unless Lender receives a written statement of
Borrower's exceptions within thirty (30) days after such statement has been
rendered to Borrower. At Lender's request, Borrower shall execute and deliver to
Lender, from time to time, promissory notes, in form satisfactory to Lender to
evidence the balances owing in the loan account, but unless and until such notes
are requested and delivered, the monthly statements shall be prima facie
evidence of the loans and other Obligations owing to Lender by Borrower. All
loans and all other amounts chargeable to the loan account under this Agreement
shall be payable by the Borrower to the Lender without the necessity of Lender's
resorting to or having recourse to any Collateral.
2. DEFINITIONS
2.A. "Collateral" means all Borrower's presently owned and
hereafter acquired: Receivables and Inventory and all reserves,
balances, deposits, property of the Borrower coming into the possession
of Lender, choses in action and general intangibles (except trademarks
and service marks) which are directly associated with the Borrower's
Receivables and Inventory, and all proceeds thereof. The term shall
also include all of Borrower's books and records relating to
Receivables, Inventory and all other Collateral.
2.B. "Current Assets" means all items which, according to
Generally Accepted Accounting Principles, would be classified as
current assets on a balance sheet of the Borrower.
2.C. "Current Liabilities" means all items which, according to
Generally Accepted Accounting Principles, would be classified as
current liabilities on a balance sheet of the Borrower.
2.D. "EBIT" means, for the applicable period, the Borrower's
net income before taxes and Interest Expense as determined in
accordance with Generally Accepted Accounting Principles.
2.E. "Eligible Inventory" means raw materials,
work-in-process, and finished goods Inventory in which Lender has a
perfected first priority security interest, reduced by the amount of
the obsolescence reserves against Inventory shown on the financial
statements of the Borrower, and excluding
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(a) Inventory that is subject to any assignment,
claim, lien, or security interest other than the lien in favor
of Lender;
(b) Inventory that is obsolete, damaged, unsalable or
otherwise unfit for use;
(c) Inventory that is on consignment or Inventory
that is packaging supplies, shipping supplies and other
similar types of goods, as determined by Lender in its sole
discretion;
(d) Inventory that the Lender in its reasonable
discretion deems to be slow moving inventory and the reserve
for slow moving inventory; and
(e) Inventory that is otherwise deemed unacceptable
by Lender in its reasonable discretion.
2.F. "Eligible Receivables" means Receivables in which Lender
has a perfected first priority security interest and which meet the
following requirements at the time the Receivable is created and
continues to meet such requirements until the Receivable is collected:
(a) The Receivable is not more than thirty (30) days
from the invoice date of such Receivable;
(b) The Receivable arose from the performance of
services or an outright sale of goods by the Borrower, such
goods have been shipped to the account debtor, and the
Borrower has possession of, or has delivered to Lender,
shipping and delivery receipts evidencing such shipment;
(c) The Receivable is not subject to any assignment,
claim, lien, or security interest other than the lien in favor
of Lender, and Borrower has not made and will not make any
further assignment thereof or create any further security
interest therein, nor permit Borrower's rights therein to be
reached by attachment, levy, garnishment or other judicial
process;
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(d) The Receivable is not subject to set-off, credit,
allowance or adjustment by the account debtor, except discount
allowed for prompt payment, and the account debtor has not
complained as to its liability thereon and has not returned
any of the goods from the sale of which the account arose;
provided, however, that all Receivables incurred by the Pierre
Frozen Foods Division of Hudson Foods, Inc. (hereinafter
"Pierre") or by George A. Hormel Co. (hereinafter "Hormel") or
by an entity involved in a co-packing agreement with Borrower
which is made known to Lender in advance (hereinafter a
"Co-Parker") shall be Eligible Receivables to the extent that
the Receivables exceeds the offset, credit allowance or
adjustment;
(e) The Receivable arose in the ordinary course of
Borrower's business and did not arise from the performance of
services or a sale of goods to a supplier or employee of the
Borrower or to a subsidiary or affiliate of the Borrower;
provided, however, that Receivables of Pierre, Hormel or a Co-
Packer which otherwise would be Eligible Receivables
hereunder, shall not be disqualified under this subsection as
either a supplier or an affiliate;
(f) No notice of bankruptcy, insolvency or
receivership of the account debtor has been received by or is
known to the Borrower;
(g) The Receivable did not arise out of a contract
with the United States or any department, agency or
instrumentality thereof;
(h) The Receivable is not owing from an account
debtor located outside of the United States or Canada; and
(i) Lender has not notified the Borrower that the
Receivable or account debtor is, in the reasonable judgment of
the Lender, unsatisfactory.
Eligible Receivables shall be further reduced by all finance
charges accrued against Receivables.
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2.G. "Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants, as such principles are from time to time supplemented and
amended, applied for the period on a basis comparable in all material
respects to those applied in the most recent preceding period.
2.H. "Interest Expense" means, for the applicable period,
interest expense incurred during such period by the Borrower,
determined in accordance with Generally Accepted Accounting Principles.
2.I. "Inventory" means all of Borrower's Bakery Division or
Ham Curing Division inventory, as defined in the Uniform Commercial
Code, and all forms of merchandise in which the Borrower may have an
interest, whether or not specifically pledged or consigned, including
but not limited to, all finished and unfinished merchandise, work in
process, materials and supplies of every nature used or usable in
connection with the manufacture, packing, shipping, advertising or sale
of such merchandise, all such items in transit or whether or not in the
Borrower's constructive, actual or exclusive possession or held by the
Borrower or others for the Borrower's account and wherever the same may
be located, including but not limited to, inventory which may be upon
the premises of any carriers, forwarding agents, warehousemen, vendors,
finishers or processors or other third parties who may have possession
of such items, and all documents of title relating to such items, the
cash and non-cash proceeds thereof, including but not limited to
proceeds realized from the sale of such items and insurance proceeds.
The parties acknowledge that inventory supplied by, and the property
of, Pierre, Hormel or a Co-Packer is not the subject of this Agreement.
2.J. "Obligations" shall mean all loans and advances from time
to time made by Lender to the Borrower and to others at the Borrower's
request or for the Borrower's account, and all other existing and
future indebtedness and liabilities which may be owing from time to
time by the Borrower to Lender under this Agreement or any other
agreement which may now or hereafter be entered into by the Borrower
with Lender, whether absolute or contingent, joint
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or several, matured or unmatured, direct or indirect, whether primary
or secondary, including, but not by way of limitation, (i) all
indebtedness and liabilities of the Borrower to Lender under any
applications for letters of credit now or hereafter executed by the
Borrower in favor of Lender and (ii) the Lender's charges in connection
herewith, all charges and fees Lender may incur in filing public
notices and any local taxes relating thereto, the charge of any
attorneys whom Lender may engage in preparing and filing documents,
making title searches and rendering opinion letters, all costs and
expenses (including reasonable attorney's fees) incurred by Lender to
enforce payment or to otherwise effect collection of any Receivables,
as well as all expenses incurred in protecting, maintaining,
preserving, enforcing or foreclosing the pledge, lien and security
interest in Collateral granted to Lender herein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any
actions or proceedings arising out of or relating to Lender's
transactions with the Borrower.
2.K. "Person" means any individual, partnership, joint
venture, firm, corporation, limited liability company, association,
trust or other enterprise (whether or not incorporated) or any
governmental authority.
2.L. "Receivables" means, but is not limited to, all accounts,
contract rights, checks, notes, drafts, acceptances, instruments,
chattel paper, rental receivables, installment payment obligations,
general intangibles, and all other obligations for the payment of money
created by the Borrower or acquired by the Borrower from others
involving the purchase of ham or baked products from the Borrower's
Bakery Division or Ham Curing Division, all cash and non-cash proceeds
thereof, and contracts, documents, invoices and other instruments
evidencing the same, all security therefor, guarantees, and all of the
Borrower's rights to any property sold or leased which is represented
thereby, whether or not such Receivables are specifically assigned,
which Receivables are created or otherwise arise out of the sale of
merchandise or the rendering of services by the Borrower.
2.M. "Tangible Net Worth" means at any time, the Borrower's
net stockholders' equity, determined in
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accordance with Generally Accepted Accounting Principles, plus
indebtedness of the Borrower which is subordinated to indebtedness of
the Borrower to Lender on terms and conditions approved by Lender,
minus the book value of assets which would be treated as intangibles
under Generally Accepted Accounting Principles, including, but not
limited to, goodwill, trade names, trademarks, copyright, patents and
unamortized debt discount and expenses.
2.N. "Total Liabilities" means all obligations of Borrower
required by Generally Accepted Accounting Principles to be reported as
liabilities (including deferred taxes) on the balance sheet of the
Borrower.
2.O. "Working Capital" means Current Assets minus Current
Liabilities (with this revolving credit facility deemed to be
short-term debt).
2.P. The terms "account," "contract rights," "instruments,"
"chattel paper," "general intangibles," "inventory" and "proceeds" as
used herein, shall have the same meanings as they have in the Uniform
Commercial Code as in effect in North Carolina.
3. As security for the Obligations, including without limitation all
loans and advances made and to be made by Lender to Borrower hereunder, Borrower
does hereby grant to Lender a lien on and security interest in and to the
Collateral.
4. Borrower shall pay to the Lender an audit fee of $300.00, to be paid
upon the completion of each audit, such audit to be conducted every one hundred
twenty (120) days.
5. In consideration of Lender's commitment to make loans and advances
hereunder, Borrower agrees to pay to Lender on the date of this Agreement a
commitment fee of $10,000.00, $5,000.00 of which has been received by Lender.
6.A. In the event that Lender shall have determined that the adoption
of any applicable law, rule, regulation or guideline regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or by any court, or compliance
by Lender (or any lending office of Lender)
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with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on Lender's capital as a
consequence of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Lender's policies, as the case may be, with respect to capital
adequacy) by an amount deemed by Lender to be material, then from time to time
Borrower shall pay to Lender such additional amount or amounts as will
compensate Lender for any such reduction suffered. Within a reasonable time
after making a request for such additional amount hereunder, Lender will furnish
to Borrower a statement certifying the amount of such reduction and describing
the event giving rise to such reduction, which determination shall be conclusive
absent manifest error.
6.B. Failure on the part of Lender to demand compensation for any
reduction in amounts received or receivable or reduction in return on capital
with respect to any period shall not constitute a waiver of Lender's rights to
demand compensation for any reduction in amounts received or receivable or
reduction in return on capital in such period or in any other period. The
protection of this Section 6 shall be available to Lender regardless of any
possible contention of invalidity or inapplicability of the law, regulation or
condition which shall have been imposed.
7. With respect to the collection of Receivables:
7.A. After the occurrence of an event of default as specified
in Section 16, Lender shall have the right to notify debtors and
account debtors, at any time in Lender's discretion, that certain
Collateral has been assigned to Lender and to collect the same directly
in Lender's own name, but unless and until Lender exercises that right
Borrower shall be privileged to collect Receivables for Lender.
Payments by debtors and account debtors by credit card shall be paid
directly to Borrower who will issue a check for that amount to the
blocked account described below. Borrower shall not commingle any of
the remittances received by it with any of the Borrower's other
property or monies, but shall segregate all such remittances and hold
them in trust in a lockbox controlled by Lender or in a blocked account
with electronic transfer at a local bank
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acceptable to Lender for Lender as Lender's exclusive property and
deliver to Lender in original form and on the day of receipt, all
checks, drafts, notes, instruments, acceptances, cash and other
evidences of payment, applicable to any Collateral. The Lender will
immediately credit all such payments to Borrower's account after
charging two banking days for collection of checks and other
instruments.
7.B. All records, ledger sheets, correspondence, invoices,
documents and instruments relating to or evidencing Receivables shall,
until delivered to Lender or removed by Lender from the Borrower's
premises, be kept on the Borrower's premises, at the address specified
in Section 14(xviii), without cost to Lender, in appropriate containers
in safe places. Lender shall at all reasonable times have full access
to and the right to audit Borrower's books and records, to confirm and
verify all Receivables and to do whatever else Lender deems necessary
to protect its interest. Borrower will immediately, upon learning
thereof, report to Lender all reclaimed, repossessed or returned
merchandise, claims of any customer and any other matter affecting the
value, enforceability and collectibility of Receivables. All claims and
disputes with any customer or obligor are to be promptly adjusted with
Lender's prior approval by Borrower at Borrower's own cost and expense.
8. With respect to all Collateral:
8.A. Borrower represents, warrants and agrees that Borrower
shall take any and all steps as Lender may request to create and
maintain in Lender's favor a valid and first priority perfected
security interest in and pledge of, all Collateral, whether now
existing or created from time to time hereafter, and, with respect to
all Receivables, (a) Borrower shall provide Lender with confirmatory
assignment schedules, in form satisfactory to Lender of all
Receivables, promptly upon the creation of same, copies of invoices
and/or other documents as Lender may require, evidences of shipment or
delivery, and all other additional information and documents concerning
same as Lender may require; (b) at the time pledged to Lender, absolute
title to the Collateral, free and clear of all liens, encumbrances and
security interests (except as to Lender and holders of purchase money
security interests) will be vested in Borrower and no previous
assignments, transfers or security
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interests will then be in effect (other than purchase money security
interests), nor will there be in effect any other agreements, notices,
financing statements, or otherwise which will in any way impair or
affect Lender's first lien upon, security interest in and pledge of
such Collateral; (c) each Receivable as of the date when pledged to
Lender, (i) will represent a valid and legally enforceable
indebtedness, according to its terms and as represented by the assigned
invoice; (ii) to the best of Borrower's knowledge, the account debtor
of an Eligible Receivable will be liable for and will make payment of
the amount expressed in such invoice and according to its terms; (iii)
to the best of Borrower's knowledge, will be subject to no dispute or
claim by the account debtor as to price, terms, quality, quantity,
delay in shipment, offsets, counterclaims, contra-accounts or any other
defense of any other kind and character except as may be the case in
Borrower's transactions with Pierre, Hormel or a Co-Packer; (iv) to the
best of Borrower's knowledge, will not be subject to discounts,
deductions, allowances, offsets, or special terms of payment which were
not shown on the face of the invoice; (v) will not represent a delivery
of goods upon "consignment", "guaranteed sale", "sale or return",
"payment on reorder" or similar terms except as may be the case in
Borrower's transactions with food brokers concerning the return of
products with expired expiration dates from retail outlets; and (vi)
will not be subject to any prohibition or limitation upon assignment or
pledge.
8.B. With respect to Inventory, Borrower warrants and
represents that (a) the same shall be free and clear of all
encumbrances (other than purchase money security interests) and the
Borrower shall be the absolute owner thereof; (b) such Inventory shall
be kept at the addresses specified in Section 21 and Borrower shall
promptly notify Lender of any change thereof; and (c) Borrower shall
defend Lender's security interest in the Inventory against any claims
or demands of third parties and will promptly pay, when due, all taxes
or assessments levied on account of the Inventory.
9. Borrower will furnish, as to all Receivables, such agings and other
financial information as Lender requests from time to time and all delivery
receipts relating to such Receivables. Borrower will at all times keep accurate
and complete records and accounts in accordance with Generally
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Accepted Accounting Principles. Borrower represents and warrants that financial
statements delivered by the Borrower to Lender at or prior to the execution of
this Agreement accurately reflect the financial condition and operations of the
times and for periods therein stated, that Borrower is solvent, and that there
is no tax lien notice presently filed or judgment entered against the Borrower
or levy or attachment upon the Borrower's property.
10. Borrower shall perform any and all steps requested by Lender to
perfect Lender's lien on and security interest in the Collateral, such as
leasing warehouses to Lender, placing and maintaining signs, appointing
custodians, filing notices of lien, maintaining stock records and transferring
Inventory to warehouses. If any Inventory remains in the possession or control
of Borrower's agents or processors, Borrower shall notify such agents or
processors of Lender's instructions. Borrower agrees to maintain books and
records pertaining to the Inventory in such detail, form and scope as Lender
shall require, and Borrower agrees to notify Lender promptly of any change in
Borrower's name, mailing address, principal place of business or locations of
the Inventory. Borrower will also advise Lender promptly, in sufficient detail,
of any substantial change relating to the type, quantity or quality of the
Inventory, or any event which would have a material effect on the value of the
Inventory or on the lien and security interest granted to Lender herein. A
physical listing of all Inventory, wherever located, shall be taken by Borrower
whenever requested by Lender, and a copy of each such physical listing shall be
supplied to Lender. Lender may examine and inspect the Inventory at any time.
Borrower will execute and deliver to Lender from time to time, upon demand, such
supplemental agreements or documents relating to Inventory, or instruments of
indebtedness, in order that the full intent and purpose of this Agreement may be
carried into effect.
11. Borrower shall have the Inventory insured in Lender's name against
loss or damage by fire, theft, burglary, pilferage, loss in transportation and
such other hazards as Lender shall specify, by insurers approved by Lender, in
amounts satisfactory to Lender and under policies containing loss payable
clauses to Lender as Lender's interest may appear. If Borrower fails to do so,
Lender may procure such insurance and the cost of such insurance shall be deemed
an Obligation and will be payable to Lender on demand with interest at the rate
then applicable to loans hereunder. Insurance policies or certificates will be
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deposited with Lender, if Lender so requires. Borrower agrees that the proceeds
of all such insurance, if any loss should occur, shall be applied to the
replacement of any of the Inventory damaged or destroyed if (i) there exists no
event of default as specified in Section 16 which has not been waived or cured
within applicable periods; (ii) the Borrower presents sufficient evidence to
Lender that there are sufficient funds from the insurance proceeds and from
equity funds, if needed, to completely restore or repair the damaged Inventory;
(iii) the Borrower presents sufficient evidence to Lender that the damaged
Inventory will be restored prior to the maturity of the Obligations; and (iv)
Lender will not incur any liability to any other person as a result of such use
of insurance proceeds. If the conditions set forth herein are not satisfied
within ninety (90) days of loss, then Lender, at its option, shall apply any
insurance proceeds to the payment of any or all of the Obligations. Lender shall
have the right, in Borrower's name or in Lender's name, to file claims under any
insurance policies, to receive, receipt and give acquittance for any payments
that may be made thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments, or other documents that may be necessary
to effect the collection, compromise or settlement of any claims under any such
insurance policies.
12. Borrower hereby constitutes and appoints Lender or such person as
Lender may name from time to time, as the Borrower's attorney-in-fact and at the
Borrower's costs and expenses such attorney-in-fact shall be empowered after the
occurrence of an event of default as specified in Section 16, which has not been
waived or cured within applicable periods, to exercise at any time all or any of
the following powers: to receive, take, endorse, assign and deliver in Lender's
name or the Borrower's any and all checks, notes, drafts and other instruments
relating to Collateral, including receiving, opening and properly disposing of
all mail addressed to the Borrower concerning Receivables and to notify postal
authorities to change the address for delivery of mail to such address as Lender
may designate; to sign the Borrower's name on any invoice or bill of lading
relating to any account, drafts against account debtors, on schedules and
assignments of Receivables, on notices of assignment, financing statements and
other public records, on verifications of accounts and on notices to account
debtors; to send requests for verification of Receivables to account debtors; to
transmit to account debtors notice of Lender's interest
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therein, and to request from such account debtors notice of Lender's interest
therein, and to request from such account debtors at any time in the Borrower's
name or Lender's or that of Lender's designee, any information concerning the
Receivables and the amounts owing thereon, and to notify account debtors that
payment be made directly to Lender; to take or bring at the Borrower's cost in
the Borrower's name or Lender's all steps, actions and suits deemed by Lender
necessary or desirable to effect collection of Receivables, including, to
enforce payment of any Receivable assigned to Lender; to settle, compromise, or
release in whole or in part, any amounts owing on Receivables; to prosecute any
action or proceeding with respect to Receivables; to extend the time of payment
of any and all Receivables; to make allowances and adjustments with respect
thereto; to issue credit in Lender's name or the Borrower's, and to do all other
things necessary to carry out this agreement. Borrower ratifies and approves all
acts of such attorney-in-fact. Neither Lender nor the attorney-in-fact will be
liable for any acts of commission or omission nor for any error of judgment or
mistake of fact or law except for gross negligence, recklessness, or intentional
conduct. This power, being coupled with an interest, is irrevocable so long as
any Obligation remains unpaid or this Agreement is in effect.
13. The Borrower represents and warrants that:
(i) (a) the Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the
state of its incorporation;
(b) the Borrower has the corporate power and
authority to own its properties and assets and to carry on its
business as now being conducted;
(c) the Borrower has the corporate power and
authority to execute and perform this Agreement, to borrow
hereunder and to execute and deliver this Agreement and all
other certificates, instruments and documents with respect to
the indebtedness of the Borrower hereunder; provided, however,
the parties acknowledge that this Agreement is part of a
comprehensive refinancing of indebtedness by the Borrower, the
result of which is to replace certain revolving debt held by
NationsBank, N.A. and certain term indebtedness held by Aetna
Life Insurance Company,
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et. al., with the indebtedness reflected in this Agreement and
certain term indebtedness to be provided by other lenders, all
of which will have similar debt covenants and all of which are
to be effective on or before December 31, 1996. As part of
this comprehensive refinancing, the parties further
acknowledge that in the course of replacing certain
indebtedness with other indebtedness, the Borrower may from
time to time be in temporary technical noncompliance with the
loan agreements of one or more of its existing lenders, which
may arise due to differing closing dates for the Borrower's
replacement indebtedness, or from differing timetables for
formal loan compliance waivers. The parties agree that these
temporary technical noncompliance issues do not and will not
constitute a violation of the representations and warranties
of this Paragraph 13;
(d) when executed and delivered, this Agreement, and
all collateral documents executed in connection therewith (the
"Loan Documents") will be valid and binding obligations of the
Borrower and will be, subject to applicable bankruptcy,
moratorium, insolvency, reorganization and other similar laws
affecting the enforcement of creditors' rights generally and
to the availability of equitable remedies, enforceable in
accordance with their respective terms;
(e) the Borrower has no subsidiaries except as set
forth on Exhibit A;
(f) the Borrower does not own an interest in any
Person except as set forth on Exhibit B;
(ii) the execution, delivery and performance of the Loan
Documents
(a) have been duly authorized by all requisite
corporate action of the Borrower required for the lawful
creation and issuance thereof;
(b) do not violate any provisions of law, any order
of any court or other agency of government, and do not violate
the charter documents or by-laws of the
- 14 -
<PAGE> 15
Borrower or any provisions of any material agreement or
instrument to which the Borrower is a party;
(c) will not be in conflict with, result in a breach
of or constitute an event of default nor an event which, upon
giving of notice or lapse of time, or both, would constitute
such an event of default under any material agreement or
instrument to which the Borrower is a party;
(d) will not result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon
any of the properties or assets of the Borrower other than
liens in favor of Lender;
(iii) other than as previously disclosed to Lender, there
is no action, suit or proceeding at law or in equity or by or before
any governmental instrumentality or agency or arbitral body now
pending, or to the knowledge of the Borrower, threatened by or against
or affecting the Borrower or any properties or rights of the Borrower
which, if adversely determined, would materially be expected to impair
the right of the Borrower to carry on its business substantially as now
conducted or would have a material adverse effect on the financial
condition, business or result of operations of the Borrower;
(iv) the Borrower has filed or caused to be filed all
federal, state and local tax returns which are required to be filed and
have paid or caused to be paid all taxes as shown on said returns or on
any assessment received by it, to the extent that such taxes have
become due, except taxes being contested in good faith and against
which adequate reserves have been maintained under Generally Accepted
Accounting Principles;
(v) the Borrower is not
(a) a party to any judgment, order, decree or any
agreement or instrument or subject to corporate restrictions
which would have a material adverse effect on the financial
condition, business or results of operations of the Borrower;
- 15 -
<PAGE> 16
(b) in material default in the performance,
observance or fulfillment of any of the material obligations,
covenants or conditions contained in any material agreement or
instrument to which it is a party;
(vi) neither the nature of the Borrower nor its business
or properties, nor any relationship between the Borrower, and any other
person, nor any circumstance in connection with the offer, issue, sale
or delivery of this Agreement 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 Borrower as a condition to
the execution and delivery of this Agreement;
(vii) the Borrower has not incurred any accumulated
unfunded deficiency within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA") or incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC")
established under such Act (or any successor thereto under such Act) in
connection with any employee benefit plan established or maintained by
the Borrower;
(viii) the business of the Borrower has been operated in
compliance in all respects with all applicable federal, state and local
laws, regulations, orders, ordinances, judgments and decrees
(including, for example, matters relating to the environment,
discrimination, employment and health and safety), except for such
matters, if any, as may have been previously disclosed by the Borrower
to the Lender in writing and for violations which do not and will not
have a material adverse effect on the financial conditions, business or
results of operations of the Borrower. All material permits,
certificates, licenses, approvals, and other authorizations that are
required in connection with the operation of the respective businesses
of the Borrower has been issued, and, as of the date hereof and
immediately thereafter the Borrower will have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of its business;
- 16 -
<PAGE> 17
(ix) the Borrower does not purchase livestock directly from
any party and is not subject to the Packers and Stockyards Act (7
U.S.C.A. Section 181 et. seq.); and
(x) as of the date of each extension of credit under this
Agreement, the representations and warranties made by the Borrower in
this Section 13 or which are contained in any certificate furnished at
any time under or in connection with this Agreement shall be true and
correct in all material respects on and as of the date of such
extensions of credit as if made on and as of such date.
14. The Borrower hereby covenants with Lender and warrant that, from
the date hereof until such later date as all of the Obligations are paid and
satisfied in full and this Agreement is terminated in accordance with its terms,
it will:
(i) as soon as practical and in any event not later than
ninety (90) days after the end of each fiscal year, deliver to Lender
audited financial reports of the Borrower, including a balance sheet of
the Borrower as at the end of such fiscal year, and the notes thereto,
and the related statements of income and retained earnings and the
notes thereto and statement of cash flow for such fiscal year, setting
forth in each case comparative financial statements for the
corresponding period in the preceding year, all prepared in accordance
with Generally Accepted Accounting Principles, and containing an
unqualified opinion of independent certified public accountants
selected by Borrower and acceptable to Lender;
(ii) as soon as practical and in any event not later than
within thirty (30) days after the end of each accounting period,
deliver to Lender financial reports, including a balance sheet of
Borrower as at the end of such accounting period and statements of
income and retained earnings of Borrower as at the end of such
accounting period, setting forth in each case comparative financial
statements for the corresponding accounting period in the preceding
year, in a form acceptable to Lender, and approved and signed by a duly
authorized officer of the Borrower as presenting fairly the financial
condition of the Borrower;
(iii) deliver with each financial statement required in (i)
and (ii) above a certificate from the
- 17 -
<PAGE> 18
Borrower's duly authorized officer stating, on behalf of the Borrower,
that there exists no default under this Agreement;
(iv) as soon as practical and in any event not later than
within forty-five (45) days after the end of each quarter, deliver to
Lender a compliance certificate in the form attached hereto as Exhibit
C;
(v) deliver to Lender weekly borrowing base certificates
including a contra account update;
(vi) as soon as practicable and in no event later than the end
of each fiscal year, a forecast for the twelve (12) month period
commencing on the first day after the end of such fiscal year, of the
financial statements of Borrower, including balance sheets, income
statements, statements of cash flow, and cash flow projections, and an
annual capital expenditures budget of Borrower for such twelve (12)
month period, all in reasonable detail and form satisfactory to Lender;
(vii) promptly, from time to time, deliver to Lender such
other information regarding Borrower's operations, business affairs and
financial condition as Lender may reasonably request. Lender is hereby
authorized to deliver a copy of any such financial information
delivered hereunder to Lender to any regulatory authority having
jurisdiction over Lender;
(viii) maintain all personal property in good working order
and condition and make all needed repairs, replacements and renewals as
is necessary to conduct its business in accordance with prudent
business practices;
(ix) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence;
(x) comply with or contest in good faith all statutes and
governmental regulations (including all federal, state and local
requirements relating to protection of health or the environment) in
connection with the operation of Borrower's businesses;
- 18 -
<PAGE> 19
(xi) pay all taxes, assessments, governmental charges, claims
for labor, supplies, rent and any other obligation which, if unpaid,
might become a lien against any of its properties except liabilities
being contested in good faith and against which, if requested, by
Lender, reserves in accordance with Generally Accepted Accounting
Principles will be established;
(xii) without limiting the specific requirements of Section 11
hereof, at all times keep its insurable properties insured, to such
extent and against such risks, including, without limitation, public
liability insurance, worker's compensation and other insurance required
by law, as is customary with companies of comparable size in the same
or similar business;
(xiii) without limiting the specific requirements of Section
11 hereof, maintain insurance covering real property and tangible
personal property subject to a lien or security interest in favor of
Lender that shall provide that, in case of each separate loss, the full
amount of insurance proceeds with respect thereto shall be payable to
the Lender as mortgagee, secured party, or otherwise as its interests
may appear;
(xiv) preserve, protect, retain and maintain free from
encumbrances, all patents, licenses trademarks, trademark rights,
tradenames, tradename rights and copyrights used or useful in the
conduct of its businesses and maintain all other properties and assets
used or useful in the conduct of its businesses in good repair, working
order and condition and from time to time cause to be made all proper
replacements, betterments and improvements thereto;
(xv) keep true books of records and accounts in accordance
with Generally Accepted Accounting Principles, and in which full, true
and correct entries will be made of all of Borrower's dealings and
transactions;
(xvi) permit any officer, employee or agent of Lender
designated in writing by Lender, to visit and inspect the Borrower's
properties and records, at such times as Lender may reasonably request
upon reasonable notice and during ordinary business hours;
- 19 -
<PAGE> 20
(xvii) make prompt payment of all contributions required under
all employee benefit plans ("Plans") and required to meet the minimum
funding standard set forth in ERISA with respect to its Plans; (b) upon
the request of Lender furnish to Lender copies of each annual
report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor and/or
the Internal Revenue Service pursuant to ERISA, and the regulations
promulgated thereunder, in connection with each of its Plans for each
plan year; (c) notify Lender immediately of any fact, including, but
not limited to, any Reportable Event (as defined in ERISA) arising in
connection with any of its Plans, which might constitute grounds for
termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer
such Plan, (d) provide Lender with a statement, if requested by Lender,
as to the reason therefor and the action, if any, proposed to be taken
with respect thereto, together with a copy of the notice of such
Reportable Event given to the PBGC or a statement that said notice will
be filed with the annual report to the United States Department of
Labor with respect to such Plan if such filing has been authorized, (e)
promptly after receipt thereof, provide Lender with a copy of any
material notice to Borrower or any of the Controlled Group may receive
from the United States Department of Labor, the Internal Revenue
Service or the PBGC with respect to such Plan; and (f) furnish to
Lender, upon its request, such additional information concerning any of
its Plans as may be reasonably requested;
(xviii) maintain its place of business, or if it has more than
one place of business, its chief executive office at WSMP Drive,
Claremont, North Carolina 28610;
(xix) maintain Tangible Net Worth of at least (a)
$15,000,000.00 on February 28, 1997 and (b) for each fiscal year
thereafter an amount equal to the prior fiscal year's Tangible Net
Worth requirement plus fifty percent (50%) of the Borrower's after-tax
profits for the fiscal year then ended;
(xx) maintain a ratio of Total Liabilities to Tangible Net
Worth of not more than 2.0 to 1.0 on February 28, 1997 and on each
fiscal quarter thereafter;
- 20 -
<PAGE> 21
(xxi) maintain Working Capital of at least $400,000.00 on
February 28, 1997 and on each fiscal quarter thereafter; and
(xxii) maintain a ratio of EBIT to Interest Expense of at
least 1.35 to 1.0 for the twelve month period ending on February 28,
1997 and on each fiscal quarter thereafter.
15. Borrower hereby covenants with Lender and warrants that, from the
date hereof until such later date as all of the Obligations are paid and
satisfied in full and this Agreement is terminated in accordance with its terms,
it will not, without the prior consent of Lender:
(i) incur, create, assume or permit to exist any indebtedness
for borrowed money, howsoever evidenced, or its equivalent (including,
but not limited to, capitalized lease indebtedness) other than (a)
indebtedness incurred to Lender, (b) purchase money indebtedness, (c)
indebtedness in excess of $1,000,000.00 in any fiscal year and (d)
indebtedness set forth on Exhibit D;
(ii) incur, create or permit to exist any pledge, security
interest, lien, charge or other encumbrance of any nature whatsoever on
the Borrower's property (including the Collateral), whether now owned
or hereafter acquired, other than (a) the liens and security interests
in favor of Lender, (b) liens and security interests on property other
than the Collateral not in excess of $1,000,000.00 in any fiscal year
and (c) liens incurred in connection with the indebtedness set forth on
Exhibit D;
(iii) repurchase, redeem or retire any of its capital stock in
excess of $200,000.00 in any fiscal year;
(iv) guarantee, assume, sell with recourse, endorse,
contingently agree to purchase, become surety for, or otherwise become
liable upon the obligation of any other Person, firm or corporation in
excess of $500,000.00 in any fiscal year other than by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;
(v) make or permit any change in the (i) control of the
Borrower by HERTH Management, Inc. or (ii) control of
- 21 -
<PAGE> 22
HERTH Management, Inc. by James C. Richardson, Jr., Richard F. Howard
and David R. Clark; or
(vi) purchase livestock directly from any Person.
16. If Borrower fails to pay when due any balances owing in the loan
account or under any promissory note executed in connection herewith, or fails
to pay any other amounts owing to Lender under this or any other agreement
between Lender and Borrower or under any other promissory note or instrument
given to Lender, including without limitation the failure to pay any Obligation
when due and such default is not remedied within ten (10) business days after
receipt of written notice of the default from Lender to Borrower; or Borrower
breaches any of the provisions of this Agreement (including any of the covenants
set forth in Sections 14 and 15 hereof) or any other agreement between the
parties and such default is not remedied within thirty (30) days after receipt
of written notice of the default from Lender to Borrower; or Borrower fails to
furnish promptly any financial or Collateral reports requested by Lender from
time to time and such default is not remedied within thirty (30) days after
receipt of written notice of the default from Lender to Borrower; or any
statements furnished by Borrower relating to the Receivables, the operations and
financial condition of Borrower or any other representation or warranty made by
Borrower in this Agreement or any document, certificate, statement or report
heretofore or hereafter made by Borrower to Lender proves to be false in any
material respect; or if Borrower fails to give immediate notice to Lender of the
occurrence of any event of default described herein; or if the Borrower becomes
insolvent, or is unable to meet its debts as they mature, or suspend operations
or discontinue its businesses as a going concern; or make an assignment for the
benefit of creditors; or there is filed by or against the Borrower a petition
under the Bankruptcy Code and if filed against Borrower such petition is not set
aside within sixty (60) days after such filing or any proceeding is commenced by
or against the Borrower under any insolvency laws; or a receiver or trustee is
appointed to administer the assets or affairs of the Borrower; or a judgment is
entered or an attachment is levied against the assets of the Borrower which in
the sole opinion of Lender will adversely affect the Borrower's ability to
perform this Agreement or which in Lender's judgment will impair the
enforceability of Lender's lien upon and security interest in the Collateral and
such judgment or lien is not removed or satisfied or a bond posted in the amount
of such lien
- 22 -
<PAGE> 23
within forty-five (45) days after such lien is filed or judgment is entered; or
any creditor of the Borrower forecloses upon or takes possession of any assets
of the Borrower under any claim of lien or security interest; or if any event
occurs which materially adversely affects the value of the Collateral; or if the
Borrower should default in the performance of any obligation with respect to any
money borrowed from another lender (including capitalized lease obligations); or
then upon any one of such events, Lender may declare this Agreement in default
and all amounts owing under this Agreement and all other Obligations owing by
the Borrower to Lender shall, without demand or notice, immediately become due
and payable (notwithstanding that the maturity date or dates expressed in any
evidence of such indebtedness may be otherwise) and Lender may foreclose
Lender's lien or security interest in the Collateral in any way permitted by
law, and Lender shall have, without limitation, the remedies of a secured party
under the Uniform Commercial Code. Lender may thereupon enter the Borrower's
premises without legal process and without incurring liability to the Borrower
and remove the same to such place as Lender may deem advisable, or Lender may
require the Borrower to make the Collateral available to Lender at a convenient
place and, with or without having the Collateral at the time or place of sale,
Lender may sell or otherwise dispose of all or any part of the Collateral
whether in its then condition or after further preparation or processing, either
at public or private sale or at any broker's board, with or without notice and
with or without advertisement, in lots or in bulk, for cash or for credit, at
any time or place, in one or more sales, and upon such terms and conditions as
Lender may elect. At any such sale Lender may be the purchaser. If any Inventory
shall require rebuilding, repairing, maintenance, preparation, or is in process
or other unfinished state, Lender shall have the right, at Lender's option, to
do such rebuilding, repairing, preparation, processing or completing of
manufacturing, for the purpose of putting the Inventory in such saleable form as
Lender shall deem appropriate subject to the concurrence of the Borrower and the
liability insurance provider, such concurrence not to be unreasonably withheld.
17. The proceeds from any sale shall first be applied to any costs and
expenses in securing possession of the Inventory, storing, repairing and
finishing for sale, and to any expenses in connection with the sale. The net
proceeds will be applied toward the payment of any and all Obligations to
Lender, including interest, reasonable attorneys' fees and all other
- 23 -
<PAGE> 24
costs and expenses. Application of the net proceeds as,to particular Obligations
or as to principal or interest shall be in Lender's absolute discretion. Any
deficiency will be paid to Lender forthwith upon demand and any surplus will be
paid to Borrower if Borrower is not indebted to Lender under any other
Obligation. The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any rights shall not preclude the exercise of any
other rights, all of which shall be cumulative.
18. To the extent that any of Borrower's Obligations to Lender are now
or hereafter secured by property other than the Collateral, or by a guarantee,
endorsement or property of any other person, firm or corporation, then Lender
shall have the right to proceed against such other property, guarantee, or
endorsement upon Borrower's default in the payment of any Obligation or in any
of the terms, covenants or conditions contained herein, and Lender shall have
the right in Lender's sole discretion to determine which rights, security,
liens, security interests or remedies Lender shall at any time pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of them or any of Lender's rights
or Borrower's Obligations hereunder.
19. The lien, rights and security interest granted to Lender herein are
to continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that the principal account maintained in Borrower's name
on Lender's books may from time to time be temporarily in a credit position,
until the final payment to Lender in full of all Obligations and indebtedness
due Lender by Borrower, together with interest thereon. Lender's delay or
omission to exercise any right shall not be deemed to waiver thereof or of any
other right, unless such waiver be in writing. A waiver on one occasion shall
not be construed as a bar to or waiver of any rights or remedies on any future
occasion.
20. During the term of this Agreement, none of the Collateral will be
pledged, assigned or granted as security to any other person other than purchase
money security interests and none are now assigned, pledged or granted as
security other than to Lender and other than holders of purchase money security
interests. This Agreement shall govern all Receivables pledged by Borrower under
any trade styles used by it. With respect to
- 24 -
<PAGE> 25
all present and future Collateral, Borrower will make appropriate entries in
their books, and execute and deliver all papers and instruments, and do all
things necessary to evidence and effectuate Lender's security interest therein.
Lender is hereby authorized to file financing statements without Borrower's
signatures in accordance with the terms of Section 13 hereof.
21. All Inventory of the Borrower shall be maintained at the following
location and none other:
WSMP Drive
Claremont, North Carolina 28610
United Refrigerated Services
1000 Exchange Street
Charlotte, North Carolina 28208
22. Borrower expressly waives presentment, demand, protest, and notice
of dishonor as to any instrument, as well as any other notice to which Borrower
might be entitled.
23. This Agreement shall be governed and interpreted according to the
laws of the State of North Carolina. Borrower and Lender hereby irrevocably
submit to the jurisdiction of any State of North Carolina or federal court
sitting in Mecklenburg County, State of North Carolina, for any action or
proceeding arising out of or relating to this Agreement or any other agreement
between Lender and the Borrower or extended by the Borrower to Lender, and
Borrower and Lender hereby irrevocably agree that all claims in respect of any
such action or proceeding may be heard and determined in such State of North
Carolina court or, to the extent permitted by law, in such federal court.
Borrower and Lender hereby irrevocably waive, to the fullest extent they may
effectively do so, the defense of an inconvenient forum to the maintenance of
any such action or proceeding. Borrower agrees to accept service of process out
of the before-mentioned courts in any such action or proceeding by registered or
certified mail addressed to Borrower at the addresses set forth in the
introductory paragraph of this Agreement. Borrower further agrees that the
foregoing provisions of this Section shall be in addition to, and not in
substitution for, any other rights available to Lender pursuant to applicable
law.
- 25 -
<PAGE> 26
24. This Agreement shall have an initial term that shall end on
November 22, 1998 (the "Initial Term") and shall be automatically extended for
an additional one year period on each anniversary date of this Agreement unless
terminated as herein provided. Borrower may terminate this Agreement effective
on the last day of the Initial Term or any renewal term by giving Lender at
least ninety (90) days written notice of termination prior to the end of such
term. Lender may terminate this Agreement at any time a default exists hereunder
or if no default exists effective on the last day of the Initial Term or any
renewal term upon giving Borrower at least ninety (90) days written notice of
termination prior to the end of such term; provided, however, the terms and
conditions of this Agreement shall continue until all Obligations of Borrower to
Lender shall have been fully paid and satisfied, and until so paid and
satisfied, Borrower shall continue to assign accounts to Lender and turn over
all collections to Lender, as herein provided, and Lender shall be entitled to
retain its security interest in all existing and future accounts, inventory and
other Collateral. Any repayment of all or substantially all of the obligations
during the term of the Obligations then outstanding with funds advanced,
directly or indirectly, to the Borrower by another lender shall be deemed a
termination of this Agreement by Borrower and shall, effective upon receipt of
such repayment by Lender, relieve the Lender of any further obligations under
this Agreement.
26. This Agreement shall inure to the benefit of and be binding upon
the parties hereto, their heirs, personal representatives, successors and
assigns and shall not be modified or altered except in writing, signed by the
party to be charged.
27. This Agreement supersedes all prior commitments and commitment
letters heretofore made by Lender.
- 26 -
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal as of the day and year first above written.
WSMP, INC.
ATTEST:
By /s/ James W. Berry By /s/ Bobby G. Holman
------------------ -------------------
Title Asst. Sec. Title CFO & Treasurer
---------- ---------------
(Corporate Seal)
NATIONAL BANK OF CANADA
By /s/ C. Collie
-------------
Title VP & Mgr.
---------
By /s/ Alex M. Council IV
----------------------
Title Vice President
--------------
- 27 -
<PAGE> 28
EXHIBIT A
[List of Subsidiaries]
- 28 -
<PAGE> 29
EXHIBIT B
[Interests in other Persons]
- 29 -
<PAGE> 30
EXHIBIT C
COMPLIANCE CERTIFICATE
for the
period/year ending _________, ____
To: National Bank of Canada
Two First Union Center, Suite 2020
Charlotte, North Carolina 28282
Attention: Alex M. Council, Vice President
Ladies and Gentlemen:
This Compliance Certificate (the "Certificate") is being delivered
pursuant to Section 14(iv) of that certain Financing and Security Agreement (the
"Agreement") dated as of _________ __, 1996 between WSMP, Inc. (the "Borrower")
and NATIONAL BANK OF CANADA (the "Lender"). All capitalized terms, unless
otherwise defined herein, shall have the same meanings as in the Agreement. All
the calculations set forth below shall be made pursuant to the terms of the
Agreement.
The undersigned, the chief executive officer, chief financial officer
or chief accounting officer of the Borrower, does hereby certify to the Lender
that:
1. DEFAULT.
No default has occurred and is continuing or if a default has occurred
and is continuing, I have described on the attached Exhibit A the
nature thereof and the steps taken or proposed to remedy such default.
<TABLE>
<CAPTION>
Actual Required Compliance
------ -------- ----------
<S> <C>
2. SECTION 14(xix) - Tangible Net Worth. Yes No
The Borrower must maintain a Tangible
Net Worth of at least $_______1
</TABLE>
- --------
1 $15,000,000.00 on February 28, 1997 and for each fiscal year
thereafter an amount equal to the prior fiscal year's Tangible
Net Worth requirement plus fifty percent (50%) of the
Borrower's after-tax profits for the fisal year then ended.
- 30 -
<PAGE> 31
<TABLE>
<CAPTION>
Actual Required Compliance
------ -------- ----------
<C> <C> <C> <C>
3. SECTION 14(xx)-Total Liabilities to Tangible Net Worth. __ to 1.0 2.0 to 1.0 Yes No
------------------------------------------------------
The Borrower must maintain a ratio of Total Liabilities
to Tangible Net Worth of not more than 2.0 to 1.0 on
February 28, 1997 and on each fiscal quarter thereafter.
4. SECTION 14(xxi)-Working Capital. The Borrower must $_____ $400,000.00 Yes No
-------------------------------
maintain Working Capital of at least $400,000.00 on
February 28, 1997 and on each fiscal quarter
thereafter.
5. SECTION 14(xxii)-EBIT to Interest Expense. The __ to 1.0 1.35 to 1.0 Yes No
-----------------------------------------
Borrower must maintain a ratio of EBIT to Interest
Expense of at least 1.35 to 1.0 for the twelve month
period ending on February 28, 1997 and on each fiscal
quarter thereafter.
</TABLE>
6. ATTACHED SCHEDULE 1.
Attached hereto as Schedule 1 are the calculations supporting the
computation set forth in items 2-5 of this Certificate. All information
contained herein and on Schedule 1 is true and correct.
9. FINANCIAL STATEMENTS.
The audited/unaudited financial statements attached hereto were
prepared in accordance with GAAP and fairly and accurately represent,
on a consolidated and consolidating basis, the financial condition and
the results of the operations of the Borrower at the date and for the
periods indicated therein.
- 31 -
<PAGE> 32
IN WITNESS WHEREOF, the undersigned has executed this Certificate
effective this ___ day of _______________, 19__.
By:
--------------------------
Name:
-------------------------
Title:
------------------------
- 32 -
<PAGE> 33
Schedule 1
to Compliance Certificate
Calculations of Compliance with Financial Covenants
<TABLE>
<S> <C>
1. Tangible Net Worth.
A. Stockholders' equity plus $
----
B. Subordinated Debt minus $
-----
C. Goodwill minus <$ >
--------
D. Patents, trademarks, trade names and copyrights minus
E. Deferred expenses minus <$ >
--------
F. Other intangible assets minus <$ >
--------
G. Tangible Net Worth (1.A. + 1.B.) - (1.C. through 1.F.) $
----
2. Total Liabilities to Tangible Net Worth.
A. Total Liabilities $
----
B. Tangible Net Worth (from 1.H. above) $
----
C. Total Liabilities to Tangible Net Worth (2.A. / by 2.B.) to
------ -----
3. Working Capital.
A. Current Assets $
----
B. Current Liabilities $
----
C. Working Capital (3.A.-3.B.) $
----
4. EBIT to Interest Expense.
A. Net Income plus $
----
B. Taxes plus $
----
C. Interest Expense $
----
D. EBIT (4.A. + 4.B. + 4.C.) $
----
E. EBIT to Interest Expense (4.D. / 4.C.) to
------ ----
</TABLE>
- 33 -
<PAGE> 34
Exhibit A
Defaults or Events of Default
(if any)
- 34-
<PAGE> 35
EXHIBIT D
[Permitted Indebtedness]
- 35-
<PAGE> 1
EXHIBIT 99.D
WSMP, INC. FIRST CENTURY BANK Loan Number 88015386
P.O. BOX 399 200 PEPPERS FERRY ROAD Date DECEMBER 31, 1996
CLAREMONT, NC 28610 PO BOX 879 Maturity Date DEC. 30, 1998
WYTHEVILLE, VA 24382 Loan Amount $1,900,000.00
Renewal Of __________________
SOC SECURITY 56-094564
BORROWER'S NAME AND ADDRESS
"I" includes each borrower above, joint and severally.
LENDER'S NAME AND ADDRESS
"You" mean the lender, its successors and assigns.
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of ONE MILLION NINE HUNDRED THOUSAND AND NO/100
**************** Dollars $1,900,000.00
[X]Single Advance: I will receive all of this principal sum on DECEMBER 31,
1996. No additional advances are contemplated under this note.
[ ]Multiple Advance: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On __________________ I will
receive the amount of $____________ and future principal advances are
contemplated. Conditions: The conditions for future advances are
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
[ ] Open End Credit: You and I agree that I may borrow up to the
maximum principal sum more than one time. This feature is subject
to all conditions and expires on _________________.
[ ] Closed End Credit: You and I agree that I may borrow (subject to
all other conditions) up to the maximum principal sum only one
time.
INTEREST: I agree to pay interest on the outstanding principal balance from
DECEMBER 31, 1996 at the rate of 9.25% per year until FIRST CHANGE
DATE.
[X]Variable Rate: This rate may then change as stated below.
[X] Index Rate: The future rate will be 1.000% OVER the following index
rate: THE HIGHEST PRIME RATE OF INTEREST AS QUOTED DAILY IN THE WALL
STREET JOURNAL.
[ ] No Index: The future rate will not be subject to any Internal or
external index. It will be entirely in your control.
[X] Frequency and Timing: The rate on this note may change as often as
DAILY. A change in the interest rate will take effect ON THE SAME DAY
[ ] Limitations: During the term of this loan, the applicable annual
interest rate will not be more than ____________% or less than
____________%. The rate may not change more than ____________% each
____________
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments:
[X] The amount of each scheduled payment will change.
[X] The amount of the final payment will change.
[ ] __________________________________________________________________
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this
note owing after maturity, and until paid in full, as stated below:
[X] on the same fixed or variable rate basis in effect before maturity
(as indicated above).
[ ] at a rate equal to ______________________________________________
[X] LATE CHARGE: If a payment is made more than 7 days after it is due, I
agree to pay a late charge of 5.000% OF THE LATE PAYMENT WITH A MAXIMUM
OF $100.00.
[X] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which [ ] are [X] are not included in the principal amount
above: ALL LOAN COSTS OUTLINED IN SEPARATE STATEMENT PREPARED BY
COUNSEL.
PAYMENTS: I agree to pay this note as follows:
[X] Interest: I agree to pay accrued interest ON DEMAND, BUT IF NO DEMAND
IS MADE THEN ON THE 30TH DAY OF EACH MONTH BEGINNING JANUARY 30, 1997
[X] Principal: I agree to pay the principal ON DEMAND, BUT IF NO DEMAND IS
MADE THEN ON DECEMBER 30, 1998.
[ ] Installments: I agree to pay this note in ____________ payments. The
first payment will be in the amount of $____________ and will be due
_______________________. A payment of $____________ will be due
___________________ thereafter. The final payment of the entire unpaid
balance of principal and interest will be due ___________________.
PURPOSE: The purpose of this loan is BUSINESS; RESTRUCTURE OF DEBT FROM ANOTHER
BANK.
[X] CONFESSION OF JUDGMENT: I appoint and authorize RICHARD H. WALL AND/OR
JEFFERY L. FORLINES attorneys in fact to, if I default on this
agreement, appear in the office of CLERK OF THE CIRCUIT COURT OF WYTHE
COUNTY, Virginia, and confess judgment against me in the amount of any
unpaid principal, accrued interest
<PAGE> 2
and costs of collection as provided in this agreement. SEE PAGE 3 FOR
ADDITIONAL TERMS OF THE CONFESSION OF JUDGMENT.
IMPORTANT NOTICE: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT
PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE
AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU
WITHOUT ANY FURTHER NOTICE.
ADDITIONAL TERMS: EACH PAYMENT SHALL BE PAID ON THE DATE DUE, OR IF SUCH DATE
DOES NOT EXIST FOR THAT MONTH, THEN SUCH PAYMENT SHALL BE DUE ON THE LAST DAY OF
THAT MONTH.
THIS NOTE IS SUBJECT TO THE TERMS CONTAINED IN A SEPARATE LETTER OF COMMITMENT
ORIGINALLY DATED OCTOBER 17, 1996, AND ALL SUBSEQUENT MODIFICATIONS.
THIS NOTE IS FURTHER SUBJECT TO THE TERMS CONTAINED IN SEPARATE DOCUMENTATION
AND/OR AGREEMENTS RELATING TO THE PLEDGE OF THE STOCK OF SAGEBRUSH, INC. BY
WSMP, INC.; TENNESSEE WSMP, INC.; SOUTH CAROLINA WSMP, INC.
THIS NOTE IS FURTHER SUBJECT TO ANY CURRENT OR FUTURE CROSS-
COLLATERALIZATION/DEFAULT AGREEMENT(S) RELATING TO OTHER LOANS MADE TO WSMP,
INC. BY FIRST CENTURY BANK.
- --------------------------------------------------------------------------------
(page 1 of 3)
/s/ BH
------- -------
<PAGE> 3
SECURITY
SECURITY INTEREST: I give you a security interest in all of the Property
described below that I now own and that I may own in the future
(including, but not limited to, all parts, accessories, repairs,
improvements, and accessions to the Property), wherever the Property is
or may be located, and all proceeds and products from the Property.
[ ] Inventory: All inventory which I hold for ultimate sale or
lease, or which has been or will be supplied under contracts
of service, or which are raw materials, work in process, or
materials used or consumed in my business.
[ ] Equipment: All equipment including, but not limited to, all
machinery, vehicles, furniture, manufacturing equipment, farm
machinery and equipment, shop equipment, office and
recordkeeping equipment, and parts and tools. All equipment
described in a list or schedule which I give to you will also
be included in the acquired property, but such a list is not
necessary for a valid security interest in my equipment.
[ ] Farm Products: All farm products including, but not limited
to:
(a) all poultry and livestock and their young, along with
their products, produce and replacements;
(b) all crops, annual or perennial, and all products of the
crops; and
(c) all feed, seed, fertilizer, machines, and other supplies
used or produced in my farming operations.
[ ] Accounts, Instruments, Documents, Chattel Paper or Other
Rights to Payment: All rights I have now and that I may have
in the future to the payment of money including, but not
limited to:
(a) payment for goods and other property sold or leased or for
services rendered, whether or not I have earned such payment
by performance and
(b) rights to payment arising out of all present and future
debt instruments, chattel paper and loans and obligations
receivable. The above include any rights and interests
(including all liens and security interests) which I may have
by law or agreement against any account, debtor or obligor of
mine.
[ ] General Intangibles: All general intangibles including, but
not limited to, tax refunds, applications for patents,
patents, copyrights, trademarks, trade secrets, good will,
trade names, customer lists, permits and franchises, and the
right to use my name.
[ ] Government Payments and Programs: All payments, accounts,
general intangibles, or other benefits (including, but not
limited to, payments in kind, deficiency payments, letters of
entitlement, warehouse receipts, storage payments, emergency
assistance payments, diversion payments and conservation
reserve payments) in which I now have and in the future may
have any rights or interests and which arise under or as a
result of any preexisting, current or future Federal or state
governmental program (including, but not limited to, all
programs administered by the Commodity Credit Corporation and
the ASCS).
[X] The secured property includes, but is not limited by the
following: SEPARATE THIRD PARTY PLEDGE AGREEMENTS AND DEED OF
TRUST RECORDATIONS FOR PROPERTY(S) COMMONLY REFERRED TO AS
THOSE OWNED BY WSMP, INC. AND/OR SUBSIDIARY(S) LOCATED IN:
MORRISTON, TN; MT. VIEW, NC; STATESVILLE, NC; WALDORF, MD.
THIS NOTE IS FURTHER SECURED BY A SEPARATE THIRD PARTY PLEDGE
AGREEMENT FOR THE STOCK OF SAGEBRUSH, INC. EXECUTED BY WSMP,
INC.; TENNESSEE WSMP, INC.; AND SOUTH CAROLINA WSMP, INC.
If this agreement covers timber to be cut, minerals (including oil and gas),
fixtures or crops growing or to be grown, the description of the real estate is:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] If checked, file this agreement on the real estate records. Record
owner (if not me)
-----------------------------------------------------
- --------------------------------------------------------------------------------
The Property will be used for a [ ] personal [X] business [ ] agricultural
[ ] purpose.
------------
<PAGE> 4
ADDITIONAL TERMS OF THE SECURITY AGREEMENT
GENERALLY - This agreement secures this note and any other debt I have with you,
now or later. However, it will not secure other debts if you fail with respect
to such other debts, to make any required disclosure about this security
agreement or if you fail to give any required notice of the right of rescission.
If property described in this agreement is located in another state, this
agreement may also, in some circumstances, be governed by the law of the state
in which the Property is located.
OWNERSHIP AND DUTIES TOWARD PROPERTY - I represent that
I own all of this Property, or to the extent this is a purchase money security
interest I will acquire ownership of the Property with the proceeds of the loan.
I will defend it against any other claim. Your claim to the Property is ahead of
the claims of any other creditor. I agree to do whatever you require to protect
your security interest and to keep your claim in the Property ahead of the
claims of other creditors. I will not do anything to harm your position.
I will keep books, records and accounts about the Property and my
business in general. I will let you examine these records at any reasonable
time. I will prepare any report or account you request, which deals with the
Property.
I will keep the Property in my possession and will keep it in good
repair and use it only for the purpose(s) described on page 1 of this agreement.
I will not change this specified use without your express written permission. I
represent that I am the original owner of the Property and, if I am not, that I
have provided you with a list of prior owners of the Property.
I will keep the Property at my address listed on page 1 of this
Agreement, unless we agree I may keep it at another location. If the Property is
to be used in another state, I will give you a list of those states. I will not
try to sell the Property unless it is inventory or I receive your written
permission to do so. If I sell the Property I will have the payment made payable
to the order of you and me.
You may demand immediate payment of the debt(s) if the debtor is not a
natural person and without your written consent; (1) a beneficial interest in
the debtor is sold or transferred, or (2) there is a change in either the
identity or number of members of the partnership, or (3) there is a change in
ownership of more than 25 percent of the voting stock of a corporation.
I will pay all taxes and charges on the Property as they become due.
You have the right of reasonable access in order to inspect the Property. I will
immediately inform you of any loss or damage to the Property.
If I fail to perform any of my duties under this security agreement, or
any mortgage, deed of trust, lien or other security interest, you may without
notice to me perform the duties or cause them to be performed. Your right to
perform for me shall not create an obligation to perform and your failure to
perform will not preclude you from exercising any of your other rights under the
law or this security agreement.
PURCHASE MONEY SECURITY INTEREST - For the sole purpose of determining the
extent of a purchase money security interest arising under this security
agreement: (a) payments on any nonpurchase money loan also secured by this
agreement will not be deemed to apply to the Purchase Money Loan, and (b)
payments on the Purchase Money Loan will be deemed to apply first to the
nonpurchase money portion of the loan, if any, and then to the purchase money
obligation in the order in which the items of collateral were acquired or if
acquired at the same time, in the order selected by you. No security interest
will be terminated by application of this formula. "Purchase Money Loan" means
any loan the proceeds of which, in whole or in part, are used to acquire any
collateral securing the loan and all extensions, renewals, consolidations and
refinancing of such loan.
PAYMENTS BY LENDER - You are authorized to pay, on my behalf, charges I am or
may become obligated to pay to preserve or protect the secured property (such as
property insurance premiums). You may treat those payments as advances and add
them to the unpaid principal under the note secured by this agreement or your
may demand immediate payment of the amount advanced.
INSURANCE - I agree to buy insurance on the Property against the risks and for
the amounts you require and to furnish you continuing proof of coverage. I will
have the insurance company name you as loss payee on any such policy. You may
require added security if you agree that insurance proceeds may be used to
repair or replace the Property. I will buy insurance from a firm licensed to do
business in the state where you are located. The firm will be reasonably
acceptable to you. The Insurance will last until the Property is released from
this agreement. If I fail to buy or maintain the insurance (or fail to name you
as loss payee) you may purchase it yourself.
WARRANTIES AND REPRESENTATIONS - If this agreement includes accounts, I will not
settle any account for less than its full value without your written permission.
I will collect all accounts until you tell me otherwise. I will keep the
proceeds from all the accounts and any goods which are returned to me or which I
take back in trust for you. I will not mix them with any other property of mine.
I will deliver them to you at your request. If you ask me to pay you the full
price on any returned items or items retaken by myself, I will do so.
If this agreement covers inventory, I will not dispose of it except in
my ordinary course of business at the fair market value for the Property, or at
a minimum price established between you and me.
If this agreement covers farm products, I will provide you, at your
request, a written list of the buyers, commission merchants or selling agents to
or through whom I may sell my farm products. In addition to those parties named
on this written list, I authorize you to notify at your sole discretion any
additional parties regarding your security interest in my farm products. I
remain subject to all applicable penalties for selling my farm products in
violation of my agreement with you and the Food Security Act. In this paragraph
the terms farm products, buyers, commission merchants and selling agents have
the meanings given to them in the Federal Food Security Act of 1985.
REMEDIES - I will be in default on this security agreement if I am in default on
any note this agreement secures or if I fail to keep any promise contained in
the terms of this agreement. If I default, you have all of the rights and
remedies provided in the note and under the Uniform Commercial Code. You may
require me to make the secured property available to you at a place which is
reasonably convenient. You may take possession of the secured property and sell
it as provided by law. The proceeds will be applied first to your expenses and
then to the debt. I agree that 10 days written notice sent to my last known
address by first class mail be reasonable notice under the Uniform Commercial
Code. My current address is on page 1. I agree to inform you in writing of any
change of my address.
FILING - A carbon, photographic or other reproduction of this security agreement
or the financing statement covering the Property described in this agreement may
be used as a financing statement where allowed by law. Where permitted by law,
you may file a financing statement which does not contain my signature, covering
the Property secured by this agreement.
- --------------------------------------------------------------------------------
Any person who signs within this box does so to give you a security interest in
the Property described on this page. This person does not promise to pay the
note. "I" as used in this security agreement will include the borrower and any
person who signs within this box.
Date:
------------------------------
Signed:
-----------------------------
- --------------------------------------
(page 2 of 3)
/s/ BH
------- -------
<PAGE> 5
ADDITIONAL TERMS OF THE NOTE
DEFINITIONS - As used on pages 1 and 2, "[X]" means the terms that apply to this
loan, "I," "me" or "my" means each Borrower who signs this note and each other
person or legal entity (including guarantors, endorsers, and sureties) who
agrees to pay this note (together referred to as "us"). "You" or "your" means
the Lender and its successors and assigns.
APPLICABLE LAW - The law of the state of Virginia will govern this agreement.
Any term of this agreement which is contrary to applicable law will not be
effective, unless the law permits you and me to agree to such a variation. If
any provision of this agreement cannot be enforced according to its terms, this
fact will not affect the enforceability of the remainder of this agreement. No
modification of this agreement may be made without your express written consent.
Time is of the essence in this agreement.
PAYMENTS - Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of each
payment will then reduce accrued unpaid interest, and then unpaid principal. If
you and I agree to a different application of payments, we will describe our
agreement on this note. I may prepay a part of, or the entire balance of this
loan without penalty, unless we specify to the contrary on this note. Any
partial prepayment will not excuse or reduce any later scheduled payment until
this note is paid in full (unless , when I make the prepayment, you and I agree
in writing to the contrary).
INTEREST - Interest accrues on the principal remaining unpaid from time to time,
until paid in full. If I receive the principal in more than one advance, each
advance will start to earn interest only when I receive the advance. The
interest rate in effect on this note at any given time will apply to the entire
principal sum outstanding at that time. Notwithstanding anything to the
contrary, I do not agree to pay and you do not intend to charge any rate of
interest that is higher than the maximum rate of interest you could charge under
applicable law for the extension of credit that is agreed to in this note
(either before or after maturity). If any notice of interest accrual is sent and
is in error, we mutually agree to correct it, and if you actually collect more
interest than allowed by law and this agreement, you agree to refund it to me.
INDEX RATE - The index will serve only as a device for setting the interest rate
on this note. You do not guarantee by selecting this index, or the margin, that
the interest rate on this note will be the same rate you charge on any other
loans or class of loans you make to me or other borrowers.
POST MATURITY RATE - For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS - If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph on page 2.
MULTIPLE ADVANCE LOANS - If this a multiple advance loan, you and I expect that
you will make more than one advance of principal. If this is closed end credit,
repaying a part of the principal will not entitle me to additional credit.
SET-OFF - I agree that you may set off any amount due and payable under this
note against any right I have to receive money from you.
"Right to receive money from you" means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an item presented to you or in
your possession for collection or exchange; and
(3) any repurchase agreement or other nondeposit obligation.
"Any amount due and payable under this note" means the total amount of
which you are entitled to demand payment under the terms of this note at the
time you set off. This total includes any balance the due date for which you
properly accelerate under this note.
If my right to receive money from you is also owned by someone who has
not agreed to pay this note, your right to set-off will apply to my interest in
the obligation and to any other amounts I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.
You will not be liable for the dishonor of any check when the dishonor
occurs because you set off this debt against any of my accounts. I agree to hold
you harmless from any such claims arising as a result of your exercise of your
right to set-off.
DEFAULT - I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
Property insured, if required; (3) I fail to pay, or keep any promise, on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I owe him through court proceedings; (5) I die, am declared
incompetent, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (8) I make any written statement or provide any
financial information I know is untrue or inaccurate at the time it was
provided; (7) I do or fail to do something which causes you to believe you will
have difficulty collecting the amount I owe you; (8) any collateral securing
this note is used in a manner or for a purpose which threatens confiscation by a
legal authority; (9) I change my name or assume an additional name without first
notifying you before making such a change; (10) I fail to plant, cultivate, and
harvest crops in due season if I am a producer of crops; (11) any loan proceeds
are used for a purpose that will contribute to excessive erosion of highly
erodible land or to the conversion of wetlands that produce an agricultural
commodity, as further explained in 7 C.F.R.P. Part 1940, Subpart G, Exhibit M.
REMEDIES - If I am in default on this note you have, but are not limited to, the
following remedies:
(1) You may demand immediate payment of all I owe you under this note
(principal, accrued paid interest and other accrued unpaid charges).
(2) You may set off this debt against any right I have to the payment
of money from you, subject to the terms of the "SET-OFF" paragraph
herein.
(3) You may demand security, additional security, or additional parties
to be obligated to pay this note as a condition for not using any other
remedy.
(4) You may refuse to make advances to me or allow purchases
on credit by me.
(5) You may use any remedy you have under state or federal
law.
(6) You may make use of any remedy given to you in any
agreement securing this note.
By selecting any one or more of these remedies you do not give up your
right to use later any other remedy. By waiving your right to declare any event
to be a default, you do not waive your right to consider later the event a
default if it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES - I agree to pay all costs of collection,
replevin or any other or similar type of cost if I am in default. In addition,
if you hire an attorney to collect this note, I also agree to pay any fee you
incur with such attorney plus court costs (except where prohibited by law). To
the extent permitted by the United States Bankruptcy Code, I also agree to pay
the reasonable attorney's fees and costs you incur to collect this debt as
awarded by any court exercising jurisdiction under the Bankruptcy Code.
WAIVER - I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest); or
(3) give notice that amounts due have not been paid (notice of
dishonor).
I waive any defense I have based on suretyship or impairment of
collateral.
OBLIGATIONS INDEPENDENT - I understand that I must pay this note even if someone
else has also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement). You may sue me alone, or anyone else who is obligated
on this note, or any number of us together, to collect this note. You may
without notice release any party to this agreement without releasing any other
party. If you give up any of your rights, with our without notice, it will not
affect my duty to pay this note. Any extension of new credit to any of us, or
renewal of this note by all or less than all of us will not release me from my
duty to pay it.
<PAGE> 6
(Of course, you are entitled to only one payment in full.) I agree that you may
at your option extend this note or the debt represented by this note, or any
portion of the note or debt, from time to time without limit or notice and for
any term without affecting my liability for payment of this note. I will not
assign my obligation under this agreement without your prior written approval.
CREDIT INFORMATION - I agree and authorize you to obtain credit information
about me from time to time (for example, by requesting a credit report) and to
report to others your credit experience with me (such as a credit reporting
agency). I agree to provide you, upon request, any financial statement or
information you may deem necessary. I warrant that the financial statements and
information I provide to you are or will be accurate, correct and complete.
CONFESSION OF JUDGMENT AND WAIVER OF EXEMPTION - If agreed on page 1 then, in
addition to your remedies listed herein, I authorize the attorneys in fact named
on page 1 of this agreement, in the event of my default, to appear in the office
listed on page 1, and to confess judgment. The confession of judgment may be
without process, against me, in favor of you, for any unpaid principal, accrued
interest and accrued charges due on this agreement, together with collection
costs including reasonable attorney's fees. I waive the benefit of all homestead
and other exemptions and I agree that the judgment shall be a lien on my
principal residence immediately upon confession. This power of attorney shall
not terminate upon my disability.
SIGNATURES: I AGREE TO THE TERMS OF THIS AGREEMENT (INCLUDING THOSE ON PAGES 1
AND 2). I have received a copy on today's date.
WSMP, INC.
---------------------------------- ----------------------------------
BY: /s/ Bobby G. Holman
---------------------------------- ----------------------------------
BOBBY G. HOLMAN - TREASURER AND CFO
---------------------------------- ----------------------------------
SIGNATURE FOR LENDER: X /s/ J.L. Forlines
---------------------------------
J.L. Forlines
(page 3 of 3)
<PAGE> 1
EXHIBIT 99.E
SECURITY AGREEMENT
(Collateral Pledge Agreement)
Date: DECEMBER 31, 1996
-----------------------
Debtor WSMP, INC. Secured FIRST CENTURY BANK
Party
Business
or Address
Residence P.O. BOX 399 200 PEPPERS FERRY ROAD
Address PO BOX 879
City, City,
State & CLAREMONT, NC 28610 State & WYTHEVILLE, VA 24382
Zip Code Zip Code
1. Security Interest and Collateral. To secure [check one]:
[ ] the payment and performance of each and every debt, liability and
obligation of every type and description which Debtor may now or at any
time hereafter owe to Secured Party (whether such debt, liability or
obligation now exists or is hereafter created or incurred, and whether
it is or may be direct or indirect, due to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or joint,
several or joint and several); all such debts, liabilities and
obligations being herein collectively referred to as the
"Obligations"),
[X] the debt, liability or obligation of the Debtor to secured party
evidenced by the following: NOTE DATED 12/31/96 IN THE AMOUNT OF
$1,900,000.00, and any extensions, renewals or replacements thereof
(herein referred to as the "Obligations").
Debtor hereby grants Secured Party a security interest (herein called the
"Security Interest") in [check one]:
[ ] all property of any kind now or any time hereafter owned by Debtor,
or in which Debtor may now or hereafter have an interest which may now
be or may at any time hereafter come into the possession or control of
Secured Party's agents or correspondents, whether such possession or
control is given for collateral purposes or for safekeeping, together
with all rights in connection with such property (herein called the
"Collateral"),
[X] the property owned by Debtor and held by Secured Party that is
described as follows: 9,608 SHARES OF THE STOCK OF SAGEBRUSH, INC.
CERTIFICATE S0019 together with all rights in connection with such
property (herein called the "Collateral").
2. Representations, Warranties and Covenants. Debtor represents, warrants and
covenants that:
(a) Debtor will duly endorse, in blank, cash and every instrument
constituting Collateral by signing on said instrument or by signing a separate
document of assignment or transfer, if required by Secured Party.
(b) Debtor is the owner of the Collateral free and clear of all liens,
encumbrances, security interests and restrictions, except the Security Interest
and any restrictive legend appearing on any instrument constituting Collateral.
(c) Debtor will keep the Collateral free and clear of all liens,
encumbrances and security interests, except the Security Interest.
(d) Debtor will pay, when due, all taxes and other governmental charges
levied or assessed upon or against any Collateral.
(e) At any time, upon request by Secured Party in pledge as additional
Collateral all securities distributed on account of the Collateral such as stock
dividends and securities resulting from stock splits, reorganizations and
recapitalizations.
THIS AGREEMENT CONTAINS ADDITIONAL PROVISIONS SET FORTH ON PAGE 2 HEREOF,
ALL OF WHICH ARE MADE A PART HEREOF.
WSMP, Inc.
---------------------------------
Debtor's Name
By: /s/ Bobby G. Holman
---------------------------------
BOBBY G. HOLMAN
Title: TREASURER & CFO
---------------------------------
By:
---------------------------------
Title:
---------------------------------
(page 1 of 2)
<PAGE> 2
ADDITIONAL PROVISIONS
3. RIGHTS OF SECURED PARTY. Debtor agrees that Secured Party may at any time,
whether before or after the occurrence of an Event of Default and without notice
or demand of any kind, (i) notify the obligor or an issuer of any Collateral to
make payments to Secured Party of any amounts due or distributable thereon, (ii)
in Debtor's name or Secured Party's name enforce collection of any Collateral by
suit or otherwise, or surrender, release or exchange all or any part of it, or
compromise, extend or renew for any period any obligation evidenced by the
Collateral, (iii) receive all proceeds of the Collateral, and (iv) hold any
increase or profits received from the Collateral as additional security for the
Obligations, except that any money received from the Collateral shall, at
Secured Party's option, be applied in reduction of the Obligations, in such
order of application as Secured Party may determine, or be remitted to Debtor.
4. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an
event of default under this Agreement (herein called "Event of Default"); (i)
Debtor shall fail to pay any or all of the Obligations when due or (if payable
on demand) on demand, or shall fail to observe or perform any covenant or
agreement herein binding on it; (ii) any representation or warranty by Debtor
set forth in this Agreement or made to Secured Party in any financial statements
or reports submitted to Secured Party by or on behalf of Debtor shall prove
materially false or misleading; (iii) a garnishment summons or a writ of
attachment shall be issued against or served upon the Secured Party for the
attachment of any property of the Debtor or any indebtedness owing to Debtor;
(iv) Debtor or any guarantor of any Obligation shall (A) be or become insolvent
(however defined); (B) voluntarily file, or have filed against it involuntarily,
a petition under the United States Bankruptcy Code; or (C) if a corporation,
partnership or organization, be dissolved or liquidated or, if a partnership,
suffer the death of a partner or, if an individual, die; or (D) go out of
business; (v) Secured Party shall in good faith believe that the value then
realizable by collection or disposition of the Collateral, after deduction of
expenses of collection and disposition, is less than the aggregate unpaid
balance of all Obligations then outstanding; (vi) Secured Party shall in good
faith believe that the prospect of due and punctual payment of any or all of the
Obligations is impaired.
5. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of Default
and at any time thereafter, Secured Party may exercise any one or more of the
following rights or remedies: (i) declare all unmatured Obligations to be
immediately due and payable, and the same shall thereupon be immediately due and
payable, without presentment or other notice or demand; (ii) exercise all voting
and other rights as a holder of the Collateral; (iii) exercise and enforce any
or all rights and remedies available upon default to a secured party under the
Uniform Commercial Code, including the right to offer and sell the Collateral
privately to purchasers who will agree to take the Collateral for investment and
not with a view to distribution and who will agree to the imposition of
restrictive legends on the certificates representing the Collateral, and the
right to arrange for a sale which would otherwise quality as exempt from
regulation under the Securities Act of 1933; and if notice to Debtor of any
intended disposition of the Collateral or any other intended action is required
by law in a particular instance, such notice shall be deemed commercially
reasonable if given at least 10 calendar days prior to the date of intended
disposition or other action; (iv) exercise or enforce any or all other rights or
remedies available to Secured Party by law or agreement against the Collateral,
against Debtor or against any other person or property. Upon the occurrence of
the Event of Default described in Section 4(iv)(B), all Obligations shall be
immediately due and payable without demand or notice thereof.
6. MISCELLANEOUS. Any disposition of the Collateral in the manner provided in
Section 5 shall be deemed commercially reasonable. This Agreement can be waived,
modified, amended, terminated or discharged, and the Security Interest can be
released, only explicitly in a writing signed by Secured Party. A waiver signed
by Secured Party shall be effective only in the specific instance and for the
specific purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any of Secured Party's rights or remedies. All rights
and remedies of Secured Party shall be cumulative and may be exercised
singularly or concurrently, at Secured Party's option, and the exercise or
enforcement of any one such right or remedy shall neither be a condition to nor
bar the exercise or enforcement of any other. All notices to be given to Debtor
shall be deemed sufficiently given if delivered or mailed by registered or
certified mail, postage prepaid, to Debtor at its address set forth above or at
the most recent address shown on Secured Party's records. Secured Party's duty
of care with respect to Collateral in its possession (as imposed by law) shall
be deemed fulfilled if Secured Party exercises reasonable care in physically
safekeeping such Collateral or, in the case of Collateral in the custody or
possession of a bailee or other third person, exercises reasonable care in the
selection of the bailee or other third person, and Secured Party need not
otherwise preserve, protect, insure or care for any Collateral. Secured Party
shall not be obligated to preserve any rights Debtor may have against prior
parties, to exercise at all or in any particular manner any voting rights which
may be available with respect to any Collateral, to realize on the Collateral at
all or in any particular manner or order, or to apply any cash proceeds of
Collateral in any particular order of application. Debtor will reimburse Secured
Party for all expenses (including reasonable attorney's fees and legal expenses)
incurred by Secured Party in the protection, defense or enforcement of the
Security Interest, including expenses incurred in any litigation or bankruptcy
or insolvency proceedings. This Agreement shall be binding upon and inure to the
benefit of Debtor and Secured Party and their respective heirs, representatives,
successors and assigns and shall take effect when signed by Debtor and delivered
to Secured Party, and Debtor waives notice of Secured Party's acceptance hereof.
This Agreement shall be governed by laws of the state in which it is executed,
and unless the context otherwise requires, all terms used herein which are
defined in Articles 1 and 9 of the Uniform Commercial Code, as in effect in said
state, shall have the meanings therein stated. If any provision or application
of this Agreement is held unlawful or unenforceable in any respect, such
illegality or unenforceability shall not affect other provisions or applications
which can be given effect, and this Agreement shall be construed as if the
unlawful or unenforceable provision or application had never been contained
herein or prescribed hereby. All representation and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. If this Agreement is
signed by more than one person as Debtor, the term "Debtor" shall refer to each
of them separately and to both or all of them jointly; all such persons shall be
bound both severally and jointly with the other(s); and the Obligations shall
include all debts, liabilities and obligations owed to Secured Party by a Debtor
or by both or several or all Debtors jointly or jointly and severally, and all
property described in Section 1 shall be included as part of the Collateral,
whether it is owned jointly by both or all Debtors or is owned in whole or in
part by one (or more) of them.
(page 2 of 2)
/s/ BH
------- -------
<PAGE> 1
EXHIBIT 99.F
NON-COMPETITION AGREEMENT
THIS AGREEMENT, made and entered into this the 1st day of March,
1997, by and between CECIL R. HASH, a citizen and resident of Forsyth County,
North Carolina (hereinafter "Hash"), and WSMP, INC., a North Carolina
corporation (hereinafter "WSMP");
W I T N E S S E T H:
WHEREAS, Hash is the owner of F & H Companies, Inc., Western Steer of
North Carolina, Inc., Northwest Food Systems, Inc., Davidson Food Systems, Inc.,
Mocksville Food Systems, Inc., and CFR Foods, Inc. (hereinafter, the "Hash
Companies") and
WHEREAS, the Hash Companies have entered into an Agreement of Purchase
and Sale with WSMP as of even date herewith (the "Agreement of Purchase and
Sale"), by which WSMP has acquired the assets used in the operation of 14 of the
Hash Companies' restaurants, which WSMP intends to continue operating
(hereinafter, the "Hash Companies Restaurants"; and
WHEREAS, Hash has been the major contributor to the success of the Hash
Companies Restaurants in developing, operating and supervising the Hash
Companies' restaurants; and
WHEREAS, Hash and WSMP agree that the preservation of the good will,
proprietary rights and going business value of the Hash Companies Restaurants
for the benefit of WSMP as their new owner will be facilitated by this
Agreement; and
WHEREAS, that the execution and delivery of this Agreement by Hash is a
condition to WSMP's acquisition of the Hash Companies Restaurants;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the consideration
hereinafter stated to Hash, the parties agree as follows:
1. Restrictive Covenants.
For the fifteen year period commencing on the date hereof and ending on
March 1, 2012 ("Term"), Hash shall not, directly or indirectly, except as
otherwise permitted hereunder:
(a.) Own, operate, manage or otherwise have control or
interest in the operation of any restaurant or food service business
similar to the restaurants or food service businesses operated by WSMP
at the date of this Agreement, either as an officer, director,
proprietor, employee, partner, investor (other than as a passive
investor in less than ten percent (10%) of the outstanding stock of a
publicly traded corporation), consultant, advisor, agent, franchisee,
or otherwise in any states in which WSMP presently operates restaurants
or franchises;
(b.) Assist others in engaging in any of the activities
specified in the foregoing Subparagraph (a);
(c.) Induce employees of WSMP to engage in any of the
activities specified in the foregoing Subparagraph (a) or induce any
former Hash Companies employees to terminate their employment with
WSMP.
2. Exceptions.
The parties hereto expressly agree that the following activities of
Hash shall not be included in and shall be specifically excluded from the
prohibitions of this Agreement:
(a.) Any activities of Hash as an employee, director,
consultant, franchisee or agent of WSMP;
(b.) Any activities of Hash in any capacity in connection with
the ownership, operation, investment, or otherwise, in the restaurants
and restaurant franchisees in which Hash has
Page 2
<PAGE> 3
such activities as of the date of this Agreement; and
(c.) Any activities of Hash in any state other than the states
described in Paragraph 1(a).
3. Consideration.
In consideration for the agreements of Hash hereunder, WSMP does hereby
issue and deliver to Hash a total of 98,750 shares of authorized but unissued
WSMP, Inc. common stock (the "WSMP Stock"), which the parties value for the
purpose of this agreement at $9.00 per share, or $888,750, irrespective of the
market price of WSMP Stock at this or any later time.
The WSMP stock will be unregistered, will bear a restrictive legend,
and will be restricted in Hash's hands. Hash acknowledges that sale of such
shares will only be made through the provisions of the Securities and Exchange
Commission's Rule 144. Hash acknowledges and warrants the following:
(a) He is an "accredited investor" within the meaning of Rule
501 under the Securities Act or has sufficient knowledge and experience
in investing in companies similar to WSMP so as to be able to evaluate
the risks and merits of his investment in WSMP and he is able
financially to bear the risks thereof;
(b) He is a resident of, and is domiciled in, the State of
North Carolina; the transactions contemplated by this Agreement have
been negotiated solely in the State of North Carolina; and, without
limiting the generality of the foregoing, the subject matter of this
agreement (i) originated within the State of North Carolina, (ii) was
directed to and received by Hash within the State of North Carolina,
and (iii) has been accepted by communications to WSMP made solely in
the State of North Carolina.
(c) Hash has had an opportunity to discuss the business,
management and financial affairs of WSMP with WSMP's management and has
received (or had made available to him) any financial and business
documents requested by him;
(d) The WSMP Stock being issued to Hash is being
Page 3
<PAGE> 4
acquired for its own account, for investment, and not with a view to or
for sale in connection with any unregistered distribution thereof in
violation of the Securities Act or any state securities act;
(e) Hash understands that (i) the WSMP Stock must be held for
a period of two (2) years unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such
registration, (ii) the WSMP Stock will bear a legend to such effect and
(iii) WSMP will make or cause to be made a notation on its transfer
books to such effect;
(f) Hash does not have any contract, arrangement or
understanding with any broker, finder or similar agent with respect to
the WSMP Stock, or the transactions contemplated by this Agreement.
If any WSMP Stock becomes eligible for resale pursuant to Rule 144(k),
WSMP shall, upon the request of Hash, remove the legend from the certificate for
such WSMP Stock.
4. Breach.
Should Hash breach the terms of this Agreement, WSMP shall be entitled
to demand and receive back from Hash the WSMP Stock as an element of its
damages, provided, however, that should Hash's breach occur in year two through
year 15 of this Agreement, the amount of stock to be returned to WSMP shall be a
pro-rata amount as set forth in Paragraph 6 hereof.
Should the stock no longer be in possession of Hash at the time of the
breach, then WSMP may recover a like sum in cash, based on a valuation of $9.00
per share.
5. Death.
Upon the death of Hash during the term of this Agreement, his estate
shall refund to WSMP a pro-rata portion of the WSMP Stock, as determined under
Paragraph 6 hereof. Should the stock no longer be a possession of Hash at the
time of Hash's death, then WSMP may
Page 4
<PAGE> 5
recover a like sum in cash based upon a valuation of $9.00 per share. In order
to fund this obligation, WSMP shall have the right to acquire a policy of
insurance at WSMP's cost upon Hash's life payable to WSMP in the face amount of
$888,750. This policy shall have a declining term, and shall reduce itself to
the amounts set forth in Paragraph 6 for each passing year of the term of this
Agreement.
6. Pro Rata Determinations.
For the purposes of Paragraphs 5 and 6 hereof, the parties agree that
should a breach or Hash's death occur any one of the following years of the term
of this Agreement, the pro-rata recovery of WSMP shall be as follows:
<TABLE>
<CAPTION>
Year Shares of Stock Cash
- ---- --------------- ----
<S> <C> <C>
One 98,750 $888,750
Two 92,150 828,750
Three 85,550 768,750
Four 78,950 708,750
Five 72,350 648,750
Six 65,750 588,750
Seven 59,150 528,750
Eight 52,550 468,750
Nine 45,950 408,750
Ten 39,350 348,750
Eleven 32,750 288,750
Twelve 26,150 228,750
Thirteen 19,550 168,750
Fourteen 12,950 108,750
Fifteen 6,300 48,750
</TABLE>
7. Change in Control.
a. Right to Register. Should there ever occur a "change in control"
of WSMP, then Hash may require WSMP to take all necessary steps promptly to
file a registration statement so as to permit a public offering of the WSMP
Stock by Hash, and to utilize its best efforts to have the registration
statement declared effective at the earliest
Page 5
<PAGE> 6
practical date under the Securities Act of 1933 and all applicable state Blue
Sky Laws.
b. "Change in Control". As used herein, "change in control" shall
mean (i) any direct or indirect change in the ownership of WSMP by HERTH
Management, Inc., RSH Management, Inc., James C. Richardson, Jr., Richard F.
Howard, James M. Templeton, or their affiliates which reduces their collective
ownership below 40%; or, once their collective holdings are below 40%, then
again if their collective holdings are reduced to below 25%; or (ii) should
James C. Richardson, Jr. or Richard F. Howard leave the active employment or
involvement with WSMP.
7. Judicial Amendments.
It is expressly understood and agreed that although Hash and WSMP
consider the restrictions contained in this Agreement to be reasonable for the
purpose of preserving for WSMP's benefit the good will, proprietary rights, and
going business value of the Company's businesses, if a final judicial
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unreasonable or otherwise unenforceable restriction against Hash, the provisions
of this Agreement shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such other extent as such
court may judicially determine or indicate to be reasonable.
8. WSMP's Remedies.
It is expressly understood and agreed that WSMP's remedy at law for a
breach or threatened breach of any of the provisions of Paragraph 1 of this
Agreement would be inadequate and, in recognition of that fact, in the event of
a breach or threatened breach by Hash, of the provisions of Paragraph 1 of this
Agreement, WSMP, in addition to its remedy at law, shall be entitled to obtain,
and Hash shall not oppose WSMP's request for, equitable
Page 6
<PAGE> 7
relief in the form of specific performance, a temporary restraining order, a
temporary or permanent injunction, or any other equitable remedy which may then
be available.
9. Waiver.
The Waiver by WSMP of a breach of any provision of this Agreement by
Hash shall not operate or be construed as a waiver of any subsequent breach by
Hash.
10. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina.
11. Provisions.
The provisions of this Agreement shall inure to the benefit of the
parties hereto, their heirs, representatives, successors and assigns.
12. Conditional Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the
obligations hereunder it conditioned upon and shall be effective only upon
closing and consummation of the Agreement of Purchase and Sale in accordance
with its terms.
Page 7
<PAGE> 8
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement,
this the day and year first above written.
/s/ CECIL R. HASH
---------------------------(SEAL)
CECIL R. HASH
WSMP, INC.
By: /s/ James C. Richardson, Jr.
------------------------------
President
ATTEST:
/s/ Matthew V. Hollifield
- ----------------------------------
Asst. Secretary
(corporate seal)
Page 8
<PAGE> 1
EXHIBIT 99.G
GUARANTY AGREEMENT
FOR VALUE RECEIVED, and as an inducement to and part of the
consideration for:
(i) the execution and delivery by WSMP, Inc. (the "Buyer") of the
Agreement of Purchase and Sale dated as of February 28, 1997, between
the Buyer and F & H Companies, Inc., Western Steer of North Carolina,
Inc., Northwest Food Systems, Inc., Mocksville Food Systems, Inc.,
Davidson Food Systems, Inc. and CFR Foods, Inc. (the "Sellers")
providing for the purchase of certain restaurant assets from the
Sellers (the "Agreement of Purchase and Sale"); and
(ii) the execution and delivery by the Buyer of the Non-Competition
Agreement dated as of February 28, 1997, between the Buyer and Cecil R.
Hash (the "Guarantor"); and
(iii) the execution and delivery by the Buyer of certain Promissory
Notes dated as of March 1, 1997 to certain of the Sellers pursuant to
the Agreement of Purchase and Sale (the "Promissory Notes");
(iv) the execution by the Buyer of Assignments dated March 1, 1997,
accepting assignment of eleven leases under which the Sellers were
lessees, and the execution and delivery of three Lease Agreements dated
March 1, 1997, with Cecil R. Hash or CFR Foods, Inc. (collectively "the
Leases").
The Guarantor does hereby represent, warrant, covenant and agree with
the Buyer and its successors and assigns, the following:
SECTION 1. GUARANTY OF OBLIGATIONS.
The Guarantor does hereby unconditionally GUARANTEE:
(a) the full and prompt payment when due by the Sellers of each and
every payment of fees, expenses, disbursements and other amounts agreed
to be paid by the Sellers pursuant to the Agreement of Purchase and
Sale and all other sums owing by the Sellers pursuant to the Agreement
of Purchase and Sale, all at the time and place and to the person
entitled thereto under the terms of the Agreement of Purchase and Sale;
(b) in addition to the obligations to pay the amounts guaranteed in
paragraph (a) above, the full and prompt performance and observance by
the Lessee of each and all of the other covenants, warranties,
indemnities and agreements required to be performed, observed or
defended by the Sellers under the terms of the Agreement of Purchase
and Sale; and
(c) payment, upon demand by any person entitled thereto, of all costs
and expenses, legal or otherwise (including reasonable attorneys'
fees), as shall be expended or incurred in the protection or
enforcement of any right or privilege under the Agreement of Purchase
1
<PAGE> 2
and Sale which the Sellers are obligated to protect or enforce or in
the protection or enforcement of any rights, privileges or liabilities
under this Section 1 of this Guaranty Agreement or action in connection
therewith.
SECTION 2. GENERAL PROVISIONS RELATING TO THE GUARANTY.
(a) Each and every event of default in the Agreement of Purchase and
Sale and each and every default in payment of performance of any
obligation of the Sellers under the Agreement of Purchase and Sale
shall give rise to a separate claim and cause of action hereunder, and
separate claims or suits may be made and brought, as the case may be
hereunder as each such default occurs.
(b) The guaranty hereunder shall be a continuing, absolute,
unconditional and irrevocable guaranty of payment and performance as
aforesaid and shall remain in full force and effect until the
obligations of the Sellers shall have been fully and satisfactorily
discharged in accordance with the terms and provisions of the Agreement
of Purchase and Sale and the Guarantor shall have fully and
satisfactorily discharged all of his obligations under this Guaranty
Agreement.
(c) The guaranty and the liability of the Guarantor hereunder shall be
primary, direct and immediate and shall remain in full force and effect
irrespective of the genuineness, validity, regularity or enforceability
of the Agreement of Purchase and Sale or of any assignment or
termination of Agreement of Purchase and Sale and shall in no wise be
affected or impaired by (and no notice to the Guarantor shall be
required in respect of) any compromise, waiver, settlement, release,
renewal, extension, indulgence, change in or modification of any of the
obligations and liabilities of the Sellers under the Agreement of
Purchase and Sale, or by any redelivery, repossession, surrender or
destruction of the Restaurants or any item thereof in whole or in part,
or the transfer, assignment, subletting or mortgaging or the purported
transfer, assignment, subletting or mortgaging of all or any part of
the interest of Buyer in the Restaurants or any failure of title with
respect to the Buyer or the interest in the Restaurants or any failure,
neglect or omission as the part of the Buyer or any other person to
give the Guarantor notice of the occurrence of any default by the
Sellers under the Agreement of Purchase and Sale or to realize upon any
obligations or liabilities of the Sellers, nor shall the obligation and
liability of the Guarantor hereunder be impaired, diminished, abated,
modified, changed, released, limited or otherwise affected by any set
off, defense or counterclaim which the Sellers, the Buyer or the
Guarantor may have or claim to have (other than payment of the
obligations of the Sellers under the Agreement of Purchase and Sale or
the performance of the Sellers of their other obligations under said
agreements, at any time or from time to time or by the commencement by
or against the Buyer, the Sellers or the Guarantor of any proceedings
under any bankruptcy or insolvency law or laws relating to the relief
of debtors, readjustment of indebtedness, reorganizations,
arrangements, compositions or extensions or other similar laws or by
any merger or consolidation of the Sellers or the Guarantor into, or
with any other corporation or any sale, lease or transfer of any of the
assets of the Sellers or the Guarantor to any other person, or any
change in the ownership of any shares of capital stock of the Sellers,
it being the intent and purpose hereof that the Guarantor shall not be
entitled to and does hereby waive any
2
<PAGE> 3
and all defenses available to guarantors, sureties and other secondary
parties at law or in equity, whether or not referred to above. In order
to hold the Guarantor liable hereunder, there shall be no obligation on
the part of any person at any time to demand or resort for payment or
performance to the Lessee or to any other person or corporation, their
properties or assets or to any security, property or other rights or
remedies whatsoever, and each person entitled to receive payments or
the benefit or performance guaranteed hereunder shall have the right to
enforce this guaranty irrespective of whether or not proceedings or
steps are pending seeking resort to or realization upon or from any of
the foregoing. Without limiting the foregoing, it is understood that
repeated and successive demands may be made and recoveries may be had
hereunder as and when, from time to time, the Sellers shall default
under the terms of the Agreement of Purchase and Sale, and that
notwithstanding recovery hereunder for or in respect of any given
default or defaults by the Sellers under the Agreement of Purchase and
Sale, this guaranty shall remain in force and effect and shall apply to
each and every subsequent default. So long as default under the
Agreement of Purchase and Sale shall have occurred and be continuing or
a default by the Guarantor hereunder, any claim against the Sellers by
way of subrogation or otherwise which the Guarantor shall have by
reason of any payment to the Lessor or any other person pursuant to
this Guaranty Agreement shall not be asserted, enforced or collected as
against (or to the detriment of) the Sellers (including, without
limitation, any liquidator, trustee in bankruptcy, assignee for the
benefit of creditors or receiver of property of assets of the Sellers),
the Buyer or such other person in any action, suit or proceeding.
(d) No act or omission of any kind or at any time on the part of the
Buyer or any other person in respect of any matter whatsoever shall in
any way affect or impair this guaranty.
(e) The payment by the Guarantor to any person or any amount pursuant
to this Guaranty Agreement shall not in any way entitle the Guarantor
to any right, title or interest of such person under the Agreement of
Purchase and Sale; provided that upon any payment by the Guarantor in
accordance with this Guaranty Agreement, the Guarantor shall be
subrogated to the rights of the payee to receive any such payment from
the Sellers and shall be entitled to receive such payment from the
Sellers to recover any amount paid by the Guarantor pursuant to this
Guaranty Agreement from the Sellers; provided, further, that the
foregoing right to subrogation shall be subordinate to the rights of
such payee and any other person entitled to payment or performance
hereunder and under the Agreement of Purchase and Sale; and provided
further that the Guarantor shall not be entitled to receive any such
payment or to recover any such amount, whether pursuant to the
foregoing right of subrogation or otherwise, so long as a default by
the Guarantor hereunder shall have occurred and be continuing.
(f) The obligations of the Guarantor set forth herein constitute the
full recourse obligations of the Guarantor.
(g) The Guarantor unconditionally waives, to the extent permitted by
applicable law, notice of any of the matters specified in paragraph (c)
hereof, all notices which may be required by statute, rule of law or
otherwise, now or hereafter in effect to preserve intact
3
<PAGE> 4
any rights against the Guarantor, including, without limitation, any
demand, presentment and protest, proof of notice of non-payment under
Sellers Agreement of Purchase and Sale and notice of default or any
failure on the part of the Sellers to perform and comply with any
covenant, agreement, term or condition of the Agreement of Purchase and
Sale any right to the enforcement, assertion or exercise against the
Sellers of any right, power, privilege or remedy conferred in the
Agreement of Purchase and Sale or otherwise, any requirement of
diligence on the part of any person, any requirement to exhaust any
remedies or to mitigate the damages resulting from default under the
Agreement of Purchase and Sale.
(h) At the option of the Buyer, the Guarantor may be joined in any
action or proceeding commenced by any such party against the Sellers in
connection with or based on the Agreement of Purchase and Sale or any
provision thereof, and recovery for which the Guarantor is liable
hereunder may be had against the Guarantor in any such action or
proceeding or in any independent action or proceeding against the
Guarantor, without any requirement that any such party first assert,
prosecute or exhaust any remedy or claim against the Sellers.
(i) The guaranty hereunder shall continue to be effective to be
reinstated, as the case may be, if at any time any payment of any
obligation guaranteed hereunder is rescinded or must otherwise be
returned by the person to whom payment thereof was made upon the
insolvency, bankruptcy or reorganization of the Sellers or otherwise,
all as though such payment had not been made.
SECTION 3. MISCELLANEOUS
This guaranty and every part hereof shall be binding upon the Guarantor
and his heirs, representatives, successors and assigns, and shall inure to the
benefit of, and the Buyer shall be directly enforceable by, the Buyer and its
respective successors and assigns including without limitation any subsequent
assignee of any lease.
This guaranty shall be governed by and construed in accordance with the
laws of the State of North Carolina.
Unless otherwise defined herein or unless the context otherwise
requires, the capitalized terms used in this Guaranty Agreement shall have the
meanings specified in the Agreement of Purchase and Sale.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement to
be executed as of March 1, 1997.
/s/ Cecil R. Hash (SEAL)
------------------------------
CECIL R. HASH
4
<PAGE> 1
EXHIBIT 99.H
PROMISSORY NOTE
$700,000.00 Claremont, North Carolina March 1, 1997
FOR VALUE RECEIVED the undersigned promises to pay to WESTERN STEER OF
NORTH CAROLINA, INC. or order, the principal sum of Seven Hundred Thousand
Dollars ($700,000.00), with interest from this date, at the rate of five percent
(5%) per annum on the unpaid balance until paid or until default, both principal
and interest payable in lawful money of the United States of America, at the
office of WESTERN STEER OF NORTH CAROLINA, INC., 3536 Vest Mill Road,
Winston-Salem, North Carolina 27103, or at such place as the legal holder hereof
may designate in writing. The principal and interest shall be due and payable as
follows:
ALL PRINCIPAL AND INTEREST payable in full on March 1, 1999.
If not sooner paid, the entire remaining indebtedness shall be due and
payable on March 1, 1999.
In the event of (a) default in payment of principal or interest hereof
as the same becomes due and such default is not cured within five (5) days from
the due date, or (b) default under the terms of any instrument securing this
Note, and such default is not cured within fifteen (15) days after written
notice to maker, then in either such event the holder may without further
notice, declare the remainder of the principal sum, together with all interest
accrued thereon, at once due and payable. Failure to exercise this option shall
not constitute waiver of the right to exercise the same at any other time. The
unpaid principal of this Note and any part thereof, accrued interest and all
other sums due under this Note, if any, shall bear interest at the rate of
twelve percent (12%) per annum after default until paid.
All parties to this note, including maker and any sureties, endorsers,
or guarantors hereby waive protest, presentment, notice of dishonor, and notice
of acceleration of maturity and agree to continue to remain bound for the
payment of principal, interest and all other sums due under this Note
notwithstanding any change or changes by way of release, surrender, exchange,
modification or substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and interest; and
all parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice or consent of any of them.
Upon default the holder of this Note may employ an attorney to enforce
the holder's right and remedies and the maker, principal, surety, guarantor and
endorsers of this note hereby agree to pay to the holder reasonable attorney
fees not exceeding a sum equal to fifteen percent (15%) of the outstanding
balance owing on said Note, plus all other reasonable expenses incurred by the
holder in exercising any of the holder's rights and remedies upon default. The
rights and remedies of the holder as provided in this Note and any instrument
securing this Note shall be cumulative and may be pursued singly, successively,
or together against funds, property, or security held by the holder for payment
or security, in the sole discretion of the holder. The
<PAGE> 2
failure to exercise any such right or remedy shall not be a waiver or release of
such rights or remedies or the right to exercise any of them at another time.
This Note is issued as part of a transaction set forth in an Agreement
of Purchase and Sale dated February 28, 1997, the terms of which are
incorporated herein by reference as if set forth herein in full.
This Note is to be governed and construed in accordance with the laws
of the State of North Carolina.
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
instrument to be signed in its corporate name by its officers the day and year
first above written.
WSMP, INC.
By: /s/ James C. Richardson, Jr.
----------------------------
President
ATTEST:
/s/ Matthew V. Hollifield
- -----------------------------------
Asst. Secretary
(corporate Seal)
<PAGE> 1
EXHIBIT 99.I
PROMISSORY NOTE
$100,000.00 Claremont, North Carolina March 1, 1997
FOR VALUE RECEIVED the undersigned promises to pay to DAVIDSON FOOD
SYSTEMS, INC. or order, the principal sum of One Hundred Thousand Dollars
($100,000.00), with interest from this date, at the rate of five percent (5%)
per annum on the unpaid balance until paid or until default, both principal and
interest payable in lawful money of the United States of America, at the office
of DAVIDSON FOOD SYSTEMS, INC., 3536 Vest Mill Road, Winston-Salem, North
Carolina 27103, or at such place as the legal holder hereof may designate in
writing. The principal and interest shall be due and payable as follows:
ALL PRINCIPAL AND INTEREST payable in full on March 1, 1999.
If not sooner paid, the entire remaining indebtedness shall be due and
payable on March 1, 1999.
In the event of (a) default in payment of principal or interest hereof
as the same becomes due and such default is not cured within five (5) days from
the due date, or (b) default under the terms of any instrument securing this
Note, and such default is not cured within fifteen (15) days after written
notice to maker, then in either such event the holder may without further
notice, declare the remainder of the principal sum, together with all interest
accrued thereon, at once due and payable. Failure to exercise this option shall
not constitute waiver of the right to exercise the same at any other time. The
unpaid principal of this Note and any part thereof, accrued interest and all
other sums due under this Note, if any, shall bear interest at the rate of
twelve percent (12%) per annum after default until paid.
All parties to this note, including maker and any sureties, endorsers,
or guarantors hereby waive protest, presentment, notice of dishonor, and notice
of acceleration of maturity and agree to continue to remain bound for the
payment of principal, interest and all other sums due under this Note
notwithstanding any change or changes by way of release, surrender, exchange,
modification or substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and interest; and
all parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice or consent of any of them.
Upon default the holder of this Note may employ an attorney to enforce
the holder's right and remedies and the maker, principal, surety, guarantor and
endorsers of this note hereby agree to pay to the holder reasonable attorney
fees not exceeding a sum equal to fifteen percent (15%) of the outstanding
balance owing on said Note, plus all other reasonable expenses incurred by the
holder in exercising any of the holder's rights and remedies upon default. The
rights and remedies of the holder as provided in this Note and any instrument
securing this Note shall be cumulative and may be pursued singly, successively,
or together against funds, property, or security held by the holder for payment
or security, in the sole discretion of the holder. The
<PAGE> 2
failure to exercise any such right or remedy shall not be a waiver or release of
such rights or remedies or the right to exercise any of them at another time.
This Note is issued as part of a transaction set forth in an Agreement
of Purchase and Sale dated February 28, 1997, the terms of which are
incorporated herein by reference as if set forth herein in full.
This Note is to be governed and construed in accordance with the laws
of the State of North Carolina.
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
instrument to be signed in its corporate name by its officers the day and year
first above written.
WSMP, INC.
By: /s/ James C. Richardson, Jr.
------------------------------
President
ATTEST:
/s/ Matthew V. Hollifield
- --------------------------------
Asst. Secretary
(corporate Seal)
