UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
COMMISSION FILE NUMBER 0-17060
WLR FOODS, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-1295923
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
P.O. Box 7000
Broadway, Virginia 22815
(Address including Zip Code of Registrant's
Principal Executive offices)
(540) 896-7001
(Registrant's telephone number, including area code)
Indicate by cross mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes (X) No ()
The number of shares outstanding of Registrant's Common Stock, no par
value, at January 25, 1999 was 16,476,782 shares.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(unaudited) Thirteen weeks ended
In thousands, except per share data DECEMBER 26, DECEMBER 27,
1998 1997
<S> <C> <C>
Net sales $229,276 $247,683
Cost of sales 191,486 232,278
-------- --------
Gross profit 37,790 15,405
Selling, general and administrative expenses 22,696 23,033
-------- --------
Operating income (loss) 15,094 (7,628)
Other expense:
Interest expense 3,003 4,927
Sale of Goldsboro division 118 -
Miscellaneous expense 325 84
-------- --------
Other expense 3,446 5,011
-------- --------
Earnings (loss) before income taxes 11,648 (12,639)
Income tax expense (benefit) 4,426 (4,550)
-------- --------
Net earnings (loss) from continuing operation $7,222 ($8,089)
Income from discontinued operations, net of t - 207
-------- --------
Total income from discontinued operations - 207
Extraordinary charge on early extinguishment of
debt, net of tax (954) -
-------- --------
Net income (loss) $6,268 ($7,882)
======== ========
<PAGE>
Basic earnings (loss) per common share,
continuing operations $0.43 ($0.49)
Basic earnings per common share, discontinued
operations - 0.01
Basic loss per common share, early extinguishment
of debt (0.06) -
-------- --------
Total basic earnings (loss) per common share $0.37 ($0.48)
Diluted earnings (loss) per common share,
continuing operations $0.43 ($0.49)
Diluted earnings per common share,
discontinued operations - 0.01
Diluted loss per common share, early
extinguishment of debt (0.06) -
-------- --------
Total diluted earnings (loss) per common share $0.37 ($0.48)
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Twenty-six weeks ended
In thousands, except per share data DECEMBER 26, DECEMBER 27,
1998 1997
<S> <C> <C>
Net sales $467,216 $490,223
Cost of sales 388,129 458,071
-------- --------
Gross profit 79,087 32,152
Selling, general and administrative expenses 48,103 45,988
-------- --------
Operating income (loss) 30,984 (13,836)
Other expense:
Interest expense 7,889 9,233
Gain on sale of Goldsboro division (7,754) -
Miscellaneous expense (income) 303 (477)
-------- --------
Other expense (income) 438 8,756
-------- --------
Earnings (loss) before income taxes and
minority interest 30,546 (22,592)
Income tax expense (benefit) 11,608 (8,134)
Minority interest in net earnings of
consolidated subsidiary - 66
-------- --------
Net earnings (loss) from continuing operations $18,938 ($14,524)
Income from discontinued operations, net of
tax 664 2,190
Gain on disposal of discontinued operations,
net of tax 15,499 -
-------- --------
Total income from discontinued operations 16,163 2,190
Extraordinary charge on early extinguishment
of debt, net of tax ($2,559) -
-------- --------
3
<PAGE>
Net income (loss) $32,542 ($12,334)
======== ========
Basic earnings (loss) per common share,
continuing operations $1.12 ($0.89)
Basic earnings per common share, discontinued
operations 0.97 0.13
Basic loss per common share, early extinguishment
of debt (0.15) -
-------- --------
Total basic earnings (loss) per common share $1.94 ($0.76)
Diluted earnings (loss) per common share,
continuing operations $1.12 ($0.89)
Diluted earnings per common share,
discontinued operations 0.95 0.13
Diluted loss per common share, early
extinguishment of debt (0.15) -
-------- --------
Total diluted earnings (loss) per common share $1.92 ($0.76)
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
DECEMBER 26, June 27,
1998 1998
ASSETS (unaudited)
Current Assets
<S> <C> <C>
Cash and cash equivalents $197 $335
Accounts receivable, less allowance for
doubtful accounts of $2,303 and $1,515 59,707 72,457
Inventories (Note 2) 99,630 128,031
Income taxes receivable 1,002 1,002
Other current assets 1,433 1,870
-------- --------
Total current assets 161,969 203,695
Property, plant and equipment, net 114,839 153,702
Deferred income taxes 2,134 18,247
Other assets 5,926 6,098
-------- --------
TOTAL ASSETS $284,868 $381,742
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt (Note 5) $3,560 $3,452
Excess checks over bank balances 10,628 9,925
Trade accounts payable 26,322 28,742
Accrued expenses 32,372 32,245
Deferred income taxes 6,784 10,636
Other current liabilities 3,501 -
-------- --------
Total current liabilities 83,167 85,000
Long-term debt, excluding current maturities
(Note 5) 60,455 189,225
Other liabilities and deferred credits 3,727 3,626
5
<PAGE>
Shareholders' equity:
Common stock, no par value 68,937 67,851
Additional paid-in capital 2,974 2,974
Retained earnings 65,608 33,066
-------- --------
Total shareholders' equity 137,519 103,891
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $284,868 $381,742
======== ========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Twenty-six weeks ended
Dollars in thousands DECEMBER 26, DECEMBER 27,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $32,542 ($12,334)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Extraordinary charge on early extinguishment of
debt, net of tax 2,559 -
Depreciation and amortization 11,421 13,190
(Gain) loss on sale of property, plant and
equipment 142 (59)
Gain on sale of Goldsboro division (7,754) -
Gain on sale of discontinued operation (24,998) -
Deferred income taxes 12,261 (8,482)
Valuation allowance on assets held for sale 1,380 -
Other, net (284) (72)
Change in operating assets and liabilities:
Decrease in accounts receivable 7,697 8,399
Decrease in inventories 19,343 30,095
Decrease in other current assets 345 3,925
Increase in long-term assets (682) (1,454)
Decrease in accounts payable (804) (3,731)
(Decrease) Increase in accrued expenses and
other 6,097 (3,083)
-------- --------
Net Cash Provided by Operating Activities 59,265 26,394
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (15,032) (10,756)
Proceeds from sale of discontinued operation 53,928 -
Proceeds from sale of Goldsboro division 37,582 -
7
<PAGE>
Proceeds from sale of property, plant and
equipment 95 1,528
-------- --------
Net Cash Used in Investing Activities 76,573 (9,228)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of revolver and
long-term debt 218,113 10,000
Payments on revolver and long-term debt (353,386) (5,825)
Financing costs paid (1,767) -
Increase (decrease) in checks drawn not
presented 703 (12,118)
Issuance of common stock 361 460
Repurchase of common stock - (4,438)
-------- --------
Net Cash Used in Financing Activities (135,976) (11,921)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (138) 5,245
Cash and Cash Equivalents at Beginning of
Fiscal Year 335 283
-------- --------
Cash and Cash Equivalents at End of Period $197 $5,528
======== ========
Supplemental cash flow information:
Cash paid (refunded) for :
Interest $10,241 $7,444
Income taxes paid (refunded) 5,811 (3,113)
The Company considers all highly liquid investments with maturities of 3
months or less at purchase to be cash equivalents.
8
<PAGE>
Non-cash financing activities:
In fiscal 1999:
The Company recorded 142,384 stock warrants at a value of $904,136 which
related to the February 1998 debt refinancing.
The Company had 28,180 stock warrants expire at a value of $178,943 when
a portion of the February 1998 debt was repaid.
The Company incurred an extraordinary charge on early extinguishment of
debt in the amount of $4.1 million for write-off of debt costs.
In fiscal 1998:
The Company issued 102,296 shares of stock in the first quarter.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
9
<PAGE>
Notes to Consolidated Financial Statements
WLR Foods, Inc. and Subsidiaries
1. Accounting Policies
The consolidated financial statements presented herein, include the
accounts of WLR Foods, Inc. and its wholly-owned subsidiaries. All
material balances and transactions have been eliminated in
consolidation. The consolidated balance sheet as of December 26, 1998,
and the consolidated statements of operations for the thirteen and
twenty-six weeks ended December 26, 1998 and December 27, 1997, and
the consolidated statements of cash flows for the twenty-six weeks
ended December 26, 1998 and December 27, 1997 are unaudited. In the
opinion of management, all adjustments necessary for fair presentation
of such consolidated financial statements have been included. Such
adjustments consisted only of normal recurring accruals and the use of
estimates. Interim results are not necessarily indicative of results
for the entire fiscal year.
The consolidated financial statements and notes are presented in
conformity with the requirements for Form 10-Q and do not contain
certain information included in the Company's annual consolidated
financial statements and notes.
The Company's unaudited interim consolidated financial statements
should be read in conjunction with the consolidated financial
statements included in the Annual Report to Shareholders for the
fiscal year ended June 27, 1998. In both, the accounting policies and
principles used are consistent in all material respects.
2. Inventories
A summary of inventories at December 26, 1998 and June 27, 1998
follows:
(unaudited)
Dollars in thousands December 26, June 27,
1998 1998
------------ --------
Live poultry and breeder flocks $46,735 $58,947
Processed poultry and meat products 25,326 38,837
Packaging supplies, parts and other 13,421 15,879
Feed, grain and eggs 14,148 14,368
-------- --------
Total inventories $99,630 $128,031
======== ========
10
<PAGE>
3. Earnings Per Share
The following is a reconciliation between the calculation of basic
and diluted net earnings (loss)per share:
Second Quarter Second Quarter
December 26, December 27,
1998 1997
Basic EPS Computation
Numerator - Net earnings (loss) $6,268 ($7,882)
Denominator:
Common shares outstanding 16,466 16,298
Effect of outstanding stock
warrants 322 -
------ ------
Basic weighted average common
shares outstanding 16,788 16,298
Basic earnings (loss) per share $0.37 ($0.48)
====== ======
Diluted EPS Computation
Numerator - Net earnings (loss) $6,268 ($7,882)
Denominator:
Common shares outstanding 16,466 16,298
Effect of outstanding options 15 -
Effect of outstanding stock
warrants 322 -
------ ------
Diluted weighted average common
shares outstanding 16,803 16,298
Diluted earnings (loss) per
share $0.37 ($0.48)
====== ======
Year To Date Year To Date
December 26, December 27,
1998 1997
Basic EPS Computation
Numerator - Net earnings (loss) $32,542 ($12,334)
Denominator:
Common shares outstanding 16,447 16,270
11
<PAGE>
Effect of outstanding stock
warrants 297 -
------ ------
Basic weighted average common
shares outstanding 16,744 16,270
Basic earnings (loss) per share $1.94 ($0.76)
====== ======
Diluted EPS Computation
Numerator - Net earnings (loss) $32,542 ($12,334)
Denominator:
Common shares outstanding 16,447 16,270
Effect of outstanding options 10 -
Effect of outstanding stock
warrants 515 -
------ ------
Diluted weighted average common
shares outstanding 16,972 16,270
Diluted earnings (loss) per
share $1.92 ($0.76)
====== ======
4. Sale of Assets
The Company completed the sale of its Cassco Ice & Cold Storage
subsidiary in July 1998 for net proceeds of approximately $54 million,
resulting in a gain of approximately $25 million ($15 million after
tax). Income from operations in the current fiscal year was
approximately $1 million ($0.7 million after tax). Both items
relating to the sale have been segregated from continuing operations
and reported as separate line items on the statement of operations.
Based on a net asset value calculation at the date of sale,
additional consideration from the seller may be received by the
Company.
In August 1998, the Company completed the sale of its Goldsboro, North
Carolina chicken complex. Net proceeds of approximately $37 million
resulted in a gain of approximately $8 million ($5 million after tax).
In the second quarter of fiscal year 1999, the Company entered into an
agreement to sell its further processing plant in Monroe, NC. The
Company has reduced the carrying value of the property by $1.4 million
to approximate its net realizable value of $4.3 million. The
transaction is expected to be consummated in the third quarter of the
current fiscal year.
12
<PAGE>
5. Debt Refinancing
The Company refinanced its Secured Term Notes and Secured Revolving
Credit Notes as of November 20, 1998. The new facility is a three-
year financing agreement that provides a total borrowing capacity of
$150 million. The Agreement includes a $50 million term loan and a
$100 million revolving credit facility. Both facilities have a
maturity date of November 20, 2001 and are secured by virtually all of
the Company's assets.
Initially, interest on both the term loan and revolving credit
facility is based on the Company's choice of the London Inter-Bank
Offering Rate (LIBOR) plus an applicable margin of 250 basis points or
prime plus an applicable margin of 50 basis points. At the end of
each quarter, the applicable margins may be reduced based upon Company
performance.
At December 26, 1998, all $50 million of term loan borrowings were
based on a LIBOR rate of 5.04% plus the applicable margin of 250 basis
points for a total rate of 7.54%. Revolving credit borrowings totaled
$12.7 million as of December 26, 1998, with $7.0 million tied to a
LIBOR rate of 5.55% plus the 250 basis point applicable margin for a
total rate of 8.05%. The remaining $5.7 million in revolving credit
borrowings was based on prime plus 50 basis points, for a total rate
of 8.25%.
Principal payments of $1.0 to $1.5 million are required at the end of
each fiscal quarter beginning with the fourth fiscal quarter of 1999
for the Term Loan portion of the credit facility. Additionally,
principal payments are required on the proceeds of asset sales in
excess of $1.0 million dollars annually and for substantial new
issuances of common stock.
The Company recorded an extraordinary non-cash charge to write off the
remaining unamortized debt issue costs of the prior credit facility
during the quarter ended December 26, 1998 of $1.5 million ($1.0
million after tax). The charge is shown as an extraordinary item for
the early extinguishment of debt. During the first quarter ended on
September 26, 1998, the Company recorded an extraordinary charge of
$2.6 million ($1.6 million after tax) for the early extinguishment of
debt resulting from the permanent reduction of its prior credit
facility due to the sale of its Cassco Ice and Cold Storage, Inc.
subsidiary and its Goldsboro, North Carolina chicken complex. Total
year to date charges for the early extinguishment of debt are $4.1
million (2.6 million after tax).
The Company incurred approximately $1.8 million in costs to establish
the new credit facility, which have been capitalized and are being
amortized to interest expense over the life of the loan.
13
<PAGE>
In connection with the refinancing, an interest rate swap that was
required under the prior credit facility was assigned from First Union
National Bank to the Bank of Montreal. Accordingly, the swap has been
marked to market as of November 20, 1998, with a non-cash charge of
$0.6 million taken into interest expense. The variable to fixed
interest rate swap agreement has a notional amount of $50.0 million,
and fixes the Company's variable interest rate at 6.29% through
January 4, 2000. The related $0.6 million mark to market credit will
be amortized as an offset to interest expense over the remaining life
of the swap agreement.
The Company was in compliance with all covenants required by its new
credit facility as of December 26, 1998.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
WLR Foods, Inc. (the Company) is a fully integrated poultry
production, processing and marketing business with operations in
Virginia, West Virginia, Pennsylvania and North Carolina.
Operating income for the second quarter of fiscal 1999 of $15.1
million was $22.7 million more than the same quarter last year. The
improvement was primarily due to lower feed costs approximating $15
million. Additionally, the Company benefited from an increase in
turkey pricing coupled with the continued recent trend of strong
chicken pricing, which resulted in a total benefit of $10.3 million
during the quarter. Partially offsetting these gains were operational
inefficiencies related to the conversion and start up of the
Marshville chicken complex during the quarter of approximately $3
million.
Results of Operations
Net sales from continuing operations for the second quarter decreased
$18.4 million or 7.4% to $229.3 million, compared to $247.7 million
for the same quarter last year. Of this decrease, approximately $12
million is due to the closing of the distribution business in
Franconia, Pennsylvania during the first quarter. Chicken revenues
for the quarter increased 1%, the result of a 6% increase in pricing,
offset by a 5% decrease in volume. Turkey revenues decreased 7%, with
a 3% increase in price partially offsetting decreased volumes of 10%,
which were planned cutbacks that primarily resulted from the
conversion of the Marshville complex from turkey to chicken in the
first quarter of this fiscal year.
For the first six months of fiscal 1999, net sales from continuing
operations decreased $23.0 million or 4.7% to $467.2 million, compared
to $490.2 million for the same period last year. Chicken revenues
increased 4%, the result of a 7% increase in pricing, offset by a 3%
decrease in volume. Turkey revenues decreased 6%, with a 2% increase
in price partially offsetting decreased volumes of 8%.
For the second quarter of fiscal 1999, gross profits from continuing
operations increased $22.4 million to $37.8 million and gross profit
margins from continuing operations improved to 16.5% from 6.2% for the
same quarter last year. Improving grain costs of approximately $15
million were the result of corn and soymeal average delivered prices
decreasing 19.6% and 40.1%, respectively. Chicken and turkey prices
for the quarter increased 6% and 3%, respectively, compared to pricing
15
<PAGE>
for the same quarter last year, resulting in additional revenues of
$5.7 million in chicken and $4.6 million in turkey.
Gross profits from continuing operations increased $46.9 million to
$79.1 million for the first six months of fiscal 1999. Gross profit
margins from continuing operations improved to 16.9% from 6.6% last
year. The improvements in gross profits are primarily attributable to
decreases in grain costs of approximately $34 million. In addition,
chicken and turkey prices for the six months increased 7% and 2%,
respectively, compared to the same period last year, resulting in
additional revenues of $14.8 million in chicken and $4.0 million in
turkey.
During the second quarter of fiscal 1999, selling, general and
administrative expenses, which included accrued employee incentives of
$1.0 million, decreased $0.3 million when compared to the same quarter
last year. For the first six months of 1999, selling, general and
administrative expenses, which included $1.6 million of accrued
employee incentives, increased $2.1 million when compared to the same
period last year.
Interest expense decreased $1.9 million for the quarter and $1.3
million for the first six months, when compared to the same periods
last year. These decreases are primarily the result of reduced
borrowings.
On August 14th, 1998 the Company sold its Goldsboro, North Carolina
chicken complex for approximately $37 million in net proceeds
resulting in a pre-tax gain of $7.8 million. The net proceeds were
used to reduce long term debt.
The Company had net earnings from continuing operations of $7.2
million, or $0.43 per diluted share for the second quarter of fiscal
1999, compared with a net loss of $8.1 million, or $0.49 per diluted
share for the same quarter last year. For the first six months of
fiscal 1999, net earnings from continuing operations were $18.9
million, or $1.12 per diluted share, versus a net loss of $14.5
million, or $0.89 per diluted share in the same period last year.
On July 31st, 1998 the Company sold its Cassco Ice and Cold Storage,
Inc., subsidiary for approximately $54 million in net proceeds. While
there was no income from Cassco during the second quarter of this
fiscal year, the year-to-date Cassco income from discontinued
operations is $0.7 million and compares to $2.2 million for the six
months ended December 27, 1997. The net proceeds from the sale of the
subsidiary were used to reduce long-term debt. The gain on the sale
of $15.5 million, net of tax, occurred during the first fiscal quarter
of 1999 and has been specifically identified on the income statement
as a gain on the sale of discontinued operations.
16
<PAGE>
Due to the permanent reduction of long term debt resulting from the
sale of the Cassco subsidiary and the Goldsboro complex, the Company
recorded an extraordinary after-tax charge of $1.6 million during the
first quarter of fiscal 1999, representing the write-off of
capitalized debt costs.
In conjunction with the November 20, 1998 debt refinancing, the
Company recorded an extraordinary after-tax charged of $1.0
million during the second quarter of fiscal 1999, representing the
write-off of remaining capitalized debt costs pertaining to the prior
credit facility.
Net income for the fiscal 1999 second quarter was $6.3 million, or
$0.37 per diluted share, and included an after-tax non-cash write-off
totaling $1.0, or $0.06 per diluted share, on the early extinguishment
of debt, versus a net loss of $7.9 million, or $0.48 per diluted share
for the same quarter last year.
For the fiscal 1999 six-month period, net income was $32.5 million, or
$1.92 per diluted share, and included: after-tax income of $0.7
million, or $0.04 per diluted share from the Company s Cassco Ice &
Cold Storage subsidiary; an after-tax gain of $15.5 million or $0.91
per diluted share on the sale of Cassco; and an after-tax, non-cash
write-off totaling $2.6 million, or $0.15 per diluted share, on the
early extinguishment of debt, versus a net loss of $12.3 million, or
$0.76 per diluted share, which included after-tax income of $2.2
million, or $0.13 per diluted share from Cassco, for the same period
last year.
Financial Condition and Liquidity
Accounts receivable and total inventory at the end of the first six
months of fiscal 1999 were $12.8 million and $28.4 million lower,
respectively, when compared to the end of fiscal year 1998. Live and
processed inventories decreased $12.2 million and $13.5 million,
respectively. The decrease in live inventories was primarily due to
lower feed costs while the processed inventories decreased primarily
from the seasonal sale of turkey products.
Debt levels were reduced substantially during the first six months of
fiscal 1999, from $192.7 million at fiscal 1998 year-end to $64.0
million at the end of the first six months of fiscal 1999. The
decrease of $128.7 million is the result of approximately $92 million
from the sales of Cassco Ice and Cold Storage, Inc. and the Goldsboro
complex, and from approximately $36.7 million in cash flow from
operations.
17
<PAGE>
Capital Resources
The Company's capital spending for the quarter was $6.9 million and
$15.0 million for the first six months of fiscal 1999. The major
capital project during the first and second quarter was the conversion
of the Marshville, North Carolina complex from turkey to chicken,
which resulted in capital expenditures of $3.8 million for the second
quarter and $9.4 million for the six months. The remaining capital
expenditures were primarily for replacements of existing equipment and
safety requirements.
Depreciation expense was $4.8 million for the quarter and $9.7
million year-to-date. Projected capital spending for fiscal 1999 is
expected to total $23 to $26 million.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1
is effective for fiscal years beginning after December 15, 1998 and
provides guidance on accounting for the described costs. SOP 98-1
should not have a material impact on our financial position, results
of operations or cash flows when adopted.
The Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information."
The standard requires that companies report certain information about
operating segments in a complete set of financial statements and in
condensed financial statements of interim periods issued to
shareholders. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997. The Company does not believe the adoption of
this statement will have a significant impact on the financial
statements.
In June 1998, The Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS is effective in fiscal year 2000. We have not yet
determined the impact of the adoption on our financial statements;
however, we do not expect the impact to be material.
Company performance expectations or "forward looking statements"
expressed from time to time are always subject to the possible
material impact of any risks of the business. These risks include
weather conditions impacting grain production and harvesting and live
growout of poultry; feed supplies and prices; supplies and selling
prices of poultry and competing meats; consumer preferences;
governmental and regulatory intervention in the export/import of
poultry; changes in the regulations governing production processes;
and fluctuations in the general business climate.
18
<PAGE>
Year 2000 Update
The Company began addressing the Year 2000 issue in 1995 and elected
to replace its multiple financial and order management systems with
one set of integrated software from Oracle Corporation. An upgrade to
a newer release of the Oracle software that supports the Year 2000
should be completed during the third quarter of this fiscal year. The
Company has assessed all personal computers and communication networks
and believes there are no significant Year 2000 problems in these
areas.
A review of operational systems, including processing plants, feed
mills, warehouses and hatcheries has been performed. This review has
resulted in a plan for minor upgrades or replacements of equipment.
At the present time, management is not aware of any significant
operational problems resulting from Year 2000 related equipment.
To ensure that WLR business with our vendors and customers will
continue without interruption in the new millennium, the Company began
assessing vendor and customer Year 2000 readiness by written
questionnaires in November of 1998. Questionnaires were sent to
customers comprising a majority of our sales revenue and to all
significant vendors. To date, no problems have arisen with either
vendors or customers, but all responses have not yet been obtained.
The Company will continue to monitor and request Year 2000 readiness
disclosures from its vendors and customers through out the remainder
of the year. There can be no assurance that the systems of other
parties upon which the Company relies will be converted on a timely
basis.
In evaluating contingency plans, the Company has identified its live
production accounting as the area most likely to need a backup system
in case of Year 2000 problems. The system is not deemed a critical
system in terms of operating procedures and operates independently
from the major Oracle operating systems. The Company estimates that
the live production accounting system will be Year 2000 compliant by
October of 1999. In the event of a system failure in the live
accounting area, the Company feel's that there is sufficient written
documentation to prepare the needed accounting information on a manual
basis.
The Company has a committee that meets regularly to discuss progress
and issues pertaining to the Year 2000. Progress is reported on a
regular basis to the Board of Directors.
19
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Market risks relating to the Company's operations result primarily
from changes in interest rates and commodity prices. To address these
risks, the Company enters into various hedging transactions as
described below. The Company does not use financial instruments for
trading purposes and is not party to any leveraged derivatives.
Interest Rate Sensitivity
The Company hedges exposures to changes in interest rates on certain
of its financial instruments. Under the terms of various term and
revolving credit loans, the Company enters into interest rate swap
agreements to effectively lock in a fixed interest rate for a portion
of these borrowings. In addition, the Company enters into interest
rate cap agreements to effectively limit the Company's exposure to
increases in interest rates.
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are
sensitive to changes in interest rates. For debt obligations, the
table presents principal cash flows and related weighted average
interest rates by expected maturity dates. For interest rate swaps,
the table presents notional amounts and weighted average interest
rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the
contract.
Expected Maturity Date
Liabilities:
Dollars in thousands 1999 2000 2001 2002
- - -------------------------- ---- ---- ---- ----
Liabilities:
Long-term debt, including
Current Portion Fixed Rate $183 $196 $202 $215
Average interest rate 6.00% 6.00% 6.00% 6.00%
Variable Rate $1,042 $4,850 $5,850 $51,244
Average interest rate 7.48% 7.51% 7.51% 7.69%
Interest Rate Derivatives
Dollars in thousands 1999 2000 2001 2002
- - -------------------------- ---- ---- ---- ----
Interest Rate Swaps
Variable to Fixed $0 $50,000 $0 $0
Average pay rate 0.00 6.29% 0.00 0.00
Average receive rate
- USD 1 month Libor
20
<PAGE>
Interest Rate Cap
Average pay rate $0.00 $75,000 $0.00 $0.00
Average receive rate
- USD 1 month Libor 0.00 6.50% 0.00 0.00
Liabilities: There- Fair
Dollars in thousands 2003 after Total Value
- - -------------------------- ---- ------ ----- -----
Liabilities:
Long-term debt, including
Current Portion Fixed Rate $89 $144 $1,029 $1,029
Average interest rate 6.00% 6.00% 6.00%
Variable Rate $0 $0 $62,986 $62,986
Average interest rate 0.00% 0.00% 7.65%
Interest Rate Derivatives There- Fair
Dollars in thousands 2003 after Total Value
- - -------------------------- ---- ------ ----- -----
Interest Rate Swaps
Variable to Fixed $0 $0 $50,000 ($638)
Average pay rate 0.00 0.00 6.29%
Average receive rate
- USD 1 month Libor
Interest Rate Cap
Average pay rate $0.00 $0.00 $75,000 $7
Average receive rate
- USD 1 month Libor 0.00 0.00 6.50%
Commodity Price Sensitivity
The Company is a purchaser of certain commodities, primarily corn and
soybeans. The Company uses commodity futures for hedging purposes to
reduce the effect of changing commodity prices on a portion of its
commodity purchases. The contracts that effectively meet risk
reductions and correlation criteria are recorded using hedge
accounting. Gains and losses on hedge transactions are recorded as a
component of the underlying inventory purchase.
The following table provides information about the Company's corn,
soybean meal and other feed ingredient inventory and futures contracts
that are sensitive to changes in commodity prices. For inventory, the
table presents the carrying amount and fair value at December 26, 1998.
For the futures contracts, the table presents the notional amounts in
bushels, the weighted average contract prices, and the total dollar
21
<PAGE>
contract amount by expected maturity dates, the latest of which occurs
in December 1999. Contract amounts are used to calculate the contractual
payments and quantity of corn and soybean meal to be exchanged under the
futures contracts.
On Balance Sheet Commodity Position
and Related Derivatives
Carrying Fair
Dollars in thousands Amount Value
- - -------------------------- -------- -----
Corn, Soybean Meal and
Other Feed Ingredient
Inventory 10,992 10,992
Contractual Fair
Related Derivatives Amount Value
- - -------------------------- ----------- -----
Corn Futures Contracts
Contract Volumes
(100,000 bushels) 58
Weighted Average Price
(per bushel) 2.41 2.35
Contract Amount (dollars
in thousands) 14,026 13,692
22
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See attached Exhibit Index
(b) Form 8-K
Reporting Date November 12, 1998. Item Reported - Item
5, Other Events. WLR Foods, Inc. announced it had entered
into a three year financing arrangement with Harris Trust
and Savings Bank as agent for a syndicate of lenders to
refinance the Company s existing debt. The Company also
announced plans to sell its Monroe, North Carolina further
processing plant, and to consolidate its Monroe, North
Carolina and Franconia, Pennsylvania further processing
operations in Franconia.
23
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, this report is signed this 9th day of February, 1999, by the
Registrant's principal financial officer who is also authorized by the
Registrant to sign on its behalf.
WLR FOODS, INC.
__/s/ Dale S. Lam__
Dale S. Lam, Chief Financial
Officer and duly authorized
signator for Registrant
24
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.1 Form of Credit Agreement, dated as of
November 20, 1998
2.2 Form of Revolving Credit Note, as of dated
November 20, 1998
2.3 Form of Term Credit Note, dated as of
November 20, 1998
27 Financial Data Schedule
25
<PAGE>
Exhibit 2.1
=================================================================
CREDIT AGREEMENT
DATED AS OF NOVEMBER 20, 1998
AMONG
WAMPLER FOODS, INC.
THE LENDERS
PARTY HERETO,
AND
HARRIS TRUST AND SAVINGS BANK,
INDIVIDUALLY AND AS ADMINISTRATIVE AGENT
================================================================
<PAGE>
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. THE REVOLVING CREDIT . . . . . . . . . . . 1
Section 1.1. Revolving Credit . . . . . . . . . . . . . 1
Section 1.2. Revolving Credit Loans . . . . . . . . . . 2
Section 1.3. Term Credit . . . . . . . . . . . . . . . . 2
Section 1.4. Letters of Credit . . . . . . . . . . . . . 3
Section 1.5. Manner and Disbursement of Loans . . . . . 6
Section 1.6. Authorized Person . . . . . . . . . . . . . 7
Section 1.7. Late Payment By Lender . . . . . . . . . . 7
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES . . . 8
Section 2.1. Interest Rate Options . . . . . . . . . . . 8
Section 2.2. Minimum LIBOR Portion Amounts . . . . . . . 9
Section 2.3. Computation of Interest . . . . . . . . . . 9
Section 2.4. Manner of Rate Selection . . . . . . . . . 9
Section 2.5. Change of Law . . . . . . . . . . . . . . 10
Section 2.6. Unavailability of Deposits or Inability
to Ascertain Adjusted LIBOR . . . . . . . 10
Section 2.7. Taxes and Increased Costs . . . . . . . . 10
Section 2.8. Change in Capital Adequacy Requirements . 11
Section 2.9. Funding Indemnity . . . . . . . . . . . . 12
Section 2.10. Lending Branch . . . . . . . . . . . . . 12
Section 2.11. Lender's Duty to Mitigate . . . . . . . . 12
Section 2.12. Discretion of Lenders as to Manner of
Funding . . . . . . . . . . . . . . . . . 13
Section 2.13. Replacement of Lender . . . . . . . . . . 13
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, AND
APPLICATIONS . . . . . . . . . . . . . . 14
Section 3.1. Fees . . . . . . . . . . . . . . . . . . 14
Section 3.2. Voluntary Prepayments . . . . . . . . . . 15
Section 3.3. Mandatory Prepayments . . . . . . . . . . 15
Section 3.4. Terminations of Revolving Credit
Commitments . . . . . . . . . . . . . . . 17
Section 3.5. Place and Application of Payments . . . . 17
Section 3.6. Weekly Settlement . . . . . . . . . . . . 20
Section 3.7. Computation of Obligations Outstanding . 23
Section 3.8. Notations . . . . . . . . . . . . . . . . 23
SECTION 4. COLLATERAL AND GUARANTIES . . . . . . . . 24
Section 4.1. Collateral . . . . . . . . . . . . . . . 24
Section 4.2. Collateral Proceeds . . . . . . . . . . . 25
Section 4.3. Guaranties from Subsidiaries . . . . . . 25
Section 4.3. Release of Collateral from De Minimus
Sales . . . . . . . . . . . . . . . . . . 25
Section 4.4. Further Assurances . . . . . . . . . . . 26
<PAGE>
SECTION 5. DEFINITIONS; INTERPRETATION . . . . . . . 26
Section 5.1. Definitions . . . . . . . . . . . . . . . 26
Section 5.2. Interpretation . . . . . . . . . . . . . 41
SECTION 6. REPRESENTATIONS AND WARRANTIES . . . . . 42
Section 6.1. Organization and Qualification . . . . . 42
Section 6.2. Subsidiaries . . . . . . . . . . . . . . 42
Section 6.3. Corporate Authority and Validity of
Obligations . . . . . . . . . . . . . . . 42
Section 6.4. Use of Proceeds; Margin Stock . . . . . . 43
Section 6.5. Financial Reports . . . . . . . . . . . . 43
Section 6.6. No Material Adverse Change . . . . . . . 43
Section 6.7. Full Disclosure . . . . . . . . . . . . . 44
Section 6.8. Good Title . . . . . . . . . . . . . . . 44
Section 6.9. Litigation and Other Controversies . . . 44
Section 6.10. Taxes . . . . . . . . . . . . . . . . . . 44
Section 6.11. Approvals . . . . . . . . . . . . . . . . 44
Section 6.12. Affiliate Transactions . . . . . . . . . 44
Section 6.13. Investment Company; Public Utility
Holding Company . . . . . . . . . . . . . 45
Section 6.14. ERISA . . . . . . . . . . . . . . . . . . 45
Section 6.15. Compliance with Laws . . . . . . . . . . 45
Section 6.16. Other Agreements . . . . . . . . . . . . 45
Section 6.17. No Default . . . . . . . . . . . . . . . 45
Section 6.18. Year 2000 Compliance . . . . . . . . . . 45
Section 6.19. Mortgaged Real Estate . . . . . . . . . . 46
SECTION 7. CONDITIONS PRECEDENT . . . . . . . . . . . . . 46
Section 7.1. All Advances . . . . . . . . . . . . . . 46
Section 7.2. Initial Advance . . . . . . . . . . . . . 47
Section 7.3. Use of Initial Advance . . . . . . . . . 49
Section 7.4. Post-Closing Matters . . . . . . . . . . 49
SECTION 8. COVENANTS . . . . . . . . . . . . . . . . . . 50
Section 8.1. Maintenance of Business . . . . . . . . . 50
Section 8.2. Maintenance of Properties . . . . . . . . 50
Section 8.3. Taxes and Assessments . . . . . . . . . . 50
Section 8.4. Insurance . . . . . . . . . . . . . . . . 50
Section 8.5. Financial Reports . . . . . . . . . . . . 51
Section 8.6. Inspection . . . . . . . . . . . . . . . 53
Section 8.7. Capital Expenditures . . . . . . . . . . 53
Section 8.8. Consolidated Tangible Net Worth . . . . . 54
Section 8.9. Leverage Ratio . . . . . . . . . . . . . 54
Section 8.10. Fixed Charge Coverage Ratio . . . . . . . 55
Section 8.11. Minimum Consolidated EBITDA . . . . . . . 55
Section 8.12 Indebtedness for Borrowed Money . . . . . 55
Section 8.13. Liens . . . . . . . . . . . . . . . . . . 56
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<PAGE>
Section 8.14. Investments, Acquisitions, Loans,
Advances and Guaranties . . . . . . . . . 57
Section 8.15. Operating Leases . . . . . . . . . . . . 58
Section 8.16. Mergers, Consolidations and Sales . . . . 58
Section 8.17. Maintenance of Subsidiaries . . . . . . . 58
Section 8.18. Dividends and Certain Other Restricted
Payments . . . . . . . . . . . . . . . . 58
Section 8.19. ERISA . . . . . . . . . . . . . . . . . . 58
Section 8.20. Compliance with Laws . . . . . . . . . . 59
Section 8.21. Burdensome Contracts With Affiliates . . 59
Section 8.22. No Changes in Fiscal Year . . . . . . . . 59
Section 8.23. Formation of Subsidiaries . . . . . . . . 59
Section 8.24. Change in the Nature of Business . . . . 60
Section 8.25. Year 2000 Assessment . . . . . . . . . . 60
SECTION 9. EVENTS OF DEFAULT AND REMEDIES . . . . . 60
Section 9.1. Events of Default . . . . . . . . . . . . 60
Section 9.2. Non-Bankruptcy Defaults . . . . . . . . . 62
Section 9.3. Bankruptcy Defaults . . . . . . . . . . . 63
Section 9.4. Collateral for Undrawn Letters of Credit 63
SECTION 10. THE ADMINISTRATIVE AGENT . . . . . . . . 63
Section 10.1. Appointment and Authorization . . . . . . 63
Section 10.2. Rights as a Lender . . . . . . . . . . . 64
Section 10.3. Standard of Care . . . . . . . . . . . . 64
Section 10.4. Costs and Expenses . . . . . . . . . . . 65
Section 10.5. Indemnity . . . . . . . . . . . . . . . . 65
SECTION 11. GUARANTEE . . . . . . . . . . . . . . . . 66
Section 11.1. Guarantee . . . . . . . . . . . . . . . . 66
Section 11.2. Guarantee Unconditional . . . . . . . . . 66
Section 11.3. Discharge Only Upon Payment in Full;
Reinstatement in Certain Circumstances . 67
Section 11.4. Waivers . . . . . . . . . . . . . . . . . 67
Section 11.5. Limit on Recovery . . . . . . . . . . . . 67
Section 11.6. Stay of Acceleration . . . . . . . . . . 68
Section 11.7. Benefit to Guarantors . . . . . . . . . . 68
Section 11.8. Guarantor Covenants . . . . . . . . . . . 68
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . 68
Section 12.1. Non-Business Days . . . . . . . . . . . . 68
Section 12.2. No Waiver, Cumulative Remedies . . . . . 68
Section 12.3. Waivers, Modifications and Amendments . . 68
Section 12.4. Costs and Expenses . . . . . . . . . . . 69
Section 12.5. Survival of Representations . . . . . . . 70
Section 12.6. Survival of Indemnities . . . . . . . . . 70
Section 12.7. Participations . . . . . . . . . . . . . 70
Section 12.8. Assignment Agreements . . . . . . . . . . 70
iii
<PAGE>
Section 12.9. Notices . . . . . . . . . . . . . . . . . 71
Section 12.10. Withholding Taxes . . . . . . . . . . . . 71
Section 12.11. Construction . . . . . . . . . . . . . . 72
Section 12.12. Headings . . . . . . . . . . . . . . . . 73
Section 12.13. Severability of Provisions . . . . . . . 73
Section 12.14. Counterparts . . . . . . . . . . . . . . 73
Section 12.15. Entire Understanding . . . . . . . . . . 73
Section 12.16. Binding Nature, Governing Law, Etc . . . 73
Section 12.17. Submission to Jurisdiction; Waiver of
Jury Trial . . . . . . . . . . . . . . . 73
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Exhibit A - Revolving Credit Note
Exhibit B - Term Credit Note
Exhibit C - Borrowing Base Certificate
Exhibit D - Compliance Certificate
Exhibit E - Assignment and Acceptance
Exhibit F - Guaranty Agreement
Schedule 6.2 - Subsidiaries
Schedule 6.9 - Litigation
iv
<PAGE>
CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
the Lenders from time to time
party hereto
Ladies and Gentlemen:
The undersigned, Wampler Foods, Inc., a Virginia corporation (the
"Company"), applies to you for your several commitments, subject to
the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, to extend credit
to the Company, all as more fully hereinafter set forth. The
undersigned, WLR Foods, Inc., a Virginia corporation (the "Parent"),
executes and delivers this Agreement to confirm certain of its
agreements made in connection with the extension of such credit to the
Company.
SECTION 1. THE REVOLVING CREDIT.
Section 1.1. Revolving Credit. Subject to the terms and
conditions hereof, each Lender severally agrees to extend a revolving
credit (the "Revolving Credit") to the Company which may be availed of
by the Company from time to time during the period from and including
the date hereof to but not including the Termination Date, at which
time the commitments of the Lenders to extend credit under the
Revolving Credit shall expire. The maximum amount of the Revolving
Credit which each Lender agrees to extend to the Company shall be such
Lender's Revolving Credit Commitment, as such amount may be reduced
pursuant hereto. The Revolving Credit may be utilized by the Company
in the form of Revolving Credit Loans and Letters of Credit, all as
more fully hereinafter set forth, provided that the aggregate
principal amount of Revolving Credit Loans and L/C Obligations
outstanding at any one time shall not exceed the lesser of (i) the
Available Revolving Credit Commitments and (ii) the Borrowing Base as
then determined and computed. During the period from and including
the date hereof to but not including the Termination Date, the Company
may use the Revolving Credit Commitments by borrowing, repaying and
reborrowing Revolving Credit Loans in whole or in part and/or by
having the Administrative Agent issue Letters of Credit, having such
Letters of Credit expire or otherwise terminate without having been
drawn upon or, if drawn upon, reimbursing the Administrative Agent for
each such drawing, and having the Administrative Agent issue new
Letters of Credit, all in accordance with the terms and conditions of
this Agreement. For purposes of this Agreement, where a determination
of the unused or available amount of the Revolving Credit Commitments
is necessary, the Revolving Credit Loans and L/C Obligations shall be
deemed to utilize the Revolving Credit Commitments. The obligations
of the Lenders hereunder are several and not joint, and no Lender
<PAGE>
shall under any circumstances be obligated to extend credit under the
Revolving Credit in excess of its Revolving Credit Commitment.
Notwithstanding any other provision of this Agreement to the contrary,
the Administrative Agent shall have the right from time to time to
establish reserves (such as the Hedging Reserve and Grower Payable
Reserve) against the amount of availability under the Revolving Credit
which the Company may otherwise request hereunder in such amounts and
with respect to such matters as the Administrative Agent shall
reasonably deem necessary or appropriate. The amount of such reserves
shall be subtracted from what would otherwise be the Borrowing Base
when calculating the amount of availability under the Revolving Credit
Commitments. The Administrative Agent agrees to give the Company ten
(10) Business Days' prior notice of the establishment of any such
reserve (other than the Hedging Reserve and Grower Payable Reserve).
Section 1.2. Revolving Credit Loans. Subject to the terms and
conditions hereof, the Revolving Credit may be availed of by the
Company in the form of loans (individually a "Revolving Credit Loan"
and collectively the "Revolving Credit Loans"). Each Revolving Credit
Loan shall be made pro rata by the Lenders in accordance with the
amounts of their respective Revolving Credit Commitments. Each
Revolving Credit Loan shall initially constitute part of the
applicable Domestic Rate Portion except to the extent the Company has
timely elected that such Revolving Credit Loan, or any part thereof,
constitutes part of a LIBOR Portion as provided in Section 2.1 hereof.
All advances made by a Lender of its pro rata share of a Revolving
Credit Loan shall be made against and evidenced by a single Revolving
Credit Note of the Company (individually a "Revolving Credit Note" and
collectively the "Revolving Credit Notes") payable to the order of
such Lender in the amount of its share of the Revolving Credit Loans
evidenced thereby, with each Revolving Credit Note to be in the form
(with appropriate insertions) attached hereto as Exhibit A. Each
Revolving Credit Note shall be dated the date of issuance thereof, be
expressed to bear interest as set forth in Section 2 hereof, and be
expressed to mature on the Termination Date. The actual principal
amount at any time outstanding and owing by the Company on account of
each Revolving Credit Note shall be the sum of all Revolving Credit
Loans made thereon less all payments of principal actually received.
Section 1.3. Term Credit. Subject to all of the terms and
conditions hereof, each Lender agrees to make a loan to the Company
under a term credit (the "Term Credit") in the amount of its Term
Credit Commitment (the credit facility under which such loans are made
being hereinafter referred to as the "Term Credit") (the loans from
all the Lenders under the Term Credit being hereinafter referred to
collectively as the "Term Loan"). The Term Loan shall be made pro-
rata by the Lenders in accordance with the amount of their Term Credit
2
<PAGE>
Commitments. The Term Loan shall initially constitute part of the
applicable Domestic Rate Portion except to the extent the Company has
timely elected that the Term Loan, or any part thereof, constitutes
part of a LIBOR Portion as provided in Section 2.1 hereof. The
Lenders' advances of the Term Loan shall be made concurrently and the
Term Loan shall be disbursed in a single advance in an aggregate
principal amount equal to the Term Credit Commitments made, if at
all, on the date of the initial Revolving Credit Loan, at which time
the commitments of the Lenders to make the Term Loan under the Term
Credit shall expire. Each Lender's pro rata share of the Term Loan
made by such Lender to the Company under the Term Credit shall be
evidenced by a Term Credit Note of the Company (individually a "Term
Credit Note" and collectively the "Term Credit Notes") payable to the
order of such Lender in the amount of its Term Credit Commitment, each
Term Credit Note to be in the form (with appropriate insertions)
attached hereto as Exhibit B. Each Term Credit Note shall be
expressed to mature in ten (10) consecutive quarterly installments,
commencing on July 2, 1999 and continuing on the last day of each
calendar quarter occurring thereafter to and including September 28,
2001, and with a final installment due on November 20, 2001 and with
the aggregate amount of each installment on all Term Credit Notes to
be as follows: $1,000,000 on each of July 2, 1999 and October 1,
1999; $1,250,000 on each of December 31, 1999, March 31, 2000, June
30, 2000 and September 29, 2000; $1,500,000 on each of December 29,
2000, March 30, 2001, June 29, 2001 and September 28, 2001, and with
the final installment due on November 20, 2001 and aggregating the
entire remaining unpaid principal balance of the Term Credit Notes.
The amount of each installment due on the Term Credit Note held by
each Lender shall be a pro rata part (based on the relationship which
its Term Credit Commitment bears to the total Term Credit Commitments)
of each such aggregate amount. No amount repaid on the Term Credit
Notes may be reborrowed under the Term Credit.
Section 1.4. Letters of Credit.
(a) General Terms. Subject to the terms and conditions hereof,
the Revolving Credit may be availed of by the Company in the form of
standby and commercial letters of credit issued by the Administrative
Agent for the account of the Company (individually a "Letter of
Credit" and collectively the "Letters of Credit"), provided that the
aggregate amount of L/C Obligations shall not at any time exceed
$15,000,000. For purposes of this Agreement, a Letter of Credit shall
be deemed outstanding as of any time in an amount equal to the maximum
amount which could be drawn thereunder under any circumstances and
over any period of time plus any unpaid Reimbursement Obligations then
outstanding with respect thereto. If and to the extent any Letter of
Credit expires or otherwise terminates without having been drawn upon,
the availability under the Revolving Credit Commitments shall to such
3
<PAGE>
extent be reinstated. The Letters of Credit shall be issued by the
Administrative Agent, but each Lender shall be obligated to reimburse
the Administrative Agent for such Lender's pro rata share of the
amount of each draft drawn under a Letter of Credit in accordance with
this Section 1.4 and, accordingly, each Letter of Credit shall be
deemed to utilize the Revolving Credit Commitments of all Lenders pro
rata in accordance with the amounts of their Revolving Credit
Commitments.
(b) Term. Each Letter of Credit issued hereunder shall expire
not later than the earlier of (i) twelve (12) months from the date of
issuance (or be cancelable not later than twelve (12) months from the
date of issuance and each renewal) or (ii) the date which is thirty
(30) days prior to the Termination Date. In the event the
Administrative Agent issues any Letter of Credit with an expiration
date that is automatically extended unless the Administrative Agent
gives notice that the expiration date will not so extend beyond its
then scheduled expiration date, the Administrative Agent will give
such notice of non-renewal before the time necessary to prevent such
automatic extension if before such required notice date (i) the
expiration date of such Letter of Credit if so extended would be after
the date which is thirty (30) days prior to the Termination Date, (ii)
the Revolving Credit Commitments have terminated or (iii) an Event of
Default exists and the Required Lenders have given the Administrative
Agent instructions not to so permit the extension of the expiration
date of such Letter of Credit.
(c) General Characteristics. Each Letter of Credit issued
hereunder shall be payable in U.S. Dollars, conform to the general
requirements of the Administrative Agent for the issuance of
commercial or standby letters of credit, as the case may be, as to
form and substance, and be a letter of credit which the Administrative
Agent may lawfully issue. The Administrative Agent agrees to issue
amendments to the Letter(s) of Credit increasing the amount, or
extending the expiration date thereof at the request of the Company
subject to the conditions of Section 7 and the other terms of this
Section 1.4. Without limiting the generality of the foregoing, the
Administrative Agent's obligation to issue, amend or extend the
expiration date of a Letter of Credit is subject to the conditions of
Section 7 and the other terms of this Section 1.4 and the
Administrative Agent will not issue, amend or extend the expiration
date of any Letter of Credit if any Lender notifies the Administrative
Agent (or if any Lender then serving as Administrative Agent has
actual knowledge) of any failure to satisfy or otherwise comply with
such conditions and terms and directs the Administrative Agent not to
take such action (after giving the effect to any waiver or amendment
of any such condition or term in accordance with the provisions of
this Agreement).
4
<PAGE>
(d) Applications. At the time the Company requests each Letter
of Credit to be issued (or prior to the first issuance of a Letter of
Credit in the case of a continuing application), the Company shall
execute and deliver to the Administrative Agent an application for
such Letter of Credit in the form then customarily prescribed by the
Administrative Agent (individually an "Application" and collectively
the "Applications"). Subject to the other provisions of this
subsection, the obligation of the Company to reimburse the
Administrative Agent for drawings under a Letter of Credit (a
"Reimbursement Obligation") shall be governed by the Application for
such Letter of Credit. Anything contained in the Applications to the
contrary notwithstanding, (i) in the event the Administrative Agent is
not reimbursed (including reimbursement out of the proceeds of a
Revolving Credit Loan made by virtue of Section 1.5(b) hereof) by the
Company for the amount the Administrative Agent pays on any draft
drawn under a Letter of Credit by 11:00 a.m. (Chicago time) on the
date when such drawing is paid, the Reimbursement Obligation in
respect of the draft so paid shall bear interest (which the Company
hereby promises to pay on demand) from and after the date the draft is
paid until reimbursement in full thereof at a fluctuating rate per
annum determined by adding 2% to the Domestic Rate as from time to
time in effect, (ii) the Company shall pay fees in connection with
each Letter of Credit as set forth in Section 3 hereof, (iii) except
as otherwise provided in Section 3.3 hereof, prior to the occurrence
of a Default or an Event of Default the Administrative Agent will not
call for additional collateral security for L/C Obligations other than
the collateral security contemplated by this Agreement and the
Collateral Documents and collateral security consisting of rights in
goods (or documents of title covering the same) financed under such
Applications, and (iv) except as otherwise provided in Section 3.3
hereof, prior to the occurrence of a Default or an Event of Default
the Administrative Agent will not call for the funding of a Letter of
Credit by the Company prior to being presented with a draft drawn
thereunder (or, in the event the draft is a time draft, prior to its
due date).
(e) Change in Laws. If the Administrative Agent or any Lender
shall determine in good faith that any change in any applicable law,
regulation or guideline (including, without limitation, Regulation D
of the Board of Governors of the Federal Reserve System) or any new
law, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the
administration thereof or any central bank or other fiscal, monetary
or other authority having jurisdiction over the Administrative Agent
or such Lender (whether or not having the force of law), shall:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirement against the Letters of
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Credit, or the Administrative Agent's or such Lender's or the
Company's liability with respect thereto; or
(ii) impose on the Administrative Agent or such Lender
any penalty with respect to the foregoing or any other
condition regarding this Agreement, the Applications or the
Letters of Credit;
and the Administrative Agent or such Lender shall determine in good
faith that the result of any of the foregoing is to increase the cost
(whether by incurring a cost or adding to a cost) to the
Administrative Agent or such Lender of issuing, maintaining or
participating in the Letters of Credit hereunder (without benefit of,
or credit for, any prorations, exemptions, credits or other offsets
available under any such laws, regulations, guidelines or
interpretations thereof), then the Company shall pay on demand to the
Administrative Agent or such Lender from time to time as specified by
the Administrative Agent or such Lender such additional amounts as the
Administrative Agent or such Lender shall determine are sufficient to
compensate and indemnify it for such increased cost. If the
Administrative Agent or any Lender makes such a claim for
compensation, it shall provide the Company (with a copy to the
Administrative Agent in the case of any Lender) a certificate setting
forth the computation of the increased cost as a result of any event
mentioned herein in reasonable detail and such certificate shall be
conclusive if reasonably determined.
(f) Participations in Letters of Credit. Each Lender shall
participate on a pro rata basis in the Letters of Credit issued by the
Administrative Agent, which participation shall automatically arise
upon the issuance of each Letter of Credit. Each Lender
unconditionally agrees that in the event the Company fails to pay the
Administrative Agent any Reimbursement Obligation at the time required
by Section 1.4(d) hereof, then in that event such Lender shall pay to
the Administrative Agent such Lender's pro rata share of such unpaid
Reimbursement Obligation based on the percentage which its Revolving
Credit Commitment bears to the aggregate of the Revolving Credit
Commitments and in return such Lender shall automatically receive an
equivalent percentage participation in each payment received in
respect of the relevant Reimbursement Obligation, together with
interest thereon as provided for herein. The obligations of the
Lenders to the Administrative Agent under this subsection shall be
absolute, irrevocable and unconditional under any and all
circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Lender may have or have
had against the Company, the Administrative Agent, any other Lender or
any other party whatsoever. In the event that any Lender fails to
honor its obligation to reimburse the Administrative Agent for its pro
rata share of the amount of any such draft, then in that event (i)
each other Lender shall pay its pro rata share of the payment due the
Administrative Agent from the defaulting Lender (provided no Lender
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shall be required under this Section to make such payment to the
extent the amount so paid by such Lender, when taken together with
such Lender's share of the Loans and credit risk on Letters of Credit,
would exceed its Revolving Credit Commitment), (ii) the defaulting
Lender shall have no right to participate in any recoveries from the
Company in respect of such draft and (iii) all amounts to which the
defaulting Lender would otherwise be entitled under the terms of this
Agreement or any of the other Loan Documents shall first be applied to
reimbursing the Lenders for their respective pro rata shares of the
defaulting Lender's portion of the draft, together with interest
thereon as provided for herein. Upon reimbursement to the other
Lenders (pursuant to clause (iii) above or otherwise) of the amount
advanced by them to the Administrative Agent in respect of the
defaulting Lender's share of the draft together with interest thereon,
the defaulting Lender shall thereupon be entitled to its participation
in the Administrative Agent's right of recovery against the Company in
respect of the draft paid by the Administrative Agent. The L/C
Issuance Fee and L/C Administration Fee shall be solely for the
account of the Administrative Agent and shall not be shared by the
other Lenders.
(g) Manner of Obtaining Letters of Credit. The Company shall
provide at least three (3) Business Days' advance written notice to
the Administrative Agent of each request for the issuance of a Letter
of Credit which is a standby Letter of Credit and shall notify the
Administrative Agent not later than 11:00 a.m. (Chicago time) on any
Business Day of each request for the issuance on such day of a Letter
of Credit which is a commercial Letter of Credit, such notice in each
case to be accompanied by an Application for such Letter of Credit
properly completed and executed by the Company and in the case of an
extension or an increase in the amount of a Letter of Credit, a
written request therefor, in a form acceptable to the Administrative
Agent, in each case, together with the fees called for by this
Agreement. The Administrative Agent shall promptly notify each Lender
of the Administrative Agent's receipt of each such notice and the
Administrative Agent's issuance of the Letter of Credit so requested.
Section 1.5. Manner and Disbursement of Loans. (a) The Company
shall give written or telephonic notice to the Administrative Agent
(which notice shall be irrevocable once given and, if given by
telephone, shall be promptly confirmed in writing) by no later than
12:00 noon (Chicago time) on the date the Company requests that any
Loan be made to it under the Revolving Credit Commitments, and, except
in the case of Loans made under Section 3.6(e) hereof the
Administrative Agent shall promptly notify each Lender of the
Administrative Agent's receipt of each such notice. Each such notice
shall specify the date of the Loan requested (which must be a Business
Day) and the amount of such Loan. Each Loan shall initially
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constitute part of the applicable Domestic Rate Portion except to the
extent the Company has otherwise timely elected that such Loan
constitute part of a LIBOR Portion as provided in Section 2 hereof.
Not later than 1:00 p.m. (Chicago time) on the date specified for any
Loan hereunder, each Lender shall make the proceeds of its pro rata
share of such Loan available to the Administrative Agent in Chicago,
Illinois in immediately available funds. Subject to the provisions of
Section 7 hereof, the proceeds of each Loan shall be made available to
the Company at the principal office of the Administrative Agent in
Chicago, Illinois by depositing such proceeds to the credit of the
Company's general operating account with the Administrative Agent
numbered 439-433-4, in immediately available funds, upon receipt by
the Administrative Agent from each Lender of its pro rata share of
such Loan. Unless the Administrative Agent shall have been notified
by a Lender prior to 1:00 p.m. (Chicago time) on the date a Loan is to
be made hereunder that such Lender does not intend to make its pro
rata share of such Loan available to the Administrative Agent, the
Administrative Agent may assume that such Lender has made such share
available to the Administrative Agent on such date and the
Administrative Agent may in reliance upon such assumption make
available to the Company a corresponding amount.
(b) Reimbursement Obligation. In the event the Company fails to
give notice pursuant to Section 1.5(a) above of a request for a
Revolving Credit Loan equal to the amount of a Reimbursement
Obligation and has not notified the Administrative Agent by 12:00 Noon
(Chicago time) on the day such Reimbursement Obligation becomes due
that it intends to repay such Reimbursement Obligation through funds
not borrowed under this Agreement, the Company shall be deemed to have
requested a Revolving Credit Loan constituting part of the Domestic
Rate Portion on such day in the amount of the Reimbursement Obligation
then due, subject to Section 7.1 hereof, which Revolving Credit Loan
shall be applied to pay the Reimbursement Obligation then due.
Section 1.6. Authorized Person. For purposes of requests for
Loans, selection of interest rates and other actions to be taken by
the Company under this Agreement, the Company agrees that the
Administrative Agent may rely upon any written or telephonic notice
given by any person the Administrative Agent in good faith believes is
an Authorized Representative without the necessity of independent
investigation and, in the event any telephonic notice conflicts with
the written confirmation, such telephonic notice shall govern if the
Administrative Agent or any Lender has acted in reliance thereon.
Section 1.7. Late Payment By Lender. If an amount due the
Administrative Agent from a Lender (x) to fund such Lender's pro rata
share of a Loan as required by Section 1.5 hereof, or (y) to effect
the Settlement of any Loan as required of Section 3.6 hereof, in the
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case of each of clause (x) and (y), is not in fact made available to
the Administrative Agent by such Lender and the Administrative Agent
has made the corresponding amount available to the Company, the
Administrative Agent shall be entitled to receive such amount from
such Lender forthwith upon the Administrative Agent's demand, together
with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Company
and ending on but excluding the date the Administrative Agent recovers
such amount at a rate per annum equal to the effective rate charged to
the Administrative Agent for overnight federal funds transactions with
member banks of the federal reserve system for each day as determined
by the Administrative Agent (or in the case of a day which is not a
Business Day, then for the preceding day). If such amount is not
received from such Lender by the Administrative Agent immediately upon
demand, the Company will, on demand, repay to the Administrative Agent
the proceeds of the Loan attributable to such Lender with interest
thereon at a rate per annum equal to the interest rate applicable to
the relevant Loan, but (i) without such payment being considered a
payment or prepayment of a LIBOR Portion (so that the Company will
have no liability under Section 2.9 hereof with respect to such
payment) and (ii) without such payment impairing or otherwise
prejudicing the Company's claims and other rights against such Lender.
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1. Interest Rate Options.
(a) Portions. Subject to the terms and conditions of this
Section 2, portions of the principal indebtedness evidenced by the
Notes (all of the indebtedness evidenced by a particular Class of
Notes bearing interest at the same rate for the same period of time
being hereinafter referred to as a "Portion") may, at the option of
the Company, bear interest with reference to the Domestic Rate
("Domestic Rate Portions") or with reference to the Adjusted LIBOR
("LIBOR Portions"), and Portions may be converted from time to time
from one basis to another. All of the indebtedness evidenced by a
particular Class of Notes which is not part of a LIBOR Portion shall
constitute a single Domestic Rate Portion. All of the indebtedness
evidenced by a particular Class of Notes which bears interest with
reference to a particular Adjusted LIBOR for a particular Interest
Period shall constitute a single LIBOR Portion. There shall not be
more than ten (10) LIBOR Portions applicable to a particular Class of
Notes outstanding at any one time, and each Lender shall have a
ratable interest in each Portion. Anything contained herein to the
contrary notwithstanding, the obligation of the Lenders to create,
continue or effect by conversion any LIBOR Portion shall be
conditioned upon the fact that at the time no Default or Event
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of Default shall have occurred and be continuing. The Company hereby
promises to pay interest on each Portion at the rates and times
specified in this Section 2.
(b) Domestic Rate Portion. Each Domestic Rate Portion shall
bear interest at the rate per annum determined by adding the
Applicable Margin to the Domestic Rate as in effect from time to time,
provided that if a Domestic Rate Portion or any part thereof is not
paid when due (whether by lapse of time, acceleration or otherwise)
such Portion shall bear interest, whether before or after judgment,
until payment in full thereof as set forth in subsection (d) below.
Interest on each Domestic Rate Portion shall be payable monthly in
arrears on the last day of each month (commencing on the first of such
dates after the date hereof) and at maturity of the Notes, and
interest after maturity (whether by lapse of time, acceleration or
otherwise) shall be due and payable upon demand. Any change in the
interest rate on the Domestic Rate Portions resulting from a change in
the Domestic Rate shall be effective on the date of the relevant
change in the Domestic Rate.
(c) Libor Portions. Each LIBOR Portion shall bear interest for
each Interest Period selected therefor at a rate per annum determined
by adding the Applicable Margin to the Adjusted LIBOR for such
Interest Period, provided that if any LIBOR Portion is not paid when
due (whether by lapse of time, acceleration or otherwise) such Portion
shall bear interest, whether before or after judgment, until payment
in full thereof as set forth in subsection (d) below. Interest on
each LIBOR Portion shall be due and payable on the last day of each
Interest Period applicable thereto and, with respect to any Interest
Period applicable to a LIBOR Portion in excess of one (1) month, on
the last day of each calendar month during such Interest Period and at
the end of such Interest Period, and interest after maturity (whether
by lapse of time, acceleration or otherwise) shall be due and payable
upon demand. The Company shall notify the Administrative Agent on or
before 11:00 a.m. (Chicago time) on the third Business Day preceding
the end of an Interest Period applicable to a LIBOR Portion whether
such LIBOR Portion is to continue as a LIBOR Portion, in which event
the Company shall notify the Administrative Agent of the new Interest
Period selected therefor, and in the event the Company shall fail to
so notify the Administrative Agent, such LIBOR Portion shall
automatically be converted into and added to the applicable Domestic
Rate Portion as of and on the last day of such Interest Period. The
Administrative Agent shall promptly notify each Lender of each notice
received from the Company pursuant to the foregoing provision.
(d) Default Rate. Notwithstanding anything to the contrary
contained above, while any Event of Default exists or after
acceleration, the Company shall pay interest (after as well as before
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entry of judgment thereon to the extent permitted by law) on the
principal amount of all Loans (computed on the basis of a year of 360
days and actual days elapsed) at a rate per annum equal to:
(i) for any Loan which constitutes part of a Domestic
Rate Portion, the sum of 2% plus the Applicable Margin plus
the Domestic Rate from time to time in effect; and
(ii) for any Loan which constitutes part of a LIBOR
Portion, the sum of 2% plus the rate of interest in effect
thereon at the time of such default until the end of the
Interest Period applicable thereto and, thereafter at a rate
per annum equal to the sum of 2% plus the Applicable Margin
for Domestic Rate Portions plus the Domestic Rate from time
to time in effect;
provided, however, that in the absence of acceleration, any
adjustments pursuant to this subsection (d) shall be made at the
election of the Required Lenders with written notice to the Company.
While any Event of Default exists or after acceleration, interest
shall be paid on demand of the Administrative Agent at the request or
with the consent of the Required Lenders.
Section 2.2. Minimum LIBOR Portion Amounts. Each LIBOR Portion
shall be in an amount equal to $1,000,000 or such greater amount which
is an integral multiple of $100,000.
Section 2.3. Computation of Interest. All interest on the
Notes shall be computed on the basis of a year of 360 days for the
actual number of days elapsed.
Section 2.4. Manner of Rate Selection. The Company shall
notify the Administrative Agent by 11:00 a.m. (Chicago time) at least
three (3) Business Days prior to the date upon which the Company
requests that any LIBOR Portion be created or that any part of the
applicable Domestic Rate Portion be converted into a LIBOR Portion
(each such notice to specify in each instance the amount thereof and
the Interest Period selected therefor). The Administrative Agent
shall promptly notify each Lender of each notice received from the
Company pursuant to the foregoing provision; provided, however, that
in the case of the creation or continuation of or conversion into any
LIBOR Portion, the Administrative Agent shall so notify the Lenders in
no event any later than 11:00 a.m. (Chicago time) at least two (2)
Business Days prior to the date of such requested creation,
continuation or conversion. If any request is made to convert a LIBOR
Portion into the applicable Domestic Rate Portion, such conversion
shall only be made so as to become effective as of the last day of the
Interest Period applicable thereto. All requests for the creation,
continuance and conversion of Portions under this Agreement shall be
irrevocable. Such requests may be written or oral and the
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Administrative Agent is hereby authorized to honor telephonic requests
for creations, continuances and conversions received by it from any
person the Administrative Agent in good faith believes to be an
Authorized Representative without the necessity of independent
investigation, the Company hereby indemnifying the Administrative
Agent and the Lenders from any liability or loss ensuing from so
acting.
Section 2.5. Change of Law. Notwithstanding any other
provisions of this Agreement or any Note, if at any time any Lender
shall determine in good faith that any change in applicable laws,
treaties or regulations or in the interpretation thereof makes it
unlawful for such Lender to create or continue to maintain any LIBOR
Portion, it shall promptly so notify the Administrative Agent (which
shall in turn promptly notify the Company and the other Lenders) and
the obligation of such Lender to create, continue or maintain any such
LIBOR Portion under this Agreement shall terminate until it is no
longer unlawful for such Lender to create, continue or maintain such
LIBOR Portion. The Company, on demand, shall, if the continued
maintenance of any such LIBOR Portion is unlawful, thereupon prepay
the outstanding principal amount of the affected LIBOR Portion,
together with all interest accrued thereon and all other amounts
payable to affected Lender with respect thereto under this Agreement;
provided, however, that the Company may elect to convert the principal
amount of the affected Portion into the Domestic Rate Portion, subject
to the terms and conditions of this Agreement.
Section 2.6. Unavailability of Deposits or Inability to
Ascertain Adjusted LIBOR. Notwithstanding any other provision of this
Agreement or any Note, if prior to the commencement of any Interest
Period, the Required Lenders shall determine in good faith that
deposits in the amount of any LIBOR Portion scheduled to be
outstanding during such Interest Period are not readily available to
such Lenders in the relevant market or, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not
exist for ascertaining Adjusted LIBOR, then such Lenders shall
promptly give notice thereof to the Administrative Agent (which shall
in turn promptly notify the Company and the other Lenders) and the
obligations of the Lenders to create, continue or effect by conversion
any such LIBOR Portion in such amount and for such Interest Period
shall terminate until deposits in such amount and for the Interest
Period selected by the Company shall again be readily available in the
relevant market and adequate and reasonable means exist for the
Administrative Agent to ascertain Adjusted LIBOR.
Section 2.7. Taxes and Increased Costs. With respect to any
LIBOR Portion, if any Lender shall determine in good faith that any
change in any applicable law, treaty, regulation or guideline
(including, without limitation, Regulation D of the Board of Governors
of the Federal Reserve System) or any new law, treaty, regulation or
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guideline, or any interpretation of any of the foregoing by any
governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having
jurisdiction over such Lender or its lending branch or the LIBOR
Portions contemplated by this Agreement (whether or not having the
force of law), shall:
(i) impose, increase, or deem applicable any reserve,
special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, or any other
acquisition of funds or disbursements by, such Lender which is
not in any instance already accounted for in computing the
interest rate applicable to such LIBOR Portion;
(ii) subject such Lender, any LIBOR Portion or a Note to the
extent it evidences such a Portion to any tax (including, without
limitation, any United States interest equalization tax or
similar tax however named applicable to the acquisition or
holding of debt obligations and any interest or penalties with
respect thereto), duty, charge, stamp tax, fee, deduction or
withholding in respect of this Agreement, any LIBOR Portion or a
Note to the extent it evidences such a Portion, except such taxes
as may be measured by the overall net income or gross receipts of
such Lender or its lending branches and imposed by the
jurisdiction, or any political subdivision or taxing authority
thereof, in which such Lender's principal executive office or its
lending branch is located;
(iii) change the basis of taxation of payments of
principal and interest due from the Company to such Lender
hereunder or under a Note to the extent it evidences any LIBOR
Portion (other than by a change in taxation of the overall net
income or gross receipts of such Lender or its lending branches);
or
(iv) impose on such Lender any penalty with respect to
the foregoing or any other condition regarding this Agreement,
any LIBOR Portion, or its disbursement, or a Note to the extent
it evidences any LIBOR Portion;
and such Lender shall determine in good faith that the result of any
of the foregoing is to increase the cost (whether by incurring a cost
or adding to a cost) to such Lender of creating or maintaining any
LIBOR Portion hereunder or to reduce the amount of principal or
interest received or receivable by such Lender (without benefit of, or
credit for, any prorations, exemption, credits or other offsets
available under any such laws, treaties, regulations, guidelines or
interpretations thereof), then the Company shall pay on demand to the
Administrative Agent for the account of such Lender from time to time
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as specified by such Lender such additional amounts as such Lender
shall reasonably determine are sufficient to compensate and indemnify
it for such increased cost or reduced amount. If a Lender makes such
a claim for compensation, it shall provide to the Company (with a copy
to the Administrative Agent) a certificate setting forth the
computation of the increased cost or reduced amount as a result of any
event mentioned herein in reasonable detail and such certificate shall
be deemed prima facie correct if reasonably determined.
Section 2.8. Change in Capital Adequacy Requirements. If any
Lender shall determine that the adoption after the date hereof of any
applicable law, rule or regulation regarding capital adequacy, or any
change in any existing law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender
(or any of its branches) or any corporation controlling such Lender
with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or
comparable agency to the extent based on any such new or changed law,
rule or regulation or change in the interpretation or administration
thereof, has or would have the effect of reducing the rate of return
on such Lender's or such corporation's capital, as the case may be, as
a consequence of such Lender's obligations hereunder or for the credit
which is the subject matter hereof to a level below that which such
Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to liquidity and capital adequacy)
by an amount deemed by such Lender to be material, then from time to
time, within fifteen (15) days after demand by such Lender, the
Company shall pay to the Administrative Agent for the account of such
Lender such additional amount or amounts reasonably determined by such
Lender as will compensate such Lender for such reduction. If a Lender
makes such a claim for compensation, it shall provide to the Company
(with a copy to the Administrative Agent) a certificate setting forth
the computation of the increased cost or reduced amount as a result of
any event mentioned herein in reasonable detail and such certificate
shall be deemed prima facie correct if reasonably determined.
Section 2.9. Funding Indemnity. In the event any Lender shall
incur any loss, cost or expense (including, without limitation, any
loss (including loss of profit), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired or
contracted to be acquired by such Lender to fund or maintain its part
of any LIBOR Portion or the relending or reinvesting of such deposits
or other funds or amounts paid or prepaid to such Lender) as a result
of:
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(i) any payment of a LIBOR Portion on a date other than the
last day of the then applicable Interest Period for any reason,
whether before or after default, and whether or not such payment
is required by any provisions of this Agreement (other than any
such payment required as a result of Section 2.5 hereof); or
(ii) any failure by the Company to create, borrow,
continue or effect by conversion a LIBOR Portion on the date
specified in a notice given pursuant to this Agreement;
then, upon the demand of such Lender, the Company shall pay to the
Administrative Agent for the account of such Lender such amount as
will reimburse such Lender for such loss, cost or expense (but in any
event excluding any loss attributable to the Applicable Margin due
such Lender with respect to such LIBOR Portion). If a Lender requests
such a reimbursement, it shall provide to the Company (with a copy to
the Administrative Agent) a certificate setting forth the computation
of the loss, cost or expense giving rise to the request for
reimbursement in reasonable detail and such certificate shall be
deemed prima facie correct if reasonably determined.
Section 2.10. Lending Branch. Each Lender may, at its option,
elect to make, fund or maintain its pro rata share of the Loans
hereunder at the branches or offices specified on the signature pages
hereof or on any Assignment Agreement executed and delivered pursuant
to Section 12.8 hereof or at such of its branches or offices as such
Lender may from time to time elect.
Section 2.11. Lender's Duty to Mitigate. Each Lender agrees
that, as promptly as practicable after it becomes aware of the
occurrence of an event or the existence of a condition that would
cause it to be affected under Section 1.4(e), 2.5, 2.6 or 2.7 hereof,
such Lender will, after notice to the Company, to the extent not
inconsistent with such Lender's internal policies and customary
business practices, use its best efforts to make, fund or maintain the
affected LIBOR Portion or issue or participate in the affected Letter
of Credit, as the case may be, through another lending office of such
Lender if as a result thereof the unlawfulness which would otherwise
require payment of such Portion pursuant to Section 2.5 hereof would
cease to exist or the circumstances which would otherwise terminate
such Lender's obligation to make such Portion under Section 2.6 hereof
would cease to exist or the increased costs which would otherwise be
required to be paid in respect of such Portion or Letter of Credit
pursuant to Section 2.7 or 1.4(e) hereof would be materially reduced,
and if, as determined by such Lender, in its sole discretion, the
making, funding or maintaining of such Portion, or issuance or
participation in such Letter of Credit, as the case may be, through
such other lending office would not otherwise adversely affect such
Portion or such Lender. The Company hereby agrees to pay all
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reasonable expenses incurred by each such Lender in utilizing another
lending office pursuant to this Section 2.11.
Section 2.12. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each
Lender shall be entitled to fund and maintain its funding of all or
any part of its Note in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations
hereunder (including, without limitation, determinations under
Sections 2.6, 2.7 and 2.9 hereof) shall be made as if each Lender had
actually funded and maintained each LIBOR Portion during each Interest
Period applicable thereto through the purchase of deposits in the
relevant market in the amount of its pro rata share of such LIBOR
Portion, having a maturity corresponding to such Interest Period, and
bearing an interest rate equal to the LIBOR for such Interest Period.
Section 2.13. Replacement of Lender. (a) In the event that (x)
the Company receives from a Lender a certificate requesting an amount
be paid to such Lender under Section 1.4(e), 2.7 or 2.8 hereof and the
Required Lenders have not similarly made requests for payment arising
out of the same circumstances or (y) the obligation of any Lender to
make or maintain any LIBOR Portion has terminated under Section 2.5 or
2.6 hereof and the obligations of the Required Lenders to make or
maintain LIBOR Portions have not similarly terminated by reason of the
same circumstances, then the Company may request any other Lender or
Lenders hereunder to assume in full the Commitments then in effect of
the Lender requesting such amount be paid or whose obligations with
respect to LIBOR Portions have so terminated (such Lender in each case
being herein referred to as the "Replaceable Lender"), and to purchase
the Notes issued to the Replaceable Lender at a price equal to the
outstanding principal amount of such Notes and the Replaceable
Lender's share of any accrued and unpaid interest on such Notes plus
accrued and unpaid commitment fees owed to the Replaceable Lender, and
if any Lender or Lenders in their sole discretion agree so to assume
in full the Commitments of the Replaceable Lender (each an "Assuming
Lender"), and after payment by the Company to the Replaceable Lender
of all amounts due under this Agreement to such Lender (including any
amount specified as due in a certificate submitted under Section
1.4(e), 2.7 or 2.8 hereof) not so paid by the Assuming Lender, then
such assumption shall take place in the manner set forth in subsection
(b) below. In the event no Lender or Lenders agrees to assume in full
the Commitments of the Replaceable Lender, then the Company may
nominate one or more Lenders not then party to this Agreement so to
assume in full the Commitments of the Replaceable Lender, and if such
nominated Lender or Lenders are acceptable to the Administrative Agent
and Required Lenders (excluding the Replaceable Lender), such
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assumption shall take place in the manner set forth in subsection (b)
below and each such Lender or Lenders shall become a Lender hereunder
(each a "New Lender") and the Replaceable Lender shall no longer be a
party hereto or have any rights hereunder.
(b) In the event a Replaceable Lender's Commitments are to be
assumed in full by an Assuming Lender or a New Lender, then such
assumption shall take place on a date acceptable to the Company, the
Replaceable Lender and the Assuming Lender or New Lender, as the case
may be, and such assumption shall take place through the payment of
all amounts due under this Agreement to the Replaceable Lender and the
execution of such instruments and documents as shall, in the
reasonable opinion of the Administrative Agent, be reasonably
necessary or appropriate for the Assuming Lender or New Lender to
assume in full the Commitments of the Replaceable Lender (including,
without limitation, the issuance of new Notes and the execution of an
amendment hereto making any New Lender a party hereto). In the event
no Assuming Lender or New Lender agrees to assume in full the
Commitments of the Replaceable Lender, then such Replaceable Lender
shall remain a party hereto and its Commitments shall remain in
effect.
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, AND APPLICATIONS.
Section 3.1. Fees.
(a) Commitment Fee. For the period from and including the date
hereof to but not including the Termination Date, the Company shall
pay to the Administrative Agent for the account of the Lenders a
commitment fee at the rate equal to the Applicable Margin (computed on
the basis of a year of 360 days for the actual number of days elapsed)
on the average daily unused portion of the Available Revolving Credit
Commitments. Such commitment fee shall be payable quarterly in
arrears on the last day of each March, June, September and December in
each year (commencing December 31, 1998) and on the Termination Date.
(b) Administrative Agent's Fee. On the date hereof, and on the
date occurring on each anniversary of the date hereof when any credit,
or commitment to extend credit, is outstanding hereunder, the Company
shall pay to the Administrative Agent, for its own use and benefit, an
Administrative Agent's fee in such amount as is mutually agreed to in
writing between the Company and the Administrative Agent.
(c) Letter of Credit Fees. In consideration of the issuance of
Letters of Credit, the Company agrees to pay the Administrative Agent
for the benefit of the Lenders a fee (the "L/C Participation Fee") at
a rate per annum equal to the Applicable Margin for LIBOR Portions
(computed on the basis of a 360 day year and actual days elapsed) of
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the face amount for each Letter of Credit issued for the account of
the Company hereunder. In addition, the Company shall pay the
Administrative Agent for its own account (x) a fee (the "L/C Issuance
Fee") in the amount equal to one-eighth of one percent (0.125%) of the
stated amount of each standby Letter of Credit issued hereunder, and
(y) such drawing, negotiation, amendment and other administrative fees
in connection with each L/C as may be established by the
Administrative Agent from time to time (the "L/C Administrative Fee").
All L/C Issuance Fees and L/C Participation Fees shall be payable
quarterly in arrears on the last day of each March, June, September
and December commencing December 31, 1998 and on the Termination Date,
and all L/C Administrative Fees shall be payable on the date of
issuance of each Letter of Credit hereunder and on the date required
by the Administrative Agent.
(d) Audit Fees. The Company shall pay to the Administrative
Agent for its own use and benefit charges for audits of the Collateral
performed by the Administrative Agent or its agents or representatives
in such amounts as the Administrative Agent may from time to time
request (the Administrative Agent acknowledging and agreeing that such
charges shall be computed in the same manner as it at the time
customarily uses for the assessment of charges for similar collateral
audits, but that in any event such charges for audit personnel shall
not exceed a rate of $500 per man day plus reimbursement for
out-of-pocket costs and expenses); provided, however, that in the
absence of any Default or Event of Default, the Company shall not be
required to reimburse the Administrative Agent for more than three (3)
such Collateral audits per calendar year.
Section 3.2. Voluntary Prepayments. In addition to such other
prepayments of the Notes resulting from the application of proceeds of
the Collateral required by Section 4.2 hereof, the Company shall have
the privilege of making additional prepayments of the Notes in whole
or in part (but if in part, then in a minimum amount of $100,000) at
any time upon notice from the Company to the Administrative Agent no
later than 11:00 a.m. (Chicago time) on the date of such prepayment
(such notice if received subsequent to 11:00 a.m. (Chicago time) on a
given day to be treated as though received at the opening of business
on the next Business Day), which shall promptly so notify the Lenders,
by paying to the Administrative Agent for the account of the Lenders
(i) the principal amount to be prepaid, (ii) if such a prepayment
prepays a Class of Notes in full, accrued interest on such Class of
Notes to the date of prepayment plus (in the case of such a prepayment
of the Revolving Credit Notes in full and is accompanied by the
termination in whole of the Revolving Credit Commitments), any
commitment fee which has accrued and is unpaid plus any amounts due to
the Lenders under Section 3.4 hereof, (iii) any amounts due to the
Lenders under Section 2.9 hereof.
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Section 3.3. Mandatory Prepayments. (a) Borrowing Base. The
Company covenants and agrees that if at any time the then unpaid
principal balance of the Revolving Credit Notes and the L/C
Obligations then outstanding shall be in excess of the Borrowing Base
as then determined and computed, the Company shall immediately and
without notice or demand pay over the amount of the excess to the
Administrative Agent for the account of the Lenders as and for a
mandatory prepayment on such Obligations, with each such prepayment
first to be applied to the Revolving Credit Loans until payment in
full thereof with any remaining balance to be held by the
Administrative Agent as collateral security for the L/C Obligations.
(b) Available Revolving Credit Commitment. The Company
covenants and agrees that if at any time the then unpaid principal
balance of the Revolving Credit Notes and the L/C Obligations then
outstanding shall be in excess of the sum of the Available Revolving
Credit Commitment, the Company shall immediately and without notice or
demand pay over the amount of the excess to the Administrative Agent
for the account of the Lenders as and for a mandatory prepayment on
such Obligations, with each such prepayment first to be applied to the
Revolving Credit Loans until payment in full thereof with any
remaining balance to be held by the Administrative Agent as collateral
security for the L/C Obligations.
(c) Equity Offering. Within five (5) Business Days of receipt
by the Parent or the Company of cash proceeds from any public offering
or private placement of any capital stock or other equity of the
Parent or the Company (other than (i) any sale of capital stock of the
Parent or the Company pursuant to an employee stock ownership plan,
(ii) any issuance of capital stock of the Parent or the Company to
growers used by the Company pursuant to incentive plans to enhance the
Company's supply arrangements, and (iii) any sale of capital stock of
the Parent or the Company pursuant to a dividend reinvestment plan for
its employees, producers and directors), the Company shall prepay the
Term Loan in an amount equal to the lesser of (x) 100% of the gross
cash proceeds of such issuance (net of underwriting discounts and
commissions and any other costs and expenses directly incurred and
payable in connection therewith) or (y) the aggregate amount of the
Term Loans then outstanding. Each such prepayment shall be applied to
the remaining installments of the Term Loan in the inverse order of
maturity.
(d) Mandatory Prepayments out of Asset Sale Proceeds. Any and
all proceeds derived from the sale or disposition (whether voluntary
or involuntary), or on account of the damage or destruction, of the
real estate, furniture, fixtures, equipment or other fixed assets of
the Parent, the Company and any Subsidiary shall be paid over to the
Administrative Agent as and when received by the Parent, the Company
or any Subsidiary, as applicable, as and for a mandatory prepayment on
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the Term Credit Notes until payment in full thereof; provided,
however, that if at the time of receipt of such proceeds no amount is
outstanding under the Term Credit Notes such payment or excess (as
appropriate) shall be applied to the Revolving Credit Notes until
payment in full thereof, with any remaining balance to be held by the
Administrative Agent as collateral security for the Obligations owing
under the Applications; provided further, however, that (i) the
foregoing provisions shall be inapplicable to funds received by the
Administrative Agent under the Collateral Documents if and so long as,
pursuant to the terms of the Collateral Documents, the same are to be
held by the Administrative Agent and disbursed for the restoration,
repair or replacement of the property in respect of which such
proceeds were received, (ii) no prepayment shall be required with
respect to up to $1,000,000 of proceeds received in any calendar year
(such $1,000,000 amount in each such year being hereinafter referred
to as the "sales basket" for such year) from the sale or other
disposition or the loss of real estate, equipment, furniture and
fixtures (with (x) any proceeds of any sale, disposition or loss in
each case payable on a deferred basis to be deemed received for
purposes of determining the amount of such proceeds which are exempt
from prepayment under this clause (ii) as if they were all received
concurrent with such disposition or loss (it being understood that any
such deferred proceeds received in years subsequent to the year of
such sale, loss or disposition do not count against the sales basket
in such subsequent years) and (y) the deferred proceeds so exempted,
and permitted to be retained by the Company, to be the first so
received up to such amount) and (iii) no prepayment shall be required
with respect to proceeds received from the sale, damage or destruction
of any such assets subject to liens permitted by Section 8.13(e)
hereof which are prior to the liens of the Collateral Documents to the
extent such proceeds are applied in reduction of the indebtedness
permitted by Section 8.12(b) hereof. To the extent that this Section
3.3(d) requires the payment of any such deferred proceeds to the
Administrative Agent for the account of the Lenders, such payment
shall not be required to be made to the Administrative Agent until
such deferred proceeds are actually received by the Parent, the
Company or any Subsidiary, as applicable. Nothing contained in this
Section shall be interpreted to permit any sale or other disposition
of assets not otherwise permitted by the Loan Documents.
Section 3.4. Terminations of Revolving Credit Commitments. The
Company shall have the right at any time and from time to time, to
terminate in whole but not in part the Revolving Credit Commitments
upon (i) thirty (30) days' prior notice to the Administrative Agent
(which shall promptly so notify the Lenders), (ii) the payment in full
of all outstanding Obligations (including, without limitation, the
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outstanding principal balance of the Revolving Credit Loans, all
accrued and unpaid interest thereon, any accrued and unpaid fees to
the date of termination and any amount due under Section 2.9 hereof),
(iii) the payment of any prepayment premium required pursuant to the
terms of this Agreement, and (iv) the expiration or termination of all
Letters of Credit and, to the extent any such Letter of Credit has not
expired in accordance with its terms or otherwise been terminated to
the satisfaction of the Lenders, accompanied by collateral security in
form and in such amounts as shall be satisfactory to the Lenders in
their sole discretion. Any termination of the Revolving Credit
Commitments pursuant to this Section 3.4 may not be reinstated.
(b) At the effective date of any such termination of the
Revolving Credit Commitments the Company shall pay a prepayment
premium to the Administrative Agent for the ratable benefit of the
Lenders, as liquidated damages for the loss of bargain and not as a
penalty, in an amount equal to the sum set forth below for the
effective date of such termination:
For any Effective Date Prepayment Premium shall be:
of Termination Occurring:
At any time prior to
November 20, 1999 $1,500,000
Thereafter through
May 20, 2000 $ 750,000
At any time thereafter $ 0
Section 3.5. Place and Application of Payments. (a) Generally.
All payments of principal, interest, fees and all other Obligations
payable hereunder and under the other Loan Documents shall be made to
the Administrative Agent at its office at 111 West Monroe Street,
Chicago, Illinois (or at such other place as the Administrative Agent
may specify) on the date any such payment is due and payable.
Payments received by the Administrative Agent after 11:00 a.m.
(Chicago time) shall be deemed received as of the opening of business
on the next Business Day. All such payments shall be made in lawful
money of the United States of America, in immediately available funds
at the place of payment, without set-off or counterclaim and without
reduction for, and free from, any and all present or future taxes,
levies, imposts, duties, fees, charges, deductions, withholdings,
restrictions and conditions of any nature imposed by any government or
any political subdivision or taxing authority thereof (but excluding
any taxes imposed on or measured by the net income of any Lender).
Except as herein provided (such as, for example, Section 3.6 hereof),
all payments shall be received by the Administrative Agent for the
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ratable account of the Lenders and shall be promptly distributed by
the Administrative Agent ratably to the Lenders. Unless the Company
directs otherwise or this Agreement provides otherwise, principal
payments on a given Class of Notes (including payments made by virtue
of the application of proceeds of Collateral under Section 3.5 hereof)
shall be first applied to the Domestic Rate Portion of such Notes
until payment in full thereof, with any balance applied to the LIBOR
Portions of the same Class of Notes in the order in which their
Interest Periods expire. All payments and collections received in
respect of the Obligations and all proceeds of Collateral received, in
each instance, by the Administrative Agent or any of the Lenders,
shall be remitted to the Administrative Agent and as and to the extent
provided in this Section 3, applied by the Agent to the Obligations
the due and payable, with any balance of such proceeds not applied to
the Obligations to be held by the Administrative Agent (whether
voluntary or required) shall be accompanied by any amount due the
Lenders under Section 2.9 hereof, but no acceptance of such a payment
without requiring payment of amounts due under Section 2.9 shall
preclude a later demand by the Lenders for any amount due them under
Section 2.9 in respect of such payment. Notwithstanding the
foregoing, if and so long as no Default or Event of Default has
occurred and is continuing, if and to the extent a mandatory
prepayment required by Sections 3.3(b), 3.3(c) or 3.3(d) hereof would
otherwise be applied against any LIBOR Portion of the relevant Notes,
the Company may direct that such prepayment be held in a cash
collateral account maintained by the Company with the Administrative
Agent pursuant to agreements in form, scope and substance reasonably
satisfactory to the Administrative Agent (the "Cash Collateral
Account") and not applied to any LIBOR Portion of such Notes until the
earlier of (i) the last day of the Interest Period then applicable to
such LIBOR Portion or (ii) the occurrence of any Default or Event of
Default. The Company hereby grants, and each Guarantor (by its
execution of a Guaranty) thereby grants, a lien on the Cash Collateral
Account and all earnings thereon as collateral security for the
Obligations, it being understood and agreed that at such time as any
Default or Event of Default shall occur, the balance of the Cash
Collateral Account and earnings thereon may be applied by the
Administrative Agent to the Obligations as provided in this Agreement.
(b) Application of Collateral Proceeds Before Default. Prior to
the occurrence of a Default or Event of Default, all proceeds of
Collateral received in the Concentration Account within the meaning of
Section 4.2 hereof shall (subject to the other terms of this
Agreement) be applied by the Administrative Agent against the
outstanding Obligations as follows:
(i) first, to any outstanding fees, charges and
expenses then due the Administrative Agent or the Lenders;
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(ii) second, to outstanding interest charges then due in
respect of the Obligations;
(iii) third, to the outstanding principal balance of the
Loans and any liabilities in respect of unpaid drawings under
Letters of Credit; and
(iv) finally, to be applied to, or held as collateral
security for, any remaining unpaid or unsatisfied Obligations.
(c) Application After Default. Anything contained herein to the
contrary notwithstanding, all payments and collections received in
respect of the Obligations and all proceeds of the Collateral
received, in each instance, by the Administrative Agent or any of the
Lenders after the occurrence of an Event of Default shall be remitted
to the Administrative Agent and distributed as follows:
(i) first, to the payment of any outstanding costs and
expenses incurred by the Administrative Agent in monitoring,
verifying, protecting, preserving or enforcing the Liens on
the Collateral, and in protecting, preserving or enforcing
rights under this Agreement or any of the other Loan Documents,
and in any event including all costs and expenses of a character
which the Company has agreed to pay under Section 12.4 hereof
(such funds to be retained by the Administrative Agent for its
own account unless it has previously been reimbursed for such
costs and expenses by the Lenders, in which event such amounts
shall be remitted to the Lenders to reimburse them for payments
theretofore made to the Administrative Agent);
(ii) second, to the payment of any outstanding interest
or other fees or amounts due under this Agreement or any of
the other Loan Documents other than for principal, pro rata
as among the Administrative Agent and the Lenders in accord
with the amount of such interest and other fees or amounts owing
each;
(iii) third, to the payment of the principal of the Notes
and any liabilities in respect of unpaid drawings under Letters
of Credit, pro rata as among the Lenders in accord with the then
respective unpaid principal balances of the Notes and the then
unpaid liabilities in respect of unpaid drawings under the
Letters of Credit;
(iv) fourth, to the Administrative Agent and the Lenders pro
rata in accord with the amounts of any other indebtedness,
obligations or liabilities of the Company owing to them (other
than the Hedging Liability) and secured by the Collateral
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Documents unless and until all such indebtedness, obligations and
liabilities have been fully paid and satisfied;
(v) fifth, to the Administrative Agent for the cash
collateralization of the entire amount undrawn on the Letters of
Credit, with amounts to be so remitted on account of such undrawn
Letters of Credit until the Administrative Agent is holding an
amount of cash equal to the then outstanding undrawn amount of
all such Letters of Credit; and
(vi) sixth, to the Administrative Agent and the Lenders
pro rata in accord with the amounts of any Hedging Liability
owing to them unless and until all such Hedging Liability has
een fully paid and satisfied; and
(vii) seventh, to the Company or to whoever the
Administrative Agent reasonably determines to be lawfully
entitled thereto.
Except as otherwise specifically provided for herein, the Company
hereby irrevocably waives the right to direct the application of
payments and collections at any time received by the Administrative
Agent or any of the Lenders from or on behalf of the Company, and the
Company hereby irrevocably agrees that the Administrative Agent shall
have the continuing exclusive right to apply and reapply any and all
such payments and collections received at any time by the
Administrative Agent or any of the Lenders against the Obligations in
the manner described above. In the event that the amount of any
Hedging Liability is not fixed and determined at the time proceeds of
Collateral are received which are to be allocated thereto, the
proceeds of Collateral so allocated shall be held by the
Administrative Agent as collateral security until such Hedging
Liability is fixed and determined and then the same shall (if and
when, and to the extent that, payment of such Hedging Liability is
required by the terms of the relevant Hedging Arrangements) be applied
to the Hedging Liability.
The foregoing paragraph to the contrary notwithstanding, if upon
the occurrence of an Event of Default the percentages of the Revolving
Credit Commitments in use are not identical (whichever of the
Revolving Credit Commitments has the highest utilization being herein
referred to as the "Overfunded Commitment" and whichever has the lower
utilization being hereinafter referred to as the "Underfunded
Commitment") (i) payments which pursuant to the foregoing paragraph
are to be allocated to the principal of the Notes shall first be
applied to the Revolving Credit Notes issued under the Overfunded
Commitment until the utilization percentages of the Revolving Credit
Commitments are identical and (ii) at the request of either the
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Administrative Agent or the Required Lenders (with the Required
Lenders computed solely for this purpose as though the Administrative
Agent had no Revolving Credit Commitment hereunder) the Lender or
Lenders holding the Underfunded Commitment shall purchase from the
Lender or Lenders holding the Overfunded Commitment participations in
the overfunded Lenders' Loans (and Reimbursement Obligations, if
applicable) in an amount such that after giving effect thereto, the
percentages of the Revolving Credit Commitments in use are identical.
All of the foregoing principles shall be applied as though the
Revolving Credit Commitments had not terminated, whether or not such
is in fact the case.
(d) The Company hereby irrevocably authorizes the Administrative
Agent and any Lender to charge any of the Company's deposit accounts
maintained with the Administrative Agent or such Lender for the
amounts from time to time necessary to pay any then due Obligations;
provided that the Company acknowledges and agrees that neither the
Administrative Agent nor any Lender shall be under an obligation to do
so and neither the Administrative Agent nor any Lender shall incur any
liability to the Company or any other Person for the Administrative
Agent's or such Lender's failure to do so.
Section 3.6. Weekly Settlement. (a) In order to minimize the
frequency of transfers of funds between the Administrative Agent and
each Lender, advances and repayments of Loans will be settled
according to the procedures described in this Section 3.6. The
Administrative Agent shall, once every seven (7) days, or sooner, if
so elected by the Administrative Agent in its discretion, but in each
case on a Business Day, (each such day being a "Settlement Date"),
distribute to each Lender a statement (the "Administrative Agent's
Report") disclosing as of the immediately preceding Business Day, the
aggregate unpaid principal balance of Revolving Credit Loans
outstanding as of such date (including Revolving Credit Loans made by
the Administrative Agent under Section 3.6(e) hereof), repayments and
prepayments of principal received from the Company with respect to the
Revolving Credit Loans since the immediately preceding Administrative
Agent's Report, additional Revolving Credit Loans made to the Company
since the date of the immediately preceding Administrative Agent's
Report and the Company's Borrowing Base as of the most recent
determination thereof. Each Administrative Agent's Report shall
disclose the net amount (the "Settlement Amount") due to or due from
the Lenders to effect a Settlement of any Revolving Loan and the
calculations therefor. The Administrative Agent's Report submitted to
a Lender shall be prima facie evidence of the amount due to or from
such Lender to effect a Settlement of any Revolving Loan. If the
Administrative Agent's Report discloses a net amount due from the
Administrative Agent to any Lender to effect the Settlement of a
Revolving Loan, the Administrative Agent, concurrently with the
delivery of the Administrative Agent's Report to the Lenders, shall
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transfer, by wire transfer or otherwise, such amount to such Lender in
funds immediately available to such Lender, in accordance with such
Lender's instructions. If the Administrative Agent's Report discloses
a net amount due to the Administrative Agent from any Lender to affect
the Settlement of any Revolving Loan, then such Lender shall wire
transfer such amount, in funds immediately available to the
Administrative Agent, as instructed by the Administrative Agent. Such
net amount due from a Lender to the Administrative Agent shall be due
on the Settlement Date if such Administrative Agent's Report is
received before 12:00 noon (Chicago time) and such net amount shall be
due on the first Business Day following the Settlement Date if such
Administrative Agent's Report is received after 12:00 noon (Chicago
time). Notwithstanding the foregoing, payments actually received by
the Administrative Agent with respect to the following items shall be
distributed by the Administrative Agent to each Lender as follows:
(i) any principal payment of a LIBOR Portion that is not
converted or continued will be paid to the Lenders by the
Administrative Agent on the same day as received;
(ii) as soon as possible, but in any event, within one
Business Day after receipt thereof by the Administrative
Agent, payments applicable to interest on the Revolving
Credit Loans shall be paid to each Lender in proportion to its
pro rata share of such Revolving Credit Loans, subject to any
adjustments for any Revolving Credit Loans made by the
Administrative Agent under Section 3.6(e) hereof so that the
Administrative Agent alone shall receive interest on the
Revolving Credit Loans so made until Settlement with such Lender
on such Revolving Credit Loans and each Lender shall only receive
interest on the amount of funds actually advanced by such Lender.
Each Lender's share of interest accruing each day on the
Revolving Credit Loans shall be based on such Lender's Daily Loan
Balance. For purposes hereof, the term "Daily Loan Balance"
shall mean as of any day for any Lender, an amount calculated as
of the end of that day by subtracting (a) the cumulative
principal amount paid by the Administrative Agent to such Lender
on account of Revolving Credit Loans from the date of the initial
extension of credit under this Agreement (the "Closing Date")
through and including the date as of which the Daily Loan Balance
is being determined from (b) the cumulative principal amount
advanced by such Lender to the Administrative Agent for the
benefit of the Company to fund Revolving Credit Loans made on and
after the Closing Date through and including such date of
determination; and
(iii) as soon as possible, but in any event, within one
Business Day after receipt thereof by the Administrative
Agent, payments applicable to principal of and interest on the
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Term Loan, the fees set forth in Sections 1.4(a) and 3.1 hereof
and expenses payable under this Agreement, shall in each case be
paid to each Lender as set forth in the applicable Section
hereof.
(b) All funds advanced to the Company by the Administrative
Agent or a Lender pursuant to this Section 3.6 shall for all purposes
be treated as a Revolving Loan or Term Loan, as appropriate, made by
such Lender against the appropriate Note of such Lender and all funds
received by any Lender pursuant to this Section 3.6 for all purposes
be treated as a repayment of amounts owed with respect to Loans made
by such Lender against the appropriate Note of such Lender.
(c) In the event that any bankruptcy, reorganization,
liquidation, receivership or similar cases or proceedings in which the
Company is a debtor, prevent the Administrative Agent or any Lender
from making any Revolving Loan to effect a Settlement contemplated
hereby, the Administrative Agent or such Lender, as the case may be,
will make such dispositions and arrangements with the other Lenders
with respect to such Loans, either by way of purchase of
participations, distribution, pro tanto assignment of claims,
subrogation or otherwise, as shall result in each Lender's share of
the outstanding Loans being equal, as nearly as may be, to the
percentage which such Lender's Revolving Credit Commitment bears to
the Revolving Credit Commitments of all the Lenders.
(d) Payments to effect a Settlement shall be made without
setoff, counterclaim or reduction of any kind. The failure or refusal
of any Lender to make available to the Administrative Agent at the
aforesaid time and place the amount of the Settlement Amount due from
such Lender (i) shall not relieve any other Lender from its several
obligation hereunder to make available to the Administrative Agent the
amount of such other Lender's Settlement Amount and (ii) shall not
impose upon such other Lender any liability with respect to such
failure or refusal or otherwise increase the Revolving Credit
Commitment or Term Credit Commitment of such other Lender.
(e) Notwithstanding the notice requirements set forth in Section
1.5 above, but otherwise in accordance with the terms and conditions
of this Agreement, the Administrative Agent may, in its sole
discretion without conferring with the Lenders but on their behalf,
make Loans in an amount requested by the Company. Any such Loans so
funded by the Administrative Agent shall be deemed Loans made by the
Administrative Agent under its Revolving Credit Commitment, except for
purposes of Section 3.1(a) hereof. Each Lender's obligation to fund
its portion of any such Loan made by the Administrative Agent will
commence on the date such Loan is actually so made by the
Administrative Agent. However, until the date on which the Settlement
of such Loan is required in accordance with this Section 3.6 above,
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such obligation of the Lender shall be satisfied by the Administrative
Agent's making of such Loan. The Company acknowledges and agrees that
the making of such Loans by the Administrative Agent under this
Section 3.6(e) shall, in each case, be subject in all respects to the
provisions of this Agreement as if each such Loan were made in
response to a notice requesting such Loan made in accordance with
Section 1.5 hereof, including without limitation the limitations set
forth in Section 1.1 hereof and the requirements of Section 3.3
hereof. All actions taken by the Administrative Agent pursuant to the
provisions of this Section 3.6(e) shall be conclusive and binding on
the Company in the absence of manifest error. Any Loans made by the
Administrative Agent pursuant to this Section shall constitute the
Domestic Rate Portion of the Revolving Credit Notes unless and until
converted in accordance with the provisions of this Agreement.
Notwithstanding anything herein to the contrary, prior to the
Settlement with any Lender of any Loan funded by the Administrative
Agent under this Section, interest payable on such Loan otherwise
allocable to such Lender shall be for the sole account of the
Administrative Agent and payment of principal on such Loan otherwise
allocable to such Lender shall be for the sole account of the
Administrative Agent.
Section 3.7. Computation of Obligations Outstanding. For the
purpose of calculating the aggregate principal balance of Obligations
outstanding hereunder, Obligations shall be deemed to be paid on the
date payments or collections, as the case may be, are applied by the
Administrative Agent to such Obligations; provided, however, for
purposes of calculating interest payable by the Company on the Loans
and on any other interest-bearing Obligations under this Agreement,
any payment or collection of the Obligations by virtue of the
application of proceeds of Collateral pursuant to Section 3.5 hereof,
as the case may be, shall be deemed to be applied to the Loans or
other interest-bearing Obligations two (2) Business Days after receipt
of such payment or collection by the Administrative Agent (any
additional amount payable by the Company solely by virtue of this
deemed application to be paid to and retained by the Administrative
Agent for its sole account as an administrative fee, with the Lenders
to have no right to any share thereof) further provided, however, that
each payment or collection received by wire or ACH transfer directly
to the Concentration Account maintained with the Administrative Agent
as contemplated by Section 3.5 hereof shall be deemed applied on the
date of the Administrative Agent's receipt of such transfer. The
Administrative Agent shall apply all payments and collections received
in respect of the Obligations, and all proceeds of Collateral, in each
case received by the Administrative Agent, in reduction of the
Obligations promptly after the Administrative Agent deems such sums
collected in good funds in accordance with its then standard criteria
for determining availability of funds. Notwithstanding the foregoing,
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if any item credited by the Administrative Agent in reduction of the
Obligations is not honored, the Administrative Agent may reverse any
provisional credit which has been given for the item and make
appropriate adjustments to the amount of interest and principal
otherwise due hereunder.
Section 3.8. Notations. All Loans made against a Note, the
status of all amounts evidenced by a Note as constituting part of the
Domestic Rate Portion or a LIBOR Portion, and, in the case of any
LIBOR Portion, the rates of interest and Interest Periods applicable
to such Portions shall be recorded by each Lender on its books and
records or, at its option in any instance, endorsed on a schedule to
its Note and the unpaid principal balance and status, rates and
Interest Periods so recorded or endorsed by such Lender shall be prima
facie evidence in any court or other proceeding brought to enforce
such Note of the principal amount remaining unpaid thereon, the status
of the Loans evidenced thereby and the interest rates and Interest
Periods applicable thereto; provided that the failure of a Lender to
record any of the foregoing shall not limit or otherwise affect the
obligation of the Company to repay the principal amount of each Note
together with accrued interest thereon. Prior to any negotiation of a
Note, a Lender shall record on a schedule thereto the status of all
amounts evidenced thereby as constituting part of the applicable
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR
Portion, the rates of interest and the Interest Periods applicable
thereto.
SECTION 4. COLLATERAL AND GUARANTIES.
Section 4.1. Collateral. The payment and performance of the
Obligations, as well as any Hedging Liability, shall be secured by (i)
all of each of the Parent's, the Company's and each Material
Subsidiary's now existing or hereafter arising or acquired accounts,
general intangibles, inventory, machinery, equipment and all other
goods, chattel paper, instruments, documents and certain other assets
and property of the Company pursuant to a Security Agreement dated of
even date herewith, as the same may be amended, modified or
supplemented from time to time (the "Security Agreement") and (ii) all
real estate owned by the Parent, the Company or any of the Material
Subsidiaries which is used by any such Person as a processing plant,
further processing plant, feedmill or hatchery and all the rents,
issues and profits thereof, whether now owned or hereafter acquired or
arising; provided, however, that until an Event of Default has
occurred and is continuing and thereafter until otherwise required by
the Required Lenders or the Administrative Agent, (i) liens need not
be perfected on copyrights, trademarks, patents and licenses thereof
having a fair market value of less than $250,000 in any instance and
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$250,000 in the aggregate, (ii) liens need not be perfected on notes
receivable having a fair market value of less than $250,000 in any
instance and $250,000 in the aggregate, and (iii) liens on vehicles
which are subject to a certificate of title law need not be noted on
the certificate of title. The Liens on the Collateral shall be
granted to the Administrative Agent for the ratable account of the
Lenders and shall be valid and perfected first liens subject, however,
to the proviso appearing at the end of the immediately preceding
sentence and Permitted Liens. Notwithstanding anything to the
contrary contained herein, in no event will any of the Collateral
described above be deemed to include (a) any interest in copyrights,
trademarks, patents or similar intangibles licensed to the Company,
any Guarantor or any Subsidiary from any third party (other than the
Company or any of its Affiliates) to the extent that the granting of a
security interest or lien therein is prohibited by the license or
other agreement(s) pursuant to which such the Company or such
Guarantor or Subsidiary holds such interest and such prohibition has
not been or is not waived or the consent of the applicable party has
not been or is not obtained, (b) any interest in contracts and
contracts rights thereunder (other than Accounts arising therefrom) to
the extent that the granting of a security interest or lien therein is
prohibited by such contract and such prohibition has not been or is
not waived or the consent of the applicable party has not been or is
not obtained, (c) any interests in equipment owned by the Company or
any Subsidiary which is subject to a Purchase Money Lien in favor of
any third party (other than the Company or any of its Affiliates) to
the extent the granting of a security interest or lien therein is
prohibited by the agreement(s) pursuant to which such equipment is
financed and such prohibition has not been or is not waived or the
consent of the applicable party has not been or is not obtained and
(d) any interests in any leases or licenses to use property under
which the Company, any Guarantor or any Material Subsidiary is lessee
or licensee and a Person other than the Company, any Guarantor or an
Affiliate of such Person is lessor or licensor to the extent the
granting of a security interest or lien therein is prohibited by the
agreement(s) pursuant to which such property is leased and such
prohibition has not been or is not waived or the consent of the
applicable party has not been or is not obtained.
Section 4.2. Collateral Proceeds. The Company agrees to make
such arrangements as shall be necessary or appropriate to assure
(through the use of one or more lock boxes under the sole control of
the Administrative Agent) that all proceeds of the Collateral are
deposited (in the same form as received) in one or more remittance
accounts at least one of which is maintained with the Administrative
Agent but the others of which may be maintained with any commercial
bank acceptable to the Administrative Agent if and so long as it
remains under the control of the Administrative Agent, each such
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account to constitute a special restricted account (each such special
restricted account with a commercial bank other than the
Administrative Agent to be referred to hereinafter as a "Blocked
Account" and the special restricted account maintained with the
Administrative Agent to be referred to herein as the "Concentration
Account"). Each commercial bank at which a Blocked Account is
maintained must provide its written acknowledgement and agreement in
form and substance reasonably satisfactory to the Administrative Agent
that funds deposited in such Blocked Account represent proceeds of the
Collateral, that such commercial bank agrees to hold such funds as the
Administrative Agent's bailee subject to the Administrative Agent's
direction and control and that such commercial bank agrees to wire
transfer to the Concentration Account on a daily basis all amounts on
deposit in the Blocked Account as and when such commercial bank deems
such amounts to constitute collected funds in accordance with its
customary practices regarding funds availability. Any proceeds of
Collateral received by the Company shall be held by the Company in
trust for the Administrative Agent and the Lenders in the same form in
which received, shall not be commingled with any assets of the
Company, and shall be delivered immediately to the Administrative
Agent (together with any necessary endorsements thereto) for deposit
into the Concentration Account. The Company acknowledges that the
Administrative Agent has (and is hereby granted to the extent it does
not already have) a Lien on the Blocked and Concentration Accounts and
all funds contained therein for the ratable benefit of the Lenders to
secure the Obligations. No amounts deposited in the Blocked or
Concentration Accounts shall be released to the Company, but shall
instead be applied to, or otherwise held as collateral security for,
the outstanding Obligations as set forth in Section 3 hereof, it being
understood and agreed that the Company notwithstanding such
application shall have the right to obtain additional Loans and
Letters of Credit under this Agreement subject to the terms and
conditions hereof.
Section 4.3. Guaranties from Subsidiaries. The payment and
performance of the Obligations, as well as any Hedging Liability,
shall at all times be jointly and severally guaranteed by each
Material Subsidiary pursuant hereto or pursuant to a Guaranty issued
by such Subsidiary. In the event any Material Subsidiary is hereafter
acquired or formed, the Company shall also cause such Subsidiary to
execute such Collateral Documents (having terms and conditions
substantially similar to those executed by the Company and its
Subsidiaries in connection with the initial Loans under this
Agreement) as the Administrative Agent may then require granting the
Administrative Agent for the benefit of the Lenders a security
interest in and lien on the assets of such Subsidiary as collateral
security for the Notes and the other Obligations and any Hedging
Liability, together with such other instruments, documents,
certificates and opinions required by the Administrative Agent in
connection therewith.
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Section 4.4. Release of Collateral from De Minimus Sales.
Notwithstanding anything in any Loan Document to the contrary, the
Administrative Agent shall release from the liens of the Collateral
Documents any real estate, furniture, fixtures, equipment or other
fixed assets of the Parent, the Company or any Subsidiary aggregating
not more than $3,500,000 in fair market value in any calendar year
which were sold or otherwise disposed of at arms length to an
unaffiliated third party if, and only if, (i) any payment required by
Section 3.3(d) hereof on account of such sale or other disposition
shall have been made and (ii) at the time of such sale or other
disposition and immediately after giving effect thereto, no Default or
Event of Default shall occur or be continuing.
Section 4.5. Further Assurances. The Company covenants and
agrees that it shall, and shall cause each Material Subsidiary to,
comply with all the terms and conditions of each of the Collateral
Documents and that it shall, at any time and from time to time as
reasonably requested by the Administrative Agent or the Required
Lenders, execute and deliver such further instruments and do such acts
and things as the Administrative Agent or the Required Lenders may
reasonably deem necessary or desirable to provide for or protect or
perfect the Lien of the Administrative Agent in the Collateral.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein
shall have the following meanings:
"Adjusted LIBOR" means a rate per annum determined by the
Administrative Agent in accordance with the following formula:
Adjusted LIBOR = _________LIBOR_________
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted
LIBOR, the maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental or other
special reserves) imposed by the Board of Governors of the Federal
Reserve System (or any successor) under Regulation D on Eurocurrency
liabilities (as such term is defined in Regulation D) for the
applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by
such Board or its successor, and taking into account any transitional
adjustments thereto becoming effective during such Interest Period.
For purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of
or credit for prorations, exemptions or offsets under Regulation D.
"LIBOR" means, for each Interest Period, (a) the LIBOR Index Rate for
such Interest Period, if such rate is available, and (b) if the LIBOR
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Index Rate cannot be determined, the arithmetic average of the rates
of interest per annum (rounded upward, if necessary, to the nearest
1/100th of 1%) at which deposits in U.S. Dollars in immediately
available funds are offered to the Administrative Agent at 11:00 a.m.
(London, England time) two Business Days before the beginning of such
Interest Period by three (3) or more major banks in the interbank
eurodollar market selected by the Administrative Agent for a period
equal to such Interest Period and in an amount equal or comparable to
the applicable LIBOR Portion scheduled to be outstanding from the
Administrative Agent during such Interest Period. "LIBOR Index Rate"
means, for any Interest Period, the rate per annum (rounded upwards,
if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to
such Interest Period which appears on the Telerate Page 3750 as of
11:00 a.m. (London, England time) on the date two Business Days before
the commencement of such Interest Period. "Telerate Page 3750" means
the display designated as "Page 3750" on the Telerate Service (or
such other page as may replace Page 3750 on that service or such other
service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Banker's
Association Interest Settlement Rates for U.S. Dollar deposits). Each
determination of LIBOR made by the Administrative Agent shall be
conclusive and binding on the Company and the Lenders absent manifest
error.
"Administrative Agent" means Harris Trust and Savings Bank and
any successor thereto appointed pursuant to Section 10.1 hereof.
"Affiliate" means any Person directly or indirectly controlling
or controlled by, or under direct or indirect common control with,
another Person. A Person shall be deemed to control another Person
for the purposes of this definition if such Person possesses, directly
or indirectly, the power to direct, or cause the direction of, the
management and policies of the other Person, whether through the
ownership of voting securities, common directors, trustees or
officers, by contract or otherwise; provided that, in any event for
purposes of this definition, any Person that owns, directly or
indirectly, 5% or more of the securities having the ordinary voting
power for the election of directors or governing body of a corporation
or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person)
will be deemed to control such corporation or other Person. The term
Affiliate shall not include, in the case of the Parent, Pioneering
Management Corporation.
"Agreement" means this Credit Agreement, as the same may be
amended, modified or restated from time to time in accordance with the
terms hereof.
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"Applicable Margin" shall mean, with respect to the commitment
fee and each type of Portion described below, the rate of interest per
annum shown below for the range of Leverage Ratio specified below:
Level I Level II Level III Level IV Level V
------- -------- --------- -------- -------
Leverage Ratio < 2.00X _ 2.00X _ 2.50X _ 3.00X - 3.50X
AND AND AND
< 2.50X < 3.00X < 3.50X
Domestic Rate 0% 0% 0% .25% .50%
Portion
LIBOR Portion 1.40% 1.65% 2.00% 2.25% 2.50%
Commitment Fee .375% .375% .50% .50% .50%
Not later than 5 Business Days after receipt by the
Administrative Agent of the financial statements called for by Section
8.5 hereof for the last month of the applicable fiscal quarter of the
Company, the Administrative Agent shall determine the Leverage Ratio
for the applicable period and shall promptly notify the Company and
the Lenders of such determination and of any change in the Applicable
Margins resulting therefrom. Any such change in the Applicable
Margins shall be effective as of the date the Administrative Agent so
notifies the Company and the Lenders with respect to all Portions
outstanding on such date, and such new Applicable Margins shall
continue in effect until the effective date of the next quarterly
redetermination in accordance with this Section. Each determination
of the Leverage Ratio and Applicable Margins by the Administrative
Agent in accordance with this Section shall be conclusive and binding
on the Company and the Lenders absent manifest error. The Applicable
Margins shall first be adjusted upon receipt of the financial
statements for the fiscal quarter ending December 31, 1998. From the
date hereof until the Applicable Margins are first adjusted pursuant
hereto, the Applicable Margins shall be those set forth in Level V
above.
"Application" is defined in Section 1.4(d) hereof.
"Approved Contract Growers" shall mean those Persons who, from
time to time, hold live chicken and turkey inventory owned by the
Company or any Subsidiary under and subject to grower contracts which
preserve and in every way maintain the title of the Company or any
Subsidiary in and to such inventory to the satisfaction of the
Administrative Agent.
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"Assignment Agreement" means an Assignment and Acceptance entered
into by a Lender and an assignee in accordance with Section 12.8
hereof substantially in the form of Exhibit E hereto.
"Authorized Representative" means those persons shown on the list
of officers provided by the Company pursuant to Section 7.2(a) hereof
or on any update of any such list provided by the Company to the
Administrative Agent, or any further or different officer of the
Company so named by any Authorized Representative in a written notice
to the Administrative Agent.
"Available Revolving Credit Commitment" means, as to each Lender,
the amount of such Lender's Revolving Credit Commitment less the then
outstanding principal amount of the Term Loan made by such Lender.
"Borrowing Base" means, as of any time it is to be determined,
the amount (if any) by which (x) the reserves imposed on availability
under the Revolving Credit pursuant to Section 1.1 hereof (including
without limitation the Hedging Reserve and the Grower Payable Reserve)
is exceeded by (y) the sum of:
(a) 85% of the remainder of the then outstanding
unpaid amount of Eligible Accounts less any and all returns,
rebates, discounts, credits, allowances, finance charges
and/or taxes of any nature at any time issued, owing, available
to or claimed by account debtors, granted, outstanding or payable
in connection with such Eligible Accounts at such time; plus
(b) 65% of the value (computed at the lower of market or
cost using the first-in/first-out method of inventory valuation
applied by the Company in accordance with GAAP) of Eligible
Inventory consisting of Feed, Grain and Ingredients Inventory;
plus
(c) 45% of the value (computed at the lower of market
or cost using the first-in/first-out method of inventory
valuation applied by the Company in accordance with GAAP) of
Eligible Inventory consisting of Live Poultry Inventory; plus
(d) 65% of the value (computed at the lower of market
or cost using the first-in/first-out method of inventory
valuation applied by the Company in accordance with GAAP) of
Eligible Inventory consisting of Processed Inventory;
provided that the Borrowing Base shall be computed only as against and
on so much of such Collateral as is included on the certificates to be
furnished from time to time by the Company pursuant to this Agreement
and, if required by the Administrative Agent pursuant to any of the
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terms hereof or any Collateral Document, as verified by such other
evidence required to be furnished to the Administrative Agent pursuant
hereto or pursuant to any such Collateral Document.
"Business Day" means any day other than a Saturday or Sunday on
which banks are not authorized or required to close in Chicago,
Illinois and, when used with respect to LIBOR Portions, a day on which
banks are also dealing in United States Dollar deposits in London,
England and Nassau, Bahamas.
"Capital Expenditures" means, for any period, capital
expenditures of the Parent and its Subsidiaries during such period as
defined and classified in accordance with GAAP.
"Capital Lease" means any lease of Property which in accordance
with GAAP is required to be capitalized on the balance sheet of the
lessee.
"Capitalized Lease Obligation" means the amount of the liability
shown on the balance sheet of any Person in respect of a Capital Lease
determined in accordance with GAAP.
"Change of Control" means the occurrence of any of the following
circumstances:
(a) any Person or two or more Persons acting in concert
acquire beneficial ownership (within the meaning of Rule 13d3 of
the Securities Exchange Commission under the Securities Exchange
Act of 1934), directly or indirectly, of equity securities of the
Parent (or other equity securities convertible into such
equitable securities) representing 25% or more of the combined
voting power of all equitable securities of the Parent entitled
to vote in the election of directors; or
(b) during any period of up to 12 consecutive months,
whether commencing before or after the date hereof, the
membership of the Board of Directors of the Parent changes for
any reason (other than by reason of death, disability, or
scheduled retirement) so that the majority of the Board of
Directors is made up of Persons who were not directors at the
beginning of such 12 month period; or
(c) the Company shall at any time and for any reason cease
to be a Wholly-Owned Subsidiary of the Parent.
"Class of Notes" shall mean the Revolving Credit Notes (taken as
a group) and the Term Credit Notes (taken as a group).
"Code" means the Internal Revenue Code of 1986, as amended, and
any successor statute thereto.
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"Collateral" means all properties, rights, interests and
privileges from time to time subject to the Liens granted to the
Administrative Agent for the benefit of the Lenders by the Collateral
Documents.
"Collateral Documents" means the Security Agreement, the
Mortgages and all other mortgages, deeds of trust, security
agreements, assignments, financing statements and other documents as
shall from time to time secure the Obligations.
"Commitments" means and includes the Revolving Credit Commitments
and the Term Credit Commitments.
"Company" is defined in the introductory paragraph hereof.
"Consolidated EBITDA" means, with reference to any period,
Consolidated Net Income for such period, (a) plus all amounts deducted
in arriving at such Consolidated Net Income amount in respect of (i)
Interest Expense for such period, (ii) federal, state and local income
taxes for such period, (iii) all amounts properly charged for
depreciation of fixed assets and amortization of intangible assets
during such period on the books of the Parent and its Subsidiaries,
and (iv) any other non-cash charges as computed in accordance with
GAAP and (b) minus all amounts added in arriving at such Consolidated
Net Income amount in respect of income generated from the sale of
Cassco Ice & Cold Storage, Inc. and the sale of the Company's
Goldsboro, North Carolina broiler complex during such period.
"Consolidated Net Income" means, with reference to any period,
the net income (or net loss) of the Parent and its Subsidiaries for
such period (excluding any amounts attributable to Cassco Ice & Cold
Storage, Inc.) as computed on a consolidated basis in accordance with
GAAP, and, without limiting the foregoing, after deduction from gross
income of all expenses and reserves, including reserves for all taxes
on or measured by income, but excluding any extraordinary profits and
also excluding any taxes on such profits.
"Consolidated Tangible Net Worth" means, as of any time the same
is to be determined, (a) the sum of (i) total shareholders' equity
(including capital stock, additional paid-in-capital and retained
earnings after deducting treasury stock, but excluding minority
interests in Subsidiaries) which would appear on the balance sheet of
the Parent and its Subsidiaries determined on a consolidated basis in
accordance with GAAP and (ii) the principal amount then outstanding on
Subordinated Indebtedness, less (b) the sum of (i) the aggregate book
value of all assets of the Parent and its Subsidiaries which would be
classified as intangible assets under GAAP, including, without
limitation, goodwill, patents, trademarks, trade names, copyrights,
franchises and deferred charges (including, without limitation,
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unamortized debt discount and expense, organization costs and deferred
research and development expense) and similar assets and (ii) the
write-up of assets above cost.
"Controlled Group" means all members of a controlled group of
corporations, partnerships, and all trades or businesses (whether or
not incorporated) under common control which, together with the
Company or any Subsidiary, are treated as a single employer under
Section 414 of the Code.
"Debt Service" means, with reference to any period, the sum of
(i) the aggregate amount of payments required to be made during such
period in respect of principal of all Funded Debt (whether at
maturity, as a result of scheduled mandatory sinking fund redemption,
scheduled mandatory prepayment or otherwise to the extent regularly
scheduled) and (ii) Interest Expense on Funded Debt during such
period.
"Default" means any event or condition the occurrence of which
would, with the passage of time or the giving of notice, or both,
constitute an Event of Default.
"Derivative Agreement" means any agreement (other than grain
hedging contracts) with respect to any exchange-traded or
over-the-counter transaction, contract, instrument, security,
obligations or undertaking of whatever nature that constitutes (in
whole or in part) a forward, future, option, swap, cap, collar, floor
or combination thereof, or anything similar to any of the foregoing,
whether for physical delivery or cash settlement, which is entered
into for the purpose of mitigating risk in connection with a commodity
price or index.
"Domestic Rate" means, for any day, the greater of (i) the rate
of interest announced by the Administrative Agent from time to time as
its prime commercial rate, as in effect on such day; and (ii) the sum
of (x) the rate determined by the Administrative Agent to be the
average (rounded upwards, if necessary, to the next higher 1/100 of
1%) of the rates per annum quoted to the Administrative Agent at
approximately 10:00 a.m. (Chicago time) (or as soon thereafter as is
practicable) on such day (or, if such day is not a Business Day, on
the immediately preceding Business Day) by two or more Federal funds
brokers selected by the Administrative Agent for the sale to the
Administrative Agent at face value of Federal funds in an amount equal
or comparable to the principal amount owed to the Administrative Agent
for which such rate is being determined, plus (y) 1/2 of 1% (0.5%).
"Domestic Rate Portions" is defined in Section 2.1(a) hereof.
"Eligible Accounts" means all accounts receivable of the Company
which the Administrative Agent, in its reasonable judgment, deem to be
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Eligible Accounts; provided that in no event shall an account
receivable be deemed an Eligible Account unless all representations
and warranties set forth in the Collateral Documents with respect to
such account receivable are true and correct and further provided that
such account receivable:
(a) arises out of the sale by the Company of finished
goods inventory delivered to and accepted by, or out of the
rendition by the Company of services fully performed by the
Company and accepted by, the account debtor on such account
receivable and such account receivable otherwise represents
a final sale;
(b) the account debtor on such account receivable is
located within the United States of America or, if such right has
arisen out of the sale of such goods shipped to, or out of the
rendition of services to, an account debtor located in any other
country, such right is either (i) supported by insurance issued
by the EXIM Bank or any other insurer acceptable to the
Administrative Agent, in each case in form and substance
satisfactory to the Administrative Agent (which in any event
shall insure not less than ninety percent (90%) or the face
amount of such account receivable and shall be subject to such
deductions as are acceptable to the Administrative Agent) or (ii)
secured by a valid and irrevocable letter of credit pursuant to
which any of the Company or its transferee may draw on a lender
reasonably acceptable to the Administrative Agent for the full
amount thereof;
(c) is the valid, binding and legally enforceable
obligation of the account debtor obligated thereon and such
account debtor is not (i) a Subsidiary or an Affiliate of the
Company, (ii) a shareholder, director, officer or employee of the
Company or any Subsidiary, (iii) the United States of America, or
any state or political subdivision thereof, or any department,
agency or instrumentality of any of the foregoing, unless the
Company has complied with the Assignment of Claims Act or any
similar state or local statute, as the case may be, to the
satisfaction of the Administrative Agent or such account is a
Minor Government Receivable, (iv) a debtor under any proceeding
under the United States Bankruptcy Code, as amended, or any other
comparable bankruptcy or insolvency law, or (v) an assignor
for the benefit of creditors;
(d) is not evidenced by an instrument or chattel paper
unless the same has been endorsed and delivered to the
Administrative Agent;
(e) is an asset of the Company to which it has good and
marketable title, is freely assignable, is subject to a
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perfected, first priority Lien in favor of the Administrative
Agent, and is free and clear of any other Lien other than Liens
permitted by Section 8.13(a) and (b) hereof;
(f) is not owing from an account debtor who is also a
creditor or supplier of the Company, is not subject to any
offset, counterclaim or other defense with respect thereto and,
with respect to said account receivable or the contract or
purchase order out of which the same arose, no surety bond was
required or given in connection therewith;
(g) is (i) not unpaid more than forty-five (45) days after
the original invoice date (which must be not more than five (5)
days subsequent to the shipment date);
(h) is not owed by an account debtor who is obligated
on accounts receivable owed to the Company more than 50% of
the aggregate unpaid balance of which have been past due for
longer than the relevant period specified in subsection (g)
above unless the Administrative Agent has approved the
continued eligibility thereof;
(i) would not cause the total accounts receivable owing
from any one account debtor (excluding account debtors then
approved for such purposes in writing by the Administrative
Agent) and its Affiliates to exceed 10% of all Eligible Accounts
unless the Administrative Agent has approved the continued
eligibility thereof; and
(j) does not arise from a sale to an account debtor on
a bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or
return basis.
"Eligible Inventory" means all finished goods inventory of the
Company (other than packaging, crating and supplies inventory)
constituting Live Poultry Inventory, Processed Inventory or Feed,
Grain and Ingredients Inventory which in each case the Administrative
Agent, in its reasonable judgment, deems to be Eligible Inventory;
provided that in no event shall inventory be deemed Eligible Inventory
unless all representations and warranties set forth in the Collateral
Documents with respect to such inventory are true and correct and such
inventory:
(a) is an asset of the Company to which it has good and
marketable title, is freely assignable, is subject to a
perfected, first priority Lien in favor of the Administrative
Agent for the benefit of the Lenders, and is free and clear of
any other Liens other than Liens permitted by Section 8.13(a),
(b) and (f) hereof;
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(b) is located in the United States and within a
jurisdiction in which the Administrative Agent's security
interests have attached and are perfected by the filing of
financing statements;
(c) if such Inventory consists of finished goods at cold
storage locations which are leased or warehouses not owned by the
Company, (i) a landlord's or warehouseman's waiver satisfactory
in form and substance to the Administrative Agent shall have been
delivered to the Administrative Agent if the aggregate value of
Inventory at such location exceeds $100,000, (ii) any such
warehouseman is licensed and bonded by the United States
Department of Agriculture, (iii) any non-negotiable warehouse
receipts or other non-negotiable documents for such inventory are
issued in the name of the Company or, alternatively, designate
the Administrative Agent directly or by endorsement as the only
person to whom or to whose order the warehouseman is legally
obligated to deliver such goods and (iv) any negotiable warehouse
receipts or other negotiable documents for such inventory are in
the possession of the Administrative Agent;
(d) is not so identified to a contract to sell that it
constitutes an account;
(e) is not obsolete or slow moving, and is of good and
merchantable quality free from any defects which might
adversely affect the market value thereof; and
(f) is not subject to the statutory trust established
under the Perishable Agricultural Commodities Act or any
successor statute thereto;
(g) if the Inventory consists of eggs, live chicken or
live turkeys or other farm products, such Inventory is not
deemed to be diseased, out-of-condition and unmerchantable
according to standards promulgated by the United States
Department of Agriculture or any other federal, state or local
governmental agency or any department or division thereof having
regulatory authority over the Company or any of Company's assets
or activities;
(h) if the Inventory consists of Feed, Grain and
Ingredients Inventory, such Inventory is either (i) located
at a Permitted Collateral Location, (ii) in transit between
any two Permitted Collateral Locations or (iii) in transit to any
Permitted Collateral Location; and
(i) if the Inventory is located with an Approved
Contract Grower, no account payable owed by the Company to such
Approved Contract Grower shall be past due for more than
fifteen days.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as
such in Section 9.1 hereof.
"Feed, Grain and Ingredients Inventory" means that portion of the
Company's inventory consisting of feed, grain and feed ingredients for
use in the ordinary course of the Company's business.
"Fixed Charge Coverage Ratio" means, as of any time the same is
to be determined, the ratio of (x) Consolidated EBITDA during the four
most recently completed fiscal quarters of the Parent minus net cash
payments during such period by the Parent, the Company and their
Subsidiaries on federal, state and local income taxes (excluding any
taxes paid during such period in respect of income received from the
sale of Cassco Ice & Cold Storage, Inc. and the Company's Goldsboro,
North Carolina broiler complex and in respect of any Net Income
attributable to Cassco Ice & Cold Storage, Inc.) minus Capital
Expenditures during such period (but in any event excluding (i) up to
$7,500,000 of Capital Expenditures being made during the Parent's
fiscal year ending on or about June 30, 1999 to convert the
Marshville, North Carolina turkey processing plant to a chicken
processing plant and (ii) Capital Expenditures to the extent financed
with the proceeds of Indebtedness for Borrowed Money (other than the
Loans hereunder) permitted by Section 8.12 hereof) minus Restricted
Payments during such period to (y) the sum of (i) all Interest Expense
incurred during the same such period plus (ii) all payments of
principal during such period (whether at maturity as a result of
mandatory sinking fund redemption, mandatory prepayment, acceleration
or otherwise, but in any event excluding mandatory prepayments
required by virtue of Section 3.3(d) hereof) in respect of Funded
Debt.
"Funded Debt" means, at any time the same is to be determined,
the aggregate of all Indebtedness for Borrowed Money of the Parent and
the Subsidiaries at such time, plus all Indebtedness for Borrowed
Money of any other Person which is directly or indirectly guaranteed
by any Parent or any Subsidiary or which the Parent or any Subsidiary
has agreed (contingently or otherwise) to purchase or otherwise
acquire or in respect of which the Parent or any Subsidiary has
otherwise assured a creditor against loss.
"GAAP" means generally accepted accounting principles as in
effect from time to time, applied by the Parent, the Company and the
Subsidiaries on a basis consistent with the preparation of the
Parent's most recent financial statements furnished to the Lenders
pursuant to Section 6.5 hereof.
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"Grower Payable Reserve" shall mean as of any time the
outstanding amount of Secured Grower Payables that are more than
fifteen days past due.
"Guarantor" means the Parent and each Subsidiary (other than the
Company) that is a signatory hereto or that executes and delivers to
the Administrative Agent a Guaranty along with accompanying closing
documents required by Section 7.2 hereof.
"Guaranty" means this Agreement as to Guarantors party hereto and
otherwise, a letter to the Agent in the form of Exhibit F hereto
executed by a Subsidiary whereby it acknowledges it is party hereto as
a Guarantor under Section 11 hereof and also in the case of any
Subsidiary not organized under the laws of the United States of any
State thereof, such other form of guaranty as shall be reasonably
acceptable to the Agent and the Required Lenders.
"Hedging Liability" shall mean liabilities of the Company to the
Lenders or any of them or to any of their Affiliates arising in
connection with any Interest Rate Hedging Arrangements entered into by
the Company or any Subsidiary with any Lender or any Affiliate of any
Lender. Unless and until the amount of the Hedging Liability is fixed
and determined, the Hedging Liability shall be deemed to be 4% per
annum of the notional amount of the hedge from the date of computation
to the date the hedge expires.
"Hedging Reserve" shall mean as of any time, the amount which the
Administrative Agent has then determined to be the aggregate amount of
liabilities of the Company and its Subsidiaries then outstanding on
Interest Rate Hedging Arrangements if the arrangements contemplated
thereby were then terminated. For purposes hereof, the Hedging
Reserve attributable to any interest rate swap agreement or forward
rate agreement shall equal the product obtained by multiplying (a) the
product obtained by multiplying the notional amount set forth in such
agreement by the number of years (or portion thereof) equal to the
remaining term of such agreement, by (b) 2% (two percent).
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any
manner by such Person representing money borrowed (including by the
issuance of debt securities), (ii) all indebtedness for the deferred
purchase price of property or services (other than trade accounts
payable arising in the ordinary course of business which are not more
than thirty (30) days past the final due date unless and to the extent
such payables are being contested in good faith by appropriate
proceedings which prevent enforcement of the matter under contest and
do not interfere with the conduct of business in the ordinary course),
(iii) all indebtedness secured by any Lien upon Property of such
Person, whether or not such Person has assumed or become liable for
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the payment of such indebtedness, (iv) all Capitalized Lease
Obligations of such Person and (v) all obligations of such Person on
or with respect to letters of credit, bankers' acceptances and other
extensions of credit whether or not representing obligations for
borrowed money.
"Initial Mortgaged Real Estate" means the Company's real estate
listed on Schedule 6.19 hereto.
"Initial Mortgages" means the mortgages and deeds of trust in
favor of the Administrative Agent encumbering the Initial Mortgaged
Real Estate.
"Interest Expense" means, with reference to any period, the sum
of all interest charges (including imputed interest charges with
respect to Capitalized Lease Obligations and excluding the
amortization of debt issuance costs and interest rate hedging
instruments) of the Parent and its Subsidiaries for such period
determined in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the
period commencing on, as the case may be, the creation, continuation
or conversion date with respect to such LIBOR Portion and ending one
(1), two (2), three (3) or six (6) months thereafter as selected by
the Company in its notice as provided herein; provided that all of the
foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day
which is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day, unless in the case
of an Interest Period for a LIBOR Portion the result of such
extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end on
the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final
maturity date of the Notes; and
(iii) the interest rate to be applicable to each Portion for
each Interest Period shall apply from and including the first day
of such Interest Period to but excluding the last day thereof.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an
Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period
is to end, then such Interest Period shall end on the last Business
Day of such month.
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"Interest Rate Hedging Arrangement" means any and all agreements,
devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange
rates or forward rates applicable to such party's assets, liabilities
or exchange transactions, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate
options, puts and warrants.
"L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement
Obligations.
"Lender" means Harris Trust and Savings Bank, the other
signatories hereto (other than the Company) and all other lenders
becoming parties hereto pursuant to Section 12.8 hereof.
"Letters of Credit" is defined in Section 1.3 hereof.
"Leverage Ratio" means, as of any time the same is to be
determined, the ratio of (x) Senior Funded Debt as of such date to (y)
Consolidated EBITDA during the four most recently completed fiscal
quarters of the Parent.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge,
charge or encumbrance of any kind in respect of any Property,
including the interests of a vendor or lessor under any conditional
sale, Capital Lease or other title retention arrangement.
"Limited Grower Payable Liens" means liens arising in favor of
any Approved Contract Growers securing Secured Grower Payables, unless
such liens secure Secured Grower Payables which are over 15 days past
due and aggregate in excess of $1,500,000.
"Live Poultry Inventory" means that portion of the Company's
inventory consisting of turkey and chicken eggs, live chickens and
live turkeys in each case ready for sale or use (such as breeder
stock) in the ordinary course of the Company's business.
"Loan Documents" means this Agreement, the Notes, the
Applications and the Collateral Documents and each other instrument or
document to be delivered hereunder or thereunder or otherwise in
connection therewith.
"Loans" means and includes the Revolving Credit Loans and the
Term Loans.
"Material Plan" is defined in Section 9.1(h) hereof.
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"Material Subsidiary" means (i) each Subsidiary whose
consolidated total assets (directly and together with its
subsidiaries), as of the close of the current or any subsequent fiscal
year of the Parent for which audited financial statements are
available, were greater than 1% of consolidated total assets of the
Parent and its Subsidiaries (as determined in accordance with GAAP) as
of any such time, (ii) each Subsidiary whose consolidated gross
revenues (directly and together with its subsidiaries), for the
current or any subsequent fiscal year of the Company for which audited
financial statements are available, were greater than 1% of
consolidated total gross revenues of the Parent and its Subsidiaries
(as determined in accordance with GAAP) for any such year and (iii)
each Subsidiary which becomes a Material Subsidiary by reason of the
following proviso; provided, however, each Subsidiary which would (but
for the application of this proviso to such Subsidiary) constitute a
Non-Material Subsidiary with the greatest consolidated total assets
shall constitute a Material Subsidiary if (i) the consolidated gross
revenues of such Subsidiary (directly and together with its
subsidiaries, when taken together with the consolidated gross revenues
of all other Non-Material Subsidiaries (directly and together with
their respective subsidiaries), in each case as of the close of the
current or any subsequent fiscal year of the Parent for which all
audited financial statements are available, equal or exceed 5% of
consolidated gross revenues of the Parent and its Subsidiaries (as
determined in accordance with GAAP) as of any such time or (ii) the
consolidated total assets of such Subsidiary (directly and together
with its subsidiaries), when taken together with the consolidated
total assets of all other Non-Material Subsidiaries (directly and
together with their respective subsidiaries), in each case as of the
close of the current or any subsequent fiscal year of the Parent for
which audited financial statements are available, equal or exceed 5%
of consolidated total assets of Parent and its Subsidiaries (as
determined in accordance with GAAP) as of such date. Once a
Subsidiary is a Material Subsidiary, it shall remain a Material
Subsidiary unless and until the Required Lenders agree otherwise.
Notwithstanding the foregoing, Rockingham Poultry, Inc., a foreign
sales corporation organized under the laws of the U.S. Virgin Islands
(the "Company's FSC"), shall not constitute a Material Subsidiary if
and so long as (i) the Company's FSC at no time generates or holds any
accounts receivable, (ii) the sole source of revenue and sole asset of
the Company's FSC is income from commissions payable to it by the
Company and (iii) the Company's liability for such commissions is at
no time paid in cash, but rather is offset by charges to the Company's
FSC for management, accounting and administrative services provided by
the Company to the Company's FSC.
"Non-Material Subsidiary" means any Subsidiary which is not a
Material Subsidiary.
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"Notes" means and includes the Revolving Credit Notes and the
Term Credit Notes.
"Obligations" means all obligations of the Company to pay
principal and interest on the Loans, all Reimbursement Obligations,
all fees and charges payable hereunder, and all other payment
obligations of the Company arising under or in relation to any Loan
Document, in each case whether now existing or hereafter arising, due
or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired.
"Parent" means WLR Foods, Inc., a Virginia corporation.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to any or all of its functions under ERISA.
"Permitted Collateral Location" shall have the meaning assigned
to such term in the Security Agreement.
"Permitted Liens" means the Liens permitted pursuant to Section
8.13 hereof.
"Person" means an individual, partnership, corporation,
association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political
subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title
IV of ERISA or subject to the minimum funding standards under Section
412 of the Code that either (i) is maintained by a member of the
Controlled Group for employees of a member of the Controlled Group, or
(ii) is maintained pursuant to a collective bargaining agreement or
any other arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group is then
making or accruing an obligation to make contributions or has within
the preceding five plan years made contributions.
"Portion" is defined in Section 2.1(a) hereof.
"Prior Credit Agreement" means that certain Revolving Credit
Agreement dated as of February 25, 1998 by and among the Parent, the
Company, Cassco Ice & Cold Storage, Inc., Wampler Supply Company,
Inc., Valley Rail Service, Inc., the Revolving Credit Lenders referred
to therein and First Union National Bank, as agent, as amended from
time to time.
"Prior Lenders" means the Revolving Credit Lenders under the
Prior Credit Agreement.
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"Processed Inventory" means that portion of the Company's
inventory consisting of dressed chicken, dressed turkey, and other
finished meat products which are ready for sale in the ordinary course
of the Company's business.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Purchase Money Liens" means those Liens described in Section
8.13(e).
"Reimbursement Obligation" is defined in Section 1.4(d) hereof.
"Required Lenders" means, as of the date of determination
thereof, those Lenders holding at least 66-2/3% of the Commitments or,
in the event that no Commitments are outstanding hereunder, holding at
least 66-2/3% in aggregate principal amount of the Loans and credit
risk on the Letters of Credit outstanding hereunder.
"Restricted Payments" means, for any period for which the same is
to be determined, the sum of all dividends on the capital stock of the
Company (other than dividends payable solely in its capital stock),
all direct or indirect purchases, redemptions, acquisitions or
retirements of capital stock of the Company.
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitments" means the commitments of the
Lenders to extend credit hereunder in the amounts set forth opposite
their signatures hereto under the heading "Revolving Credit
Commitment" and opposite their signatures on Assignment Agreements
delivered pursuant to Section 12.8 hereof under the heading
"Commitment", as such amounts may be reduced pursuant hereto.
"Revolving Credit Loan" is defined in Section 1.2 hereof.
"Revolving Credit Note" is defined in Section 1.2 hereof.
"Secured Grower Payables" shall mean all amounts owed from time
to time by the Company or any Guarantor to any Person on account of
products or services if the Administrative Agent or Required Lenders
reasonably determines that such Person is entitled to the benefits of
any grower's or producer's lien, statutory trust or similar security
arrangements to secure the payment of any amounts owed to such Person,
including without limitation the Packers and Stockyards Act, Va. Code
SEC 43-32, and/or other comparable state statute.
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"Security Agreement" is defined in Section 4.1 hereof.
"Senior Funded Debt" means all Funded Debt other than
Subordinated Indebtedness.
"Settlement" means as of any time, the making of, or the
receiving of payments, in immediately available funds, by the Lenders,
to the extent necessary to cause each Lender's actual share of the
outstanding amount of Revolving Credit Loans (after giving effect to
any Loan to be made on such day) to be equal to such Lender's ratable
share (as hereinafter set forth) of the Loans then outstanding (after
giving effect to any Loan to be made on such day), in any case where,
prior to such event or action, such Lender's actual share of the Loans
is not so equal. For purposes hereof, a Lender's "ratable share" of
the outstanding Loans as of any time shall be a fraction of the Loans
then outstanding, the numerator of which is such Lender's Revolving
Credit Commitment, and the denominator of which is the Revolving
Credit Commitments of all the Lenders.
"Settlement Amount" is defined in Section 3.6 hereof.
"Settlement Date" is defined in Section 3.6 hereof.
"Subordinated Indebtedness" means any Indebtedness for Borrowed
Money which is subordinated in right of payment to the prior payment
of the Obligations pursuant to subordination provisions approved in
writing by the Administrative Agent and Required Lenders, pursuant to
documentation, containing interest rates, payment terms, maturities,
amortization schedules, covenants, defaults, remedies, subordination
provisions and other material terms in each case in form and substance
satisfactory to the Administrative Agent and Required Lenders in their
discretion.
"Subsidiary" means any corporation or other Person more than 50%
of the outstanding ordinary voting shares or other equity interests of
which is at the time directly or indirectly owned by the Company or
the Parent, by one or more of its Subsidiaries, or by the Company, the
Parent and/or one or more of its Subsidiaries.
"Term Credit" is defined in Section 1.3 hereof.
"Term Credit Commitment" means the commitments of the Lenders to
extend credit under the Term Credit in the amounts set forth opposite
their signatures hereto.
"Term Credit Note" is defined in Section 1.3 hereof.
"Term Loan" is defined in Section 1.3 hereof.
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"Termination Date" means November 20, 2001, or such earlier date
on which the Revolving Credit Commitments are terminated in whole
pursuant to Section 3.4, 9.2 or 9.3 hereof.
"Unfunded Vested Liabilities" means, for any Plan at any time,
the amount (if any) by which the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds the fair
market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan,
but only to the extent that such excess represents a potential
liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1)
of ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the
issued and outstanding shares of capital stock (other than directors'
qualifying shares as required by law) or other equity interests are
owned by the Company and/or one or more Wholly-Owned Subsidiaries
within the meaning of this definition.
"Year 2000 Problem" means any significant risk that computer
hardware, software, or equipment containing embedded microchips
essential to the business or operations of the Parent, the Company and
their Subsidiaries taken as a whole will not, in the case of dates or
time periods occurring after December 31, 1999, function at least as
efficiently and reliably as in the case of times or time periods
occurring before January 1, 2000, including the making of accurate
leap year calculations.
Section 5.2. Interpretation. The foregoing definitions are
equally applicable to both the singular and plural forms of the terms
defined. The words "hereof", "herein", and "hereunder" and words of
like import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement. All
references to time of day herein are references to Chicago, Illinois
time unless otherwise specifically provided. Where the character or
amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement,
it shall be done in accordance with GAAP except where such principles
are inconsistent with the specific provisions of this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
Each of the Parent and the Company represents and warrants to the
Administrative Agent and the Lenders as follows:
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Section 6.1. Organization and Qualification. The Parent, the
Company and each Subsidiary is duly organized, validly existing and in
good standing as a corporation under the laws of its state of
incorporation, has full and adequate power to own its Property and
conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the
nature of the business conducted by it or the nature of the Property
owned or leased by it requires such licensing or qualifying except
where the failure to be so licensed or qualified would not have a
material adverse effect on the financial condition, Properties,
business or operations of the Parent, the Company and their
Subsidiaries taken as a whole.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, as the case may
be, has full and adequate power to own its Property and conduct its
business as now conducted, and is duly licensed or qualified and in
good standing in each jurisdiction in which the nature of the business
conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying except where the failure to be
so licensed or qualified would not have a material adverse effect on
the financial condition, Properties, business or operations of the
Parent, the Company and their Subsidiaries taken as a whole. Schedule
6.2 hereto identifies each Subsidiary, the jurisdiction of its
incorporation or organization, as the case may be, the percentage of
issued and outstanding shares of each class of its capital stock or
other equity interests owned by the Parent, the Company and the
Subsidiaries and, if such percentage is not 100% (excluding directors'
qualifying shares as required by law), a description of each class of
its authorized capital stock and other equity interests and the number
of shares of each class issued and outstanding. Each Material
Subsidiary is a Guarantor. All of the outstanding shares of capital
stock and other equity interests of each Subsidiary are validly issued
and outstanding and fully paid and nonassessable and all such shares
and other equity interests indicated on Schedule 6.2 as owned by the
Parent, the Company and their Subsidiaries taken as a whole are owned,
beneficially and of record, by the Parent, the Company or such
Subsidiary free and clear of all Liens. There are no outstanding
commitments or other obligations of any Subsidiary to issue, and no
options, warrants or other rights of any Person to acquire, any shares
of any class of capital stock or other equity interests of any
Subsidiary.
Section 6.3. Corporate Authority and Validity of Obligations.
The Parent, the Company and each Subsidiary has full right and
authority to enter into this Agreement and the other Loan Documents,
to make the borrowings herein provided for, to issue its Notes in
evidence thereof, to grant to the Administrative Agent the Liens
described in the Collateral Documents, and to perform all of its
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obligations hereunder and under the other Loan Documents. The Loan
Documents delivered by the Parent, the Company and each Subsidiary
have been duly authorized, executed and delivered by the Parent, the
Company and each Subsidiary and constitute valid and binding
obligations of the Parent, the Company and each Subsidiary enforceable
in accordance with their terms except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether the application of such principles is
considered in a proceeding in equity or at law); and this Agreement
and the other Loan Documents do not, nor does the performance or
observance by the Parent, the Company or any Subsidiary of any of the
matters and things herein or therein provided for, contravene or
constitute a default in any material respect under any provision of
law or any judgment, injunction, order or decree binding upon the
Parent, the Company or any Subsidiary or any provision of the charter,
articles of incorporation or by-laws of the Parent, the Company or any
Subsidiary or any covenant, indenture or agreement of or affecting the
Parent, the Company or any Subsidiary or any of their respective
Properties, or result in the creation or imposition of any Lien on any
Property of the Parent, the Company or any Subsidiary.
Section 6.4. Use of Proceeds; Margin Stock. The Company shall
use the proceeds of the Loans and other extensions of credit made
available hereunder solely for its general working capital purposes
and for such other legal and proper purposes as are consistent with
all applicable laws, the Company's charter, articles of incorporation
and by-laws, resolutions of the Company's board of directors, and the
terms of this Agreement. Neither the Company nor any Guarantor is
engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of any Loan or any other extension of credit made
hereunder will be used to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying
any such margin stock.
Section 6.5. Financial Reports. The balance sheet of the
Parent and its Subsidiaries as at June 27, 1998 and the related
statements of income, retained earnings and cash flows of the Parent
and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit
report of KPMG Peat Marwick, independent public accountants, and the
unaudited interim balance sheet of the Parent and its Subsidiaries as
at September 30, 1998 and the related statements of income, retained
earnings and cash flows of the Parent and its Subsidiaries for the
three (3) months then ended, heretofore furnished to the Lenders,
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fairly present the financial condition of the Parent, the Company and
the Subsidiaries as at said dates and the results of its operations
for the periods then ended in conformity with generally accepted
accounting principles applied on a consistent basis. Neither the
Parent, the Company nor any Subsidiary has contingent liabilities
which are material to it other than as indicated on such financial
statements or, with respect to future periods, on the financial
statements furnished pursuant to Section 8.5 hereof.
Section 6.6. No Material Adverse Change. Since June 27, 1998,
there has been no change in the condition (financial or otherwise) or
business prospects of the Parent, the Company or any Subsidiary except
for the sales of Cassco Ice & Cold Storage, Inc. and the Company's
Goldsboro, North Carolina broiler complex and except for those
occurring in the ordinary course of business, none of which
individually or in the aggregate would have a material adverse effect
on the financial condition, Properties, business or operations of the
Parent, the Company and their Subsidiaries taken as a whole.
Section 6.7. Full Disclosure. The statements and information
furnished to the Lenders in connection with the negotiation of this
Agreement and the other Loan Documents and the commitments by the
Lenders to provide all or part of the financing contemplated hereby do
not contain any untrue statements of a material fact or omit a
material fact necessary to make the material statements contained
herein or therein not misleading, the Lenders acknowledging that as to
any projections furnished to the Lenders, the Parent and the Company
only represents that the same were prepared on the basis of
information and estimates the Parent and the Company believed to be
reasonable.
Section 6.8. Good Title. The Parent, the Company and the
Subsidiaries each have good and defensible title to their assets as
reflected on the most recent consolidated balance sheet of the Parent
and its Subsidiaries furnished to the Lenders (except for sales of
assets by the Parent and its Subsidiaries in the ordinary course of
business), subject to no Liens other than such thereof as are
permitted by Section 8.13 hereof.
Section 6.9. Litigation and Other Controversies. There is no
litigation or governmental proceeding or labor controversy pending,
nor to the knowledge of the Parent or the Company threatened, against
the Parent, the Company or any Subsidiary which if adversely
determined would (a) impair the validity or enforceability of, or
impair the ability of the Company or any Guarantor to perform its
obligations under, this Agreement or any of the other Loan Documents
or (b) result in any material adverse change in the financial
condition, Properties, business or operations of the Parent, the
Company and their Subsidiaries taken as a whole.
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Section 6.10. Taxes. All tax returns required to be filed by
the Parent, the Company or any Subsidiary in any jurisdiction have, in
fact, been filed, and all taxes, assessments, fees and other
governmental charges upon the Parent, the Company or any Subsidiary or
upon any of their respective Properties, income or franchises, which
are shown to be due and payable in such returns, have been paid.
Neither the Parent nor the Company knows of any proposed additional
tax assessment against it or any Subsidiary for which adequate
provision in accordance with GAAP has not been made on its accounts.
Adequate provisions in accordance with GAAP for taxes on the books of
the Parent, the Company and each Subsidiary have been made for all
open years, and for its current fiscal period.
Section 6.11. Approvals. Except for the filing of the
Collateral Documents, no authorization, consent, license, or exemption
from, or filing or registration with any court or governmental
department, agency or instrumentality, nor any approval or consent of
the stockholders of the Parent, the Company or any Subsidiary or any
other Person, is or will be necessary to the valid execution, delivery
or performance by the Parent, the Company or any Subsidiary of this
Agreement or any other Loan Document.
Section 6.12. Affiliate Transactions. None of the Parent, the
Company nor any Subsidiary is a party to any contracts or agreements
with any of its Affiliates on terms and conditions which are less
favorable to the Parent, the Company or such Subsidiary than would be
usual and customary in similar contracts or agreements between Persons
not affiliated with each other.
Section 6.13. Investment Company; Public Utility Holding
Company. None of the Parent, the Company nor any Guarantor is an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, or a "public utility holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
Section 6.14. ERISA. The Parent and each other member of its
Controlled Group has fulfilled its obligations under the minimum
funding standards of and is in compliance in all material respects
with ERISA and the Code to the extent applicable to it and has not
incurred any liability to the PBGC or a Plan under Title IV of ERISA
other than a liability to the PBGC for premiums under Section 4007 of
ERISA. Neither the Parent nor any Subsidiary has any contingent
liabilities with respect to any post-retirement benefits under a
Welfare Plan in an aggregate amount for the Parent and all of its
Subsidiaries in excess of $1,000,000, other than liability for
continuation coverage described in article 6 of Title I of ERISA.
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Section 6.15. Compliance with Laws. Each of the Parent, the
Company and the Subsidiaries are in compliance with the requirements
of all federal, state and local laws, rules and regulations applicable
to or pertaining to their Properties or business operations
(including, without limitation, the Poultry Products Inspection Act,
the Occupational Safety and Health Act of 1970, the Americans with
Disabilities Act of 1990, and laws and regulations establishing
quality criteria and standards for air, water, food products, land and
toxic or hazardous wastes and substances), non-compliance with which
would reasonably be expected to have a material adverse effect on the
financial condition, Properties, business or operations of the Parent,
the Company and their Subsidiaries taken as a whole. None of the
Parent, the Company nor any Subsidiary has received written notice to
the effect that its operations are not in compliance with any of the
requirements of applicable federal, state or local food product,
environmental, health and safety statutes and regulations or are the
subject of any governmental investigation evaluating whether there
exists any such noncompliance or whether any remedial action is needed
to respond to a release of any toxic or hazardous waste or substance
into the environment, which non-compliance or remedial action would
reasonably be expected to have a material adverse effect on the
financial condition, Properties, business or operations of the Parent,
the Company and their Subsidiaries taken as a whole.
Section 6.16. Other Agreements. None of the Parent, the Company
nor any Subsidiary is in default under the terms of any covenant,
indenture or agreement of or affecting the Parent, the Company, any
Subsidiary or any of their Properties, which default if uncured would
have a material adverse effect on the financial condition, Properties,
business or operations of the Parent, the Company and their
Subsidiaries taken as a whole.
Section 6.17. No Default. No Default or Event of Default has
occurred and is continuing.
Section 6.18. Year 2000 Compliance. Each of the Parent and the
Company has conducted a comprehensive review and assessment of the
computer applications of the Parent and its Subsidiaries and is making
inquiry of their material suppliers, vendors (including data
processors) and customers, with respect to any defect in computer
software, data bases, hardware, controls and peripherals related to
the occurrence of the year 2000 or the use at any time of any date
which is before, on and after December 31, 1999, in connection
therewith. Based on the foregoing review, assessment and inquiry, the
Parent believes that no such defect could reasonably be expected to
have a material adverse effect on the business or financial affairs of
the Parent, the Company and their Subsidiaries taken as a whole.
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Section 6.19. Mortgaged Real Estate. To the best knowledge and
belief of the Parent and the Company, the Initial Mortgaged Real
Estate constitutes all the real property underlying or otherwise
relating to the facilities of the Company described on Schedule 6.19
hereto and such facilities constitute all the processing plants,
further processing plants, feedmills and hatcheries operated by the
Company as of the date hereof. The real property encumbered by
mortgages constituting Collateral Documents will at all times comprise
all the real estate underlying or otherwise relating to each
processing plant, further processing plant, feedmill and hatchery
operated by the Company.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Lenders to make any Loan or of the
Administrative Agent to issue any Letter of Credit under this
Agreement is subject to the following conditions precedent:
Section 7.1. All Advances. As of the time of the making of
each extension of credit (including the initial extension of credit)
hereunder, whether in the form of a Loan or Letter of Credit:
(a) each of the representations and warranties set forth in
Section 6 hereof and in the other Loan Documents shall be true
and correct in all material respects as of such time, except to
the extent the same expressly relate to an earlier date (in which
case such representations and warranties shall have been true and
accurate on and as of such earlier date);
(b) the Company shall be in full compliance with all of the
terms and conditions of this Agreement and of the other Loan
Documents, and no Default or Event of Default shall have occurred
and be continuing or would occur as a result of making such
extension of credit;
(c) after giving effect to such extension of credit the
aggregate principal amount of all Loans and Letters of Credit
outstanding under this Agreement shall not exceed the lesser of
(i) the Available Revolving Credit Commitments and (ii) the
Borrowing Base;
(d) such extension of credit shall not violate any
order, judgment or decree of any court or other authority or
any provision of law or regulation applicable to the
Administrative Agent or any Lender (including, without
limitation, Regulation U of the Board of Governors of the
Federal Reserve System) as then in effect.
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The Company's request for any Loan or Letter of Credit shall
constitute its warranty as to the facts specified in subsections (a)
through (c), both inclusive, above.
Section 7.2. Initial Advance. At or prior to the making of the
initial extension of credit hereunder, the following conditions
precedent shall also have been satisfied:
(a) the Administrative Agent shall have received the
following for the account of the Lenders (each to be properly
executed and completed) and the same shall have been approved
as to form and substance by the Administrative Agent:
(i) the Notes;
(ii) a Guaranty from any Material Subsidiary not
party hereto;
(iii) the Security Agreement, together with any
financing statements requested by the Administrative
Agent in connection therewith;
(iv) the Initial Mortgages (other than the Initial
Mortgages described in Section 7.4(b) below);
(v) an appraisal of the equipment subject to the
Security Agreement;
(vi) a mortgagee's policy of title insurance (or
binding commitment therefor) for each Initial Mortgage
and in an amount equal to 110% of the appraised fair
market value of the Initial Mortgaged Real Estate
subject thereto, with a waiver of coinsurance insuring
the liens of such Initial Mortgage to be a valid first
lien (except for the prior liens on the Company's
facilities in New Oxford, Pennsylvania) subject to no
defects or objections which are unacceptable to the
Administrative Agent, together with such direct access
reinsurance agreements and endorsements (including
without limitation a revolving credit endorsement and
doing business and usury endorsements) as the
Administrative Agent may require;
(vii) current Phase I Environmental inspection
reports for the Initial Mortgaged Real Estate;
(viii) copies (executed or certified, as may be
appropriate) of all legal documents or proceedings
taken in connection with the execution and delivery of
this Agreement and the other Loan Documents to the
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extent the Administrative Agent or its counsel may
reasonably request;
(ix) an incumbency certificate containing the
name, title and genuine signatures of the Authorized
Representatives;
(x) evidence of insurance required by Section 8.4
hereof; and
(xi) copies of the results of a field audit of the
Collateral acceptable to the Lenders.
(b) the Administrative Agent shall have received for
itself the arrangement fee and initial agent's fees called for
hereby;
(c) the Administrative Agent shall have received the
non-refundable closing fee in the amount heretofore agreed upon
in writing between the Company and the Bank;
(d) each Lender shall have received such valuations and
certifications as it may require in order to satisfy itself as
to the value of the Collateral, the financial condition of the
Company and the Subsidiaries, and the lack of material contingent
liabilities of the Company and the Subsidiaries;
(e) legal matters incident to the execution and delivery of
this Agreement and the other Loan Documents and to the
transactions contemplated hereby shall be satisfactory to each
Lender and its counsel; and the Administrative Agent shall have
received for the account of the Lenders the favorable written
opinion of counsel for the Company in form and substance
satisfactory to the Administrative Agent and its counsel;
(f) the Administrative Agent shall have received for the
account of the Lenders a Borrowing Base certificate in the form
attached hereto as Exhibits C-1 and C-2 showing the computation
of the Borrowing Base in reasonable detail as of the most
recently completed mid-month or month end fiscal period of the
Company (but in any event after giving effect to the making of
the initial extension of credit hereunder) and showing excess
availability of at least $15,000,000 after deeming as borrowed
hereunder an amount equal to all but $250,000 of accounts payable
over sixty (60) days past due;
(g) the Administrative Agent shall have received for the
account of the Lenders a good standing certificate (each dated as
of a date no earlier than thirty (30) days prior to the date
hereof) for the Company from the office of the secretary of state
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of the states of Virginia, West Virginia, North Carolina and
Pennsylvania and for the Guarantor from the office of the
secretary of state of the state of Virginia;
(h) the Liens granted to the Administrative Agent under the
Collateral Documents shall have been perfected in a manner
satisfactory to each Lender and its counsel;
(i) the Administrative Agent shall have received a
pay-off letter from the Prior Lenders under the Prior Credit
Agreement in form and substance satisfactory to the
Administrative Agent which contains the Prior Lenders'
acknowledgment that the indebtedness under the Prior Agreement
will be paid in full and on agreement by the Prior Lenders that
upon receipt of such payment the Prior Lenders shall release or
assign their Liens on the Collateral; and
(j) the Administrative Agent shall have received for the
account of the Lenders such other agreements, instruments,
documents, certificates and opinions as the Administrative Agent
or the Lenders may reasonably request.
Section 7.3. Use of Initial Advance. The initial Loans under
the Revolving Credit shall be in an amount sufficient to, and the
Company hereby irrevocably authorizes and directs the Lenders to apply
such Loans to, pay and discharge all indebtedness and obligations of
the Company under the Prior Credit Agreement owing to the Prior
Lenders.
Section 7.4. Post-Closing Matters. (a) No later than February
28, 1999, the Company shall furnish the Administrative Agent with a
survey prepared by a licensed surveyor of each parcel of the Initial
Mortgaged Real Estate and certified to the Administrative Agent and
which survey shall (x) be sufficient for the title company issuing the
title insurance referred to in Section 7.2 (vi) above to issue
extended coverage and to remove any exceptions to title relating to
matters of survey and (y) designate any area of such Initial Mortgaged
Real Estate lying within a flood plain.
(b) No later than March 20, 1999, the Company shall
deliver to the Administrative Agent the Initial Mortgages
encumbering fee simple title to the real property located in
New Oxford, Pennsylvania commonly known as the Round Hill
Processing Plant and Distribution Center, together with the
items relating to such Initial Mortgages set forth in Sections
7.2(a)(vi), 7.2(a)(vii) and 7.4(a) hereof.
(c) No later than 30 days following the date hereof, the
Company shall have delivered to the Administrative Agent a
collateral assignment of hedging contracts, such assignment of
hedging contracts to (x) grant to the Administrative Agent for
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the benefit of the Lenders a lien on and security interest in all
of the Company's Hedging Accounts (as defined in the Security
Agreement), (y) be acknowledged by the broker with which such
Hedging Account is maintained and (z) be in form and substance
reasonably satisfactory to the Administrative Agent.
(d) No later than 30 days following the date hereof, the
Administrative Agent shall have received for the account of the
Lenders a good standing certificate for the Company and the
Guarantor (each dated as of a date no earlier than the date
hereof) from the office of the secretary of state of each state
in which it is qualified to do business other than those states
listed in Section 7.2(g) hereof with respect to the Company and
the Guarantor, respectively.
(e) Except to the extent set forth in the Security
Agreement, no later than January 19, 1999, the Company shall
have delivered to the Administrative Agent fully executed
warehouseman's lien waivers, in connection with the Property
of the Company located in warehouses, each in form and
substance reasonably satisfactory to the Administrative
Agent. The failure by the Company to deliver such
warehouseman's lien waivers by the time set forth above shall
render any inventory of the Company situated at a location for
which the Security Agreement requires, but has not received a
warehousemen's lien waiver ineligible for the purposes of the
definition of "Eligible Inventory".
(f) The failure by the Company to satisfy any of the
foregoing requirements of Sections (a), (b), (c) and (d) of
this Section 7.4 by the relevant deadline expressed herein shall
constitute an Event of Default hereunder.
SECTION 8. COVENANTS.
Each of the Parent and the Company agrees that, so long as any
credit is available to or in use by the Company hereunder, except to
the extent compliance in any case or cases is waived in writing by the
Required Lenders:
Section 8.1. Maintenance of Business. Each of the Parent and
the Company shall, and shall cause each Material Subsidiary to,
preserve and maintain its existence. Each of the Parent and the
Company shall, and shall cause each Subsidiary to, preserve and keep
in force and effect all licenses, permits and franchises necessary to
the proper conduct of its business. Notwithstanding anything
contained in this Section 8.1 to the contrary, nothing herein shall
prevent the abandonment, modification or termination of the existence,
rights and franchise of any Subsidiary which is not a Material
Subsidiary if the Parent or the Company shall reasonably and in good
faith determine that the preservation thereof is no longer desirable
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in the conduct of the business of the Parent, the Company and their
Subsidiaries taken as a whole and that the failure to so maintain such
Subsidiary's corporate existence is not disadvantageous in any
material respect to the Administrative Agent and the Lenders.
Section 8.2. Maintenance of Properties. Each of the Parent and
the Company shall maintain, preserve and keep its property, plant and
equipment in good repair, working order and condition (ordinary wear
and tear excepted) and shall from time to time make all needful and
proper repairs, renewals, replacements, additions and betterments
thereto so that at all times the efficiency thereof shall be fully
preserved and maintained, and shall cause each Subsidiary to do so in
respect of Property owned or used by it.
Section 8.3. Taxes and Assessments. Each of the Parent and the
Company shall duly pay and discharge, and shall cause each Subsidiary
to duly pay and discharge, all taxes, rates, assessments, fees and
governmental charges upon or against it or its Properties, in each
case before the same become delinquent and before penalties accrue
thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of
the matter under contest and adequate reserves are provided therefor.
Section 8.4. Insurance. Each of the Parent and the Company
shall insure and keep insured, and shall cause each Subsidiary to
insure and keep insured, with good and responsible insurance
companies, all insurable Property owned by it which is of a character
usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in
such amounts, as are insured by Persons similarly situated and
operating like Properties; and each of the Parent and the Company
shall insure, and shall cause each Subsidiary to insure, such other
hazards and risks (including employers' and public liability risks)
with good and responsible insurance companies as and to the extent
usually insured by Persons similarly situated and conducting similar
businesses. Each of the Parent and the Company shall in any event
maintain insurance on the Collateral to the extent required by the
Collateral Documents. Each of the Parent and the Company shall upon
request furnish to the Administrative Agent a certificate setting
forth in summary form the nature and extent of the insurance
maintained pursuant to this Section.
Section 8.5. Financial Reports. Each of the Parent and the
Company shall, and shall cause each Subsidiary to, maintain a standard
system of accounting in accordance with GAAP and shall furnish to the
Administrative Agent and its duly authorized representatives such
information respecting the business and financial condition of each of
the Parent and the Company and the Subsidiaries as the Administrative
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Agent or any Lender may reasonably request; and without any request,
shall furnish to the Administrative Agent (with sufficient copies for
each Lender, and with the Administrative Agent to promptly distribute
the same to each Lender, provided that the Company shall be required
to furnish the Administrative Agent only one copy of the information
required pursuant to Section 8.5(d) below and the Administrative Agent
shall furnish each Lender such information in summary form unless such
Lender requests otherwise):
(a) as soon as available, and in any event no later than
the third Business Day of each calendar week, a Borrowing Base
certificate in the form attached hereto as Exhibit C-1 showing
the computation of the Borrowing Base consisting of Eligible
Accounts in reasonable detail as of the close of business on the
last day of the immediately preceding week, together with such
other information as such certificate requires, each prepared by
the Company and certified to by the chief financial officer of
the Company (provided however, if and so long as excess
availability under the Revolving Credit has been not less than
$10,000,000 at all times since the beginning of the then most
recently completed calendar week, then the Company need not
furnish a Borrowing Base Certificate for such week's close, but
shall instead furnish the Administrative Agent as soon as
available, and in any event no later than fifteen (15) days after
the last day of the month in which such week was completed, a
Borrowing Base Certificate showing the computation of the
Borrowing Base as of the close of business on the last day of
such month);
(b) as soon as available, and in any event no later than
twenty (20) days after the last day of each calendar month, a
Borrowing Base Certificate in the form attached hereto as Exhibit
C-2 showing the computation of the Borrowing Base consisting of
Eligible Inventory in reasonable detail as of the close of
business on the last day of the immediately preceding month,
together with such other information as such certificate
requires, each prepared by the Company and certified to by the
chief financial officer of the Company;
(c) as soon as available, and in any event within
thirty (30) days after the close of each monthly accounting
period of the Parent, a copy of the consolidated and
consolidating balance sheet of the Parent, the Company and
the Subsidiaries as of the close of such period and the
consolidated and the consolidating statements of income,
retained earnings and cash flows of the Parent, the Company
and the Subsidiaries for such period, each in reasonable
detail showing in comparative form the figures for the
corresponding date and period in the previous fiscal year as
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well as showing in comparative form the year-to-date
comparisons to the Parent's current business plan/operating
budget, prepared by the Parent in accordance with GAAP and
certified to by the chief financial officer of the Parent;
(d) as soon as available, and in any event within
twenty (20) days after the close of each monthly accounting
period of the Company, an accounts receivable and accounts
payable aging, an accounts receivable concentration and
reconciliation report and an inventory report (broken down by
category), each as of the close of such period and in reasonable
detail prepared by the Company and certified to by the chief
financial officer of the Company;
(e) as soon as available, and in any event within 90 days
after the close of each annual accounting period of the Parent, a
copy of the consolidated and consolidating balance sheet of the
Parent, the Company and the Subsidiaries as of the last day of
the period then ended and the consolidated and consolidating
statements of income, retained earnings and cash flows of the
Parent, the Company and the Subsidiaries for the period then
ended, and accompanying notes thereto, each in reasonable detail
showing in comparative form the figures for the previous fiscal
year, accompanied by an unqualified opinion thereon of KPMG Peat
Marwick or another firm of independent public accountants of
recognized national standing, selected by the Parent and
satisfactory to the Required Lenders, to the effect that the
financial statements have been prepared in accordance with GAAP
and present fairly in accordance with GAAP the consolidated
financial condition of the Parent, the Company and its
Subsidiaries as of the close of such fiscal year and the results
of their operations and cash flows for the fiscal year then ended
and that an examination of such accounts in connection with such
financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, such examination
included such tests of the accounting records and such other
auditing procedures as were considered necessary in the
circumstances;
(f) promptly after receipt thereof, any additional
written reports, management letters or other detailed
information contained in writing concerning significant
aspects of the Parent's, the Company's or any Subsidiary's
operations and financial affairs given to it by its
independent public accountants;
(g) as soon as available, and in any event within 30 days
after the end of each fiscal year of the Parent, a copy of the
Parent's consolidated and consolidating business plan for the
following fiscal year, such business plan to show the Parent's
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projected consolidated and consolidating revenues, expenses, and
balance sheet on month-by-month basis, such business plan to be
in reasonable detail prepared by the Parent and in form
reasonably satisfactory to the Required Lenders;
(h) promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Parent or the
Company, written notice of (x) any threatened or pending
litigation or governmental proceeding or labor controversy
against the Parent, the Company or any Subsidiary which, if
adversely determined, would adversely effect the financial
condition, Properties, business or operations of the Parent, the
Company and their Subsidiaries taken as a whole or (y) the
occurrence of any Default or Event of Default hereunder or (z)
the shutdown of any slaughter plant; and
(i) promptly after sending or filing thereof, copies of all
proxy statements, financial statements and reports which the
Parent sends to its shareholders, and copies of all other
regular, periodic and special reports and all registration
statements which the Parent files with the SEC or any successor
thereto, or with any national securities exchange;
Each of the financial statements furnished to the Lenders pursuant to
subsection (c) of this Section coinciding with the close of any fiscal
quarter of the Parent shall be accompanied by a written certificate in
the form attached hereto as Exhibit D signed by the chief financial
officer of the Parent to the effect that to the best of the chief
financial officer's knowledge and belief no Default or Event of
Default has occurred during the period covered by such statements or,
if any such Default or Event of Default has occurred during such
period, setting forth a description of such Default or Event of
Default and specifying the action, if any, taken by the Company to
remedy the same. Such written certificate shall also set forth
financial data and computations evidencing the Company's compliance
with certain covenants hereof specified on Schedule I to Exhibit D
hereof.
Section 8.6. Inspection. Each of the Parent and the Company
shall, and shall cause each Subsidiary to, permit the Administrative
Agent, each Lender and each of their duly authorized representatives
and agents to visit and inspect any of the Properties, corporate books
and financial records of the Parent, the Company and each Subsidiary,
to examine and make copies of the books of accounts and other
financial records of the Parent, the Company and each Subsidiary, and
to discuss the affairs, finances and accounts of the Parent, the
Company and each Subsidiary with, and to be advised as to the same by,
its officers and independent public accountants (and by this provision
each of the Parent and the Company authorizes such accountants to
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discuss with the Administrative Agent and such Lender the finances and
affairs of the Parent, the Company and of each Subsidiary) at such
reasonable times and reasonable intervals as the Administrative Agent
or any such Lender may designate. Notwithstanding anything contained
in this Section 8.6 to the contrary, (i) no Lender (other than the
Lender acting as Administrative Agent) may exercise its rights under
this Section 8.6 without the prior written consent of Administrative
Agent (which consent shall not be unreasonably withheld), (ii) the
Administrative Agent shall afford each Lender at least one opportunity
each calendar year upon not less than five days notice to such Lender
for such Lender to accompany the Administrative Agent on any
visitation or other inspection of the Parent's or the Company's
Properties and (iii) the Administrative Agent shall make a reasonable
effort to coordinate such visitations and inspections by the Lenders.
Section 8.7. Capital Expenditures. Each of the Parent and the
Company shall not, nor shall it permit any Subsidiary to, expend or
become obligated for capital expenditures (as determined in accordance
with GAAP), (i) during the Parent's fiscal year ending June 30, 1999
in an aggregate amount for the Parent, the Company and their
Subsidiaries in excess of $26,000,000 and (ii) during any fiscal year
of the Parent ending subsequent to June 30, 1999 in an aggregate
amount for the Parent, the Company and their Subsidiaries in excess of
the amount equal to 115% of the amount properly charged to
depreciation on the books of the Parent, the Company and their
Subsidiaries during such fiscal year (as determined in accordance with
GAAP).
Section 8.8. Consolidated Tangible Net Worth. The Parent will,
as of the close of each monthly accounting period of the Parent
specified below, maintain Consolidated Tangible Net Worth, in an
amount not less than:
Consolidated Tangible
Net Worth Shall Not
From and Including: To and Including: Be Less Than:
the 4th monthly the 11th monthly $115,000,000
accounting period accounting period
of fiscal year 1999
the 12th monthly the 11th monthly $120,000,000
accounting period accounting period
of fiscal year 1999 of fiscal year 2000
the 12th monthly the 11th monthly $125,000,000
accounting period accounting period
of fiscal year 2000 of fiscal year 2001
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the 12th monthly all monthly $130,000,000
accounting period accounting periods
of fiscal year 2001 thereafter
Section 8.9. Leverage Ratio. The Parent shall not, as of the
close of each monthly accounting period of the Parent specified below,
permit the Leverage Ratio as of such date to be more than:
Leverage Ratio Shall
From and Including: To and Including: Not Be Greater Than:
the 4th monthly the 11th monthly 5.0 to 1.0
accounting period accounting period of
fiscal year 1999
the 12th monthly the 5th monthly 4.75 to 1.0
accounting period of accounting period of
fiscal year 1999 fiscal year 2000
the 6th monthly the 11th monthly 4.25 to 1.0
accounting period of accounting period of
fiscal year 2000 fiscal year 2000
the 12th monthly All monthly 3.5 to 1.0
accounting period of accounting periods
fiscal year 2000 thereafter
Section 8.10. Fixed Charge Coverage Ratio. The Parent shall
not, as of the close of each quarterly accounting period of the Parent
specified below, permit the Fixed Charge Coverage Ratio to be less
than:
Fixed Charge
Coverage Ratio Shall
From and Including: To and Including: Not Be Less Than:
the 4th fiscal the 3rd fiscal 1.0 to 1.0
quarter quarter
of fiscal year 1999 of fiscal year 2000
the 4th fiscal the 3rd fiscal 1.05 to 1.0
quarter quarter
of fiscal year 2000 of fiscal year 2001
the 4th fiscal All fiscal quarters 1.10 to 1.0
quarter thereafter
of fiscal year 2001
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Section 8.11. Minimum Consolidated EBITDA. The Parent will, as
of the close of each quarterly accounting period of the Parent
specified below (commencing with the second fiscal quarter of the
Parent's fiscal year 1999), maintain a minimum Consolidated EBITDA for
the four fiscal quarters of the Parent then ended:
For the Four Fiscal Quarters Minimum Consolidated EBITDA Shall
Ended Not Be Less Than
At the close of the $20,000,000
2nd fiscal quarter of fiscal
year 1999
At the close of the $25,000,000
the 3rd fiscal quarter of fiscal
year 1999
Section 8.12 Indebtedness for Borrowed Money. Neither the
Parent nor the Company shall, nor shall either permit any Subsidiary
to, issue, incur, assume, create or have outstanding any Indebtedness
for Borrowed Money; provided, however, that the foregoing provisions
shall not restrict nor operate to prevent:
(a) the Obligations;
(b) purchase money indebtedness and Capitalized Lease
Obligations secured by Liens permitted by Section 8.13(e)
hereof in an aggregate amount not to exceed $5,000,000 at any one
time outstanding;
(c) other indebtedness existing on the date hereof and
listed on Schedule 8.12 hereto, including any renewals,
replacements, refundings and refinancings of (without any
increases in) such indebtedness; and
(d) Indebtedness for Borrowed Money not otherwise
permitted under this Section aggregating not more than
$2,500,000 at any one time outstanding.
Section 8.13. Liens. Neither the Parent nor the Company
shall, nor shall either permit any Subsidiary to, create, incur or
permit to exist any Lien of any kind on any Property owned by the
Parent, the Company or any Subsidiary; provided, however, that this
Section shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social
security obligations, taxes, assessments, statutory obligations
or other similar charges, good faith cash deposits in connection
with tenders, contracts or leases to which the Parent, the
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Company or any Subsidiary is a party or other cash deposits
required to be made in the ordinary course of business, provided
in each case that the obligation is not for borrowed money and
that the obligation secured is not overdue or, if overdue, is
being contested in good faith by appropriate proceedings which
prevent enforcement of the matter under contest and adequate
reserves have been established therefor;
(b) mechanic's, workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary
course of business with respect to obligations which are not
due or which are being contested in good faith by
appropriate proceedings which prevent enforcement of the
matter under contest;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal proceeding,
provided that the aggregate amount of liabilities of the Parent,
the Company and the Subsidiaries secured by a pledge of assets
permitted under this subsection, including interest and penalties
thereon, if any, shall not be in excess of $2,500,000 at any one
time outstanding;
(d) the Liens granted in favor of the Administrative Agent
by the Collateral Documents;
(e) Liens on Property of the Parent, the Company or any of
the Subsidiaries created solely for the purpose of securing
indebtedness permitted by Section 8.12(b) hereof, representing or
incurred to finance, refinance or refund the purchase price of
Property, provided that no such Lien shall extend to or cover
other Property of the Parent, the Company or such Subsidiary
other than the respective Property so acquired, and the principal
amount of indebtedness secured by any such Lien shall at no time
exceed the original purchase price of such Property;
(f) Limited Grower Payable Liens;
(g) Liens on personal property held in a margin account by
the counter party with respect to a Derivative Agreement relating
to commodities, so long as (i) such Derivative Agreement was
entered into in the ordinary course of business solely for the
purpose of mitigating risk and (ii) the aggregate fair market
value of all personal property held in all such margin accounts
does not at any time exceed $10,000,000;
(h) survey exceptions or encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities
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and other similar purposes, or rights of lessors or sublessors of
real property leased by the Company or any Subsidiary, or zoning
or other restrictions as to the use of real properties which are
necessary for the conduct of the activities of the Company and
any Subsidiary of the Company or which customarily exist on
properties of corporations engaged in similar activities and
similarly situated and which do not in any event materially
impair their use in the operation of the business of the Company
or any Subsidiary of the Company; and
(i) Liens existing on the date hereof and listed on
Schedule 8.13 hereof.
Section 8.14. Investments, Acquisitions, Loans, Advances and
Guaranties. Neither the Parent nor the Company shall, nor shall
either permit any Subsidiary to, directly or indirectly, make, retain
or have outstanding any investments (whether through purchase of stock
or obligations or otherwise) in, or loans or advances (other than for
travel advances and other similar cash advances made to employees in
the ordinary course of business) to, any other Person, or acquire all
or any substantial part of the assets or business of any other Person
or division thereof, or be or become liable as endorser, guarantor,
surety or otherwise for any debt, obligation or undertaking of any
other Person, or otherwise agree to provide funds for payment of the
obligations of another, or supply funds thereto or invest therein or
otherwise assure a creditor of another against loss, or apply for or
become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have
to the claim or demand of any other Person; provided, however, that
the foregoing provisions shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United
States of America or of any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations of
the United States of America, provided that any such obligations
shall mature within one year of the date of issuance thereof;
(b) investments in commercial paper rated at least P1
by Moody's Investors Services, Inc. and at least A1 by
Standard & Poor's Corporation maturing within 270 days of the
date of issuance thereof;
(c) investments in certificates of deposit issued by any
United States commercial bank having capital and surplus of not
less than $100,000,000 which have a maturity of one year or less;
(d) investments in repurchase obligations with a term
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of not more than thirty (30) days for underlying securities
of the types described in subsection (a) above entered into
with any bank meeting the qualifications specified in subsection
(c) above, provided all such agreements require physical delivery
of the securities securing such repurchase agreement, except
those delivered through the Federal Reserve Book Entry System;
(e) endorsement of items for deposit or collection of
commercial paper received in the ordinary course of business; and
(f) investments, acquisitions, loans, advances and
guaranties not otherwise permitted under this Section
aggregating not more than $2,500,000 at any one time
outstanding.
In determining the amount of investments, acquisitions, loans,
advances and guarantees permitted under this Section, investments and
acquisitions shall always be taken at the original cost thereof
(regardless of any subsequent appreciation or depreciation therein),
loans and advances shall be taken at the principal amount thereof then
remaining unpaid, and guarantees shall be taken at the amount of
obligations guaranteed thereby.
Section 8.15. Operating Leases. Neither the Parent nor the
Company shall, nor shall either permit any Subsidiary to, acquire the
use or possession of any Property under a lease or similar
arrangement, whether or not the Parent, the Company or any Subsidiary
has the express or implied right to acquire title to or purchase such
Property, at any time if, after giving effect thereto, the aggregate
amount of fixed rentals and other consideration payable by the Company
and its Subsidiaries under all such leases and similar arrangements
would exceed $5,000,000 during any fiscal year of the Parent. Capital
Leases shall not be included in computing compliance with this Section
to the extent the Parent's, the Company's and its Subsidiaries'
liability in respect of the same is permitted by Section 8.12(c)
hereof.
Section 8.16. Mergers, Consolidations and Sales. Neither the
Parent nor the Company shall, nor shall either permit any Subsidiary
to, be a party to any merger or consolidation, or in any event sell or
discount (with or without recourse) any of its notes or accounts
receivable. Neither the Parent nor the Company shall, nor shall
either permit any Subsidiary to sell, transfer, lease or otherwise
dispose of all or any of its Property, including any disposition of
Property as part of a sale and leaseback transaction; provided,
however, that this Section shall not apply to nor operate to prevent
the Parent, the Company or any Subsidiary from selling its inventory
in the ordinary course of its business; provided, further, that this
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Section shall not apply to nor operate to prevent the Parent, the
Company or any Subsidiary from selling, transferring, leasing or
otherwise disposing of any real estate, furniture, fixtures, equipment
or other fixed assets having an aggregate fair market value for the
Parent, the Company and the Subsidiaries not in excess of $3,500,000
for any calendar year.
Section 8.17. Maintenance of Subsidiaries. Neither the Parent
nor the Company shall assign, sell or transfer, or permit any
Subsidiary to issue, assign, sell or transfer, any shares of capital
stock of a Subsidiary; provided that the foregoing shall not operate
to prevent the issuance, sale and transfer to any person of any shares
of capital stock of a Subsidiary solely for the purpose of qualifying,
and to the extent legally necessary to qualify, such person as a
director of such Subsidiary.
Section 8.18. Dividends and Certain Other Restricted Payments.
Without the prior written consent of the Required Lenders, neither the
Parent nor the Company shall during any fiscal year (a) declare or pay
any dividends on or make any other distributions in respect of any
class or series of its capital stock (other than dividends payable
solely in its capital stock) or (b) directly or indirectly purchase,
redeem or otherwise acquire or retire any of its capital stock.
Section 8.19. ERISA. Each of the Parent and the Company shall,
and shall cause each Subsidiary to, promptly pay and discharge all
obligations and liabilities arising under ERISA of a character which
if unpaid or unperformed might result in the imposition of a Lien
against any of its Properties. Each of the Parent and the Company
shall, and shall cause each Subsidiary to, promptly notify the
Administrative Agent of (i) the occurrence of any reportable event (as
defined in ERISA) with respect to a Plan, (ii) receipt of any notice
from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor, (iii) its intention to terminate or
withdraw from any Plan, and (iv) the occurrence of any event with
respect to any Plan which would result in the incurrence by the
Parent, the Company or any Subsidiary of any material liability, fine
or penalty, or any material increase in the contingent liability of
the Parent, the Company or any Subsidiary with respect to any
post-retirement Welfare Plan benefit.
Section 8.20. Compliance with Laws. Each of the Parent and the
Company shall, and shall cause each Subsidiary to, comply in all
respects with the requirements of all federal, state and local laws,
rules, regulations, ordinances and orders applicable to or pertaining
to their Properties or business operations, non-compliance with which
could result in the shutdown of any slaughter plant or have a material
adverse effect on the financial condition, Properties, business or
operations of the Parent, the Company and their Subsidiaries taken as
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a whole or could result in a Lien not permitted by this Agreement upon
any of their Property.
Section 8.21. Burdensome Contracts With Affiliates. Neither the
Parent nor the Company shall, nor shall either permit any Subsidiary
to, enter into any contract, agreement or business arrangement with
any of its Affiliates (other than with Wholly-Owned Subsidiaries) on
terms and conditions which are less favorable to the Company or such
Subsidiary than would be usual and customary in similar contracts,
agreements or business arrangements between Persons not affiliated
with each other.
Section 8.22. No Changes in Fiscal Year. None of the Parent,
the Company nor any Subsidiary shall change its fiscal year or its
quarterly or monthly accounting periods from their present basis
without the prior written consent of the Required Lenders.
Section 8.23. Formation of Subsidiaries. In the event any
Subsidiary is formed or acquired after the date hereof, the Company
shall within thirty (30) Business Days thereof (x) furnish an update
to Schedule 6.2 hereof to reflect such new Subsidiary and (y) cause
such newly-formed or acquired Subsidiary, if such Subsidiary is a
Material Subsidiary, to execute a Guaranty and execute such Collateral
Documents to the extent required by Section 4 hereof (on terms
substantially similar to those executed in connection with this
Agreement) as the Administrative Agent may then require granting the
Administrative Agent for the benefit of the Lenders a security
interest in and lien on the personal property of such Subsidiary as
collateral security for the Notes and the other Obligations, together
with documentation (including a legal opinion) similar to that
described in Section 7.2 hereof relating to the authorization for,
execution and delivery of, and validity of such Subsidiary's
obligations as a Guarantor hereunder and under its Guaranty in form
and substance satisfactory to the Administrative Agent and such other
instruments, documents, certificates and opinions as are reasonably
required by the Administrative Agent in connection therewith.
Section 8.24. Change in the Nature of Business. Neither the
Parent nor the Company shall, nor shall either permit any Subsidiary
to, engage in any business or activity if as a result the general
nature of the business of the Company or any Subsidiary would be
changed in any material respect from the general nature of the
business engaged in by the Company or such Subsidiary on the date of
this Agreement.
Section 8.25. Year 2000 Assessment. Each of the Parent and the
Company shall take all actions necessary and commit adequate resources
to assure that its computer based and other systems (and those of all
Subsidiaries) are able to effectively process dates, including dates
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before, on and after January 1, 2000, without experiencing any Year
2000 Problem that could cause a material adverse effect on the
business or financial affairs of the Parent or the Company (or of the
Parent and the Subsidiaries taken on a consolidated basis). At the
request of the Administrative Agent, each of the Parent and the
Company will provide the Administrative Agent with written assurances
and substantiations (including, but not limited to, the results of
internal or external audit reports prepared in the ordinary course of
business) reasonably acceptable to the Administrative Agent as to the
capability of the Parent, the Company and the Subsidiaries to conduct
its and their businesses and operations before, on and after January
1, 2000, without experiencing a Year 2000 Problem causing a material
adverse effect on the business or financial affairs of the Parent or
the Company (or of the Parent, the Company and the Subsidiaries taken
on a consolidated basis).
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the
following shall constitute an "Event of Default" hereunder:
(a) (i) default in the payment when due of any principal
of any Note or any Loan evidenced thereby or of any Reimbursement
Obligation, whether at the stated maturity thereof or at any
other time provided in any Loan Document; or (ii) default for a
period of five (5) days in the payment when due of interest on
any Note or any Loan evidenced thereby or on any Reimbursement
Obligation or in the payment when due of any fee or other
Obligation; or
(b) default in the observance or performance of any
covenant set forth in Sections 8.5, 8.6, 8.7, 8.8, 8.9, 8.10,
8.11, 8.12, 8.13, 8.14, 8.15, 8.16, 8.17, 8.18, 8.23 or 8.24
hereof or of any provision requiring the maintenance of insurance
on the Collateral subject thereto or dealing with the use or
remittance of proceeds of Collateral in each case contained
herein or in any other Loan Document; or
(c) default in the observance or performance of any other
provision hereof or of any other Loan Document which is not
remedied within thirty (30) days after the earlier of (i) the
date on which such failure shall first become known to any
responsible officer of the Company or (ii) written notice thereof
is given to the Company by the Administrative Agent; or
(d) any representation or warranty made by the Parent
or the Company herein or in any other Loan Document, or in any
statement or certificate furnished by it pursuant hereto
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or thereto, or in connection with any extension of credit made
hereunder, proves untrue in any material respect as of the date
of the issuance or making thereof; or
(e) any event occurs or condition exists (other than those
described in subsections (a) through (d) above) which is
specified as an event of default under any of the other Loan
Documents and continues beyond any period of grace expressed in
such Loan Document as applicable thereto; or any of the Loan
Documents shall for any reason not be or shall cease to be in
full force and effect; or any of the Loan Documents is declared
to be null and void, or any of the Collateral Documents shall for
any reason fail to create a valid and perfected first priority
Lien in favor of the Administrative Agent on Collateral purported
to be covered thereby aggregating more than $100,000 in value
except as expressly permitted by the terms thereof and such
failure shall not be remedied within thirty (30) days after
written notice thereof is given to the Company by the
Administrative Agent; or
(f) default shall occur under any evidence of
Indebtedness for Borrowed Money aggregating in excess of
$1,000,000 issued, assumed or guaranteed by the Parent, the
Company or any Subsidiary or under any indenture, agreement
or other instrument under which the same may be issued, and
such default shall continue for a period of time sufficient
to permit the acceleration of the maturity of any such
Indebtedness for Borrowed Money (whether or not such maturity is
in fact accelerated) or any such Indebtedness for Borrowed Money
shall not be paid when due (whether by lapse of time,
acceleration or otherwise) and continues unpaid for any period of
grace expressly applicable thereto not exceeding five (5) days;
or
(g) any judgment or judgments, writ or writs, or
warrant or warrants of attachment, or any similar process or
processes in an aggregate amount in excess of $2,500,000 shall be
entered or filed against the Parent, the Company or any
Subsidiary or against any of their Property and which remains
unvacated, unbonded, unstayed or unsatisfied for a period of
thirty (30) days; or
(h) the Parent or any member of its Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess
of $5,000,000 which it shall have become liable to pay to the
PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans having aggregate Unfunded Vested
Liabilities in excess of $5,000,000 (collectively, a "Material
Plan") shall be filed under Title IV of ERISA by the Parent or
any other member of its Controlled Group, any plan administrator
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or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material
Plan against the Parent or any member of its Controlled Group to
enforce Section 515 or 4219(c)(5) of ERISA and such proceeding
shall not have been dismissed within thirty (30) days thereafter;
or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or
(i) dissolution or termination of existence of the
Parent, the Company or any Material Subsidiary; or
(j) there shall occur any material adverse change in the
condition (financial or otherwise) or business prospects of the
Parent, the Company and their Subsidiaries taken as a whole; or
(k) the Parent, the Company or any Subsidiary makes any
payment or payments aggregating in excess of $100,000 on account
of the principal of or interest on any indebtedness which
payments are prohibited under the terms of any instrument
subordinating such indebtedness to the Notes or any other
Obligations; or
(l) a Change of Control shall occur; or
(m) the Parent, the Company or any Subsidiary shall (i)
have entered involuntarily against it an order for relief under
the United States Bankruptcy Code, as amended, or other
bankruptcy law or law for the relief of debtors, (ii) not pay, or
admit in writing its inability to pay, its debts generally as
they become due, (iii) make an assignment for the benefit of
creditors, (iv) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any substantial part of
its Property, (v) institute any proceeding seeking to have
entered against it an order for relief under the United States
Bankruptcy Code, as amended, or other bankruptcy law or law for
the relief of debtors to adjudicate it insolvent, or seeking
dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed
against it, or (vi) fail to contest in good faith any appointment
or proceeding described in Section 9.1(n) hereof; or
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(n) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Parent, the Company
or any Subsidiary or any substantial part of any of their
Property, or a proceeding described in Section 9.1(m)(v) shall be
instituted against the Parent, the Company or any Subsidiary, and
such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of thirty (30)
days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of
Default described in subsection (a) through (l), both inclusive, of
Section 9.1 has occurred and is continuing, the Administrative Agent
may or, upon the request of the Required Lenders, shall, in each case
by notice to the Company, take one or more of the following actions:
(a) terminate the obligations of the Lenders to extend
any further credit hereunder on the date (which may be the date
thereof) stated in such notice;
(b) declare the principal of and the accrued interest
on the Notes to be forthwith due and payable and thereupon the
Notes, including both principal and interest and all fees,
charges and other Obligations payable hereunder and under the
other Loan Documents, shall be and become immediately due and
payable without further demand, presentment, protest or notice of
any kind;
(c) cancel any Letter of Credit which by its terms
permits the issuer thereof to terminate the same; and
(d) enforce any and all rights and remedies available to it
under the Loan Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default
described in subsection (m) or (n) of Section 9.1 has occurred and is
continuing, then the Notes, including both principal and interest, and
all fees, charges and other Obligations payable hereunder and under
the other Loan Documents, shall immediately become due and payable
without presentment, demand, protest or notice of any kind, and the
obligations of the Lenders to extend further credit pursuant to any of
the terms hereof shall immediately terminate. In addition, the
Administrative Agent may exercise any and all remedies available to it
under the Loan Documents or applicable law.
Section 9.4. Collateral for Undrawn Letters of Credit. When
any Event of Default, other than an Event of Default described in
subsection (m) or (n) of Section 9.1, has occurred and is continuing,
the Company shall, upon demand of the Administrative Agent (which
demand shall be made upon the request of the Required Lenders), and
when any Event of Default described in subsection (m) or (n) of
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Section 9.1 has occurred the Company shall, without notice or demand
from the Administrative Agent, immediately pay to the Administrative
Agent the full amount of each Letter of Credit then outstanding, the
Company agreeing to immediately make such payment and acknowledging
and agreeing that the Administrative Agent and the Lenders would not
have an adequate remedy at law for failure of the Company to honor any
such demand and that the Administrative Agent and the Lenders shall
have the right to require the Company to specifically perform such
undertaking whether or not any draws have been made under any such
Letters of Credit.
SECTION 10. THE ADMINISTRATIVE AGENT.
Section 10.1. Appointment and Authorization. Each Lender hereby
appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers hereunder and under
the other Loan Documents as are designated to the Administrative Agent
by the terms hereof and thereof together with such powers as are
reasonably incidental thereto. The Lenders expressly agree that the
Administrative Agent is not acting as a fiduciary of the Lenders in
respect of the Loan Documents, the Company or otherwise. The
Administrative Agent may resign at any time by sending twenty (20)
days prior written notice to the Company and the Lenders. The
Administrative Agent may be removed by the Required Lenders upon
twenty (20) days' prior written notice to the Company and the Lenders
and (except for any such removal during the continuance of any Event
of Default) the prior written consent of the Company to such removal.
In the event of any such resignation or removal the Required Lenders
may appoint a new agent with the Company's consent (which consent
shall not be unreasonably withheld), which shall succeed to all the
rights, powers and duties of the Administrative Agent hereunder and
under the other Loan Documents. Any resigning or removed
Administrative Agent shall be entitled to the benefit of all the
protective provisions hereof with respect to its acts as an agent
hereunder, but no successor Administrative Agent shall in any event be
liable or responsible for any actions of its predecessor. No such
resignation or removal shall be effective unless and until such a
successor is appointed.
Section 10.2. Rights as a Lender. The Administrative Agent has
and reserves all of the rights, powers and duties hereunder and under
the other Loan Documents as any Lender may have and may exercise the
same as though it were not the Administrative Agent and the terms
"Lender" or "Lenders" as used herein and in all of such documents
shall, unless the context otherwise expressly indicates, include the
Administrative Agent in its individual capacity as a Lender.
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Section 10.3. Standard of Care. The Lenders acknowledge that
they have received and approved copies of the Loan Documents and such
other information and documents concerning the transactions
contemplated and financed hereby as they have requested to receive
and/or review. The Administrative Agent makes no representations or
warranties of any kind or character to the Lenders with respect to the
validity, enforceability, genuineness, perfection, value, worth or
collectibility hereof or of the Notes or any of the other Obligations
or of any of the other Loan Documents or of the Liens provided for
thereby or of any other documents called for hereby or thereby or of
the Collateral. The Administrative Agent need not verify the worth or
existence of the Collateral and may rely exclusively on reports of the
Company in computing the Borrowing Base, provided that the
Administrative Agent agrees to furnish the Lenders with copies of any
field audit reports made in connection with inspections which it may
make pursuant to Sections 3.1 or 8.6 hereof but the Administrative
Agent makes no representations or warranties of any kind in connection
therewith nor shall the Administrative Agent have any liability in
connection therewith except for its own gross negligence or willful
misconduct. Neither the Administrative Agent nor any director,
officer, employee, agent or representative thereof (including any
security trustee therefor) shall in any event be liable for any
clerical errors or errors in judgment, inadvertence or oversight, or
for action taken or omitted to be taken by it or them hereunder or
under the other Loan Documents or in connection herewith or therewith
except for its or their own gross negligence or willful misconduct.
The Administrative Agent shall incur no liability under or in respect
of this Agreement or the other Loan Documents by acting upon any
notice, certificate, warranty, instruction or statement (oral or
written) of anyone (including anyone in good faith believed by it to
be authorized to act on behalf of the Company), unless t has actual
knowledge of the untruthfulness of same. The Administrative Agent may
execute any of its duties hereunder by or through employees, agents,
and attorneys-in-fact and shall not be answerable to the Lenders for
the default or misconduct of any such agents or attorneys-in-fact
selected with reasonable care. The Administrative Agent shall be
entitled to advice of counsel concerning all matters pertaining to the
agencies hereby created and its duties hereunder, and shall incur no
liability to anyone and be fully protected in acting upon the advice
of such counsel. The Administrative Agent shall be entitled to assume
that no Default or Event of Default exists unless notified to the
contrary by a Lender or unless the Administrative Agent itself has
actual knowledge that a Default or Event of Default exists. The
Administrative Agent shall in all events be fully protected in acting
or failing to act in accord with the instructions of the Required
Lenders. Upon the occurrence of an Event of Default hereunder, the
Administrative Agent shall take such action with respect to the
enforcement of the Liens on the Collateral and the preservation and
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protection thereof as it shall be directed to take by the Required
Lenders but unless and until the Required Lenders have given such
direction the Administrative Agent shall take or refrain from taking
such actions as it deems appropriate and in the best of interest of
all Lenders. The Administrative Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by the Administrative
Agent by reason of taking or continuing to take any such action. The
Administrative Agent may treat the owner of any Note as the holder
thereof until written notice of transfer shall have been filed with
the Administrative Agent signed by such owner in form satisfactory to
the Administrative Agent. Each Lender acknowledges that it has
independently and without reliance on the Administrative Agent or any
other Lender and based upon such information, investigations and
inquiries as it deems appropriate made its own credit analysis and
decision to extend credit to the Company. It shall be the
responsibility of each Lender to keep itself informed as to the
creditworthiness of the Company and the Administrative Agent shall
have no liability to any Lender with respect thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to
reimburse the Administrative Agent for all costs and expenses suffered
or incurred by the Administrative Agent or any security trustee in
performing its duties hereunder and under the other Loan Documents, or
in the exercise of any right or power imposed or conferred upon the
Administrative Agent hereby or thereby, to the extent that the
Administrative Agent is not promptly reimbursed for same by the
Company or out of the Collateral, all such costs and expenses to be
borne by the Lenders ratably in accordance with the amounts of their
respective Revolving Credit Commitments. If any Lender fails to
reimburse the Administrative Agent for such Lender's share of any such
costs and expenses, such costs and expenses shall be paid pro rata by
the remaining Lenders, but without in any manner releasing the
defaulting Lender from its liability hereunder.
Section 10.5. Indemnity. The Lenders shall ratably indemnify
and hold the Administrative Agent and its directors, officers,
employees, agents and representatives (including as such any security
trustee therefor) harmless from and against any liabilities, losses,
costs and expenses suffered or incurred by it hereunder or under the
other Loan Documents or in connection with the transactions
contemplated hereby or thereby, regardless of when asserted or
arising, except to the extent the Administrative Agent is promptly
reimbursed for the same by the Company or out of the Collateral and
except to the extent that any event giving rise to a claim was caused
by the gross negligence or willful misconduct of the Administrative
Agent seeking to be indemnified. If any Lender defaults in its
obligations hereunder, its share of the obligations shall be paid pro
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rata by the remaining Lenders, but without in any manner releasing the
defaulting Lender from its liability hereunder.
SECTION 11. GUARANTEE.
Section 11.1. Guarantee. To induce the Lenders to provide the
credits described herein and in consideration of benefits expected to
accrue to each Guarantor by reason of the Commitments and for other
good and valuable consideration, receipt of which is hereby
acknowledged, the Parent and each Subsidiary party hereto or to a
Guaranty (individually a "Guarantor" and collectively the
"Guarantors") hereby unconditionally and irrevocably guarantees
jointly and severally to the Administrative Agent, the Lenders and
each other holder of any of the Obligations, the due and punctual
payment of all present and future indebtedness of the Company
evidenced by or arising out of the Loan Documents, including, but not
limited to, the due and punctual payment of principal of and interest
on the Notes and the due and punctual payment of all other Obligations
now or hereafter owed by the Company under the Loan Documents as and
when the same shall become due and payable, whether at stated
maturity, by acceleration or otherwise, according to the terms hereof
and thereof. In case of failure by the Company punctually to pay any
indebtedness or other Obligations guaranteed hereby, each Guarantor
hereby unconditionally agrees jointly and severally to make such
payment or to cause such payment to be made punctually as and when the
same shall become due and payable, whether at stated maturity, by
acceleration or otherwise, and as if such payment were made by the
Company.
Section 11.2. Guarantee Unconditional. The obligations of each
Guarantor as a guarantor or joint and several obligor under the Loan
Documents, including this Section 11, shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall
not be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of the Company or
of any Guarantor under this Agreement or any other Loan Document
or by operation of law or otherwise;
(b) any modification or amendment of or supplement to
this Agreement or any other Loan Document;
(c) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting, the Company, any Guarantor,
or any of their respective assets, or any resulting release or
discharge of any obligation of Company or of any Guarantor
contained in any Loan Document;
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(d) the existence of any claim, set-off or other
rights which the Guarantor may have at any time against the
Administrative Agent, any Lender or any other Person, whether or
not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim
or demand or any exercise of, or failure to exercise, any rights
or remedies against the Company, any Guarantor or any other
Person or Property;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of the Company, regardless
of what obligations of the Company remain unpaid;
(g) any invalidity or unenforceability relating to or
against the Company or any Guarantor for any reason of this
Agreement or of any other Loan Document or any provision of
applicable law or regulation purporting to prohibit the
payment by the Company or any Guarantor of the principal of
or interest on any Note or any other amount payable by them
under the Loan Documents; or
(h) any other act or omission to act or delay of any kind
by the Administrative Agent, any Lender or any other Person or
any other circumstance whatsoever that might, but for the
provisions of this paragraph, constitute a legal or equitable
discharge of the obligations of the Guarantors under the Loan
Documents.
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances. Each Guarantor's obligations under this
Section 11 shall remain in full force and effect until the Commitments
are terminated and the principal of and interest on the Notes and all
other amounts payable by the Company under this Agreement and all
other Loan Documents shall have been paid in full at which time the
Guarantors' obligations hereunder shall, subject to the following
sentence, terminate. If at any time any payment of the principal of
or interest on any Note or any other amount payable by the Company
under the Loan Documents is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the
Company or of any Guarantor, or otherwise, each Guarantor's
obligations under this Section 11 with respect to such payment shall
be reinstated at such time as though such payment had become due but
had not been made at such time.
Section 11.4. Waivers. (a) General. Each Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and
any notice not provided for herein, as well as any requirement that at
any time any action be taken by the Administrative Agent, any Lender
or any other Person against the Company, another Guarantor or any
other Person.
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(b) Subrogation and Contribution. Each Guarantor
hereby agrees not to exercise or enforce any right of
exoneration, contribution, reimbursement, recourse or
subrogation available to such Guarantor against any Person
liable for payment of the Obligations, or as to any security
therefor, unless and until the full amount owing on the
Obligations has been paid and the Commitments have
terminated; and the payment by such Guarantor of any amount
pursuant to any of the Loan Documents on account of credit
extended to the Company shall not in any way entitle such
Guarantor to any right, title or interest (whether by way of
subrogation or otherwise) in and to any of the Obligations or any
proceeds thereof or any security therefor unless and until the
full amount owing on the Obligations has been paid and the
Commitments have terminated.
Section 11.5. Limit on Recovery. Notwithstanding any other
provision hereof or of the Notes, the right of recovery against each
Guarantor under this Section 11 or against the Company on the Notes
issued by it shall not (to the extent required by or as may be
necessary or desirable to ensure the enforceability against such
Guarantor of its obligations hereunder or thereunder in accordance
with the laws of the jurisdiction of its incorporation or where it
carries on business) exceed $1.00 less than the amount which would, as
of the time of such recovery, render such Guarantor's obligations
under this Section 11 and the Notes void or voidable under applicable
law, including without limitation fraudulent conveyance law.
Section 11.6. Stay of Acceleration. If acceleration of the time
for payment of any amount payable by the Company under this Agreement
or any other Loan Document is stayed upon the insolvency, bankruptcy
or reorganization of the Company, all such amounts otherwise subject
to acceleration under the terms of this Agreement or the other Loan
Documents shall nonetheless be payable jointly and severally by the
Guarantors hereunder forthwith on demand by the Administrative Agent
made at the request of the Required Lenders.
Section 11.7. Benefit to Guarantors. All of the Guarantors are
engaged in related businesses and integrated to such an extent that
the financial strength and flexibility of each Guarantor has a direct
impact on the success of each other Guarantor. Each Guarantor will
derive substantial direct and indirect benefit from the extension of
credit hereunder.
Section 11.8. Guarantor Covenants. Each Guarantor shall take
such action as the Company is required by this Agreement to cause such
Guarantor to take, and shall refrain from taking such action as the
Parent or the Company is required by this Agreement to prohibit such
Guarantor from taking.
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SECTION 12. MISCELLANEOUS.
Section 12.1. Non-Business Days. If any payment hereunder
becomes due and payable on a day which is not a Business Day, the due
date of such payment shall be extended to the next succeeding Business
Day on which date such payment shall be due and payable. In the case
of any payment of principal falling due on a day which is not a
Business Day, interest on such principal amount shall continue to
accrue during such extension at the rate per annum then in effect,
which accrued amount shall be due and payable on the next scheduled
date for the payment of interest.
Section 12.2. No Waiver, Cumulative Remedies. No delay or
failure on the part of any Lender or on the part of any holder of any
of the Obligations in the exercise of any power or right shall operate
as a waiver thereof or as an acquiescence in any default, nor shall
any single or partial exercise of any power or right preclude any
other or further exercise thereof or the exercise of any other power
or right. The rights and remedies hereunder of the Lenders and any of
the holders of the Obligations are cumulative to, and not exclusive
of, any rights or remedies which any of them would otherwise have.
Section 12.3. Waivers, Modifications and Amendments. Any
provision hereof or of any of the other Loan Documents may be amended,
modified, waived or released and any Default or Event of Default and
its consequences may be rescinded and annulled upon the written
consent of the Required Lenders; provided, however, that without the
consent of all Lenders no such amendment, modification or waiver shall
(i) increase the amount or extend the terms of any or all of the
Commitments, (ii) reduce the interest rate applicable to or extend the
date of payment or any other maturity of any Obligation owed to it
(including without limitation any payment owed to it by virtue of the
Borrowing Base provisions of Section 3.3(a) hereof), (iii) reduce the
amount of any principal or any other sum to which such Lender is
entitled hereunder (for example by reducing such Lender's share of any
Obligation), (iv) change the order of payment of the Obligation in
Sections 3.5(b) or (c) hereof, (v) subordinate payment of any
Obligations, (vi) increase any advance rate or reduce the Grower
Payable Reserve in each case used in computing the Borrowing Base,
(vii) release over any one calendar year more than $1,000,000 in value
of the collateral security afforded by the Collateral Documents
(except in connection with a sale or other disposition, required or
permitted to be effected by the provisions hereof or of the Collateral
Documents), (viii) release any Guarantor, (ix) change this Section
12.3, (x) change the definition of "Required Lenders" or (xi) change
the number of Lenders required to take any action hereunder or under
any of the other Loan Documents. No amendment, modification or waiver
of the Administrative Agent's protective provisions shall be effective
without the prior written consent of the affected Administrative
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Agent. Without the prior written consent of all Lenders, the
Administrative Agent shall not make any Revolving Credit Loan or
issue, amend or extend any Letter of Credit in each case if the
Administrative Agent has actual knowledge that, as of the time of such
Loan, issuance, amendment or extension, as the case may be, or
immediately after giving effect thereto, the aggregate principal
amount of Revolving Credit Loans and L/C Obligations then outstanding
shall exceed the Borrowing Base as then determined and computed.
Section 12.4. Costs and Expenses. The Company agrees to pay on
demand the costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, execution and delivery
of this Agreement, the other Loan Documents and the other instruments
and documents to be delivered hereunder or thereunder, and in
connection with the recording or filing of any of the foregoing, and
in connection with the transactions contemplated hereby or thereby,
and in connection with any consents hereunder or waivers or amendments
hereto or thereto, including the reasonable fees and expenses of
Messrs. Chapman and Cutler, counsel for the Administrative Agent, with
respect to all of the foregoing (whether or not the transactions
contemplated hereby are consummated). The Company further agrees to
pay to Administrative Agent and the Lenders and any other holders of
the Obligations all costs and expenses (including court costs and
attorneys' fees), if any, incurred or paid by the Administrative
Agent, the Lenders or any other holders of the Obligations in
connection with any Default or Event of Default or in connection with
the enforcement of this Agreement or any of the other Loan Documents
or any other instrument or document delivered hereunder or thereunder.
The Company further agrees to indemnify and save the Lenders, the
Administrative Agent and any security trustee for the Lenders harmless
from any and all liabilities, losses, costs and expenses incurred by
the Lenders or the Administrative Agent in connection with any action,
suit or proceeding brought against the Administrative Agent, or any
security trustee or any Lender by any Person (but excluding attorneys'
fees for litigation solely between the Lenders to which the Company is
not a party) which arises out of any action or inaction by the Company
or any Affiliate of the Company in each case in connection with any of
the transactions contemplated hereby, except for such thereof as is
caused by the gross negligence or willful misconduct of the party
seeking to be indemnified. The provisions of this Section 12.4 and
the protective provisions of Section 2 hereof shall survive payment of
the Obligations.
Section 12.5. Survival of Representations. All representations
and warranties made herein or in any of the other Loan Documents or in
certificates given pursuant hereto or thereto shall survive the
execution and delivery of this Agreement and the other Loan Documents,
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and shall continue in full force and effect with respect to the date
as of which they were made as long as any credit is in use or
available hereunder.
Section 12.6. Survival of Indemnities. All indemnities and
other provisions relative to reimbursement to the Administrative Agent
and the Lenders of amounts sufficient to protect the yield of the
Administrative Agent and the Lenders with respect to the Loans and
Letters of Credit, including, but not limited to, Sections 1.4(e),
2.7, 2.8 and 2.9 hereof, shall survive the termination of this
Agreement and the payment of the Obligations.
Section 12.7. Participations. Any Lender may grant
participations in its extensions of credit hereunder to any other
Lender or other lending institution (a "Participant"), provided that
(i) no Participant shall thereby acquire any direct rights under this
Agreement, (ii) no Lender shall agree with a Participant not to
exercise any of such Lender's rights hereunder without the consent of
such Participant except for rights which under the terms hereof may
only be exercised by all Lenders and (iii) no sale of a participation
in extensions of credit shall in any manner relieve the selling Lender
of its obligations hereunder.
Section 12.8. Assignment Agreements. Each Lender may, from time
to time upon at least five (5) Business Days' prior written notice to
the Administrative Agent, assign to other commercial lenders part of
its rights and obligations under this Agreement (including without
limitation the indebtedness evidenced by the Note then owned by such
assigning Lender, together with an equivalent proportion of its
Revolving Credit Commitment to make Loans and participate in the
credit risk on Letters of Credit hereunder) pursuant to an Assignment
Agreement executed by such assigning Lender, such assignee lender or
lenders, the Company, and the Administrative Agent, which Assignment
Agreements shall specify in each instance the portion of the
indebtedness evidenced by the Note which is to be assigned to each
such assignee lender and the portion of the Revolving Credit
Commitment of the assigning Lender to be assumed by it; provided,
however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of the assigning Lender's rights and obligations
under this Agreement and the assignment shall cover the same
percentage of such Lender's Revolving Credit Commitment, Loans, Note
and credit risk with respect to Letters of Credit; (ii) unless the
Administrative Agent otherwise consents, the aggregate amount of the
Revolving Credit Commitment, Loans and Note of the assigning Lender
being assigned pursuant to each such assignment (determined as of the
effective date of the relevant Assignment Agreement) shall in no event
be less than $5,000,000 and shall be an integral multiple of
$1,000,000; (iii) the Administrative Agent and (except for any such
assignment made during the continuance of any Event of Default) the
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Company must each consent, which consent shall not be unreasonably
withheld (it being understood and agreed that it would not be
unreasonable to withhold consent to any such assignment based upon the
size or financial strength of the proposed assignee), to each such
assignment to a party which was not an original signatory of this
Agreement; and (iv) the assigning Lender must pay to the
Administrative Agent a processing and recordation fee of $3,500 and
any out-of-pocket attorneys' fees and expenses incurred by the
Administrative Agent in connection with such Assignment Agreement.
Upon the execution of each Assignment Agreement by the assigning
Lender thereunder, the assignee lender thereunder, the Company, and
the Administrative Agent and payment to such assigning Lender by such
assignee lender of the purchase price for the portion of the
indebtedness of the Company being acquired by it, (i) such assignee
lender shall thereupon become a "Lender" for all purposes of this
Agreement with a Revolving Credit Commitment in the amount set forth
in such Assignment Agreement and with all the rights, powers and
obligations afforded a Lender hereunder, (ii) such assigning Lender
shall have no further liability for funding the portion of its
Commitments assumed by such other Lender and (iii) the address for
notices to such assignee Lender shall be as specified in the
Assignment Agreement executed by it. Concurrently with the execution
and delivery of such Assignment Agreement, the Company shall execute
and deliver a Note to the assignee Lender in the respective amounts of
its Revolving Credit Commitment under the Revolving Credit and a new
Note to the assigning Lender in the amount of its Revolving Credit
Commitment under the Revolving Credit after giving effect to the
reduction occasioned by such assignment, all such Notes to constitute
"Notes" for all purposes of this Agreement and of the other Loan
Documents.
Section 12.9. Notices. Except as otherwise specified herein,
all notices hereunder shall be in writing (including telecopy) and
shall be given to the relevant party at its address or telecopier
number set forth below, in the case of the Company, or on the
appropriate signature page hereof, in the case of the Lenders and the
Administrative Agent, or such other address or telecopier number as
such party may hereafter specify by notice to the Administrative Agent
and the Company given by United States certified or registered mail,
by telecopy or by other telecommunication device capable of creating a
written record of such notice and its receipt. Notices hereunder to
the Company shall be addressed to the Company at:
Wampler Foods, Inc.
800 Co-Op Drive
Timberville, Virginia 22853
Attention: Mr. Dale Lam
Vice President of Finance and
Corporate Controller
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Telephone: 540-896-0466
Telecopy: 540-896-0498
Each such notice, request or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section 12.9 and a confirmation of
such telecopy has been received by the sender, (ii) if given by mail,
five (5) days after such communication is deposited in the mail,
certified or registered with return receipt requested, addressed as
aforesaid or (iii) if given by any other means, when delivered at the
addresses specified in this Section 12.9; provided that any notice
given pursuant to Section 1 or Section 2 hereof shall be effective
only upon receipt.
Section 12.10. Withholding Taxes. (a) Payments Free of
Withholding. Except as otherwise required by law and subject to
Section 12.10(b) hereof, each payment by the Company under this
Agreement and under any other Loan Document shall be made without
withholding for or on account of any present or future taxes (other
than overall net income taxes on the recipient) imposed by or within
the jurisdiction in which the Company is domiciled, any jurisdiction
from which the Company makes any payment, or (in each case) any
political subdivision or taxing authority thereof or therein. If any
such withholding is so required, the Company shall make the
withholding, pay the amount withheld to the appropriate governmental
authority before penalties attach thereto or interest accrues thereon
and forthwith pay such additional amount as may be necessary to ensure
that the net amount actually received by each Lender and the
Administrative Agent free and clear of such taxes (including such
taxes on such additional amount) is equal to the amount which that
Lender or the Administrative Agent (as the case may be) would have
received had such withholding not been made. If the Administrative
Agent or any Lender pays any amount in respect of any such taxes,
penalties or interest, the Company shall reimburse the Administrative
Agent or such Lender for that payment on demand in the currency in
which such payment was made. If the Company pays any such taxes,
penalties or interest, it shall deliver official tax receipts
evidencing that payment or certified copies thereof to the Lender or
Administrative Agent on whose account such withholding was made (with
a copy to the Administrative Agent if not the recipient of the
original) on or before the thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that
is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) shall submit to the Company
and the Administrative Agent on or before the earlier of the
date the initial extension of credit is made hereunder and 30
days after the date hereof, two duly completed and signed copies
of either Form 1001 (relating to such Lender and entitling it to
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a complete exemption from withholding under the Code on all
amounts to be received by such Lender, including fees, pursuant
to the Loan Documents and the Loans) or Form 4224 (relating to
all amounts to be received by such Lender, including fees,
pursuant to the Loan Documents and the Loans) of the United
States Internal Revenue Service. Thereafter and from time to
time, each Lender shall submit to the Company and the
Administrative Agent such additional duly completed and signed
copies of one or the other of such Forms (or such successor forms
as shall be adopted from time to time by the relevant United
States taxing authorities) as may be (i) requested by the Company
in a written notice, directly or through the Administrative
Agent, to such Lender and (ii) required under then-current United
States law or regulations to avoid or reduce United States
withholding taxes on payments in respect of all amounts to be
received by such Lender, including fees, pursuant to the Loan
Documents or the Loans.
(c) Inability of Lender to Submit Forms. If any
Lender determines, as a result of any change in applicable law,
regulation or treaty, or in any official application or
interpretation thereof, that it is unable to submit to the
Company or the Administrative Agent any form or certificate
that such Lender is obligated to submit pursuant to subsection
(b) of this Section 12.10 or that such Lender is required to
withdraw or cancel any such form or certificate previously
submitted or any such form or certificate otherwise becomes
ineffective or inaccurate, such Lender shall promptly notify the
Company and Administrative Agent of such fact and the Lender
shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any
affected form or certificate, as applicable.
Section 12.11. Construction. The parties hereto acknowledge and
agree that this Agreement and the other Loan Documents shall not be
construed more favorably in favor of one than the other based upon
which party drafted the same, it being acknowledged that all parties
hereto contributed substantially to the negotiation of this Agreement
and the other Loan Documents. Nothing contained herein shall be
deemed or construed to permit any act or omission which is prohibited
by the terms of any of the other Loan Documents, the covenants and
agreements contained herein being in addition to and not in
substitution for the covenants and agreements contained in the other
Loan Documents.
Section 12.12. Headings. Section headings used in this Agreement
are for convenience of reference only and are not a part of this
Agreement for any other purpose.
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Section 12.13. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. All rights, remedies and powers
provided in this Agreement and the other Loan Documents may be
exercised only to the extent that the exercise thereof does not
violate any applicable mandatory provisions of law, and all the
provisions of this Agreement and the other Loan Documents are intended
to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they
will not render this Agreement or the other Loan Documents invalid or
unenforceable.
Section 12.14. Counterparts. This Agreement may be executed in
any number of counterparts, and by different parties hereto on
separate counterpart signature pages, and all such counterparts taken
together shall be deemed to constitute one and the same instrument.
Section 12.15. Entire Understanding. This Agreement together
with the other Loan Documents constitute the entire understanding of
the parties with respect to the subject matter hereof and any prior
agreements, whether written or oral, with respect thereto are
superseded hereby.
Section 12.16. Binding Nature, Governing Law, Etc. This
Agreement shall be binding upon the Company, the Parent and the
Guarantors and their successors and assigns, and shall inure to the
benefit of the Administrative Agent and the Lenders and the benefit of
their successors and assigns, including any subsequent holder of an
interest in the Obligations. The Company may not assign its rights
hereunder without the written consent of the Lenders. THIS AGREEMENT
AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 12.17. Submission to Jurisdiction; Waiver of Jury Trial.
The Company and each Guarantor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Northern
District of Illinois and of any Illinois State court sitting in the
City of Chicago for purposes of all legal proceedings arising out of
or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Company and each
Guarantor irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in
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an inconvenient forum. THE COMPANY, EACH GUARANTOR, THE
ADMINISTRATIVE AGENT, AND EACH LENDER HEREBY IRREVOCABLY WAIVE ANY AND
ALL RIGHT TO TRAIL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
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Upon your acceptance hereof in the manner hereinafter set forth,
this Agreement shall constitute a contract between us for the uses and
purposes hereinabove set forth.
Dated as of this _20_ day of _November_, 1998.
Wampler Foods, Inc.
By:__/s/ Dale S. Lam__
Name:__Dale S. Lam____
Title:__Treasurer_____
WLR Foods, Inc.
By:__/s/ Dale S. Lam__
Name:__Dale S. Lam____
Title:__Vice President of Finance__
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Accepted and Agreed to at Chicago, Illinois as of the day and
year last above written.
Each of the Lenders hereby agrees with each other Lender that if
it should receive or obtain any payment (whether by voluntary payment,
by realization upon collateral, by the exercise of rights of set-off
or banker's lien, by counterclaim or cross action, or by the
enforcement of any rights under this Agreement, any of the other Loan
Documents or otherwise) in respect of the Obligations in a greater
amount than such Lender would have received had such payment been made
to the Administrative Agent and been distributed among the Lenders as
contemplated by Section 3.5 hereof then in that event the Lender
receiving such disproportionate payment shall purchase for cash
without recourse from the other Lenders an interest in the Obligations
of the Company to such Lenders in such amount as shall result in a
distribution of such payment as contemplated by Section 3.5 hereof.
In the event any payment made to a Lender and shared with the other
Lenders pursuant to the provisions hereof is ever recovered from such
Lender, the Lenders receiving a portion of such payment hereunder
shall restore the same to the payor Lender, but without interest.
Amount and Percentage of
Commitments:
Revolving Credit Commitment: Harris Trust and Savings Bank,
$30,000,000.00 (20.00000000%) individually and as
Administrative Agent
Term Credit Commitment:
$10,000,000 (6.66666667%) By:__/s/ William T. Kane__
Name:__William T. Kane____
Title:__Vice President____
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate
principal amount at any one time
outstanding in excess of $30,000,000
111 West Monroe Street
Chicago, Illinois 60603
Attention: AgriBusiness Group
& Asset Based Lending
Telephone: (312) 461-2116
Telecopy: (312) 765-1641
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LIBOR Funding Office:
Nassau Branch
c/o 111 West Monroe Street
Chicago, Illinois 60690
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Amount and Percentage of
Commitments:
Revolving Credit Commitment: US Bancorp Ag Credit, Inc.
$25,000,000.00 (16.66666667%)
Term Credit Commitment: By:__/s/ Douglas S. Hoffner__
$8,333,333.33 (5.55555556%) Name:__Douglas S. Hoffner____
Title:__Vice President_______
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate
principal amount at any one time
outstanding in excess of $25,000,000
950 Seventeenth Street
Suite 350
Denver, CO 80202
Attention: Douglas S. Hoffner
Telephone: (303) 585-6789
Telecopy: (303) 585-4732
LIBOR Funding Office:
___Same as Above___
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Amount and Percentage of
Commitments:
Revolving Credit Commitment: Nations Bank, N.A.
$25,000,000.00 (16.66666667%)
Term Credit Commitment: By:__/s/ Joseph Lenrer__
$8,333,333.33 (5.55555556%) Name:__Joseph Lenrer____
Title:__Vice President__
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate
principal amount at any one time
outstanding in excess of $25,000,000
600 Peachtree Street
13th Floor
Atlanta, GA 30308
Attention: Steve Kluemper
Telephone: (404) 607-5412
Telecopy: (404) 607-6642
LIBOR Funding Office:
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Amount and Percentage of
Commitments:
Revolving Credit Commitment: Green Tree Financial Servicing
$25,000,000.00 (16.66666667%) Corporation
Term Credit Commitment:
$8,333,333.33 (5.55555556%) By:__/s/ Christopher Gouskos__
Name:__Christopher Gouskos__
Title: Senior Vice President
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate
principal amount at any one time
outstanding in excess of $25,000,000
100 North Point Center East
Suite 200
Alpharetta, GA 30022
Attention: Ray Zavacki-Credit
Maryann Stathis
Operations
Telephone: (770) 772-3341
Ray Zavacki
(770) 772-3723
Maryann Stathis
Telecopy: (770) 772-3786
LIBOR Funding Office:
100 North Point Center East
Suite 200
Alpharetta, GA 30022
96
<PAGE>
Amount and Percentage of
Commitments:
Revolving Credit Commitment: The CIT Group/Business Credit,
$15,000,000.00 (10.00000000%) Inc.
Term Credit Commitment: By:__/s/ Neal Mulford__
$5,000,000.00 (3.33333333%) Name:__Neal Mulford____
Title:__Vice President_
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate
principal amount at any one time
outstanding in excess of $15,000,000
1200 Ashwood Parkway
Suite 150
Atlanta, GA 30338
Attention: Regional Credit
Manager
Telephone: (770) 522-7684
Telecopy: (770) 522-7673
LIBOR Funding Office:
1211 Avenue of the Americas
22nd Floor
New York, NY 10036
Attention: Marvin Daniel
Telephone: (212) 536-1243
Telecopy: (212) 536-1329
97
<PAGE>
Amount and Percentage of
Commitments:
Revolving Credit Commitment: Branch Banking and Trust
$10,000,000.00 (6.66666667%) Company of Virginia
Term Credit Commitment:
$3,333,333.33 (2.22222222%) By:__/s/ R. Matthew Hall__
Name:__R. Matthew Hall____
Title:__Vice President____
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate
principal amount at any one time
outstanding in excess of $10,000,000
2809 Emerywood Parkway
Suite 500
P.O. Box 85050
Richmond, VA 23285
Attention: J. Charles Link
Telephone: (804) 756-0257
Telecopy: (804) 755-7818
LIBOR Funding Office:
200 West Second Street
Winston-Salem, NC 27102
98
<PAGE>
Amount and Percentage of
Commitments:
Revolving Credit Commitment: Mercantile Bank National
$10,000,000.00 (6.66666667%) Association
Term Credit Commitment: By:__/s/ Wayne C. Lewis__
$3,333,333.33 (2.22222222%) Name:__Wayne C. Lewis____
Title:__Vice President___
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate.
principal amount at any one time
outstanding in excess of $10,000,000
One Mercantile Center
St. Louis, MO 63166-0524
Attention: Wayne C. Lewis
Telephone: (314) 418-3991
Telecopy: (314) 418-2162
LIBOR Funding Office:
99
<PAGE>
Amount and Percentage of
Commitments:
Revolving Credit Commitment: Blue Ridge Farm Credit, ACA
$10,000,000.00 (6.66666667%)
Term Credit Commitment: By:__/s/ Thomas H. Byerly__
$3,333,333.33 (2.22222222%) Name:__Thomas H. Bryerly___
Title:__Executive Vice_____
__President__________
The undersigned is not obligated
under its Commitments to extend
credit hereunder in an aggregate
principal amount at any one time
outstanding in excess of $10,000,000
State Route 792
P.O. Box 899
Staunton, VA 24402-0899
Attention: Thomas H. Bryerly
Telephone: (540) 886-3435
Telecopy: (540) 886-3437
LIBOR Funding Office:
AgFirst Farm Credit Bank
P.O. Box 1499
1401 Hampton Street
Columbia, SC 29202-1499
100
<PAGE>
EXHIBIT A
WAMPLER FOODS, INC.
REVOLVING CREDIT NOTE
Chicago, Illinois
_______________, ____
On the Termination Date, for value received, the undersigned,
Wampler Foods, Inc., a Virginia corporation (the "Company"), hereby
promises to pay to the order of _______________________________ (the
"Lender"), at the principal office of Harris Trust and Savings Bank in
Chicago, Illinois, such amount as may at the time of the maturity
hereof, whether by acceleration or otherwise, be the aggregate unpaid
principal amount of all Loans owing from the Company to the Lender
under the Revolving Credit provided for in the Credit Agreement
hereinafter mentioned.
This Note evidences Loans constituting part of a "Domestic Rate
Portion" or a "LIBOR Portion" as such terms are defined in that
certain Credit Agreement dated as of ________________, 1998 among the
Company, WLR Foods, Inc., Harris Trust and Savings Bank, individually
and as Administrative Agent thereunder, and the other Lenders which
are now or may from time to time hereafter become parties thereto
(said Credit Agreement, as the same may be amended, modified or
restated from time to time, being referred to herein as the "Credit
Agreement") made and to be made to the Company by the Lender under the
Revolving Credit provided for under the Credit Agreement, and the
Company hereby promises to pay interest at the office described above
on each Loan evidenced hereby at the rates and at the times and in the
manner specified therefor in the Credit Agreement.
Each Loan made under the Revolving Credit provided for in the
Credit Agreement by the Lender to the Company against this Note, any
repayment of principal hereon, the status of each such Loan from time
to time as part of the Domestic Rate Portion or a LIBOR Portion and,
in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto shall be endorsed by the holder hereof on a
schedule to this Note or recorded on the books and records of the
holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company
agrees that in any action or proceeding instituted to collect or
enforce collection of this Note, the entries so endorsed on a schedule
to this Note or recorded on the books and records of the holder hereof
shall be prima facie evidence of the unpaid principal balance of this
Note, the status of each such Loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion, and, in the case of any
LIBOR Portion, the interest rate and Interest Period applicable
thereto.
This Note is issued by the Company under the terms and provisions
of the Credit Agreement and is secured by, among other things, the
<PAGE>
Collateral Documents, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred
to therein, to which reference is hereby made for a statement thereof.
This Note may be declared to be, or be and become, due prior to its
expressed maturity, voluntary prepayments may be made hereon, and
certain prepayments are required to be made hereon, all in the events,
on the terms and with the effects provided in the Credit Agreement.
All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit
Agreement.
The Company hereby promises to pay all costs and expenses
(including attorneys fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral
therefor. The Company hereby waives presentment for payment and
demand. This Note shall be construed in accordance with, and governed
by, the internal laws of the State of Illinois without regard to
principles of conflicts of laws.
Wampler Foods, Inc.
By:________________
Name:______________
Title:_____________
2
<PAGE>
EXHIBIT B
WAMPLER FOODS, INC.
TERM CREDIT NOTE
Chicago, Illinois
$________________ ___________, ____
For Value Received, the undersigned, Wampler Foods, Inc., a
Virginia corporation (the "Company"), hereby promises to pay to the
order of __________________ (the "Lender"), at the principal office of
Harris Trust and Savings Bank in Chicago, Illinois, the principal sum
of _____________________________________ Dollars ($_____________) or,
if less, the aggregate unpaid principal amount of such Lender's pro
rata share of the Term Loan made to the Company under the Term Credit
provided for under the Credit Agreement hereinafter identified and
defined and remaining unpaid on November 20, 2001, together with
interest on the principal amount of such Term Loan from time to time
outstanding hereunder at the rates, and payable in the manner and on
the dates specified in said Credit Agreement.
This Note evidences a loan constituting part of a "Domestic Rate
Portion" or a "LIBOR Portion" as such terms are defined in that
certain Credit Agreement dated as of ____________, 1998, by and among
the Company, WLR Foods, Inc., Harris Trust and Savings Bank,
individually and as Agent thereunder, and the other Lenders which are
now or may from time to time hereafter become parties thereto (said
Credit Agreement, as the same may be amended, modified or restated
from time to time, being referred to herein as the "Credit Agreement")
made to the Company by the Lender under the Term Credit provided for
under the Credit Agreement, and the Company hereby promises to pay
interest at the office specified above on each loan evidenced hereby
at the rates and at the times and in the manner specified therefor in
the Credit Agreement.
The loan made under the Term Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any
repayment of principal hereon, the status of each such loan from time
to time as part of the Domestic Rate Portion or a LIBOR Portion and,
in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto shall be endorsed by the holder hereof on a
schedule to this Note or recorded on the books and records of the
holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company
agrees that in any action or proceeding instituted to collect or
enforce collection of this Note, the entries so endorsed on a schedule
to this Note or recorded on the books and records of the holder hereof
shall be prima facie evidence of the unpaid balance of this Note and
the status of such loan from time to time as part of the Domestic
<PAGE>
Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions
of the Credit Agreement and is secured by, among other things, the
Collateral Documents, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred
to therein, to which reference is hereby made for a statement thereof.
This Note may be declared to be, or be and become, due prior to its
expressed maturity, voluntary prepayments may be made hereon, and
certain prepayments are required to be made hereon, all in the events,
on the terms and with the effects provided in the Credit Agreement.
All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit
Agreement.
The Company hereby promises to pay all costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral
therefor. The Company hereby waives presentment for payment and
demand. This Note shall be construed in accordance with, and governed
by, the internal laws of the State of Illinois without regard to
principles of conflicts of laws.
Wampler Foods, Inc.
By:________________
Name:______________
Title:_____________
2
<PAGE>
EXHIBIT C-1
BORROWING BASE CERTIFICATE
(Eligible Accounts)
<PAGE>
EXHIBIT C-2
BORROWING BASE CERTIFICATE
(Eligible Inventory)
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to the Administrative
Agent and the Lenders pursuant to that certain Credit Agreement dated
as of _________________, 1998, by and among Wampler Foods, Inc. (the
"Company"), WLR Foods, Inc., and you (the "Credit Agreement"). Unless
otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Credit
Agreement.
The Undersigned hereby certifies that:
1. I am the duly elected__________________ of the Company;
2. I have reviewed the terms of the Credit Agreement and I have
made, or have caused to be made under my supervision, a detailed
review of the transactions and conditions of the Company and the
Subsidiaries during the accounting period covered by the attached
financial statements;
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or the
occurrence of any event which constitutes a Default or Event of
Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate,
except as set forth below;
4. The financial statements required by Section 8.5 of the
Credit Agreement and being furnished to you concurrently with this
Certificate are, to best of my knowledge, true, correct and complete
in all material respects as of the date and for the periods covered
thereby; and
5. The Attachment hereto sets forth financial data and
computations evidencing the Company's compliance with certain
covenants of the Credit Agreement, all of which data and computations
are, to the best of my knowledge, true, complete and correct and have
been made in accordance with the relevant Sections of the Credit
Agreement.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period
during which it has existed and the action which the Company has
taken, is taking, or proposes to take with respect to each such
condition or event:
____________________________________________________________
____________________________________________________________
<PAGE>
The foregoing certifications, together with the computations set
forth in the Attachment hereto and the financial statements delivered
with this Certificate in support hereof, are made and delivered this
_________ day of __________________ 19___.
______________________________
______________, ______________
(Name) (Title)
2
<PAGE>
SCHEDULE I
ATTACHMENT TO COMPLIANCE CERTIFICATE
WAMPLER FOODS, INC.
Compliance Calculations for Credit Agreement
Dated as of ___________, 1998
Calculations as of _____________, 19___
_________________________________________________________________
A. CAPITAL EXPENDITURES (SECTION 8.7)
1. Capital expenditures $__________
2. As set forth in Section 8.8,
net capital expenditures (Line 3)
must not exceed (NOTE: $26 million
during year ending 6/30/99 or
thereafter, 115% of depreciation) $__________
3. Company is in compliance?
(Circle yes or no) _Yes / No__
B. CONSOLIDATED TANGIBLE NET WORTH
(SECTION 8.8)
1. Total shareholders' equity
2. Subordinated Indebtedness
3. Sum of Lines 1 and 2
4. Intangible Assets as defined
(book value)
5. Write up of assets above cost
6. Sum of Lines 4 and 5
7. Line 3 minus Line 6
("Consolidated Tangible Net Worth")
8. As listed in Section 8.8, for the
date of this Certificate, Consolidated
Tangible Net Worth must not be less
than $____________
9. Company is in compliance?
(Circle yes or no) __Yes / No___
<PAGE>
C. LEVERAGE RATIO (SECTION 8.9)
1. Senior Funded Debt
2. Net Income for the Parent and
Subsidiary $__________
specified four fiscal quarters
of the Company most recently completed
3. Net Income from Cassco Ice & Cold
Storage, Inc. $__________
4. Subtract Line 3 from Line 2 $__________
(Consolidated Net Income)
5. Interest Expense for the same period $__________
6. Federal, state and local income taxes $__________
for the same period
7. Depreciation of fixed assets for the $__________
same period
8. Amortization for the same period $__________
9. Other non-cash charges $__________
10. Add Lines 4 through 9 $__________
("Consolidated Gross EBITDA")
11. Income from sale of Cassco Ice & Cold $__________
Storage and Goldsboro, NC broiler
complex
12. Subtract Line 11 from Line 10 $__________
("Consolidated EBITDA")
13. Senior Funded Debt (Line 1)
to Consolidated EBITDA (Line 12)
("Leverage Ratio") _________:1
14. As listed in Section 8.8, for
the date of this Certificate,
the Leverage Ratio shall not
be less than _________:1
15. Company is in compliance?
(Circle yes or no) __Yes / No__
2
<PAGE>
D. FIXED CHARGE COVERAGE RATIO (SECTION 8.10)
1. Consolidated EBITDA $__________
2. Net cash federal, state and local
income taxes paid $__________
3. Taxes in respect of Net Income
attributable to Cassco $__________
Ice & Cold Storage, Inc.
4. Taxes in respect of income from
sale of Cassco Ice & Cold
Storage, Inc. $__________
5. Taxes in respect of income from
sale of Company's $__________
Goldsboro, NC broker complex.
6. Add Lines 3 through 5 $__________
7. Line 2 minus Line 6 $__________
8. Capital Expenditures $__________
9. Marshville conversion expenditures $__________
10. Expenditures financed by other
indebtedness $__________
11. Net Capital Expenditures $__________
(Line 8 minus Lines 9 and 10)
12. Restricted Payments $__________
13. Sum of Lines 3, 11 & 12 $__________
14. Line 1 minus Line 13 $__________
15. Fixed Charges $__________
(a) Principal payments on Funded Debt $__________
(b) Interest Expense $__________
16. Sum of 15(a) and 15(b)
("Fixed Charges") $__________
17. Ratio of Line 14 to Line 11
("Fixed Charge Coverage Ratio") __________:1
3
<PAGE>
18. As listed in Section 8.10 for the date
of this Certificate, the Fixed Charge
Coverage Ratio shall not be less than __________:1
19. Company is in compliance?
(Circle yes or no) __Yes / No___
E. MINIMUM CONSOLIDATED EBITDA (SECTION 8.11)
1. Consolidated EBITDA on rolling 4
quarter basis $__________
2. As listed in Section 8.11 for the date
of this Certificate, Consolidated
EBITDA shall not be less than $__________
3. Company is in compliance? __Yes / No__
(Circle yes or no)
4
<PAGE>
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19_____
Reference is made to the Credit Agreement dated as of
____________, 1998 (the "Credit Agreement") among Wampler Foods, Inc.,
WLR Foods, Inc., the Lenders (as defined in the Credit Agreement) and
Harris Trust and Savings Bank, as Administrative Agent for the Lenders
(the "Administrative Agent"). Terms defined in the Credit Agreement
are used herein with the same meaning.
___________________________________________ (the "Assignor") and
_________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, a ____%
interest in and to all of the Assignor's rights and obligations under
the Credit Agreement as of the Effective Date (as defined below),
including, without limitation, such percentage interest in the
Assignor's Commitment as in effect on the Effective Date and the
Loans, if any, owing to the Assignor on the Effective Date and the
Assignor's pro rata share of any outstanding L/C Obligations, if any.
2. The Assignor (i) represents and warrants that as of the date
hereof (A) its Commitment is $____________, (B) the aggregate
outstanding principal amount of Loans made by it under the Credit
Agreement that have not been repaid is $_____________ and a
description of the interest rates and interest periods for such Loans
is attached as Schedule 1 hereto, and (C) the aggregate principal
amount of Assignor's outstanding L/C Obligations is $____________ and
a description of the expiry date, amount and account party for such
L/C Obligations is also attached as Schedule 1 hereto; (ii) represents
and warrants that it is the legal and beneficial owner of the interest
being assigned by it hereunder and that such interest is free and
clear of any adverse claim, lien, or encumbrance of any kind; (iii)
makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement or any other instrument or document furnished
pursuant thereto; and (iv) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Company or the performance or observance by the Company of any of
their respective obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto.
<PAGE>
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the most recent financial
statements delivered to the Lenders pursuant to Section 8 thereof and
such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any
other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement;
(iii) appoints and authorizes the Administrative Agent to take such
action as Administrative Agent on its behalf and to exercise such
powers under the Credit Agreement as are delegated to the
Administrative Agent by the terms thereof, together with such powers
as are reasonably incidental thereto; (iv) agrees that it will perform
in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a
Lender; and (v) specifies as its lending offices (and address for
notices) the offices set forth beneath its name on the signature pages
hereof.
4. As consideration for the assignment and sale contemplated in
Section 1 hereof, the Assignee shall pay to the Assignor on the date
hereof in Federal funds an amount equal to $________________*. It is
understood that commitment and/or Letter of Credit fees accrued to the
date hereof with respect to the interest assigned hereby are for the
account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor
and the Assignee hereby agrees that if it receives any amount under
the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party
to the extent of such other party's interest therein and shall
promptly pay the same to such other party.
5. The effective date for this Assignment and Acceptance shall
be ________________, 19___ (the "Effective Date"). Following the
execution of this Assignment and Acceptance, it will be delivered to
the Company for its acceptance and to the Administrative Agent for
acceptance and recording by the Administrative Agent.
6. Upon such acceptance and recording, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the
rights and obligations of a Lender thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the
Credit Agreement.
2
<PAGE>
7. Upon such acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments under
the Credit Agreement in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest
and commitment fees with respect thereto) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement for periods prior to the Effective
Date directly between themselves.
8. In accordance with Section 11.8 of the Credit Agreement, the
Assignor and the Assignee request and direct that the Administrative
Agent prepare and cause the Company to execute and deliver to the
Assignee a Revolving Credit Note payable to the Assignee in the amount
of its Commitment and a new Revolving Credit Note to the Assignor in
the amount of its Commitment after giving effect to the assignment
hereunder.
___________________
* Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the Assignee.
It may be preferable in an appropriate case to specify these amounts
generically or by formula rather than as a fixed sum.
3
<PAGE>
9. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Illinois.
[Assignor Lender]
By:______________
Title:___________
[Assignee Lender]
By:______________
Title:___________
Lending Office (and
address for notices):
LIBOR Funding Office:
Accepted and consented this ___ day of ___________, 19__
By:_______________
Title:____________
Accepted and consented to by the Administrative Agent
this_______ day of ___________, 19__
[ADMINISTRATIVE AGENT]
By:_______________
Title:____________
4
<PAGE>
SCHEDULE I
REVOLVING LOANS
Principal Borrower Type of Interest Last day
Amount to Whom Revolving Rate of
Loan Loan Interest
Disbursed Period
_________ _________ _________ _________ ________
LETTERS OF CREDIT
Account Party Face Amount Expiry Date
_____________ ___________ ___________
<PAGE>
EXHIBIT F
GUARANTY AGREEMENT
_____________, 19___
Harris Trust and Savings Bank,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
115 South LaSalle Street
Chicago, Illinois 60603
Dear Sirs:
Reference is made to the Credit Agreement, dated as of
__________________, 1998 (the "Credit Agreement") among Wampler Foods,
Inc., WLR Foods, Inc., the Lenders named therein, Harris Trust and
Savings Bank as Administrative Agent for the Lenders. Capitalized
terms used and not defined herein have the meanings assigned to them
in the Credit Agreement.
The undersigned, [name of Guarantor], a [jurisdiction of
incorporation] corporation, hereby elects to be a "Guarantor" for all
purposes of the Credit Agreement, effective from the date hereof and
the undersigned hereby agrees to perform all the obligations of a
Guarantor under, and to be bound in all respects by the terms of, the
Credit Agreement, including without limitation Sections 3.3, 11 and
12.17 thereof, as if the undersigned were a direct signatory party
thereto.
The undersigned confirms that (i) it is a Subsidiary of the
Company, (ii) the execution, delivery and performance by it of this
Guaranty is within its corporate powers, have been duly authorized by
all necessary corporate action, requires no action by or in respect
of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of
applicable law or regulation or of its charter or by-laws or of any
agreement or instrument to which the Company or the undersigned is a
party or is subject, or by which the Company or the undersigned, or
the Company's or the undersigned's property, is bound, or of any
judgment, injunction, order, decree or other instrument binding upon
it or result in the creation or imposition of any lien on any asset of
the Company or any of its Subsidiaries and (iii) the representations
and warranties set forth in Section 6 of the Credit Agreement are true
and correct as to the undersigned and its subsidiaries as of the date
hereof.
<PAGE>
This Agreement shall be construed in accordance with and governed
by the internal laws of the State of Illinois.
Very truly yours,
[Name of Guarantor]
By:_______________
Name:_____________
Title:____________
2
<PAGE>
SCHEDULE 6.2
SUBSIDIARIES
NAME JURISDICTION OWNER PERCENTAGE
OF OWNERSHIP
INCORPORATION
- - ------------------- ------------- --------------- ----------
Wampler Foods, Inc. Virginia WLR Foods, Inc. 100%
Wampler Supply Virginia WLR Foods, Inc. 100%
Company
Valley Rail Service, Virginia WLR Foods, Inc. 100%
Inc.
Rockingham Poultry, Virginia Wampler Foods, 100%
Inc. Inc.
Rockingham Poultry, U.S. Virgin Wampler Foods, 100%
Inc. Islands Inc.
<PAGE>
SCHEDULE 8.12
EXISTING DEBT
In addition to all debts secured by liens listed on Schedule
8.13:
1. Debt owed to Tom Bross, Jr., with a present principal
balance not in excess of $481,000.
<PAGE>
SCHEDULE 8.13
EXISTING LIENS
Wampler Foods, Inc.:
1. Pennsylvania Industrial Development Authority with a
present principal balance not in excess of $542,000,
secured by real estate at New Oxford, Pennsylvania.
2. Farmers Bank and Trust Co. of Hanover with a present
principal balance not in excess of $855,000, secured by
real state and equipment at New Oxford, Pennsylvania.
3. Bank of Hanover & Trust Company, two notes with an
aggregate present principal balance not in excess of
$392,000, secured by real estate at New Oxford,
Pennsylvania.
4. Huffman's Old Car Farm with a present principal balance
not in excess of $43,000, secured by real estate in
Rockingham County, Virginia.
<PAGE>
SCHEDULE 6.19
MORTGAGED PREMISES
Monroe Fur. Proc. Plant located Round Hill Distribution Center
in Union County, NC located in Adams County, PA
Alma Plant located in Page Marshville Proc. Plant located
County, VA in Union County, NC
Broadway Hatchery located in Wingate Feedmill located in
Rockingham County, VA Union County, NC
Broadway Feed Mill located in Franconia Plant located in
Rockingham County, VA Montgomery County, PA
Round Hill Proc. Plant located Harrisonburg Plant located in
in Adams County, PA Harrisonburg, VA
Moorefield Plant located in Broadway Plant and Broadway
Hardy County, WV Protein Plant located in
Rockingham County, VA
Moorefield Hatchery located in Harrisonburg Hatchery located
Hardy County, WV in Rockingham County, VA
Moorefield Feed Mill located in Harrisonburg Feed Mill located
Hardy County, WV in Harrisonburg, VA
Hinton Plant located in Concord Hatchery located in
Rockingham County, VA Cabarrus County, NC
<PAGE>
Exhibit 2.2
Wampler Foods, Inc.
Revolving Credit Note
Chicago, Illinois
November 20, 1998
On the Termination Date, for value received, the undersigned,
Wampler Foods, Inc., a Virginia corporation (the "Company"), hereby
promises to pay to the order of Harris Trust and Savings Bank (the
"Lender"), at the principal office of Harris Trust and Savings Bank in
Chicago, Illinois, such amount as may at the time of the maturity
hereof, whether by acceleration or otherwise, be the aggregate unpaid
principal amount of all Loans owing from the Company to the Lender
under the Revolving Credit provided for in the Credit Agreement
hereinafter mentioned.
This Note evidences Loans constituting part of a "Domestic Rate
Portion" or a "LIBOR Portion" as such terms are defined in that
certain Credit Agreement dated as of November 20, 1998 among the
Company, WLR Foods, Inc., certain of its Subsidiaries, Harris Trust
and Savings Bank, individually and as Administrative Agent thereunder,
and the other Lenders which are now or may from time to time hereafter
become parties thereto (said Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to
herein as the "Credit Agreement") made and to be made to the Company
by the Lender under the Revolving Credit provided for under the Credit
Agreement, and the Company hereby promises to pay interest at the
office described above on each Loan evidenced hereby at the rates and
at the times and in the manner specified therefor in the Credit
Agreement.
Each Loan made under the Revolving Credit provided for in the
Credit Agreement by the Lender to the Company against this Note, any
repayment of principal hereon, the status of each such Loan from time
to time as part of the Domestic Rate Portion or a LIBOR Portion and,
in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto shall be endorsed by the holder hereof on a
schedule to this Note or recorded on the books and records of the
holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company
agrees that in any action or proceeding instituted to collect or
enforce collection of this Note, the entries so endorsed on a schedule
to this Note or recorded on the books and records of the holder hereof
shall be prima facie evidence of the unpaid principal balance of this
Note, the status of each such Loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion, and, in the case of any
LIBOR Portion, the interest rate and Interest Period applicable
thereto.
This Note is issued by the Company under the terms and provisions
of the Credit Agreement and is secured by, among other things, the
Collateral Documents, and this Note and the holder hereof are entitled
<PAGE>
to all of the benefits and security provided for thereby or referred
to therein, to which reference is hereby made for a statement thereof.
This Note may be declared to be, or be and become, due prior to its
expressed maturity, voluntary prepayments may be made hereon, and
certain prepayments are required to be made hereon, all in the events,
on the terms and with the effects provided in the Credit Agreement.
All capitalized terms used herein without definition shall have
the same meanings herein as such terms are defined in the Credit
Agreement.
The Company hereby promises to pay all costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral
therefor. The Company hereby waives presentment for payment and
demand. This Note shall be construed in accordance with, and governed
by, the internal laws of the State of Illinois without regard to
principles of conflicts of laws.
Wampler Foods, Inc.
By:__/s/ Dale S. Lam__
Name:__Dale S. Lam__
Title:__Treasurer__
2
<PAGE>
Exhibit 2.3
Wampler Foods, Inc.
Term Credit Note
Chicago, Illinois
$10,000,000 November 20, 1998
For Value Received, the undersigned, Wampler Foods, Inc., a
Virginia corporation (the "Company"), hereby promises to pay to the
order of Harris Trust and Savings Bank (the "Lender"), at the
principal office of Harris Trust and Savings Bank in Chicago,
Illinois, the principal sum of Ten Million Dollars ($10,000,000) or,
if less, the aggregate unpaid principal amount of such Lender's pro
rata share of the Term Loan made to the Company under the Term Credit
provided for under the Credit Agreement hereinafter identified and
defined and remaining unpaid on November 20, 2001, together with
interest on the principal amount of such Term Loan from time to time
outstanding hereunder at the rates, and payable in the manner and on
the dates specified in said Credit Agreement.
This Note evidences a loan constituting part of a "Domestic Rate
Portion" or a "LIBOR Portion" as such terms are defined in that
certain Credit Agreement dated as of November 20, 1998, by and among
the Company, WLR Foods, Inc., certain of its Subsidiaries, Harris
Trust and Savings Bank, individually and as Agent thereunder, and the
other Lenders which are now or may from time to time hereafter become
parties thereto (said Credit Agreement, as the same may be amended,
modified or restated from time to time, being referred to herein as
the "Credit Agreement") made to the Company by the Lender under the
Term Credit provided for under the Credit Agreement, and the Company
hereby promises to pay interest at the office specified above on each
loan evidenced hereby at the rates and at the times and in the manner
specified therefor in the Credit Agreement.
The loan made under the Term Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any
repayment of principal hereon, the status of each such loan from time
to time as part of the Domestic Rate Portion or a LIBOR Portion and,
in the case of any LIBOR Portion, the interest rate and Interest
Period applicable thereto shall be endorsed by the holder hereof on a
schedule to this Note or recorded on the books and records of the
holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company
agrees that in any action or proceeding instituted to collect or
enforce collection of this Note, the entries so endorsed on a schedule
to this Note or recorded on the books and records of the holder hereof
shall be prima facie evidence of the unpaid balance of this Note and
the status of such loan from time to time as part of the Domestic
Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto.
<PAGE>
This Note is issued by the Company under the terms and provisions
of the Credit Agreement and is secured by, among other things, the
Collateral Documents, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred
to therein, to which reference is hereby made for a statement thereof.
This Note may be declared to be, or be and become, due prior to
its expressed maturity, voluntary prepayments may be made hereon, and
certain prepayments are required to be made hereon, all in the events,
on the terms and with the effects provided in the Credit Agreement.
All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit
Agreement.
The Company hereby promises to pay all costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral
therefor. The Company hereby waives presentment for payment and
demand. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
Wampler Foods, Inc.
By:__/S/ Dale S. Lam__
Name:__Dale S. Lam__
Title:__Treasurer__
2
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-03-1999
<PERIOD-END> DEC-26-1998
<CASH> 197
<SECURITIES> 0
<RECEIVABLES> 62,010
<ALLOWANCES> 2,303
<INVENTORY> 99,630
<CURRENT-ASSETS> 161,969
<PP&E> 300,624
<DEPRECIATION> 185,785
<TOTAL-ASSETS> 284,868
<CURRENT-LIABILITIES> 83,167
<BONDS> 60,455
0
0
<COMMON> 68,937
<OTHER-SE> 68,582
<TOTAL-LIABILITY-AND-EQUITY> 284,868
<SALES> 229,276
<TOTAL-REVENUES> 229,276
<CGS> 191,486
<TOTAL-COSTS> 191,486
<OTHER-EXPENSES> 22,696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,003
<INCOME-PRETAX> 11,648
<INCOME-TAX> 4,426
<INCOME-CONTINUING> 7,222
<DISCONTINUED> 0
<EXTRAORDINARY> (954)
<CHANGES> 0
<NET-INCOME> 6,268
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
