<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 4, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ____________ to ____________
COMMISSION FILE NUMBER: 0-7277
FRESH FOODS, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA
(State or other jurisdiction of incorporation or organization)
56-0945643
(I.R.S. Employer Identification No.)
361 SECOND STREET, NW
HICKORY, NORTH CAROLINA 28601
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (513) 874-8741
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (3) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 1, 2000
----- ------------------------------
COMMON STOCK, NO PAR VALUE 5,848,649
<PAGE> 2
FRESH FOODS, INC.
INDEX
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets -
December 4, 1999 and March 6, 1999.................................. 1-2
Consolidated Statements of
Operations and Retained Earnings -
Thirteen Weeks Ended December 4, 1999
and Thirteen Weeks Ended December 5, 1998........................... 3-4
Consolidated Statements of
Operations and Retained Earnings -
Thirty-Nine Weeks Ended December 4, 1999
and Forty Weeks Ended December 5, 1998.............................. 5-6
Consolidated Statements of Cash
Flows - Thirty-Nine Weeks Ended December 4, 1999 and
Forty Weeks Ended December 5, 1998.................................. 7-8
Notes to Consolidated Financial
Statements.......................................................... 9-16
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.................... 17-22
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K........................... 23-25
Signatures.......................................................... 26
Index to Exhibits................................................... 27
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRESH FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
December 4, March 6,
1999 1999
----------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,988,325 $ 1,664,398
Accounts receivable, net (includes related party receivables of
$331,924 and $326,147 at December 4, 1999 and March 6, 1999,
respectively) 17,612,501 18,565,152
Notes receivable, net (includes related party notes receivable of
$857,949 and $986,457 at December 4, 1999 and March 6, 1999,
respectively) 908,800 1,122,268
Inventories 32,119,779 30,430,482
Income taxes receivable 2,146,788 --
Deferred income taxes 1,101,761 2,722,095
Prepaid expenses and other current assets (includes related party
prepaid expenses of $105,356 at December 4, 1999) 794,851 988,023
------------ ------------
Total current assets 60,672,805 55,492,418
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 34,734,290 74,999,394
------------ ------------
OTHER ASSETS:
Properties held for sale -- 2,086,847
Trade name, net 42,134,136 43,242,636
Excess of cost over fair value of net assets of businesses acquired,
net 29,149,379 32,623,400
Other intangible assets, net 2,604,953 3,520,053
Notes receivable (includes related party notes receivable of $313,274
at March 6, 1999) -- 367,494
Deferred loan origination fees, net 3,906,746 4,524,753
Other -- 132,028
------------ ------------
Total other assets 77,795,214 86,497,211
------------ ------------
Total assets $173,202,309 $216,989,023
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 4
FRESH FOODS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
December 4, March 6,
1999 1999
---------------- ----------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt $ 359,534 $ 673,752
Trade accounts payable (includes related party payables of $180,324
and $92,370 at December 4, 1999 and March 6, 1999, respectively) 4,834,892 11,255,920
Income taxes payable -- 151,366
Accrued insurance 145,032 1,155,942
Accrued interest 140,211 3,533,771
Accrued payroll and payroll taxes 5,236,749 4,941,033
Accrued marketing and advertising (includes related party payables
of $18,096 at December 4, 1999) 2,377,268 1,420,580
Accrued taxes (other than income and payroll) 461,536 1,176,888
Other accrued liabilities (includes related party accrued liabilities of
$1,695,922 at December 4, 1999 and $185,000 at
March 6, 1999) 3,533,492 3,351,366
------------ ------------
Total current liabilities 17,088,714 27,660,618
LONG TERM DEBT, less current installments 115,197,270 146,265,928
DEFERRED INCOME TAXES 1,003,357 1,910,468
SHAREHOLDERS' EQUITY:
Preferred stock - par value $.10, authorized 2,500,000 shares; no
shares issued -- --
Common stock - no par value, authorized 100,000,000 shares; issued
and outstanding December 4, 1999 - 5,831,719 shares and March 6,
1999 - 5,807,049 shares 5,831,719 5,807,049
Additional paid in capital 23,767,280 23,251,845
Retained earnings 10,313,969 12,093,115
------------ ------------
Total shareholders' equity 39,912,968 41,152,009
------------ ------------
Total liabilities and shareholders' equity $173,202,309 $216,989,023
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE> 5
FRESH FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
Thirteen Weeks Ended December 4, 1999 and Thirteen Weeks Ended December 5, 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
REVENUES:
Food processing $ 50,012,578 $ 46,015,410
Ham curing -- 2,336,986
------------ ------------
Total operating revenues 50,012,578 48,352,396
------------ ------------
COSTS AND EXPENSES:
Cost of goods sold (includes related party transactions totaling
$31,440 in 1998) 32,257,768 30,087,735
Selling, general and administrative expenses (includes related party
transactions totaling $1,842,038 and $548,489 in 1999 and 1998,
respectively) 22,234,985 11,707,676
Depreciation and amortization 1,567,003 1,696,662
------------ ------------
Total costs and expenses 56,059,756 43,492,073
------------ ------------
OPERATING INCOME (LOSS) (6,047,178) 4,860,323
------------ ------------
OTHER INCOME (EXPENSE):
Net loss on disposition of property, plant and equipment (28,233) (14,970)
Interest expense (3,667,038) (4,048,536)
Other income (expense), net - (including interest) (includes related
party income totaling $46,960 and $18,759 in 1999 and 1998,
respectively) 99,224 (171,332)
------------ ------------
Other expense, net (3,596,047) (4,234,838)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS (9,643,225) 625,485
INCOME TAX BENEFIT (EXPENSE) 1,728,597 (369,950)
------------ ------------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS (7,914,628) 255,535
DISCONTINUED OPERATIONS:
Income from discontinued restaurant segment (net of income taxes of
$214,473 and $529,357 in 1999 and 1998, respectively) 299,246 981,664
Gain on disposal of discontinued restaurant segment (net of income taxes
of $3,968,525) 6,801,726 --
------------ ------------
Discontinued operations, net 7,100,972 981,664
------------ ------------
NET INCOME (LOSS) $ (813,656) $ 1,237,199
============ ============
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C>
RETAINED EARNINGS:
Balance at beginning of period 11,127,625 9,642,510
Net income (loss) (813,656) 1,237,199
------------ ------------
Balance at end of period $ 10,313,969 $ 10,879,709
============ ============
INCOME (LOSS) PER SHARE - BASIC
Income (loss) per share from continuing operations $ (1.36) $ .04
Discontinued operations:
Income per share from discontinued operations, net .05 .17
Income per share from disposal of discontinued operations, net 1.17 --
------------ ------------
Discontinued operations, net 1.22 .17
------------ ------------
Net income (loss) per share $ (.14) $ .21
============ ============
INCOME (LOSS) PER SHARE - DILUTED
Income (loss) per share from continuing operations $ (1.36) $ .04
Discontinued operations:
Income per share from discontinued operations, net .05 .16
Income per share from disposal of discontinued operations, net 1.17 --
------------ ------------
Discontinued operations, net 1.22 .16
------------ ------------
Net income (loss) per share $ (.14) $ .20
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 7
FRESH FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
Thirty-nine Weeks Ended December 4, 1999 and Forty Weeks Ended December 5, 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
REVENUES:
Food processing $ 133,991,291 $ 104,222,228
Ham curing 2,096,052 5,412,230
------------- -------------
Total operating revenues 136,087,343 109,634,458
------------- -------------
COSTS AND EXPENSES:
Cost of goods sold (includes related party transactions totaling
$2,882 and $263,929 in 1999 and 1998, respectively) 82,665,162 73,479,849
Selling, general and administrative expenses (includes related party
transactions totaling $3,444,961 and $2,015,974 in 1999 and 1998,
respectively) 49,776,969 26,852,242
Depreciation and amortization 4,639,944 3,720,199
------------- -------------
Total costs and expenses 137,082,075 104,052,290
------------- -------------
OPERATING INCOME (LOSS) (994,732) 5,582,168
------------- -------------
OTHER INCOME (EXPENSE):
Net loss on sale of Mom `n' Pop's Country Ham, LLC (2,857,160) --
Net loss on disposition of property, plant and equipment (29,909) (996,795)
Interest expense (11,616,320) (8,454,239)
Other income (expense), net - (including interest) (includes related
party income totaling $91,950 in 1999 and $62,120 in 1998,
respectively) 69,270 87,420
------------- -------------
Other expense, net (14,434,119) (9,363,614)
------------- -------------
LOSS BEFORE INCOME TAXES, DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM (15,428,851) (3,781,446)
INCOME TAX BENEFIT 4,071,962 1,345,346
------------- -------------
LOSS BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM (11,356,889) (2,436,100)
DISCONTINUED OPERATIONS:
Income from discontinued restaurant segment (net of income taxes of
$1,507,029 and $2,277,747 in 1999 and 1998, respectively) 2,828,367 3,716,325
Gain on disposal of discontinued restaurant segment (net of income
taxes of $3,968,525) 6,801,726 --
------------- -------------
Discontinued operations, net 9,630,093 3,716,325
------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (1,726,796) 1,280,225
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT (NET OF INCOME TAX
BENEFIT OF $35,633 AND $42,312 IN 1999 AND 1998, RESPECTIVELY) (52,350) (62,774)
------------- -------------
NET INCOME (LOSS) $ (1,779,146) $ 1,217,451
============= =============
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C> <C>
RETAINED EARNINGS:
Balance at beginning of period 12,093,115 9,662,258
Net income (loss) (1,779,146) 1,217,451
------------- -------------
Balance at end of period $ 10,313,969 $ 10,879,709
============= =============
INCOME (LOSS) PER SHARE - BASIC
Loss per share from continuing operations $ (1.95) $ (.41)
Discontinued operations:
Income per share from discontinued restaurant segment, net .49 .63
Income per share from disposal of discontinued operations, net 1.17 --
------------- -------------
Discontinued operations, net 1.66 .63
------------- -------------
Loss per share from early extinguishment of debt, net (.01) (.01)
------------- -------------
Net income (loss) per share $ (.30) $ .21
============= =============
INCOME (LOSS) PER SHARE - DILUTED
Loss per share from continuing operations $ (1.95) $ (.40)
Discontinued operations:
Income per share from discontinued operations, net .49 .61
Income per share from disposal of discontinued operations, net 1.17 --
------------- -------------
Discontinued operations, net 1.66 .61
------------- -------------
Loss per share from early extinguishment of debt, net (.01) (.01)
------------- -------------
Net income (loss) per share $ (.30) $ .20
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 9
FRESH FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Thirty-nine Weeks Ended December 4, 1999 and Forty Weeks Ended December 5, 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,779,146) $ 1,217,451
------------ -------------
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities, net of business acquisition and
dispositions:
Extraordinary loss from early extinguishment of debt (before tax
benefit of $35,633 and $42,312 in 1999 and 1998, respectively) 87,983 105,086
Depreciation and amortization 6,795,241 6,348,111
Depreciation on properties leased to others 116,837 212,166
Deferred income taxes 713,223 420,048
Net loss on disposition of property, plant and equipment 2,866,027 994,988
Net gain on disposition of discontinued operations (10,805,626) --
Other non-cash adjustments to earnings 642,727 406,900
Changes in operating assets and liabilities:
Receivables (476,767) (2,961,225)
Inventories (3,793,185) 1,140,208
Income taxes receivable, prepaid expenses and other
current assets (2,231,561) (581,411)
Trade accounts payable, incomes taxes payable and accrued
liabilities (3,623,030) (1,386,227)
------------ -------------
Total adjustments (9,708,131) 4,698,644
------------ -------------
Net cash provided by (used in) operating activities (11,487,277) 5,916,095
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of net assets of Pierre Foods -- (123,460,948)
Proceeds from sales of property, plant and equipment (including
sales to related parties of $19,750 in 1999) 620,292 87,890
Net proceeds from disposal of restaurant division 49,234,814 --
Decrease in related party notes receivables 1,436,782 250,000
Decrease in other notes receivable 139,180 173,561
Capital expenditures to related parties (316,233) (1,802,185)
Capital expenditures - other (3,468,571) (10,678,199)
Payments for non-compete and consulting agreements (490,178) --
Other investing activities, net 53,877 --
------------ -------------
Net cash provided by (used in) investing activities 47,209,963 (135,429,881)
------------ -------------
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of senior notes -- 115,000,000
Net borrowings (repayments) under revolving credit agreement (29,000,000) 38,102,085
Principal payments on long-term debt (2,337,775) (12,560,741)
Net repayments under short-term borrowing agreements -- (5,105,144)
Loan origination fees (177,909) (4,782,088)
Proceeds from exercise of stock options 116,925 74,750
------------ -------------
Net cash provided by (used in) financing activities (31,398,759) 130,728,862
------------ -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,323,927 1,215,076
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,664,398 2,818,071
------------ -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,988,325 $ 4,033,147
============ =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
8
<PAGE> 11
FRESH FOODS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position as of December 4, 1999 and March 6, 1999, the results of
operations for the thirteen weeks and thirty-nine weeks ended December 4, 1999
and the thirteen weeks and forty weeks ended December 5, 1998, and the cash
flows for the thirty-nine weeks ended December 4, 1999 and the forty weeks ended
December 5, 1998. Financial statements for the periods in the fiscal year ended
March 6, 1999 ("fiscal 1999") have been reclassified, where applicable, to
conform to financial statement presentation used for the periods in the fiscal
year ending March 4, 2000 ("fiscal 2000").
The Company reports the results of its operations using a 52-53 week
basis. During fiscal 1999 the Company changed its interim fiscal periods to
conform to standard food processing industry interim periods. In line with this,
each quarter of the fiscal year will contain 13 weeks except for the infrequent
fiscal years with 53 weeks. Due to the change in interim fiscal periods during
fiscal 1999, current quarter results reflect 13 weeks of operations and current
year-to-date results reflect 39 weeks of operations, compared with 13 weeks and
40 weeks for the respective periods during fiscal 1999. The effect of the
additional one week in the year-to-date ended December 5, 1998 is not material.
The results of operations for the thirteen weeks and thirty-nine weeks
ended December 4, 1999 are not necessarily indicative of the results to be
expected for the full year. These interim unaudited consolidated financial
statements should be read in conjunction with the Company's March 6, 1999
audited consolidated financial statements and notes thereto.
2. INVENTORY
A summary of inventories, by major classifications, follows:
December 4, March 6,
1999 1999
--------------- ---------------
Manufacturing supplies $ 2,814,650 $ 1,299,177
Raw materials 2,784,625 4,553,087
Work in process 306 1,008,315
Finished goods 26,520,198 22,776,027
Restaurant food and supplies - 793,876
--------------- ---------------
Total $ 32,119,779 $ 30,430,482
=============== ===============
3. WEIGHTED AVERAGE SHARES
Weighted average shares outstanding used in the calculation of basic
income (loss) per share reflect the issuance of common stock under existing
stock option and award programs. Weighted average shares outstanding for basic
and diluted income (loss) per share were as follows:
9
<PAGE> 12
Quarter Ended Year-to-date Ended
------------------------- -------------------------
December 4, December 5, December 4, December 5,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Basic shares 5,821,347 5,914,174 5,827,173 5,908,018
Diluted shares 5,821,347 6,006,195 5,827,173 6,102,926
4. SUPPLEMENTAL CASH FLOW DISCLOSURES - CASH PAID DURING THE PERIOD
Thirty-nine Forty
Weeks Ended Weeks Ended
December 4, 1999 December 5, 1998
---------------- ----------------
Interest $ 14,413,440 $ 7,655,265
================ ================
Income taxes $ 2,952,890 $ 2,614,677
================ ================
During the second quarter of fiscal 2000, the Company received an 8%,
$985,050 note due December 31, 1999, related to the sale of Mom `n' Pop's
Country Ham, LLC (Note 11). During the third quarter of fiscal 2000, the
principal amount of the note plus accrued interest was paid in full.
5. PURCHASE OF PIERRE FOODS DIVISION
On June 9, 1998, the Company purchased certain of the net operating
assets of the Pierre Foods Division ("Pierre") of Hudson Foods, Inc. ("Hudson"),
a wholly owned subsidiary of Tyson Foods, Inc. The following unaudited pro forma
consolidated results of operations assume the Pierre acquisition occurred as of
the beginning of fiscal 1999:
(In Thousands,
Except Per
Share Data)
Forty
Weeks Ended
December 5, 1998
----------------
Revenues $ 138,512
================
Operating income 5,690
----------------
Loss before discontinued operations and
extraordinary item (4,815)
Income from discontinued restaurant segment, net 3,717
Extraordinary loss from early extinguishment of
debt, net (73)
----------------
Net loss $ (1,171)
================
Basic loss per share
Loss before discontinued operations and
extraordinary item $ (0.81)
Discontinued restaurant segment, net 0.62
Extraordinary loss from early extinguishment of
debt, net (0.01)
----------------
Net loss $ (0.20)
================
10
<PAGE> 13
6. COMPREHENSIVE INCOME
Total comprehensive income (loss) was comprised solely of the net loss
in the fiscal 2000 period and net income and unrealized holding gains on
available-for-sale securities in the fiscal 1999 period. Comprehensive income
was $(813,656) and $1,224,634 for the quarters ended December 4, 1999 and
December 5, 1998, respectively, and $(1,779,146) and $1,215,095 for the
year-to-date periods ended December 4, 1999 and December 5, 1998, respectively.
7. SEGMENTS
The following tables set forth revenue and operating profit by segment
included in continuing operations.
Thirteen Weeks Ended December 4, 1999
-------------------------------------
Food Ham
Processing Curing Total
------------ ---------- -----------
Revenues from external customers $ 50,012,578 -- $50,012,578
Segment operating expenses 47,722,989 -- 47,722,989
------------ ---------- -----------
Segment profit 2,289,589 -- 2,289,589
Corporate expenses 8,336,767
Interest expense 3,667,038
Other non-operating income (70,991)
-----------
Loss before income taxes and
discontinued operations $(9,643,225)
===========
Thirteen Weeks Ended December 5, 1998
-------------------------------------
Food Ham
Processing Curing Total
------------ ---------- -----------
Revenues from external customers $ 46,015,410 2,336,986 $48,352,396
Segment operating expenses 39,853,188 2,440,256 42,293,444
------------ --------- -----------
Segment profit (loss) 6,162,222 (103,270) 6,058,952
Corporate expenses 1,198,629
Interest expense 4,048,536
Other non-operating expense 186,302
-----------
Income before income taxes and
discontinued operations $ 625,485
===========
11
<PAGE> 14
Thirty-nine Weeks Ended December 4, 1999
----------------------------------------
Food Ham
Processing Curing Total
------------ ---------- ------------
Revenues from external customers $133,991,291 2,096,052 $136,087,343
Segment operating expenses 121,841,210 2,366,168 124,207,378
------------ --------- ------------
Segment profit (loss) 12,150,081 (270,116) 11,879,965
Corporate expenses 12,874,697
Interest expense 11,616,320
Other non-operating expense 2,817,799
------------
Loss before income taxes,
discontinued operations
and extraordinary item $(15,428,851)
============
Forty Weeks Ended December 5, 1998
-----------------------------------------
Food Ham
Processing Curing Total
------------ ---------- ------------
Revenues from external customers $104,222,228 5,412,230 $109,634,458
Segment operating expenses 92,538,660 5,583,357 98,122,017
------------ ---------- ------------
Segment profit (loss) 11,683,568 (171,127) 11,512,441
Corporate expenses 5,930,273
Interest expense 8,454,239
Other non-operating expense 909,375
------------
Loss before income taxes,
discontinued operations
and extraordinary item $ (3,781,446)
============
There were no material changes in total assets for the food processing
segment from the amounts disclosed in the annual report for the fiscal year
ended March 6, 1999. Total assets for the ham curing segment decreased
$3,350,858 as a result of the sale of the ham curing segment, discussed in Note
11. Total assets for the restaurant segment decreased $34,678,481 as a result of
the sale of the restaurant segment, discussed in Note 10.
8. LONG-TERM DEBT
During the current year, the Company and its lenders made necessary
amendments to the credit agreement and indenture governing the Company's $75
million revolving credit facility and $115 million Senior Notes to facilitate
the execution of corporate transactions. The amendments did not alter the
economic terms of these borrowings.
During the current quarter, the Company paid off all outstanding
balances under its revolving credit facility with the proceeds from the sale of
its restaurant segment ("Claremont Restaurant Group"). At December 4, 1999, the
Company was not in compliance with the financial covenant relating to fixed
charges under this agreement. Therefore, the Company has no availability for
borrowings under this credit facility until the covenant violation is cured,
waived or amended.
12
<PAGE> 15
9. SHAREHOLDERS' EQUITY
Set forth below is the change in shareholders' equity for the
thirty-nine week period ended December 4, 1999:
<TABLE>
<CAPTION>
Common Paid in Retained
Stock Capital Earnings Total
--------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance, March 6, 1999 5,807,049 $23,251,845 $ 12,093,115 $ 41,152,009
Stock options exercised 22,500 94,363 -- 116,863
Stock awards granted 2,170 12,783 -- 14,953
Short swing profit
reimbursement -- 62,319 -- 62,319
Accelerated vesting of
stock options -- 345,970 -- 345,970
Current year net income -- -- (1,779,146) (1,779,146)
--------- ----------- ------------ ------------
Balance, December 4, 1999 5,831,719 $23,767,280 $ 10,313,969 $ 39,912,968
========= =========== ============ ============
</TABLE>
10. DISCONTINUED OPERATIONS
On September 10, 1999, the Company signed an agreement to sell
substantially all of its restaurant operations and thereby committed itself to
disposing of its restaurant segment in a transaction completed on October 8,
1999. Under the terms of the agreement, the buyer, Carousel Capital Partners,
L.P., acquired the Claremont Restaurant Group, as well as non-compete and
consulting contracts with certain key restaurant executives in exchange for a
cash purchase price of $49,796,904, subject to adjustments. Cash proceeds were
used for payments to key restaurant executives for severance, consulting, and
noncompete agreements totaling $2,015,361 (See Note 13), payments of bonuses to
certain restaurant employees totaling $333,868, and payments of investment
banking, legal, and accounting fees totaling $1,756,167 to arrive at net cash
proceeds of $45,691,508. As of October 8, 1999, the net book value of Claremont
Restaurant Group was $34,074,024, resulting in a gain of $11,617,484. In
addition, at the time of the sale, the Company accelerated vesting of stock
options for all restaurant employees, resulting in the recognition of a charge
totaling $207,314, which reduced the net gain to $11,410,170.
Coinciding with the transaction discussed above, on October 3, 1999 the
Company sold the net assets of its one Bennett's restaurant operation to certain
members of management for a cash purchase price of $1,100,000. Net cash proceeds
received after payment of legal and other fees totaled $1,080,083, resulting in
a net gain of $522,210 from the sale.
In addition, on September 14, 1999 the Company sold five former
restaurant properties and one tract of vacant land, with a combined book value
of $2,433,482, to an entity in which a former officer and principal shareholder
is a minority investor, for a total cash price of $975,000. This transaction was
completed under an agreement entered into earlier during the fiscal year and was
contingent upon the sale of the Claremont Restaurant Group. Under the terms of
the initial agreement, all non-operating restaurant properties, consisting of
seven former restaurant locations and three tracts of undeveloped land with a
total book value of $3,620,842, were offered for sale at an aggregate price of
$2,635,000. The agreement further specified that the cash proceeds from the sale
of any of these properties to third parties prior to the sale of Claremont
Restaurant Group would reduce the purchase price of the remaining pool of
properties on a dollar-for-dollar basis, subject to the sale of Claremont
Restaurant Group. Prior to the beginning of the current quarter, four of the
properties, with a book value totaling $1,187,359, were sold to unrelated third
parties for cash totaling $1,660,000. Due to the nature of this transaction,
gross gains totaling $369,029 were deferred and are netted with the loss
recorded in the third quarter from the sale of the remaining real estate
occurring on September 14, 1999. Net cash proceeds from these transactions,
after legal fees and other settlement costs, totaled $2,463,223, resulting in a
net loss of $1,157,619.
13
<PAGE> 16
Due to the disposition of all assets and liabilities relating to the
Claremont Restaurant Group, the results of the restaurant segment have been
reported separately as discontinued operations in the Consolidated Statements of
Operations and Retained Earnings. Operating results prior to the measurement
date of September 10, 1999 are presented in "Income From Discontinued Restaurant
Segment". The operating loss subsequent to the measurement date through the date
of disposal was $4,510 and is included in "Gain on Disposal of Discontinued
Restaurant Segment", along with the gains and losses discussed above. The
results of the discontinued operations do not reflect any interest expense or
management fees allocated by the Company. In addition, the results of
discontinued operations exclude transaction success bonuses paid to certain
corporate officers totaling $3,102,689, as well as amounts totaling $1,389,503
paid to the Company's former Chairman under a severance, consulting, and
noncompete agreement as part of the sale (Note 13). Prior year consolidated
financial statements have been reclassified to present the Claremont Restaurant
Group as a discontinued operation.
Net revenues and income from discontinued operations are as follows:
<TABLE>
<CAPTION>
Quarter Ended Year-to-date Ended
------------------------------ ------------------------------
December 4, December 5, December 4, December 5,
1999 1998 1999 1998
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net operating revenues $ 8,054,899 $28,404,421 $ 59,583,905 $79,029,877
============ =========== ============ ===========
Operating income 40,090 1,541,254 4,450,496 6,362,893
Other expense, net (44,683) 30,233 115,100 368,821
Income tax expense (benefit) (214,473) 529,357 1,507,029 2,277,747
------------ ----------- ------------ -----------
Income from discontinued
operations $ 299,246 $ 981,664 $ 2,828,367 $ 3,716,325
============ =========== ============ ===========
Pretax gain from disposal of
discontinued restaurant
segment (10,770,251) -- (10,770,251) --
Income tax expense 3,968,525 -- 3,968,525 --
------------ ----------- ------------ -----------
Gain from disposal of
discontinued restaurant
segment $ 6,801,726 $ -- $ 6,801,726 $ --
============ =========== ============ ===========
</TABLE>
All net assets of the discontinued restaurant segment were sold prior
to December 4, 1999. At March 6, 1999, the net assets of the discontinued
operations were as follows:
Current assets $ 2,474,646
Property, plant and equipment 40,453,593
Other assets 3,783,656
Current liabilities (7,750,921)
Deferred income taxes (594,000)
------------
Net assets of discontinued operations $ 38,366,974
=============
14
<PAGE> 17
11. DISPOSITION OF MOM `N" POP'S COUNTRY HAM, LLC
Effective July 3, 1999, the Company sold Mom `n' Pop's Country Ham, LLC
to the management group of that subsidiary for $995,000. Under the terms of the
sale agreement, the Company received cash of $9,950 and an 8%, unsecured
$985,050 note, due December 31, 1999. In addition, the Company agreed to provide
an 8%, $500,000 unsecured working capital line of credit through December 31,
1999. As part of the sale transaction, the Company, on behalf of Mom `n' Pop's
Country Ham, LLC, paid $490,178 for a non-compete and consulting agreement with
a former executive officer of the subsidiary. In addition, the executive officer
received severance benefits totaling $357,583 as a result of the disposal of
this business. As a result of this sale, the Company recorded a loss on
disposition of $2,857,160. Included in this loss is a charge of $23,031
resulting from the acceleration of vesting on options for employees of Mom `n'
Pop's Country Ham, LLC. As of December 4, 1999, all outstanding principal
amounts and accrued interest under the note and working capital line were paid
in full.
12. INCOME TAXES
For the thirty-nine weeks ended December 4, 1999, the Company recorded
a tax benefit of $4,071,962, or 26.4%, relating to the loss from continuing
operations of $15,428,851. For the thirteen weeks ended December 4, 1999, the
Company recorded tax benefit of $1,728,597, or 17.9% relating to the loss from
continuing operations of $9,643,225. The tax benefits recorded during these
periods were reduced due to certain expenses totaling $2,471,000 not being
deductible for income tax purposes due to limitations imposed by Section 162(m)
of the Internal Revenue Code which, under certain circumstances, limits
deductibility of annual compensation to individual employees for amounts in
excess of $1.0 million.
13. MANAGEMENT AGREEMENTS
During the second quarter of fiscal 2000, the Company replaced certain
existing Change in Control Agreements with two key restaurant executives (Mr.
Miller and Mr. Templeton) and with the Company's former Chairman (Mr. Howard)
with Severance, Consulting and Noncompete Agreements. These agreements, which
became effective with the disposition of the restaurant operations, provide the
terms under which the three named executives are to provide consulting services
to Claremont Restaurant Group, and are to refrain from engaging in competitive
activities related to restaurant operations and franchising for a period of five
years. On October 7, 1999, payments totaling $2,015,361 were made to the two
restaurant executives as a result of these agreements, and the consulting and
noncompete agreements were transferred to Carousel Capital Partners, L.P. The
costs of the agreements are reflected in Gain on Disposal of Discontinued
Restaurant Segment (Note 10). Payments made to the Company's former Chairman
under this agreement totaled $1,389,503 and are included in continuing
operations in Selling, General and Administrative Expense during the current
quarter.
On June 30, 1999, the Company replaced the existing Change in Control
Agreement with the Company's former Chief Financial Officer (Mr. Harris) with a
Bonus Agreement which specified the amounts of bonus payments to be received
upon the disposition of either or both of the Company's restaurant segment and
the food processing segment. Payments totaling $1,059,701 were made under the
terms of this agreement during the current quarter as a result of the sale of
Claremont Restaurant Group, and the related expense is included in continuing
operations in Selling, General and Administrative Expense.
On July 6, 1999, the Company replaced certain existing Change in
Control Agreements with the Company's current Chairman (Mr. Richardson) and
current Vice Chairman (Mr. Clark) with revised Change in Control Agreements. The
revised agreements provide that, if a change in control of the Company occurs,
the following benefits will be provided by the Company: three times the amount
of the annual base salary of the officer; three times the amount of the cash
bonus paid or payable to such person for the most recent fiscal year; and a
"gross-up" payment for all excise and income tax liabilities resulting from
payments under the Change in Control Agreements. A change in control of the
Company is considered to have occurred if: 1) the individuals who constituted
the Board of Directors as of the date of the applicable Change in Control
Agreement cease to constitute a majority of the Board; 2) any "person" (as
defined in the applicable Change in Control Agreement) acquires 15% of the
Company's
15
<PAGE> 18
common stock; 3) any of certain business combinations is consummated, unless the
beneficial owners of the Company's common stock before the combination own more
than 50% of the stock after the combination; or 4) the Company is liquidated or
dissolved. Payments under the Change in Control Agreements are payable upon a
change in control of the Company, whether or not an officer's employment is
terminated. The term of each Change in Control Agreement is ten years unless it
expires earlier upon the termination of an officer's employment.
On August 18, 1999, the Company entered into an Incentive Agreement
with the Company's current President (Mr. Woodhams), which replaced a Change in
Control Agreement and Employment Contract. The agreement, as amended on January
1, 2000, specifies terms relating to salary and bonus amounts to be paid to the
executive during the four year-term of the agreement, as well as severance and
disposition bonus amounts to be received upon any sale of the Company.
On December 17, 1999, the Company signed an Amended and Restated
Management Services Agreement with HERTH Management, Inc ("HERTH"). The amended
agreement, which terminates March 31, 2002, outlines the nature and services to
be provided by HERTH and continues to provide for annual payments totaling
$1,500,000, payable in four equal quarterly installments.
14. COMMITMENTS AND CONTINGENCIES
On December 21, 1999, the Company signed an agreement with a
shareholder which finalized an agreement in principal reached on November 16,
1999. Under the terms of the agreement, the Company agreed to purchase from the
shareholder 68,024 shares of the Company's common stock and receive a release of
any possible claims for a total price of $1,020,360. The excess of the purchase
price over the market price of the stock at November 16, 1999 totals $442,156
and has been recognized as Selling, General and Administrative Expense during
the current quarter.
15. SUBSEQUENT EVENTS
On December 27, 1999, the Company adopted a plan of reorganization
which merged Pierre Foods, LLC and Pierre Leasing, LLC into Fresh Foods, Inc.,
which was effective December 31, 1999. Subsequent to the reorganization, Fresh
Foods Properties, LLC is the only subsidiary of Fresh Foods, Inc.
On January 14, 2000, the Company entered into a Consulting and
Noncompete Agreement with Mr. Charles F. Connor, Jr., a significant shareholder
and co-founder of the Company. The agreement, which has a five-year term,
provides payments of $200,000 per year and family medical insurance coverage.
On January 6, 2000, the Company entered into a Consulting and
Noncompete Agreement with Mr. L. Dent Miller, a significant shareholder, former
President of the Claremont Restaurant Group and member of the Company's Board of
Directors. The agreement, which has a five-year term, provides payments of
$200,000 per year and family medical insurance coverage. Mr. Miller also
resigned from his position as a member of the Board of Directors of the Company,
pursuant to his Consulting and Noncompete Agreement.
On December 16, 1999, the Board of Directors approved a loan to Mr.
James C. Richardson, the Company's current Chairman, of an amount up to $8.5
million for the purpose of enabling Mr. Richardson to purchase shares of the
Company's common stock owned by certain shareholders. The proposed terms of the
loan provide that any amount outstanding will bear a simple interest rate of
eight and one-half percent, with principal and interest due at maturity, which
will be three years from the date of such loan. The Board's approval was given
subject to approval by the Company's lenders.
16
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's operations are classified into three business segments:
food processing operations, principally fully cooked protein and sandwich
production; restaurant operations, comprised of the Sagebrush, Western Steer,
Prime Sirloin and Bennett's concepts; and ham curing operations. As discussed in
Notes 10 and 11 to the Consolidated Financial Statements, the Company sold its
ham curing business effective July 3, 1999, and sold its restaurant operations
effective October 8, 1999. Accordingly, the results of the restaurant operations
are presented as a discontinued operation in the Company's Consolidated
Statements of Operations and Retained Earnings, and are excluded from the table
below. The ham curing operations do not quality for discontinued operations
presentation.
As a part of the Pierre acquisition, the Company changed its interim
fiscal periods to conform to the standard food processing industry interim
periods. In line with this, each quarter of the fiscal year will contain 13
weeks except for the infrequent fiscal years with 53 weeks. Due to the change in
interim fiscal periods during fiscal 1999, current quarter results reflect 13
weeks of operations and current year-to-date results reflect 39 weeks of
operations, compared with 13 weeks and 40 weeks for the respective periods
during fiscal 1999. The effect of the additional one week in the year-to-date
ended December 5, 1998 is not material.
Results for the fiscal quarters and year-to-date periods ended December
4, 1999 and December 5, 1998, are shown below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Year-to-date Ended
----------------------------------- ------------------------------------
December 4, December 5, December 4, December 5,
1999 1998 1999 1998
--------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
(In millions)
Revenues:
Food processing operations $ 50.0 $ 46.0 $ 134.0 $ 104.2
Ham curing operations -- 2.4 2.1 5.4
--------------- ----------------- ---------------- ----------------
Total 50.0 48.4 136.1 109.6
--------------- ----------------- ---------------- ----------------
Cost of goods sold:
Food processing operations 32.2 27.9 80.8 68.7
Ham curing operations -- 2.2 1.9 4.8
--------------- ----------------- ---------------- ----------------
Total 32.2 30.1 82.7 73.5
--------------- ----------------- ---------------- ----------------
Selling, general and administrative 22.2 11.7 49.8 26.8
Depreciation and amortization 1.6 1.7 4.6 3.7
--------------- ----------------- ---------------- ----------------
Operating income (loss) (6.0) 4.9 (1.0) 5.6
--------------- ----------------- ---------------- ----------------
Other expense 3.6 4.3 14.4 9.4
--------------- ----------------- ---------------- ----------------
Income (loss) before income taxes,
discontinued operations and
extraordinary item (9.6) .6 (15.4) (3.8)
Income tax benefit (expense) 1.7 (.3) 4.0 1.4
--------------- ----------------- ---------------- ----------------
Income (loss) before income taxes,
discontinued operations and
extraordinary item $ (7.9) $ .3 $ (11.4) $ (2.4)
=============== ================= ================ ================
</TABLE>
17
<PAGE> 20
Fiscal Quarter Ended December 4, 1999 Compared to Fiscal Quarter Ended
December 5, 1998
Revenues. Revenues from continuing operations increased by $1.7
million, or 3.4%, comprised of a $4.0 million (8.7%) increase in the food
processing segment offset by a $2.3 million decrease in the ham curing segment.
The increase in food processing revenues was due to a general increase in
demand. The decrease in ham curing revenues was due to the Company's strategic
decision to exit the ham curing business, which was effective July 3, 1999.
Cost of goods sold. Cost of goods sold increased by $2.2 million, or
7.2%, comprised of a $4.3 million (15.5%) increase in the food processing
segment offset by a $2.2 million decrease in the ham curing segment. As a
percentage of food processing revenues, food processing cost of goods sold
increased from 60.7% to 64.5% due to a shift in demand to product categories
with lower margins. The decrease in ham curing cost of goods sold was due to the
Company's strategic decision to exit the ham curing business, effective July 3,
1999.
Selling, general and administrative. Selling, general and
administrative expenses increased by $10.5 million, or 89.9%, due to 1)
non-recurring expenses incurred in the disposition of the restaurant and ham
curing segments; 2) noncompete and severance payments related to the disposition
of the restaurant segment; and 3) management bonuses related to the disposition
of the restaurant segment. As a percentage of operating revenues, selling,
general and administrative expenses increased from 24.2% to 44.5% for the
reasons stated above. Excluding non-recurring expenses mentioned above, selling,
general and administrative expenses as a percentage of revenues increased
approximately $1.7 million, or approximately 14.8%, and as a percentage of
revenues increased from 24.2% to 26.9%, primarily due to increased overhead
costs related to the dispositions of the restaurant and the ham curing segments.
Depreciation and amortization. Depreciation and amortization decreased
by $.1 million, or 7.6%, due to the disposition of the net assets of the ham
curing business, which was effective July 3, 1999. As a percentage of operating
revenues, depreciation and amortization decreased from 3.5% to 3.1% for the
same reason.
Other expense, net. Net other expense decreased by $.6 million, or
15.1%. This decrease primarily was due to a decrease in interest expense
resulting from the repayment of borrowings on the Company's revolving credit
facility (see --- "Liquidity and Capital Resources" below).
Income tax provision. The effective tax rate for the fiscal quarter
ended December 4, 1999 was 17.9%, as compared to 59.7% for the fiscal quarter
ended December 5, 1998. The lower rate in the fiscal quarter ended December 4,
1999 is attributed to 1) a tax benefit recorded of $1,728,597 relating to a loss
from continuing operations of $9,643,225, offset by 2) certain expenses totaling
$2,471,000 which were not deducted for income tax purposes due to limitations
imposed by Section 162(m) of the Internal Revenue Code which, under certain
circumstances, limits deductibility of annual compensation to individual
employees for amounts in excess of $1.0 million.
18
<PAGE> 21
Fiscal Year-to-date Ended December 4, 1999 Compared to Fiscal Year-to-date
Ended December 5, 1998
Revenues. Revenues from continuing operations increased by $26.5
million, or 24.1%, comprised of a $29.8 million (28.6%) increase in the food
processing segment, offset by a $3.3 million (61.3%) decrease in the ham curing
segment. The increase in food processing revenues was due to the following
factors: 1) inclusion of Pierre revenues for 39 weeks in the fiscal year-to-date
period ended December 4, 1999 versus 26 weeks in the fiscal year-to-date period
ended December 5, 1998, due to the acquisition of Pierre on June 9, 1998; offset
by 2) the inclusion in the fiscal year-to-date period ended December 5, 1998 of
business manufactured by Pierre as part of the transition from previous
ownership in connection with the acquisition of Pierre as of June 9, 1998, which
did not recur in the fiscal year-to-date period ended December 4, 1999. The
decrease in ham curing revenues was due to the Company's strategic decision to
exit the ham curing business.
Cost of goods sold. Cost of goods sold increased by $9.2 million, or
12.5%, comprised of a $12.1 million (17.6%) increase in the food processing
segment offset by a $3.0 million (60.5%) decrease in the ham curing segment. The
increase in food processing cost of goods sold was due to the following factors:
1) inclusion of Pierre cost of goods sold for 39 weeks in the fiscal
year-to-date period ended December 4, 1999 versus 26 weeks in the fiscal
year-to-date period ended December 5, 1998 due to the acquisition of Pierre on
June 9,1998; offset by 2) an overall improvement in the cost structure of the
manufacturing process since the fiscal year-to-date period ended December 5,
1998; and 3) the inclusion in the fiscal year-to-date period ended December 5,
1998 of business which did not recur in the fiscal year-to-date period ended
December 4, 1999. As a percentage of food processing revenues, cost of goods
sold decreased from 67.0% to 60.7%, due primarily to the following: 1) the
Company's acquisition of Pierre, which has historically realized a higher gross
margin percentage than the Company's other food processing operations; and 2) an
overall improvement in the cost structure of the manufacturing process since
December 5, 1998. The decrease in the ham curing segment was due to the
Company's strategic decision to exit the ham curing business, effective July 3,
1999.
Selling, general and administrative. Selling, general and
administrative expenses increased by $22.9 million, or 85.4%, and as a
percentage of operating revenues, increased from 24.5% to 36.6%, due to 1)
incremental costs associated with the June 9, 1998 Pierre acquisition,
specifically selling, distribution, personnel and facilities costs in
Cincinnati; 2) non-recurring expenses incurred in the disposition of the
restaurant and ham curing segments; 3) noncompete and severance payments related
to the disposition of the restaurant segment; and 4) management bonuses related
to the disposition of the restaurant segment. Furthermore, selling, general and
administrative expenses include 39 weeks for Pierre in the fiscal year-to-date
period ended December 4, 1999 versus 26 weeks in the fiscal year-to-date period
ended December 5, 1998, due to the acquisition of Pierre on June 9,1998.
Depreciation and amortization. Depreciation and amortization increased
by $.9 million, or 24.7%, due to the inclusion of Pierre depreciation and
amortization of 39 weeks in the fiscal year-to-date period ended December 4,
1999 versus 26 weeks in the fiscal year-to-date period ended December 5, 1998
due to the acquisition of Pierre on June 9,1998. As a percentage of operating
revenues, depreciation and amortization was 3.4% for both fiscal year-to-date
periods.
Other expense, net. Net other expense increased by $5.1 million, or
54.2%, due to the following factors: 1) loss on disposition of the Company's ham
curing segment; 2) an increase in interest expense resulting from borrowings
obtained to finance the Pierre acquisition and the Company's recapitalization
(see "--- Liquidity and Capital Resources" below); offset by 3) the reduction of
interest expense due to the repayment of outstanding borrowings under the credit
facility with proceeds from the sale of Claremont Restaurant Group.
Income tax provision. The effective tax rate for the fiscal
year-to-date period ended December 4, 1999 was 26.4%, as compared to 35.6% for
the fiscal year-to-date period ended December 5, 1998. Such decrease was due to
1) a tax benefit recorded of $4,071,962 relating to a loss from continuing
operations of $15,428,851, offset by 2) certain expenses totaling $2,471,000
which were not deducted for income tax purposes due to limitations imposed by
Section 162(m) of the Internal Revenue Code which, under certain circumstances,
limits deductibility of annual compensation to individual employees for amounts
in excess of $1.0 million.
19
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was $11.5 million for the fiscal
year-to-date period ended December 4, 1999. The decrease in net cash provided by
operating activities was primarily due to the following factors: 1) an increase
in inventories by $1.7 million due to the seasonal building of inventories,
which normally occurs during the late spring and early summer in order to
service certain of Pierre's market channels, which require heavy shipments in
the late summer and fall; 2) non-recurring expenses related to the dispositions
of the ham curing business and the restaurant segment; 3) non-compete,
consulting, severance and transaction success bonuses related to the
dispositions of the ham curing business and restaurant segment; and 4) payment
of estimated income taxes due; offset by 5) a increase in trade accounts payable
and other accrued liabilities due to the timing of certain payments.
Cash flows provided by investing activities were $47.2 million for the
fiscal year-to-date period ended December 4, 1999. The primary components of net
cash provided by investing activities for the fiscal year-to-date period ending
December 4, 1999, were 1) proceeds from the sales of certain of the Company's
assets; and 2) disposition of the restaurant segment; offset by 3) capital
expenditures for the food processing and restaurant segments.
Cash flows used in financing activities were $31.4 million for the
fiscal year-to-date period ended December 4, 1999. The major components of cash
used in financing during this period were 1) the early payoff of the Company's
industrial revenue bonds, and 2) repayment of borrowings under the revolving
credit facility with proceeds from the disposition of the restaurant segment.
As of December 4, 1999, the Company had a $75.0 million revolving
credit facility with a syndicate of four banks. This facility is a five-year
revolving line of credit (expiring June 9, 2003) under which the Company may
borrow up to an amount (including standby letters of credit up to $.5 million)
equal to the lesser of $75.0 million or a borrowing base (comprised of eligible
accounts receivable, inventory, machinery and real property). Funds available
under the facility may be used for working capital requirements, permitted
acquisitions, permitted investments and general corporate purposes. Borrowings
under the facility will bear interest at floating rates based upon the interest
rate option selected from time to time by the Company.
As of December 4, 1999, the Company had no outstanding borrowings under
the revolving credit facility due to the repayment of outstanding borrowings
from the proceeds of the disposition of the restaurant segment. At December 4,
1999, the Company was not in compliance with the financial covenant relating to
fixed charges under the agreement. Accordingly, the Company has no availability
for borrowings under this credit facility until the covenant violation is cured,
waived or amended.
The Company plans to request a waiver of the covenant violation from
its lenders and believes that, in the event that such a waiver is not obtained,
alternate sources of short-term financing are available should the need arise.
However, the Company anticipates that for its foreseeable future, its cash
requirements, including working capital, capital expenditures and required
principal and interest payments under financing arrangements, will be met
through a combination of 1) funds provided by operations; 2) the use of excess
cash invested from the proceeds of the disposition of the restaurant segment;
and 3) the practice of acquiring equipment through capital or operating leases.
The Company has budgeted approximately $1.5 million for capital
expenditures for the remainder of the current fiscal year. These expenditures
are being devoted to routine capital improvement projects in the food processing
segment and other miscellaneous expenditures. The Company believes that funds
from operations, as well as the Company's ability to enter into capital or
operating leases, will be adequate to finance these capital expenditures.
As discussed in its annual report for the fiscal year ended March 6,
1999, the Company's major market risk exposure is potential loss arising from
changing interest rates and its impact on long-term debt. The Company's policy
is to manage interest rate risk by maintaining a combination of fixed and
variable rate financial instruments in amounts and with maturities that
management considers appropriate. The risks associated with long-term debt
20
<PAGE> 23
at December 4, 1999 have not changed materially since March 6, 1999. All
long-term debt outstanding at December 4, 1999, comprised of $115 million of
Senior Notes and $.2 million in capital lease obligations, was accruing interest
at fixed rates. In the future, should the Company borrow funds under its
existing or an alternate credit facility, a rise in prevailing interest rates
could have adverse effects on the Company's financial condition and results of
operations.
ENGAGEMENT OF INVESTMENT BANKING FIRM
The Company engaged Bowles Hollowell Conner & Co., now known as First
Union Securities, Inc. ("First Union Securities"), to pursue strategic
alternatives to enhance the market price of the Company's common stock. As part
of this process, the Company disposed of its ham curing business, the restaurant
segment and all excess real estate. All current operations are conducted in the
food processing segment. The engagement of First Union Securities has been
discontinued.
SEASONALITY
The Company considers its restaurant operations to be somewhat seasonal
in nature, with stronger sales during the Christmas season and spring, weaker
sales during the mid-summer and late winter. Except for sales to school
districts, which decline during the early spring and summer and early January,
there is no significant seasonal variation in the Company's sales of food
products.
INFLATION
The Company believes that inflation has not had a material impact on
its results of operations for any of the periods reported herein.
"YEAR 2000" ISSUES
The "Year 2000" problem arose because many existing computer programs
use only the last two digits to refer to a year. If not addressed, computer
programs that are date-sensitive may not have the ability to properly recognize
dates in the year 2000 and beyond. The result could be a temporary disruption of
operations and the processing of transactions.
The Company developed a four-phase approach to addressing this problem.
Phase 1 was an analysis to identify the impact and costs relating to year 2000,
both in computer information systems and other equipment. Phase 2 was the
creation of a comprehensive plan to address and fix any problems identified.
Phase 3 was the implementation of the comprehensive plan. In Phase 4, the
Company was to address any unforeseen complications or issues not previously
addressed. At December 4, 1999, the Company had completed all four phases of the
four-phase approach.
Phases 3 and 4, relating to the Company's systems, both information
technology and non-information technology, were completed at the end of 3rd
quarter. Additionally, as part of Phase 3, the Company sent Year 2000
questionnaires to vendors and other entities with which the Company conducts
business in order to assess whether they are Year 2000 compliant or have
adequately addressed their system conversion requirements. All entities deemed
critical had responded by the end of the 3rd quarter. The vast majority of
vendors and other entities responding have done so by offering assurances that
they are either currently Year 2000 compliant or have a plan in place to be Year
2000 compliant in a timely manner. The Company validated readiness responses of
its key relationships while completing contingency planning requirements. For
those vendors that responded with substandard assurance, the Company sought
alternative sources of supply.
21
<PAGE> 24
The Company also completed its contingency plans, which were based on
its actual testing experience and an assessment of outside risks, to address
unanticipated interruptions or down time in both the Company's and third
parties' systems and services. The costs to implement the Company's plan through
December 4, 1999 were $300,525 and are being expensed as incurred.
As of January 18, 2000, the Company has not encountered any unforeseen
complications or issues not previously addressed in the comprehensive plan
(Phase 4). If any unforeseen complications or issues arise, additional resources
would be committed to complete the necessary conversions in the required time
frame. The most reasonably likely worst case Year 2000 scenario facing the
Company's food processing business is that production would be interrupted and
distribution of products to customers would be delayed, resulting in revenue and
profit losses until the problems could be corrected. These events have not
occurred, nor does the Company expect these events to occur. Since the Company
has no reason to believe that it will need to use additional (Phase 4)
resources, no estimate as to their cost has been made.
CAUTIONARY STATEMENT AS TO FORWARD LOOKING INFORMATION
Statements contained in this report as to the Company's outlook for
sales, operations, capital expenditures and other amounts, including budgeted
amounts and projections of future financial or economic performance of the
Company, and statements of the Company's plans and objectives for future
operations, are "forward looking" statements provided in reliance upon the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results or events to differ materially
from those projected, estimated, assumed or anticipated in any such forward
looking statements include, among others, the substantial leverage of the
Company, restrictions imposed on the Company by the terms of its revolving
credit facility and Senior Notes, risks relating to the Company's ability to
execute its business strategy following the Pierre acquisition, competitive
considerations, government regulation and general risks of the food industry,
the possibility of adverse changes in food costs, the availability of supplies,
the Company's dependence on key personnel, potential labor disruptions and "Year
2000" issues. See Exhibit 99.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 6, 1999.
22
<PAGE> 25
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
2.3 Purchase Agreement dated as of August 6, 1999 among Mom
'n' Pop's Country Ham, LLC, Pierre Foods, LLC, the Company
and Hoggs, LLC (schedules and exhibits omitted)
2.4 Purchase Agreement dated as of September 10, 1999 among
Claremont Restaurant Group, LLC, Fresh Foods Sales, LLC,
the Company and CRG Holdings Corp.
2.5 Plan of Merger dated as of December 27, 1999 among Pierre
Foods, LLC, Pierre Leasing, LLC and the Company
4.9 Second Supplemental Indenture dated as of February 26, 1999
among the Company, State Street Bank and Trust Company
and Fresh Foods Restaurant Group, LLC
4.10 Third Supplemental Indenture dated as of October 8, 1999
among the Company and State Street Bank and Trust Company
10.33 Borrower Joinder Agreement dated as of February 26, 1999
between Fresh Foods Restaurant Group, LLC and First Union,
as Agent (schedules omitted)
10.34 Amendment No. 2 to Credit Agreement and Waiver dated as of
April 14, 1999 among the Company, certain subsidiaries of
the Company, First Union, as Agent and a Lender, and
certain other Lenders
10.35 Amendment No. 3 to Credit Agreement dated as of May 14,
1999 among the Company, certain subsidiaries of the
Company, First Union, as Agent and a Lender, and
certain other Lenders
10.36 Consent dated as of July 29, 1999 among the Company,
certain subsidiaries of the Company, First Union, as Agent
and a Lender, and certain other Lenders
10.37 Amended and Restated Change in Control Agreement dated as
of July 6, 1999 between the Company and David R. Clark
(supersedes Exhibit 10.24 to the Company's Annual Report
on Form 10-K for its fiscal year ended March 6, 1999)
10.38 Amended and Restated Change in Control Agreement dated as
of July 6, 1999 between the Company and James C.
Richardson, Jr. (supersedes Exhibit 10.21 to the Company's
Annual Report on Form 10-K for its fiscal year ended March
6, 1999)
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
<S> <C>
10.39 Severance, Consulting and Noncompete Agreement dated as of
July 12, 1999 among Claremont Restaurant Group, LLC, the
Company and L. Dent Miller (supersedes Exhibits 10.18 and
10.26 to the Company's Annual Report on Form 10-K for its
fiscal year ended March 6, 1999)
10.40 Severance, Consulting and Noncompete Agreement dated as of
July 12, 1999 among Claremont Restaurant Group, LLC, the
Company, HERTH Management, Inc. and Richard F. Howard
(supersedes Exhibit 10.23 to the Company's Annual Report
on Form 10-K for its fiscal year ended March 6, 1999)
10.41 Incentive Agreement dated as of August 18, 1999 among the
Company, Pierre Foods, LLC and Norbert E. Woodhams,
together with First Amendment to Incentive Agreement dated
as of January 1, 2000 (supersedes Exhibits 10.20 and 10.28
to the Company's Annual Report on Form 10-K for its fiscal
year ended March 6, 1999)
10.42 Severance, Consulting and Noncompete Agreement dated as of
September 13, 1999 among Claremont Restaurant Group, LLC,
the Company, HERTH Management, Inc. and James M. Templeton
(supersedes Exhibit 10.25 to the Company's Annual Report
on Form 10-K for its fiscal year ended March 6, 1999)
10.43 Amendment No. 4 to Credit Agreement dated as of September 23,
1999 among the Company, certain subsidiaries of the Company,
First Union, as Agent and Lender, and certain other Lenders
10.44 Asset Purchase Agreement dated as of September 30, 1999
among Fairgrove Restaurants, LLC, the Company and Fresh
Foods Sales, LLC (schedules and exhibits omitted)
10.45 Amended and Restated Management Services Agreement dated
as of December 17, 1999 between HERTH Management, Inc. and
the Company (supersedes Exhibits 10.1 and 10.2 of the
Company's Annual Report on Form 10-K for its fiscal year
ended March 6, 1999)
10.46 Agreement dated December 21, 1999 between the Company and
Gungor Solmaz, together with form of Agreement dated January 2000,
between the Company and Gungor Solmaz
10.47 Fifth Amendment to Credit Agreement and Consent dated as
of December 30, 1999 among the Company, certain
subsidiaries of the Company, First Union, as Agent and
Lender, and certain other Lenders (schedules and exhibits
omitted)
10.48 Consulting and Noncompete Agreement dated as of January 6,
2000 between the Company and L. Dent Miller
10.49 Consulting and Noncompete Agreement dated as of January 14,
2000 between the Company and Charles F. Connor, Jr.
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C> <C>
10.50 Bonus Agreement dated as of June 30, 1999 between the
Company and James E. Harris (supersedes Exhibit 10.27 to the
Company's Annual Report on Form 10-K for its fiscal year
ended March 6, 1999)
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on September 13, 1999,
announcing the signing of a definitive agreement to sell the Claremont
Restaurant Group.
25
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRESH FOODS, INC.
Date January 18, 2000 By: /s/ Norbert E. Woodhams
---------------- --------------------------------------
Norbert E. Woodhams
President and Chief Executive Officer
(Principal Executive Officer)
Date January 18, 2000 By: /s/ Pamela M. Witters
---------------- --------------------------------------
Pamela M. Witters
Chief Financial Officer
(Principal Financial Officer)
26
<PAGE> 29
INDEX TO EXHIBITS
For inclusion in Quarterly Report on Form 10-Q Quarter Ended December 4, 1999
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
2.3 Purchase Agreement dated as of August 6, 1999 among Mom
'n' Pop's Country Ham, LLC, Pierre Foods, LLC, the Company
and Hoggs, LLC (schedules and exhibits omitted)
2.4 Purchase Agreement dated as of September 10, 1999 among
Claremont Restaurant Group, LLC, Fresh Foods Sales, LLC,
the Company and CRG Holdings Corp.
2.5 Plan of Merger dated as of December 27, 1999 among Pierre
Foods, LLC, Pierre Leasing, LLC and the Company
4.9 Second Supplemental Indenture dated as of February 26, 1999
among the Company, State Street Bank and Trust Company
and Fresh Foods Restaurant Group, LLC
4.10 Third Supplemental Indenture dated as of October 8, 1999
among the Company and State Street Bank and Trust Company
10.33 Borrower Joinder Agreement dated as of February 26, 1999
between Fresh Foods Restaurant Group, LLC and First Union,
as Agent (schedules omitted)
10.34 Amendment No. 2 to Credit Agreement and Waiver dated as of
April 14, 1999 among the Company, certain subsidiaries of
the Company, First Union, as Agent and a Lender, and
certain other Lenders
10.35 Amendment No. 3 to Credit Agreement dated as of May 14,
1999 among the Company, certain subsidiaries of the
Company, First Union, as Agent and a Lender, and
certain other Lenders
10.36 Consent dated as of July 29, 1999 among the Company,
certain subsidiaries of the Company, First Union, as Agent
and a Lender, and certain other Lenders
10.37 Amended and Restated Change in Control Agreement dated as
of July 6, 1999 between the Company and David R. Clark
(supersedes Exhibit 10.24 to the Company's Annual Report
on Form 10-K for its fiscal year ended March 6, 1999)
10.38 Amended and Restated Change in Control Agreement dated as
of July 6, 1999 between the Company and James C.
Richardson, Jr. (supersedes Exhibit 10.21 to the Company's
Annual Report on Form 10-K for its fiscal year ended March
6, 1999)
</TABLE>
27
<PAGE> 30
<TABLE>
<S> <C>
10.39 Severance, Consulting and Noncompete Agreement dated as of
July 12, 1999 among Claremont Restaurant Group, LLC, the
Company and L. Dent Miller (supersedes Exhibits 10.18 and
10.26 to the Company's Annual Report on Form 10-K for its
fiscal year ended March 6, 1999)
10.40 Severance, Consulting and Noncompete Agreement dated as of
July 12, 1999 among Claremont Restaurant Group, LLC, the
Company, HERTH Management, Inc. and Richard F. Howard
(supersedes Exhibit 10.23 to the Company's Annual Report
on Form 10-K for its fiscal year ended March 6, 1999)
10.41 Incentive Agreement dated as of August 18, 1999 among the
Company, Pierre Foods, LLC and Norbert E. Woodhams,
together with First Amendment to Incentive Agreement dated
as of January 1, 2000 (supersedes Exhibits 10.20 and 10.28
to the Company's Annual Report on Form 10-K for its fiscal
year ended March 6, 1999)
10.42 Severance, Consulting and Noncompete Agreement dated as of
September 13, 1999 among Claremont Restaurant Group, LLC,
the Company, HERTH Management, Inc. and James M. Templeton
(supersedes Exhibit 10.25 to the Company's Annual Report
on Form 10-K for its fiscal year ended March 6, 1999)
10.43 Amendment No. 4 to Credit Agreement dated as of September 23,
1999 among the Company, certain subsidiaries of the Company,
First Union, as Agent and Lender, and certain other Lenders
10.44 Asset Purchase Agreement dated as of September 30, 1999
among Fairgrove Restaurants, LLC, the Company and Fresh
Foods Sales, LLC (schedules and exhibits omitted)
10.45 Amended and Restated Management Services Agreement dated
as of December 17, 1999 between HERTH Management, Inc. and
the Company (supersedes Exhibits 10.1 and 10.2 of the
Company's Annual Report on Form 10-K for its fiscal year
ended March 6, 1999)
10.46 Agreement dated December 21, 1999 between the Company and
Gungor Solmaz, together with form of Agreement dated January 2000
between the Company and Gungor Solmaz
10.47 Fifth Amendment to Credit Agreement and Consent dated as
of December 30, 1999 among the Company, certain
subsidiaries of the Company, First Union, as Agent and
Lender, and certain other Lenders (schedules and exhibits
omitted)
10.48 Consulting and Noncompete Agreement dated as of January 6,
2000 between the Company and L. Dent Miller
10.49 Consulting and Noncompete Agreement dated as of January 14,
2000 between the Company and Charles F. Connor, Jr.
</TABLE>
28
<PAGE> 31
<TABLE>
<S> <C>
10.50 Bonus Agreement dated as of June 30, 1999 between the
Company and James E. Harris (supersedes Exhibit 10.27 to the
Company's Annual Report on Form 10-K for its fiscal year
ended March 6, 1999)
27 Financial Data Schedule
</TABLE>
29
<PAGE> 1
EXHIBIT 2.3
PURCHASE AGREEMENT
This Purchase Agreement dated as of August 6, 1999 is among Mom 'n'
Pop's Country Ham, LLC, a North Carolina limited liability company ("Mom 'n'
Pop's"), Pierre Foods, LLC, another North Carolina limited liability company
("Seller") and a member-manager of Mom 'n' Pop's, Fresh Foods, Inc., a North
Carolina corporation ("Fresh Foods") and the sole member-manager of Seller, and
Hoggs, LLC, a North Carolina limited liability company ("Buyer").
WHEREAS, the parties consider it advisable and in their mutual best
interest that Seller sell to Buyer all of the issued and outstanding membership
interests in Mom 'n' Pop's owned by Seller, and that Buyer buy same from Seller,
on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the terms identified in this Article shall
have the meanings indicated.
1.1 AFFILIATE: a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
another Person, within the meaning of Rule 144(a)(1) under the Securities Act of
1933, as amended.
1.2 AGREEMENT: this Purchase Agreement, including the Schedules and
Exhibits hereto.
1.3 CLOSING: the consummation of the purchase of all of the Equity in
Mom 'n' Pop's by Buyer from Seller, and the sale of all issued and outstanding
Equity in Mom 'n' Pop's by Seller to Buyer, as contemplated by this Agreement.
1.4 CLOSING DATE: August 6, 1999, or such other date for the Closing
upon which the parties may agree.
1.5 ENVIRONMENTAL LAW: any statute, law, code, regulation, order,
notice, rule or ordinance, or any requirement, restriction, limitation,
condition or obligation contained therein, including any and all plans, orders,
decrees, judgments and notices issued, entered, promulgated or approved
thereunder, purporting to regulate the use, misuse, pollution or preservation of
land, air or water resources, including (without limitation) those purporting to
regulate building or planning, industrial buildings, plants or equipment or
health or safety, as such are related to environmental matters.
1.6 EQUITY: all of the issued and outstanding membership interests in
Mom 'n' Pop's (as defined in the Mom 'n' Pop's operating agreement as amended to
the date hereof) owned by Seller.
<PAGE> 2
1.7 ISSUER CONTROL AGREEMENT: the issuer control agreement among Buyer,
Seller and all of the members of Buyer, substantially in the form attached
hereto as EXHIBIT A.
1.8 LIEN: any lien, mortgage, security interest, pledge, charge, claim,
equity, reservation or other encumbrance of any kind.
1.9 MATERIAL ADVERSE CHANGE: with respect to a Person, a material
adverse change in the business, condition (financial or otherwise), operations
or prospects of such Person.
1.10 MATERIAL ADVERSE EFFECT: with respect to a Person, a material
adverse effect on the business, condition (financial or otherwise), operations
or prospects of such Person.
1.11 NOTE: Buyer's promissory note in the principal amount of $985,050,
substantially in the form attached hereto as EXHIBIT B.
1.12 PERSON: an individual, a corporation, a partnership, a limited
liability company, an association, a joint-stock company, a trust, an
unincorporated organization, a government or a political subdivision thereof.
1.13 PLEDGE AGREEMENT: the pledge agreement by all of the members of
Buyer in favor of Seller, substantially in the form attached hereto as EXHIBIT
C.
1.14 SELLER'S FACILITIES: all land, buildings, fixtures, improvements
and other tangible property owned or leased by Mom 'n' Pop's or otherwise used
by it in connection with the operation of its business.
1.15 SELL-SIDE COMPANIES: Fresh Foods, Seller and Mom 'n' Pop's.
1.16 TRADEMARK LICENSE: the perpetual, assignable, worldwide,
royalty-free license to use that certain trademark used by Mom 'n' Pop's,
substantially in the form attached hereto as EXHIBIT D.
ARTICLE II
THE CLOSING
The Closing, effective for all purposes as of July 2, 1999, will occur
at the offices of McGuire, Woods, Battle & Boothe LLP at 100 North Tryon Street,
Suite 2900, Charlotte, North Carolina, commencing at 10:00 A.M., Charlotte time,
on the Closing Date. At the Closing, Seller will sell the Equity to Buyer and
Buyer will buy the Equity from Seller, in each case subject to satisfaction or
waiver of the applicable Closing conditions specified in Article VII of this
Agreement. Upon the Closing, Seller will execute and deliver the Trademark
License to Buyer.
2
<PAGE> 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELL-SIDE COMPANIES
Fresh Foods and Seller jointly and severally represent and warrant to
Buyer as follows:
3.1 ORGANIZATION AND QUALIFICATION. Mom 'n' Pop's is duly organized,
validly existing and in good standing under the laws of the State of North
Carolina and has the requisite power and authority to carry on its business as
it is now being conducted. Mom 'n' Pop's is duly qualified to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned or leased by it, or the nature of its activities, is such that
qualification to do business in that jurisdiction is required by law, except for
jurisdictions in which the failure to be so qualified is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on any of
them. Seller has delivered to Buyer a true and complete copy of the operating
agreement of Mom 'n' Pop's.
3.2 CAPITALIZATION OF MOM 'N' POP'S. Mom 'n' Pop's has issued and
outstanding capital consisting of (a) the Equity and (b) a 1% membership
interest owned by James C. Richardson, Jr. The Equity is owned (of record and
beneficially) by Seller free and clear of any Liens. The Equity was duly
authorized and validly issued. No membership interests in Mom 'n' Pop's are
reserved for issuance, nor are there issued or outstanding any options,
warrants, convertible securities or other rights, agreements or commitments to
issue or acquire any such membership interests.
3.3 NO SUBSIDIARIES OR INVESTMENTS. Mom 'n' Pop's owns no capital stock
or other securities issued by any Person.
3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been duly
and validly executed and delivered by each of Seller and Fresh Foods and
constitutes a legal, valid and binding agreement of each of them, enforceable
against each of them in accordance with its terms. Each of Seller and Fresh
Foods has all requisite power and authority to enter into this Agreement. Seller
has all requisite corporate power and authority to consummate the transactions
contemplated hereby. No other action is required on the part of either of Fresh
Foods or Seller to authorize any of Fresh Foods or Seller to consummate the
transactions contemplated hereby.
3.5 ABSENCE OF BREACH; NO CONSENTS. The execution and delivery of this
Agreement by each of Fresh Foods, Seller and Mom 'n' Pop's does not, and the
performance by them of their obligations hereunder will not, (a) result in a
breach of any provision of the operating agreement of Mom 'n' Pop's or Seller or
the charter or bylaws of Fresh Foods; (b) violate any law, rule or regulation of
any State or the United States, or of any foreign jurisdiction, or any order,
writ, judgment, injunction, decree, determination or award of any court or other
authority having jurisdiction over any of Fresh Foods, Seller or Mom 'n' Pop's
or any of their material properties, or cause the suspension or revocation of
any authorization, consent, approval or license presently in effect that affects
or binds any of Fresh Foods, Seller or Mom 'n' Pop's or any of their material
properties, except, with respect to all matters described in this subsection
(b), to the extent that such
3
<PAGE> 4
violation would not reasonably be expected to have a Material Adverse Effect on
Mom 'n' Pop's; (c) except as contemplated by Section 7.3(d) of this Agreement,
result in a material breach of or default under any material indenture or loan
or credit agreement or other material agreement or instrument to which Fresh
Foods or Seller or Mom 'n' Pop's is a party or by which it or they or any of its
or their material properties are affected or bound; (d) require the
authorization, consent, approval or license of any Person of such a nature that
the failure to obtain the same would have a Material Adverse Effect on Mom 'n'
Pop's; or (e) constitute grounds for the loss or suspension of any material
permit, license or other authorization used by Mom 'n' Pop's.
3.6 COMPLIANCE WITH LAWS. Mom 'n' Pop's is in compliance with all laws
applicable to its business, including all applicable Environmental Laws and all
SEC rules and regulations, except for instances of noncompliance that have not
resulted in, and are not reasonably likely to result in, a Material Adverse
Effect on Mom 'n' Pop's.
3.7 COMPLIANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. The
consolidated financial statements of Fresh Foods as of March 6, 1999 and for the
fiscal year then ended, as filed by Fresh Foods with the SEC in Fresh Foods'
Annual Report on Form 10-K for its fiscal year ended March 6, 1999, were
prepared in conformity with generally accepted accounting principles, applied on
a consistent basis, and are correct and complete and present fairly the
financial condition of Fresh Foods as of March 6, 1999 and the results of
operations of Fresh Foods for the fiscal year then ended.
3.8 TAXES. Fresh Foods, Seller and Mom 'n' Pop's have filed or caused
to be filed all federal, state, local and foreign income and other tax returns,
reports and declarations that are required by applicable law to be filed by them
(except to the extent that failure to file is not reasonably likely to have a
Material Adverse Effect on Mom 'n' Pop's) and have paid, or made full and
adequate provision for the payment of, all federal, state, local and foreign
income and other taxes properly due for the periods covered by such returns,
reports and declarations, except for taxes the nonpayment of which is not
reasonably likely to have a Material Adverse Effect on Mom 'n' Pop's.
3.9 TITLE TO REAL AND PERSONAL PROPERTY. Except as disclosed in
SCHEDULE 3.9 or as contemplated by Section 7.2(d) of this Agreement, Mom 'n'
Pop's has good and marketable title to, or valid leasehold interests in, all
real property and personal property used by it in the conduct of its business,
free and clear of all Liens, except Liens for taxes not yet due and minor
imperfections of title and encumbrances, if any, which, singly and in the
aggregate, are not substantial in amount and do not detract materially from the
value of the property subject thereto or impair materially the use thereof.
3.10 NO INJUNCTIONS. There is not in effect any preliminary or
permanent injunction or other order by any federal or state authority
prohibiting the consummation of the transactions contemplated hereby.
4
<PAGE> 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sell-Side Companies as follows:
4.1 ORGANIZATION AND QUALIFICATION. Buyer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of North Carolina and has the requisite power and authority to carry
on its business as it is now being conducted. Buyer has delivered to Seller a
true and complete copy of the operating agreement of Buyer.
4.2 OWNERSHIP. Buyer has authorized capital consisting solely of
membership interests of a single class and series, all of which are owned (of
record and beneficially) by James C. Richardson, Jr., A. Eugene Houston, Richard
D. Page and Brian D. Davis free and clear of any Liens. All such membership
interests have been duly authorized and validly issued.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been duly
and validly executed and delivered by Buyer and constitutes a legal, valid and
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms. Buyer has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The members of Buyer
have, subject to the terms and conditions set forth herein, approved this
Agreement and the transactions contemplated hereby. No other action is required
on the part of Buyer or the members of Buyer to authorize Buyer to consummate
the transactions contemplated hereby.
4.4 ABSENCE OF BREACH; NO CONSENTS. The execution and delivery of this
Agreement by Buyer do not, and the performance by Buyer of its obligations
hereunder will not, (a) result in a breach of any provision of the operating
agreement of Buyer; (b) violate any law, rule or regulation of any State or the
United States, or of any foreign jurisdiction, or any order, writ, judgment,
injunction, decree, determination or award of any court or other authority
having jurisdiction over Buyer or any of its properties, or cause the suspension
or revocation of any authorization, consent, approval or license presently in
effect that affects or binds Buyer or any of its properties; (c) result in a
breach of or default under any loan or credit agreement or other agreement or
instrument to which Buyer is a party or by which it or any of its properties are
affected or bound; or (d) require the authorization, consent, approval or
license of any Person.
4.5 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with this
Agreement or the transactions contemplated hereby, or any related transaction,
based upon any agreement, written or oral, made by or on behalf of Buyer or any
of Buyer's Affiliates.
ARTICLE V
COVENANTS OF THE SELL-SIDE COMPANIES
5.1 BEST EFFORTS; GOOD FAITH. Subject to the terms and conditions
herein provided and to
5
<PAGE> 6
applicable fiduciary duties, each of Fresh Foods, Seller and Mom 'n' Pop's
agrees to use its best efforts to take or cause to be taken all such actions
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions set forth in Article VII and to consummate the transactions
contemplated by this Agreement, including the execution of any additional
documents necessary to consummate the transactions contemplated hereby. Seller
agrees to notify Buyer immediately of any event or circumstance that occurs that
reasonably could be expected to result in a Material Adverse Effect on Buyer or
Seller or that might result in Seller's failure to effect the Closing or a delay
in respect thereof.
5.2 EXPENSES. Whether or not the Closing occurs, all costs and expenses
incurred by Seller in connection with this Agreement and the transactions
contemplated hereby shall be paid by Seller except as otherwise provided herein.
5.3 CONDUCT OF BUSINESS PENDING THE CLOSING. The Sell-Side Companies
covenant and agree with Buyer that, prior to the Closing, unless Buyer shall
otherwise consent in writing, except as otherwise contemplated by this
Agreement:
(a) The Sell-Side Companies will not cause Mom 'n' Pop's to (1) amend
or restate its operating agreement, or (2) split, combine or reclassify any of
its equity interests or other securities, or declare, set aside or pay any
dividend or other distribution on any of its equity interests or other
securities, or make or agree or commit to make any exchange for or redemption of
any of its equity interests or other securities payable in cash, stock or
property;
(b) The Sell-Side Companies will not cause Mom 'n' Pop's to issue or
agree to issue any equity interests in itself, or options, warrants or other
rights of any kind to acquire any such equity interests, whether by purchase or
conversion or exchange of other equity interests or other securities;
(c) The Sell-Side Companies will not cause Mom 'n' Pop's to create,
incur, assume or guarantee any indebtedness for borrowed money, except in the
ordinary course of business and consistent with past practice;
(d) The Sell-Side Companies will not cause Mom 'n' Pop's to acquire (by
merger, consolidation or acquisition of equity interests or assets) any
corporation, partnership or other organization or division thereof engaged in
any business or any equity interest therein; and
(e) The Sell-Side Companies will not cause Mom 'n' Pop's to enter into
any contract, agreement, commitment or understanding, whether in writing or
otherwise, with respect to any of the matters referred to in subsections (a)
through (d) above.
(f) Fresh Foods will permit Mom 'n' Pop's employees to continue to
participate in its health benefit plans (but not its 401(K) or employee stock
purchase plan) from July 2, 1999 through the Closing Date.
6
<PAGE> 7
ARTICLE VI
COVENANTS OF BUYER
6.1 BEST EFFORTS; GOOD FAITH. Subject to the terms and conditions
herein provided, Buyer agrees to use its best efforts to take or cause to be
taken all such actions necessary, proper or advisable under applicable laws and
regulations to satisfy the conditions set forth in Article VII and to consummate
the transactions contemplated by this Agreement, including the execution of any
additional documents necessary to consummate the transactions contemplated
hereby. Buyer agrees to notify Seller immediately of any event or circumstance
that occurs or comes to Buyer's attention if and to the extent that a result of
the event or circumstance, or of Buyer's knowledge of the same, might be Buyer's
failure to effect the Closing or a delay in respect thereof.
6.2 EXPENSES. Whether or not the Closing occurs, all costs and expenses
incurred by Buyer in connection with this Agreement and the transactions
contemplated hereby shall be paid by Buyer except as otherwise provided herein.
6.3 PUBLICITY. Prior to the first to occur of the termination of this
Agreement and the second business day following the Closing Date, any written
news releases by Buyer pertaining to this Agreement or the Closing shall be
submitted to Seller for review and approval prior to release and shall be
released only in a form approved by Seller.
6.4 MAINTENANCE OF RECORDS. Buyer agrees to maintain for seven years
after the Closing Date the books, records and other documents of Mom 'n' Pop's
as they exist on the Closing Date. Buyer agrees to afford to each of Fresh Foods
and Seller and their accountants, legal counsel and other agents full access to
such documents (to the extent that Fresh Foods or Seller can demonstrate a
reasonable need for such access), during normal business hours, for seven years
from the Closing Date.
6.5 INDEMNIFICATION AND INSURANCE. (a) Buyer agrees to cause the
operating agreement of Mom 'n' Pop's to continue to contain the provisions with
respect to exculpation and indemnification of officers, directors, members and
other Persons set forth therein on the date hereof, which provisions shall not
be amended for six years after the Closing Date (except for amendments that do
not affect adversely the rights of Persons at or prior to the Closing Date).
(b) From and after the Closing Date, Buyer shall indemnify, defend and
hold harmless Seller from and against any loss, damage, liability, cost or
expense incurred in connection with any claim, action, suit, proceeding or
investigation, including, without limitation, any proceeding brought by or on
behalf of Mom 'n' Pop's, any of its predecessors or Buyer (collectively,
"Claims"), arising from the acts or omissions of Mom 'n' Pop's at any time
(whether before or after the date hereof or before or after the Closing Date) or
the breach by Buyer of any representation and warranty, covenant or other
agreement contained in this Agreement.
(c) This Section is intended to be for the benefit of, and shall be
enforceable by, the Seller and the Seller's successors and assigns. Buyer shall
pay any and all Claims referred to in subsection (b) upon demand by Seller, it
being understood and agreed that such a demand may
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precede the final disposition of the related Claim. The rights to
indemnification hereunder are in addition to, and not in limitation of, any
other rights to indemnification that Seller may have under applicable law or
under the operating agreement of Buyer. This Section shall be binding upon Buyer
and its successors and assigns.
6.6 SHARED SERVICES. Buyer will reimburse Seller or Fresh Foods, as
applicable, for any and all operating expenses incurred by Seller or Fresh Foods
attributable to the operations of Mom 'n' Pop's following the effective date of
the Closing, including, without limitation, telephone and utility expenses,
payments pursuant to capital leases and equipment leases and expenses incurred
in transferring personal property described in SCHEDULE 3.9 to Mom 'n' Pop's.
6.7 EMPLOYEE BENEFITS. Following the Closing, in that the Closing shall
be deemed to have occurred as of July 2, 1999, Buyer will reimburse Fresh Foods
for the incremental cost incurred by Fresh Foods in permitting Mom 'n' Pop's
employees to participate in Fresh Foods' health benefit plans from July 2, 1999
through the Closing.
6.8 TRANSFER TAXES. Seller shall be responsible for satisfying any and
all liabilities, costs and expenses arising from revenue stamp, transfer, excise
and similar taxes arising, directly or indirectly, from the transfers or deemed
transfers of ownership contemplated by this Agreement. Seller agrees to
indemnify Buyer for any and all liabilities, costs and expenses incurred by
Buyer in that regard.
6.9 CONDUCT OF BUSINESS PENDING THE CLOSING. In connection with Fresh
Foods' delegation to Buyer of the power and authority necessary to manage Mom
'n' Pop's prior to the Closing pursuant to the Binding Letter Agreement dated
July 2, 1999 between Fresh Foods and Buyer, the Buyer covenants and agrees with
the Seller that, prior to the Closing, unless Seller shall otherwise consent in
writing, except as otherwise contemplated by this Agreement:
(a) Buyer will cause Mom 'n' Pop's to conduct business in the ordinary
and usual course, consistent with past practice;
(b) Buyer will not cause Mom 'n' Pop's to authorize or make any capital
expenditure;
(c) Buyer will not cause Mom 'n' Pop's to (1) create, incur or assume
or guarantee any indebtedness for borrowed money (other than pursuant to that
certain Revolving Credit Agreement dated as of July 2, 1999 between Buyer and
Fresh Foods), or (2) guarantee or otherwise assure the repayment of any such
indebtedness;
(d) Buyer will not cause Mom 'n' Pop's to incur any voluntary lien on
any asset of Mom 'n' Pop's;
(e) Buyer will not cause Mom 'n' Pop's to (1) issue or agree to issue
any equity interests in itself, or options, warrants or other rights of any kind
to acquire any such equity interests, whether by purchase or conversion or
exchange of other equity interests or other
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securities, (2) merge or consolidate with any entity, or (3) make any material
change in the business of Mom 'n' Pop's; and
(f) Buyer will not cause Mom 'n' Pop's to enter into any contract,
agreement, commitment or understanding, whether in writing or otherwise, with
respect to any of the matters referred to in subsections (b) through (e) above.
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF ALL PARTIES. The obligation of each
party to effect the Closing shall be subject to satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) Each party shall have received a copy, certified by the Secretary
or an Assistant Secretary of Seller, of resolutions duly adopted (and not
subsequently modified or rescinded) by Seller as the sole member-manager of Mom
'n' Pop's, by the terms of which resolutions such member-manager shall have
approved this Agreement and authorized the transactions contemplated hereby.
(b) Each party shall have received a copy, certified by the Secretary
or an Assistant Secretary of Buyer, of resolutions duly adopted (and not
subsequently modified or rescinded) by the members of Buyer, by the terms of
which resolutions such Persons shall have approved this Agreement and authorized
the transactions contemplated hereby.
(c) There shall not be in effect any preliminary or permanent
injunction or other order by any federal or state authority prohibiting the
consummation of the transactions contemplated hereby.
7.2 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
effect the Closing shall be subject to satisfaction or waiver of the following
additional conditions on or prior to the Closing Date:
(a) The representations and warranties of the Sell-Side Companies set
forth in this Agreement shall be true and correct in all material respects as of
the date of this Agreement and, except in such respects as would not reasonably
be expected to have a Material Adverse Effect on Mom 'n' Pop's, as of the
Closing Date (as if made at such time).
(b) The Sell-Side Companies shall have performed in all material
respects the covenants and agreements required by this Agreement to be performed
by them at or prior to the Closing.
(c) Buyer shall have received from Fresh Foods an officer's
certificate, executed by the President of Fresh Foods (in his capacity as such)
and dated the Closing Date, confirming satisfaction of the conditions stated in
paragraphs (a) and (b) above.
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(d) Seller shall have conveyed to Mom 'n' Pop's the parcel of real
estate upon which Mom 'n' Pop's operates its food processing business.
7.3 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
effect the Closing shall be subject to satisfaction or waiver of the following
additional conditions on or prior to the Closing Date:
(a) The representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and, except in such respects as would not reasonably be expected
to have a Material Adverse Effect on Seller, as of the Closing Date (as if made
at such time).
(b) Buyer shall have performed in all material respects the covenants
and agreements required by this Agreement to be performed by it at or prior to
the Closing.
(c) Seller shall have received from Buyer a member-manager's
certificate, executed by James C. Richardson, Jr. (in his capacity as
member-manager of Buyer) and dated the Closing Date, confirming satisfaction of
the conditions stated in paragraphs (a) and (b) above.
(d) Fresh Foods, Seller and Mom 'n' Pop's shall have received any and
all necessary waivers and consents granted by their institutional lenders or
shall have received amendments to their credit documents having the same effect.
(e) Fresh Foods shall have received an opinion letter of Bowles
Hollowell Conner, a division of First Union Capital Markets Corp., dated a
recent date, endorsing the transactions contemplated by this Agreement.
(f) Buyer shall have executed and delivered the Note to Seller.
(g) The members of Buyer shall have executed and delivered the Pledge
Agreement to Seller.
(h) The Buyer and the members of Buyer shall have executed and
delivered the Issuer Control Agreement to Seller.
(i) The operating agreement of Buyer shall have been amended to include
the provision set forth in EXHIBIT E to this Agreement and to eliminate any
provisions inconsistent therewith.
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ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
8.1 TERMINATION. Notwithstanding any other provision of this Agreement,
this Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing:
(a) by written consent of Buyer and Seller;
(b) by either Buyer or Seller in the event of a material
misrepresentation, material breach of warranty or material breach of covenant or
other agreement by the other party, which representation, warranty, covenant or
agreement is contained in this Agreement (and which breach has not been cured
within fifteen days following receipt of written notice thereof by the breaching
party);
(c) by Seller in the event that the Closing shall not have occurred by
11:59 P.M., Eastern time, on the 21st day following the date of this Agreement,
provided that the nonoccurrence of the Closing by such time is not caused by a
material misrepresentation or a material breach of this Agreement by Seller; or
(d) by Buyer in the event that the Closing shall not have occurred by
11:59 P.M., Eastern time, on the sixtieth day following the date of this
Agreement, provided that the nonoccurrence of the Closing by such time is not
caused by a material misrepresentation or a material breach of this Agreement by
Buyer.
8.2 CONSEQUENCES OF TERMINATION. In the event of the termination of
this Agreement and the abandonment of the transactions contemplated by this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and of no effect, without any liability on the part of any party hereto, or its
Affiliates, directors, officers, members or shareholders, other than pursuant to
the provisions of this Article and of Sections 5.2 and 6.2, which shall survive
such termination and abandonment; PROVIDED that termination of this Agreement
pursuant to subsection (b) of Section 8.1 shall not relieve a party from
liability for the misrepresentation or for the uncured breach of warranty,
covenant or agreement giving rise to termination. The liability of a party may
exceed the aggregate amount of such party's out-of-pocket expenses described
below. In the event of the termination of this Agreement by Seller and the
abandonment of the transactions contemplated by this Agreement pursuant to
subsection (b) or (c) of Section 8.1, Buyer will pay to Seller, not later than
ten days following delivery of notice of such termination and abandonment to
Buyer, the aggregate amount of Seller's documented legal, investment banking,
accounting and other out-of-pocket expenses incurred in pursuit of the
transactions contemplated by this Agreement (whether incurred before or after
the date hereof). In the event of the termination of this Agreement by Buyer and
the abandonment of the transactions contemplated by this Agreement pursuant to
subsection (b) or (d) of Section 8.1, Seller will pay to Buyer, not later than
ten days following delivery of notice of such termination and abandonment to
Seller, the aggregate amount of Buyer's documented legal, accounting and other
out-of-pocket expenses incurred in pursuit of the transactions contemplated by
this Agreement (whether incurred before or after the date hereof). Any and all
payments made
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pursuant to this Section 8.2 shall be made by wire transfer of immediately
available funds to an account designated for such purpose by the recipient in
its notice of termination and abandonment.
8.3 AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
8.4 WAIVERS. To the extent permitted by applicable law, the Sell-Side
Companies or Buyer may at any time (a) extend the time for the performance of
any of the obligations or other acts of the other, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements, covenants or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.1 SURVIVAL. The representations, warranties, covenants, indemnities
and other agreements of the parties made in and pursuant to this Agreement shall
not survive the Closing, except for covenants and agreements that, by their
terms, are to be performed after the Closing Date.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed sufficiently given if delivered personally or sent
by facsimile transmission or by registered or certified mail (postage prepaid),
addressed as follows (or to such other address for a party as shall be specified
by like notice given at least seven days prior thereto):
if to any or all of the Sell-Side Companies, then to:
Mr. David R. Clark
Fresh Foods, Inc.
361 2nd Street, NW
Hickory, NC 28601
Fax: (828) 304-2330
with a copy (which shall not constitute notice) to:
Sandra Copenhaver Simos, Esq.
McGuire, Woods, Battle & Boothe LLP
Bank of America Corporate Center
100 North Tryon Street, 29th Floor
Charlotte, NC 28202
Fax: (704) 373-8837
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if to Buyer, then to:
Mr. James C. Richardson, Jr.
Hoggs, LLC
3437 East Main Street
Claremont, NC 28610
Fax: (828) 304-2330
with a copy (which shall not constitute notice) to:
Charles R. Young, Esq.
Tate, Young, Morphis, Bach & Taylor, L.L.P.
First Lawyers Building
400 Second Avenue, N.W.
Hickory, NC 28603-2428
Fax: (704) 322-2023
All such notices and communications shall be considered as having been duly
given at the time delivered by hand, if delivered personally; 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.
9.3 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.4 MISCELLANEOUS. This Agreement (a) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between and among the parties, or any of them, with respect to the subject
matter hereof, except as specifically provided otherwise or referred to herein,
so that no such external or separate agreements relating to the subject matter
of this Agreement shall have any effect or be binding, unless the same is
referred to specifically in this Agreement or is executed by the parties after
the date hereof; (b) except for Section 6.5, is not intended to confer upon any
other person any rights or remedies hereunder; (c) shall not be assigned by
operation of law or otherwise; and (d) shall be governed by and construed in
accordance with the laws of the State of North Carolina. This Agreement may be
executed in any number of counterparts, each of which shall constitute an
original but all of which together shall constitute one agreement.
[SIGNATURES APPEAR ON NEXT PAGE]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and delivered as of the date first written above.
PIERRE FOODS, LLC
By: FRESH FOODS, INC.,
its sole member-manager
By: /s/ David R. Clark
----------------------------------
David R. Clark
President
MOM 'n' POP'S COUNTRY HAM, LLC
By: PIERRE FOODS, LLC,
its sole member-manager
By: FRESH FOODS, INC.,
its sole member-manager
By: /s/ David R. Clark
------------------------------
David R. Clark
President
FRESH FOODS, INC.
By: /s/ David R. Clark
-----------------------------------------
David R. Clark
President
HOGGS, LLC
By: /s/ James C. Richardson, Jr.
-----------------------------------------
James C. Richardson, Jr.
Member-Manager
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(SCHEDULES AND EXHIBITS HAVE BEEN OMITTED.
THE COMPANY AGREES TO FURNISH SUPPLEMENTALLY TO THE COMMISSION,
UPON REQUEST, A COPY OF ANY SUCH OMITTED SCHEDULE OR EXHIBIT.)
<PAGE> 1
EXHIBIT 2.4
PURCHASE AGREEMENT
This Purchase Agreement dated as of September 10, 1999 is among
Claremont Restaurant Group, LLC, a North Carolina limited liability company
("Claremont"), Fresh Foods Sales, LLC, another North Carolina limited liability
company ("Sales"), Fresh Foods, Inc., a North Carolina corporation and the sole
member-manager of both Claremont and Sales ("Seller"), and CRG Holdings Corp., a
North Carolina corporation ("Buyer").
WHEREAS, the parties consider it advisable and in their mutual best
interest that Seller sell Claremont and Sales to Buyer, and that Buyer buy
Claremont and Sales from Seller, on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, the parties do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the terms identified in this Article shall
have the meanings indicated.
1.1 ACCOUNTANTS: PricewaterhouseCoopers, LLP.
1.2 ACTUAL NET WORKING CAPITAL AMOUNT: has the meaning ascribed to such
term in Section 2.2(a) of this Agreement.
1.3 AFFILIATE: a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
another Person, within the meaning of Rule 144(a)(1) under the Securities Act.
1.4 AGREEMENT: this Purchase Agreement, including the Schedules and
Exhibits hereto and Seller's Disclosure Document.
1.5 BENEFIT PLANS: has the meaning ascribed to such term in Section
3.11(c) of this Agreement.
1.6 BUSINESS: has the meaning ascribed to such term in Section
5.11(a)(1) of this Agreement.
1.7 BUYER: has the meaning ascribed to such term in the recitals to
this Agreement.
1.8 BUYER'S COUNSEL: Kennedy Covington Lobdell & Hickman, L.L.P., Bank
of America Corporate Center, 100 North Tryon Street, Suite 4200, Charlotte,
North Carolina 28202-4006.
1.9 CLAREMONT: has the meaning ascribed to such term in the recitals to
this Agreement.
<PAGE> 2
1.10 CLAREMONT SUBSIDIARY: any of Sagebrush of South Carolina, LLC,
Sagebrush of North Carolina, LLC, Fresh Foods Restaurant Group, LLC, Spicewood,
Inc. and Sagebrush of Tennessee, LP (collectively, the "Claremont
Subsidiaries").
1.11 CLOSING: the consummation of the purchase of all issued and
outstanding Interests in Claremont and Sales by Buyer from Seller, and the sale
of all issued and outstanding Interests in Claremont and Sales by Seller to
Buyer, as contemplated by this Agreement.
1.12 CLOSING DATE: October 1, 1999, or such other date for the Closing
upon which the parties may agree upon satisfaction of all of the conditions to
Closing contained herein.
1.13 CLOSING DATE BALANCE SHEET: has the meaning ascribed to such term
in Section 2.2(a) of this Agreement.
1.14 CLOSING PRICE: has the meaning ascribed to such term in Section
2.1(b) of this Agreement.
1.15 ENVIRONMENTAL LAW: any statute, law, code, regulation, order,
notice, rule or ordinance, or any requirement, restriction, limitation,
condition or obligation contained therein, including any and all plans, orders,
decrees, judgments and notices issued, entered, promulgated or approved
thereunder, purporting to regulate the use, misuse, pollution or preservation of
land, air or water resources, including (without limitation) those purporting to
regulate building or planning, industrial buildings, plants or equipment or
health or safety, as such are related to environmental matters.
1.16 ERISA: the Employee Retirement Income Security Act of 1974, as
amended and in effect at the date of this Agreement.
1.17 ESTIMATED NET WORKING CAPITAL AMOUNT: has the meaning ascribed to
such term in Section 2.1(c) of this Agreement.
1.18 ESTIMATED PURCHASE PRICE: has the meaning ascribed to such term in
Section 2.1(c) of this Agreement.
1.19 EXCHANGE ACT: the Securities Exchange Act of 1934, as amended to
the date as of which any reference thereto is relevant under this Agreement.
1.20 FIDUCIARY DETERMINATION: a good faith determination by Seller's
board of directors or a duly constituted committee thereof, after consultation
with legal counsel, that termination of this Agreement and acceptance of a
proposal made by a Person other than Buyer to acquire (including pursuant to a
merger or share exchange) some or all of the Sell-Side Companies, or assets
thereof, is necessary in execution of such directors' duties under the NCBCA.
1.21 GAAP: generally accepted accounting principles, as in effect on
the date of any statement, report or determination that purports to be, or is
required to be, prepared or made in accordance therewith; and references herein
to financial statements prepared "in accordance
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with GAAP" shall mean in accordance with GAAP consistently applied throughout
the periods to which reference is made.
1.22 HSR ACT: the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended to the date as of which any reference thereto is relevant under this
Agreement.
1.23 INTEREST: a membership interest in Claremont or Sales, as the
context requires, as defined in such limited liability company's operating
agreement as amended to the date hereof.
1.24 LAST OFFER: has the meaning ascribed to such term in Section
2.2(c) of this Agreement.
1.25 LIEN: any lien, mortgage, security interest, pledge, charge,
claim, equity, reservation, adverse claim or other encumbrance of any kind.
1.26 MATERIAL ADVERSE CHANGE: with respect to a Person, a material
adverse change in the business, condition (financial or otherwise), operations
or prospects of such Person.
1.27 MATERIAL ADVERSE EFFECT: with respect to a Person, a material
adverse effect on the business, condition (financial or otherwise), operations
or prospects of such Person.
1.28 NASDAQ: the National Association of Securities Dealers, Inc.
Automated Quotation system.
1.29 NCBCA: the North Carolina Business Corporation Act, as amended to
the date as of which any reference thereto is relevant under this Agreement.
1.30 NET WORKING CAPITAL AMOUNT: has the meaning ascribed to such term
in Section 2.1(b) of this Agreement.
1.31 NON-PREVAILING PARTY: has the meaning ascribed to such term in
Section 2.2(c) of this Agreement.
1.32 PERSON: an individual, a corporation, a partnership, a limited
liability company, an association, a joint-stock company, a trust, an
unincorporated organization, a government or a political subdivision thereof.
1.33 PREVAILING PARTY: has the meaning ascribed to such term in Section
2.2(c) of this Agreement.
1.34 PURCHASE PRICE: has the meaning ascribed to such term in Section
2.1(b) of this Agreement.
1.35 RESTAURANT SEGMENT: Claremont and its Subsidiaries, Sales and
Sunshine WSMP, Inc., a Subsidiary of the Seller.
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1.36 RESTAURANT SEGMENT'S AUDITED FINANCIAL STATEMENTS: the combined
balance sheet of the Restaurant Segment as of March 7, 1999 and the related
combined statements of earnings and cash flows for the year then ended, audited
and reported on as of August 30, 1999 by Deloitte & Touche LLP.
1.37 RESTRICTED PERIOD: has the meaning ascribed to such term in
Section 5.11(a) of this Agreement.
1.38 RETAINED ASSETS: the assets to be transferred by Sales, Claremont
and the Claremont Subsidiaries to other Persons prior to the sale of the
Interests to Buyer hereunder, consisting of a Bennett's restaurant and rights
related exclusively thereto and certain vacant and undeveloped real property
(all as specifically identified in Seller's Disclosure Document).
1.39 RETAINED LIABILITIES: any and all liabilities and obligations
associated with the Retained Assets, including those liabilities and obligations
identified in Seller's Disclosure Document.
1.40 SALES: has the meaning ascribed to such term in the recitals to
this Agreement.
1.41 SEC: the Securities and Exchange Commission.
1.42 SEC REPORT: a document filed with the SEC pursuant to the Exchange
Act.
1.43 SECURITIES ACT: the Securities Act of 1933, as amended to the date
as of which any reference thereto is relevant under this Agreement.
1.44 SELLER: has the meaning ascribed to such term in the recitals to
this Agreement.
1.45 SELLER'S AUDITED FINANCIAL STATEMENTS: the audited consolidated
balance sheets, income statements, statements of shareholders' equity and
statements of cash flows of Seller filed by Seller as part of its Annual Report
on Form 10-K for its fiscal year ended March 6, 1999.
1.46 SELLER'S BALANCE SHEET: the most recent balance sheet included in
Seller's Audited Financial Statements.
1.47 SELLER'S COUNSEL: McGuire, Woods, Battle & Boothe LLP, Bank of
America Corporate Center, l00 North Tryon Street, 29th Floor, Charlotte, North
Carolina 28202-4000.
1.48 SELLER'S DISCLOSURE DOCUMENT: the document delivered by Seller to
Buyer at or prior to the date of this Agreement, the receipt of which is hereby
acknowledged, containing certain disclosures regarding the Sell-Side Companies
and Claremont Subsidiaries pursuant to this Agreement.
1.49 SELLER'S FACILITIES AND EQUIPMENT: all restaurants, stores,
fixtures, improvements, equipment, automobiles and other tangible property owned
or leased by Sales, Claremont or a
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Claremont Subsidiary or otherwise used by one of them in connection with the
operation of its business or leased or subleased to other Persons, excluding,
however, the Retained Assets.
1.50 SELL-SIDE COMPANIES: Seller, Claremont and Sales.
1.51 SUBSEQUENT AGREEMENT: has the meaning ascribed to such term in
Section 8.2(b) of this Agreement.
1.52 SUBSIDIARY: with respect to any Person, a second Person of which
fifty percent or more of the effective voting power, or the effective power to
elect a majority of the Board of Directors or similar governing body, or fifty
percent or more of the equity interest, is owned by the first Person, directly
or indirectly.
1.53 TAKEOVER LAWS: any and all "moratorium," "control share," "fair
price," "business combination" and other anti-takeover laws of the State of
North Carolina, including, without limitation, Articles 9 and 9A of the NCBCA.
1.54 TAX AGREEMENT: that certain Tax Agreement of even date herewith
among the parties hereto.
1.55 TRANSACTION DOCUMENTS: this Agreement and the Tax Agreement.
ARTICLE II
THE CLOSING
2.1. CLOSING PURCHASE PRICE. (a) The Closing will occur at the office
of Seller's Counsel, commencing at 10:00 A.M., Eastern time, on the Closing
Date. At the Closing, Seller will sell the Interests to Buyer and Buyer will buy
the Interests from Seller, in each case subject to satisfaction or waiver of the
applicable Closing conditions specified in Article VII of this Agreement. Upon
the Closing, (i) Buyer will deliver to Seller the Estimated Purchase Price
(determined and delivered in accordance with paragraphs (b), (c) and (d) below)
against a written receipt (in form reasonably acceptable to Buyer) evidencing
Seller's transfer of the Interests to Buyer and (ii) Buyer will acquire good,
valid and exclusive title to the Interests free and clear of all Liens.
(b) At the Closing, Buyer will pay to Seller $50,000,000 (the "Closing
Price"), subject to adjustment as provided in Sections 2.1(c) and 2.2 with
respect to the Net Working Capital Amount (as finally determined and adjusted,
the "Purchase Price"). "Net Working Capital Amount" means an amount (determined
in accordance with GAAP and on a basis consistent with, and using the same
accounting principles, policies, practices and procedures used in preparing, the
Restaurant Segment's Audited Financial Statements) equal to (x) the sum of cash
and cash equivalents, accounts receivable (less allowance for doubtful
accounts), current portion of notes and other receivables (other than Retained
Assets), inventories, prepaid expenses and other current assets less (y) the sum
of trade accounts payable, accrued payroll and all related accrued payroll taxes
and benefits, accrued insurance (both premiums and estimated losses and incurred
but not reported claims pushed-down from Seller's balance sheet), gift
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certificates outstanding and all other current liabilities (including, but not
limited to, rent payable and amounts payable to the health plan covering
employees of Claremont and Sales). In calculating the Net Working Capital
Amount, there shall be excluded all assets, liabilities and accruals related to
Taxes (as defined in the Tax Agreement), Retained Assets and Retained
Liabilities.
(c) Not less than two business days prior to the Closing Date, Seller
will deliver to Buyer an unaudited combined balance sheet that will (i) set
forth Seller's estimate of the Net Working Capital Amount of Sales and Claremont
as of the close of business on the Closing Date (the "Estimated Net Working
Capital Amount"), determined in accordance with the second sentence of Section
2.2(a) as if it were the Actual Net Working Capital Amount, but based upon
Seller's review of the most current financial information then available to
Seller and its inquiries of personnel responsible for the preparation of
financial information relating to Sales and Claremont, and (ii) otherwise be
satisfactory to Buyer in its reasonable good faith discretion. The Closing Price
will be reduced or increased dollar-for-dollar, as the case may be (as so
adjusted, the "Estimated Purchase Price"), by the amount by which the Estimated
Net Working Capital Amount is less or more, as the case may be, than negative
$4,650,000.
(d) On the Closing Date, Buyer will pay by wire transfer of immediately
available funds to such account as Seller has theretofore designated an amount
equal to the Estimated Purchase Price.
2.2. PURCHASE PRICE ADJUSTMENT. (a) To determine the Purchase Price,
the Estimated Purchase Price will be reduced or increased dollar-for-dollar, as
the case may be, to the extent that the Actual Net Working Capital Amount is
less or greater, as the case may be, than the Estimated Net Working Capital
Amount. "Actual Net Working Capital Amount" means the Net Working Capital Amount
as set forth on a combined balance sheet of Claremont and Sales, prepared in
accordance with this Section 2.2 as of the close of business on the Closing Date
(the "Closing Date Balance Sheet") determined in accordance with GAAP and on a
basis consistent with, and using the same accounting principles, policies,
practices and procedures used in preparing, the Restaurant Segment's Audited
Financial Statements.
(b) Within 45 calendar days after the Closing Date, Buyer will prepare
and deliver, or cause to be prepared and delivered, to Seller an unaudited
Closing Date Balance Sheet setting forth the Actual Net Working Capital Amount.
(c) If, within ten calendar days after the date of Buyer's delivery of
its computation of the Actual Net Working Capital Amount, Seller determines in
good faith that such computation is inaccurate, Seller will give written notice
to Buyer within such ten-calendar day period (i) setting forth Seller's
computation of the Actual Net Working Capital Amount as of the Closing Date and
(ii) specifying in reasonable detail Seller's basis for its disagreement with
Buyer's computation. The failure by Seller so to express its disagreement or
provide such specification within such ten-calendar day period will constitute
Seller's acceptance of Buyer's computation of the Actual Net Working Capital
Amount. If Seller and Buyer are unable to resolve any disagreement between them
within ten calendar days after the giving of notice of such disagreement, then
the items in dispute will be referred for determination to the Charlotte
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office of the Accountants as promptly as practicable. The Accountants will make
a determination as to each of the items in dispute, which determination will be
(A) in writing, (B) furnished to each of the parties hereto as promptly as
practicable after the items in dispute have been referred to the Accountants,
(C) made in accordance with this Agreement and (D) conclusive and binding upon
each of the parties hereto. In connection with their determination of the
disputed items, the Accountants will be entitled to have access to the
workpapers, trial balances and similar materials prepared by Deloitte & Touche
LLP in connection with such firm's examination of the Restaurant Segment's
Audited Financial Statements, and the fees and expenses of the Accountants will
be shared equally by Buyer and Seller (except as provided below). Buyer and
Seller will use reasonable efforts to cause the Accountants to render their
decision as soon as practicable, including by promptly complying with all
reasonable requests by the Accountants for information, books, records and
similar items. If the determination of the Accountants represents an outcome
more favorable to either Buyer or Seller than the midpoint of such parties' last
written settlement offers related to all items in dispute, in the aggregate,
submitted to the Accountants upon the referral of the matter to the Accountants
(each, a "Last Offer"), then the party obtaining such favorable result will be
deemed the "Prevailing Party" and the other party will be deemed the
"Non-Prevailing Party." For purposes hereof, all of the fees and expenses of the
Accountants, and the reasonable out-of-pocket expenses of the Prevailing Party,
will be borne by the Non-Prevailing Party. No party will disclose to the
Accountants, and the Accountants will not consider for any purpose, any
settlement offer (other than the Last Offer) made by any party.
(d) To the extent that the Actual Net Working Capital Amount determined
as provided in this Section 2.2 is greater or less than the Estimated Net
Working Capital Amount, Buyer or Seller, as applicable, will, within ten
calendar days after the final determination of the Actual Net Working Capital
Amount pursuant to this Section 2.2, make payment by wire transfer of
immediately available funds of the amount of such difference, together with
interest thereon from the Closing Date to the date of payment (at a rate equal
to Bank of America's prime rate, as publicly announced and in effect from time
to time during such period, plus 2.0%, calculated on the basis of the actual
number of days elapsed over 365), to such account as has been designated by
Buyer or Seller, as applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELL-SIDE COMPANIES
The Sell-Side Companies jointly and severally represent and warrant to
Buyer as follows:
3.1 ORGANIZATION AND QUALIFICATION. Each of the Sell-Side Companies is
duly organized, validly existing and in good standing under the laws of the
State of North Carolina and has the requisite power and authority to carry on
its business as it is now being conducted. Each of the Sell-Side Companies is
duly qualified to do business, and is in good standing, in each jurisdiction
where the character of the properties owned or leased by it, or the nature of
its activities, is such that qualification to do business in that jurisdiction
is required by law, except for jurisdictions in which the failure to be so
qualified is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on any of them. Seller has delivered to Buyer true and
complete copies of
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the articles of organization and operating agreements of Claremont and Sales and
all amendments, supplements and modifications thereto and the charter and bylaws
of Seller.
3.2 CAPITALIZATION OF CLAREMONT AND SALES. Claremont and Sales have
authorized capital consisting solely of the Interests, all of which are owned
(of record and beneficially) by Seller, free and clear of any Liens. All of the
outstanding Interests have been duly authorized and validly issued. No
membership interests in either Claremont or Sales are reserved for issuance, nor
are there issued or outstanding any options, warrants, convertible securities or
other rights, agreements or commitments to issue or acquire any such membership
interests. On the Closing Date, Buyer will acquire good, valid and exclusive
title to the Interests, free and clear of all Liens.
3.3 SUBSIDIARIES AND INVESTMENTS. Sales has no Subsidiaries. Claremont
has disclosed in Section 3.3 of Seller's Disclosure Document the identity,
jurisdiction of organization, foreign qualifications and outstanding equity
capitalization of each of its Subsidiaries. Except for Claremont's equity
interests in its Subsidiaries, neither Claremont nor Sales owns (of record or
beneficially) any capital stock, membership interest or other equity interest in
any Person. Claremont or a Claremont Subsidiary owns (of record and
beneficially) the entire equity interest in each Claremont Subsidiary, free and
clear of all Liens. No equity interest in any such Subsidiary is or may become
required to be issued by reason of any option, warrant or other right relating
to the equity of such Subsidiary. There is no contract, arrangement or
understanding by which any Claremont Subsidiary is bound to issue any of its
equity or any option, warrant or other right relating thereto or by which
Claremont is or may be bound to transfer any part of the equity interest in any
Claremont Subsidiary. There is no contract, arrangement or understanding
relating to the right of Claremont to vote, transfer or otherwise dispose of any
of the equity interest in any Claremont Subsidiary. The equity interest in each
Claremont Subsidiary that has been issued has been duly authorized and validly
issued, was not issued in violation of any preemptive rights and is fully paid
and nonassessable under the law of the jurisdiction in which such Subsidiary was
organized and is owned by Claremont, free and clear of all Liens. Each Claremont
Subsidiary is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of the properties owned or leased by it, or the
nature of its activities, is such that qualification to do business in that
jurisdiction is required by law, except for jurisdictions in which the failure
to be so qualified is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Claremont, Sales and the Claremont
Subsidiaries (considered as one enterprise). Seller has delivered to Buyer true
and complete copies of the articles of organization, operating agreements,
certificates of limited partnership, partnership agreements, articles of
incorporation, bylaws and other organizational documents, if any, for or
relating to all of the Claremont Subsidiaries.
3.4 AUTHORITY RELATIVE TO TRANSACTION DOCUMENTS. The Transaction
Documents have been duly and validly executed and delivered by each of the
Sell-Side Companies. Each Transaction Document constitutes a legal, valid and
binding agreement of each of the Sell-Side Companies enforceable against each of
them in accordance with its terms. Each of the Sell-Side Companies has all
requisite power and authority to enter into the Transaction Documents and to
consummate the transactions contemplated thereby. Seller (the sole
member-manager of each of Claremont and Sales) has, subject to the terms and
conditions set forth herein: (a) determined that the Transaction Documents and
the transactions contemplated thereby are fair to, and in the best
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interests of, the Sell-Side Companies and Seller's shareholders; and (b)
approved the Transaction Documents and the transactions contemplated thereby. No
other action is required on the part of any Sell-Side Company, and no action is
required on the part of Seller's shareholders, to authorize any of the Sell-Side
Companies to execute and deliver the Transaction Documents and consummate the
transactions contemplated thereby.
3.5 ABSENCE OF BREACH; NO CONSENTS. The execution and delivery of this
Agreement by the Sell-Side Companies do not, and the performance by them of
their obligations hereunder will not, (a) result in a breach of any provision of
the articles of organization or operating agreement of Claremont or Sales, the
articles of incorporation or bylaws of Seller or the articles of organization or
operating agreement or the articles of incorporation or bylaws of any Claremont
Subsidiary; (b) violate any law, rule or regulation of any state or the United
States (except for compliance with alcoholic beverage retail sales licensing
laws applicable to Claremont), or of any foreign jurisdiction, or any order,
writ, judgment, injunction, decree, determination or award of any court or other
authority having jurisdiction over any of the Sell-Side Companies or any
Claremont Subsidiary or any of their material properties, or cause the
suspension or revocation of any authorization, consent, approval or license
presently in effect that affects or binds any of the Sell-Side Companies or any
Claremont Subsidiary or any of their material properties, except, with respect
to all matters described in this subsection (b), to the extent that such
violation would not reasonably be expected to have a Material Adverse Effect on
Claremont and Sales (considered as one enterprise); (c) result in a breach of or
default under any material indenture or loan or credit agreement or other
material agreement or instrument to which Seller or any of its Subsidiaries is a
party or by which it or they or any of its or their material properties are
affected or bound; (d) require the authorization, consent, approval, permit or
license of any Person, any notice to be given to, filing to be made with or
other action to be taken with or by any Person (other than filings and actions
to be made and taken under the HSR Act), of such a nature that the failure to
obtain or make the same would be reasonably expected to have a Material Adverse
Effect on Claremont and Sales (considered as one enterprise); or (e) constitute
grounds for the loss or suspension of any material permit, license or other
authorization used by Sales, Claremont or a Claremont Subsidiary (other than
alcoholic beverage retail sales licenses used by Claremont).
3.6 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with this Agreement
or the transactions contemplated hereby, or any related transaction, based upon
any agreement, written or oral, made by or on behalf of any of the Sell-Side
Companies or any of their Affiliates, except that Bowles Hollowell Conner, a
division of First Union Capital Markets Corp., is entitled to certain payments
under its agreement with Seller dated as of April 7, 1999. Seller is solely
responsible for all payments under such agreement.
3.7 DELIVERED DOCUMENTS. Seller has delivered to Buyer each of the
following:
(a) Annual Report of Seller to its shareholders for its fiscal year
ended March 6, 1999;
(b) Annual Report of Seller on Form 10-K as filed with the SEC for
Seller's fiscal year ended March 6, 1999;
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(c) proxy statement of Seller relating to its meeting of shareholders
held on July 22, 1999; and
(d) all other SEC Reports of Seller, to the extent that such reports
have been filed with the SEC after the filing of the SEC Report
referred to in clause (b) above.
Each such document did not, at the time it was filed with the SEC, and all such
documents taken together do not, contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made or are
made, respectively, not misleading. All of the financial statements contained in
the foregoing documents were prepared from the books and records of Seller and
its Subsidiaries. Seller's Audited Financial Statements were prepared in
accordance with GAAP and fairly and accurately reflect the financial condition
and results of operations of Seller and its consolidated Subsidiaries as at the
dates and for the periods indicated.
3.8 STATE TAKEOVER LAWS. The transactions contemplated by this
Agreement are exempt from any applicable Takeover Laws.
3.9 FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) The Restaurant Segment's Audited Financial Statements were prepared
from the books and records of the Restaurant Segment. The Restaurant Segment's
Audited Financial Statements are accurate and correct in all material respects
and fairly present the combined financial position of the Restaurant Segment as
of March 7, 1999 and the results of its combined earnings and its combined cash
flows for the year then ended in conformity with GAAP.
(b) The books and records of Claremont, Sales and the Claremont
Subsidiaries made available to Buyer and its agents are accurate, current and
complete in all material respects.
3.10 FRANCHISES.
(a) Seller's Disclosure Document contains a list of the Restaurant
Segment franchises currently in operation, including the name of the franchisor,
the name of the franchisee, the address of such franchisee's franchised location
or locations and the date the franchise agreement with such franchisee
terminates.
(b) There are no material disputes or claims by any Restaurant Segment
franchisee with, or against, Seller, Sales, Claremont or any Claremont
Subsidiary, except as disclosed in Seller's Disclosure Document. The franchise
agreements with the Restaurant Segment franchisees do not require the consent of
such franchisees with respect to the transactions contemplated by this
Agreement.
(c) The revenues reasonably expected by Seller from the Restaurant
Group franchisees are as specified in Seller's Disclosure Document, except for
such differences as, in the aggregate, are not material.
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3.11 ABSENCE OF MATERIAL DIFFERENCES FROM SELLER'S DISCLOSURE DOCUMENT.
Except as disclosed in Seller's Disclosure Document:
(a) NO MATERIAL ADVERSE CHANGE OR OTHER EVENT. Since the date of
Seller's Balance Sheet, there has not been:
(1) a Material Adverse Change in Claremont, Sales and the Claremont
Subsidiaries (considered as one enterprise);
(2) any purchase or disposition of any material items of real or
personal property (other than Retained Assets) by Claremont, Sales or
any Claremont Subsidiary;
(3) any change in the accounting methods or practices of Claremont,
Sales or any Claremont Subsidiary;
(4) any material liability incurred by Claremont, Sales or any
Claremont Subsidiary;
(5) any bonus paid to any officer of Claremont, Sales or any Claremont
Subsidiary, any increase in the compensation paid or to be paid,
directly or indirectly, to any officer of Claremont, Sales or any
Claremont Subsidiary or any severance payments or arrangements made to,
for or with any officer of Claremont, Sales or any Claremont
Subsidiary; or
(6) any agreement entered into between, on the one hand, Claremont,
Sales or any Claremont Subsidiary and, on the other hand, Seller, any
of its Subsidiaries or any of the directors, officers, employees or
greater-than-5% shareholders of Seller, any of its Subsidiaries or any
of their respective Affiliates.
(b) EMPLOYEES. Claremont, Sales and the Claremont Subsidiaries are not
bound by any express or implied contract or agreement to employ, directly or as
a consultant or otherwise, any Person for any specific period of time or until
any specific age.
(c) EMPLOYEE BENEFIT PLANS.
(1) Seller's Disclosure Document contains a complete list of all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus and other incentive
plans, all other written employee programs, arrangements and agreements, all
medical, vision, dental and other health plans, all life insurance plans and all
other employee benefit plans and fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently or previously adopted, maintained by, sponsored in whole or in
part by or contributed to by Seller or an Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors and
other beneficiaries of Claremont and Sales and under which employees, retirees,
dependents, spouses, directors, independent contractors and other beneficiaries
of Claremont and Sales are eligible to participate (collectively, "Benefit
Plans").
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(2) Seller has delivered or made available to Buyer true and complete
copies of all Benefit Plans, including, but not limited to, any trust
instruments or insurance contracts, if any, forming a part thereof.
(3) To the knowledge of Seller, each Benefit Plan has been administered
in all material respects in accordance with the terms thereof and is in material
compliance with, to the extent applicable, ERISA, the Code, the Age
Discrimination in Employment Act and other applicable laws. Each Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has received a
determination from the Internal Revenue Service that such plan is so qualified,
and Seller is not aware of any circumstances reasonably likely to result in the
revocation or denial of any such determination. There is no pending or, to
Seller's knowledge, threatened litigation or governmental audit, examination or
investigation relating to any Benefit Plan other than benefit claims made in the
ordinary course.
(4) All contributions, premiums and payments required to be made under
the terms of any Benefit Plan have been made or accrued.
(5) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or employee of
Claremont or Sales from Claremont or Sales, (ii) increase any benefits otherwise
payable under any Benefit Plan or (iii) result in any acceleration in the time
of payment or vesting of any such benefit.
(d) ADEQUACY OF ASSETS AND FACILITIES. The properties and assets of
Claremont, Sales and the Claremont Subsidiaries include (i) all tangible and
intangible real and personal property and other assets necessary for the
continuation of their business as currently conducted after the Closing, (ii)
all properties and assets reflected in the detailed fixed asset listing
underlying the Restaurant Segment's Audited Financial Statements (except for
properties and assets, not material in the aggregate, disposed of in the
ordinary course of business) and (iii) all properties and assets (other than the
Retained Assets) that generated the revenues reflected in the Restaurant
Segment's Audited Financial Statements. Seller's Facilities and Equipment are
structurally sound. Seller's Facilities and Equipment are in good operating
condition and repair and are adequate for the uses to which they are being put,
in each case with such exceptions as are not in the aggregate reasonably likely
to have a Material Adverse Effect on Claremont and Sales (considered as one
enterprise). None of Seller's Facilities and Equipment is in need of maintenance
or repairs, except for routine maintenance and other repairs not reasonably
likely to have a Material Adverse Effect on Claremont and Sales (considered as
one enterprise). Neither Claremont nor Sales is in breach, violation or default
of any lease with respect to or as a result of which the other party thereto
(whether lessor, lessee, sublessor or sublessee) has the right to terminate the
same, except for terminations not reasonably likely in the aggregate to have a
Material Adverse Effect on Claremont and Sales (considered as one enterprise).
Neither Claremont nor Sales has received notice of any claim or assertion that
it is in any such breach, violation or default, except for breaches, violations
and defaults not reasonably likely in the aggregate to have a Material Adverse
Effect on Claremont and Sales (considered as one enterprise). Claremont, Sales
and the Claremont Subsidiaries hold all of the material governmental licenses,
permits and other governmental franchises required
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for the conduct of their business and are not in default under any such license,
permit or franchise, except for such defaults as in the aggregate are not
reasonably likely to have a Material Adverse Effect on Claremont and Sales
(considered as one enterprise). Since January 1, 1997, neither Seller nor any of
its Affiliates has received any warning or notice alleging (i) any violation of
any material governmental license, permit or franchise relating to the business
conducted by Claremont, Sales and the Claremont Subsidiaries or (ii) that
Claremont, Sales or any of the Claremont Subsidiaries (or any of their
predecessors) do not have any material governmental license, permit or franchise
required for their conduct of the business.
(e) LITIGATION. There is no action, suit, claim, proceeding or
investigation pending or threatened against Sales, Claremont or a Claremont
Subsidiary. No action, suit, claim, proceeding or investigation by Sales,
Claremont or any Claremont Subsidiary is pending or threatened against any
Person.
(f) COMPLIANCE WITH LAWS. Claremont and Sales are in compliance with
all laws applicable to their business, including all applicable Environmental
Laws, except for instances of noncompliance that in the aggregate have not
resulted in, and are not reasonably likely to result in, a Material Adverse
Effect on Claremont and Sales (considered as one enterprise). To Seller's
knowledge and except in such circumstances as in the aggregate are not
reasonably likely to have a Material Adverse Effect on Claremont and Sales
(considered as one enterprise), no substances, materials or wastes have been
used, spilled, discharged, released or allowed to escape or migrate on or to any
real property (including the soil and subsurface thereof) owned or leased by
Claremont, Sales or any Claremont Subsidiary in a manner to violate any
Environmental Law, to give rise to any liability under any Environmental Law or
to affect the value of any such real property. To Seller's knowledge, all
operations of the business of Claremont, Sales and the Claremont Subsidiaries
(and their respective predecessors) comply, and have complied, in all material
respects with all Environmental Laws. No investigation or proceeding is pending
or, to Seller's knowledge, threatened with respect to (i) the presence or
alleged presence of any substance, material or waste or (ii) any violation or
alleged violation of, or any liability or alleged liability under, any
Environmental Laws, in either case relating to (a) any real property currently
or formerly owned or leased by Claremont, Sales or any Claremont Subsidiary or
(b) any of their operations thereon.
(g) DISCLOSURE OF RELATED PARTY TRANSACTIONS. Seller is party to no
transactions with its officers, directors or shareholders required by the
Exchange Act to be disclosed to the public at the date hereof.
(h) INTELLECTUAL PROPERTY. Sales, Claremont and Claremont's
Subsidiaries own or have the right to use (without violating or conflicting
with, in any material respect, the rights of others) all of the federal, state
and foreign registrations of trademarks and of other marks, trade names and
other trade rights, all pending applications for such registrations, all patents
and copyrights and all pending applications therefor, all other trademarks and
other marks, trade names and other trade rights in which Sales, Claremont and
Claremont's Subsidiaries have any interest whatsoever and all other trade
secrets, designs, plans, specifications, technical information and other
proprietary rights, whether or not registered, that are necessary or useful for
the conduct of the business of Sales,
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Claremont and the Claremont Subsidiaries consistent with past practice, with
such exceptions as in the aggregate would have no Material Adverse Effect on
Claremont and Sales (considered as one enterprise).
(i) TITLE TO REAL AND PERSONAL PROPERTY; LEASEHOLD INTERESTS. Sales,
Claremont and Claremont's Subsidiaries have good and marketable title, or valid,
effective and continuing leasehold rights in the case of leased property, to all
real property and all personal property owned or leased by them, including all
properties and assets reflected in the detailed fixed asset listing underlying
the Restaurant Segment's Audited Financial Statements (other than properties and
assets disposed of in the ordinary course of business), or used by them in the
conduct of their business, free and clear of all Liens, except Liens for taxes
not yet due and minor imperfections of title and encumbrances, if any, which,
singly and in the aggregate, are not substantial in amount and do not detract
materially from the value of the property subject thereto or impair materially
the use thereof. Seller's Disclosure Document contains the following information
regarding all real property owned or leased by Seller, Claremont and the
Claremont Subsidiaries, which information is true and accurate in all respects:
(i) a listing of the respective owners of record title to each of 20 owned
restaurant sites; (ii) a listing of the respective current holders of leasehold
interests relative to each of 46 leased restaurant sites; and (iii) a listing of
the current "landlord" or "lessor" relative to each of the 46 leased restaurant
sites. Each lease covering a leased restaurant site is in full force and effect,
and neither the relevant tenant nor, to the best knowledge of the Sell-Side
Companies, any other party thereto is in default with respect to any material
provision of any such lease. Seller has delivered true and correct copies of all
such leases, together with any and all consents, assignments, subleases,
amendments, modifications and other documents pertaining thereto, to Buyer.
There are no pending, threatened or contemplated condemnation, eminent domain or
similar proceedings involving all or any portion of the owned restaurant sites
or, to the best knowledge of the Sell-Side Companies, the leased restaurant
sites. No property damage to any owned or leased restaurant site resulting from
a casualty event has occurred during the twelve-month period immediately
preceding the date hereof (or, if any such damage has occurred during such
period, the property so damaged has been fully restored).
(j) MATERIAL CONTRACTS. Sales, Claremont and Claremont's Subsidiaries
(1) have no contracts, agreements or commitments that are material to their
business, (2) are not in default in any material respect under any material
contract, agreement or commitment to which any of them is a party or by which
any of them is bound or by which any property owned or leased by any of them is
involved and (3) have performed in all material respects all of their respective
obligations required to be performed to date under all of their material
contracts, agreements and commitments.
(k) INSURANCE. All of the material assets and operations of Claremont,
Sales and the Claremont Subsidiaries of an insurable nature and customarily
insured by companies of similar size and in similar businesses are insured by
Seller in such amounts and against such losses, casualties or risks as is
customary for such companies and such assets and operations.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sell-Side Companies as follows:
4.1 ORGANIZATION AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina and has the requisite power and authority to carry on its
business as it is now being conducted. Buyer has delivered to Seller a true and
complete copy of the articles of incorporation and bylaws of Buyer.
4.2 OWNERSHIP. Buyer has authorized capital consisting solely of
1,000,000 shares of common stock and 100,000 shares of preferred stock, all of
the outstanding shares of which are owned (of record and beneficially) by
Carousel Capital Partners, L.P., free and clear of any Liens. All such
outstanding shares have been duly authorized and validly issued.
4.3 AUTHORITY RELATIVE TO TRANSACTION DOCUMENTS. The Transaction
Documents have been duly and validly executed and delivered by Buyer. Each
Transaction Document constitutes a legal, valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms. Buyer has all requisite
power and authority to enter into the Transaction Documents and to consummate
the transactions contemplated thereby. The board of directors and shareholders
of Buyer have, subject to the terms and conditions set forth herein, approved
the Transaction Documents and the transactions contemplated thereby. No other
action is required on the part of Buyer or the shareholders of Buyer to
authorize Buyer to execute and deliver the Transaction Documents and to
consummate the transactions contemplated thereby.
4.4 ABSENCE OF BREACH; NO CONSENTS. The execution and delivery of this
Agreement by Buyer do not, and the performance by Buyer of its obligations
hereunder will not, (a) result in a breach of any provision of the articles of
incorporation or bylaws of Buyer; (b) violate any law, rule or regulation of any
state or the United States (except for compliance with alcoholic beverage retail
sales licensing laws applicable by reason of Buyer's purchase of Claremont), or
of any foreign jurisdiction, or any order, writ, judgment, injunction, decree,
determination or award of any court or other authority having jurisdiction over
Buyer or any of its material properties, or cause the suspension or revocation
of any authorization, consent, approval or license presently in effect that
affects or binds Buyer or any of its material properties, except, with respect
to all matters described in this subsection (b), to the extent that such
violation would not reasonably be expected to have a Material Adverse Effect on
Buyer; (c) result in a material breach of or default under any material
indenture or loan or credit agreement or other material agreement or instrument
to which Buyer is a party or by which it or any of its material properties are
affected or bound; or (d) require the authorization, consent, approval, permit
or license of any Person, any notice to be given to, filing to be made with or
other action to be taken with or by any Person (other than filings and actions
required to be made and taken under the HSR Act), of such a nature that the
failure to obtain or make the same would be reasonably expected to have a
Material Adverse Effect on Buyer.
4.5 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's, or other fee or commission for which Seller would have any
liability in connection with this
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Agreement or the transactions contemplated hereby, or any related transaction,
based upon any agreement, written or oral, made by or on behalf of Buyer or any
of Buyer's Affiliates.
4.6 FINANCING. Buyer has delivered to Seller a commitment letter of
even date herewith, issued by one or more lenders, to lend to the Buyer, subject
to all of the terms of and satisfaction or waiver of the conditions stated
therein, an amount not less than the Purchase Price (less Buyer's anticipated
equity capitalization), to be applied by Buyer in payment thereof at the
Closing.
ARTICLE V
COVENANTS OF THE SELL-SIDE COMPANIES
5.1 BEST EFFORTS; GOOD FAITH. Subject to the terms and conditions
herein provided and to applicable fiduciary duties, each of Seller, Claremont
and Sales agrees to use its best efforts to take or cause to be taken all such
actions necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions set forth in Article VII and to consummate the
transactions contemplated by this Agreement (whether before or after the
Closing), including the prompt execution and delivery of such other
certificates, agreements, consents, governmental licenses and permits and other
documents and the taking of such other actions as may be necessary or desirable
in order to consummate or implement expeditiously the transactions contemplated
by this Agreement (including any necessary to ensure the accuracy of Section
3.11(d)) and including the filing or recording, as soon as possible following
the Closing, of certificates, financing statements, agreements and other
documents with the appropriate governmental authorities and other Persons
necessary to effect the transactions contemplated by this Agreement. Seller
shall use reasonable efforts to assist Buyer in the preparation of the
applications for all licenses and permits necessary for the post-Closing
operation of Sales, Claremont and the Claremont Subsidiaries, and in the
securing of such licenses and permits. Seller agrees to use its best efforts to
obtain fair-market-value renewal options to lease through December 31, 2014 any
and all real properties leased by Sales, Claremont or any of the Claremont
Subsidiaries for use as restaurants at the date hereof. Seller agrees to notify
Buyer immediately of any event or circumstance that occurs that reasonably could
be expected to result in a Material Adverse Effect on Claremont and Sales
(considered as one enterprise) or that might result in Seller's failure to
effect the Closing or a delay in respect thereof. Seller also agrees to notify
Buyer immediately of the receipt by Seller or by any of Seller's representatives
of an offer or proposal made by any Person other than Buyer relating to any
merger, reorganization, consolidation, share exchange, recapitalization,
business combination, liquidation, dissolution or other similar transaction of
or with Claremont, Sales or any Claremont Subsidiary, or any sale, lease,
exchange, transfer or other disposition of all or any significant portion of the
assets of Claremont, Sales or any Claremont Subsidiary or any of the membership
interests of Claremont, Sales or any Claremont Subsidiary, in a single
transaction or series of related transactions, except for offers and proposals
relating only to Retained Assets.
5.2 CONTINUING INVESTIGATION; CONFIDENTIALITY.
(a) Each of the Sell-Side Companies covenants and agrees with Buyer
that Buyer may, prior to the Closing Date and through its own employees and
agents, make a reasonable investigation of the business and assets of Sales,
Claremont and the Claremont Subsidiaries, it being
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understood and agreed (i) that such investigation shall have no effect on any
representations or warranties hereunder and (ii) that Buyer's satisfaction with
the results of such investigation is not a condition precedent to Buyer's
obligation to effect the Closing (all such conditions being stated in Article
VII). In furtherance of this covenant and agreement, each of the Sell-Side
Companies covenants and agrees to permit Buyer and its agents to have reasonable
access, upon notice and during regular business hours, to the premises and books
and records of Sales, Claremont and the Claremont Subsidiaries. Seller will
furnish to Buyer and its agents such financial and operating data and other
information with respect to the business and assets of Sales, Claremont and the
Claremont Subsidiaries as Buyer may reasonably request. In the event of
termination of this Agreement, Buyer will deliver to Seller all documents, work
papers and other material so obtained before or after the execution hereof and
will not itself use, directly or indirectly, any information so obtained or
otherwise obtained hereunder, or in connection herewith, from Seller or any of
Seller's Affiliates or agents. In such event, Buyer also will use its best
efforts to have all such information kept confidential and not used in any way
detrimental to Seller or any of Seller's Affiliates, except for information
that, otherwise than pursuant to a breach by any Person of a duty of
confidentiality, (a) is or becomes available to the public, (b) was known by
Buyer before its disclosure by Seller or its representatives or (c) becomes
available to Buyer from a Person other than Seller or its representatives.
(b) Each of the Sell-Side Companies agrees to use its best efforts to
arrange and permit Buyer to interview and have discussions with those Persons
identified by Buyer who are franchisees of the Restaurant Segment as soon as
practicable after the date hereof. Buyer and the Sell-Side Companies shall
cooperate in good faith in the identification of appropriate Persons with whom
Buyer might conduct such interviews and discussions and to arrange the time,
place and manner thereof.
5.3 EXPENSES. Whether or not the Closing occurs, all costs and expenses
incurred by Seller in connection with this Agreement and the transactions
contemplated hereby shall be paid by Seller except as otherwise provided in
Section 8.2.
5.4 PUBLICITY. Prior to the first to occur of the termination of this
Agreement and the second business day following the Closing Date, any news
releases by Seller pertaining to this Agreement or the Closing shall be
submitted to Buyer for review and approval prior to release and shall be
released only in a form approved by Buyer; PROVIDED, HOWEVER, that (1) such
approval shall not be unreasonably delayed or withheld, and (2) notwithstanding
Seller's best efforts to give Buyer the opportunity to review and approve any
news release, such review and approval shall not be required of a release by
Seller if in Seller's reasonable judgment (exercised in consultation with
Seller's Counsel) it would prevent the dissemination of information in such time
as may be necessary or appropriate to comply with applicable law or NASDAQ rules
(in which case, however, the text of the announcement, if written, or a written
summary thereof, if oral, shall be provided prior to such release to Buyer).
5.5 DISCLOSURE AMENDMENTS. Seller shall notify Buyer of any changes,
additions or events that should, consistently with this Agreement, result in the
filing by Seller of any SEC Reports or in any amendment to any of Seller's SEC
Reports or to Seller's Disclosure Document promptly after the occurrence of the
same and again at the Closing by delivery of appropriate
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amendments thereto. No notification made pursuant to this Section shall be
deemed to cure any misrepresentation or any breach of warranty made in or in
connection with this Agreement unless Buyer specifically agrees thereto in
writing.
5.6 STATE TAKEOVER LAWS. None of the Sell-Side Companies or Claremont
Subsidiaries shall take any steps to make the transactions contemplated by this
Agreement subject to any Takeover Law.
5.7 CONDUCT OF BUSINESS PENDING THE CLOSING. The Sell-Side Companies
covenant and agree with Buyer that, prior to the Closing, unless Buyer shall
otherwise consent in writing, except as otherwise contemplated by this Agreement
or by Section 5.7 of Seller's Disclosure Document:
(a) Sales, Claremont and Claremont's Subsidiaries will conduct business
in the ordinary and usual course, will use reasonable efforts to keep intact
their business organizations and goodwill, will use reasonable efforts to keep
available the services of their respective officers and employees, will pay
accounts payable in the ordinary course of business consistent with their terms,
otherwise will use its best efforts to maintain a level of working capital
consistent with past practice and will use reasonable efforts to maintain good
relationships with suppliers, lenders, creditors, distributors, employees,
customers and others having business or financial relationships with them;
(b) Seller will continue properly and promptly (1) to file or cause to
be filed when due (meaning, to the extent that extensions of time are permitted
and utilized, by the expiration of the extension period) all periodic reports
and other documents required to be filed by it with the SEC and all federal,
state, local, foreign and other tax returns, reports and declarations required
to be filed by any of the Sell-Side Companies and (2) to pay, or make full and
adequate provision for the payment of, all taxes and governmental charges due
from or payable by any of the Sell-Side Companies with respect to Claremont and
Sales;
(c) none of Sales, Claremont or Claremont's Subsidiaries will (1) amend
or restate its articles of organization or operating agreement, its certificate
of limited partnership or partnership agreement or its articles of incorporation
or bylaws or (2) split, combine or reclassify any of its equity interests or
other securities or make or agree or commit to make any exchange for or
redemption of any of its equity interests or other securities payable in cash,
stock or property;
(d) none of Sales, Claremont or Claremont's Subsidiaries will issue or
agree to issue any equity interests in itself, or options, warrants or other
rights of any kind to acquire any such equity interests, whether by purchase or
conversion or exchange of other equity interests or other securities;
(e) none of Sales, Claremont or Claremont's Subsidiaries will create,
incur, assume or guarantee any indebtedness for borrowed money, except for
incurrences of indebtedness to Seller in the ordinary course of business and
consistent with past practice;
(f) none of Sales, Claremont or Claremont's Subsidiaries will (1)
adopt, enter into or amend any bonus, profit sharing, compensation, stock
option, warrant, pension, retirement, deferred compensation, employment,
severance, termination, change in control or other employee benefit
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plan, agreement, trust fund or arrangement for the benefit or welfare of any
officer, director, employee or consultant or (2) agree to any increase in the
compensation payable or to become payable to, or any increase in the contractual
term of employment of, any officer, director, salaried employee or consultant
or, except in the ordinary course of business and consistent with past practice,
any hourly employee;
(g) none of Sales, Claremont or Claremont's Subsidiaries will sell,
lease, mortgage, encumber or otherwise dispose of or grant any interest in any
of its assets or properties, except for (1) sales, leases, encumbrances and
other dispositions or grants in the ordinary course of business and consistent
with past practice, (2) sales, leases, encumbrances, dispositions or grants
involving Retained Assets and (3) Liens for taxes not yet due or Liens not
material in amount or effect that do not impair the use of the property;
(h) none of Sales, Claremont or Claremont's Subsidiaries will (1)
acquire (by merger, consolidation or acquisition of equity interests or assets)
any corporation, partnership or other organization or division thereof engaged
in any business (including, in particular, restaurant operations) or any equity
interest therein; (2) enter into any contract or agreement that would be
material to it or extend, renew, amend or renegotiate any contract with any
supplier to Sales, Claremont or any Claremont Subsidiary; or (3) authorize or
make any repairs or capital expenditure (or series of related repairs or capital
expenditures) in excess of $25,000 in the aggregate or outside the ordinary
course of business or inconsistent with past practice; and
(i) none of Sales, Claremont or Claremont's Subsidiaries will enter
into any agreement, commitment or understanding, whether in writing or
otherwise, with respect to any of the matters referred to in subsections (c)
through (h) of this Section.
5.8 FINANCIAL CONDITION OF BUSINESS AT THE CLOSING. The Sell-Side
Companies covenant and agree with Buyer that, immediately prior to the Closing,
unless Buyer shall otherwise consent in writing:
(a) the current liabilities of Claremont and Sales at the Closing will
have been incurred in the ordinary course of their restaurant business; and
(b) none of Sales, Claremont or Claremont's Subsidiaries will have any
indebtedness for borrowed money (including any guarantee of any indebtedness for
borrowed money).
5.9 NO SOLICITATION. Each of Seller, Claremont and Sales shall not, and
each of them shall cause its Subsidiaries and its and its Subsidiaries'
officers, directors, agents, advisors, representatives and Affiliates not to,
consider, solicit, discuss or encourage inquiries or proposals from any Person
with respect to, or engage in any negotiations concerning or provide any
confidential information regarding, the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, or any merger or
consolidation with, Claremont, Sales or any of the Claremont Subsidiaries.
5.10 RETAINED LIABILITIES. From and after the Closing Date, Seller
shall indemnify, defend and hold harmless Buyer, Sales, Claremont and the
Claremont Subsidiaries from and
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against any loss, damage, liability, cost or expense incurred in connection with
any claim, action, suit, proceeding or investigation arising from the any of the
Retained Liabilities.
5.11 NON-COMPETITION.
(a) Seller agrees that, for a period of three years from the Closing
Date (the "Restricted Period"), it shall not:
(1) engage, either directly or indirectly, as a principal or for its
own account or solely or jointly with others, or as a stockholder in
any corporation, member of any limited liability company or equity
holder of any other Person, in the ownership or operation of a
restaurant (the "Business") in any city in which the Restaurant Segment
currently operates a restaurant or of any steakhouse restaurant in any
state in which the Restaurant Segment currently operates a restaurant;
PROVIDED, HOWEVER, that nothing herein shall prohibit: (A) Seller from
holding or acquiring, solely for investment purposes, any interest in a
business engaged in the Business if (i) Seller has no participation in
the management of such business and (ii) such interest constitutes less
than a five percent ownership interest in such business; or (B) Seller
from engaging in the Business so long as such engagement is limited to
the continued operation of the Retained Assets in a manner and on a
scale consistent with past practices;
(2) use or disclose any confidential information related to the
Business; or
(3) solicit the performance of services by any employee of Sales,
Claremont or any Claremont Subsidiary or otherwise induce any such
employee to leave his or her employment with Sales, Claremont or any
Claremont Subsidiary.
(b) If any provision contained in this Section shall for any reason be
held invalid, illegal or unenforceable in any respect, then such invalidity,
illegality or unenforceability shall not affect any other provision of this
Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that, if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time that is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, then such provision shall not be construed to be null, void and
of no effect, but, to the extent such provision would be valid or enforceable
under applicable law, a court of competent jurisdiction shall construe and
interpret or reform this Section to provide for a covenant having the maximum
enforceable geographic area, time period and other provisions (not greater than
those contained herein) as would be valid and enforceable under such applicable
law. Seller acknowledges that Buyer would be irreparably harmed by any breach of
this Section and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Seller agrees that Buyer shall be entitled
to injunctive relief requiring specific performance by Seller of this Section
upon appropriate judicial determination thereof.
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ARTICLE VI
COVENANTS OF BUYER
6.1 BEST EFFORTS; GOOD FAITH. Subject to the terms and conditions
herein provided, Buyer agrees to use its best efforts to take or cause to be
taken all such actions necessary, proper or advisable under applicable laws and
regulations to satisfy the conditions set forth in Article VII and to consummate
the transactions contemplated by this Agreement (whether before or after the
Closing), including the prompt execution and delivery of such other
certificates, agreements, consents, governmental licenses and permits and other
documents and the taking of such other actions as may be necessary or desirable
in order to consummate or implement expeditiously the transactions contemplated
by this Agreement and including the filing or recording, as soon as possible
following the Closing, of certificates, financing statements, agreements and
other documents with the appropriate governmental authorities and other Persons
necessary to effect the transactions contemplated by this Agreement. Buyer
agrees to notify Seller immediately of any event or circumstance that occurs or
comes to Buyer's attention in the course of Buyer's continuing investigation of
Claremont, Sales and the Claremont Subsidiaries or in the course of Buyer's
financing of the transactions contemplated hereby, or otherwise, if and to the
extent that a result of the event or circumstance, or of Buyer's knowledge of
the same, might be Buyer's failure to effect the Closing or a delay in respect
thereof.
6.2 EXPENSES. Whether or not the Closing occurs, all costs and expenses
incurred by Buyer in connection with this Agreement and the transactions
contemplated hereby shall be paid by Buyer except as otherwise provided in
Section 8.2.
6.3 PUBLICITY. Prior to the first to occur of the termination of this
Agreement and the second business day following the Closing Date, any news
releases by Buyer pertaining to this Agreement or the Closing shall be submitted
to Seller for review and approval prior to release and shall be released only in
a form approved by Seller; PROVIDED, HOWEVER, that such approval shall not be
unreasonably withheld or delayed.
6.4 DISCLOSURE AMENDMENTS. Buyer shall notify Seller of any changes,
additions or events that should, consistently with this Agreement, result in any
amendment to Article IV of this Agreement promptly after the occurrence of the
same and again at the Closing by delivery of appropriate amendments thereto. No
notification made pursuant to this Section shall be deemed to cure any
misrepresentation of any breach of warranty made in or in connection with this
Agreement unless Seller specifically agrees thereto in writing.
6.5 MAINTENANCE OF RECORDS. Buyer agrees to cause Sales, Claremont and
the Claremont Subsidiaries to maintain for seven years after the Closing Date
the books, records and other documents of Sales, Claremont, the Claremont
Subsidiaries and their respective predecessors. Buyer agrees to afford to Seller
and its accountants, legal counsel and other agents full access to such
documents (to the extent that Seller can demonstrate a reasonable need for such
access), during normal business hours, for seven years from the Closing Date.
6.6 CONTINUATION OF EMPLOYEE BENEFITS. Buyer acknowledges and agrees
that it presently intends, after the Closing Date, to cause Sales, Claremont and
the Claremont Subsidiaries
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to provide their employees with benefit arrangements that are substantially
equivalent in total to the employee benefit arrangements currently maintained by
Seller for such employees.
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
effect the Closing shall be subject to satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) The representations and warranties of the Sell-Side Companies set
forth in this Agreement shall be true and correct in all material respects as of
the date of this Agreement and, without consideration of any further disclosures
made pursuant to Section 5.5 of this Agreement, as of the Closing Date (as if
made at such time), PROVIDED that, with respect to any representation or
warranty that is qualified by a materiality standard, such representation and
warranty shall be true and correct in all respects.
(b) The Sell-Side Companies shall have performed the covenants and
agreements required by this Agreement to be performed by them at or prior to the
Closing.
(c) Buyer shall have received from Seller an officers' certificate,
executed by the president and the chief financial officer of Seller (in their
capacities as such) and dated the Closing Date, confirming satisfaction of the
conditions stated in subsections (a), (b), (i), (j), (k), (l), (n) and (o) of
this Section.
(d) Buyer shall have received an opinion letter of Seller's Counsel,
dated the Closing Date, conforming to the provisions of Sections 3.1, 3.2, 3.3,
3.4, 3.5, 3.8 and 3.11(e) of this Agreement insofar as such provisions relate to
matters of law as distinguished from matters of fact.
(e) Buyer shall have executed and delivered definitive credit
documentation with the parties that have provided the financing commitment
described in Section 4.6 (or with other lenders satisfactory to Seller), and all
of the conditions to funding contained therein shall have been satisfied.
(f) Buyer shall have received certificates from each of the Sell-Side
Companies, dated the Closing Date and signed by the secretary or an assistant
secretary of such Sell-Side Company, certifying (i) that the attached copies of
(A) such Sell-Side Company's articles of incorporation and bylaws or certificate
of formation and operating agreement, as the case may be, and (B) resolutions of
the board of directors of Seller and of Seller as sole member-manager of Sales
and Claremont adopted in connection with the transactions contemplated by this
Agreement are all true, correct and complete and remain in full force and effect
and (ii) as to the incumbency and specimen signature of each Person executing
any of the Transaction Documents on behalf of any of the Sell-Side Companies.
(g) Buyer shall have received certificates as of a recent date as to
the existence of Sales, Claremont and each Claremont Subsidiary under the laws
of its jurisdiction of organization.
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(h) Buyer shall have received the written resignations of the officers
and directors of Sales, Claremont and the Claremont Subsidiaries requested by
Buyer. Each such officer and director (whether or not resigning) shall have
released Buyer, Sales, Claremont and the Claremont Subsidiaries from any
liabilities (other than for salaries and employee benefits owed in the ordinary
course of business).
(i) All management bonus plans and programs that involve bonus payments
to executives of Claremont and Sales shall have been terminated prospectively,
with such termination to be effective on the Closing Date and with none of
Buyer, Sales, Claremont or the Claremont Subsidiaries having any liability under
any such plans or programs after the Closing Date.
(j) Buyer shall have received the original books and records, and
substantially all other documents related thereto, of Sales, Claremont and the
Claremont Subsidiaries.
(k) Sales, Claremont and the Claremont Subsidiaries shall have
transferred the Retained Assets and the Retained Liabilities to other Persons.
(l) Any and all applicable waiting periods under the HSR Act relating
to the transactions contemplated by this Agreement shall have expired or been
terminated. There shall not be in effect any preliminary or permanent injunction
or other order by any federal or state authority prohibiting the consummation of
the transactions contemplated hereby.
(m) Seller and Claremont shall have entered into a lease relating to
certain office facilities located in Claremont, North Carolina which shall (1)
provide for an initial term expiring December 31, 1999, (2) be renewable on a
month-to-month basis, (3) include monthly rental payments of $5,000 and (4)
otherwise be on terms and conditions satisfactory to Seller and Claremont.
(n) Seller shall have entered into agreements extending through
December 31, 2014 the initial terms or renewal terms of all leases of real
property leased at the date hereof from any of its Affiliates for use as
restaurants.
(o) None of Sales, Claremont or any Claremont Subsidiary shall have any
indebtedness for borrowed money.
7.2 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
effect the Closing shall be subject to satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) The representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and, without consideration of any further disclosures made
pursuant to Section 6.4 of this Agreement, as of the Closing Date (as if made at
such time), PROVIDED that, with respect to any representation or warranty that
is qualified by a materiality standard, such representation and warranty shall
be true and correct in all respects.
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(b) Buyer shall have performed the covenants and agreements required by
this Agreement to be performed by it at or prior to the Closing.
(c) Seller shall have received from Buyer an officers' certificate,
executed by the president and the secretary of Buyer (in their capacities as
such) and dated the Closing Date, confirming satisfaction of the conditions
stated in subsections (a), (b) and (g) of this Section.
(d) Seller shall have received an opinion letter of Buyer's Counsel,
dated the Closing Date, conforming to the provisions of Sections 4.1, 4.2, 4.3
and 4.4 of this Agreement insofar as such provisions relate to matters of law as
distinguished from matters of fact.
(e) Seller shall have received a certificate from Buyer, dated the
Closing Date and signed by the secretary or an assistant secretary of Buyer,
certifying (i) that the attached copies of (A) Buyer's articles of incorporation
and bylaws and (B) resolutions of the board of directors of Buyer adopted in
connection with the transactions contemplated by this Agreement are all true,
correct and complete and remain in full force and effect and (ii) as to the
incumbency and specimen signature of each Person executing any of the
Transaction Documents on behalf of Buyer.
(f) Buyer shall have received a certificate as of a recent date as to
the existence of Buyer under the laws of its jurisdiction of organization.
(g) Any and all applicable waiting periods under the HSR Act relating
to the transactions contemplated by this Agreement shall have expired or been
terminated. There shall not be in effect any preliminary or permanent injunction
or other order by any federal or state authority prohibiting the consummation of
the transactions contemplated hereby.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
8.1 TERMINATION. Notwithstanding any other provision of this Agreement,
this Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing:
(a) by written consent of Buyer and Seller;
(b) by either Buyer or Seller in the event of a material
misrepresentation or material breach of warranty of the other party contained in
this Agreement (which breach has not been cured, in the case of a breach of
warranty, within fifteen days following receipt of written notice thereof by the
breaching party);
(c) by either Buyer or Seller in the event of a material breach of any
covenant or agreement by the other party contained in this Agreement (which
breach has not been cured within fifteen days following receipt of written
notice thereof by the breaching party);
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(d) by Seller in the event that the Closing shall not have occurred by
11:59 P.M., Eastern time, on the 45th day following the date of this Agreement,
PROVIDED that the nonoccurrence of the Closing by such time is not caused by a
material misrepresentation or a material breach of this Agreement by Seller or
solely because the condition set forth in Section 7.2(g) has not been satisfied;
(e) by Buyer in the event that the Closing shall not have occurred by
11:59 P.M., Eastern time, on the 45th day following the date of this Agreement,
PROVIDED that the nonoccurrence of the Closing by such time is not caused by a
material misrepresentation or a material breach of this Agreement by Buyer or
solely because the condition set forth in Section 7.1(l) has not been satisfied;
(f) by Buyer in the event of a misrepresentation of Seller contained in
Section 3.10(c) of this Agreement or in the event of a material breach of the
covenant contained in Section 5.2(b) of this Agreement (which breach has not
been cured within three days following receipt of written notice thereof by the
breaching party), PROVIDED that notice of such misrepresentation or of such
uncured covenant breach, as the case may be, is received by Buyer by 5:00 P.M.,
Eastern time, on the twentieth day following the date of this Agreement;
(g) by either Buyer or Seller in the event that the Closing shall not
have occurred by 11:59 P.M., Eastern time, on the 90th day following the date of
this Agreement if the condition set forth in Section 7.1(l) or 7.2(g) has not
been satisfied by that time;
(h) by either Buyer or Seller if the board of directors of Seller (or a
committee of such board) makes a Fiduciary Determination.
8.2 CONSEQUENCES OF TERMINATION.
(a) In the event of the termination of this Agreement and the
abandonment of the transactions contemplated by this Agreement pursuant to
Section 8.1, this Agreement shall forthwith become void and of no effect,
without any liability on the part of any party hereto, or its Affiliates,
directors, officers, members or shareholders, other than pursuant to the
provisions of this Article and of Sections 3.6, 4.5, 5.2(a) (last two
sentences), 5.3 and 6.2, which shall survive such termination and abandonment;
PROVIDED, HOWEVER, that termination of this Agreement pursuant to subsection
(b), (c) or (f) of Section 8.1 shall not relieve a party from liability for the
misrepresentation or for the breach of warranty, covenant or agreement giving
rise to termination. In the event of the termination of this Agreement by Seller
pursuant to subsection (b) or (c) of Section 8.1, Buyer will pay to Seller, not
later than ten days following delivery of notice of such termination to Buyer,
the aggregate amount of Seller's reasonable and documented legal, investment
banking, accounting and other out-of-pocket expenses incurred in pursuit of the
transactions contemplated by this Agreement (whether incurred before or after
the date hereof). In the event of the termination of this Agreement by Buyer
pursuant to subsection (b) or (c) of Section 8.1, Seller will pay to Buyer, not
later than ten days following delivery of notice of such termination to Seller,
the aggregate amount of Buyer's reasonable and documented legal, investment
banking, accounting and other out-of-pocket expenses incurred in pursuit of the
transactions contemplated by this Agreement (whether incurred before or after
the date hereof). In the event of a termination of
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this Agreement by Buyer or Seller pursuant to subsection (h) of this Agreement,
Seller will pay to Buyer, not later than ten days following delivery of notice
of such termination, as liquidated damages (and not as a penalty), $1,000,000
plus the aggregate amount of Buyer's reasonable and documented legal, accounting
and other out-of-pocket expenses incurred in pursuit of the transactions
contemplated by this Agreement (whether incurred before or after the date
hereof). Any such payment shall be made by wire transfer of immediately
available funds to an account designated for such purpose by the recipient in
its notice of termination.
(b) If in the event of a termination of this Agreement by Buyer
pursuant to subsections (b), (c) or (e) and within six months following such
termination Seller accepts a proposal made by a Person other than Buyer to
acquire some or all of Claremont, Sales and the Claremont Subsidiaries, or a
material portion of the assets thereof, or otherwise enters into an agreement to
sell some or all of Claremont, Sales and the Claremont Subsidiaries, or a
material portion of the assets thereof, to a Person other than Buyer (any of the
foregoing being a "Subsequent Agreement"), and if the purchase price stated in
the Subsequent Agreement assumes an enterprise value for Claremont, Sales and
the Claremont Subsidiaries that exceeds the Purchase Price, and if the Person
with whom the Subsequent Agreement is made is a Person with whom Seller or its
agents discussed a purchase of Claremont, Sales and the Claremont Subsidiaries,
or a material portion of the assets thereof, in person or by telephone prior to
the date hereof, then Seller will pay to Buyer, not later than ten days
following the date of the Subsequent Agreement, as liquidated damages (and not
as a penalty), $1,000,000 plus the aggregate amount of Buyer's reasonable and
documented legal, accounting and other out-of-pocket expenses incurred in
pursuit of the transactions contemplated by this Agreement (whether incurred
before or after the date hereof).
8.3 AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
8.4 WAIVERS. To the extent permitted by applicable law, the Sell-Side
Companies or Buyer at any time may (a) extend the time for the performance of
any of the obligations or other acts of the other, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements, covenants or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.1 SURVIVAL. Absent fraud, the representations, warranties, covenants,
indemnities and other agreements of the parties made in and pursuant to this
Agreement shall not survive the Closing, except for the covenants and agreements
made in Sections 5.1, 5.2, 5.3, 5.4, 5.10, 5.11, 6.1, 6.2, 6.3 and 6.5, which,
by their terms, are to be performed after the Closing Date.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed sufficiently given if delivered personally or sent
by facsimile transmission or by
26
<PAGE> 27
registered or certified mail (postage prepaid), addressed as follows (or to such
other address for a party as shall be specified by like notice given at least
seven days prior thereto):
if to any or all of the Sell-Side Companies, then to:
Mr. David R. Clark
Fresh Foods, Inc.
361 2nd Street, NW
Hickory, NC 28601
Fax: (828) 304-2330
with a copy (which shall not constitute notice) to:
Patrick Daugherty, Esq.
McGuire, Woods, Battle & Boothe LLP
Bank of America Corporate Center
100 North Tryon Street, 29th Floor
Charlotte, NC 28202
Fax: (704) 373-8823
if to Buyer, then to:
CRG Holdings Corp.
c/o Carousel Capital Partners, L.P.
201 North Tryon Street, Suite 2450
Charlotte, NC 28202
Attention: Mr. Nelson Schwab III
Fax: (704) 372-1040
with a copy (which shall not constitute notice) to:
Sean M. Jones, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Bank of America Corporate Center
100 North Tryon Street, Suite 4200
Charlotte, NC 28202
Fax: (704) 331-7598
All such notices and communications shall be considered as having been duly
given at the time delivered by hand, if delivered personally; when receipt
confirmed, if sent by facsimile; and five business days after deposit in the
mail, if sent by registered or certified mail.
9.3 HSR ACT COMPLIANCE. Each of Buyer and Seller shall (a) make or
cause to be made the filings required of such party or any of its Subsidiaries
or Affiliates under the HSR Act with respect to the transactions contemplated
hereby as promptly as practicable, (b) comply at the earliest practicable date
with any request for further information or documents received by such party or
any
27
<PAGE> 28
of its Subsidiaries from the Federal Trade Commission, the Department of Justice
or any other governmental authority in respect of such filings or such
transactions, including, without limitation, any request for additional
information and documents under the HSR Act, and (c) cooperate with the other
party in connection with any such filing (including, with respect to the party
making a filing, providing copies of all such documents to the non-filing party
and its advisors prior to filing (other than documents containing confidential
business information, which need be shared only with legal counsel to the
non-filing party) and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith) and in connection with
resolving any investigation or other inquiry of any such agency or other
governmental authority with respect to any such filing or any such transaction.
Each party shall use its reasonable best efforts to furnish to each other all
information required for any application or other filing to be made pursuant to
any applicable law in connection with the transactions contemplated by this
Agreement. Each party shall promptly inform the other party of any communication
with, and any proposed understanding, undertaking or agreement with, any
governmental authority regarding any such filings or any such transaction.
Neither party shall independently participate in any meeting with any
governmental authority in respect of any such filings, investigation or other
inquiry without giving the other party prior notice of the meeting and, to the
extent permitted by such governmental authority, the opportunity to attend and
participate. The parties will consult and cooperate with one another in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act. Each of
Buyer and Seller shall use its reasonable best efforts to resolve such
objections, if any, as may be asserted by any governmental authority with
respect to the transactions contemplated by this Agreement.
9.4 CERTAIN CLAIMS AND INSURANCE MATTERS. Seller covenants and agrees
with Buyer that, immediately prior to the Closing, Seller will assign to
Claremont, and Claremont will assume from Seller, any and all claims (whether or
not in litigation) then pending or asserted against Seller to the extent, and
only to the extent, that such claims arise from or relate to the acts or
omissions of Claremont, Sales and the Claremont Subsidiaries prior to the
Closing (and are not Retained Liabilities). Seller represents and warrants to
Buyer that Seller has secured its obligations to its general liability insurer
with respect to these and other claims by arranging a letter of credit in the
amount of approximately $1.9 million. Buyer covenants and agrees with Seller
that, prior to the Closing, Buyer will provide such insurer with collateral of
its own on terms and conditions sufficient to cause such insurer to release the
collateral arranged by Seller with respect to all claims to be assigned to and
assumed by Claremont hereunder. The assignment, assumption, collateralization
and release contemplated by this Section of the Agreement shall be documented on
terms and conditions reasonably acceptable to Seller and Buyer. To the extent
that any provision of this Section may be inconsistent with any other provision
of this Agreement, the provision of this Section shall be the one that governs
the rights and duties of the parties.
9.5 MISCELLANEOUS. This Agreement (a) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between and among the parties, or any of them, with respect to the subject
matter hereof, except as specifically provided otherwise or referred to herein,
so that no such external or separate agreements relating to the subject matter
of this Agreement shall have any effect or be binding, unless the same is
referred to
28
<PAGE> 29
specifically in this Agreement or is executed by the parties after the date
hereof; (b) is not intended to confer upon any other person any rights or
remedies hereunder; (c) shall not be assigned by operation of law or otherwise;
and (d) shall be governed by and construed in accordance with the laws of the
State of North Carolina. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original but all of which
together shall constitute one agreement. The Tax Agreement is integral to the
transactions contemplated by this Agreement and shall be construed IN PARI
MATERIA with this Agreement.
[SIGNATURES APPEAR ON NEXT PAGE]
29
<PAGE> 30
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed
and delivered as of the date first written above.
CLAREMONT RESTAURANT GROUP, LLC
By FRESH FOODS, INC.,
its sole member-manager
By /s/ David R. Clark
-----------------------------
David R. Clark
President
FRESH FOODS SALES, LLC
By FRESH FOODS, INC.,
its sole member-manager
By /s/ David R. Clark
-----------------------------
David R. Clark
President
FRESH FOODS, INC.
By /s/ David R. Clark
-----------------------------
David R. Clark
President
CRG HOLDINGS CORP.
By /s/ Nelson Schwab III
-----------------------------
Nelson Schwab III
President
30
<PAGE> 1
EXHIBIT 2.5
PLAN OF MERGER
OF
PIERRE FOODS, LLC, PIERRE LEASING, LLC
AND
FRESH FOODS, INC.
DECEMBER 27, 1999
A. ENTITIES PARTY TO THE MERGER.
Pierre Foods, LLC, a North Carolina limited liability company ("Pierre
Foods"), and Pierre Leasing, LLC, another North Carolina limited
liability company ("Pierre Leasing" and, together with Pierre Foods,
the "Merging Companies"), will merge with and into Fresh Foods, Inc., a
North Carolina corporation, which will be the surviving business entity
(the "Surviving Corporation").
B. NAME OF SURVIVING CORPORATION.
After the merger contemplated by this Plan of Merger (the "Plan of
Merger"), the Surviving Corporation will continue to have the name
"Fresh Foods, Inc."
C. MERGER.
The merger of the Merging Companies into the Surviving Corporation will
be effected pursuant to the terms and conditions of this Plan of
Merger. Upon the merger's becoming effective, the limited liability
company existence of each of the Merging Companies will cease, and the
corporate existence of the Surviving Corporation will continue. The
time when the merger becomes effective is hereinafter referred to as
the "Effective Time."
D. CONVERSION AND EXCHANGE OF MEMBERSHIP INTERESTS AND SHARES.
At the Effective Time, the outstanding membership interests of the
Merging Companies and the outstanding shares of the Surviving
Corporation will be converted and exchanged as follows:
1. SURVIVING CORPORATION. The outstanding shares of the Surviving
Corporation will not be converted, exchanged, or altered in
any manner as a result of the merger and will remain
outstanding as shares of the Surviving Corporation.
2. MERGING COMPANIES. The outstanding membership interest held by
the sole member of each of the Merging Companies will be
automatically cancelled without any further act on the part of
either of the Merging Companies or the sole member of each of
the Merging Companies; inasmuch as the Surviving Corporation
is the sole member and manager of each of the Merging
Companies, no additional membership interest will be issued to
the
<PAGE> 2
Surviving Corporation upon cancellation of the outstanding
membership interest in each of the Merging Companies.
E. AMENDMENTS TO ARTICLES OF INCORPORATION.
The Articles of Incorporation of the Surviving Corporation shall not be
hereby amended.
F. EFFECTIVE TIME OF ARTICLES OF MERGER.
The merger of the Merging Companies with and into the Surviving
Corporation will become effective at 11:59 p.m. on Friday, December 31,
1999 (the "Effective Time").
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
2
<PAGE> 3
This Plan of Merger is executed as of the date first set forth above
and may be executed in one or more counterparts, which together shall constitute
but one and the same instrument.
SURVIVING CORPORATION:
FRESH FOODS, INC.
By: /s/ JAMES C. RICHARDSON, JR.
-------------------------------
Name: James C. Richardson, Jr.
Title: Chairman of the Board of Directors
MERGING COMPANIES:
PIERRE FOODS, LLC
By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ PAMELA M. WITTERS
-------------------------------
Name: Pamela M. Witters
Title: Chief Financial Officer
PIERRE LEASING, LLC
: By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ PAMELA M. WITTERS
-------------------------------
Name: Pamela M. Witters
Title: Chief Financial Officer
3
<PAGE> 1
EXHIBIT 4.9
SECOND SUPPLEMENTAL INDENTURE dated as of February 26, 1999 among FRESH
FOODS, INC., a North Carolina corporation (the "Company"), STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company (the "Trustee"), as Trustee under
the Indenture dated as of June 9, 1998 among the Company, each of several
subsidiaries of the Company and the Trustee, as supplemented by the First
Supplemental Indenture dated as of September 5, 1998 among the Company, the
Trustee and Pierre Leasing, LLC, a North Carolina limited liability company (the
"Indenture," capitalized terms defined therein and not otherwise defined herein
being used herein as defined therein), and FRESH FOODS RESTAURANT GROUP, LLC, a
Delaware limited liability company (the "Additional Guarantor").
WHEREAS, Section 10.07 of the Indenture states that the Company will
cause any Person that becomes a Restricted Subsidiary to guarantee the Company's
obligations under the Indenture and the Notes to the same extent that the
Guarantors have guaranteed the Company's obligations under the Indenture and the
Notes; and
WHEREAS, the parties to this Second Supplemental Indenture desire to
implement Section 10.07 of the Indenture as it relates to the Additional
Guarantor, which is a Person that has become a Restricted Subsidiary since the
date of execution and delivery of the Indenture;
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, the parties to this Second
Supplemental Indenture covenant and agree among themselves as follows for the
equal and proportionate benefit of the Noteholders:
ARTICLE 1
ADDITIONAL GUARANTEE
The Additional Guarantor hereby guarantees the Company's obligations
under the Indenture and the Notes to the same extent that the Guarantors have
guaranteed the Company's obligations under the Indenture and the Notes. With
specific reference to Article 10 of the Indenture but without limiting the
generality of the foregoing, the Additional Guarantor hereby unconditionally and
irrevocably guarantees to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment of principal of, premium, if any, and
interest and Liquidated Damages, if any, on the Notes when due, whether at
maturity, by acceleration, by redemption or otherwise, and all other monetary
obligations of the Company under the Indenture and the Notes and (b) the full
and punctual performance within applicable grace periods of all other
obligations of the Company under the Indenture and the Notes, in each case to
the extent, but only to the extent, that such obligations are guaranteed by the
Guarantors pursuant to the Indenture, all as if the Additional Guarantor were a
Guarantor party to the Indenture.
<PAGE> 2
ARTICLE 2
MISCELLANEOUS
SECTION 2.01. AUTHORIZATION AND EFFECT OF SUPPLEMENTAL INDENTURE. This
Second Supplemental Indenture is executed by the Company, the Trustee and the
Additional Guarantor pursuant to Section 9.01(d) of the Indenture. The terms and
conditions of this Second Supplemental Indenture shall be deemed to be part of
the Indenture for all purposes. The Indenture, as supplemented by this Second
Supplemental Indenture, is in all respects hereby adopted, ratified and
confirmed.
SECTION 2.02. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Second Supplemental Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement. One signed copy
is enough to prove this Second Supplemental Indenture.
SECTION 2.03. DISCLAIMER BY TRUSTEE. The Trustee assumes no
responsibility for the correctness of the recitals herein contained, which shall
be taken as the statements of the Company and the Additional Guarantor. The
Trustee makes no representations and shall have no responsibility as to the
validity or sufficiency of this Second Supplemental Indenture or the due
authorization and execution hereof by the Company or the Additional Guarantor.
SECTION 2.04. GOVERNING LAW. This Second Supplemental Indenture shall
be governed by, and construed in accordance with, the laws of the State of New
York applicable to agreements made and to be performed in the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Second Supplemental
Indenture to be duly executed as of the date first written above.
FRESH FOODS, INC.
By: /s/ JAMES E. HARRIS
-----------------------------------
Name: James E. Harris
Title: Executive Vice President
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: /s/ PAUL D. ALLEN
-----------------------------------
Name: Paul D. Allen
Title: Vice President
FRESH FOODS RESTAURANT GROUP, LLC
By: CLAREMONT RESTAURANT GROUP, LLC,
Sole Member-Manager
By: FRESH FOODS, INC.,
Sole Member-Manager
By: /s/ JAMES E. HARRIS
------------------------------
Name: James E. Harris
Title: Executive Vice President
3
<PAGE> 1
EXHIBIT 4.10
THIRD SUPPLEMENTAL INDENTURE dated as of October 8, 1999 among FRESH
FOODS, INC., a North Carolina corporation (the "Company"), and STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company (the "Trustee"), as Trustee
under the Indenture dated as of June 9, 1998 among the Company, each of several
subsidiaries of the Company and the Trustee, as supplemented by the First
Supplemental Indenture dated as of September 5, 1998 among the Company, the
Trustee and Pierre Leasing, LLC, a North Carolina limited liability company, and
further supplemented by the Second Supplemental Indenture dated as of February
26, 1999 among the Company, the Trustee and Fresh Foods Restaurant Group, LLC, a
Delaware limited liability company (the "Indenture," capitalized terms defined
therein and not otherwise defined herein being used herein as defined therein).
WHEREAS, Section 10.06 of the Indenture provides that in the event of a
sale or other disposition of all of the Capital Stock of any Guarantor by way of
merger, consolidation or otherwise, such Guarantor will be released and relieved
of any obligations under its Guarantee, provided that such transaction is
carried out pursuant to and in accordance with Section 4.11 of the Indenture;
and
WHEREAS, the Company has entered into a Purchase Agreement dated as of
September 10, 1999 among Claremont Restaurant Group, LLC ("Claremont"), Fresh
Foods Sales, LLC ("Sales"), the Company and CRG Holdings Corp. ("CRG"), pursuant
to which CRG is purchasing the Company's membership interests in each of
Claremont and Sales (the "Proposed Transaction"); and
WHEREAS, the parties to this Third Supplemental Indenture desire to
implement Section 10.06 of the Indenture as it relates to Claremont, Sales and
the subsidiaries of Claremont;
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, the parties to this Third
Supplemental Indenture covenant and agree among themselves as follows for the
equal and proportionate benefit of the Noteholders:
ARTICLE 1
RELEASE OF GUARANTEES
Each of Claremont Restaurant Group, LLC, Fresh Foods Sales, LLC,
Sagebrush of North Carolina, LLC, Sagebrush of South Carolina, LLC, Sagebrush of
Tennessee, L.P., Spicewood, Inc. and Fresh Foods Restaurant Group, LLC
(collectively, the "Released Guarantors") is hereby released from its
obligations under its Guarantee. The Released Guarantors shall have no further
liability or obligation with respect the Indenture, including, without
limitation, with respect to (a) the full and punctual payment of principal of,
premium, if any, and interest and Liquidated Damages, if any, on the Notes when
due, whether at maturity, by acceleration, by redemption or otherwise, and
<PAGE> 2
all other monetary obligations of the Company under the Indenture and the Notes
or (b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under the Indenture and the Notes.
ARTICLE 2
MISCELLANEOUS
SECTION 2.01. AUTHORIZATION AND EFFECT OF SUPPLEMENTAL INDENTURE. This
Third Supplemental Indenture is executed by the Company and the Trustee pursuant
to Section 9.01(g) of the Indenture. The terms and conditions of this Third
Supplemental Indenture shall be deemed to be part of the Indenture for all
purposes. The Indenture, as supplemented by this Third Supplemental Indenture,
is in all respects hereby adopted, ratified and confirmed.
SECTION 2.02. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Third Supplemental Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement. One signed copy
is enough to prove this Third Supplemental Indenture.
SECTION 2.03. DISCLAIMER BY TRUSTEE. The Trustee assumes no
responsibility for the correctness of the recitals herein contained, which shall
be taken as the statements of the Company. The Trustee makes no representations
and shall have no responsibility as to the validity or sufficiency of this Third
Supplemental Indenture or the due authorization and execution hereof by the
Company.
SECTION 2.04. GOVERNING LAW. This Third Supplemental Indenture shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to agreements made and to be performed in the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Third Supplemental
Indenture to be duly executed as of the date first written above.
FRESH FOODS, INC.
By: /s/ JAMES E. HARRIS
---------------------------------
Name: James E. Harris
Title: Executive Vice President
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: /s/ CHI C. MA
---------------------------------
Name: Chi C. Ma
Title: Vice President
3
<PAGE> 1
EXHIBIT 10.33
BORROWER JOINDER AGREEMENT
THIS BORROWER JOINDER AGREEMENT (the "AGREEMENT"), dated as of February
26, 1999, is by and between FRESH FOODS RESTAURANT GROUP, LLC, a Delaware
limited liability company, (the "APPLICANT BORROWER"), and FIRST UNION
COMMERCIAL CORPORATION, in its capacity as Agent (the "AGENT") under that
certain Credit Agreement (as amended and modified, the "CREDIT AGREEMENT") dated
as of June 9, 1998 by and among Fresh Foods, Inc., a North Carolina corporation
and certain related borrowing entities (the "BORROWERS"), the Lenders party
thereto and the Agent. All of the defined terms in the Credit Agreement are
incorporated herein by reference.
Chardent, Inc. (the "Former Borrower") has reorganized its corporate
structure by merging into the Applicant Borrower, a newly formed indirect
subsidiary of Fresh Foods, Inc., with the Applicant Borrower as the surviving
limited liability company to assume all of the obligations of the Former
Borrower under the Credit Agreement. The Applicant Borrower has indicated its
desire to become a Borrower pursuant to the terms of the Credit Agreement.
Accordingly the Applicant Borrower hereby agrees as follows with the
Agent, for the benefit of the Lenders:
1. The Applicant Borrower hereby acknowledges, agrees and confirms
that, by its execution of this Agreement, the Applicant Borrower will be deemed
to be a party to the Credit Agreement and a "Borrower" for all purposes of the
Credit Agreement and the other Credit Documents, and shall have all of the
obligations of a Borrower thereunder as if it has executed the Credit Agreement
and the other Credit Documents. The Applicant Borrower hereby ratifies, as of
the date hereof, and agrees to be bound by, all of the terms, provisions and
conditions contained in the Credit Agreement and in the Credit Documents,
including without limitation (i) all of the representations and warranties of
the Borrowers set forth in Article VI of the Credit Agreement, as supplemented
from time to time in accordance with the terms thereof, and (ii) all of the
affirmative and negative covenants set forth in Articles VII, VIII, and IX of
the Credit Agreement.
2. The Applicant Borrower hereby acknowledges, agrees and confirms
that, by its execution of this Agreement, the Applicant Borrower will be deemed
to be a party to the Security Agreement, and shall have all the obligations of
an "Obligor" (as such term is defined in the Security Agreement) thereunder as
if it had executed the Security Agreement. The Applicant Borrower hereby
ratifies, as of the date hereof, and agrees to be bound by, all of the terms,
provisions and conditions contained in the Security Agreement. Without limiting
generality of the foregoing terms of this paragraph 2, the Applicant Borrower
hereby grants to the Agent, for the benefit of the Lenders, a continuing
security interest in, and a right of set off against any and all right, title
and interest of the Applicant Borrower in and to the Collateral (as such term is
defined in Section 2 of the Security Agreement) of the Applicant Borrower.
3. The Applicant Borrower hereby acknowledges, agrees and confirms
that, by its execution of this Agreement, the Applicant Borrower will be deemed
to be a party to the Pledge Agreement, and shall have all the obligations of a
"Pledgor" thereunder as if it had executed the Pledge Agreement. The Applicant
Borrower hereby ratifies, as of the date hereof, and agrees to be bound by, all
the terms, provisions and conditions contained in the Pledge Agreement. Without
limiting the generality of the foregoing terms of this paragraph 3, the
Applicant Borrower hereby pledges and assigns to the Agent, for the benefit of
the Lenders, and grants to the Agent, for the benefit of the Lenders, a
continuing security interest in any and all right, title and interest of the
Applicant Borrower in and to Pledged Shares (as such
<PAGE> 2
term is defined in Section 2 of the Pledge Agreement) and the other Pledged
Collateral (as such term is defined in Section 2 of the Pledge Agreement).
4. The Applicant Borrower acknowledges and confirms that it has
received a copy of the Credit Agreement and the schedules and exhibits thereto,
the Pledge Agreement and the schedules and exhibits thereto and the Security
Agreement and the schedules and exhibits relating thereto. The information on
the Schedules to the Credit Agreement, the Pledge Agreement and the Security
Agreement are amended to provide the information shown on the attached SCHEDULE
A.
5. Fresh Foods, Inc. confirms that all of its and its Subsidiaries'
obligations under the Credit Agreement are, and upon the Applicant Borrower
becoming a Borrower shall continue to be, in full force and effect. Fresh Foods,
Inc. further confirms that immediately upon the Applicant Borrower becoming a
Borrower the term "Obligations", as used in the Credit Agreement, shall include
all Obligations of such Applicant Borrower under the Credit Agreement and under
each other Credit Document.
6. The Applicant Borrower hereby agrees that upon becoming a Borrower
it will assume all Obligations of a Borrower as set forth in the Credit
Agreement. By its execution of this Agreement, the Applicant Borrower appoints
each of David R. Clark, President and James E. Harris, Executive Vice President,
of Fresh Foods, Inc., to be its attorneys ("its Attorneys") and in its name and
on its behalf and as its act and deed or otherwise to sign all documents and
carry out all such acts as are necessary or appropriate in connection with
executing any Notice of Borrowing, Notice of Extension/Conversion or any
Borrowing Base Certificate or any security documents (the "Documents") in
connection with the Credit Agreement, provided that such Documents are in
substantially the form provided therefor in the applicable exhibits thereto.
This Power of Attorney shall be valid for the duration of the term of the Credit
Agreement. The Applicant Borrower hereby undertakes to ratify everything which
either of its Attorneys shall do in order to execute the Documents mentioned
herein.
7. Each of Fresh Foods, Inc. and the Applicant Borrower agrees that at
any time and from time to time, upon the written request of the Agent, it will
execute and deliver such further documents and do such further acts and things
as the Agent may reasonably request in order to effect the purposes of this
Agreement.
8. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
9. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
[remainder of page intentionally left blank]
2
<PAGE> 3
IN WITNESS WHEREOF, the Applicant Borrower has caused this Borrower Joinder
Agreement to be duly executed by its authorized officers, and the Agent, for the
benefit of the Lenders, has caused the same to be accepted by its authorized
officer, as of the day and year first above written.
FRESH FOODS RESTAURANT GROUP, LLC
By: CLAREMONT RESTAURANT GROUP,
LLC, its Sole Member
By: FRESH FOODS, INC.,
its Sole Member
By: /s/ James E. Harris
---------------------------
Name: James E. Harris
-------------------------
Title: Executive Vice President
------------------------
FRESH FOODS, INC.
By: /s/ James E. Harris
---------------------------
Name: James E. Harris
-------------------------
Title: Executive Vice President
------------------------
FIRST UNION COMMERCIAL CORPORATION
By: /s/ Eric Butler
---------------------------
Name: Eric Butler
-------------------------
Title: Senior Vice President
------------------------
3
<PAGE> 4
(Schedules Omitted)
<PAGE> 1
EXHIBIT 10.34
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AND WAIVER
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT AND WAIVER, dated as of April
14, 1999 (the "AMENDMENT") relating to the Credit Agreement referenced below, by
and among FRESH FOODS, INC., a North Carolina corporation (the "COMPANY"), the
subsidiaries of the Company listed on the signature pages hereto (collectively
referred to as the "SUBSIDIARY BORROWERS" or individually referred to as a
"SUBSIDIARY BORROWER") (hereinafter, the Company and the Subsidiary Borrowers
are collectively referred to as the "BORROWERS" or individually referred to as a
"BORROWER"), each of those financial institutions identified as Lenders on the
signature pages hereto (together with each of their successors and assigns,
referred to individually as a "LENDER" and, collectively, as the "LENDERS"), and
FIRST UNION COMMERCIAL CORPORATION ("FUCC"), acting in the manner and to the
extent described in Article XIII of the Credit Agreement (in such capacity, the
"AGENT"). Terms used herein but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $75,000,000 credit facility was extended to the Borrowers
pursuant to the terms of that certain Credit Agreement dated as of June 9, 1998
(as amended, modified or otherwise supplemented, the "CREDIT AGREEMENT") among
the Borrowers, the Lenders and the Agent;
WHEREAS, the Borrowers have requested that the Credit Agreement be
amended as described herein; and
WHEREAS, the Lenders are willing to make such amendments;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
(A) AMENDMENTS.
1. AMENDMENTS TO SECTION 1.1.
(a) Clause (v) of the definition of Permitted
Indebtedness is amended by deleting the second proviso
thereof.
(b) The definition of Permitted Indebtedness is
further amended by renumbering the first clause (viii) as
clause (vii), renumbering the second clause (viii) as clause
(ix), and adding the following new clause (viii):
(viii) unsecured letters of credit in
addition to any Letters of Credit that may be issued
under this Agreement, not to exceed $2,000,000 in the
aggregate at any time; and
<PAGE> 2
2. AMENDMENT TO SECTION 7.1.
(a) Section 7.1(b) is amended by deleting the words
"forty-five (45)" in the first sentence thereof and inserting
the words "fifty (50)" in their place.
(b) Section 7.1(f) is amended by deleting the words
"forty-five (45)" and inserting the words "fifty (50)" in
their place.
3. WAIVER OF SECTION 9.4. Any violation of Section 9.4
occurring as a result of the change of the Company's principal place of
business from One WSMP Drive, Claremont, NC 28610 to 361 2nd Street NW,
Hickory, NC 28603 is hereby waived.
(B) REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants that (i) the
representations and warranties contained in Article VI of the Credit Agreement
are correct on and as of the date hereof as though made on and as of such date
(except for those representations and warranties which by their terms relate
solely to an earlier date) and after giving effect to the amendments contained
herein, (ii) no Default or Event of Default exists under the Credit Agreement on
and as of the date hereof and after giving effect to the amendments contained
herein, (iii) it has the corporate power and authority to execute and deliver
this Amendment and to perform its obligations hereunder and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of this Amendment and (iv) it has duly executed and delivered this
Amendment, and this Amendment constitutes its legal, valid and binding
obligation enforceable in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws affecting
the rights of creditors generally or by general principles of equity.
(C) This Amendment shall become effective upon receipt by the Agent of
executed signature pages to this Amendment.
(D) Except as expressly amended or modified by the terms hereof, the
Credit Agreement each other Credit Document shall remain in full force and
effect. This Amendment shall not affect, modify or diminish the obligations of
the Borrowers which have accrued prior to the effectiveness of the provisions
hereof. The waiver contained herein shall be effective only in the specific
instance, for the specific purpose for which given and for the period of time
set forth herein.
(E) The Borrowers agree to pay all reasonable costs and expenses of the
Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC.
(F) This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
2
<PAGE> 3
(G) This Amendment and the Credit Agreement as amended hereby shall be
governed by and construed and interpreted in accordance with the laws of the
State of North Carolina.
[Remainder of page intentionally left blank]
3
<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
COMPANY: FRESH FOODS, INC.
By: /s/ JAMES E. HARRIS
-------------------------------
Name: James E. Harris
Title: Vice President
SUBSIDIARY BORROWERS: CLAREMONT RESTAURANT GROUP, LLC
BY: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS RESTAURANT GROUP, LLC
BY: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
BY: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS PROPERTIES, LLC
BY: FRESH FOODS, INC.,
its Sole Member
SPICEWOOD, INC.
SUNSHINE WSMP, INC.
FRESH FOODS SALES, LLC
BY: FRESH FOODS, INC.,
its Sole Member
<PAGE> 5
PIERRE FOODS, LLC
BY: FRESH FOODS, INC.,
its Sole Member
MOM `n' POP'S COUNTRY HAM, LLC
BY: PIERRE FOODS, LLC,
its Sole Member
BY: FRESH FOODS, INC.,
its Sole Member
SAGEBRUSH OF TENNESSEE, L.P.
BY: SAGEBRUSH OF SOUTH
CAROLINA, LLC
General Partner
BY: CLAREMONT
RESTAURANT
GROUP, LLC, its Sole
Member
BY: FRESH FOODS,INC.,
its sole member
SAGEBRUSH OF NORTH CAROLINA, LLC
BY: CLAREMONT RESTAURANT
GROUP, LLC its Sole Member
BY: FRESH FOODS, INC.,
its sole member
SAGEBRUSH OF SOUTH CAROLINA, LLC
BY: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
BY: FRESH FOODS, INC.,
its sole member
<PAGE> 6
PIERRE LEASING, LLC
BY: FRESH FOODS, INC.,
its Sole Member
By: /s/ JAMES E. HARRIS
------------------------------
Name: James E. Harris
Title: Vice President
<PAGE> 7
AGENT AND LENDERS: FIRST UNION COMMERCIAL CORPORATION,
as Agent and a Lender
By: /s/ Terri K. Lins
-------------------------------
Name: Terri K. Lins
Title: VP
NATIONSBANK, N.A.,
as a Lender
By: /s/ Angela Peterson Leake
-------------------------------
Name: Angela Peterson Leake
Title: Vice President
NATIONAL CITY COMMERCIAL
FINANCE, INC.,
as a Lender
By: /s/ Joseph L. White
-------------------------------
Name: Joseph L. White
Title: Sr. VP
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as a Lender
By: /s/ Dawn M. Dieter
-------------------------------
Name: Dawn M. Dieter
Title: Vice President
<PAGE> 1
EXHIBIT 10.35
AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT, dated as of May 14, 1999,
(the "AMENDMENT") relating to the Credit Agreement referenced below, by and
among FRESH FOODS, INC., a North Carolina corporation (the "COMPANY"), the
subsidiaries of the Company listed on the signature pages hereto (collectively
referred to as the "SUBSIDIARY BORROWERS" or individually referred to as a
"SUBSIDIARY BORROWER") (hereinafter, the Company and the Subsidiary Borrowers
are collectively referred to as the "BORROWERS" or individually referred to as a
"BORROWER"), each of those financial institutions identified as Lenders on the
signature pages hereto (together with each of their successors and assigns,
referred to individually as a "LENDER" and, collectively, as the "LENDERS"), and
FIRST UNION COMMERCIAL CORPORATION ("FUCC"), acting in the manner and to the
extent described in Article XIII of the Credit Agreement (in such capacity, the
"AGENT"). Terms used herein but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $75,000,000 credit facility was extended to the Borrowers
pursuant to the terms of that certain Credit Agreement dated as of June 9, 1998
(as amended, modified or otherwise supplemented, the "CREDIT AGREEMENT") among
the Borrowers, the Lenders and the Agent;
WHEREAS, the Borrowers have requested that the Credit Agreement be
amended as described herein; and
WHEREAS, the Lenders are willing to make such amendments;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
(A) AMENDMENT TO SECTION 9.5. Section 9.5 is amended by deleting the
word "and" following subclause (b), inserting a comma in its place, and adding
the following after subclause (c):
and (d) guaranties by any Borrower in respect of obligations
of any other Borrower under leases, supply contracts and other
similar contractual obligations incurred in the ordinary
course of business.
(B) REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants that (i) the
representations and warranties contained in Article VI of the Credit Agreement
are correct on and as of the date hereof as though made on and as of such date
(except for those representations and warranties which by their terms relate
solely to an earlier date) and after giving effect to the amendments contained
herein, (ii) no Default or Event of Default exists under the Credit Agreement on
and as of the date hereof and after giving effect to the amendments contained
herein, (iii) it has the corporate
<PAGE> 2
power and authority to execute and deliver this Amendment and to perform its
obligations hereunder and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of this Amendment and (iv) it has
duly executed and delivered this Amendment, and this Amendment constitutes its
legal, valid and binding obligation enforceable in accordance with its terms
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the rights of creditors generally or by general
principles of equity.
(C) This Amendment shall become effective upon receipt by the Agent of
executed signature pages to this Amendment.
(D) Except as expressly amended or modified by the terms hereof, the
Credit Agreement and each other Credit Document shall remain in full force and
effect. This Amendment shall not affect, modify or diminish the obligations of
the Borrowers which have accrued prior to the effectiveness of the provisions
hereof.
(E) The Borrowers agree to pay all reasonable costs and expenses of the
Agent in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, the reasonable fees and expenses of
Moore & Van Allen, PLLC.
(F) This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
(G) This Amendment and the Credit Agreement as amended hereby shall be
governed by and construed and interpreted in accordance with the laws of the
State of North Carolina.
[Remainder of page intentionally left blank]
2
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
COMPANY: FRESH FOODS, INC.
By: /s/ JAMES E. HARRIS
-------------------------------
Name: James E. Harris
Title: Vice President
SUBSIDIARY BORROWERS: CLAREMONT RESTAURANT GROUP, LLC
By: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS RESTAURANT GROUP, LLC
By: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
BY: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS PROPERTIES, LLC
By: FRESH FOODS, INC.,
its Sole Member
SPICEWOOD, INC.
SUNSHINE WSMP, INC.
FRESH FOODS SALES, LLC
By: FRESH FOODS, INC.,
its Sole Member
PIERRE FOODS, LLC
<PAGE> 4
By: FRESH FOODS, INC.,
its Sole Member
MOM 'n' POP'S COUNTRY HAM, LLC
By: PIERRE FOODS, LLC,
its Sole Member
By: FRESH FOODS, INC.,
its Sole Member
SAGEBRUSH OF TENNESSEE, L.P.
By: SAGEBRUSH OF SOUTH
CAROLINA, LLC
General Partner
By: CLAREMONT RESTAURANT
GROUP, LLC, its Sole
Member
By: FRESH FOODS,
INC., its sole member
SAGEBRUSH OF NORTH CAROLINA, LLC
By: CLAREMONT RESTAURANT
GROUP, LLC its Sole Member
By: FRESH FOODS, INC.,
its sole member
SAGEBRUSH OF SOUTH CAROLINA, LLC
By: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
By: FRESH FOODS, INC.,
its sole member
<PAGE> 5
PIERRE LEASING, LLC
By: FRESH FOODS, INC.,
its Sole Member
By: /s/ James E. Harris
--------------------------------
Name: James E. Harris
Title: Vice President
<PAGE> 6
AGENT AND LENDERS: FIRST UNION COMMERCIAL CORPORATION,
as Agent and a Lender
By: /s/ Terri K. Lins
--------------------------------
Name: Terri K. Lins
Title: VP
NATIONSBANK, N.A.,
as a Lender
By: /s/ Angela Peterson Leake
--------------------------------
Name: Angela Peterson Leake
Title: Vice President
NATIONAL CITY COMMERCIAL
FINANCE, INC.,
as a Lender
By: /s/ Carrie C. Tate
--------------------------------
Name: Carrie C. Tate
Title: VP
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as a Lender
By: /s/ Dawn M. Dieter
--------------------------------
Name: Dawn M. Dieter
Title: Vice President
<PAGE> 1
EXHIBIT 10.36
CONSENT
THIS CONSENT, dated as of July 29, 1999, (the "CONSENT") relating to
the Credit Agreement referenced below, is by and among FRESH FOODS, INC., a
North Carolina corporation (the "COMPANY"), the subsidiaries of the Company
listed on the signature pages hereto (collectively referred to as the
"SUBSIDIARY BORROWERS" or individually referred to as a "SUBSIDIARY BORROWER")
(hereinafter, the Company and the Subsidiary Borrowers are collectively referred
to as the "BORROWERS" or individually referred to as a "BORROWER"), each of
those financial institutions identified as Lenders on the signature pages hereto
(together with each of their successors and assigns, referred to individually as
a "LENDER" and, collectively, as the "LENDERS"), and FIRST UNION COMMERCIAL
CORPORATION ("FUCC"), acting in the manner and to the extent described in
Article XIII of the Credit Agreement (in such capacity, the "AGENT"). Terms used
herein but not otherwise defined herein shall have the meanings provided in the
Credit Agreement.
W I T N E S S E T H
WHEREAS, a $75,000,000 credit facility was extended to the Borrowers
pursuant to the terms of that certain Credit Agreement dated as of June 9, 1998
(as amended, modified or otherwise supplemented, the "CREDIT AGREEMENT") among
the Borrowers, the Lenders and the Agent;
WHEREAS, the Borrowers have requested that the Lenders and the Agent
consent to certain matters related to the Credit Agreement as described herein;
and
WHEREAS, the Lenders are willing to make give such consents;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. The following new definitions are applicable to this
Consent:
"MOM 'N' POP'S LOAN" shall mean a revolving credit
loan in the amount of $500,000 made by the Company to Mom 'n'
Pop's Country Ham, LLC to provide working capital with a
scheduled maturity date of July 1, 2000.
"SMOKEHOUSE" shall mean the smokehouse facility and
related real property constituting a portion of the Claremont
Office property owned by Fresh Foods, Inc.
<PAGE> 2
2. SALE OF CERTAIN ASSETS. Notwithstanding the prohibition
contained in Section 9.3 of the Credit Agreement, the Lenders hereby
consent, subject to the terms and conditions set forth herein, to the
sale of certain assets of the Borrowers listed on Annex I hereto (the
"Sale Assets") to third parties, upon terms and conditions satisfactory
to the Agent. In connection with the sale of the Sale Assets, the
Lenders hereby authorize the Agent to release any and all Liens on the
personal property, fixtures and real property comprising the Sale
Assets.
3. SALE OF MOM 'N' POP'S, LLC. Notwithstanding the prohibition
contained in Section 9.3 of the Credit Agreement, the Lenders hereby
consent, subject to the terms and conditions set forth herein, to (a)
the sale by Pierre Foods, LLC of all of the membership interests in
Mom'n' Pop's Country Ham, LLC ("Mom 'n' Pop's") to Hoggs, LLC ("Hoggs")
in consideration of a three-year promissory note from Hoggs in the
amount of $995,000 (the "Hoggs Note") to be secured by all of the
issued and outstanding membership interests in Hoggs, and (b) (i) if
the Smokehouse is subdivided from the Claremont Office property prior
to the closing of the sale of the membership interests in Mom 'n'
Pop's, the intercompany transfer of the Smokehouse by the Company to
Mom 'n' Pop's so that the Smokehouse can be sold concurrently with the
sale of the membership interests in Mom 'n' Pop's, or (ii) if the
Smokehouse is not so subdivided from the Claremont Office property, the
lease of the Smokehouse to Mom 'n' Pop's for $1.00 and the subsequent
transfer of the Smokehouse to Mom 'n' Pop's without further
consideration upon the Smokehouse being legally subdivided from the
Claremont Office property. In connection with the sale of Mom 'n'
Pop's, the Lenders hereby authorize the Agent to release any and all
Liens on the personal property, fixtures and real property used in
connection with the business of Mom 'n' Pop's, including, without
limitation, the Smokehouse.
4. CONSENT TO LICENSE. Notwithstanding the prohibition
contained in Section 9.18 of the Credit Agreement, the Lenders hereby
consent, subject to the terms and conditions set forth herein, to the
grant by Fresh Foods Properties, LLC to Hoggs of (i) a perpetual,
worldwide license to use the trademarks set forth on Annex II hereto on
terms and conditions satisfactory to the Agent and the Lenders and (ii)
a right to purchase the trademark set forth on Annex II hereto for
$1.00 in the event Fresh Foods Properties, LLC should decide to sell
such trademark. The Lenders also consent, and authorize the Agent to
take such action when appropriate, to the release of any liens or
security interests in the trademarks set forth on Annex II hereto in
connection with the exercise by Hoggs of such right to purchase without
further payment to Lenders.
5. RELEASE OF BORROWERS. The Lenders hereby consent to the
release of the following Borrowers as parties to the Credit Agreement
and the other Credit Documents, subject to the terms and conditions set
forth herein: Mom 'n' Pop's Country Ham, LLC.
2
<PAGE> 3
6. RELEASE OF COLLATERAL. The Agent hereby agrees to release
its Liens on (a) the Sale Assets and (b) the personal property,
fixtures and real property used in connection with the business of Mom
'n' Pop's, such releases to be held in escrow pending consummation of
the transactions contemplated herein and the Agent's receipt of the
proceeds thereof.
7. EXCLUSION OF SALE ASSETS AND SMOKEHOUSE FROM ELIGIBLE REAL
PROPERTY. As of the date hereof, the Sale Assets and the Smokehouse
shall be excluded from the definition of Eligible Real Property, and
Eligible Real Property shall be reduced by $2,255,000.
.
8. CONDITION TO SECTIONS 3, 4, 5 AND 6(b). The Lenders' and
the Agent's consent to Sections 3, 4, 5, and 6(b) shall be subject to
the following:
(a) the Agent's approval of the notes and other loan documents
in respect of the Mom 'n' Pop's Loan and the Hoggs Note.
(b) the applicable Borrower's pledge to the Lenders of the Mom
'n' Pop's Loan and the Hoggs Note pursuant to documents acceptable to
the Agent;
(c) the delivery of the original of the duly executed and
delivered note evidencing the Mom 'n' Pop's Loan and the Hoggs Note to
the Agent pursuant to the pledge agreement; and
(d) the approval of the Agent of the form of the License
Agreement referred to in Section 4 hereof.
[Remainder of page intentionally left blank.]
3
<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Consent to be duly executed and delivered as of the date
first above written.
COMPANY: FRESH FOODS, INC.
By: /s/ James E. Harris
-------------------------------
Name: James E. Harris
Title: Vice President
SUBSIDIARY BORROWERS: CLAREMONT RESTAURANT GROUP, LLC
By: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS RESTAURANT GROUP, LLC
By: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
By: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS PROPERTIES, LLC
By: FRESH FOODS, INC.,
its Sole Member
SPICEWOOD, INC.
SUNSHINE WSMP, INC.
FRESH FOODS SALES, LLC
By: FRESH FOODS, INC.,
its Sole Member
<PAGE> 5
PIERRE FOODS, LLC
By: FRESH FOODS, INC.,
its Sole Member
MOM 'n' POP'S COUNTRY HAM, LLC
By: PIERRE FOODS, LLC,
its Sole Member
By: FRESH FOODS, INC.,
its Sole Member
SAGEBRUSH OF TENNESSEE, L.P.
By: SAGEBRUSH OF SOUTH
CAROLINA, LLC
General Partner
By: CLAREMONT RESTAURANT GROUP,
LLC, its Sole Member
By: FRESH FOODS INC.,
its sole member
SAGEBRUSH OF NORTH CAROLINA, LLC
By: CLAREMONT RESTAURANT GROUP, LLC,
its Sole Member
By: FRESH FOODS, INC.,
its sole member
SAGEBRUSH OF SOUTH CAROLINA, LLC
By: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
By: FRESH FOODS, INC.,
its sole member
<PAGE> 6
PIERRE LEASING, LLC
By: FRESH FOODS, INC.,
its Sole Member
By: /s/ James E. Harris
--------------------------------
Name: James E. Harris
Title: Vice President
<PAGE> 7
AGENT AND LENDERS: FIRST UNION COMMERCIAL CORPORATION,
as Agent and a Lender
By: /s/ Terri K. Lins
--------------------------------
Name: Terri K. Lins
Title: Vice President
NATIONSBANK, N.A.,
as a Lender
By: /s/ Angela Peterson Leake
--------------------------------
Name: Angela Peterson Leake
Title: Vice President
NATIONAL CITY COMMERCIAL
FINANCE, INC.,
as a Lender
By: /s/ Joseph L. White
--------------------------------
Name: Joseph L. White
Title: Sr. VP
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as a Lender
By: /s/ Elizabeth J. Limpert
--------------------------------
Name: Elizabeth J. Limpert
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.37
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT (the "Agreement")
between Fresh Foods, Inc., a North Carolina corporation (the "Company"), and
David R. Clark (the "Executive") is dated as of July 6, 1999 (the "Effective
Date").
W I T N E S S E T H:
WHEREAS, the Company and the Executive entered into a certain
Employment Contract dated as of June 30, 1996, as amended by a certain Amendment
to Employment Contract dated as of February 23, 1998 (as so amended, the
"Employment Contract"); and
WHEREAS, the Executive is a key employee of the Company, having served
in an executive capacity at the Company, thereby acquiring an intimate knowledge
of the business and affairs of the Company and having clearly demonstrated the
ability to perform valuable services for the Company; and
WHEREAS, the Company considers it to be in the best interests of its
shareholders to encourage the continued employment of key employees of the
Company in that the continuity of management is essential to protecting and
enhancing the best interests of the Company and its shareholders; and
WHEREAS, the Company believes that the possibility of the occurrence of
a Change in Control of the Company (as defined below) may result in the
termination of the Executive's employment by the Company or in the distraction
of the Executive from the performance of his duties to the Company, in either
case to the detriment of the Company and its shareholders; and
WHEREAS, the Company recognizes that the Executive could suffer adverse
financial and professional consequences if a Change in Control of the Company
were to occur; and
WHEREAS, in view of the premises, the Company and the Executive entered
into a certain Change in Control Agreement dated as of August 29, 1997 (the
"Original Agreement") to protect the Executive in the event that a Change in
Control of the Company were to occur, thereby encouraging the Executive to
remain with the Company and not be distracted from the performance of his duties
to the Company; and
WHEREAS, the Company and the Executive desire to amend the Original
Agreement to facilitate the possible sale of a business segment of the Company
and to decrease the benefits payable to the Executive upon a Change in Control
of the Company and, in connection therewith, to terminate the Employment
Contract;
NOW, THEREFORE, the parties agree as follows:
1
<PAGE> 2
Section 1. Construction; Definitions. (a) In the event of the enactment
of any successor provision to any statute or rule cited in this Agreement,
references in this Agreement to such statute or rule shall be to such successor
provision. The headings of Sections of this Agreement shall not control the
meaning or interpretation of this Agreement. References in this Agreement to any
Section are to the corresponding Section of this Agreement unless the context
otherwise indicates.
(b) As used in this Agreement, the following terms shall have
the meanings indicated:
(i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date hereof.
(ii) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of securities of the Company constituting a
Substantial Block, but shall not include (A) the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or
of any Subsidiary of the Company or any Person organized, appointed or
established by the Company or such Subsidiary as a fiduciary pursuant
to the terms of any such employee benefit plan, (B) any Person
consisting of or including any or all of Messrs. James C. Richardson,
Jr., David R. Clark and James E. Harris, but only if and so long as
such Person consists of or includes at least one full-time employee of
the Company, and (C) any Person who or which, together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner
of a Substantial Block solely as a result of a change in the aggregate
number of shares of Voting Stock or other voting securities of the
Company outstanding since the last date on which such Person acquired
Beneficial Ownership of any securities of the Company included in such
Substantial Block.
(iii) "After-Tax Payments" means payments to or for the
benefit of the Executive under this Agreement after reduction for any
and all federal, state and local income tax and excise tax liabilities
of the Executive resulting therefrom.
(iv) "Agreement" means this Amended and Restated Change in
Control Agreement as it may be amended from time to time in accordance
with Section 10.
(v) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(A) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has (1) the
right or obligation to acquire (whether such right or
obligation is exercisable or effective immediately or
2
<PAGE> 3
otherwise) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise or (2) the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), including pursuant to any agreement,
arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of or to "beneficially own" any security
under this clause (2) if the agreement, arrangement or
understanding to vote such security (x) arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations of
the Exchange Act and (y) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(B) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable
proxy as described in clause (2) of subparagraph (A) of this
paragraph (v)) or disposing of any voting securities of the
Company.
No part of this definition shall cause a Person ordinarily engaged in
business as an underwriter of securities to be the "Beneficial Owner"
of or to "beneficially own" any securities acquired in a bona fide firm
commitment underwriting pursuant to an underwriting agreement with the
Company until the expiration of forty days after the date of such
acquisition.
(vi) "Board of Directors" means the entire Board of Directors
of the Company.
(vii) A "Business Combination" shall occur when
(A) any Person (other than a Subsidiary of the
Company) combines or consolidates with, or merges with and
into, the Company, and the Company shall be the continuing or
surviving corporation of such combination, consolidation or
merger and, in connection with such combination, consolidation
or merger, all or part of the shares of Voting Stock shall be
changed into or exchanged for other securities of any Person
or cash or any other property;
(B) the Company combines or consolidates with, or
merges with and into, any other Person (other than a
Subsidiary of the Company),
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and the Company shall not be the continuing or surviving
corporation of such combination, consolidation or merger; or
(C) the Company sells or otherwise transfers (or one
or more of its Subsidiaries sells or otherwise transfers), in
one or more transactions, assets, cash flow or earning power
aggregating more than 90 percent of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a
whole and calculated on the basis of the Company's most recent
regularly prepared financial statements) to any other Person
or Persons (other than the Company or any Subsidiary of the
Company).
(viii) A "Change in Control of the Company" shall have
occurred if, after the Effective Date,
(A) individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered a member of the Incumbent Board;
(B) any Person, alone or together with its Affiliates
and Associates, at any time after the Effective Date, shall
become an Acquiring Person;
(C) a Business Combination shall be consummated; or
(D) the Company is liquidated or dissolved.
(ix) "Change in Control Date" means the date of occurrence of
a Change in Control of the Company.
(x) "Company" has the meaning assigned to such term in the
recitals to this Agreement and shall include any Person with or into
which such Person shall have been merged or consolidated or to which
such Person shall have transferred all or substantially all of its
assets.
(xi) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(xii) "Expiration Date" means the end of the ten-year period
beginning on the Effective Date.
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(xiii) "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company, limited
partnership, limited liability company, trust, unincorporated
organization, government or agency or political subdivision of any
government. When the context of this Agreement so indicates, such term
also has the meaning assigned to it in Section 13(d) of the Exchange
Act.
(xiv) "Subsidiary" means any corporation or other legal entity
of which a majority of the voting power of the voting equity securities
or voting interest is owned, directly or indirectly, by such Person, or
which is otherwise controlled by such Person.
(xv) "Shares" means shares of capital stock of the Company.
(xvi) "Substantial Block" shall mean a number of shares of the
Voting Stock equal to or in excess of 15% of the number of shares of
the Voting Stock then outstanding.
(xii) "Voting Stock" means Shares the holders of which are
entitled to vote for the election of directors of the Company, but
excluding Shares entitled to vote only upon the occurrence of a
contingency unless that contingency shall have occurred.
Section 2. Term. If a Change in Control of the Company shall occur
before the expiration of the term of this Agreement, then, whether or not the
Executive's employment by the Company shall at any time thereafter be
terminated, the Executive shall be entitled to receive the benefits provided for
in this Agreement. The term of this Agreement shall begin on the Effective Date
and, unless extended pursuant to the third sentence of this Section or
terminated pursuant to the fourth sentence of this Section, shall expire at the
Expiration Date. If the Company shall not have given written notice to the
Executive at least 45 days before the Expiration Date that the term of this
Agreement will expire on the Expiration Date, then the term of this Agreement
shall be extended automatically for successive one-year periods (the first such
period to begin on the day immediately following the Expiration Date) unless and
until the Company shall give written notice to the Executive at least 45 days
before the end of any one-year period for which the term of this Agreement shall
have been extended that such term will expire at the end of such one-year
period, whereupon the term of this Agreement shall expire at the end of such
one-year period.
Section 3. Benefits Payable Upon Change in Control. If a Change in
Control of the Company shall occur before the expiration of the term of this
Agreement, then the Executive shall be entitled to the following benefits:
(i) The Company shall pay to the Executive, as a lump sum, an
amount equal to the sum of:
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(A) three times the amount of the base salary paid or
payable by any and all of the Company and HERTH Management,
Inc. ("HERTH") to the Executive for services rendered to the
Company during the most recent complete fiscal year of the
Company, regardless of when such salary may have been paid or
payable, plus
(B) three times the amount of the aggregate cash
bonus paid or payable by any and all of the Company and HERTH
to the Executive for services rendered during to the Company
during the most recent complete fiscal year of the Company,
regardless of when such bonus may have been paid or payable,
plus
(C) an amount determined by the Company to be equal
to the aggregate of any and all federal, state and local
income tax and excise tax liabilities of the Executive
resulting from the payments due pursuant to clauses (A) and
(C) hereof; provided, however, that, if the Company determines
that the total of all After-Tax Payments would be increased by
the limitation or elimination of any payment under this
Section 3, then amounts payable under this Section 3 shall be
reduced to the extent, and only to the extent, determined
necessary by the Company to maximize the After-Tax Payments;
and provided further that the Company shall withhold from all
payments to be made to the Executive pursuant to this
Agreement all taxes that, by applicable federal, state or
local law, the Company determines that it is required to
withhold.
Each payment required to be made to the Executive pursuant to the
foregoing provisions of this Section 3 shall be made by bank check or
other good funds on the Change in Control Date.
(ii) The Company shall transfer and convey to the Executive
all of its right, title and interest in and to the motor vehicle
currently used by the Executive for business purposes. Upon request by
the Executive, the Company will execute and deliver all such documents
and take all such other actions as the Executive may reasonably request
to better evidence such transfer and conveyance.
Section 4. Notices. Notices required or permitted to be given by either
party pursuant to this Agreement shall be in writing and shall be deemed to have
been given when delivered personally to the other party or when deposited with
the United States Postal Service as registered mail with postage prepaid and
addressed: (i) if to the Executive, at the Executive's address last shown on the
Company's records, and (ii) if to the Company, at P.O. Box 3967, Hickory, North
Carolina 28603, directed to the attention of the Corporate Secretary; or, in
either case, to such other address as the party to whom or to which such notice
is to be given shall have specified by notice given to the other party.
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<PAGE> 7
Section 5. Expenses of Enforcement. Upon demand by the Executive made
to the Company, the Company shall reimburse the Executive for all reasonable
expenses (including legal fees and expenses) incurred by the Executive in
enforcing or seeking to enforce the payment of any amount or other benefit to
which the Executive shall become entitled pursuant to this Agreement.
Section 6. Employment by Subsidiary. If, at the Effective Date, the
Executive is an employee of a subsidiary of the Company, then references in this
Agreement to the Executive's employment by the Company shall be understood as
references to the Executive's employment by the subsidiary.
Section 7. No Obligation to Mitigate. The Executive shall not be
required to mitigate the amount of any payment or other benefit required to be
paid to the Executive pursuant to this Agreement, whether by seeking other
employment or otherwise, nor shall the amount of any such payment or other
benefit be reduced on account of any compensation earned by the Executive as a
result of employment by another Person. No amount paid or payable to the
Executive by HERTH at any time or for any reason shall be considered in
mitigation of any amount due to him under this Agreement.
Section 8. Confidential Information. From the Effective Date until the
expiration of the term of this Agreement, the Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, that shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and that shall not have become public knowledge (other than
as a result of acts by the Executive in violation of this Section). The Company,
however, shall not withhold or reduce any amount or other benefit payable to the
Executive pursuant to the terms of this Agreement, or otherwise, on the ground
that the Executive has breached or threatened to breach the foregoing provisions
of this Section; the sole remedy of the Company for a breach or anticipated
breach of such provisions shall be injunctive relief.
Section 9. Amendment and Waiver. This Agreement may be amended or
waived only by a written instrument signed by both parties. No waiver by either
party of any breach of this Agreement shall be considered a waiver of any other
or subsequent breach.
Section 10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina.
Section 11. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, all of which shall remain in full force
and effect.
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Section 12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
Section 13. Assignment. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representative. The Company shall
not assign any of its obligations under this Agreement, by operation of law or
otherwise, without the express prior written consent of the Executive; any
assignment supposedly effected absent such consent shall be void.
Section 14. Original Agreement. The Original Agreement, as amended and
restated hereby, is hereby ratified and confirmed in all respects.
Section 15. Employment Contract Terminated. The parties agree that the
Employment Contract shall terminate in its entirety, immediately prior to any
Change in Control of the Company, without liability on the part of any party as
a consequence thereof. Without limiting the generality of the foregoing, the
Company shall have no liability to the Executive, upon a Change in Control of
the Company, pursuant to the Employment Contract.
Section 16. Entire Agreement; No Effect on Options. This Agreement sets
forth the entire understanding between the parties relating to the subject
matter hereof and supersedes all previous and contemporaneous understandings or
agreements, written and oral. This Agreement may be modified only by an
agreement in writing, signed by all parties, purporting to modify it. This
Agreement shall not be construed as having any effect on the rights of the
Executive under the stock option agreements and related stock option plans that
govern stock options granted by the Company to the Executive and held by the
Executive at the Effective Date or Change in Control Date.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the Effective Date.
FRESH FOODS, INC. Attest:
By: /s/ James E. Harris /s/ Matthew V. Hollifield
----------------------------- -----------------------------
James E. Harris Matthew V. Hollifield
Chief Financial Officer Assistant Secretary
THE EMPLOYEE:
/s/ David R. Clark (L.S.)
- ---------------------------------
David R. Clark
8
<PAGE> 1
EXHIBIT 10.38
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT (the "Agreement")
between Fresh Foods, Inc., a North Carolina corporation (the "Company"), and
James C. Richardson, Jr. (the "Executive") is dated as of July 6, 1999 (the
"Effective Date").
W I T N E S S E T H:
WHEREAS, the Executive is an executive officer of the Company, having
provided management services through HERTH Management, Inc. ("HERTH"), thereby
acquiring an intimate knowledge of the business and affairs of the Company and
having clearly demonstrated the ability to perform valuable services for the
Company; and
WHEREAS, the Company considers it to be in the best interests of its
shareholders to encourage continuity of management; and
WHEREAS, the Company believes that the possibility of the occurrence of
a Change in Control of the Company (as defined below) may result in the
termination of the Executive's management of the Company or in the distraction
of the Executive from the performance of his duties to the Company, in either
case to the detriment of the Company and its shareholders; and
WHEREAS, the Company recognizes that the Executive could suffer adverse
financial and professional consequences if a Change in Control of the Company
were to occur; and
WHEREAS, in view of the premises, the Company and the Executive entered
into that certain Change in Control Agreement dated as of August 29, 1997 (the
"Original Agreement"), in order to protect the Executive in the event that a
Change in Control of the Company were to occur, thereby encouraging the
Executive to continue to manage the Company and not be distracted from the
performance of his duties to the Company; and
WHEREAS, the Company and the Executive desire to amend the Original
Agreement to facilitate the possible sale of a business segment of the Company
and to decrease the benefits payable to the Executive upon a Change in Control
of the Company;
NOW, THEREFORE, the parties agree as follows:
Section 1. Construction; Definitions.
(a) In the event of the enactment of any successor provision to any
statute or rule cited in this Agreement, references in this Agreement to such
statute or rule shall be to such successor provision. The headings of Sections
of this Agreement shall not control the meaning or interpretation of this
Agreement. References in this Agreement to any
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Section are to the corresponding Section of this Agreement unless the context
otherwise indicates.
(b) As used in this Agreement, the following terms shall have the
meanings indicated:
(i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date hereof.
(ii) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of securities of the Company constituting a
Substantial Block, but shall not include (A) the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or
of any Subsidiary of the Company or any Person organized, appointed or
established by the Company or such Subsidiary as a fiduciary pursuant
to the terms of any such employee benefit plan, (B) any Person
consisting of or including any or all of Messrs. James C. Richardson,
Jr., David R. Clark and James E. Harris, but only if and so long as
such Person consists of or includes at least one full-time employee of
the Company, and (C) any Person who or which, together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner
of a Substantial Block solely as a result of a change in the aggregate
number of shares of Voting Stock or other voting securities of the
Company outstanding since the last date on which such Person acquired
Beneficial Ownership of any securities of the Company included in such
Substantial Block.
(iii) "After-Tax Payments" means payments to or for the
benefit of the Executive under this Agreement after reduction for any
and all federal, state and local income tax and excise tax liabilities
of the Executive resulting therefrom.
(iv) "Agreement" means this Amended and Restated Change in
Control Agreement as it may be amended from time to time in accordance
with Section 10.
(v) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(A) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has (1) the
right or obligation to acquire (whether such right or
obligation is exercisable or effective immediately or
otherwise) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise or (2) the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the
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Exchange Act), including pursuant to any agreement,
arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of or to "beneficially own" any security
under this clause (2) if the agreement, arrangement or
understanding to vote such security (x) arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations of
the Exchange Act and (y) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(B) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable
proxy as described in clause (2) of subparagraph (A) of this
paragraph (v)) or disposing of any voting securities of the
Company.
No part of this definition shall cause a Person ordinarily engaged in business
as an underwriter of securities to be the "Beneficial Owner" of or to
"beneficially own" any securities acquired in a bona fide firm commitment
underwriting pursuant to an underwriting agreement with the Company until the
expiration of forty days after the date of such acquisition.
(vi) "Board of Directors" means the entire Board of Directors
of the Company.
(vii) A "Business Combination" shall occur when
(A) any Person (other than a Subsidiary of the
Company) combines or consolidates with, or merges with and
into, the Company, and the Company shall be the continuing or
surviving corporation of such combination, consolidation or
merger and, in connection with such combination, consolidation
or merger, all or part of the shares of Voting Stock shall be
changed into or exchanged for other securities of any Person
or cash or any other property;
(B) the Company combines or consolidates with, or
merges with and into, any other Person (other than a
Subsidiary of the Company), and the Company shall not be the
continuing or surviving corporation of such combination,
consolidation or merger; or
(C) the Company sells or otherwise transfers (or one
or more of its Subsidiaries sells or otherwise transfers), in
one or more transactions, assets, cash flow or earning power
aggregating more than 90 percent of
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the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole and calculated on the basis of
the Company's most recent regularly prepared financial
statements) to any other Person or Persons (other than the
Company or any Subsidiary of the Company).
(viii) A "Change in Control of the Company" shall have
occurred if, after the Effective Date,
(A) individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose
election or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered a member of the Incumbent Board;
(B) any Person, alone or together with its Affiliates
and associates, at any time after the Effective Date, shall
become an Acquiring Person;
(C) a Business Combination shall be consummated; or
(D) the Company is liquidated or dissolved.
(ix) "Change in Control Date" means the date of occurrence of
a Change in Control of the Company.
(x) "Company" has the meaning assigned to such term in the
recitals to this Agreement and shall include any Person with or into
which such Person shall have been merged or consolidated or to which
such Person shall have transferred all or substantially all of its
assets.
(xi) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(xii) "Expiration Date" means the end of the ten-year period
beginning on the Effective Date.
(xiii) "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company, limited
partnership, limited liability company, trust, unincorporated
organization, government or agency or political subdivision of any
government. When the context of this Agreement so indicates, such term
also has the meaning assigned to it in Section 13(d) of the Exchange
Act.
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(xiv) "Subsidiary" means any corporation or other legal entity
of which a majority of the voting power of the voting equity securities
or voting interest is owned, directly or indirectly, by such Person, or
which is otherwise controlled by such Person.
(xv) "Shares" means shares of capital stock of the Company.
(xvi) "Substantial Block" shall mean a number of shares of the
Voting Stock equal to or in excess of 15% of the number of shares of
the Voting Stock then outstanding.
(xvii) "Voting Stock" means Shares the holders of which are
entitled to vote for the election of directors of the Company, but
excluding Shares entitled to vote only upon the occurrence of a
contingency unless that contingency shall have occurred.
Section 2. Term. If a Change in Control of the Company shall occur
before the expiration of the term of this Agreement, then, whether or not the
Executive's role as an executive officer of the Company shall at any time
thereafter be terminated, the Executive shall be entitled to receive the
benefits provided for in this Agreement. The term of this Agreement shall begin
on the Effective Date and, unless extended pursuant to the third sentence of
this Section or terminated pursuant to the fourth sentence of this Section,
shall expire at the Expiration Date. If the Company shall not have given written
notice to the Executive at least 45 days before the Expiration Date that the
term of this Agreement will expire on the Expiration Date, then the term of this
Agreement shall be extended automatically for successive one-year periods (the
first such period to begin on the day immediately following the Expiration Date)
unless and until the Company shall give written notice to the Executive at least
45 days before the end of any one-year period for which the term of this
Agreement shall have been extended that such term will expire at the end of such
one-year period, whereupon the term of this Agreement shall expire at the end of
such one-year period.
Section 3. Benefits Payable Upon Change in Control. If a Change in
Control of the Company shall occur before the expiration of the term of this
Agreement, then the Executive shall be entitled to the following benefits:
(i) The Company shall pay to the Executive, as a lump sum, an
amount equal to the sum of:
(A) three times the amount of the base salary paid,
payable or allocated by any and all of HERTH and the Company
to the Executive for services rendered to the Company during
the most recent complete fiscal year of the Company,
regardless of when such salary may have been paid or payable,
plus
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(B) three times the amount of the aggregate cash
bonus paid, payable or allocated by any and all of HERTH and
the Company to the Executive for services rendered to the
Company during the most recent complete fiscal year of the
Company, regardless of when such bonus may have been paid or
payable, plus
(C) an amount determined by the Company to be equal
to the aggregate of any and all federal, state and local
income tax and excise tax liabilities of the Executive
resulting from the payments due pursuant to clauses (A), (B)
and (C) hereof; provided, however, that, if the Company
determines that the total of all After-Tax Payments would be
increased by the limitation or elimination of any payment
under this Section 3, then amounts payable under this Section
3 shall be reduced to the extent, and only to the extent,
determined necessary by the Company to maximize the After-Tax
Payments; and provided further that the Company shall withhold
from all payments to be made to the Executive pursuant to this
Agreement all taxes that, by applicable federal, state or
local law, the Company determines that it is required to
withhold.
Each payment required to be made to the Executive pursuant to the
foregoing provisions of this Section 3 shall be made by bank check or
other good funds on the Change in Control Date.
(ii) The Company shall transfer and convey to the Executive
all of its right, title and interest in and to the motor vehicle
currently used by the Executive for business purposes. Upon request by
the Executive, the Company will execute and deliver all such documents
and take all such other actions as the Executive may reasonably request
to better evidence such transfer and conveyance.
Section 4. Notices. Notices required or permitted to be given by either
party pursuant to this Agreement shall be in writing and shall be deemed to have
been given when delivered personally to the other party or when deposited with
the United States Postal Service as registered mail with postage prepaid and
addressed:
(i) if to the Executive, at the Executive's address last shown
on the Company's records, and
(ii) if to the Company, at P.O. Box 3967, Hickory, North
Carolina 28603, directed to the attention of the Corporate Secretary;
or, in either case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other party.
Section 5. Expenses of Enforcement. Upon demand by the Executive made
to the Company, the Company shall reimburse the Executive for all reasonable
expenses (including legal fees and expenses) incurred by the Executive in
enforcing or seeking to
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enforce the payment of any amount or other benefit to which the Executive shall
become entitled pursuant to this Agreement.
Section 6. No Obligation to Mitigate. The Executive shall not be
required to mitigate the amount of any payment or other benefit required to be
paid to the Executive pursuant to this Agreement, whether by seeking other
employment or otherwise, nor shall the amount of any such payment or other
benefit be reduced on account of any compensation earned by the Executive as a
result of employment by another Person. No amount paid or payable to the
Executive by HERTH at any time or for any reason shall be considered in
mitigation of any amount due to him under this Agreement.
Section 7. Confidential Information. From the Effective Date until the
expiration of the term of this Agreement, the Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, that shall have been obtained by the
Executive during the Executive's management of the Company or any of its
affiliated companies and that shall not have become public knowledge (other than
as a result of acts by the Executive in violation of this Section). The Company,
however, shall not withhold or reduce any amount or other benefit payable to the
Executive pursuant to the terms of this Agreement, or otherwise, on the ground
that the Executive has breached or threatened to breach the foregoing provisions
of this Section; the sole remedy of the Company for a breach or anticipated
breach of such provisions shall be injunctive relief.
Section 8. Amendment and Waiver. This Agreement may be amended or
waived only by a written instrument signed by both parties. No waiver by either
party of any breach of this Agreement shall be considered a waiver of any other
or subsequent breach.
Section 9. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina.
Section 10. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, all of which shall remain in full force
and effect.
Section 11. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
Section 12. Assignment. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representative. The Executive may
assign to HERTH his rights pursuant to this Agreement or any provision hereof.
The Company shall not assign any of its obligations under this Agreement, by
operation of law or otherwise, without the express prior written consent of the
Executive; any assignment supposedly effected absent such consent shall be void.
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Section 13. Original Agreement. The Original Agreement, as amended and
restated hereby, is hereby ratified and confirmed in all respects.
Section 14. Entire Agreement; No Effect on Options. This Agreement sets
forth the entire understanding between the parties relating to the subject
matter hereof and supersedes all previous and contemporaneous understandings or
agreements, written and oral. This Agreement may be modified only by an
agreement in writing, signed by all parties, purporting to modify it. This
Agreement shall not be construed as having any effect on the rights of the
Executive under the stock option agreements and related stock option plans that
govern stock options granted by the Company to the Executive and held by the
Executive at the Effective Date or Change in Control Date.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the Effective Date.
FRESH FOODS, INC. Attest:
By: /s/ James E. Harris /s/ Matthew V. Hollifield
----------------------------- -----------------------------
James E. Harris Matthew V. Hollifield
Chief Financial Officer Assistant Secretary
THE EXECUTIVE:
/s/ James C. Richardson, Jr. (L.S.)
- --------------------------------
James C. Richardson, Jr.
8
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EXHIBIT 10.39
SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT
THIS SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT (the "Agreement")
is entered into as of July 12, 1999 among Claremont Restaurant Group, LLC, a
North Carolina limited liability company ("Claremont"), Fresh Foods, Inc., a
North Carolina corporation and the sole member and manager of Claremont ("Fresh
Foods"), and L. Dent Miller (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is a director of Fresh Foods and executive
employee of Claremont, having served in an executive capacity at Fresh Foods and
Claremont, thereby acquiring an intimate knowledge of the business and affairs
of Fresh Foods and Claremont; and
WHEREAS, the Executive and Fresh Foods entered into a certain
Employment Agreement dated as of January 29, 1998 (the "Employment Agreement");
and
WHEREAS, the Executive and Fresh Foods entered into a certain Change in
Control Agreement dated as of January 29, 1998 (the "Change in Control
Agreement"); and
WHEREAS, the Executive and Fresh Foods desire to terminate the
Employment Agreement and to set forth their agreement with respect to such
termination; and
WHEREAS, the Executive and Fresh Foods desire to terminate the Change
in Control Agreement and to set forth their agreement with respect to such
termination; and
WHEREAS, Claremont desires to engage the services of the Executive as a
consultant in the event of a sale or other disposition of Claremont by Fresh
Foods and the Executive desires to be so engaged upon the terms and conditions
provided herein; and
WHEREAS, the Executive and Claremont desire to set forth their
agreement with respect to certain noncompete obligations of the Executive; and
WHEREAS, Fresh Foods desires to provide incentives for the Executive to
remain with Claremont in the event of a sale or other disposition of Claremont
by Fresh Foods and to assist in the planning and execution of such sale or other
disposition;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. CHANGE IN CONTROL AGREEMENT TERMINATED. The parties agree that the
Change in Control Agreement shall terminate in its entirety, immediately prior
to the Effective Date (as defined in Section 3), without liability on the party
of any party as a consequence thereof. Without limiting the generality of the
foregoing, neither Fresh Foods nor Claremont shall have
<PAGE> 2
any liability to the Executive, upon the sale of Claremont or Fresh Foods (or
otherwise), pursuant to the Change in Control Agreement.
2. EMPLOYMENT AGREEMENT TERMINATED. The parties agree that the
Employment Agreement shall terminate in its entirety, immediately prior to the
Effective Date, without liability on the part of any party as a consequence
thereof.
3. CONSULTING SERVICES. Claremont agrees to engage the Executive as a
consultant as of the Effective Date, and the Executive hereby accepts such
engagement, in each case upon the terms and conditions set forth in this
Agreement. Throughout the term of this Agreement, the Executive shall report to
the President of Claremont (or, if none exists, then the Manager(s) of
Claremont) and shall perform such Consulting Services (as defined in Section 4)
as the President or such Manager(s), as the case may be (the "Superior
Officer"), may reasonably request. As used in this Agreement, the term
"Effective Date" shall mean the date of consummation of the sale or other
disposition by Fresh Foods of all of the issued and outstanding membership
interests in Claremont.
4. DUTIES. The Executive shall, to the extent reasonably requested by
the Superior Officer, at reasonable times and places (a) consult with and advise
Claremont on management of Claremont's restaurant operation and franchising
business and (b) market and promote Claremont's restaurant operation and
franchising business in the southeastern United States (collectively,
"Consulting Services"). The Executive need not devote more than twenty hours per
calendar week or 500 hours per calendar year to Consulting Services. Except as
otherwise provided in this Agreement, the Executive is not entitled to payment
of any fee or other compensation for his Consulting Services, but Claremont
shall reimburse him for the reasonable out-of-pocket expenses that he incurs
while performing Consulting Services upon presentation of receipts or other
documentation in reasonable detail.
5. INDEPENDENT CONTRACTOR. Claremont and the Executive hereby agree
that the Executive is an independent contractor, solely responsible for the
manner and form in which he performs Consulting Services. Nothing contained
herein shall be construed as creating an employer/employee, master/servant,
principal/agent, partnership, joint venture or other similar kind of
relationship. The Executive agrees that he will not take any action on behalf of
Claremont without specific instructions from, and the prior approval of, the
Superior Officer and that he does not have any right or power in any manner to
bind or commit Claremont to any contract or other obligation with any individual
or entity except upon the specific prior written approval of the Superior
Officer.
6. TERM. This Agreement shall terminate five years from the Effective
Date, unless it is terminated earlier in as provided elsewhere in this Section.
Claremont may, by written notice to the Executive, terminate this Agreement at
any earlier date, it being understood that no termination of this Agreement
shall affect (1) the Executive's obligations under Sections 8 and 9 of this
Agreement, which shall remain in full force and effect, or (2) the obligations
of Fresh Foods and Claremont under Section 7. This Agreement shall in any event
terminate upon the death of the Executive.
2
<PAGE> 3
7. COMPENSATION.
(a) Fresh Foods shall pay to the Executive, as a lump sum payment,
an amount equal to the sum of
(i) $825,000 plus
(ii) an amount equal to the aggregate of any and all federal,
state and local income tax and excise tax liabilities of the
Executive resulting from the payments due pursuant to clauses (i)
and (ii) hereof; provided, however, that, if Fresh Foods determines
that the total of all payments to or for the benefit of the
Executive under this Agreement after reduction for any and all
federal, state and local income tax and excise tax liabilities of
the Executive resulting therefrom (the "After-Tax Payments") would
be increased by the limitation or elimination of any payment under
this Section 7, then amounts payable under this Section 7 shall be
reduced to the extent, and only to the extent, determined necessary
by Fresh Foods to maximize the After-Tax Payments; and provided
further that Fresh Foods shall withhold from all payments to be
made to the Executive pursuant to this Agreement all taxes that, by
applicable federal, state or local law, Fresh Foods determines that
it is required to withhold.
Each payment required to be made to the Executive pursuant to the
foregoing provisions of this Section 7 shall be made by bank check or
other good funds on the Effective Date. The compensation payable
pursuant to this Section 7 is allocated as set forth on EXHIBIT A
hereto among: (i) consideration for the Executive's consulting
obligations, (ii) consideration for the Executive's noncompete
obligations, (iii) a transaction success bonus and (iv) severance.
(b) COMPANY CAR. On the Effective Date, Fresh Foods and Claremont
will transfer and convey to the Executive all of their right, title and
interest in and to the motor vehicle currently used by the Executive
for business purposes. Upon request by the Executive, Fresh Foods and
Claremont will execute and deliver all such documents and take all such
other actions as the Executive may reasonably request to better
evidence such transfer and conveyance.
8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During the
Executive's prior positions with Claremont and Fresh Foods and during the term
of this Agreement, the Executive has and will become acquainted with
confidential information of Claremont, Fresh Foods and their affiliates,
including, but not limited to, customer files, customer lists, special customer
matters, sales methods and techniques, merchandising concepts and plans,
business plans, sources of supply and vendors, special business relationships
with vendors, agents and brokers, promotional materials and information,
financial matters, mergers, acquisitions, personnel matters and confidential
processes, designs, formulas, ideas, plans, devices and materials and other
similar matters that are kept confidential (any and all such information being
referred to herein as "Confidential Information"). The use of Confidential
Information against Claremont or Fresh Foods would seriously damage its
business. Accordingly, the Executive agrees:
3
<PAGE> 4
(a) He shall not, directly or indirectly, use, divulge, publish or
otherwise reveal or allow to be revealed any Confidential Information
to any individual or entity except with the prior, express and written
consent of either Claremont or Fresh Foods, as applicable, or as
required by law;
(b) He shall refrain from any action or conduct that might
reasonably or foreseeably be expected to compromise the confidentiality
or proprietary nature of any Confidential Information; and
(c) He shall have no right to apply for, or to obtain any patent,
copyright or other form of intellectual property protection regarding,
any Confidential Information.
9. COVENANT NOT TO COMPETE.
(a) COVENANT. The Executive hereby stipulates, covenants and agrees
that, during the Restrictive Period (as defined below), he shall not,
directly or indirectly, other than on behalf of Claremont, without
Claremont's prior, express and written consent:
(i) Engage in Competition (as defined below) with Claremont or
any of its successors or assigns; or
(ii) Employ or solicit the employment of any individual who
is, or has been, at any time during the Restrictive Period or
during the twelve complete calendar months immediately preceding
the Effective Date, an employee of Claremont.
(b) DEFINITIONS. As used in this Section, the following terms shall
have the following meanings:
(i) "Business" shall mean the business conducted by Claremont
at the Effective Date, including the business of restaurant
operation and restaurant franchising, but excluding the business
conducted or proposed to be conducted by Fairgrove Restaurants, LLC
or any other entity in which the Executive has an equity interest
at the Effective Date.
(ii) "Competition" shall mean:
(1) Engaging in the Business within the Territory;
(2) Assisting any individual or entity, whether in a
financial, managerial, employment, advisory or other material
capacity, to engage in the Business within the Territory;
provided, however, that nothing herein shall preclude the
Executive, directly or indirectly, from leasing restaurant
property to a tenant as a bona fide lessor; or
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<PAGE> 5
(3) Owning any interest in, or organizing an entity that
engages in, the Business within the Territory; provided,
however, that nothing herein shall preclude the Executive,
directly or indirectly, from holding not more than one percent
of the outstanding shares of common stock of any company whose
shares of common stock are listed on a national securities
exchange or authorized for quotation by NASDAQ.
(iii) "Restrictive Period" shall mean the five-year period
beginning on the Effective Date.
(iv) "Territory" shall mean the 25-mile radius from (A) any
restaurant owned or franchised directly or indirectly by Claremont
or (B) any other site used directly or indirectly by Claremont, to
the extent that the business of the restaurant or site was assisted
by the Executive during the term of his service to Fresh Foods or
Claremont.
10. COVENANT TO USE BEST EFFORTS TO CONSUMMATE TRANSACTION. The
Executive hereby covenants and agrees that he will not resign his position with
Claremont without the consent of Fresh Foods until the consummation of a sale or
other disposition of Claremont by Fresh Foods. The Executive further covenants
and agrees to use his best efforts to consummate any such sale or disposition
recommended or approved by Fresh Foods.
11. ENFORCEMENT. In the event of any breach of this Agreement,
Claremont, Fresh Foods and their successors and assigns shall be entitled to any
and all of the following remedies in addition to such other remedies as they may
have in equity or at law:
(a) In that a breach or anticipatory breach by the Executive of
Section 8 or 9 of this Agreement will cause irreparable damage to
Claremont or Fresh Foods, Claremont or Fresh Foods, as applicable,
shall be entitled to an injunction restraining the Executive from
attempting to violate, violating or continuing a violation of Section 8
or 9 of this Agreement. The existence of any claim or cause of action
on the part of the Executive against Claremont, Fresh Foods or their
successors or assigns, whether arising from this Agreement or
otherwise, shall in no way constitute a defense to the enforcement of
Sections 8 and 9.
(b) The Restrictive Period shall be extended by any time period
during which the Executive is in violation of this Agreement.
12. ACKNOWLEDGEMENT OF ADEQUATE CONSIDERATION. The parties stipulate
and agree that the payments and other benefits owed to the Executive by Fresh
Foods and Claremont under this Agreement and the performance of Fresh Foods' and
Claremont's obligations hereunder constitute sufficient consideration to support
enforcement of the covenants of this Agreement.
13. ACKNOWLEDGEMENT OF REASONABLENESS. The Executive has carefully read
and considered the provisions of this Agreement in consultation with attorneys
of his choice and agrees that the restrictions set forth herein are fair and
reasonably required for Claremont's
5
<PAGE> 6
protection. In the event that any provision relating to the Restrictive Period
or the Territory (or both) shall be declared by a court of competent
jurisdiction to exceed the maximum time period or geographical area such court
deems reasonable and enforceable under applicable law, the time period or area
of restriction considered reasonable and enforceable by the court shall
thereafter be the applicable Restrictive Period or Territory under this
Agreement.
14. ATTORNEYS' FEES. Should it become necessary for Claremont or Fresh
Foods to institute legal proceedings as a result of a breach of any terms or
covenants contained in this Agreement, Claremont or Fresh Foods, as applicable,
shall, if it is the prevailing party in such litigation, be entitled to have and
recover from the non-prevailing party reasonable attorneys' fees plus court
costs in addition to any and all relief otherwise available to it, either at law
or in equity. Should it become necessary for the Executive to institute legal
proceedings as a result of a breach of any terms or covenants contained in this
Agreement, the Executive shall, if he is the prevailing party in such
litigation, be entitled to have and recover from the non-prevailing party
reasonable attorneys' fees plus court costs in addition to any and all relief
otherwise available to him, either at law or in equity.
15. SEVERABILITY. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
16. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
17. ENTIRE AGREEMENT; NO EFFECT ON OPTIONS. This Agreement sets forth
the entire understanding between the parties relating to the subject matter
hereof and supersedes all previous and contemporaneous understandings or
agreements, written and oral. This Agreement may be modified only by an
agreement in writing, signed by all parties, purporting to modify it. This
Agreement shall not be construed as having any effect on the rights of the
Executive under the stock option agreements and related stock option plans that
govern stock options that have been granted by Fresh Foods to the Executive and
may be held by the Executive at the Effective Date.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
19. NOTICES. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses listed below:
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<PAGE> 7
If to Claremont: Claremont Restaurant Group, LLC
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to Fresh Foods: Fresh Foods, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to Executive: L. Dent Miller
209 Museum Road
Statesville, NC 28625
or, in any case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other parties.
20. SUCCESSORS, HEIRS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
21. DIRECTOR. Nothing in this Agreement shall affect the Executive's
position as a member of the Fresh Foods Board of Directors.
22. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CLAREMONT RESTAURANT GROUP, LLC
By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ DAVID R. CLARK
---------------------------
David R. Clark
President
FRESH FOODS, INC.
By: /s/ DAVID R. CLARK
----------------------------------
David R. Clark
President
THE EXECUTIVE:
/s/ L. DENT MILLER (SEAL)
--------------------------------------
L. Dent Miller
8
<PAGE> 9
EXHIBIT A
Percentage of Total Payments
Pursuant to Sections
Allocation Category Dollar Amount 7(a) and 7(b) of this Agreement
- ------------------- ------------- -------------------------------
Consulting $ 94,615 11%
Noncompete 567,690 69%
Transaction Success Bonus 57,788 7%
Severance 104,906 13%
-------- --------
TOTAL $825,000 100%
======== ========
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<PAGE> 1
EXHIBIT 10.40
SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT
THIS SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT (the "Agreement")
is entered into as of July 12, 1999 among Claremont Restaurant Group, LLC, a
North Carolina limited liability company ("Claremont"), Fresh Foods, Inc., a
North Carolina corporation and the sole member and manager of Claremont ("Fresh
Foods"), HERTH Management, Inc., a North Carolina corporation ("HERTH"), and
Richard F. Howard (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is a director and an executive employee of Fresh
Foods, having provided management services to Fresh Foods and Claremont through
HERTH, thereby acquiring an intimate knowledge of the business and affairs of
Fresh Foods and Claremont; and
WHEREAS, the Executive and Fresh Foods entered into a certain
Non-Competition and Confidentiality Agreement dated July 19, 1997 (the
"Non-Competition and Confidentiality Agreement"); and
WHEREAS, the Executive and Fresh Foods entered into a certain Change in
Control Agreement dated as of August 29, 1997 (the "Change in Control
Agreement"); and
WHEREAS, the Executive and Fresh Foods desire to terminate the
Non-Competition and Confidentiality Agreement and to set forth their agreement
with respect to such termination; and
WHEREAS, the Executive and Fresh Foods desire to terminate the Change
in Control Agreement and to set forth their agreement with respect to such
termination; and
WHEREAS, Claremont desires to engage the services of the Executive,
through HERTH, as a consultant in the event of a sale or other disposition of
Claremont by Fresh Foods and the Executive desires to be so engaged upon the
terms and conditions provided herein; and
WHEREAS, the Executive, HERTH and Claremont desire to set forth their
agreement with respect to certain noncompete obligations of the Executive; and
WHEREAS, Fresh Foods desires to provide incentives for the Executive to
remain with HERTH (to provide management services to Claremont) in the event of
a sale or other disposition of Claremont by Fresh Foods and to assist in the
planning and execution of such sale or other disposition;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. CHANGE IN CONTROL AGREEMENT TERMINATED. The parties agree that the
Change in Control Agreement shall terminate in its entirety, immediately prior
to the Effective Date (as
<PAGE> 2
defined in Section 3), without liability on the part of any party as a
consequence thereof. Without limiting the generality of the following, neither
Fresh Foods nor Claremont shall have any liability to the Executive, upon the
sale of Claremont or Fresh Foods (or otherwise), pursuant to the Change in
Control Agreement.
2. NON-COMPETITION AND CONFIDENTIALITY AGREEMENT TERMINATED. The
parties agree that the Non-Competition and Confidentiality Agreement shall
terminate in its entirety, immediately prior to the Effective Date, without
liability on the part of any party as a consequence thereof.
3. CONSULTING SERVICES. Claremont agrees to engage the Executive,
through HERTH, as a consultant as of the Effective Date, and the Executive
hereby accepts such engagement, in each case upon the terms and conditions set
forth in this Agreement. Throughout the term of this Agreement, the Executive
shall report to the President of Claremont (or, if none exists, then the
Manager(s) of Claremont) and shall perform such Consulting Services (as defined
in Section 4) as the President or such Manager(s), as the case may be (the
"Superior Officer"), may reasonably request. As used in this Agreement, the term
"Effective Date" shall mean the date of consummation of the sale or other
disposition by Fresh Foods of all of the issued and outstanding membership
interests in Claremont.
4. DUTIES. The Executive shall, to the extent reasonably requested by
the Superior Officer, at reasonable times and places (a) consult with and advise
Claremont on the management of Claremont's restaurant operation and franchising
business and (b) market and promote Claremont's restaurant operation and
franchising business in the southeastern United States (collectively,
"Consulting Services"). The Executive need not devote more than twenty hours per
calendar week or 500 hours per calendar year to Consulting Services. Except as
otherwise provided in this Agreement, the Executive is not entitled to payment
of any fee or other compensation for his Consulting Services, but Claremont
shall reimburse him for the reasonable out-of-pocket expenses that he incurs
while performing Consulting Services upon presentation of receipts or other
documentation in reasonable detail.
5. INDEPENDENT CONTRACTOR. Claremont, HERTH and the Executive hereby
agree that the Executive is an independent contractor, solely responsible for
the manner and form in which he performs Consulting Services. Nothing contained
herein shall be construed as creating an employer/employee, master/servant,
principal/agent, partnership, joint venture or other similar kind of
relationship. The Executive agrees that he will not take any action on behalf of
Claremont without specific instructions from, and the prior approval of, the
Superior Officer and that he does not have any right or power in any manner to
bind or commit Claremont to any contract or other obligation with any individual
or entity except upon the specific prior written approval of the Superior
Officer.
6. TERM. This Agreement shall terminate five years from the Effective
Date, unless it is terminated earlier as provided elsewhere in this Section.
Claremont may, by written notice to each of the Executive and HERTH, terminate
this Agreement at any earlier date, it being understood that no termination of
this Agreement shall affect (1) the Executive's obligations under Sections 8 and
9 of this Agreement, which shall remain in full force and effect, or (2)
2
<PAGE> 3
Fresh Foods' obligations under Section 7. This Agreement shall in any event
terminate upon the death of the Executive.
7. COMPENSATION. Fresh Foods shall pay to HERTH, for the benefit of the
Executive, as a lump sum payment, an amount equal to the sum of
(a) $750,000 plus
(b) an amount equal to the aggregate of any and all federal,
state and local income tax and excise tax liabilities of the Executive
resulting from the payments due pursuant to clauses (a) and (b) hereof;
provided, however, that, if Fresh Foods determines that the total of
all payments to HERTH for the benefit of the Executive under this
Agreement after reduction for any and all federal, state and local
income tax and excise tax liabilities of the Executive resulting
therefrom (the "After-Tax Payments") would be increased by the
limitation or elimination of any payment under this Section 7, then
amounts payable under this Section 7 shall be reduced to the extent,
and only to the extent, determined necessary by Fresh Foods to maximize
the After-Tax Payments; and provided further that Fresh Foods shall
withhold from all payments to be made to HERTH for the benefit of the
Executive pursuant to this Agreement all taxes that, by applicable
federal, state or local law, Fresh Foods determines that it is required
to withhold.
Each payment required to be made to HERTH for the benefit of the Executive
pursuant to the foregoing provisions of this Section 7 shall be made by bank
check or other good funds on the Effective Date. The compensation payable
pursuant to this Section 7 is allocated as set forth on EXHIBIT A hereto among:
(i) consideration for the Executive's consulting obligations, (ii) consideration
for the Executive's noncompete obligations, (iii) a transaction success bonus
and (iv) severance.
8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During the
Executive's prior positions with Claremont and Fresh Foods and during the term
of this Agreement, the Executive has and will become acquainted with
confidential information of Claremont, Fresh Foods and their affiliates,
including, but not limited to, customer files, customer lists, special customer
matters, sales methods and techniques, merchandising concepts and plans,
business plans, sources of supply and vendors, special business relationships
with vendors, agents and brokers, promotional materials and information,
financial matters, mergers, acquisitions, personnel matters and confidential
processes, designs, formulas, ideas, plans, devices and materials and other
similar matters that are kept confidential (any and all such information being
referred to herein as "Confidential Information"). The use of Confidential
Information against Claremont or Fresh Foods would seriously damage its
business. Accordingly, the Executive agrees that:
(a) He shall not, directly or indirectly, use, divulge,
publish or otherwise reveal or allow to be revealed any Confidential
Information to any individual or entity except with the prior, express
and written consent of either Claremont or Fresh Foods, as applicable,
or as required by law;
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<PAGE> 4
(b) He shall refrain from any action or conduct that might
reasonably or foreseeably be expected to compromise the confidentiality
or proprietary nature of any Confidential Information; and
(c) He shall have no right to apply for, or to obtain any
patent, copyright or other form of intellectual property protection
regarding, any Confidential Information.
9. COVENANT NOT TO COMPETE.
(a) COVENANT. The Executive hereby stipulates, covenants and
agrees that, during the Restrictive Period (as defined below), he shall
not, directly or indirectly, other than on behalf of Claremont, without
Claremont's prior, express and written consent:
(i) Engage in Competition (as defined below) with
Claremont or any of its successors or assigns; or
(ii) Employ or solicit the employment of any
individual who is, or has been, at any time during the
Restrictive Period or during the twelve complete calendar
months immediately preceding the Effective Date, an employee
of Claremont.
(b) DEFINITIONS. As used in this Section, the following terms
shall have the following meanings:
(i) "Business" shall mean the business conducted by
Claremont at the Effective Date, including the business of
restaurant operation and restaurant franchising, but excluding
the business conducted or proposed to be conducted by
Fairgrove Restaurants, LLC or any other entity in which the
Executive has an equity interest at the Effective Date.
(ii) "Competition" shall mean:
(1) Engaging in the Business within the
Territory;
(2) Assisting any individual or entity,
whether in a financial, managerial, employment,
advisory or other material capacity, to engage in the
Business within the Territory; provided, however,
that nothing herein shall preclude the Executive,
directly or indirectly, from leasing restaurant
property to a tenant as a bona fide lessor; or
(3) Owning any interest in, or organizing an
entity that engages in, the Business within the
Territory; provided, however, that nothing herein
shall preclude the Executive, directly or indirectly,
from holding not more than one percent of the
outstanding shares of common stock of any company
whose shares of common stock are listed on a national
securities exchange or authorized for quotation by
NASDAQ.
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<PAGE> 5
(iii) "Restrictive Period" shall mean the five-year
period beginning on the Effective Date.
(iv) "Territory" shall mean the 25-mile radius from
(A) any restaurant owned or franchised directly or indirectly
by Claremont or (B) any other site used directly or indirectly
by Claremont, to the extent that the business of the
restaurant or site was assisted by the Executive during the
term of his service to Fresh Foods or Claremont.
10. COVENANT TO USE BEST EFFORTS TO CONSUMMATE TRANSACTION. The
Executive hereby covenants and agrees that he will not resign his position with
HERTH without the consent of Fresh Foods until the consummation of a sale or
other disposition of Claremont by Fresh Foods. The Executive further covenants
and agrees to use his best efforts to consummate any such sale or disposition
recommended or approved by Fresh Foods.
11. ENFORCEMENT. In the event of any breach of this Agreement,
Claremont, Fresh Foods and their successors and assigns shall be entitled to any
and all of the following remedies in addition to such other remedies as they may
have in equity or at law,:
(a) In that a breach or anticipatory breach by the Executive
of Section 8 or 9 of this Agreement will cause irreparable damage to
Claremont or Fresh Foods, Claremont or Fresh Foods, as applicable,
shall be entitled to an injunction restraining the Executive from
attempting to violate, violating or continuing a violation of Section 8
or 9 of this Agreement. The existence of any claim or cause of action
on the part of the Executive against Claremont, Fresh Foods or their
successors or assigns, whether arising from this Agreement or
otherwise, shall in no way constitute a defense to the enforcement of
Sections 8 and 9.
(b) The Restrictive Period shall be extended by any time
period during which the Executive is in violation of this Agreement.
12. ACKNOWLEDGEMENT OF ADEQUATE CONSIDERATION. The parties stipulate
and agree that the payments and other benefits owed to HERTH for the benefit of
the Executive by Fresh Foods under this Agreement and the performance of Fresh
Foods' obligations hereunder constitute sufficient consideration to support
enforcement of the covenants of this Agreement.
13. ACKNOWLEDGEMENT OF REASONABLENESS. The Executive has carefully read
and considered the provisions of this Agreement in consultation with attorneys
of his choice and agrees that the restrictions set forth herein are fair and
reasonably required for Claremont's protection. In the event that any provision
relating to the Restrictive Period or the Territory (or both) shall be declared
by a court of competent jurisdiction to exceed the maximum time period or
geographical area such court deems reasonable and enforceable under applicable
law, the time period or area of restriction considered reasonable and
enforceable by the court shall thereafter be the applicable Restrictive Period
or Territory under this Agreement.
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<PAGE> 6
14. ATTORNEYS' FEES. Should it become necessary for Claremont or Fresh
Foods to institute legal proceedings as a result of a breach of any terms or
covenants contained in this Agreement, Claremont or Fresh Foods, as applicable,
shall, if it is the prevailing party in such litigation, be entitled to have and
recover from the non-prevailing party reasonable attorneys' fees plus court
costs in addition to any and all relief otherwise available to it, either at law
or in equity. Should it become necessary for the Executive or HERTH to institute
legal proceedings as a result of a breach of any terms or covenants contained in
this Agreement, the Executive or HERTH, as applicable, shall, if he or it is the
prevailing party in such litigation, be entitled to have and recover from the
non-prevailing party reasonable attorneys' fees plus court costs in addition to
any and all relief otherwise available to him, either at law or in equity.
15. SEVERABILITY. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
16. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
17. ENTIRE AGREEMENT; NO EFFECT ON OPTIONS. This Agreement sets forth
the entire understanding between the parties relating to the subject matter
hereof and supersedes all previous and contemporaneous understandings or
agreements, written and oral. This Agreement may be modified only by an
agreement in writing, signed by all parties, purporting to modify it. This
Agreement shall not be construed as having any effect on the rights of the
Executive under the stock option agreements and related stock option plans that
govern stock options that have been granted by Fresh Foods to the Executive and
may be held by the Executive at the Effective Date.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
19. NOTICES. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses listed below:
If to Claremont: Claremont Restaurant Group, LLC
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
6
<PAGE> 7
If to Fresh Foods: Fresh Foods, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to HERTH: HERTH Management, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: James C. Richardson, Jr.
If to the Executive: Richard F. Howard
5982 Highway 150 East
Denver, NC 28037
or, in any case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other parties.
20. SUCCESSORS, HEIRS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
21. DIRECTOR. Nothing in this Agreement shall affect the Executive's
position as Chairman of the Board of Directors of Fresh Foods.
22. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CLAREMONT RESTAURANT GROUP, LLC
By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ David R. Clark
-----------------------------
David R. Clark
President
FRESH FOODS, INC.
By: /s/ David R. Clark
-------------------------------
David R. Clark
President
HERTH MANAGEMENT, INC.
By: /s/ James C. Richardson, Jr.
-------------------------------
James C. Richardson, Jr.
President
THE EXECUTIVE:
/s/ Richard F. Howard (SEAL)
-----------------------------
Richard F. Howard
8
<PAGE> 9
EXHIBIT A
Percentage of Total Payments
Pursuant to Sections
Allocation Category Dollar Amount 7(a) and 7(b) of this Agreement
- ------------------- ------------- -------------------------------
Consulting $ 94,615 13%
Noncompete 567,690 76%
Transaction Success Bonus 66,351 9%
Severance 21,343 3%
---------- ---
TOTAL $ 750,000 100%
========== ===
9
<PAGE> 1
EXHIBIT 10.41
INCENTIVE AGREEMENT
This INCENTIVE AGREEMENT is among Fresh Foods, Inc., a North Carolina
corporation (the "Company"), Pierre Foods, LLC, a North Carolina limited
liability company and wholly-owned subsidiary of the Company ("Pierre"), and
Norbert E. Woodhams (the "Executive").
WHEREAS, the Company is evaluating the potential sale or other
disposition (whether by merger or consolidation or transfer of assets or equity
interests issued by the Company or by one or more subsidiaries of the Company)
of all or substantially all of the food processing operations presently
conducted by Pierre;
WHEREAS, the aforementioned disposition (the "Disposition") is a
complex and demanding undertaking, which will challenge fully the energy,
resourcefulness and commitment of the Company's executives in a critical period
of the Company's corporate life; and
WHEREAS, the Company wants to incentivize the Executive by promising to
compensate the Executive for the extraordinary efforts that will be required to
assist others in the execution of this extraordinary corporate transaction for
the benefit of the Company's shareholders;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. SALARY. The Company hereby confirms the annual salary of the
Executive in the amount specified as such on SCHEDULE A to this Agreement. The
amount of such salary shall not be increased throughout the term of this
Agreement otherwise than pursuant to an amendment of this Agreement executed on
behalf of the Company by each of its Chief Executive Officer and its President.
2. PAY-TO-STAY BONUS; NO GUARANTEED EMPLOYMENT. The Executive covenants
and agrees with the Company to use the best efforts of the Executive, during the
term of this Agreement, to consummate any Disposition recommended or approved by
the Company. The Executive further covenants and agrees with the Company not to
resign his position with the Company, during the term of this Agreement, without
the consent of the Company until the consummation of a Disposition. In
consideration of these covenants and agreements of the Executive, the Company
promises to pay to the Executive the amount specified as the "Pay-to-Stay Bonus"
on SCHEDULE A to this Agreement in the event that, during the term of this
Agreement, (i) a definitive agreement contemplating a Disposition (a "Definitive
Agreement") is executed and delivered or (ii) for any reason the Executive's
employment by the Company is terminated. Notwithstanding any provision of this
Agreement (or any other agreement), the Executive is and shall remain an
employee at will of the Company whose employment by the Company may be
terminated by the Company at any time, with or without cause.
3. DISPOSITION BONUS. The Company will pay the Executive, by bank check
or other good funds, as a transaction success bonus, an amount specified as the
"Disposition Bonus" on
<PAGE> 2
SCHEDULE A to this Agreement in the event that, during the term of this
Agreement, (i) a Disposition is consummated or (ii) for any reason the
Executive's employment by the Company is terminated.
4. OPERATING BONUSES. Regardless of the occurrence or nonoccurrence of
a Disposition, for each complete or partial fiscal quarter during the term of
this Agreement the Executive shall be eligible for operating bonuses as and to
the extent provided for in this Section. The Company will pay the Executive an
amount equal to 6.25% of the Executive's annual salary for each fiscal quarter
in which Pierre achieves operating income in an amount not less than the amount
budgeted by the Board of Directors of the Company for Pierre. The parties
acknowledge that the amounts of operating income so budgeted for Pierre through
the end of the current fiscal year are as follows: first fiscal quarter,
$4,803,259; second fiscal quarter, $4,976,411; third fiscal quarter, $6,915,232;
and fourth fiscal quarter, $5,908,162. If and to the extent that the operating
income for Pierre exceeds the budgeted amount, then, and in each such case, the
Company shall establish a bonus pool in an aggregate amount equal to 25% of the
excess. The Company will pay the Executive an amount equal to the percentage of
such bonus pool specified as the "Incremental Operating Bonus" on SCHEDULE A to
this Agreement. Each payment to be made to the Executive pursuant to this
Section shall be made not later than fourteen days after the date on which the
Company first publicly announces its results of operations for the relevant
fiscal quarter.
5. SEVERANCE. The Company will pay the Executive, by bank check or
other good funds, the amount specified as "Severance" on SCHEDULE A to this
Agreement in the event that, during the term of this Agreement, (i) a
Disposition is consummated or (ii) for any reason the Executive's employment by
the Company is terminated.
6. STOCK OPTIONS. The Executive presently holds stock options granted
by the Company with the characteristics described on SCHEDULE A to this
Agreement. This Agreement shall not be construed as having any effect on the
rights of the Executive under the stock option agreements and related stock
option plans that govern such stock options. The Board of Directors of the
Company and the Executive Compensation Committee of such Board have taken all
action necessary to accelerate the vesting of all such stock options upon the
consummation of a Pierre Disposition.
7. TERM. This Agreement shall terminate on June 8, 2003. Thereafter,
the term shall automatically continue from year to year unless the Executive or
the Company gives written notice of termination 120 days prior to the end of the
term or any renewal term.
8. COMPANY DETERMINATIONS FINAL. The "gross-up amounts" to be withheld
by the Company pursuant to Sections 2, 3 and 5 of this Agreement, and all
amounts to be paid and withheld pursuant to Section 4, shall be determined by
the Company. Every such determination by the Company shall be binding and
conclusive for all purposes in the absence of fraud.
9. SEVERABILITY. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
2
<PAGE> 3
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
10. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
11. EMPLOYMENT AGREEMENT AND CHANGE IN CONTROL AGREEMENT TERMINATED.
The parties agree that the Employment Contract between Pierre and the Executive
dated as of March 4, 1998, as amended by that certain Amendment to Employment
Contract dated as of March 24, 1999, is hereby terminated in its entirety
without liability on the part of any party as a consequence thereof. The parties
further agree that the Change in Control Agreement between the Company and the
Executive dated as of June 9, 1998 (together with any and all amendments to and
restatements of such agreement, the "Change in Control Agreement") is hereby
terminated in its entirety without liability on the part of any party as a
consequence thereof. Without limiting the generality of the foregoing, the
Company shall have no liability to the Executive, upon a Disposition or
otherwise, pursuant to the Change in Control Agreement.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between such parties relating to the Executive's employment by the
Company, including all compensation payable to the Executive for such
employment, and supersedes all previous understandings or agreements (written
and oral). This Agreement may be amended only by an agreement in writing, signed
by each of the Chief Executive Officer and the President of the Company (for the
Company) and by the Executive.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
14. NOTICES. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested: if to the Company,
then to Fresh Foods, Inc., P.O. Box 3967, Hickory, NC 28603, Attention: David R.
Clark; if to the Executive, then to the address specified on SCHEDULE A to this
Agreement; or, in any case, to such other address as the party to whom or to
which such notice is to be given shall have specified by notice given to the
other parties.
15. SUCCESSORS, HEIRS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
16. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of August 18, 1999.
FRESH FOODS, INC.
By: /s/ JAMES C. RICHARDSON, JR.
------------------------------------
James C. Richardson, Jr., Chief Executive Officer
By: /s/ DAVID R. CLARK
------------------------------------
David R. Clark, President
PIERRE FOODS, LLC
By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ DAVID R. CLARK
------------------------------
David R. Clark, President
THE EXECUTIVE:
/s/ NORBERT E. WOODHAMS
--------------------------------(SEAL)
Norbert E. Woodhams
4
<PAGE> 5
SCHEDULE A
ANNUAL SALARY: $250,000
PAY-TO-STAY BONUS:
Amount before income tax gross-up: $432,256
Gross-up amount (to be withheld
by the Company): $367,744
Total payment after gross-up: $800,000
DISPOSITION BONUS:
Amount before income tax gross-up: $405,240
Gross-up amount (to be withheld
by the Company): $344,760
Total payment after gross-up: $750,000
INCREMENTAL OPERATING BONUS: 24.53%
SEVERANCE:
Amount before income tax gross-up: $287,504
Gross-up amount (to be withheld
by the Company): $244,595
Total payment after gross-up: $532,099
STOCK OPTIONS:
<TABLE>
<CAPTION>
NO. EXERCISE PRICE ORIGINAL GRANT DATE EXPIRATION DATE
------ -------------- ------------------- ---------------
<S> <C> <C> <C>
200,000 $10.50 6-6-1998 6-6-2008
</TABLE>
EXECUTIVE'S ADDRESS FOR NOTICES:
Norbert E. Woodhams
7312 Charter Cup Lane
West Chester, OH 45069
5
<PAGE> 6
FIRST AMENDMENT TO INCENTIVE AGREEMENT
This FIRST AMENDMENT TO INCENTIVE AGREEMENT (the "First Amendment")
between Fresh Foods, Inc., a North Carolina corporation (the "Company"), Pierre
Foods, LLC, a North Carolina limited liability company and wholly-owned
subsidiary of the Company ("Pierre"), and Norbert E. Woodhams (the "Executive")
is dated as of January 1, 2000.
WHEREAS, the Company, Pierre and the Executive entered into a certain
Incentive Agreement dated as of August 18, 1999 (the "Incentive Agreement"); and
WHEREAS, the Company, Pierre and the Executive desire to amend the
Incentive Agreement to modify the Executive's salary payable thereunder; and
WHEREAS, the Company, Pierre and the Executive desire to amend the
Incentive Agreement to modify the operating bonuses payable thereunder;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. The Incentive Agreement is hereby amended by deleting "$250,000"
specified as Annual Salary on Schedule A to the Incentive Agreement and
substituting "$300,000" in lieu thereof.
2. The Incentive Agreement is hereby amended by deleting Paragraph 4,
entitled "Operating Bonuses," and replacing it with the following:
4. Operating Bonuses. The Executive shall be entitled
to a periodic bonus to be determined in accordance with the
Company's executive bonus plan as adopted and amended from
time to time by the Executive Compensation Committee and the
Board of Directors of the Company.
3. This First Amendment shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
4. This First Amendment may be executed in counterparts, each of which
shall constitute an original and all of which, taken together, shall constitute
one and the same instrument.
5. Except as amended hereby, the Incentive Agreement shall remain in
full force and effect.
6. This First Amendment shall inure to the benefit of and be binding
upon the parties hereto, their successors, heirs and assigns.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date first above written.
FRESH FOODS, INC.
By: /s/ James C. Richardson, Jr.
------------------------------------
James C. Richardson, Jr.,
Chief Executive Officer
By: /s/ David R. Clark
------------------------------------
David R. Clark, President
PIERRE FOODS, LLC
By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ David R. Clark
--------------------------------
David R. Clark, President
THE EXECUTIVE:
/s/ Norbert E. Woodhams (SEAL)
----------------------------------
Norbert E. Woodhams
2
<PAGE> 1
EXHIBIT 10.42
SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT
THIS SEVERANCE, CONSULTING AND NONCOMPETE AGREEMENT (the "Agreement")
is entered into as of September 13, 1999 (the "Effective Date") among Claremont
Restaurant Group, LLC, a North Carolina limited liability company ("Claremont"),
Fresh Foods, Inc., a North Carolina corporation and the sole member and manager
of Claremont ("Fresh Foods"), HERTH Management, Inc., a North Carolina
corporation ("HERTH"), and James M. Templeton (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is an executive employee of Claremont, having
provided management services through HERTH, thereby acquiring an intimate
knowledge of the business and affairs of Claremont; and
WHEREAS, the Executive and Fresh Foods entered into a certain Change in
Control Agreement dated as of August 29, 1997 (the "Change in Control
Agreement"); and
WHEREAS, the Executive and Fresh Foods desire to terminate the Change
in Control Agreement and to set forth their agreement with respect to such
termination; and
WHEREAS, the Executive, HERTH, Claremont and Fresh Foods desire to set
forth their agreement with respect to certain matters relating to the
Executive's employment, through HERTH, by Claremont; and
WHEREAS, Claremont desires to engage the services of the Executive,
through HERTH, as a consultant in the event of a sale or other disposition of
Claremont by Fresh Foods and the Executive desires to be so engaged upon the
terms and conditions provided herein; and
WHEREAS, the Executive, HERTH and Claremont desire to set forth their
agreement with respect to certain noncompete obligations of the Executive;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. CHANGE IN CONTROL AGREEMENT TERMINATED. The parties agree that the
Change in Control Agreement is hereby terminated in its entirety without
liability on the part of any party as a consequence thereof. Without limiting
the generality of the foregoing, neither Fresh Foods nor Claremont shall have
any liability to the Executive, upon the sale of Claremont or Fresh Foods (or
otherwise), pursuant to the Change in Control Agreement.
2. EXECUTIVE'S EMPLOYMENT TERMINATED. The parties agree that the
Executive's employment (through HERTH or otherwise) with any and all of
Claremont, Fresh Foods and their subsidiaries, is hereby terminated in its
entirety.
<PAGE> 2
3. CONSULTING SERVICES. Claremont agrees to engage the Executive,
through HERTH, as a consultant as of the Effective Date, and the Executive
hereby accepts such engagement, in each case upon the terms and conditions set
forth in this Agreement. Throughout the term of this Agreement, the Executive
shall report to the President of Claremont (or, if none exists, then the
Manager(s) of Claremont) and shall perform such Consulting Services (as defined
in Section 4) as the President or such Manager(s), as the case may be (the
"Superior Officer"), may reasonably request.
4. CONSULTING DUTIES. The Executive shall, to the extent reasonably
requested by the Superior Officer, at reasonable times and places (a) consult
with and advise Claremont on management of Claremont's restaurant operation and
franchising business and (b) market and promote Claremont's restaurant operation
and franchising business in the southeastern United States (collectively,
"Consulting Services"). The Executive need not devote more than twenty hours per
calendar week or 500 hours per calendar year to Consulting Services. Except as
otherwise provided in this Agreement, the Executive is not entitled to payment
of any fee or other compensation for his Consulting Services, but Claremont
shall reimburse him for the reasonable out-of-pocket expenses that he incurs
while performing Consulting Services upon presentation of receipts or other
documentation in reasonable detail.
5. INDEPENDENT CONTRACTOR. Claremont, HERTH and the Executive hereby
agree that the Executive is an independent contractor, solely responsible for
the manner and form in which he performs Consulting Services. Nothing contained
herein shall be construed as creating an employer/employee, master/servant,
principal/agent, partnership, joint venture or other similar kind of
relationship. The Executive agrees that he will not take any action on behalf of
Claremont without specific instructions from, and the prior approval of, the
Superior Officer and that he does not have any right or power in any manner to
bind or commit Claremont to any contract or other obligation with any individual
or entity except upon the specific prior written approval of the Superior
Officer.
6. TERM. This Agreement shall terminate five years from the Effective
Date, unless it is terminated earlier as provided elsewhere in this Section.
Claremont may, by written notice to each of the Executive and HERTH, terminate
this Agreement at any earlier date, it being understood that no termination of
this Agreement shall affect (1) the Executive's obligations under Sections 8 and
9 of this Agreement, which shall remain in full force and effect, or (2) the
obligations of Fresh Foods and Claremont under Section 7. This Agreement shall
in any event terminate upon the death of the Executive.
7. COMPENSATION.
(a) Fresh Foods shall pay to HERTH, for the benefit of the
Executive, as a lump sum payment, an amount equal to the sum of
(i) $315,000 plus
(ii) an amount determined by Fresh Foods to be equal to the
aggregate of any and all federal, state and local income tax and
excise tax liabilities of the
2
<PAGE> 3
Executive resulting from the payments due pursuant to clauses (i)
and (ii) hereof; provided, however, that, if Fresh Foods determines
that the total of all payments to HERTH for the benefit of the
Executive under this Agreement after reduction for any and all
federal, state and local income tax and excise tax liabilities of
the Executive resulting therefrom (the "After-Tax Payments") would
be increased by the limitation or elimination of any payment under
this Section 7, then amounts payable under this Section 7 shall be
reduced to the extent, and only to the extent, determined necessary
by Fresh Foods to maximize the After-Tax Payments; and provided
further that Fresh Foods shall withhold from all payments to be made
to HERTH for the benefit of the Executive pursuant to this Agreement
all taxes that, by applicable federal, state or local law, Fresh
Foods determines that it is required to withhold.
The payment required to be made to HERTH for the benefit of the
Executive pursuant to the foregoing provisions of this Section 7 shall
be made by bank check or other good funds on the Effective Date. The
compensation payable pursuant to the foregoing provisions of this
Section 7 is allocated as set forth on EXHIBIT A hereto among: (i)
consideration for the Executive's consulting obligations, (ii)
consideration for the Executive's noncompete obligations, (iii) a
transaction success bonus and (iv) severance.
(b) COMPANY CAR. On the Effective Date, Fresh Foods and
Claremont will transfer and convey to the Executive all of their right,
title and interest in and to the motor vehicle currently used by the
Executive for business purposes. Upon request by the Executive, Fresh
Foods and Claremont will execute and deliver all such documents and
take all such other actions as the Executive may reasonably request to
better evidence such transfer and conveyance.
(c) INSURANCE PREMIUMS. On the Effective Date, Fresh Foods
will deliver to the Executive a bank check in an amount equal to the
present value, discounted at 4.5%, of all future premium payments due
on the term life insurance policy (no. 0030026670-0) issued by Security
Life and Trust Insurance Company insuring the Executive's life (such
amount not to exceed $34,823.86).
8. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During the
Executive's prior positions with Claremont and Fresh Foods and during the term
of this Agreement, the Executive has and will become acquainted with
confidential information of Claremont, Fresh Foods and their affiliates,
including, but not limited to, customer files, customer lists, special customer
matters, sales methods and techniques, merchandising concepts and plans,
business plans, sources of supply and vendors, special business relationships
with vendors, agents and brokers, promotional materials and information,
financial matters, mergers, acquisitions, personnel matters and confidential
processes, designs, formulas, ideas, plans, devices and materials and other
similar matters that are kept confidential (any and all such information being
referred to herein as "Confidential Information"). The use of Confidential
Information against Claremont or Fresh Foods would seriously damage its
business. Accordingly, the Executive agrees:
3
<PAGE> 4
(a) He shall not, directly or indirectly, use, divulge, publish or
otherwise reveal or allow to be revealed any Confidential Information
to any individual or entity except with the prior, express and written
consent of either Claremont or Fresh Foods, as applicable, or as
required by law;
(b) He shall refrain from any action or conduct that might
reasonably or foreseeably be expected to compromise the confidentiality
or proprietary nature of any Confidential Information; and
(c) He shall have no right to apply for, or to obtain any patent,
copyright or other form of intellectual property protection regarding,
any Confidential Information.
9. COVENANT NOT TO COMPETE.
(a) COVENANT. The Executive hereby stipulates, covenants and agrees
that, during the Restrictive Period (as defined below), he shall not,
directly or indirectly, other than on behalf of Claremont, without
Claremont's prior, express and written consent:
(i) Engage in Competition (as defined below) with Claremont or
any of its successors or assigns; or
(ii) Employ or solicit the employment of any individual who is,
or has been, at any time during the Restrictive Period or during the
twelve complete calendar months immediately preceding the Effective
Date, an employee of Claremont.
(b) DEFINITIONS. As used in this Section, the following terms shall
have the following meanings:
(i) "Business" shall mean the business conducted by Claremont at
the Effective Date, including the business of restaurant operation
and restaurant franchising, but excluding the business conducted by
any entity in which the Executive has an equity interest at the
Effective Date.
(ii) "Competition" shall mean:
(1) Engaging in the Business within the Territory;
(2) Assisting any individual or entity, whether in a
financial, managerial, employment, advisory or other material
capacity, to engage in the Business within the Territory;
provided, however, that nothing herein shall preclude the
Executive, directly or indirectly, from leasing restaurant
property to a tenant as a bona fide lessor; or
(3) Owning any interest in, or organizing an entity that
engages in, the Business within the Territory; provided, however,
that nothing herein
4
<PAGE> 5
shall preclude the Executive, directly or indirectly, from
holding not more than one percent of the outstanding shares of
common stock of any company whose shares of common stock are
listed on a national securities exchange or authorized for
quotation by NASDAQ.
(iii) "Restrictive Period" shall mean the five-year period
beginning on the Effective Date.
(iv) "Territory" shall mean the 25-mile radius from (A) any
restaurant owned or franchised directly or indirectly by Claremont
or (B) any other site used directly or indirectly by Claremont, to
the extent that the business of the restaurant or site was assisted
by the Executive during the term of his service to Fresh Foods or
Claremont.
10. ENFORCEMENT. In the event of any breach of this Agreement,
Claremont, Fresh Foods and their successors and assigns shall be entitled to any
and all of the following remedies in addition to such other remedies as they may
have in equity or at law:
(a) In that a breach or anticipatory breach by the Executive of
Section 8 or 9 of this Agreement will cause irreparable damage to
Claremont or Fresh Foods, Claremont or Fresh Foods, as applicable,
shall be entitled to an injunction restraining the Executive from
attempting to violate, violating or continuing a violation of Section 8
or 9 of this Agreement. The existence of any claim or cause of action
on the part of the Executive against Claremont, Fresh Foods or their
successors or assigns, whether arising from this Agreement or
otherwise, shall in no way constitute a defense to the enforcement of
Sections 8 and 9.
(b) The Restrictive Period shall be extended by any time period
during which the Executive is in violation of this Agreement.
11. RELEASES.
(a) The Executive hereby releases, discharges and acquits each of
Claremont and Fresh Foods and each of their affiliates, subsidiaries,
agents, employees, officers, directors, shareholders, attorneys,
accountants, agents, representatives, successors and assigns
(collectively referred to as the "Released Persons") of and from any
and all claims, demands, actions, rights, causes of action, obligations
and liabilities, known and unknown, that the Executive has against the
Released Persons (or any of them) relating to or arising out of the
Executive's employment (through HERTH or otherwise) by Claremont and
Fresh Foods, including, but not limited to, wrongful discharge, breach
of contract, tort, the Civil Rights Act, Age Discrimination in
Employment Act, Employee Retirement Income Security Act or any other
federal, state or local legislation or common law relating to
employment or discrimination in employment or otherwise.
(b) The Executive hereby releases, discharges and acquits the
Released Persons of and from any and all claims, demands, actions,
rights, causes of action,
5
<PAGE> 6
obligations and liabilities, known and unknown, that the Executive has
against the Released Persons (or any of them) relating to or arising
out of his status as a shareholder of Fresh Foods.
12. ACKNOWLEDGEMENT OF ADEQUATE CONSIDERATION. The parties stipulate
and agree that the payments and other benefits owed to the Executive and to
HERTH for the benefit of the Executive by Fresh Foods and Claremont under this
Agreement and the performance of Fresh Foods' and Claremont's obligations
hereunder constitute sufficient consideration to support enforcement of the
covenants of this Agreement.
13. ACKNOWLEDGEMENT OF REASONABLENESS. The Executive has carefully read
and considered the provisions of this Agreement in consultation with attorneys
of his choice and agrees that the restrictions set forth herein are fair and
reasonably required for Claremont's protection. In the event that any provision
relating to the Restrictive Period or the Territory (or both) shall be declared
by a court of competent jurisdiction to exceed the maximum time period or
geographical area such court deems reasonable and enforceable under applicable
law, the time period or area of restriction considered reasonable and
enforceable by the court shall thereafter be the applicable Restrictive Period
or Territory under this Agreement.
14. ATTORNEYS' FEES. Should it become necessary for Claremont or Fresh
Foods to institute legal proceedings as a result of a breach of any terms or
covenants contained in this Agreement, Claremont or Fresh Foods, as applicable,
shall, if it is the prevailing party in such litigation, be entitled to have and
recover from the non-prevailing party reasonable attorneys' fees plus court
costs in addition to any and all relief otherwise available to it, either at law
or in equity. Should it become necessary for the Executive or HERTH to institute
legal proceedings as a result of a breach of any terms or covenants contained in
this Agreement, the Executive or HERTH, as applicable, shall, if he or it is the
prevailing party in such litigation, be entitled to have and recover from the
non-prevailing party reasonable attorneys' fees plus court costs in addition to
any and all relief otherwise available to him, either at law or in equity.
15. SEVERABILITY. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
16. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
17. ENTIRE AGREEMENT; NO EFFECT ON OPTIONS. This Agreement sets forth
the entire understanding between the parties relating to the subject matter
hereof and supersedes all previous and contemporaneous understandings or
agreements, written and oral. This Agreement may be modified only by an
agreement in writing, signed by all parties, purporting to modify it. This
Agreement shall not be construed as having any effect on the rights of the
Executive under
6
<PAGE> 7
the stock option agreements and related stock option plans that govern stock
options that have been granted by Fresh Foods to the Executive and may be held
by the Executive at the Effective Date.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
19. NOTICES. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses listed below:
If to Claremont: Claremont Restaurant Group, LLC
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to Fresh Foods: Fresh Foods, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to HERTH: HERTH Management, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: James C. Richardson, Jr.
If to Executive: James M. Templeton
P.O. Box 92
Newton, NC 28658
or, in any case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other parties.
20. SUCCESSORS, HEIRS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
21. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CLAREMONT RESTAURANT GROUP, LLC
By: FRESH FOODS, INC.,
Its Sole Member and Manager
By: /s/ DAVID R. CLARK
---------------------------
David R. Clark
President
FRESH FOODS, INC.
By: /s/ DAVID R. CLARK
--------------------------------
David R. Clark
President
HERTH MANAGEMENT, INC.
By: /s/ JAMES C. RICHARDSON, JR.
--------------------------------
James C. Richardson, Jr.
President
THE EXECUTIVE:
/s/ JAMES M. TEMPLETON (SEAL)
--------------------------------
James M. Templeton
8
<PAGE> 9
EXHIBIT A
<TABLE>
<CAPTION>
DOLLAR AMOUNT PURSUANT PERCENTAGE OF TOTAL
TO SECTION 7(a) PAYMENTS PURSUANT TO
(BEFORE ADJUSTMENT SECTIONS 7(a) AND 7(b)
ALLOCATION CATEGORY UNDER SECTION 7(b)) OF THIS AGREEMENT
- ------------------- ---------------------- ---------------------
<S> <C> <C>
Consulting $ 70,961 23%
Noncompete 236,538 75%
Transaction Success Bonus 0 0%
Severance 7,501 2%
------------- ---
TOTAL $ 315,000 100%
========== ====
</TABLE>
9
<PAGE> 1
EXHIBIT 10.43
AMENDMENT NO. 4 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 4 TO CREDIT AGREEMENT, dated as of September 23,
1999, (the "AMENDMENT") relating to the Credit Agreement referenced below, by
and among FRESH FOODS, INC., a North Carolina corporation (the "COMPANY"), the
subsidiaries of the Company listed on the signature pages hereto (collectively
referred to as the "SUBSIDIARY BORROWERS" or individually referred to as a
"SUBSIDIARY BORROWER") (hereinafter, the Company and the Subsidiary Borrowers
are collectively referred to as the "BORROWERS" or individually referred to as a
"BORROWER"), each of those financial institutions identified as Lenders on the
signature pages hereto (together with each of their successors and assigns,
referred to individually as a "LENDER" and, collectively, as the "LENDERS"), and
FIRST UNION COMMERCIAL CORPORATION ("FUCC"), acting in the manner and to the
extent described in Article XIII of the Credit Agreement (in such capacity, the
"AGENT"). Terms used herein but not otherwise defined herein shall have the
meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $75,000,000 credit facility was extended to the Borrowers
pursuant to the terms of that certain Credit Agreement dated as of June 9, 1998
(as amended, modified or otherwise supplemented, the "CREDIT AGREEMENT") among
the Borrowers, the Lenders and the Agent;
WHEREAS, the Borrowers have requested that the Credit Agreement be
amended as described herein; and
WHEREAS, the Lenders are willing to make such amendments;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
(A) AMENDMENTS.
1. AMENDMENTS TO SECTION 1.1.
(a) The definition of Consolidated EBITDA is hereby
amended by adding the following proviso to the end thereof:
; PROVIDED, HOWEVER, that for purposes of calculating
Consolidated EBITDA, gains and losses incurred in
connection with the sale of (i) the membership
interests in Mom'n' Pop's Country Ham, LLC, (ii) the
Smokehouse, (iii) the Restaurant LLC's and (iv) the
Sale Assets shall be excluded.
(b) The definition of Consolidated Fixed Charges is
hereby amended by adding the words "(LESS interest income)"
following the words "all Consolidated Interest Expense" in
clause (i) thereof.
<PAGE> 2
(c) The definition of Eligible Real Property is
hereby amended and replaced in its entirety as follows:
"ELIGIBLE REAL PROPERTY" shall mean the Fair
Market Value of the owned properties noted as such on
SCHEDULE 6.19 hereto and which are subject to a
valid, enforceable and first priority Lien in favor
of Agent, together with additional properties
acquired by the Company or any of its Subsidiaries
following the Closing Date which have been approved
by the Agent, which approval shall not be
unreasonably withheld.
(d) The definition entitled "FUNB Claremont
NonRestaurant Cash Collateral Account" is hereby changed to
"FUNB Cash Collateral Account" and all references to FUNB
Claremont NonRestaurant Cash Collateral Account in the Credit
Agreement are hereby changed accordingly.
(e) The following new definitions are added to
Section 1.1 in the alphabetically appropriate place:
"MOM'N' POP'S LOAN" shall mean a revolving
credit loan in the amount of $500,000 made by the
Company to Mom'n' Pop's Country Ham, LLC to provide
working capital with a scheduled maturity date of
December 31, 1999.
"HOGGS LOAN" shall mean the three-year
secured promissory note in the amount of $985,050
from Hoggs LLC made payable to Pierre Foods, LLC to
finance the sale by Pierre Foods, LLC of the
membership interests in Mom'n'Pop's Country Ham, LLC,
including the Smokehouse, to Hoggs, LLC.
"RESTAURANT LLCs" shall mean, collectively,
Claremont Restaurant Group, LLC and Fresh Foods
Sales, LLC.
"SALE ASSETS" shall mean those assets set
forth on Annex I attached to the Consent dated as of
August 5, 1999 by and among the Borrowers, the
Lenders and the Agent.
"SMOKEHOUSE" shall mean the smokehouse
facility and related real property constituting a
portion of the Claremont Office property owned by
Fresh Foods, Inc.
(f) The definition of "Permitted Indebtedness" is
hereby amended by deleting clause (vii) thereof and
renumbering the remaining clauses accordingly.
(g) The definition of "Permitted Investments" is
hereby amended by deleting the word "and" following the words
"Permitted
2
<PAGE> 3
Acquisitions", inserting the following new clauses (vi) and
(vii) and renumbering the remaining clauses accordingly:
(vi) the Hoggs Loan;
(vii) the Mom'n' Pop's Loan; and
(h) The definition of Unfinanced Consolidated Capital
Expenditures is amended and replaced in its entirety as
follows:
"UNFINANCED CONSOLIDATED CAPITAL
EXPENDITURES" shall mean, for any period, one hundred
percent (100%) of Consolidated Capital Expenditures
made during such period.
2. DELETIONS FROM SECTION 1.1. The following definitions in
Section 1.1 of the Credit Agreement are hereby deleted in their
entirety:
Approved Restaurants, Cash Collateral Accounts, Consolidated
Restaurant Capital Expenditures, FUNB Claremont Restaurant
Cash Collateral Account, NonRestaurant Business and Restaurant
Business.
3. AMENDMENT TO SECTION 2.1(b)(i)(B). Section 2.1(b)(i)(B) of
the Credit Agreement is hereby amended by adding the following new
paragraph (4) and renumbering the remaining paragraphs accordingly:
(4) until such date as the Mom'n'Pop's Loan shall have been
repaid in full and terminated in accordance with the terms
thereof, a reserve equal to the unfunded portion of the
Mom'n'Pop's Loan; MINUS
4. AMENDMENT TO SECTION 2.1(b)(i)(B)(3). Section
2.1(b)(i)(B)(3) of the Credit Agreement is hereby amended and replaced
in its entirety as follows:
(3) an amount equal to up to 70% of the Eligible Equipment and
Eligible Real Property determined as of its initial inclusion
into the Borrowing Base; PROVIDED, HOWEVER, that on the last
day of each calendar quarter such initial amount shall be
reduced by an amount equal to 1/28th of such initial amount;
MINUS
5. AMENDMENT TO SECTION 2.4(b). Section 2.4(b) of the Credit
Agreement is hereby amended and replaced in its entirety as follows:
(b) (i) The Borrowers, individually or through the Company,
shall have each established and shall maintain lockboxes (the
"LOCKBOXES") with financial institutions, including First
Union, selected by the Company and reasonably acceptable to
the Agent (the "LOCKBOX BANKS") and shall instruct all account
debtors on the Accounts of each Borrower to remit all payments
to its respective Lockboxes. All amounts received by the
Borrowers from any account debtor, in addition to all other
cash received
3
<PAGE> 4
from any other source including but not limited to proceeds
from asset sales and judgments, shall be promptly deposited
into the applicable Lockbox Account (as defined below).
(ii) Each Borrower, individually or through the
Company, the Agent and each Lockbox Bank shall enter into
three party agreements in the form of EXHIBIT I hereto (the
"LOCKBOX AGREEMENTS"), providing, among other things, for the
following:
(A) The Borrowers, individually or through
the Company, will open and establish for the benefit
of the Agent on behalf of the Lenders an account at
each Lockbox Bank (each a "LOCKBOX ACCOUNT").
(B) All receipts held in the Lockboxes shall
be remitted daily to the appropriate Lockbox Account.
All funds deposited into the Lockbox Accounts on any
Business Day shall be transferred to the FUNB Cash
Collateral Account. All funds transferred to the FUNB
Cash Collateral Account on any Business Day shall be
immediately credited to the FUNB Leverage Account.
All funds credited on any Business Day to the FUNB
Leverage Account shall be applied by the Agent on
such Business Day to reduce the then outstanding
balance of the Revolving Loans and to pay accrued
interest thereon and to pay any other outstanding
Obligations which are then due and payable. All
amounts received directly by the Borrowers from any
account debtor, in addition to all other cash
received from any other source including but not
limited to proceeds from asset sales and judgments,
shall be held in trust by the Borrowers and promptly
deposited into the applicable Lockbox Account.
(iii) All funds deposited into the FUNB Cash
Collateral Account shall immediately become the property of
the Agent and the Borrowers shall obtain the agreement by the
Lockbox Banks to waive any offset rights against the funds so
deposited. The Agent assumes no responsibility for the Lockbox
arrangements, including, without limitation, any claim of
accord and satisfaction or release with respect to deposits
accepted by the Lockbox Banks thereunder.
(iv) The Borrowers may close Lockboxes and/or open
new lockboxes with the prior written consent of the Agent and
subject to prior execution and delivery to the Agent of
lockbox agreements consistent with the provisions of this
SECTION 2.4(b) and in form and substance satisfactory to the
Agent and its counsel.
6. AMENDMENT TO SECTION 6.34. Section 6.34 of the Credit
Agreement is hereby deleted in its entirety.
4
<PAGE> 5
7. AMENDMENT TO SECTION 7.26. Section 7.26 of the Credit
Agreement is hereby amended and restated in its entirety as follows:
7.26 ADDITIONAL ELIGIBLE REAL PROPERTY.
If the Borrowers request that any additional real property be
included within "Eligible Real Property", the Borrowers agree to
provide the Agent with an appraisal regarding such property and
additional items reasonably requested by the Agent (including
environmental audits and the other items described in Section 7 of
SCHEDULE 1.1B hereto).
8. AMENDMENTS TO ARTICLE VIII.
(a) Sections 8.2 and 8.3 of the Credit Agreement are
hereby amended and replaced in their entirety as follows:
8.2 FIXED CHARGE COVERAGE RATIO.
The Borrowers shall maintain a Fixed Charge Coverage Ratio of
not less than (a) 1.0 to 1.0 as of the last day of each such fiscal
quarter for any fiscal quarter ending on or before March 4, 2000 and
(b) thereafter, 1.2 to 1.0 as of the last day of each fiscal quarter.
8.3 CAPITAL EXPENDITURES.
The Borrowers shall not make Consolidated Capital Expenditures
during any fiscal year in excess of the following amounts (on a
non-cumulative basis) for the fiscal year periods set forth below:
AMOUNT PERIOD
------ ------
$8,000,000 March 7, 1999 and
all fiscal periods thereafter
(b) Section 8.4 of the Credit Agreement is hereby
deleted in its entirety and Section 8.5 of the Credit
Agreement is hereby renumbered as Section 8.4.
9. AMENDMENT TO SECTION 9.4. Section 9.4 of the Credit
Agreement is hereby amended and replaced as follows:
9.4 NO CORPORATE CHANGES.
Merge, consolidate with any Person or otherwise alter or
modify any Borrower's or any Subsidiary's Articles or Certificate of
Incorporation or any operating agreement or any names or principal
places of business or enter into or engage in any business, operation
or activity other than the food service business;
5
<PAGE> 6
PROVIDED, HOWEVER, the Company and its Subsidiaries may consummate the
Reorganization so long as the Company takes any and all steps and
executes any and all documents requested by the Agent in connection
therewith and pay all costs and expenses incurred by the Agent
(including reasonable attorneys' fees) in connection therewith.
10. AMENDMENT TO SECTION 9.8. Section 9.8 of the Credit
Agreement is hereby amended by deleting the word "and" following the
word "Person", adding the following new clause (b) and relettering the
remaining clause as clause (c):
, (b) as set forth on Schedule 9.3 hereto, and
11. AMENDMENT TO SCHEDULE 6.30. Schedule 6.30 is hereby
amended and replaced in its entirety with Amended Schedule 6.30
attached hereto.
12. AMENDMENT TO SCHEDULE 6.34. Schedule 6.34 is hereby
deleted in its entirety.
13. AMENDMENT TO OTHER SCHEDULES. The Schedules to the Credit
Agreement, the Security Agreement and the Pledge Agreement are hereby
amended and replaced in their entirety by the revised Schedules
attached hereto.
(B) CONSENTS.
1. SALE OF RESTAURANT LLCs. Notwithstanding the prohibition
contained in Section 9.3 of the Credit Agreement, the Lenders hereby
consent to the sale of all of the membership interests in Claremont
Restaurant Group, LLC and Fresh Food Sales, LLC (collectively, the
"Restaurant LLCs") by Fresh Foods, Inc. for aggregate Net Cash Proceeds
of not less than $38,000,000, subject to normal and customary
post-closing purchase price adjustments, and subject to the terms and
conditions set forth herein. In connection with the sale of the
Restaurant LLCs, the Lenders hereby authorize the Agent to release any
and all Liens on the personal property, fixtures and real property used
in connection with the business of the Restaurant LLCs.
2. SALE OF RETAINED ASSETS. Notwithstanding the prohibition
contained in Section 9.3 of the Credit Agreement, the Lenders hereby
consent, subject to the terms and conditions set forth herein, to the
sale of Bennetts Restaurant in Conover, NC and the sale of the Hudson
Outparcel in Hudson, NC owned by the Restaurant LLC's and not being
sold in connection with the sale referred to in Section 1 hereof (the
"Retained Assets"), upon terms and conditions satisfactory to the
Agent. In connection with the sale of the Retained Assets, the Lenders
hereby authorize the Agent to release any and all Liens on the personal
property, fixtures and real property comprising the Retained Assets.
3. RELEASE OF BORROWERS. The Lenders hereby consent to the
release of the following Borrowers as parties to the Credit Agreement
and the other Credit Documents, subject to the terms and conditions set
forth herein:
6
<PAGE> 7
Claremont Restaurant Group, LLC, Fresh Foods Restaurant Group, LLC,
Spicewood, Inc., Fresh Foods Sales, LLC, Sagebrush of Tennessee, L.P.,
Sagebrush of South Carolina, LLC, Sagebrush of North Carolina, LLC and
Sunshine WSMP, Inc.
4. RELEASE OF COLLATERAL. The Agent hereby agrees to release
its Liens on the Retained Assets and the personal property, fixtures
and real property used in connection with the business of the
Restaurant LLCs and their Subsidiaries, such releases to be held in
escrow pending consummation of the transactions contemplated herein and
the Agent's receipt of the proceeds thereof.
(C) EXCLUSION OF RETAINED ASSETS FROM ELIGIBLE REAL PROPERTY. Any
assets sold by the Borrowers pursuant to paragraph 2 of the Consent dated as of
August 5, 1999 and the Retained Assets shall be excluded from the definition of
Eligible Real Property, and Eligible Real Property shall be reduced by
$20,635,000.
(D) REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants that (i) the
representations and warranties contained in Article VI of the Credit Agreement
are correct on and as of the date hereof as though made on and as of such date
(except for those representations and warranties which by their terms relate
solely to an earlier date) and after giving effect to the amendments contained
herein, (ii) no Default or Event of Default exists under the Credit Agreement on
and as of the date hereof and after giving effect to the amendments contained
herein, (iii) it has the corporate power and authority to execute and deliver
this Amendment and to perform its obligations hereunder and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of this Amendment, (iv) it has duly executed and delivered this Amendment,
and this Amendment constitutes its legal, valid and binding obligation
enforceable in accordance with its terms except as the enforceability thereof
may be limited by bankruptcy, insolvency or other similar laws affecting the
rights of creditors generally or by general principles of equity and (v) as of
the date hereof, there has been no adverse change with respect to the
information contained in the Borrowing Base Certificate delivered pursuant to
paragraph (D)(5) hereof.
(E) PLEDGE AND GRANT OF SECURITY INTERESTS. Each of Pierre Foods, LLC
and the Company hereby acknowledge that (i) the three-year secured promissory
note evidencing the Hoggs Loan and (ii) the promissory note evidencing the
Mom'n' Pop's Loan (collectively, the "Pledged Notes") have been pledged to the
Agent and, in each case, constitute Collateral under the Security Agreement.
(F) REPLACEMENT OF LETTERS OF CREDIT. The Borrowers hereby agree that
the outstanding Letters of Credit for the account of the Restaurant LLC's shall
be replaced with substitute letters of credit or other credit support acceptable
to the beneficiary thereof and such Letters of Credit shall have been cancelled
and delivered to the Issuing Bank not later than 60 days following the date
hereof. Until the Letters of Credit shall have been cancelled and delivered to
the Agent, the Agent and the Lenders shall maintain a reserve against the
Borrowing Base in an amount equal to the face amount of such Letters of Credit.
In the event such Letters of Credit have not been replaced, cancelled and
returned to the Agent within 60 days of the date
7
<PAGE> 8
hereof, the Borrower shall immediately deliver cash collateral to the Agent
equal to the face amount of such Letters of Credit.
(G) CONDITIONS TO EFFECTIVENESS. This Amendment shall be and become
effective when all of the conditions set forth in this paragraph shall have been
satisfied.
1. EXECUTION OF COUNTERPARTS OF AMENDMENT. The Agent shall
have received counterparts of this Amendment, which collectively shall
have been duly executed on behalf of each of the Borrowers, the Agent
and the Lenders.
2. PREPAYMENT OF REVOLVING LOANS. The Borrowers shall prepay
outstanding Revolving Loans under the Credit Agreement in an amount
equal to the lesser of (a) the aggregate outstanding Revolving Loans
under the Credit Agreement as of the date hereof and (b) the aggregate
Net Cash Proceeds of the sale of (i) the Restaurant LLCs and all
personal property, fixtures and real property used in connection with
the business thereof and (ii) the Retained Assets, which prepayment
shall be made from the Net Cash Proceeds of such sales.
3. BORROWING BASE CERTIFICATE. The Agent shall have received a
Borrowing Base Certificate as of August 7, 1999, on a pro forma basis
taking into account the transactions contemplated herein, substantially
in the form of EXHIBIT L to the Credit Agreement, certified by the
Chief Financial Officer of the Company and demonstrating availability
of Loans permitted to be borrowed under the Credit Agreement, after
giving effect to the sale of the Restaurant LLCs and the Retained
Assets of at least $25,000,000.
4. LEGAL OPINION. The Agent shall have received a legal
opinion of special counsel to the Borrowers as to the enforceability of
this Amendment and such other matters as the Agent may reasonably
request, in form and substance reasonably satisfactory to the Agent.
5. FAIRNESS OPINION. The Agent shall have received a copy of a
favorable opinion from Bowles Hollowell Conner endorsing the sale of
Mom'n' Pops Country Ham, LLC.
6. RESOLUTIONS. The Agent shall have received copies of
resolutions of the board of directors of the Borrowers authorizing the
transactions contemplated by this Amendment and certified as true and
correct by an authorized officer of each such Borrower.
(H) Except as expressly amended or modified by the terms hereof, the
Credit Agreement and each other Credit Document shall remain in full force and
effect. This Amendment shall not affect, modify or diminish the obligations of
the Borrowers which have accrued prior to the effectiveness of the provisions
hereof. This Amendment is a Credit Document executed pursuant to the Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of the
Credit Agreement. At such time as this Amendment becomes effective, all
references in the Credit Agreement to the "Agreement" or the "Credit Agreement"
and all
8
<PAGE> 9
references in the other Credit Documents to the "Credit Agreement" shall be
deemed to refer to the Credit Agreement as amended by this Amendment. The
Borrowers affirm the liens and security interests created and granted in the
Credit Agreement and the Credit Documents and agree that this Amendment shall in
no manner adversely affect or impair such liens and security interests.
(I) Notwithstanding anything herein to the contrary, if the Borrower
shall fail to comply with any of the undertakings, covenants and other
obligations contained in this Amendment within the time periods specified
herein, such failure shall constitute an Event of Default under the Credit
Agreement.
(J) No Borrower has any counterclaims, offsets, credits or defenses to
the Credit Documents and the performance of its obligations thereunder, or if
any Borrower has any such claims, counterclaims, offsets, credits or defenses to
the Credit Documents or any transaction related to the Credit Documents, same
are hereby waived, relinquished and released in consideration of the Lenders'
execution and delivery of this Amendment.
(K) The Borrowers agree to pay all reasonable costs and expenses of the
Agent in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, the reasonable fees and expenses of
Moore & Van Allen, PLLC.
(L) This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
(M) This Amendment and the Credit Agreement as amended hereby shall be
governed by and construed and interpreted in accordance with the laws of the
State of North Carolina.
[Remainder of page intentionally left blank]
9
<PAGE> 10
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
COMPANY: FRESH FOODS, INC.
By: /s/ JAMES E. HARRIS
-----------------------
Name: James E. Harris
Title: Vice President
SUBSIDIARY BORROWERS: CLAREMONT RESTAURANT GROUP, LLC
BY: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS RESTAURANT GROUP, LLC
BY: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
BY: FRESH FOODS, INC.,
its Sole Member
FRESH FOODS PROPERTIES, LLC
BY: FRESH FOODS, INC.,
its Sole Member
SPICEWOOD, INC.
SUNSHINE WSMP, INC.
FRESH FOODS SALES, LLC
BY: FRESH FOODS, INC.,
its Sole Member
<PAGE> 11
PIERRE FOODS, LLC
BY: FRESH FOODS, INC.,
its Sole Member
SAGEBRUSH OF TENNESSEE, L.P.
BY: SAGEBRUSH OF SOUTH
CAROLINA, LLC
General Partner
BY: CLAREMONT RESTAURANT
GROUP, LLC, its Sole
Member
BY: FRESH FOODS,
INC., its
sole member
SAGEBRUSH OF NORTH CAROLINA, LLC
BY: CLAREMONT RESTAURANT
GROUP, LLC its Sole Member
BY: FRESH FOODS, INC.,
its sole member
SAGEBRUSH OF SOUTH CAROLINA, LLC
BY: CLAREMONT RESTAURANT
GROUP, LLC, its Sole Member
BY: FRESH FOODS, INC.,
its sole member
<PAGE> 12
PIERRE LEASING, LLC
BY: FRESH FOODS, INC.,
its Sole Member
By: /s/ JAMES E. HARRIS
-------------------------
Name: James E. Harris
Title: Vice President
<PAGE> 13
AGENT AND LENDERS: FIRST UNION COMMERCIAL CORPORATION,
as Agent and a Lender
By: /s/ TERRI K. LINS
-------------------------------
Name: Terri K. Lins
Title: Vice President
BANK OF AMERICA, N.A.
(formerly NationsBank, N.A.),
as a Lender
By: /s/ Angela Peterson Leake
-------------------------------
Name: Angela Peterson Leake
Title: Vice President
NATIONAL CITY COMMERCIAL
FINANCE, INC.,
as a Lender
By: /s/ Joseph L. White
-------------------------------
Name: Joseph L. White
Title: SVP
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as a Lender
By: /s/ Dawn M. Dieter
-------------------------------
Name: Dawn M. Dieter
Title: Vice President
<PAGE> 1
EXHIBIT 10.44
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated as of September
30, 1999, is among FAIRGROVE RESTAURANTS, LLC, a North Carolina limited
liability company (the "BUYER"), FRESH FOODS, INC., a North Carolina corporation
("FRESH FOODS"), and FRESH FOODS SALES, LLC, a North Carolina limited liability
company and wholly-owned subsidiary of Fresh Foods (the "SELLER").
WHEREAS, Seller owns all of the assets (including real property) used
and useful in the operation of the Bennett's Bar-B-Que restaurant located in
Conover, North Carolina (the "RESTAURANT"); and
WHEREAS, the parties have reached an understanding with respect to the
sale by the Seller and the purchase by the Buyer of certain assets used and
useful in the operation of the Restaurant;
NOW, THEREFORE, in consideration of the premises and the mutual
promises, agreements and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties intending legally to be bound, hereby agree as follows:
SECTION 1
PURCHASE AND SALE OF ASSETS
1.1 ACQUISITION OF ASSETS. On the terms and subject to the conditions
set forth in this Agreement, the Seller agrees to sell to the Buyer, and the
Buyer agrees to purchase from the Seller, all of the assets and properties of
Seller used in the operation of the Restaurant, including without limitation the
following (all hereinafter referred to as the "PURCHASED ASSETS"):
(a) REAL PROPERTY. All of the Seller's right, title and
interest in and to the real property listed on SCHEDULE 1.1(a),
together with all buildings, fixtures and other improvements located
thereon (the "PROPERTY");
(b) FURNITURE, FIXTURES, EQUIPMENT AND MACHINERY. All of the
Seller's right, title and interest in and to the furniture, fixtures,
equipment and machinery located on the premises of the Restaurant;
(c) VEHICLES. All of the Seller's right, title and interest in
and to the motor vehicles listed on SCHEDULE 1.1(c);
(d) INVENTORY AND SUPPLIES. All inventory of food, wine, beer
and soft drinks and all bar supplies, linen, china, silver, office
supplies and other supplies located on the premises of the Restaurant;
and
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(e) OTHER ASSETS. All of the Seller's right, title and
interest in and to all licenses and other governmental permits and
authorizations that relate to the Restaurant which Seller is permitted
to assign; all the Seller's books and records used or generated in the
operation of the Restaurant, including supplier lists and files, sales
listings and vendor files and records, together with all other assets,
tangible and intangible, owned by the Seller and used or useful in the
operation of the Restaurant, provided, however, that Buyer shall
provide Seller such access to the acquired books and records as Seller
shall reasonably request for legitimate business purposes (including,
without limitation, for the purpose of preparing tax returns, payroll
reports or any other reports required of Seller).
1.2 EXCLUDED ASSETS. Notwithstanding the provisions of Section 1.1, the
Purchased Assets shall not include any of the following:
(a) Cash and cash equivalents; and
(b) All claims and rights of Seller in and to federal, state
and local income tax refunds, credits, deductions and other tax
benefits of Seller relating to the Restaurant and accruing prior to the
effective time of the Closing (as defined herein).
1.3 ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions set forth in this Agreement, the Buyer shall assume the liabilities
and obligations of the Seller listed as balance sheet accounts under the heading
"Liabilities" on the September 6, 1999 balance sheet of the Restaurant attached
hereto as SCHEDULE 1.3, in such amounts as shall be accrued in such balance
sheet accounts as of the effective time and date of Closing (the "ASSUMED
LIABILITIES").
1.4 EXCLUDED LIABILITIES. The Assumed Liabilities shall include no
liability or obligation of any kind or nature, whether known or unknown,
absolute or contingent, liquidated or unliquidated, due or to become due, of the
Seller or Fresh Foods, save only as provided in Section 1.3. The liabilities of
the Seller and Fresh Foods not assumed by the Buyer hereunder are called
"EXCLUDED LIABILITIES" in this Agreement.
1.5 PURCHASE PRICE. In full consideration for the sale and transfer of
the Purchased Assets, and on the terms and subject to the conditions set forth
in this Agreement, the Buyer covenants and agrees to deliver to the Seller, not
later than 5:00 p.m., Eastern time, on October 4, 1999, a certified check in an
amount equal to the sum of (i) $1,100,000 plus (ii) the total dollar amount of
expenditures made by the Seller in connection with certain agreed-upon
improvements and repairs to the Restaurant made outside of the ordinary course
of business and for the benefit of the Buyer in contemplation of the
transactions provided for in this Agreement, as determined by the Seller
(reasonably and in good faith). SCHEDULES 1.5(a) and 1.5(b) attached hereto
list, to the best knowledge of the Seller as of the date of this Agreement, the
expenditures referenced in clause (ii) above, which will be updated based upon
final accounting as of the effective time and date of Closing.
1.6 RELATED AGREEMENTS. The following agreements shall be executed and
delivered at the Closing by the parties thereto (collectively, the "RELATED
AGREEMENTS"):
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(a) DEED. A deed in the form of EXHIBIT 1.6(A) (the "DEED").
(b) BILL OF SALE. A bill of sale in the form of EXHIBIT 1.6(b)
(the "BILL OF SALE").
(c) ASSUMPTION AGREEMENT. An assumption agreement in the form
of EXHIBIT 1.6(c) (the "ASSUMPTION AGREEMENT").
(d) FRANCHISE AGREEMENTS. Fresh Foods shall cause Claremont
Restaurant Group, LLC, a North Carolina limited liability company and
wholly-owned subsidiary of Fresh Foods ("CLAREMONT"), to execute and
deliver a Termination and Release Agreement, and Fresh Foods shall
cause Claremont to, and Buyer shall, execute and deliver a Third
Addendum to Franchise Agreement, each with respect to the parties'
franchise relationship with Bennett's Bar-B-Que, Inc.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND FRESH FOODS
Seller and Fresh Foods, acknowledging that Buyer is relying on the
following representations and warranties in entering into this Agreement, hereby
jointly and severally represent and warrant to Buyer as follows:
2.1 ORGANIZATION AND QUALIFICATION. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
North Carolina. Seller has the requisite power and authority to carry on its
business as it is now being conducted.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been duly
and validly executed and delivered by each of Seller and Fresh Foods and
constitutes a legal, valid and binding agreement of each of them, enforceable
against each of them in accordance with its terms. Each of Seller and Fresh
Foods has all requisite power and authority to enter into this Agreement. Seller
has all requisite power and authority to consummate the transactions
contemplated hereby. No further action is required on the part of either of
Seller or Fresh Foods to authorize either of Seller or Fresh Foods to consummate
the transactions contemplated hereby.
2.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except as
contemplated by Section 4.3(f) of this Agreement, the execution, delivery and
performance of this Agreement by each of Seller and Fresh Foods and the
consummation of the transactions contemplated hereby does not require the
consent of any third party and neither conflicts with, results in a breach of,
or constitutes a default under any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any court or governmental instrumentality,
or the articles of organization or operating agreement of Seller or the charter
or bylaws of Fresh Foods, nor does it conflict with, constitute grounds for
termination of, result in a breach of, or constitute a default under, any
agreement, instrument, license or permit to which Seller or Fresh Foods is now
subject.
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2.4 COMPLIANCE WITH LAWS. To the best of Seller's knowledge, Seller is
in compliance with all laws, regulations, or governmental orders applicable to
the Restaurant and the present use by the Seller of the Property and Purchased
Assets in the operation of the Restaurant. Neither Seller nor Fresh Foods has
received any written notice of any violation of any law, regulation or
governmental order relating to the Restaurant nor has actual knowledge of any
such violation, or of any investigation with respect to any such violation, or
of any investigation with respect to any judgment, award, order, injunction or
decree of any court or other governmental authority which in any way affects or
relates to the Property, Purchased Assets or the Restaurant.
2.5 TITLE TO PURCHASED ASSETS. Seller has good and marketable title to
all Purchased Assets, free and clear of all mortgages, security interests,
claims, liens, encumbrances and restrictions. The Seller has the right to convey
the Purchased Assets to the Buyer and the Seller shall convey at the Closing
good and marketable title to the Purchased Assets, free and clear of all
encumbrances, and shall warrant and defend the title to the Purchased Assets in
the Buyer against the claims of all persons whomsoever.
2.6 FILING OF TAX RETURNS. Seller has filed all federal, state and
local tax returns which are required to be filed (except to the extent that
failure to file is not reasonably likely to have a material adverse effect on
the business, condition (financial or otherwise), operations or prospects of the
Restaurant) in connection with the Restaurant and has paid or made adequate
provision for the payment of all assessments for such taxes and duties when due
and payable, except for taxes the nonpayment of which is not reasonably likely
to have a material adverse effect on the business, condition (financial or
otherwise), operations or prospects of the Restaurant. All such returns, as
applicable, have been prepared in all material respects in accordance with the
applicable provisions of the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder and with the applicable provisions of the state
and local laws, rules and regulations concerning taxation.
2.7 NO INJUNCTIONS. There is not in effect any preliminary or permanent
injunction or other order by any federal or state authority prohibiting the
consummation of the transactions contemplated hereby.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer, acknowledging that Seller and Fresh Foods are relying on the
following representations and warranties in entering into this Agreement,
represents and warrants to Seller and Fresh Foods as follows:
3.1 ORGANIZATION AND QUALIFICATION. Buyer is a limited liability
company duly organized, validly existing and in good standing under the laws of
North Carolina and has the requisite power and authority to carry on its
business as it is now being conducted.
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3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been duly
and validly executed and delivered by Buyer and constitutes a legal, valid and
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms. Buyer has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The members of Buyer
have, subject to the terms and conditions set forth herein, approved this
Agreement and the transactions contemplated hereby. No other action is required
on the part of Buyer or the members of Buyer to authorize Buyer to consummate
the transactions contemplated hereby.
3.3 OWNERSHIP. Buyer has authorized capital consisting of membership
interests of a single class and series, all of which are owned (of record and
beneficially) by Richard F. Howard, James C. Richardson, Jr., David R. Clark, L.
Dent Miller, Kenneth Moser and Michael Hodges free and clear of any mortgages,
security interests, claims, liens, encumbrances or restrictions. All such
membership interests have been duly authorized and validly issued.
3.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. The
execution, delivery and performance of this Agreement by Buyer does not require
the consent of any third party and neither conflicts with, results in a breach
of, or constitutes a default under any applicable law, judgment, order,
injunction, decree, rule, regulation or ruling of any court or governmental
instrumentality, or the articles of organization or operating agreement of the
Buyer, nor does it conflict with, constitute grounds for termination of, result
in a breach of, or constitute a default under, any agreement, instrument,
license or permit to which the Buyer is now subject.
3.5 COMMISSIONS. There is no broker, finder or other person who has any
valid claim against Buyer for a commission, finder's fee or brokerage fee in
connection with this Agreement or the transactions contemplated hereby. Buyer
hereby agrees to indemnify and hold Seller harmless from any claim for any such
commission or fee.
SECTION 4
CLOSING AND CONDITIONS TO CLOSING
4.1 CLOSING DATE. The closing (the "CLOSING") of the purchase and sale
of the Purchased Assets provided for in this Agreement, effective for all
purposes as of 11:59 p.m. on October 3, 1999, shall take place at the offices of
McGuire, Woods, Battle & Boothe LLP, at 10:00 a.m. on September 30, 1999, or at
such later date as shall be agreed upon by the parties. The time and date of
closing are herein called the "CLOSING DATE."
4.2 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the
Buyer to consummate the transactions provided for herein on the Closing Date are
subject to the fulfillment on or before the Closing Date of each of the
following conditions, except to the extent that the Buyer may, in its absolute
discretion, waive one or more thereof in writing in whole or in part:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Seller and Fresh Foods contained
herein shall be true and
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correct in all material respects on and as of the Closing Date with
the same force and effect as if made on and as of such date and the
covenants of the Seller and Fresh Foods set forth herein shall have
been complied with through the Closing Date in all material respects,
and a certificate to such effect, executed by the Chief Financial
Officer of Fresh Foods (in his capacity as such), shall be executed and
delivered to the Buyer on and as of the Closing Date.
(b) DOCUMENTS OF THE SELLER. The Seller shall have caused to
be delivered to the Buyer the following:
(i) GOOD STANDING CERTIFICATES. Certificate of
Seller's Existence from the North Carolina Secretary of State.
(ii) ORGANIZATION DOCUMENTS. The Articles of
Organization, as amended to date, of the Seller, certified by
the North Carolina Secretary of State, and the Operating
Agreement of the Seller, together with a certificate of the
sole member-manager of the Seller, dated as of the Closing
Date, certifying the accuracy and completeness of such
documents as of such date.
(iii) RESOLUTIONS. Certified copy of resolutions of
Fresh Foods as the sole member-manager of Seller authorizing
the transactions contemplated hereby and the execution,
delivery and performance of this Agreement and the Related
Agreements.
(c) RELATED AGREEMENTS. The Related Agreements shall have been
executed and delivered by the parties thereto (other than the Buyer).
(d) NO ADVERSE PROCEEDING. No action, suit or proceeding
before any court or any governmental or regulatory authority shall have
been commenced, no investigation by any governmental or regulatory
authority shall have been commenced, and no action, suit or proceeding
by any governmental or regulatory authority shall have been threatened,
against any of the parties to this Agreement wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation.
(e) OTHER ASSURANCES. The Seller and Fresh Foods shall have
delivered to the Buyer such other and further certificates, assurances
and documents as the Buyer may reasonably request to evidence the
accuracy of the representations and warranties made pursuant to Section
2, the performance of covenants and agreements to be performed pursuant
to Section 5 at or prior to the Closing, and the fulfillment of the
conditions to the Buyer's obligations.
4.3 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the
Seller and of Fresh Foods to consummate the transactions provided for herein on
the Closing Date are subject to the
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fulfillment on or before the Closing Date of each of the following conditions,
except to the extent that the Seller and Fresh Foods may, each in its absolute
discretion, waive in writing one or more thereof in whole or in part:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Buyer contained herein shall be true and correct in
all material respects on and as of the Closing Date with the same force
and effect as if made on and as of such date and the covenants of the
Buyer set forth herein shall have been complied with through the
Closing Date in all material respects, and a certificate to such
effect, executed by David R. Clark (in his capacity as a member of
Buyer), shall be executed and delivered to the Seller on and as of the
Closing Date.
(b) DOCUMENTS OF THE BUYER. The Buyer shall have caused to be
delivered to the Seller the following:
(i) GOOD STANDING CERTIFICATE. Certificate of Buyer's
Existence from the North Carolina Secretary of State.
(ii) ORGANIZATION DOCUMENTS. The Articles of
Organization, as amended to date, of the Buyer, certified by
the North Carolina Secretary of State, and the Operating
Agreement of the Buyer, together with a certificate of a duly
authorized officer of the Buyer, dated as of the Closing Date,
certifying the accuracy and completeness of such documents as
of such date.
(iii) RESOLUTIONS. Certified copy of resolutions of
the members of the Buyer authorizing the transactions
contemplated hereby and the execution, delivery and
performance of this Agreement and the Related Agreements.
(c) RELATED AGREEMENTS. The Related Agreements shall have been
executed and delivered by the parties thereto (other than the Seller).
(d) NO ADVERSE PROCEEDINGS. No action, suit or proceeding
before any court or any governmental or regulatory authority shall have
been commenced, no investigation by any governmental or regulatory
authority shall have been commenced, and no action, suit or proceeding
by any governmental or regulatory authority shall have been threatened,
against any of the parties to this Agreement wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation.
(e) FAIRNESS OPINION. Fresh Foods shall have received an
opinion letter of Bowles Hollowell Conner, a division of First Union
Capital Markets
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Corp., dated a recent date, in support of the transactions contemplated
by this Agreement.
(f) LENDER CONSENTS. Fresh Foods and Seller shall have
received any and all necessary waivers and consents granted by their
institutional lenders or shall have received amendments to their credit
documents having the same effect.
(g) OTHER ASSURANCES. The Buyer shall have delivered to the
Seller such other and further certificates, assurances and documents as
the Seller or its counsel may reasonably request to evidence the
accuracy of the representations and warranties made pursuant to Section
3, the performance of the covenants and agreements to be performed
pursuant to Section 5 at or prior to the Closing and the fulfillment of
the conditions to the Seller's obligations pursuant to this Section
4.3.
SECTION 5
CERTAIN COVENANTS AND AGREEMENTS
5.1 PRE-CLOSING ACCESS TO BUSINESS. Prior to the Closing, the Seller
shall afford to authorized representatives of the Buyer free and full access
upon reasonable notice and during normal business hours to the premises, assets,
properties, books, personnel and records of the Seller so that the Buyer may
have full opportunity to make such investigations as it shall desire to make of
the Seller; PROVIDED, HOWEVER, that, until the Closing, the Buyer shall not
disclose or use and shall cause its agents, attorneys and representatives not to
disclose or use any confidential data or information secured from the Seller,
and, if the Closing does not occur as herein provided, the Buyer will promptly
return to the Seller, at the request of the Seller, any and all copies,
summaries or abstracts thereof and shall not use any such information in any
manner.
5.2 INTERIM CONDUCT OF BUSINESS. Pending the Closing, the Seller shall
conduct its business only in the usual and ordinary course.
5.3 CONTINUATION OF PROPERTY INSURANCE COVERAGE. The Seller agrees that
prior to the effective date of the Closing it will retain its existing insurance
coverage in such amounts and on substantially the same terms as in effect on the
date hereof.
5.4 PRESS RELEASES AND ANNOUNCEMENTS. Prior to one week after the
Closing, no press release or other public announcement pertaining in any way to
the transactions contemplated by this Agreement will be made by any party unless
it has first been approved by the other parties or, in the reasonable opinion of
counsel to the disclosing party, is required by applicable law, rule, regulation
or order and the disclosing party gives prior written notice of its intention to
make a disclosure and provides to the nondisclosing party an opportunity to
participate in preparing any such disclosure.
5.5 INDEMNIFICATION.
(a) From and after the Closing Date, Fresh Foods shall indemnify,
defend and hold harmless Buyer from and against any loss, damage, liability,
cost or expense (each, a "LOSS")
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incurred pursuant to any claim, action, suit, proceeding or investigation (each,
a "CLAIM") asserted with respect to an Excluded Liability.
(b) From and after the Closing Date, Buyer shall indemnify, defend and
hold harmless each of Seller and Fresh Foods from and against any Loss incurred
in connection with any Claim asserted as a result of or with respect to (i) the
breach by Buyer of any representation and warranty, covenant or other agreement
contained in this Agreement or (ii) an Assumed Liability.
(c) This Section is intended to be for the benefit of, and shall be
enforceable by, each indemnified party referred to in subsections (a) and (b)
and such party's heirs, personal representatives, successors and assigns.
SECTION 6
EXPENSES AND TAXES
6.1 EXPENSES. Except as otherwise expressly provided herein, the
parties hereto shall pay their respective expenses incurred under or in
connection with this Agreement.
6.2 TRANSFER TAXES. Taxes associated with transferring the Purchased
Assets to Buyer pursuant to this Agreement, including without limitation
tangible or intangible personal property taxes and any bulk sales or use taxes,
shall be paid by Seller.
SECTION 7
FURTHER ASSURANCES
7.1 FURTHER ACTS AND ASSURANCES. Seller shall, upon the request of
Buyer and at no cost or charge to Buyer, execute and deliver to Buyer any and
all such other and further instruments, bills of sale, assignments, conveyances
or assurances as may be necessary or appropriate to vest and confirm in Buyer
and protect its right, title, and interest in and to all of the Purchased
Assets, and to otherwise consummate and carry out the transactions contemplated
hereby.
SECTION 8
MISCELLANEOUS PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and other agreements of the parties made in and pursuant
to this Agreement shall not survive the Closing, except for covenants and
agreements that, by their terms, are to be performed after the Closing Date.
Covenants and agreements to be performed after the Closing Date shall survive
the Closing for one year.
8.2 BENEFIT AND ASSIGNMENT. Neither party may assign any of its rights
under this Agreement without the prior written consent of the other party, which
will not be unreasonably
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withheld. Subject to the preceding sentence, this Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement shall not be deemed to confer any rights
or remedies upon any person other than the parties hereto and their respective
successors and permitted assigns.
8.3 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement contains
the final, complete and exclusive statement of the agreement among the parties
with respect to the transactions contemplated herein and supersedes any and all
prior agreements, arrangements and understandings relating to matters provided
for herein.
8.4 AMENDMENTS AND WAIVER. No amendment, waiver of compliance with any
provision or condition hereof, or consent pursuant to this Agreement, will be
enforceable unless evidenced by an instrument in writing signed by the party
sought to be charged with its enforcement.
8.5 CAPTIONS. The captions and headings set forth in this Agreement are
for convenience only and shall not be construed as a part of this Agreement.
8.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.7 EXHIBITS AND SCHEDULES. All exhibits and schedules referred to in
this Agreement and attached hereto shall be deemed and construed as part of this
Agreement. For all purposes, all such exhibits and schedules are hereby
specifically incorporated herein by this reference to them.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws of such State.
8.9 NOTICES. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly delivered (a) when personally delivered, (b) one
business day after being sent by facsimile at the number listed below for such
party, (c) one business day after the day on which the same has been delivered
prepaid to a national courier service guaranteeing next day service or (d) three
days after deposit in the United States mail, registered or certified, postage
prepared and return receipt requested, in each case addressed to the party to
whom such notice is to be given at the address listed below for such party, or
to such other address as any party may request by notifying in writing all of
the other parties to this Agreement:
To Buyer: Fairgrove Restaurants, LLC
361 Second Street N.W.
Hickory, NC 28601
Fax: (704) 304-2330
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Copy to: T. Stewart Gibson, Esq.
Battle, Winslow, Scott & Wiley, P.A.
2343 Professional Drive
Rocky Mount, NC 27804-0100
Fax: (252) 937-8100
To Seller: Fresh Foods Sales, LLC
361 Second Street N.W.
Hickory, NC 28601
Fax: (704) 377-8001
Copy to: Sandra Copenhaver Simos, Esq.
McGuire, Woods, Battle & Boothe LLP
Bank of America Corporate Center
100 North Tryon Street, Suite 2900
Charlotte, NC 28202-4011
Fax: (704) 373-8823
8.10 SEVERABILITY. In the event that any one or more of the provisions
of this Agreement shall be held or found to be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
8.11 TIME OF ESSENCE. Time is of the essence of this Agreement.
8.12 PRONOUNS AND NUMBER. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender as the context requires. Words
importing the singular number hereunder shall include the plural number and vice
versa.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
FAIRGROVE RESTAURANTS, LLC
By: /s/ DAVID R. CLARK
----------------------------------
David R. Clark
Member
By: /s/ JAMES C. RICHARDSON, JR.
----------------------------------
James C. Richardson, Jr.
Member
By: /s/ L. DENT MILLER
----------------------------------
L. Dent Miller
Member
By: /s/ MICHAEL DOUGLAS HODGES
----------------------------------
Michael Douglas Hodges
Member
By: /s/ KENNETH L. MOSER
----------------------------------
Kenneth L. Moser
Member
By: /s/ RICHARD F. HOWARD
----------------------------------
Richard F. Howard
Member
FRESH FOODS, INC.
By: /s/ JAMES E. HARRIS
----------------------------------
James E. Harris
Chief Financial Officer
FRESH FOODS SALES, LLC
By: Fresh Foods, Inc.,
its sole member and manager
By: /s/ JAMES E. HARRIS
----------------------------------
James E. Harris
Chief Financial Officer
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(SCHEDULES AND EXHIBITS OMITTED)
<PAGE> 1
EXHIBIT 10.45
AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT, dated as of December 17, 1999, between HERTH
MANAGEMENT, INC., a North Carolina corporation ("HERTH"), and FRESH FOODS, INC.,
a North Carolina corporation formerly named "WSMP, INC." (the "Company"),
W I T N E S S E T H:
WHEREAS, HERTH provides management services to the Company pursuant to
a Management Services Agreement dated March 31, 1995 (as amended by an Extension
Agreement dated August 29, 1997, the "Management Services Agreement"); and
WHEREAS, the Management Services Agreement is expected to remain in
effect until it expires by its terms on March 31, 2002; and
WHEREAS, the parties desire to amend the Management Services Agreement
to modify the services to be provided by HERTH subsequent to recent business
unit dispositions by the Company; and
WHEREAS, to that end, the terms of this Amended and Restated Management
Services Agreement have been considered and approved by the Board of Directors
of HERTH and by the Sensitive Transactions Committee and the Board of Directors
of the Company;
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants contained herein, the parties hereto are agreed as follows:
1. MANAGEMENT SERVICES. The Company has retained HERTH to provide
certain management services to the Company. The nature and extent of the
services to be provided by HERTH may vary from time to time as agreed upon by
the parties, but shall address the following areas of corporate management:
(a) Strategic planning and the direction of strategic
initiatives, including the identification and pursuit
of mergers, acquisitions, other investment
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opportunities (both within and without the Company's
industry) and divestitures;
(b) Management of the Company's relationships with its
investment banks, securities broker-dealers,
significant shareholders and noteholders;
(c) Management of the Company's relationships with its
commercial banks;
(d) Management of the Company's relationships with its
lawyers and independent accountants;
(e) Management of the Company's relationships with its
directors, including routine provision of information
to the directors and facilitation of meetings of the
Board of Directors (and Committees thereof); and
(f) General oversight of the Company's performance.
These services are currently being provided by James C. Richardson, Jr. and
David R. Clark, but the parties may add or remove, or substitute, personnel from
time to time as they may agree. Notwithstanding any other provision of this
Agreement, all corporate powers of the Company shall be exercised by or under
the authority of, and the business and affairs of the Company shall be managed
under the direction of, its Board of Directors, as required by the North
Carolina Business Corporation Act.
2. TERM. This Agreement shall begin as of April 1, 1996, and shall
terminate on March 31, 2002.
3. COMPENSATION. As compensation for the services rendered hereunder,
the Company shall pay HERTH the sum of One Million Five Hundred Thousand Dollars
($1,500,000.00) per annum, payable in four (4) equal installments of Three
Hundred Seventy-Five Thousand Dollars ($375,000.00), payable at the beginning of
each of the Company's accounting quarters.
4. STATUS OF HERTH OPERATIONS. HERTH services shall be rendered through
HERTH employees or independent contractors, who shall remain the employees or
2
<PAGE> 3
agents of HERTH (and shall not be regarded as employees of the Company solely by
reason of the provision of services by them pursuant to this Agreement).
5. EXTENT AND PLACE OF SERVICES. HERTH shall assume and perform such
further reasonable responsibilities and duties as may be requested from time to
time by the Company. No HERTH employee or agent shall receive any additional
compensation for service as a member of the Company's Board of Directors.
6. TRADE SECRETS. During the terms of this Agreement, HERTH shall have
access to all facilities and records of the Company and, through its employees
and agents, may acquire information which is privileged to or a trade secret of
the Company. HERTH agrees not to disclose such information in a manner which
would be harmful to or diminish the competitive stance of the Company and shall
bind its agents and employees to the same effect.
7. FACILITIES. HERTH, its agents and employees shall be furnished by
the Company with such offices, equipment and services as may be necessary or
useful for the performance of the services enumerated hereunder. Those persons
appointed by HERTH to perform services under this Agreement shall be granted
sufficient authority as may be reasonably necessary to carry out the duties of
HERTH hereunder.
8. TERMINATION. This Agreement may be terminated by either party upon a
substantial breach of the terms hereof by the other party; provided, however,
that, prior to such a termination of this Agreement, the party in breach shall
be given thirty (30) days written notice of the breach, with the opportunity to
cure the breach; and provided, further, that, should the breach not be
reasonably curable within thirty (30) days, that the party in breach shall be
given an additional reasonable period of time within which to cure the breach.
Any money damages
3
<PAGE> 4
recoverable by the Company upon any such termination shall be limited to the sum
paid to or earned by HERTH hereunder during the period of any such breach.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if delivered by hand or by
registered mail, in either case as follows:
If to the Company, then to:
Fresh Foods, Inc.
361 2nd Street, NW
Hickory, North Carolina 28601
If to HERTH, then to:
HERTH Management, Inc.
361 2nd Street, NW
Hickory, North Carolina 28601
Either party may, upon written notice to the other party, specify a different
address for the giving of notice during or after the term hereof.
10. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach.
11. ENTIRE AGREEMENT. This Agreement amends and restates the Management
Services Agreement and evidences the entire agreement of the parties. It may not
be waived, changed, modified, extended or discharged orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
12. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, their successors and assigns.
4
<PAGE> 5
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
14. SEVERABILITY. If any provision herein shall be declared invalid or
unenforceable, then the remainder of this Agreement shall continue in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above indicated.
HERTH MANAGEMENT, INC.
By: /s/ James C. Richardson, Jr.
----------------------------------------
James C. Richardson, Jr.
President
FRESH FOODS, INC.
By: /s/ Pamela M. Witters
----------------------------------------
Pamela M. Witters
Chief Financial Officer
By: /s/ William R. McDonald III
----------------------------------------
William R. McDonald III
Chairman, Sensitive Transactions Committee
5
<PAGE> 1
EXHIBIT 10.46
Agreement dated December 21, 1999 between Fresh Foods, Inc., a North
Carolina corporation (the "Company"), and Gungor Solmaz ("Solmaz").
For good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged by each party, and in consideration of the mutual
covenants contained herein, the parties hereto agree as follows:
1. Reference is made to the form of Agreement between the parties
identified as "Solmaz Agreement 3" in its footer (the "Solmaz Agreement"). The
parties agree to execute the following process as soon as commercially
reasonable and in no event later than 6:00 P.M., Charlotte time, on January 31,
2000 (the "Outside Closing Time"):
o Solmaz will tender for delivery to the Company certificates
representing all (68,024) shares of common stock issued by the
Company and beneficially owned by Solmaz and the Solmaz Entities
at the date hereof.
o Solmaz will tender or cause to be tendered a stock power or
powers, in customary form, to be delivered to the Company
together with such certificates, thereby transferring beneficial
ownership and (subject to recording by the transfer agent) record
ownership of all such shares to the Company.
o Solmaz will execute an undated counterpart of the Solmaz
Agreement and tender it for delivery to the Company.
o The Company will execute an undated counterpart of the Solmaz
Agreement and tender it for delivery to Solmaz.
o The Company will cause to be tendered for delivery to Solmaz, by
wire transfer to an account identified by Solmaz, by bank check
or by other check drawn on a trust account of McGuire, Woods,
Battle & Boothe LLP (as the Company may elect), $1,020,360.00.
2. All tenders shall be made concurrently with one another to the
extent practicable. All deliveries shall be deemed to have been made
concurrently with one another. The Solmaz Agreement, when executed and delivered
by the parties, shall be dated the date of the payment referred to above.
Failure by one party to make all tenders by the Outside Closing Time shall
constitute a material breach of this Agreement and, among other remedies (as
provided by law and equity), shall excuse the other party from its obligations
hereunder.
3. Each party covenants and agrees with the other not to disclose the
existence or terms of this Agreement to any person at any time for any purpose,
except that (a) either party may make such disclosures confidentially to the
party's lawyers and accountants in connection with the rendition of their
professional services and (b) the Company may make such disclosures as it deems
to be required by applicable securities laws.
<PAGE> 2
4. This Agreement evidences the entire agreement among the parties and
their privies relative to the subject matter covered hereby, and it supersedes
all prior or contemporaneous oral or written agreements among any or all of
them. This Agreement cannot be amended or otherwise modified, nor can
noncompliance with its terms be waived, except pursuant to a subsequent writing
signed by the party or privy sought to be charged with the amendment,
modification or waiver. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina (without regard to the
principles of conflict of laws thereof). This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns. This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, taken together, shall constitute one
and the same Agreement.
FRESH FOODS, INC.
By: /s/ DAVID R. CLARK
-------------------------
David R. Clark
Vice Chairman
/s/ GUNGOR SOLMAZ
-----------------------------
Gungor Solmaz
<PAGE> 3
Agreement dated ______________, ____ between Fresh Foods, Inc., a North
Carolina corporation (the "Company"), and Gungor Solmaz ("Solmaz").
For good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged by each party, and in consideration of the mutual
covenants contained herein, the parties hereto agree as follows:
1. For his affiliates, related parties, heirs, assigns, agents,
servants and representatives (the "Solmaz Entities"), as well as himself, Solmaz
does hereby release and forever discharge and acquit the affiliates, related
parties, employees, officers, directors, shareholders, attorneys, accountants,
agents, servants, representatives, successors and assigns of the Company (the
"Company Entities"), and the Company itself, from any and all claims, demands,
actions, rights, causes of action, obligations and liabilities, known and
unknown (collectively, "Claims"), that he or any of the Solmaz Entities has or
may have against the Company or any of the Company Entities from the beginning
of time until the date of this Agreement. Without limiting the generality of the
foregoing, Solmaz also releases and forever discharges and acquits the Company
and the Company Entities, on his own behalf and on behalf of the Solmaz
Entities, from any and all Claims that have arisen, may have arisen or might
arise at any time in the future from the status of any of them as a Company
shareholder. Solmaz represents and warrants to the Company that neither he nor
any of the Solmaz Entities has assigned, transferred or conveyed in any manner
all, or any part, of his or its Claims against the Company or any of the Company
Entities. Solmaz further represents and warrants to the Company that this
Agreement is the legal, valid and binding obligation of himself and the Solmaz
Entities, enforceable against each of them in accordance with its terms.
2. The Company does hereby release and forever discharge and acquit
Solmaz and the Solmaz Entities from any and all Claims that the Company has or
may have against Solmaz or any of the Solmaz Entities from the beginning of time
until the date of this Agreement. The Company represents and warrants to Solmaz
that none of the Company Entities has any Claim against Solmaz or any of the
Solmaz Entities and that neither the Company nor any of the Company Entities has
assigned, transferred or conveyed in any manner all, or any part, of any Claim
against Solmaz or any of the Solmaz Entities. The Company further represents and
warrants to Solmaz that this Agreement is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3. Solmaz represents and warrants to the Company that neither he nor
any of the Solmaz Entities beneficially owns any shares of common stock or other
securities issued by the Company. Solmaz covenants and agrees with the Company
that neither he nor any of the Solmaz Entities will at any time hereafter
purchase or otherwise acquire (so as to beneficially own) any security issued by
the Company.
4. As used in this Agreement: (a) a person's "affiliate" is a second
person controlled, directly or indirectly, by the first person; (b) a person's
"related party" is a second person related (by blood or marriage) to the first
person, a trust as to which the
<PAGE> 4
first person was or is a settlor, trustee or beneficiary or a corporation,
partnership or other company as to which the first person was or is a
shareholder, partner, member, officer, director or manager; and (c) the term
"beneficially owns" derives its meaning from Rule 13d-3 under the Securities
Exchange Act of 1934, as amended.
5. Each party covenants and agrees with the other not to disclose the
existence or terms of this Agreement to any person at any time for any purpose,
except that (a) either party may make such disclosures confidentially to the
party's lawyers and accountants in connection with the rendition of their
professional services and (b) the Company may make such disclosures as it deems
to be required by applicable securities laws. Each party represents and
warrants to the other that the one party knows of no unlawful conduct by the
other. Each party covenants and agrees with the other not to disparage the
reputation of the other.
6. This Agreement evidences the entire agreement among the parties and
their privies relative to the subject matter covered hereby, and it supersedes
all prior or contemporaneous oral or written agreements among any or all of
them. This Agreement cannot be amended or otherwise modified, nor can
noncompliance with its terms be waived, except pursuant to a subsequent writing
signed by the party or privy sought to be charged with the amendment,
modification or waiver. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina (without regard to the
principles of conflict of laws thereof). This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns. This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, taken together, shall constitute one
and the same Agreement.
FRESH FOODS, INC.
By:
----------------------------
David R. Clark
Vice Chairman
--------------------------------
Gungor Solmaz,
on behalf of himself
and the Solmaz Entities
<PAGE> 1
EXHIBIT 10.47
FIFTH AMENDMENT TO CREDIT AGREEMENT
AND CONSENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT AND CONSENT, dated as of
December 30, 1999 (the "AMENDMENT") relating to the Credit Agreement referenced
below, is by and among FRESH FOODS, INC., a North Carolina corporation (the
"COMPANY"), the subsidiaries of the Company listed on the signature pages hereto
(collectively referred to as the "SUBSIDIARY BORROWERS" or individually referred
to as a "SUBSIDIARY BORROWER") (hereinafter, the Company and the Subsidiary
Borrowers are collectively referred to as the "BORROWERS" or individually
referred to as a "BORROWER"), each of those financial institutions identified as
Lenders on the signature pages hereto (together with each of their successors
and assigns, referred to individually as a "LENDER" and, collectively, as the
"LENDERS"), and FIRST UNION COMMERCIAL CORPORATION ("FUCC"), acting in the
manner and to the extent described in Article XIII of the Credit Agreement (in
such capacity, the "AGENT"). Terms used herein but not otherwise defined herein
shall have the meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $75,000,000 credit facility was extended to the Merged
Borrowers, the Company and the Subsidiary Borrowers (as such terms are defined
below) pursuant to the terms of that certain Credit Agreement dated as of June
9, 1998 (as amended, modified or otherwise supplemented, the "CREDIT AGREEMENT")
among the Merged Borrowers, the Company, the Subsidiary Borrowers and certain
former subsidiaries of the Company, the Lenders and the Agent;
WHEREAS, the Borrowers have requested that the Credit Agreement be
amended as described herein; and
WHEREAS, the Lenders are willing to furnish such consent and
acknowledgment and make such amendments;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
(A) AMENDMENTS AND CONSENT.
1. Schedules 1.1F, 6.1, 6.7, 6.8, 6.9, 6.14, 6.17, 6.19, 6.28,
6.31, and 9.10, to the Credit Agreement, Schedules 3(a), 3(b) and 3(c),
to the Security Agreement and Schedules 1(b) and 2(a) to the Pledge
Agreement are hereby amended and replaced in their entirety with the
Schedules attached hereto as Exhibit A.
2. The text of Section 9.12 of the Credit Agreement is hereby
deleted in its entirety and replaces with the word "[Reserved]".
<PAGE> 2
3. Notwithstanding the provisions of Section 7.3 and Section
9.4 of the Credit Agreement to the contrary, the Lenders hereby consent
to the merger of Pierre Foods, LLC and Pierre Leasing, LLC
(collectively, the "MERGED BORROWERS") with and into the Company, with
the Company as the surviving corporation (the "December 1999
Reorganization"), subject to the satisfaction of all conditions
precedent contained in Section C hereof.
4. In connection with the December 1999 Reorganization, the
Merged Borrowers have ceased to exist as separate legal entities as a
result of merger into the Company. Accordingly, on the effective date
of this Amendment, following the December 1999 Reorganization, the
Borrowers under the Credit Agreement shall be the Company and the
remaining Subsidiary Borrower (referred to herein as the
"POST-REORGANIZATION BORROWERS" or the "BORROWERS"). The Lenders hereby
acknowledge and agree that the Merged Borrowers shall, as of the date
hereof, cease to be Borrowers under the Credit Agreement.
(B) REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants that (i) the
representations and warranties contained in Article VI of the Credit Agreement
are correct on and as of the date hereof as though made on and as of such date
(except for those representations and warranties which by their terms relate
solely to an earlier date) and after giving effect to the amendments contained
herein and the amended and restated Schedules to the Credit Documents attached
hereto as EXHIBIT A, (ii) no Default or Event of Default exists under the Credit
Agreement on and as of the date hereof and after giving effect to the amendments
contained herein, (iii) it has the corporate power and authority to execute and
deliver this Amendment and to perform its obligations hereunder and has taken
all necessary corporate action to authorize the execution, delivery and
performance by it of this Amendment and (iv) it has duly executed and delivered
this Amendment, and this Amendment constitutes its legal, valid and binding
obligation enforceable in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws affecting
the rights of creditors generally or by general principles of equity.
(C) CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective
upon satisfaction of the following conditions precedent:
1. CORPORATE DOCUMENTS. Receipt by the Agent of copies of
resolutions of the Board of Directors of each relevant Borrower
approving and implementing the December 1999 Reorganization and the
transactions contemplated thereby and of each Borrower approving and
authorizing execution and delivery of this Amendment, certified by a
secretary or assistant secretary of such Borrower to be true and
correct and in force and effect as of the date hereof.
2. PERSONAL PROPERTY COLLATERAL. Receipt by the Agent of the
following:
2
<PAGE> 3
(a) New and/or amended UCC-1 financing statements for
the Borrowers, as appropriate and necessary to perfect or
continue the perfection of the Agent's security interest in
the Collateral.
(b) Such patent/trademark/copyright filings as
requested by the Agent in order to perfect the Agent's
security interest in the Collateral following the December
1999 Reorganization, including, without limitation, filings to
effect name changes and transfers of intellectual property
with the U.S. Patent and Trademark Office and new notices of
grants of security interests in favor of the Agent to reflect
such changes and transfers.
3. REAL PROPERTY COLLATERAL. Receipt by the Agent of the
following:
(a) In regard to all Eligible Real Properties owned
by the Borrowers which have been or are to be affected by the
December 1999 Reorganization, the Company shall comply with,
and furnish to the Agent the items listed in, Section 7 of
Schedule 1.1(b) to the Credit Agreement (other than new
Mortgage Instruments), including but not limited to
(i) copies of filed merger documents for the
Mortgaged Properties set forth on Exhibit B hereto;
(ii) copies of executed deeds for the
Mortgaged Properties set forth on Exhibit B hereto,
as necessary;
(iii) delivery of title commitments without
survey exceptions for all Mortgaged Properties, as
necessary;
(iv) delivery of all title exceptions
relating thereto all Mortgaged Properties, as
necessary; and
(v) insurance certificates relating to all
Mortgaged Properties set forth on Exhibit B hereto,
as necessary.
4. OPINIONS OF COUNSEL. Receipt by the Agent of an opinion, or
opinions (which shall cover, among other things, authority, legality,
validity, binding effect, enforceability of this Amendment and
attachment and perfection of liens), satisfactory to the Agent,
addressed to the Agent and the Lenders and dated the date hereof, from
legal counsel to the Borrowers.
(D) Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits and Schedules thereto) shall remain in full force
and effect.
3
<PAGE> 4
(E) The Borrowers agree to pay all reasonable costs and expenses of the
Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Moore & Van Allen, PLLC.
(F) This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
(G) This Amendment and the Credit Agreement as amended hereby shall be
governed by and construed and interpreted in accordance with the laws of the
State of North Carolina.
[Remainder of page intentionally left blank]
4
<PAGE> 5
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
COMPANY: FRESH FOODS, INC.
By: /s/ Pamela M. Witters
--------------------------------
Name: Pamela M. Witters
Title: Chief Financial Officer, Secretary
and Treasurer
SUBSIDIARY BORROWERS: FRESH FOODS PROPERTIES, LLC
By: FRESH FOODS, INC.,
its Sole Member
PIERRE FOODS, LLC
By: FRESH FOODS, INC.,
its Sole Member
PIERRE LEASING, LLC
By: FRESH FOODS, INC.,
its Sole Member
By: /s/ Pamela M. Witters
--------------------------------
Name: Pamela M. Witters
Title: Chief Financial Officer, Secretary
and Treasurer
<PAGE> 6
AGENT AND LENDERS: FIRST UNION COMMERCIAL CORPORATION,
as Agent and a Lender
By: /s/ Eric Butler
--------------------------------
Name: Eric Butler
------------------------------
Title: SVP
-----------------------------
NATIONSBANK, N.A.,
as a Lender
By: /s/ Brian R. O'Fallon
--------------------------------
Name: Brian R. O'Fallon
------------------------------
Title: Senior Vice President
-----------------------------
NATIONAL CITY COMMERCIAL
FINANCE, INC.,
as a Lender
By: /s/ Carrie C. Tate
--------------------------------
Name: Carrie C. Tate
------------------------------
Title: Vice President
-----------------------------
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as a Lender
By: /s/ Elizabeth J. Limpert
--------------------------------
Name: Elizabeth J. Limpert
------------------------------
Title: First VP
-----------------------------
<PAGE> 7
(SCHEDULES AND EXHIBITS OMITTED)
<PAGE> 1
EXHIBIT 10.48
CONSULTING AND NONCOMPETE AGREEMENT
THIS CONSULTING AND NONCOMPETE AGREEMENT ("Agreement"), dated as of
January 6, 2000 (the "Effective Date"), between Fresh Foods, Inc., a North
Carolina corporation ("Fresh Foods"), and L. Dent Miller ("Miller")
W I T N E S S E T H:
WHEREAS, food processing is the core business of Fresh Foods, and
Miller assisted in the founding of that business; and
WHEREAS, Miller has been a director of Fresh Foods while Fresh Foods
executed its acquisition of Pierre Foods and, thereafter, integrated the
business of Pierre Foods into the company; and
WHEREAS, Miller desires to retire from the Board of Directors of Fresh
Foods while Fresh Foods desires to engage the services of Miller as a consultant
relative to its food processing business;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. CONSULTING SERVICES. Miller hereby resigns from the Board of
Directors of Fresh Foods and from all Committees of the Board of Directors of
which he is a member, and Fresh Foods hereby accepts his resignation. Fresh
Foods agrees to engage Miller as a consultant as of the Effective Date, and
Miller hereby accepts that engagement, in each case upon the terms and
conditions set forth in this Agreement. Throughout the term of this Agreement,
Miller shall report to the Chairman of the Board of Directors of Fresh Foods
(or, if none exists, then the most senior executive officer of Fresh Foods) and
shall perform such Consulting Services (as defined in Section 2) as the Chairman
or such officer, as the case may be (the "Superior Officer"), may reasonably
request.
2. DUTIES. Miller shall, to the extent reasonably requested by the
Superior Officer, at reasonable times and places (a) consult with and advise
Fresh Foods on management of Fresh Foods' food processing business and (b)
market and promote Fresh Foods' food processing business in the southeastern
United States (collectively, "Consulting Services"). Miller need not devote more
than twenty hours per calendar week or 500 hours per calendar year to Consulting
Services. Miller is not entitled to payment of any fee or other compensation for
his Consulting Services, but Fresh Foods shall reimburse him for the reasonable
out-of-pocket expenses that he incurs while performing Consulting Services upon
presentation of receipts or other documentation in reasonable detail.
3. INDEPENDENT CONTRACTOR. Fresh Foods and Miller hereby agree that
Miller is an independent contractor, solely responsible for the manner and form
in which he performs Consulting Services. Nothing contained herein shall be
construed as creating an
<PAGE> 2
employer/employee, master/servant, principal/agent, partnership, joint venture
or other similar kind of relationship. Miller agrees that he will not take any
action on behalf of Fresh Foods without specific instructions from, and the
prior approval of, the Superior Officer and that he does not have any right or
power in any manner to bind or commit Fresh Foods to any contract or other
obligation with any individual or entity except upon the specific prior written
approval of the Superior Officer.
4. TERM. This Agreement shall terminate five years from the Effective
Date.
5. COMPENSATION.
(a) CASH. Fresh Foods shall pay to Miller $200,000 annually
for the five-year term of this Agreement, less such amounts, if any, as
Fresh Foods may withhold pursuant to federal and state tax laws. Such
payments shall be made monthly in the amount of $16,667.67 per month,
less any applicable tax withholding, payable on the first day of each
month, in sixty installments, commencing the first day of the month
immediately following the Effective Date. As between the parties, Fresh
Foods will determine whether and to what extent it is obligated to
withhold portions of payments due to Miller pursuant to federal and
state tax laws. Fresh Foods will make these determinations reasonably,
in good faith and in consultation with Miller.
(b) MEDICAL BENEFIT. Miller may obtain if he so elects, but
subject to Fresh Foods' approval (not to be unreasonably withheld or
delayed), a medical insurance policy covering himself and his spouse.
For the five-year term of this Agreement, Fresh Foods will pay the
entire cost of medical insurance premiums due on such policy, provided
that the coverage of such policy is no more favorable, in the
aggregate, than the coverage presently enjoyed by Fresh Foods' most
senior executive officer under the medical insurance policy provided
and paid for him by Fresh Foods.
6. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During Miller's
prior positions with Fresh Foods and during the term of this Agreement, Miller
has and will become acquainted with confidential information of Fresh Foods and
its affiliates, including, but not limited to, customer names and
representatives, customer files, customer lists, customer specifications and
requirements, special customer matters, sales methods and techniques,
merchandising concepts and plans, business plans, sources of supply and vendors,
terms and conditions of business relationships with vendors, agents and brokers,
promotional materials and information, financial matters, mergers, acquisitions,
personnel matters and confidential processes, designs, formulas, ideas, plans,
devices and materials and other similar matters that are kept confidential (any
and all such information being referred to herein as "Confidential
Information"). The parties agree that the use of Confidential Information
against Fresh Foods would seriously damage its business. Accordingly, Miller
agrees that:
(a) He shall not, directly or indirectly, use any Confidential
Information for any purpose other than to benefit Fresh Foods except
with the prior, express and written consent of Fresh Foods or as
required by law;
2
<PAGE> 3
(b) He shall not, directly or indirectly, divulge, publish or
otherwise reveal or allow to be revealed any Confidential Information
to any individual or entity except with the prior, express and written
consent of Fresh Foods or as required by law;
(c) He shall refrain from any action or conduct that might
reasonably or foreseeably be expected to compromise the confidentiality
or proprietary nature of any Confidential Information; and
(d) He shall have no right to apply for, or to obtain any
patent, copyright or other form of intellectual property protection
regarding, any Confidential Information.
7. COVENANT NOT TO COMPETE.
(a) COVENANT. Miller hereby stipulates, covenants and agrees
that, during the Restrictive Period (as defined below), he shall not,
directly or indirectly, other than on behalf of Fresh Foods, without
Fresh Foods' prior, express and written consent:
(i) Engage in Competition (as defined below) with
Fresh Foods or any of its successors or assigns; or
(ii) Employ or solicit the employment of any
individual who is, or has been, at any time during the
Restrictive Period or during the twelve complete calendar
months immediately preceding the Effective Date, an employee
of Fresh Foods.
(b) CERTAIN DEFINITIONS. As used in this Section, the
following terms shall have the following meanings:
(i) "Business" shall mean food processing.
(ii) "Competition" shall mean:
(1) Engaging in the Business with a Contact
Person;
(2) Assisting any individual or entity,
whether in a financial, managerial, employment,
advisory or other material capacity, to engage in the
Business with a Contact Person; or
(3) Owning any interest in, or organizing an
entity that engages in, the Business with a Contact
Person; provided, however, that nothing herein shall
preclude Miller, directly or indirectly, from holding
not more than one percent of the outstanding shares
of common stock of any company whose shares of common
stock are listed on a national securities exchange or
authorized for quotation by NASDAQ.
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<PAGE> 4
(iii) "Contact Person" shall be any customer, vendor,
agent or broker at any time of Fresh Foods with which or with
whom Miller has contact on behalf of Fresh Foods at any time
during the term of this Agreement.
(iv) "Restrictive Period" shall mean the five-year
period beginning on the Effective Date.
8. REMEDIES. In the event of any breach of this Agreement, Fresh Foods
and its successors and assigns shall be entitled to any and all of the following
remedies in addition to such other remedies as they may have in equity or at
law:
(a) In that a breach of this Agreement would cause damages to
Fresh Foods that, although capable of estimation, would be inherently
difficult to measure, Miller shall pay to Fresh Foods by bank check or
other good funds, upon Fresh Foods' demand following any such breach,
the amount of $500,000. Such amount shall be paid as liquidated damages
for the breach and not as a penalty.
(b) The Restrictive Period shall be extended by any time
period during which Miller is in violation of this Agreement.
In that a breach or anticipatory breach by Miller of Section 6 or 7 of this
Agreement would cause irreparable damage to Fresh Foods, Fresh Foods also shall
be entitled to an injunction restraining Miller from attempting to violate,
violating or continuing a violation of Section 6 or 7. The existence of any
claim or cause of action on the part of Miller against Fresh Foods or its
successors or assigns, whether arising from this Agreement or otherwise, shall
in no way constitute a defense to the enforcement of Sections 6 and 7.
9. ACKNOWLEDGEMENT OF ADEQUATE CONSIDERATION. The parties stipulate and
agree that the payments and other benefits owed to Miller by Fresh Foods under
this Agreement and the performance of Fresh Foods' obligations hereunder
constitute sufficient consideration to support enforcement of the covenants of
this Agreement.
10. ACKNOWLEDGEMENT OF REASONABLENESS. Miller has carefully read and
considered the provisions of this Agreement in consultation with attorneys of
his choice and agrees that the restrictions set forth herein are fair and
reasonably required for Fresh Foods' protection. In the event that any provision
relating to the Restrictive Period or to Contact Persons (or both) shall be
declared by a court of competent jurisdiction to exceed the maximum time period
or geographical area such court deems reasonable and enforceable under
applicable law, the time period or area of restriction considered reasonable and
enforceable by the court shall thereafter be the applicable Restrictive Period
or to Contact Persons under this Agreement.
11. RELEASE BY MILLER AND MILLER ENTITIES. For his affiliates, related
parties, heirs, assigns, agents, servants and representatives (the "Miller
Entities"), as well as himself, Miller does hereby release and forever discharge
and acquit the affiliates, related parties, employees, officers, directors,
shareholders, attorneys, accountants, agents, servants, representatives,
successors and assigns of Fresh Foods (the "Fresh Foods Entities"), and Fresh
Foods itself, from
4
<PAGE> 5
any and all claims, demands, actions, rights, causes of action, obligations and
liabilities, known and unknown (collectively, "Claims"), that he or any of the
Miller Entities has or may have against Fresh Foods or any of the Fresh Foods
Entities from the beginning of time until the date of this Agreement. Without
limiting the generality of the foregoing, Miller also releases and forever
discharges and acquits Fresh Foods and the Fresh Foods Entities, on his own
behalf and on behalf of the Miller Entities, from any and all Claims that have
arisen, may have arisen or might arise at any time in the future from the status
of any of them as a Company shareholder. Miller represents and warrants to Fresh
Foods that neither he nor any of the Miller Entities has assigned, transferred
or conveyed in any manner all, or any part, of his or its Claims against Fresh
Foods or any of the Fresh Foods Entities. Miller further represents and warrants
to Fresh Foods that this Agreement is the legal, valid and binding obligation of
himself and the Miller Entities, enforceable against each of them in accordance
with its terms.
12. RELEASE BY FRESH FOODS. Fresh Foods does hereby release and forever
discharge and acquit Miller and the Miller Entities from any and all Claims that
Fresh Foods has or may have against Miller or any of the Miller Entities from
the beginning of time until the date of this Agreement. Fresh Foods represents
and warrants to Miller that none of the Fresh Foods Entities has any Claim
against Miller or any of the Miller Entities and that neither Fresh Foods nor
any of Fresh Foods Entities has assigned, transferred or conveyed in any manner
all, or any part, of any Claim against Miller or any of the Miller Entities.
Fresh Foods further represents and warrants to Miller that this Agreement is the
legal, valid and binding obligation of Fresh Foods, enforceable against Fresh
Foods in accordance with its terms.
13. FRESH FOODS SECURITIES. Miller represents and warrants to Fresh
Foods that, other than the shares of Fresh Foods common stock that he has
unconditionally contracted to sell to James C. Richardson, Jr., neither he nor
any of the Miller Entities beneficially owns any shares of common stock or other
securities issued by Fresh Foods. Miller covenants and agrees with Fresh Foods
that neither he nor any of the Miller Entities will at any time hereafter
purchase or otherwise acquire (so as to beneficially own) any security issued by
Fresh Foods.
14. CERTAIN DEFINITIONS. As used in this Agreement: (a) a person's
"affiliate" is a second person controlled, directly or indirectly, by the first
person; (b) a person's "related party" is a second person related (by blood or
marriage) to the first person, a trust as to which the first person was or is a
settlor, trustee or beneficiary or a corporation, partnership or other company
as to which the first person was or is a shareholder, partner, member, officer,
director or manager; and (c) the term "beneficially owns" derives its meaning
from Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
15. CONFIDENTIALITY; COVENANT NOT TO DISPARAGE. Each party covenants
and agrees with the other not to disclose the existence or terms of this
Agreement to any person at any time for any purpose, except that (a) either
party may make such disclosures confidentially to the party's lawyers and
accountants in connection with the rendition of their professional services and
(b) Fresh Foods may make such disclosures as it deems to be required by
applicable securities laws. Each party represents and warrants to the other that
the one party knows of no unlawful conduct by the other. Each party covenants
and agrees with the other not to disparage the reputation of the other.
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<PAGE> 6
16. CHANGE OF CONTROL. If a Change in Control of the Company shall
occur before the expiration of this Agreement, then Fresh Foods shall pay to
Miller, by bank check or other good funds on the Change in Control Date, the
entire unpaid portion of the $1,000,000 amount otherwise due to be paid to
Miller in annual installments over the five-year term of this Agreement pursuant
to Section 5(a) of this Agreement. As used herein, the terms "Change in Control
of the Company" and "Change in Control Date" shall have the meanings assigned to
them in that certain Amended and Restated Change in Control Agreement between
David R. Clark and Fresh Foods as in effect at the date hereof.
17. ATTORNEYS' FEES. Should it become necessary for Fresh Foods to
institute legal proceedings as a result of a breach of any terms or covenants
contained in this Agreement, Fresh Foods shall, if it is the prevailing party in
such litigation, be entitled to have and recover from the non-prevailing party
reasonable attorneys' fees plus court costs in addition to any and all relief
otherwise available to it, either at law or in equity. Should it become
necessary for Miller to institute legal proceedings as a result of a breach of
any terms or covenants contained in this Agreement, Miller shall, if he is the
prevailing party in such litigation, be entitled to have and recover from the
non-prevailing party reasonable attorneys' fees plus court costs in addition to
any and all relief otherwise available to him, either at law or in equity.
18. SEVERABILITY. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
19. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
20. ENTIRE AGREEMENT. This Agreement evidences the entire agreement
among the parties and their privies relative to the subject matter covered
hereby and supersedes all prior or contemporaneous oral or written agreements
among any or all of them.
21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
22. NOTICES. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses listed below:
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<PAGE> 7
If to Fresh Foods: Fresh Foods, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to Miller: Mr. L. Dent Miller
209 Museum Road
Statesville, NC 28625
or, in any case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other parties.
23. SUCCESSORS, HEIRS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
24. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
FRESH FOODS, INC.
By: /s/ David R. Clark
-------------------------
David R. Clark
Vice Chairman of the Board of Directors
MILLER:
/s/ L. Dent Miller (SEAL)
-----------------------------
L. Dent Miller,
on behalf of himself and the
Miller Entities referred to above
8
<PAGE> 1
EXHIBIT 10.49
CONSULTING AND NONCOMPETE AGREEMENT
THIS CONSULTING AND NONCOMPETE AGREEMENT ("Agreement"), dated as of
January 14, 2000 (the "Effective Date"), between Fresh Foods, Inc., a North
Carolina corporation ("Fresh Foods"), and Charles F. Connor, Jr. ("Connor")
W I T N E S S E T H:
WHEREAS, food processing is the core business of Fresh Foods, and
Connor co-founded that business; and
WHEREAS, Fresh Foods desires to engage the services of Connor as a
consultant to Fresh Foods relative to its food processing business;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Consulting Services. Fresh Foods agrees to engage Connor as a
consultant as of the Effective Date, and Connor hereby accepts such engagement,
in each case upon the terms and conditions set forth in this Agreement.
Throughout the term of this Agreement, Connor shall report to the Chairman of
the Board of Directors of Fresh Foods (or, if none exists, then the most senior
executive officer of Fresh Foods) and shall perform such Consulting Services (as
defined in Section 2) as the Chairman or such officer, as the case may be (the
"Superior Officer"), may reasonably request.
2. Duties. Connor shall, to the extent reasonably requested by the
Superior Officer, at reasonable times and places (a) consult with and advise
Fresh Foods on management of Fresh Foods' food processing business and (b)
market and promote Fresh Foods' food processing business in the southeastern
United States (collectively, "Consulting Services"). Connor need not devote more
than twenty hours per calendar week or 500 hours per calendar year to Consulting
Services. Connor is not entitled to payment of any fee or other compensation for
his Consulting Services, but Fresh Foods shall reimburse him for the reasonable
out-of-pocket expenses that he incurs while performing Consulting Services upon
presentation of receipts or other documentation in reasonable detail.
3. Independent Contractor. Fresh Foods and Connor hereby agree that
Connor is an independent contractor, solely responsible for the manner and form
in which he performs Consulting Services. Nothing contained herein shall be
construed as creating an employer/employee, master/servant, principal/agent,
partnership, joint venture or other similar kind of relationship. Connor agrees
that he will not take any action on behalf of Fresh Foods without specific
instructions from, and the prior approval of, the Superior Officer and that he
does not have any right or power in any manner to bind or commit Fresh Foods to
any contract or other obligation with any individual or entity except upon the
specific prior written approval of the Superior Officer.
<PAGE> 2
4. Term. This Agreement shall terminate five years from the Effective
Date.
5. Compensation.
(a) Cash. Fresh Foods shall pay to Connor $200,000 annually
for the five-year term of this Agreement, less such amounts, if any, as
Fresh Foods may withhold pursuant to federal and state tax laws. Such
payments shall be made monthly in the amount of $16,667.67 per month,
less any applicable tax withholding, payable on the first day of each
month, in sixty installments, commencing the first day of the month
immediately following the Effective Date. As between the parties, Fresh
Foods will determine whether and to what extent it is obligated to
withhold portions of payments due to Connor pursuant to federal and
state tax laws. Fresh Foods will make these determinations reasonably,
in good faith and in consultation with Connor.
(b) Medical Benefit. For the five-year term of this Agreement,
Fresh Foods will pay the entire cost of medical insurance premiums for
Connor and his spouse on the same terms that Fresh Foods currently pays
for its most senior executive officer.
6. Covenant Not to Disclose Confidential Information. During Connor's
prior positions with Fresh Foods and during the term of this Agreement, Connor
has and will become acquainted with confidential information of Fresh Foods and
its affiliates, including, but not limited to, customer names and
representatives, customer files, customer lists, customer specifications and
requirements, special customer matters, sales methods and techniques,
merchandising concepts and plans, business plans, sources of supply and vendors,
terms and conditions of business relationships with vendors, agents and brokers,
promotional materials and information, financial matters, mergers, acquisitions,
personnel matters and confidential processes, designs, formulas, ideas, plans,
devices and materials and other similar matters that are kept confidential (any
and all such information being referred to herein as "Confidential
Information"). The parties agree that the use of Confidential Information
against Fresh Foods would seriously damage its business. Accordingly, Connor
agrees that:
(a) He shall not, directly or indirectly, use any Confidential
Information for any purpose other than to benefit Fresh Foods except
with the prior, express and written consent of Fresh Foods or as
required by law;
(b) He shall not, directly or indirectly, divulge, publish or
otherwise reveal or allow to be revealed any Confidential Information
to any individual or entity except with the prior, express and written
consent of Fresh Foods or as required by law;
(c) He shall refrain from any action or conduct that might
reasonably or foreseeably be expected to compromise the confidentiality
or proprietary nature of any Confidential Information; and
(d) He shall have no right to apply for, or to obtain any
patent, copyright or other form of intellectual property protection
regarding, any Confidential Information.
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<PAGE> 3
7. Covenant Not to Compete.
(a) Covenant. Connor hereby stipulates, covenants and agrees
that, during the Restrictive Period (as defined below), he shall not,
directly or indirectly, other than on behalf of Fresh Foods, without
Fresh Foods' prior, express and written consent:
(i) Engage in Competition (as defined below) with
Fresh Foods or any of its successors or assigns; or
(ii) Employ or solicit the employment of any
individual who is, or has been, at any time during the
Restrictive Period or during the twelve complete calendar
months immediately preceding the Effective Date, an employee
of Fresh Foods.
(b) Certain Definitions. As used in this Section, the
following terms shall have the following meanings:
(i) "Business" shall mean food processing.
(ii) "Competition" shall mean:
(1) Engaging in the Business with a Contact
Person;
(2) Assisting any individual or entity,
whether in a financial, managerial, employment,
advisory or other material capacity, to engage in the
Business with a Contact Person; or
(3) Owning any interest in, or organizing an
entity that engages in, the Business with a Contact
Person; provided, however, that nothing herein shall
preclude Connor, directly or indirectly, from holding
not more than one percent of the outstanding shares
of common stock of any company whose shares of common
stock are listed on a national securities exchange or
authorized for quotation by NASDAQ.
(iii) "Contact Person" shall be any customer, vendor,
agent or broker at any time of Fresh Foods with which or with
whom Connor has contact on behalf of Fresh Foods at any time
during the term of this Agreement.
(iv) "Restrictive Period" shall mean the five-year
period beginning on the Effective Date.
8. Remedies. In the event of any breach of this Agreement, Fresh Foods
and its successors and assigns shall be entitled to any and all of the following
remedies in addition to such other remedies as they may have in equity or at
law:
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<PAGE> 4
(a) In that a breach of this Agreement would cause damages to
Fresh Foods that, although capable of estimation, would be inherently
difficult to measure, Connor shall pay to Fresh Foods by bank check or
other good funds, upon Fresh Foods' demand following any such breach,
the amount of $500,000. Such amount shall be paid as liquidated damages
for the breach and not as a penalty.
(b) The Restrictive Period shall be extended by any time
period during which Connor is in violation of this Agreement.
In that a breach or anticipatory breach by Connor of Section 6 or 7 of this
Agreement would cause irreparable damage to Fresh Foods, Fresh Foods also shall
be entitled to an injunction restraining Connor from attempting to violate,
violating or continuing a violation of Section 6 or 7. The existence of any
claim or cause of action on the part of Connor against Fresh Foods or its
successors or assigns, whether arising from this Agreement or otherwise, shall
in no way constitute a defense to the enforcement of Sections 6 and 7.
9. Acknowledgement of Adequate Consideration. The parties stipulate and
agree that the payments and other benefits owed to Connor by Fresh Foods under
this Agreement and the performance of Fresh Foods' obligations hereunder
constitute sufficient consideration to support enforcement of the covenants of
this Agreement.
10. Acknowledgement of Reasonableness. Connor has carefully read and
considered the provisions of this Agreement in consultation with attorneys of
his choice and agrees that the restrictions set forth herein are fair and
reasonably required for Fresh Foods' protection. In the event that any provision
relating to the Restrictive Period or to Contact Persons (or both) shall be
declared by a court of competent jurisdiction to exceed the maximum time period
or geographical area such court deems reasonable and enforceable under
applicable law, the time period or area of restriction considered reasonable and
enforceable by the court shall thereafter be the applicable Restrictive Period
or to Contact Persons under this Agreement.
11. Release by Connor and Connor Entities. For his affiliates, related
parties, heirs, assigns, agents, servants and representatives (the "Connor
Entities"), as well as himself, Connor does hereby release and forever discharge
and acquit the affiliates, related parties, employees, officers, directors,
shareholders, attorneys, accountants, agents, servants, representatives,
successors and assigns of Fresh Foods (the "Fresh Foods Entities"), and Fresh
Foods itself, from any and all claims, demands, actions, rights, causes of
action, obligations and liabilities, known and unknown (collectively, "Claims"),
that he or any of the Connor Entities has or may have against Fresh Foods or any
of the Fresh Foods Entities from the beginning of time until the date of this
Agreement. Without limiting the generality of the foregoing, Connor also
releases and forever discharges and acquits Fresh Foods and the Fresh Foods
Entities, on his own behalf and on behalf of the Connor Entities, from any and
all Claims that have arisen, may have arisen or might arise at any time in the
future from the status of any of them as a Company shareholder. Connor
represents and warrants to Fresh Foods that neither he nor any of the Connor
Entities has assigned, transferred or conveyed in any manner all, or any part,
of his or its Claims against Fresh Foods or any of the Fresh Foods Entities.
Connor further represents and warrants to Fresh
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<PAGE> 5
Foods that this Agreement is the legal, valid and binding obligation of himself
and the Connor Entities, enforceable against each of them in accordance with its
terms.
12. Release by Fresh Foods. Fresh Foods does hereby release and forever
discharge and acquit Connor and the Connor Entities from any and all Claims that
Fresh Foods has or may have against Connor or any of the Connor Entities from
the beginning of time until the date of this Agreement. Fresh Foods represents
and warrants to Connor that none of the Fresh Foods Entities has any Claim
against Connor or any of the Connor Entities and that neither Fresh Foods nor
any of Fresh Foods Entities has assigned, transferred or conveyed in any manner
all, or any part, of any Claim against Connor or any of the Connor Entities.
Fresh Foods further represents and warrants to Connor that this Agreement is the
legal, valid and binding obligation of Fresh Foods, enforceable against Fresh
Foods in accordance with its terms.
13. Fresh Foods Securities. Connor represents and warrants to Fresh
Foods that, other than the shares of Fresh Foods common stock that he has
unconditionally contracted to sell to James C. Richardson, Jr., neither he nor
any of the Connor Entities beneficially owns any shares of common stock or other
securities issued by Fresh Foods. Connor covenants and agrees with Fresh Foods
that neither he nor any of the Connor Entities will at any time hereafter
purchase or otherwise acquire (so as to beneficially own) any security issued by
Fresh Foods.
14. Certain Definitions. As used in this Agreement: (a) a person's
"affiliate" is a second person controlled, directly or indirectly, by the first
person; (b) a person's "related party" is a second person related (by blood or
marriage) to the first person, a trust as to which the first person was or is a
settlor, trustee or beneficiary or a corporation, partnership or other company
as to which the first person was or is a shareholder, partner, member, officer,
director or manager; and (c) the term "beneficially owns" derives its meaning
from Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
15. Confidentiality; Covenant Not to Disparage. Each party covenants
and agrees with the other not to disclose the existence or terms of this
Agreement to any person at any time for any purpose, except that (a) either
party may make such disclosures confidentially to the party's lawyers and
accountants in connection with the rendition of their professional services and
(b) Fresh Foods may make such disclosures as it deems to be required by
applicable securities laws. Each party represents and warrants to the other that
the one party knows of no unlawful conduct by the other. Each party covenants
and agrees with the other not to disparage the reputation of the other.
16. Change of Control. If a Change in Control of the Company shall
occur before the expiration of this Agreement, then Fresh Foods shall pay to
Connor, by bank check or other good funds on the Change in Control Date, the
entire unpaid portion of the $1,000,000 amount otherwise due to be paid to
Connor in annual installments over the five-year term of this Agreement pursuant
to Section 5(a) of this Agreement. As used herein, the terms "Change in Control
of the Company" and "Change in Control Date" shall have the meanings assigned to
them in that certain Amended and Restated Change in Control Agreement between
David R. Clark and Fresh Foods as in effect at the date hereof.
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<PAGE> 6
17. Attorneys' Fees. Should it become necessary for Fresh Foods to
institute legal proceedings as a result of a breach of any terms or covenants
contained in this Agreement, Fresh Foods shall, if it is the prevailing party in
such litigation, be entitled to have and recover from the non-prevailing party
reasonable attorneys' fees plus court costs in addition to any and all relief
otherwise available to it, either at law or in equity. Should it become
necessary for Connor to institute legal proceedings as a result of a breach of
any terms or covenants contained in this Agreement, Connor shall, if he is the
prevailing party in such litigation, be entitled to have and recover from the
non-prevailing party reasonable attorneys' fees plus court costs in addition to
any and all relief otherwise available to him, either at law or in equity.
18. Severability. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
19. Waiver of Breach. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
20. Entire Agreement. This Agreement evidences the entire agreement
among the parties and their privies relative to the subject matter covered
hereby and supersedes all prior or contemporaneous oral or written agreements
among any or all of them.
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
22. Notices. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses listed below:
If to Fresh Foods: Fresh Foods, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to Connor: Mr. Charles F. Connor, Jr.
3238 West Main Street
Claremont, NC 28610
or, in any case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other parties.
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<PAGE> 7
23. Successors, Heirs and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
24. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
FRESH FOODS, INC.
By: /s/ David R. Clark
---------------------------------------
David R. Clark
Vice Chairman of the Board of Directors
CONNOR:
/s/ Charles F. Connor, Jr. (SEAL)
-------------------------------------
Charles F. Connor, Jr.,
on behalf of himself and the
Connor Entities referred to above
8
<PAGE> 1
EXHIBIT 10.50
BONUS AGREEMENT
THIS BONUS AGREEMENT (the "Agreement") is entered into as of
June 30, 1999 among Fresh Foods, Inc., a North Carolina corporation (the
"Company"), and James E. Harris (the "Executive").
WHEREAS, the Company is contemplating the sale or other disposition of
each of its two businesses, consisting of its restaurant business and its food
processing business; and
WHEREAS, the Company wants to provide incentives for the Executive, a
key employee, to remain with the Company and to assist in the planning and
execution of these extraordinary corporate transactions; and
WHEREAS, the Executive and the Company wish to terminate their Change
in Control Agreement dated as of March 25, 1999 (the "Change in Control
Agreement") and to set forth their agreement with respect to such termination;
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Certain Defined Terms. As used in this Agreement, the following
terms have the meanings indicated:
"Disposition" means a Restaurant Disposition or a Food Processing
Disposition (or both).
"Food Processing Disposition" means the sale or other disposition
(whether by merger or consolidation or transfer of assets or equity interests
issued by the Company or by one or more subsidiaries of the Company) of all or
substantially all of the food processing operations presently conducted by
Pierre Foods, LLC.
"Restaurant Disposition" means the sale or other disposition (whether
by merger or consolidation or transfer of assets or equity interests issued by
the Company or by one or more subsidiaries of the Company) of all or
substantially all of the restaurant operations presently conducted by Claremont
Restaurant Group, LLC.
2. Change in Control Agreement Terminated. The Change in Control
Agreement shall terminate in its entirety, immediately prior to the first
Disposition, without liability on the part of any party as a consequence
thereof. Without limiting the generality of the foregoing, the Company shall
have no liability to the Executive upon any Disposition pursuant to such
Agreement.
3. Bonuses.
(a) Restaurant Disposition Bonus. Except in the circumstances
contemplated by subsection (c), in the event that the Company
consummates a Restaurant Disposition the
<PAGE> 2
Company shall pay to the Executive, as a lump sum transaction bonus, an
amount equal to the sum of:
(i) $562,500; plus
(ii) an amount determined by the Company to be equal
to the aggregate of any and all federal, state and local
income tax and excise tax liabilities of the Executive
resulting from the payments due pursuant to clauses (i) and
(ii) hereof; provided, however, that, if the Company
determines that the total of all payments to or for the
benefit of the Executive under this Agreement after reduction
for any and all federal, state and local income tax and excise
tax liabilities of the Executive resulting therefrom (the
"After-Tax Payments") would be increased by the limitation or
elimination of any payment under this subsection (a), then
amounts payable under this subsection (a) shall be reduced to
the extent, and only to the extent, determined necessary by
the Company to maximize the After-Tax Payments; and provided
further that the Company shall withhold from all payments to
be made to the Executive pursuant to this Agreement all taxes
that, by applicable federal, state or local law, the Company
determines that it is required to withhold.
The payment required to be made to the Executive pursuant to the
foregoing provisions of this subsection (a) shall be made by bank check
or other good funds at the closing of the Restaurant Disposition.
(b) Food Processing Disposition Bonus. Except in the
circumstances contemplated by subsection (c), in the event that the
Company consummates a Food Processing Disposition the Company shall pay
to the Executive, as a lump sum transaction bonus, an amount equal to
the sum of:
(i) $562,500; plus
(ii) an amount determined by the Company to be equal
to the aggregate of any and all federal, state and local
income tax and excise tax liabilities of the Executive
resulting from the payments due pursuant to clauses (i) and
(ii) hereof; provided, however, that, if the Company
determines that the total of all After-Tax Payments would be
increased by the limitation or elimination of any payment
under this subsection (b), then amounts payable under this
subsection (b) shall be reduced to the extent, and only to the
extent, determined necessary by the Company to maximize the
After-Tax Payments; and provided further that the Company
shall withhold from all payments to be made to the Executive
pursuant to this Agreement all taxes that, by applicable
federal, state or local law, the Company determines that it is
required to withhold.
The payment required to be made to the Executive pursuant to the
foregoing provisions of this subsection (b) shall be made by bank check
or other good funds at the closing of the Food Processing Disposition.
2
<PAGE> 3
(c) Combined Disposition Bonus. In the event that the Company
consummates a Restaurant Disposition and a Food Processing Disposition
in a single transaction or series of related transactions with the same
buyer or related buyers, the Company shall pay to the Executive, as a
lump sum transaction bonus, an amount equal to the sum of:
(i) $1,125,000; plus
(ii) an amount determined by the Company to be equal
to the aggregate of any and all federal, state and local
income tax and excise tax liabilities of the Executive
resulting from the payments due pursuant to clauses (i) and
(ii) hereof; provided, however, that, if the Company
determines that the total of all After-Tax Payments would be
increased by the limitation or elimination of any payment
under this subsection (c), then amounts payable under this
subsection (c) shall be reduced to the extent, and only to the
extent, determined necessary by the Company to maximize the
After-Tax Payments; and provided further that the Company
shall withhold from all payments to be made to the Executive
pursuant to this Agreement all taxes that, by applicable
federal, state or local law, the Company determines that it is
required to withhold.
The payment required to be made to the Executive pursuant to the
foregoing provisions of this subsection (c) shall be made by bank check
or other good funds at the closing of the Disposition.
4. Company Car. On the later to occur of the Restaurant Disposition and
the Food Processing Disposition, the Company shall transfer and convey to the
Executive all of its right, title and interest in and to the motor vehicle
currently used by the Executive for business purposes. Upon request by the
Executive, the Company will execute and deliver all such documents and take all
such other actions as the Executive may reasonably request to better evidence
such transfer and conveyance.
5. Stock Options. This Agreement shall not be construed as having any
effect on the rights of the Executive under the stock option agreements and
related stock option plans that govern stock options that have been granted by
the Company to the Executive and may be held by the Executive at any time.
6. Severability. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction, shall not affect
the remaining portions of this Agreement, or any part thereof; and, in case of
any such illegality, unenforceability or invalidity, this Agreement shall be
construed as if such covenants, phrases, clauses, sentences or paragraphs, to
the extent and only to the extent determined to be illegal, unenforceable or
invalid, had not been inserted.
7. Waiver of Breach. The waiver by either party of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
3
<PAGE> 4
8. Entire Agreement. This Agreement sets forth the entire understanding
between the parties relating to the subject matter hereof and supersedes all
previous and contemporaneous understandings or agreements, written and oral.
This Agreement may be modified only by an agreement in writing, signed by all
parties, purporting to modify it.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to the
principles of conflict of laws thereof.
10. Notices. Any notice that may be given hereunder shall be in writing
and shall be deemed to have been given on the earlier to occur of (a) actual
receipt or (b) the second business day after the same shall have been mailed by
certified mail, postage prepaid, return receipt requested, to the parties at the
addresses listed below:
If to the Company: Fresh Foods, Inc.
P.O. Box 3967
Hickory, NC 28603
Attention: David R. Clark
If to the Executive: James E. Harris
2123 Roswell Avenue
Charlotte, NC 28207
or, in any case, to such other address as the party to whom or to which such
notice is to be given shall have specified by notice given to the other parties.
11. Successors, Heirs and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
12. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FRESH FOODS, INC.
By: /s/ David R. Clark
------------------------------------
David R. Clark, President
THE EXECUTIVE:
/s/ James E. Harris (SEAL)
----------------------------------
James E. Harris
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FISCAL
2000 3RD QUARTER 10-Q FOR FRESH FOODS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-04-2000
<PERIOD-END> DEC-04-1999
<CASH> 5,988,325
<SECURITIES> 0
<RECEIVABLES> 17,042,025
<ALLOWANCES> 114,600
<INVENTORY> 32,119,779
<CURRENT-ASSETS> 60,672,805
<PP&E> 49,313,583
<DEPRECIATION> 14,579,293
<TOTAL-ASSETS> 173,202,309
<CURRENT-LIABILITIES> 17,088,714
<BONDS> 115,197,270
0
0
<COMMON> 5,831,719
<OTHER-SE> 34,081,249
<TOTAL-LIABILITY-AND-EQUITY> 173,202,309
<SALES> 136,087,343
<TOTAL-REVENUES> 136,087,343
<CGS> 82,665,162
<TOTAL-COSTS> 82,665,162
<OTHER-EXPENSES> 4,639,944
<LOSS-PROVISION> 198,285
<INTEREST-EXPENSE> 11,616,320
<INCOME-PRETAX> (15,428,851)
<INCOME-TAX> 4,071,962
<INCOME-CONTINUING> (11,356,889)
<DISCONTINUED> 9,630,093
<EXTRAORDINARY> (52,350)
<CHANGES> 0
<NET-INCOME> (1,779,146)
<EPS-BASIC> (.30)
<EPS-DILUTED> (.30)
</TABLE>
