<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 1997
MICHAEL FOODS, INC.
--------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 0-15638 41-0498850
--------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
324 PARK NATIONAL BANK BUILDING
5353 WAYZATA BOULEVARD
MINNEAPOLIS, MINNESOTA 55416
-----------------------------
(Address of principal executive offices) (Zip Code)
(612) 546-1500
--------------
(Registrant's telephone number, including area code)
NORTH STAR UNIVERSAL, INC.
--------------------------
6479 CITY WEST PARKWAY
----------------------
EDEN PRAIRIE, MINNESOTA 55344
-----------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
INTRODUCTORY NOTE
On February 28, 1997, the Registrant and Michael Foods, Inc., a Delaware
corporation, completed a series of transactions described in detail in
Registration Statement 333-1863 which is incorporated herein by reference (the
"Reorganization"). Prior to the Reorganization, the name of the Registrant was
North Star Universal, Inc. The Registrant's common stock traded on the Nasdaq
National Market System under the symbol NSRU. The Common Stock of Michael
Foods, Inc. (Commission File No. 0-15568) traded on the Nasdaq National Market
System under the symbol MIKL. As a result of the Reorganization, Michael Foods,
Inc., a Delaware corporation, became a wholly-owned subsidiary of the Registrant
and changed its name to Michael Foods of Delaware, Inc. The Registrant,
continuing the business of Michael Foods of Delaware, Inc., changed its name to
Michael Foods, Inc., a Minnesota corporation, and now trades on the Nasdaq
National Market System under the symbol MIKLD. Historical information regarding
Michael Foods of Delaware, Inc. is now included with the Registrant's
information. Prior to the Reorganization, the Registrant transferred all of its
assets and liabilities other than Michael Foods, Inc., a Delaware corporation,
stock and certain debt to ENStar Inc. Following the reorganization, all of the
common stock of ENStar was distributed ratably to the Registrant's shareholders
of record as of February 27, 1997. The ENStar common stock is traded on the
Nasdaq National Market System under the symbol ENSR. After the Reorganization,
the business formerly conducted by North Star Universal, Inc. is now
conducted by ENStar Inc. and the business of Michael Foods, Inc., a Delaware
corporation, is conducted by the Registrant.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
A. Papetti's Acquisition. On February 26, 1997, Michael Foods, Inc.,
(n/k/a Michael Foods of Delaware, Inc., a Delaware corporation and now a
wholly-owned subsidiary of the Registrant) ("MFD"), completed a series of
transactions described in an Agreement and Plan of Reorganization (the "Merger
Agreement") among MFD, Papetti's Hygrade Egg Products, Inc., a New Jersey
corporation ("Papetti's"), and other entities related to Papetti's ("Related
Entities"), pursuant to which MFD acquired Papetti's through a merger and
acquired the Related Entities through mergers or asset purchases. Papetti's and
the Related Entities are engaged in the egg processing and distribution
business. Papetti's is headquartered in Elizabeth, New Jersey and its principal
egg processing and distribution facilities are located in New Jersey,
Pennsylvania, Iowa and Missouri. The Registrant will continue to operate the
Papetti's business as a separate subsidiary of its M. G. Waldbaum Company egg
production, processing and distribution subsidiary. See MFD Press Release
issued February 26, 1997 filed as Exhibit 20.1 hereto.
The purchase price consisted of 3,195,455 shares of MFD common stock,
assumption of approximately $23 million of notes payable and long-term debt and
approximately $42,900,000 in cash. The cash portion of the purchase price was
paid from the proceeds of the $125 million term loan described below. The
Papetti's transaction was accounted for as a purchase.
Pursuant to the Merger Agreement, two members of the Papetti's family,
Arthur J. Papetti and Stephen T. Papetti, were named as directors of MFD and
through the Reorganization described below, became directors of the Registrant.
The former shareholders of Papetti's are
<PAGE> 3
entitled, until the third anniversary of the closing, to nominate two directors
of the Registrant if the former shareholders beneficially own at least 10% of
the Registrant's common stock, or one director if the former shareholders
beneficially own less than 10% of the Registrant's common stock.
B. Reorganization. On February 28, 1997, MFD and the Registrant
completed the transactions described in the Agreement and Plan of
Reorganization between MFD, the Registrant and NSU Merger Co. dated December
21, 1995, as amended ("Reorganization Agreement") pursuant to which, through a
series of transactions, MFD, in effect, repurchased and retired a portion of
the shares of MFD common stock held by the Registrant in exchange for the
assumption of $21,250,000 of the Registrant's net indebtedness (the
"Reorganization"). The Reorganization Agreement contemplated that the historic
business of MFD would be continued by the Registrant. MFD was merged with a
subsidiary of the Registrant with MFD as the surviving entity. In the merger,
each MFD shareholder received one share of the Registrant's common stock for
each MFD common share. Immediately prior to the Reorganization, the Registrant
effected a reverse stock split whereby each share of the Registrant's
outstanding common stock was exchanged for .562 shares of new common stock of
the Registrant. The reverse stock split ratio was determined in a manner that
would reduce the number of outstanding common shares held by the Registrant's
common shareholders prior to the Reorganization to a number equal to the number
of MFD common shares held by the Registrant at the time of the Reorganization
less the number of MFD shares valued at $11.92 per share equal to $21,250,000
in net indebtedness retained by the Registrant. Upon consummation of the
reorganization, the Registrant's Board of Directors other than Mr. Efron and
Mr. Jeffrey J. Michael resigned and Mr. Ostrander, Mr. Coonrod, Mr. Knudtson,
Mr. Marshburn, Mr. Arthur J. Papetti, Mr. Stephen Papetti and Ms. Bellantoni
were appointed as directors of the Registrant. See press release filed
herewith as Exhibit 20.3.
C. ENStar Spinoff. Prior to February 28, 1997, and as a condition to the
completion of the Reorganization, the Registrant contributed all of its
operations, employees and its assets and liabilities other than the MFD stock
and $21,250,000 in net indebtedness to a wholly-owned subsidiary, ENStar Inc.
Immediately following the completion of the Reorganization, all of the ENStar
Inc. stock owned by the Registrant was distributed ratably to the Registrant's
shareholders of record as of February 27, 1997.
ITEM 5. OTHER EVENTS
A. Debt Financing. On February 26, 1997, MFD entered into a $125 million
term loan agreement with Metropolitan Life Insurance Company and certain other
insurance companies pursuant to which MFD issued $125 million aggregate
principal amount of its 7.58% senior notes due February 26, 2009. This
indebtedness was assumed by the Registrant upon completion of the Reorganization
described above. See press release filed herewith as Exhibit 20.1.
On February 26, 1997, MFD amended its existing Loan Agreement dated
December 1, 1989 with Metropolitan Life Insurance Company. The amendment was
entered into in order to conform the loan covenants and certain other provisions
in the loan agreement with the loan covenants and other loan provisions
contained in the $125 million term loan agreement described above. This
indebtedness was assumed by the Registrant upon completion of the Reorganization
described above.
<PAGE> 4
B. Bank Financing. On February 28, 1997, but prior to the completion of
the Reorganization described above, MFD entered into a new revolving loan
agreement of up to $80 million with Bank of America Illinois and certain other
banks as evidenced by a Revolving Loan Agreement dated February 28, 1997 and
Revolving Notes in the aggregate principal amount of $80 million issued pursuant
thereto. Under specified terms and conditions, this agreement may be
increased by MFD to $100 million. As part of this borrowing, an existing
revolving loan agreement with Bank of America Illinois and certain other banks
was terminated. This indebtedness was assumed by the Registrant upon
completion of the Reorganization described above. See press release filed
herewith as Exhibit 20.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
1. Audited combined balance sheet of
Papetti Companies at December 31, 1995, combined
statements of income, equity and cash flows for the year ended
December 31, 1995, and footnotes thereto.
2. Unaudited condensed combined balance sheet of Papetti Companies
at September 30, 1996, unaudited condensed combined statements of
operations and statements of cash flows for the nine months ended
September 30, 1996 and September 30, 1995, and related notes to
unaudited condensed combined financial statements.
3. Audited consolidated financial statements of Michael Foods, Inc.,
a Delaware corporation, and Subsidiaries for the years ended
December 31, 1995, December 31, 1994 and December 31, 1993 were
filed previously as exhibits to the Registrant's Form 10-K for
the year ended December 31, 1995 and are incorporated herein by
reference.
4. Unaudited condensed consolidated financial statements of Michael
Foods, Inc., a Delaware corporation, and Subsidiaries are
incorporated herein by reference to Exhibit 99.1 hereof, an
excerpt from Form 10-Q of Michael Foods, Inc., a Delaware
corporation (Commission File 0-15568) filed for the quarterly
period ended September 30, 1996.
(b) Pro Forma Financial Information
1. Unaudited pro forma condensed balance sheets of Registrant
(Michael Foods, Inc., a Minnesota corporation, f/k/a North Star
Universal, Inc., a Minnesota corporation) and ENStar Inc. at
September 30,1996 and unaudited pro forma condensed statements
of earnings for the nine months ended September 30, 1996 and
the year ended December 31, 1995.
2. Unaudited pro forma condensed combined balance sheet of
Michael Foods, Inc., a Delaware corporation, Papetti
Companies and the Registrant (Michael Foods, Inc., a Minnesota
corporation, f/k/a North Star Universal Inc., a Minnesota
corporation) at September 30, 1996 and related unaudited pro
forma condensed combined statements of earnings for the nine
months ended September 30, 1996 and the year ended December 31,
1995.
3. Notes to unaudited pro forma condensed combined financial
statements.
<PAGE> 5
PAPETTI COMPANIES
COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 1995
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
Boards of Directors, Stockholders and Partners
Papetti Companies
We have audited the accompanying combined balance sheet of the Papetti
Companies (see Note 1) as of December 31, 1995, and the related combined
statements of income, equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
the Papetti Companies as of December 31, 1995 and the combined results of their
operations and their combined cash flows for the year then ended in conformity
with generally accepted accounting principles.
As discussed in Note 1, an agreement has been reached for the Papetti Companies
to be acquired.
/s/ Coopers & Lybrand L.L.P.
Parsippany, New Jersey
October 7, 1996
<PAGE> 7
PAPETTI COMPANIES
Combined Balance Sheet
DECEMBER 31,
1995
------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,271,163
Restricted cash 437,811
Accounts receivable, trade, net of allowance for doubtful
accounts of $630,000 in 1995 25,215,806
Inventories 21,626,953
Due from related parties 3,587,292
Prepaid expenses and other 4,883,583
------------
Total current assets 59,022,608
------------
PROPERTY, PLANT AND EQUIPMENT-AT COST
Land 173,400
Buildings and improvements 5,678,288
Machinery and equipment 44,507,698
Leasehold improvements 4,124,635
Transportation equipment 8,742,386
------------
63,226,407
Less accumulated depreciation 35,070,018
------------
28,156,389
------------
OTHER ASSETS
Due from related parties 3,863,329
Goodwill, net 1,879,210
Other 2,516,204
------------
8,258,743
------------
Total Assets $ 95,437,740
============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Bank borrowings $ 13,907,524
Current maturities of long-term debt 5,767,599
Accounts payable 26,857,563
Accrued compensation 708,569
Accrued insurance 303,325
Other accrued expenses 6,623,237
Due to related parties 151,422
------------
Total current liabilities 54,319,239
LONG-TERM DEBT, less current maturities 6,267,569
Minority interest 2,310,929
------------
62,897,737
------------
COMMITMENTS AND CONTINGENCIES
EQUITY
Partners' equity 353,330
Preferred stock 20,000
Common stock 2,422,872
Additional paid-in capital 723,896
Retained earnings 29,019,905
------------
Total equity 32,540,003
------------
Total liabilities and equity $ 95,437,740
============
SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE> 8
PAPETTI COMPANIES
Combined Statement of Income
YEAR ENDED
DECEMBER 31,
-------------
1995
-------------
Net sales $ 278,785,836
Cost of sales 256,050,257
-------------
Gross profit 22,735,579
Selling, general and administrative expenses 13,563,329
-------------
Operating profit 9,172,250
Interest expense 2,304,119
Interest income (478,888)
-------------
Income before taxes 7,347,019
Income tax expense 2,349,068
-------------
Income before minority interest 4,997,951
-------------
Minority interest 157,298
-------------
Net income $ 4,840,653
=============
SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE> 9
PAPETTI COMPANIES
Combined Statement of Equity
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
PARTNERS' SHARES SHARES PAID-IN RETAINED TOTAL
EQUITY ISSUED AMOUNT ISSUED AMOUNT CAPITAL EARNINGS EQUITY
--------- --------- -------- ------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at:
December 31, 1994 $ 253,125 20,000 $ 20,000 2,404 $ 2,420,862 $ 524,906 $ 25,494,268 $ 28,713,161
Net income 108,083 4,732,570 4,840,653
Contributions 50,000 50,000
Issuance of common stock 1,675 2,010 198,990 201,000
Cash dividends (1,206,933) (1,206,933)
Partnership distributions (57,878) (57,878)
--------- --------- -------- ------ ----------- ---------- ------------ ------------
Balance at:
December 31, 1995 $ 353,330 20,000 $ 20,000 4,079 $ 2,422,872 $ 723,896 $ 29,019,905 $ 32,540,003
========= ========= ======== ====== =========== ========== ============ ============
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE> 10
PAPETTI COMPANIES
Combined Statement of Cash Flows
YEAR ENDED
DECEMBER
31,
-----------
1995
-----------
Cash flows from operating activities:
Net income $ 4,840,653
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,776,980
Deferred income taxes (420,718)
Loss on sale of assets 76,123
Provision for doubtful accounts 457,131
Minority interest in income 157,298
(Increase) decrease in assets:
Accounts receivable, trade (6,199,305)
Inventories (4,648,454)
Due from related parties (3,089,199)
Prepaid expenses and other (2,411,127)
Other noncurrent assets (707,926)
Increase (decrease) in liabilities:
Due to related parties (904,954)
Accounts payable 7,825,702
Accrued compensation 268,699
Accrued insurance 56,522
Other accrued expenses 3,819,707
-----------
Net cash provided by operating activities 4,897,132
-----------
Cash flows from investing activities:
Proceeds from sale of property and equipment 426,827
Payments received on mortgage 502,514
Additions to patents and trademarks (227,737)
Advances to affiliates (4,000,000)
Purchase of property and equipment (6,590,208)
Other investing activities 35,089
-----------
Net cash used in investing activities (9,853,515)
-----------
Cash flows from financing activities:
Increase in bank borrowings 3,578,433
Proceeds from long-term debt 2,872,482
Repayments of long-term debt (2,394,008)
Advances to stockholders (660,000)
Net change in restricted cash (376,568)
Cash dividends paid to shareholders (1,206,933)
Cash dividends paid to minority interest (88,977)
Distributions to partners (57,878)
Distributions to minority interest (22,122)
Contributions by partners 50,000
Proceeds from issuance of common stock
to shareholders 201,000
Proceeds from issuance of common stock
to minority interest 99,000
-----------
Net cash provided by financing activities 1,994,429
-----------
Net (decrease) increase in cash and cash equivalents (2,961,954)
Cash and cash equivalents at beginning of year 6,233,117
-----------
Cash and cash equivalents at end of year $ 3,271,163
===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 2,578,430
Income taxes $ 4,729,000
Noncash investing activity:
Assets acquired by incurring directly related liabilities $ 598,589
SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE> 11
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ORGANIZATION, PRINCIPLES OF COMBINATION AND FISCAL YEAR
The combined financial statements of the Papetti Companies ("Companies")
include all the separate entities which are owned by the Papetti family as
presented below. The Companies are engaged in the procurement,
manufacturing and distribution of egg products to customers primarily
throughout the United States. The Companies' procurement trends consider
current market prices and availability of eggs. All significant balances
and transactions between the combined entities have been eliminated.
<TABLE>
<CAPTION>
FORM INTEREST
OF OF INTEREST
COMMENCED BUSINESS PAPETTI OF
ENTITY ABBREVIATION OPERATION ORGANIZATION FAMILY OTHERS
- ------------------------- ------------ --------- ------------- -------- --------------------
<S> <C> <C> <C> <C> <C>
Papetti's Hygrade Egg
Products, Inc. Hygrade 1967 C Corporation 100%
Papetti Foods, Inc. Foods 1994 S Corporation 100%
Quaker State Farms, Inc. Quaker 1990 S Corporation 100%
Papetti's of Iowa Food
Products, Inc. Iowa 1969 S Corporation 67% T. Rechsteiner - 33%
Monark Egg Corporation Monark 1991 S Corporation 75% T. Rechsteiner - 25%
Casa Trucking Limited
Partnership Casa 1994 Partnership 80% T. Catherman - 20%
Egg Specialties, Inc. Specialties 1995 S Corporation 66.6% T. Catherman - 16.7%
R. Mosier - 16.7%
Papetti Transport Leasing
Limited Partnership Transport 1993 Partnership 100%
Papetti Equipment Leasing
Limited Partnership Equipment 1993 Partnership 100%
</TABLE>
Amounts included are as of December 31, and the year then ended for all
entities except Hygrade, which is as of October 31, and for the year then
ended. During the two months ended December 31, 1995, Hygrade incurred a
net loss of approximately $850,000.
The minority stockholders' and partners' proportionate share of the equity
of the Companies is shown as minority interest.
On June 28, 1996, the Companies reached an agreement to be acquired by
Michael Foods, Inc., a U.S. food processor and distributor, for a purchase
price of approximately $85 million consisting of cash and Michael Foods,
Inc. common stock. The acquisition is expected to close in the first
quarter of 1997.
CASH AND CASH EQUIVALENTS
The Companies consider highly liquid temporary investments with original
maturities of three months or less to be cash equivalents.
<PAGE> 12
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) method.
REVENUE RECOGNITION
Sales of the Companies' products are recognized when the goods are shipped
to customers and are recorded net of discounts, rebates, allowances and
returns.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is
provided by using accelerated methods over the following estimated useful
lives of the assets by most entities. Certain entities provide
depreciation by using the straight-line method.
Buildings and improvements 18-40 years
Machinery and equipment 3-20 years
Leasehold improvements 7-40 years
Transportation equipment 3-7 years
PATENTS AND TRADEMARKS
Patents and trademarks are carried at cost less accumulated amortization
which is calculated using the straight-line method over their legal or
estimated useful lives of fifteen years. Amounts total $1,068,108 at
December 31, 1995 and are included within other assets. The recoverability
of these carrying amounts are reviewed by management periodically and
adjusted for any unfavorable changes in value. Accumulated amortization
was $81,182 at December 31, 1995.
GOODWILL
Goodwill has arisen from acquisitions made by the Companies. All
acquisitions have been accounted for as purchases and the excess of the
total purchase price over the fair value of the net assets acquired was
recorded as goodwill. Goodwill is amortized using the straight-line method
over fifteen years. Accumulated amortization was $143,090 at December 31,
1995. The Companies evaluate their goodwill annually to determine
potential impairment by comparing the carrying value to the undiscounted
cash flows of the related assets. The Companies modify the life or adjust
the value of goodwill if an impairment is identified.
ADVERTISING COSTS
Advertising costs are expensed when incurred. The companies incurred
advertising costs of $820,974 for the year ended December 31, 1995.
<PAGE> 13
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES
Some of the Companies are organized as partnerships and others as S
corporations. There is no provision for Federal income taxes on
partnerships or S corporations reflected in the combined statement of
income. Certain "S" corporations are subject to state income taxes.
Deferred income taxes are provided by using the asset and liability method.
Under this method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Companies to
concentration of credit risk, consist principally of cash and trade
receivables. The Companies place their cash with high credit quality
institutions. Such amounts exceed FDIC insurance limits. Concentration of
credit risk with respect to trade receivables is limited due to the large
number of customers comprising the Companies' customer base. Ongoing
credit evaluations of customers' financial condition are performed and
collateral is not required.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant estimates relate to the
accrual for rebates and allowance for doubtful accounts. Actual results
could differ from those estimates.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long Lived
Assets and Long Lived Assets To Be Disposed Of," which the Companies are
required to adopt January 1, 1996. This standard establishes guidance on
when and how to measure impairment of long-lived assets, certain
identifiable intangibles, and how to value long-lived assets to be disposed
of. Management believes the adoption of this new accounting standard will
not have a material effect on the Companies' financial statements.
<PAGE> 14
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. RESTRICTED CASH:
As required by the line of credit agreement (Note 5), Iowa is required to
deposit all collections from trade accounts receivable in a separate bank
account. The receipts deposited in this account are only to be applied
against the line of credit.
3. INVENTORIES:
Inventories consist of the following:
1995
------------
Raw materials and supplies $ 3,284,430
Work-in-progress and finished goods 18,342,523
------------
$ 21,626,953
============
4. PROPERTY, PLANT & EQUIPMENT:
Fully depreciated machinery and equipment still in use in the Companies'
operations totaled approximately $15,463,000 at December 31, 1995.
Depreciation expense was $5,068,409 for the year ended December 31, 1995.
5. BANK BORROWINGS:
Hygrade has lines of credit totaling $20,000,000. Amounts drawn against
the line bear interest at prime (8.75% at October 31, 1995). Borrowings
under the lines are collateralized by Hygrade's assets. The line of
credit outstanding borrowing was $4,000,000 at October 31, 1995.
Iowa has a revolving line of credit not to exceed $7,000,000 with a bank.
Amounts drawn against the line bear interest at 2.4% above prime (8.75% at
December 31, 1995). The line of credit matures on October 31, 1996 or 90
days after the bank's request. Restricted cash is credited against the
line immediately upon receipt by Iowa. The line of credit is
collateralized by all of Iowa's inventory and accounts receivable and by
limited personal guarantees of Iowa's stockholders. Iowa is required to
not permit the line of credit balance to exceed the lesser of $7,000,000
or certain amounts of accounts receivable and inventory. The line of
credit outstanding borrowing was $6,173,853 at December 31, 1995.
<PAGE> 15
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. BANK BORROWINGS (CONTINUED):
Quaker has a maximum line of credit with a bank totaling $1,000,000.
Amounts drawn against the line bear interest at the bank's prime rate (8.5%
as of December 31, 1995). At December 31, 1995, $600,000 was outstanding.
The note is collateralized by accounts receivable and requires that Quaker
maintains various financial ratios.
At December 31, 1995 Monark had a revolving note of $3,500,000 with
interest at one and one-half percent over the bank's prime rate, (9% at
December 31, 1995). The agreement's expiration date is October 1996.
Monark is required to not permit the note's balance to exceed the lesser of
$3,500,000 or certain amounts of accounts receivable and inventory. The
note is collateralized by all of Monark's assets and is guaranteed up to
$1,000,000 by three shareholders individually. The agreement contains
various covenants including dividend restrictions. Monark's note payable
was $2,433,671 at December 31, 1995.
As of December 31, 1995, Specialties has a short-term credit line totaling
$1,500,000 with a bank, of which $800,000 was unused at December 31, 1995.
Interest is payable monthly at the bank's prime rate, (8.75% at December
31, 1995). The line is collateralized by equipment and has been guaranteed
by Hygrade.
At year end 1995, covenants of certain borrowings were in violation for
which management obtained waivers during 1996.
6. LONG-TERM DEBT:
The Companies' long-term debt consists of:
1995
-----------
Note payable, bank, requiring monthly principal
payments of $16,667 plus interest at prime plus
one-half percent. (9% at December 31, 1995) The
note is collateralized by all assets of Monark
and is guaranteed by their stockholders and
matures in October 1997. The agreement contains
various covenants pertaining to maintenance of
working capital and dividend restrictions. $ 1,366,654
Note payable, bank requiring monthly repayments
including interest at 7.32%. The note is
collateralized by certain assets of Hygrade and
matures in 1999. Hygrade is required to maintain
various financial ratios. Hygrade was not in
compliance with certain loan covenants at October
31, 1995. The lender has agreed to waive compliance
with the covenants.
<PAGE> 16
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED):
However, as part of the waiver, the Companies
will repay the lender as part of the Michael
Foods acquisition (see Note 1) by January 31,
1997. The Companies have reflected all debt
from this lender as due in 1997. 1,437,500
Industrial Development Revenue Bonds requiring
annual principal payments of $600,000. Interest
is due semi-annually and the bonds carry interest
rates ranging from 7.40% to 8.50%. The bonds are
collateralized by a first mortgage lien on Iowa's
certain real property, a first security interest
on Iowa's certain fixtures and equipment and
further collateralized by guarantees and
restricted funds. The bonds mature in September
2001. 3,370,000
Note payable requiring monthly installments of
$51,459 plus interest at one-half percent above
prime (8.5% at December 31, 1995). The note is
collateralized by substantially all of Foods'
assets and matures in March 2002. The note is
guaranteed by Hygrade and requires that Hygrade
maintain a minimum tangible net worth. Foods was
not in compliance with certain loan covenants at
December 31, 1995. The lender has agreed to waive
compliance with the covenants and amend the
agreement to permit Foods to be in compliance with
such covenants through December 31, 1996. However,
as part of the waiver and amendment, the Companies
will repay the lender at the closing of the Michael
Foods acquisition. (See Note 1) As a result, the
Companies have reclassified debt from this lender
as current. 3,803,451
Other 2,057,563
-----------
12,035,168
Less: Current maturities 5,767,599
-----------
$ 6,267,569
===========
<PAGE> 17
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED):
Aggregate minimum annual principal payments of long-term debt maturing in
years subsequent to December 31, 1995 are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------------
1996 $ 5,767,599
1997 3,645,544
1998 819,233
1999 793,261
2000 639,531
Thereafter 370,000
------------
$ 12,035,168
============
In addition to the aforementioned Hygrade and Foods covenants, at year end
1995, covenants of certain other loans were in violation for which
management obtained waivers during 1996.
7. ADMINISTRATIVE SERVICE CONTRACT:
Hygrade has an administrative service contract to provide its employees
with health care insurance, which includes a self-funded portion.
Under the insurance policy with the Plan's underwriter, Hygrade's
self-funded liability is limited for each plan year to a maximum of $75,000
per employee, with an aggregate liability limit of approximately
$1,371,000. These liability limits are adjusted annually. For this
purpose, the plan year runs from January 1 through December 31 of each
year. Hygrade has recorded an actuarially determined liability for
existing and incurred but not yet reported claims of $234,400.
<PAGE> 18
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. EQUITY:
The preferred stock of Hygrade as of October 31, 1995 was:
SHARES
ISSUED
PAR SHARES AND
VALUE AUTHORIZED OUTSTANDING AMOUNT DESCRIPTION
----- ---------- ----------- -------- -----------
$1 20,000 20,000 $ 20,000 Voting
The holders of Hygrade's preferred stock receive noncumulative dividends of
$10 per share annually. Common stockholders then may receive dividends up
to $20 per share. Any dividends subsequently declared are divided equally
between preferred stockholders and common stockholders. In the event of
liquidation, preferred stockholders receive $100 per share before any
distributions are made to common stockholders. Hygrade may redeem its
preferred stock at a rate of $100 per share. Hygrade preferred
stockholders and common stockholders each have voting rights at a rate of
one vote per share. In October 1996, the preferred stock was redeemed and
cancelled in exchange for 115 shares of common stock.
The common stock of the Companies as of December 31, 1995 was:
<TABLE>
<CAPTION>
SHARES
PAR SHARES ISSUED AND
COMPANY VALUE AUTHORIZED OUTSTANDING AMOUNT DESCRIPTION
----------- ----- ---------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Hygrade - 1,000 1,000 $ 1
Foods - 2,500 300 5,000
Quaker - 200 200 50,000
Iowa $ 100 2,000 125 12,500 Class A
Iowa - 2,000 554 2,353,136 Class B, non-voting
Monark 1 30,000 225 225
Specialties 2,500 1,675 2,010
---------- ----------- -----------
40,200 4,079 $ 2,422,872
========== =========== ===========
</TABLE>
Approximately 1,234 shares of issued and outstanding common stock is held
by minority shareholders and not reflected in the Companies' common stock.
Quaker common stockholders received dividends of $3,700 per share for the
year ended December 31, 1995.
Monark common stockholders received dividends of approximately $1,186 per
share for the year ended December 31, 1995.
<PAGE> 19
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
9. ROYALTY AGREEMENTS:
Hygrade has a royalty agreement with a partnership in which it is a 49%
owner. Under the agreement Hygrade pays monthly royalties at the greater
of $30,000 or 2% of the sales of products processed utilizing the
technology which in turn are fully paid to the other partner. Royalty
expense for the year ended October 31, 1995 was $1,352,059.
10. INCOME TAXES:
The provision for income taxes consists of the following:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Current:
Federal $ 2,254,748
State 515,039
-----------
2,769,787
-----------
Deferred:
Federal (330,316)
State (90,403)
-----------
(420,719)
-----------
$ 2,349,068
===========
Deferred income taxes arise from temporary differences between financial
and tax reporting. Deferred tax assets are included with prepaid expenses
and other current assets. The tax effects of the cumulative temporary
differences resulting in the deferred tax assets are as follows:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Depreciation $ 91,946
Allowance for bad debts 185,389
Inventory 181,997
Accruals for rebates 1,387,237
Accruals for health insurance claims 95,648
Other 1,399
-----------
$ 1,943,616
===========
<PAGE> 20
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED):
The following is a reconciliation of the Federal statutory income tax rate
to the combined effective tax rate:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Federal statutory rate 34.0%
State tax effect 4.2%
Effect of certain entities being S Corporations
or partnerships (5.9)%
Other (0.3)%
--------
32.0%
========
Foods, Quaker, Monark, Iowa and Specialties have elected tax status as "S"
Corporations, whereby the stockholders account for their share of the
respective entities' income, losses, deductions, and credits on their
Federal income tax returns. Foods is subject to state income taxes.
Quaker pays dividends to the shareholders to satisfy their income tax
liability. Quaker is subject to state franchise tax. Casa, Equipment and
Transport are partnerships whereby the partners account for their share of
the respective entities' income, losses deductions and credits on their
income tax returns.
11. INTERCOMPANY BALANCES AND TRANSACTIONS:
There are significant intercompany balances and transactions between
entities included in the Companies' combined financial statements. These
balances and transactions have been eliminated in combination. The
following table summarizes intercompany balances which have been eliminated
from the combined balance sheet.
DECEMBER 31,
1995
------------
Accounts receivable $ 4,289,000
Due from related parties 4,661,000
Long term debt 3,614,000
Accounts payable 1,810,000
Due to related parties 3,525,000
<PAGE> 21
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
11. INTERCOMPANY TRANSACTIONS (CONTINUED):
Based on Hygrade having a different year end than the other entities,
certain balances between Hygrade and the other entities do not eliminate.
This deferred intercompany balance was approximately $2,506,000 as of
December 31, 1995. This amount has been included in the current portion of
due from related parties.
The following table summarizes intercompany transactions which have been
eliminated from the combined income statement:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Sales and cost of sales $ 61,139,000
Interest income and expense 322,000
12. RELATED PARTY TRANSACTIONS:
MORTGAGE RECEIVABLE
Due from related parties includes a mortgage receivable of $892,962 due
from Jersey Pride Urban Renewal (a partnership whose partners are two
stockholders of the Companies) as of December 31, 1995. Maturity of this
mortgage is as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------- ---------
1996 $ 182,227
1997 172,102
1998 122,379
1999 134,437
2000 147,687
Thereafter 134,130
---------
$ 892,962
=========
NOTES RECEIVABLE
Due from related parties at December 31, 1995 includes notes receivable of
$1,250,089, due from two stockholders of the Companies requiring annual
repayments of $100,000 each including interest at 7.00% and maturing in
2003.
Included in other assets at December 31, 1995 is $150,000 of noninterest
bearing notes receivable from individuals who are two stockholders of the
Companies.
<PAGE> 22
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. RELATED PARTY TRANSACTIONS (CONTINUED):
NOTES RECEIVABLE (CONTINUED)
Due from related parties includes a note receivable to Iowa due from
shareholders and other individuals of $1,860,000 at December 31, 1995.
This arose in 1994 when certain stockholders and officers of Iowa and other
individuals entered into a note agreement with Iowa. The proceeds from
this note were used to meet the equity requirements of a Papetti Farms,
Inc. financing agreement. The terms of the note, as amended, require a
seven-year payment schedule with annual repayments beginning June 10, 1997,
with interest payable at the prime rate as determined by Firstar Bank of
Wisconsin plus 1.5%.
RENT
The Companies lease operating facilities on a month-to-month basis from
related partnerships. Rental expense for the operating facilities totaled
approximately $1,850,000 for the year ended December 31, 1995.
GUARANTEES
The Companies are parties to financial guarantees with off-balance-sheet
risk in the normal course of business to meet financing needs of some
related parties. The financial guarantees involve credit risk in excess of
the amount recognized in the balance sheet. The Companies' exposure to
credit loss in the event of nonperformance by the related parties for
financial guarantees written is represented by the amount of the
guarantees. The Companies do not require collateral to support the
financial guarantees.
The Companies have guaranteed loans for A&A Urban Renewal (a partnership
whose partners are two stockholders of the Companies) in the amount of
$1,375,000 at December 31, 1995. The Companies have guaranteed bonds
issued by the Schuykill County Industrial Development Authority,
Pennsylvania, issued on behalf of ASA Company, a related entity from whom
the Companies lease facilities, land and certain equipment. The bonds had
an original principal balance of $1,940,000 with $965,000 outstanding at
December 31, 1995. No reserve for losses on the guarantees is provided for
at December 31, 1995.
Certain of the combined entities have guaranteed the indebtedness of other
combined entities. In addition, certain stockholders have guaranteed loans
of several of the Companies at December 31, 1995.
<PAGE> 23
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. RELATED PARTY TRANSACTIONS (CONTINUED):
SUNBEST-PAPETTI FARMS
Certain stockholders of the Companies hold a majority interest in Papetti
Farms, Inc., which owns 50% of Sunbest-Papetti Farms ("Sunbest"). Sunbest
is engaged in the egg laying business and commenced operations in 1994.
The amount due from Sunbest at December 31, 1995 was approximately
$717,000. The amount due to Sunbest at December 31, 1995 was approximately
$444,000. Purchases for the year ended December 31, 1995 from Sunbest were
approximately $8,618,000.
13. COMMITMENTS AND CONTINGENCIES:
LITIGATION
Hygrade was a defendant in a suit alleging patent infringement which has
been settled in connection with the purchase agreement with Michael Foods,
Inc. (Note 1). The settlement amount, $6 million, is contingently payable
upon the consummation of the purchase. The provision has been recorded as
of the date that the purchase agreement was signed, June 28, 1996, as this
was the point when the dollar amount became determinable and probable.
LEASE COMMITMENTS
The Companies lease certain of its facilities and equipment under operating
leases. At December 31, 1995, the minimum future rental commitments under
noncancelable leases payable over the remaining lives of the leases are:
1996 $ 314,577
1997 164,454
1998 114,248
1999 101,322
2000 24,330
---------
$ 718,931
=========
The Companies also lease certain of their operating facilities and land on
a month-to-month basis from related parties.
Rental expense under operating leases was approximately $2,531,000 for the
year ended December 31, 1995.
<PAGE> 24
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED):
PURCHASE COMMITMENTS
In order to insure a steady supply of eggs, several of the combined
companies have entered into three- to five-year contracts to purchase a
specified volume of eggs at market prices on the day the entities receive
the eggs from the suppliers. Purchases in excess of production
requirements can be readily sold in the open market.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of information about the fair value of certain
financial instruments for which it is practicable to estimate that value.
For purposes of the following disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced sale or
liquidation.
The amounts disclosed represent management's best estimates of fair value.
The methods and assumptions used to estimate fair value are as follows:
a. Restricted cash - The carrying amounts approximate fair value because
of the short maturity of those instruments and the variable market rate
of interest accruing on the various accounts.
b. Due from related parties - The carrying amounts approximate fair value
because of the short maturity of the instruments and the interest rate
accruing on the various accounts approximates the rates currently
offered to the Companies for debt of the same remaining maturities.
c. Long-term debt - The fair value of the Companies' long-term debt is
estimated based on the quoted market prices for similar issues or by
discounting expected cash flows at the rates currently offered to the
Companies for debt of the same remaining maturities as advised by the
Companies' bankers.
<PAGE> 25
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
The assets and liability amounts recorded in the balance sheet (carrying
amount) and the estimated fair values of financial instruments at December
31, consisted of the following:
1995
----------------------------
CARRYING FAIR
AMOUNT VALUE
----------- ---------------
Cash and cash equivalents $ 3,271,163 3,271,163
Restricted cash 437,811 437,811
Due from related parties 7,450,621 7,450,621
Long-term debt 12,035,168 11,802,005
<PAGE> 26
PAPETTI COMPANIES
CONDENSED COMBINED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
September 30,
1996
-------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,589,000
Accounts receivable, less allowances 35,291,000
Inventories 15,398,000
Prepaid and other 4,598,000
Due from related parties 4,854,000
------------
Total current assets 61,730,000
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land 107,000
Buildings and improvements 6,254,000
Machinery and equipment 46,433,000
Leasehold improvements 5,500,000
Transportation equipment 10,367,000
------------
68,661,000
Less accumulated depreciation 38,124,000
------------
30,537,000
OTHER ASSETS
Goodwill, net 1,778,000
Due from related parties 69,000
Other 2,332,000
------------
4,179,000
------------
$ 96,446,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 12,271,000
Current maturities of long-term debt 5,522,000
Accounts payable 27,980,000
Accrued expenses and other liabilities 13,779,000
------------
Total current liabilities 59,552,000
LONG-TERM DEBT, less current maturities 7,501,000
MINORITY INTEREST 2,460,000
CONTINGENCIES --
STOCKHOLDERS' EQUITY
Partner's equity 550,000
Preferred stock 20,000
Common stock 2,423,000
Additional paid-in capital 723,000
Retained earnings 23,217,000
------------
26,933,000
------------
$ 96,446,000
============
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed combined financial statements.
<PAGE> 27
PAPETTI COMPANIES
CONDENSED COMBINED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net sales $261,396,000 $198,467,000
Cost of sales 243,298,000 177,801,000
------------ ------------
Gross profit 18,098,000 20,666,000
Selling, general and administrative expenses 14,542,000 13,258,000
Litigation settlement 6,000,000 --
------------ ------------
Operating profit (loss) (2,444,000) 7,408,000
Interest expense, net 1,144,000 1,213,000
------------ ------------
Earnings (loss) before income taxes (3,588,000) 6,195,000
Income tax expense 214,000 2,080,000
------------ ------------
Earnings (loss) before minority interest (3,802,000) 4,115,000
Minority interest 262,000 40,000
------------ ------------
NET EARNINGS (LOSS) $ (4,064,000) $ 4,075,000
============ ============
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed combined financial statements.
<PAGE> 28
PAPETTI COMPANIES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1996 1995
------------ -------------
<S> <C> <C>
Net cash provided by operating activities $ 6,460,000 $ 4,154,000
Cash flows from investing activities:
Capital expenditures (8,543,000) (4,757,000)
Proceeds from sale of property, plant and equipment 2,421,000 427,000
Other 247,000 (422,000)
------------ ------------
Net cash used in investing activities (5,875,000) (4,752,000)
Cash flows from financing activities:
Net change in restricted cash 191,000 (798,000)
Payments on notes payable and long-term debt (11,250,000) (6,208,000)
Proceeds from notes payable and long-term debt 10,602,000 4,838,000
Cash dividends paid to shareholders and minority interest (1,394,000) (1,083,000)
Distributions to partners and minority interest (416,000) (80,000)
Contributions by partners -- 50,000
------------ ------------
Net cash used in financing activities (2,267,000) (3,281,000)
------------ ------------
Net decrease in cash and cash equivalents (1,682,000) (3,879,000)
Cash and cash equivalents at beginning of period 3,271,000 6,233,000
------------ ------------
Cash and cash equivalents at end of period $ 1,589,000 $ 2,354,000
============ ============
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed combined financial statements.
<PAGE> 29
PAPETTI COMPANIES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1996 and 1995
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with Regulation S-X pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to make the information presented not
misleading.
All the Companies have a December 31 fiscal year end, except Papetti's Hygrade
Egg Products, Inc. ("Hygrade"), which is October 31. Thus, amounts included
are as of September 30 and for the nine months then ended for all entities
except Hygrade, which is as of July 31, and for the nine months then ended.
During the two months ended September 30, 1996, Hygrade earned net income of
approximately $380,000.
In the opinion of management, the unaudited condensed combined financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of September
30, 1996, the results of operations and cash flows for the nine month periods
ended September 30, 1996 and 1995. These financial statements should be read
in conjunction with the Companies' audited financial statements for the year
ended December 31, 1995 included in this filing. The results of operations for
the nine month period ended September 30, 1996 are not necessarily indicative
of the results for the full year.
Certain reclassifications of prior year amounts have been made to conform to
the current year presentation.
The Companies' preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reported periods. Actual results could differ from those estimates.
NOTE B - INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined on
the first-in, first-out method. Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Work in process and finished goods $ 11,041,000 $ 18,343,000
Raw materials and supplies 4,357,000 3,284,000
------------ ------------
$ 15,398,000 $ 21,627,000
============ ============
</TABLE>
<PAGE> 30
PAPETTI COMPANIES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1996 and 1995
(Unaudited)
NOTE C - LONG-TERM DEBT
As of September 30, 1996, the Companies have several lines of credit and notes
payable to various financial institutions. Some of the loan agreements contain
convenants which in several instances require the Companies to maintain certain
financial ratios and restrict the payment of dividends. As of September 30,
1996, covenants of certain borrowings were in violation for which management
obtained waivers of all such requirements.
NOTE D - CONTINGENCIES
Hygrade was a defendant in a suit alleging patent infringement which has been
settled in connection with the purchase agreement with Michael Foods, Inc. (see
Note E). The settlement amount, $6 million, is payable contingent upon the
consummation of the purchase and has been recorded as of the date that the
purchase agreement was signed, June 28, 1996.
NOTE E - PURCHASE AGREEMENT
On June 28, 1996, the Companies reached an agreement to be acquired by Michael
Foods, Inc., a U.S. food processor and distributor. The purchase price will be
comprised of 3.2 million shares of Michael Foods, Inc. common stock valued at
approximately $38 million, assumption of approximately $23 million of debt and
approximately $43 million in cash, subject to certain adjustments. The
acquisition is expected to close in the first quarter of 1997.
<PAGE> 31
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements have
been prepared to reflect the February 26, 1997 acquisition of Papetti's Hygrade
Egg Products, Inc. and its affiliated entities (collectively "Papetti") by
Michael Foods, Inc. ("Michael"), as if it had occurred on January 1, 1995 for
the pro forma statements of earnings and on September 30, 1996 for the pro
forma balance sheet. The acquisition of Papetti has been accounted for as a
purchase transaction and the purchase price has been allocated to the assets
and liabilities of Papetti based on their estimated fair value at September 30,
1996. The final allocation of the purchase price and the resulting impact may
differ from those reflected in the following unaudited pro forma condensed
combined financial statements.
The "Papetti Historical" financial information is as of September 30, 1996 and
the nine month period then ended and for the year ended December 31, 1995 for
all entities except for Papetti's Hygrade Egg Products, Inc., which is as of
July 31, 1996 and the nine month period then ended and for the fiscal year ended
October 31, 1995.
The following unaudited pro forma condensed combined financial statements have
also been prepared to reflect the February 28, 1997 effectiveness of the
Agreement and Plan of Reorganization by and between Michael, North Star
Universal, Inc. ("NSU") and NSU Merger Co. ("Merger Sub"), a wholly-owned
subsidiary of NSU. The transaction merged Merger Sub, with and into Michael
with Michael as the surviving corporation. At the time of the merger the
operating companies owned by NSU and certain other assets and liabilities,
including NSU's investment in CorVel Corporation, were distributed to the
former NSU shareholders in the form of the common stock of ENStar Inc.
("ENStar").The pro forma condensed financial statements reflect this
distribution. The merger agreement is accounted for in the following
statements as if it had occurred on January 1, 1995 for the pro forma
statements of earnings and on September 30, 1996 for the pro forma balance
sheets. The effect of this merger is the assumption by Michael of NSU debt and
the retirement of Michael shares of common stock, owned by NSU, in an amount
approximately equal to the debt assumed.
Assumptions underlying the pro forma adjustments are described in the
accompanying notes which should be read in conjunction with the unaudited pro
forma condensed combined financial statements. These financial statements
should also be read in conjunction with the historical financial statements of
Michael, NSU and Papetti and the notes thereto. The pro forma financial
statements do not purport to be indicative of the actual results of operations
which would have occurred had the operations of the companies been combined at
January 1, 1995 or the future results of operations which may be obtained by
the combined companies.
<PAGE> 32
NORTH STAR UNIVERSAL, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
NSU ADJUSTMENTS NSU
ASSETS HISTORICAL -ENSTAR PRO FORMA
----------- ----------- ---------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 8,068 $ 174(a) $ 7,894
Accounts receivable, net 9,704 9,704(a) -
Inventories 6,629 6,629(a) -
Prepaid expenses and other 773 367(a) 406
-------- ------- -------
Total current assets 25,174 16,874 8,300
Property and equipment, net 1,572 1,572(a) -
Goodwill, net 4,841 4,841(a) -
Investments in unconsolidated
subsidiaries 83,468 13,199(a) 70,269
Other assets 26 26(a) -
-------- ------- -------
$115,081 $36,512 $78,569
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 1,115 $ 1,115(a) $ -
Current portion of long-term debt 11,624 17(a) 11,607
Accounts payable 5,829 5,829(a) -
Accrued liabilities 5,522 5,522(a) -
-------- ------- -------
Total current liabilities 24,090 12,483 11,607
Long-term debt, less current portion 22,310 146(a) 22,164
Deferred income taxes 26,725 3,490(a) 23,235
Stockholders' equity 41,956 20,393(a) 21,563
-------- ------- -------
$115,081 $36,512 $78,569
======== ======= =======
</TABLE>
<PAGE> 33
NORTH STAR UNIVERSAL, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
NSU ADJUSTMENTS NSU
HISTORICAL -ENSTAR PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales $49,151 $49,151 (a) $ -
Cost of sales 36,147 36,147 (a) -
------- ------- --------
Gross profit 13,004 13,004 -
Selling, general, and administrative
expenses 12,744 12,594 (a) 150
------- ------- --------
Operating profit (loss) 260 410 (150)
Interest expense, net (2,573) (191)(a) (2,382)
Investment income 7,713 - 7,713
------- ------- --------
Earnings before income taxes and equity in
earnings of unconsolidated subsidiaries 5,400 219 5,181
Income tax expense 2,240 122 (a) 2,118
------- ------- --------
Earnings before equity in earnings of
unconsolidated subsidiaries 3,160 97 3,063
Equity in earnings of unconsolidated
subsidiaries 2,750 956 (a) 1,794
------- ------- --------
Earnings from continuing operations $ 5,910 $ 1,053 $ 4,857
======= ======= ========
</TABLE>
<PAGE> 34
NORTH STAR UNIVERSAL, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
NSU ADJUSTMENTS NSU
HISTORICAL -ENSTAR PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales $54,891 $54,891 (a) $ -
Cost of sales 39,525 39,525 (a) -
------- ------- --------
Gross profit 15,366 15,366 -
Selling, general, and administrative expenses 14,882 14,333 (a) 549
------- ------- --------
Operating profit (loss) 484 1,033 (549)
Interest expense, net (4,120) (247)(a) (3,873)
------- ------- --------
Earnings before income taxes and equity in
earnings of unconsolidated subsidiaries (3,636) 786 (4,422)
Income tax expense (benefit) (1,200) 405 (a) (1,605)
------- ------- --------
Earnings before equity in earnings of
unconsolidated subsidiaries (2,436) 381 (2,817)
Equity in earnings of unconsolidated
subsidiaries 5,526 1,191 (a) 4,335
------- ------- --------
Earnings from continuing operations $ 3,090 $ 1,572 $ 1,518
======= ======= ========
</TABLE>
<PAGE> 35
MICHAEL FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MICHAEL PAPETTI ADJUSTMENTS MICHAEL NSU ADJUSTMENTS MICHAEL
ASSETS HISTORICAL HISTORICAL -PAPETTI PRO FORMA PRO FORMA -NSU PRO FORMA
----------- ---------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 2,966 $ 1,589 $ - $ 4,555 $ 7,894 $ (7,894) $ 4,555
Accounts receivable, net 50,472 40,145 (3,700) (b) 86,917 - - 86,917
6,000 (d)
(6,000) (e)
Inventories 57,875 15,398 - 73,273 - - 73,273
Prepaid expenses and other 3,059 4,598 (600) (f) 7,057 406 (406) (i) 6,357
(700) (f)
-------- ------- -------- --------- ------- -------- --------
Total current assets 114,372 61,730 (4,300) 171,802 8,300 (9,000) 171,102
Property and equipment, net 186,583 30,537 2,000 (c) 219,120 - - 219,120
Goodwill, net 56,550 1,778 56,959 (c) 114,509 - - 114,509
(1,778) (c)
1,000 (f)
Investment in unconsolidated
subsidiaries - - - - 70,269 (70,269) (i) -
Other assets 12,564 2,401 (1,487) (c) 8,078 - - 8,078
(6,000) (d)
600 (g)
-------- ------- -------- --------- ------- -------- --------
$370,069 $96,446 $ 46,994 $513,509 $78,569 $(79,269) $512,809
======== ======= ======== ======== ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 38,700 $12,271 $(50,971) (g) $ - $ - $ - $ -
Current portion of long-
term debt 12,709 5,522 (10,531) (g) 7,700 11,607 (7,894) (h) 7,700
(3,713) (h)
Accounts payable 37,674 27,980 - 65,654 - - 65,654
Accrued liabilities 23,009 13,779 (6,000) (e) 30,788 - - 30,788
-------- ------- -------- -------- ------- -------- --------
Total current liabilities 112,092 59,552 (67,502) 104,142 11,607 (11,607) 104,142
Long-term debt, less current
portion 42,910 7,501 42,913 (c) 155,826 22,164 (914) (h) 178,672
62,102 (g) 1,596 (f)
400 (f)
Deferred income taxes 29,758 - 800 (c) 30,558 23,235 (23,235) (i) 30,558
Minority interest - 2,460 (2,460) (c) - - - -
Stockholders' equity 185,309 26,933 (3,700) (b) 222,983 21,563 4,627 (h) 199,437
(23,233) (c) (47,440) (i)
37,674 (c) (2,296) (f)
-------- ------- -------- -------- ------- -------- --------
$370,069 $96,446 $ 46,994 $513,509 $78,569 $(79,269) $512,809
======== ======= ======== ======== ======= ======== ========
</TABLE>
<PAGE> 36
MICHAEL FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MICHAEL PAPETTI ADJUSTMENTS MICHAEL NSU ADJUSTMENTS MICHAEL
HISTORICAL HISTORICAL PAPETTI PRO FORMA PRO FORMA -NSU PRO FORMA
----------- ------------ -------------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $455,478 $261,396 $ - $716,874 $ - $ - $716,874
Cost of sales 403,267 243,298 214 (j) 645,292 - - 645,292
(1,487) (k)
-------- -------- -------- -------- ------- -------- --------
Gross profit 52,211 18,098 1,273 71,582 - - 71,582
Selling, general, and
administrative expenses 33,597 14,542 (766) (k) 48,178 150 (150) (r) 48,178
987 (l)
(60) (m)
(122) (n)
Litigation settlement - 6,000 (6,000) (e) - - - -
-------- -------- -------- -------- ------- -------- --------
Operating profit (loss) 18,614 (2,444) 7,234 23,404 (150) 150 23,404
Interest expense, net (5,474) (1,144) (204) (b) (8,899) (2,382) 1,174 (q) (10,107)
(2,077) (o)
Investment income - - - - 7,713 (7,713) (r) -
-------- -------- -------- -------- ------- -------- --------
Earnings (loss) before income
taxes, equity in earnings of
unconsolidated subsidiaries,
and minority interest 13,140 (3,588) 4,953 14,505 5,181 (6,389) 13,297
Income tax expense 5,260 214 332 (p) 5,806 2,118 (2,601) (p) 5,323
-------- -------- -------- -------- ------- -------- --------
Earnings (loss) before equity in
earnings of unconsolidated
subsidiaries and minority
interest 7,880 (3,802) 4,621 8,699 3,063 (3,788) 7,974
Equity in earnings of
unconsolidated subsidiaries - - - - 1,794 (1,794) (r) -
Minority interest - (262) 262(s) - - - -
-------- -------- --------- -------- ------- -------- --------
Earnings (loss) from
continuing operations $ 7,880 $ (4,064) $ 4,883 $ 8,699 $ 4,857 $ (5,582) $ 7,974
======== ======== ========= ======== ======= ======== ========
Net earnings per share -
continuing operations $ 0.41 $ 0.38
======== ========
Weighted average shares
outstanding 19,379 20,791 (t)
======== ========
</TABLE>
<PAGE> 37
MICHAEL FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MICHAEL PAPETTI ADJUSTMENTS MICHAEL NSU ADJUSTMENTS MICHAEL
HISTORICAL HISTORICAL - PAPETTI PRO FORMA PRO FORMA -NSU PRO FORMA
----------- ----------- ----------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $536,627 $278,786 $ - $815,413 $ - $ - $815,413
Cost of sales 454,652 256,051 286 (j) 709,204 - - 709,204
(1,785)(k)
-------- -------- ------- -------- ------- ------- --------
Gross profit 81,975 22,735 1,499 106,209 - - 106,209
Selling, general, and
administrative expenses 45,729 13,563 (854)(k) 58,581 549 (549) (r) 58,581
1,315 (l)
(62)(m)
(1,110)(n)
-------- -------- ------- -------- ------- ------- --------
Operating profit (loss) 36,246 9,172 2,210 47,628 (549) 549 47,628
Interest expense, net (7,635) (1,825) (328)(b) (12,751) (3,873) 2,262 (q) (14,362)
(2,963)(o)
-------- -------- ------- -------- ------- ------- --------
Earnings (loss) before income
taxes and equity in earnings of
unconsolidated subsidiaries and
minority interest 28,611 7,347 (1,081) 34,877 (4,422) 2,811 33,266
Income tax expense 11,020 2,349 582 (p) 13,951 (1,605) 961 (p) 13,307
-------- -------- ------- -------- ------- ------- --------
Earnings (loss) before equity in
earnings of unconsolidated
subsidiaries and minority
interest 17,591 4,998 (1,663) 20,926 (2,817) 1,850 19,959
Equity in earnings of
unconsolidated subsidiaries - - - - 4,335 (4,335) (r) -
Minority interest - (157) 157 (s) - - - -
-------- ------- ------- -------- ------- ------- --------
Earnings from
continuing operations $ 17,591 $ 4,841 $(1,506) $ 20,926 $ 1,518 $(2,485) $ 19,959
========= ======== ======= ======== ======= ======= =========
Net earnings per share -
continuing operations $ 0.91 $ 0.96
========= =========
Weighted average shares
outstanding 19,328 20,740(t)
========= ========
</TABLE>
<PAGE> 38
NORTH STAR UNIVERSAL, INC. AND
MICHAEL FOODS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(A) To reflect the tax free distribution of ENStar Inc. to NSU shareholders
in connection with the reorganization with Michael (see Item 2 of
Form 8-K).
(B) To eliminate receivables from related parties that were forgiven prior to
consummation of the Papetti acquisition pursuant to the acquisition
agreement, along with elimination of the related interest income.
(C) Cost of the acquisition and estimated purchase accounting adjustments are
as follows (in thousands):
<TABLE>
<S> <C>
Common stock issued (1) $37,674
Cash paid (2) 42,913
--------
Total acquisition costs 80,587
Book value of assets acquired (25,693)
Elimination of Papetti patents and intangibles 1,487
Elimination of Papetti goodwill 1,778
Additional value assigned to property and equipment (3) (2,000)
Deferred tax liability on additional value assigned to
certain property and equipment 800
--------
Excess cost over net assets acquired (goodwill) $56,959
========
</TABLE>
(1) Michael issued 3,195,455 shares under the purchase agreement.
The shares issued were valued at $11.79 per share, which is the
preliminarily estimated fair value of the common stock issued.
(2) The cash portion of the purchase price was funded through the
placement of senior term debt by Michael.
(3) Adjustment to record Papetti property and equipment being
acquired, at the preliminary appraised value.
<PAGE> 39
(D) Under a technology license agreement, Michael has been offsetting 50% of
required cash royalty payments with legal costs it had incurred to defend
the licenser's patents. A prepaid royalty has arisen from the deferral of
these legal fees. In connection with the Papetti acquisition, Papetti and
Michael agreed to settle pre-existing litigation in the amount of
$6,000,000. As a result of the settlement, Michael will record a
receivable from Papetti of $6,000,000 and a corresponding reduction of its
prepaid royalty account at the time of the acquisition. Under the terms
of the license agreement, the proceeds from this settlement are first
applied to the prepaid royalty costs. This entry has been reflected as a
pro forma balance sheet adjustment at September 30, 1996.
(E) To reflect the elimination of the Michael litigation receivable and the
Papetti accrued litigation liability, along with eliminating the one-time
litigation settlement from the nine months ended September 30, 1996
statement of earnings.
(F) To record costs of the transactions. Michael incurred transaction costs
totaling $2,296,000 related to its merger with NSU, which were charged to
stockholders' equity as a cost of the treasury shares reacquired (see (I)
below).
(G) To record the refinancing of Papetti's and Michael's debt, which was
funded through the placement of senior term debt by Michael bearing
interest at a fixed rate of 7.58%, and a long-term revolving loan with
interest at a variable rate, together with the deferred financing costs of
$600,000.
(H) To apply the NSU cash to NSU indebtedness, as well as reduce the NSU
indebtedness to the actual amount assumed by Michael on the date of the
merger. The additional $4,627,000 pay down of the NSU indebtedness was
generated primarily by dividends received from ENStar.
(I) To eliminate NSU's investment in Michael and the related deferred income
taxes, and to reflect the reacquisition of 1,782,961 shares of Michael
common stock in exchange for the assumption of $21,250,000 of NSU net
indebtedness at the date of the merger. Michael expects to refinance the
assumed NSU indebtedness within two months of the merger with the proceeds
from the placement of senior term debt, which bears interest at a fixed
rate of 7.58%.
(J) To record additional depreciation expense resulting from the estimated
additional value assigned to property and equipment.
(K) To reduce Papetti officer compensation expense to employment contract
amounts which will be effective upon completion of the purchase.
(L) To record amortization of the excess cost over net assets acquired over
40 years - net of amounts previously reported by Papetti.
(M) To eliminate amortization of Papetti patents and intangibles which have
preliminarily been assigned no value for purposes of the pro forma
financial statements.
<PAGE> 40
(N) To eliminate legal fees incurred by Papetti as a result of patent
litigation between Michael and Papetti.
(O) To record additional interest expense on the debt incurred for the cash
portion of the purchase price for Papetti, and to adjust Papetti interest
expense for the refinancing of their obligations. All new debt bears
interest at a fixed rate of 7.58%.
(P) To adjust income tax expense to an estimated effective rate of 40%.
(Q) To adjust interest expense on the indebtedness assumed in the NSU merger
for the refinancing of the indebtedness through the placement of senior
term debt by Michael bearing interest at a fixed rate of 7.58%.
(R) To eliminate the NSU income statement activity which will not be a part
of Michael's ongoing operations, including the elimination of NSU's gain
on the sale of CorVel Corporation common stock and the elimination of
NSU's equity in the earnings of Michael.
(S) To eliminate the minority interest in Papetti, as Michael acquired 100% of
the Papetti companies' operations.
(T) Includes an additional 3,195,455 shares issued under the Papetti
acquisition and a reduction of 1,782,961 shares retired as a result of the
NSU merger.
<PAGE> 41
(c) Exhibits
Exhibit Number Description
2.1 Agreement and Plan of Reorganization, dated as of
December 21, 1995, by and among North Star Universal, Inc.,
Michael Foods, Inc. and NSU Merger Co. (filed as an
exhibit to the Report on Form 8-K filed by the Company on
December 27, 1995 (schedules omitted -- the Registrant
agrees to furnish a copy of any schedule to the Commission
upon request)).
3.1 * Amended and Restated Articles of Incorporation of the
Company dated February 28, 1997.
3.2 Amended and Restated Bylaws of the Company (filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein by
reference).
4.1 * Form of Common Stock Certificate.
4.2 Form of Indenture, dated as of April 26, 1989, between the
Company and National City Bank of Minneapolis, as trustee
(filed as Exhibit 4.1 to Registration No. 33-26176 and
incorporated herein by reference).
4.3 Form of First Supplemental Indenture, dated as of
March 16 1992, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.2 to Registration
No. 33-46418 and incorporated herein by reference).
4.4 Form of Second Supplemental Indenture, dated as of
March 16, 1995, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.3 to the Company's
Annual Report on Form 10-K for
<PAGE> 42
the year ended December 31, 1994 and incorporated herein by
reference).
4.5 Indenture, dated as of December 1, 1986, between the Company and
National City Bank of Minneapolis, as trustee, relating to
$25,000,000 principal amount of Subordinated Debentures Series
87/88 (filed as Exhibit 4.1 to Registration No. 33-10558 and
incorporated herein by reference).
4.6 Indenture, dated as of September, 1985, between the Company and
American National Bank and Trust Company, as trustee, relating to
$14,000,000 principal amount of Subordinated Debentures, Series
1985 (filed as Exhibit 4 to Registration No. 2-99100 and
incorporated herein by reference).
10.1 Michael Foods, Inc. 1987 Incentive Stock Option Plan and Incentive
Stock Option Agreement (filed as Exhibit 10.15 to Michael Foods,
Inc., a Delaware corporation's Registration Statement on Form S-1
Registration No. 33-12949 and incorporated herein by reference).
10.2 Michael Foods, Inc. 1987 Non-Qualified Stock Option Plan and
Non-Qualified Stock Option Agreement (filed as Exhibit 10.16 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-1 Registration No. 33-12949 and incorporated
herein by reference).
10.3 Form of Michael Foods, Inc. Director Stock Option Agreement (filed
as Exhibit 10.25 to Michael Foods, Inc., a Delaware corporation's
Registration Statement on Form S-1 Registration No. 33-12949 and
incorporated herein by reference).
10.4 Retirement Compensation Agreement between Milton G. Waldbaum Company
and Daniel W. Gardner, dated September 24, 1987 (filed as Exhibit
10.40 to Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1989 and incorporated
herein by reference).
10.5 Loan Agreement and Promissory Note between Metropolitan Life
Insurance Company and Michael Foods, Inc., dated December 1, 1989
(filed as Exhibit 10.43 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference).
10.6 Amendment to Michael Foods, Inc. Incentive and Non-Qualified Stock
Option Plans, dated November 21, 1989 (filed as Exhibit 4.6 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective November 21, 1989, Registration No.
33-31914 and incorporated herein by reference).
10.7 License Agreement between Michael Foods, Inc. and North Carolina
State University, dated November 28, 1989 (filed as Exhibit 10.56
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference).
10.8 * Amendment dated December 18, 1996 to License Agreement between
Michael Foods, Inc., a Delaware corporation, and North Carolina
State University, dated November 28, 1989.
10.9 Severance Plan for Eligible Employees of Michael Foods, Inc. and
its Subsidiaries (incorporated by reference from the Michael
Foods, Inc., a Delaware corporation's Form 8, Amendment No. 1 to
Report on Form 10-K for the year ended December 31, 1990).
10.10 First Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated October 14, 1992 (filed as Exhibit 10.67 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1992 and incorporated herein
by reference).
<PAGE> 43
10.11 Amendment to the Michael Foods, Inc. Non-Qualified Stock Option
Plan (filed as Exhibit 4.7 to the Michael Foods, Inc., a Delaware
corporation's Registration Statement on Form S-8 effective June 9,
1993 Registration No. 33-64078 and incorporated by reference).
10.12 Stock Option Plan for Non-Employee Directors (filed as Exhibit 4.1
to the Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective June 9, 1993 Registration No.
33-64076 and incorporated herein by reference).
10.13 Michael Foods, Inc. 1994 Executive Incentive Plan (filed as
Exhibit 10.76 to Michael Foods, Inc., a Delaware corporation's
Annual Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.14 Michael Foods, Inc. 1994 Executive Performance Stock Award Plan
(filed as Exhibit 10.77 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31,1993 and incorporated herein by reference).
10.15 Employment Agreement between Michael Foods, Inc. and Gregg A.
Ostrander, dated January 31, 1994 (filed as Exhibit 10.79 to
Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.16 Second Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated February 23, 1994 (filed as Exhibit 10.81 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated herein by
reference).
10.17 Michael Foods, Inc. Employee Stock Purchase Plan (filed as Exhibit
10.88 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.18 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1994 (filed as Exhibit
10.89 to the Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.19 Employment Agreement between Michael Foods, Inc. and Jeffrey M.
Shapiro, dated December 31, 1994 (filed as Exhibit 10.90 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.20 Employment Agreement between Michael Foods, Inc. and Norman A.
Rodriguez, dated December 31, 1994 (filed as Exhibit 10.92 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.21 Employment Agreement between Michael Foods, Inc. and James J.
Kohler dated December 31, 1994 (filed as Exhibit 10.93 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.22 Employment Agreement between Michael Foods, Inc. and Kevin O.
Kelly, dated December 31, 1994 (filed as Exhibit 10.94 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.23 Employment Agreement between Michael Foods, Inc. and John D. Reedy,
dated December 31, 1994 (filed as Exhibit 10.95 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).
<PAGE> 44
10.24 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1995 (filed as Exhibit 10.97 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference).
10.25 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1996 (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference).
10.26 Employment Agreement between Michael Foods, Inc. and Bill L.
Goucher, dated December 31, 1995 (filed as Exhibit 10.99 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein
by reference).
10.27 Resolution adopted by the Michael Foods, Inc. Board of Directors on
July 27, 1995 extending the termination date of the Severance Plan
for Eligible Employees of Michael Foods, Inc. and its Subsidiaries
for one additional year (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 and incorporated herein by
reference).
10.28 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Jeffrey M. Shapiro, dated December 31, 1995 (filed as Exhibit
10.101 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.29 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Norman A. Rodriguez, dated December 31, 1995 (filed as Exhibit
10.102 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.30 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and James J. Kohler, dated December 31, 1995 (filed as Exhibit
10.103 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.31 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Kevin O. Kelly, dated December 31, 1995 (filed as Exhibit
10.104 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.32 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and John D. Reedy, dated December 31, 1995 (filed as Exhibit 10.105
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10.33 Amendment No. 2 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1995 (filed as Exhibit
10.106 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.34 Resolution adopted by the Board of Directors on June 26, 1996,
amending the Severance Plan for Eligible Employees of Michael
Foods, Inc. and Subsidiaries and extending its termination date for
one additional year (filed as Exhibit 10.107 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, and incorporated herein by
reference).
10.35 Agreement and Plan of Reorganization, and Amendment No. 1, by and
among Michael Foods, Inc., M. G. Waldbaum Company and Papetti's
Hygrade Egg Products, Inc., and Quaker State Farms, Inc., Papetti's
of Iowa Food Products, Inc., Monark Egg
<PAGE> 45
Corporation, Egg Specialties, Inc., Papetti Foods, Inc.,
Casa Trucking Limited Partnership, Papetti Transport Leasing
Limited Partnership, and Papetti Equipment Leasing Partnership
(filed as Exhibit 10.111 to Michael Foods, Inc., a Delaware
corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated herein by
reference).
10.36 Amendment No. 2, dated February 26, 1997, to Agreement and Plan of
Reorganization by and among Michael Foods, Inc., a Delaware
corporation, M. G. Waldbaum Company and Papetti's Hygrade Egg
Products, Inc., and Quaker State Farms, Inc., Papetti's of Iowa Food
Products, Inc., Monark Egg Corporation, Egg Specialties, Inc.,
Papetti Foods, Inc., Casa Trucking Limited Partnership, Papetti
Transport Leasing Limited Partnership, and Papetti Equipment Leasing
Partnership (filed as Exhibit B to Arthur J. Papetti Schedule 13D
relating to Michael Foods, Inc. filed March 7, 1997 and incorporated
herein by reference).
10.37 * Form of Employment Agreement, dated February 26, 1997, by and
between Arthur J. Papetti and Michael Foods, Inc.
10.38 Shareholder Agreement, dated February 26, 1997, by and among Michael
Foods, Inc., a Delaware corporation and Arthur N. Papetti as
Representative of and attorney-in-fact for the Shareholders and
Sellers Listed on Schedule I (filed as Exhibit D to Arthur J.
Papetti Schedule 13D filed March 7, 1997 and incorporated herein by
reference).
10.39 * Form of Loan Agreement dated as of February 26, 1997 between Michael
Foods, Inc., a Delaware corporation and various Lenders with regard
to $125,000,000 of 7.58% Senior Notes due February 26, 2009,
including form of Note and Novation and Assumption Agreement.
10.40 * Form of Amendment Agreement dated as of February 26, 1997 between
Michael Foods, Inc., a Delaware corporation and Metropolitan Life
Insurance Company regarding up to $50,000,000 of 9.5% Senior Notes
due December 1, 1999, including form of Note and Novation and
Assumption Agreement.
10.41 * Form of Revolving Loan Agreement dated as of February 28, 1997 among
Michael Foods, Inc., a Delaware corporation, the Listed Banks and
Bank of America National Trust, including exhibits.
10.42 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Stephen Papetti dated February 26, 1997.
10.43 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Arthur N. Papetti dated February 26, 1997.
10.44 * Lease by and between ASA Company, as Landlord and Michael Foods,
Inc., a Delaware corporation as Tenant dated February 26, 1997.
10.45 * Lease by and between Rechsteiner/Papetti, et al., as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.46 * Lease by and between Jersey Pride Urban Renewal, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.47 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.48 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.49 * Lease by and between Papetti Holding Company, Jack Bernstein,
Sherwood Weiser and Estate of David Levinson, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.50 * Lease by and between A & A Urban Renewal, as Landlord and Michael
Foods, Inc., a Delaware corporation as Tenant dated February 26,
1997.
<PAGE> 46
20.1 * Press releases of Michael Foods, Inc., a Delaware
corporation issued February 26, 1997, regarding the Papetti
Agreement and Plan of Reorganization and Debt Financing.
20.2 * Press release of Michael Foods, Inc., a Delaware
corporation issued February 28, 1997, regarding Bank Financing.
20.3 * Press release of the Registrant and Michael Foods, Inc., a Delaware
corporation issued February 28, 1997, regarding the North Star
Universal/Michael Foods, Inc. a Delaware corporation/NSU Merger
Co./ENStar Reorganization.
99.1 * Excerpt of financial statements and notes thereto from Michael
Foods, Inc., a Delaware corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
____________________________
* Filed Herewith
<PAGE> 47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 13, 1997
MICHAEL FOODS, INC.
By: /s/ John D. Reedy
------------------
John D. Reedy, Vice President-Finance,
Chief Financial Officer and Treasurer
<PAGE> 48
EXHIBIT INDEX
Exhibit Number Description Page
- ------------- ----------- ----
2.1 Agreement and Plan of Reorganization, dated as of
December 21, 1995, by and among North Star Universal,
Inc., Michael Foods, Inc. and NSU Merger Co. (filed as
an exhibit to the Report on Form 8-K filed by the
Company on December 27, 1995 (schedules omitted -- the
Registrant agrees to furnish a copy of any schedule to
the Commission upon request)).
3.1 * Amended and Restated Articles of Incorporation of the
Company dated February 28, 1997.
3.2 Amended and Restated Bylaws of the Company (filed as
Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and
incorporated herein by reference).
4.1 * Form of Common Stock Certificate.
4.2 Form of Indenture, dated as of April 26, 1989, between
the Company and National City Bank of Minneapolis, as
trustee (filed as Exhibit 4.1 to Registration
No. 33-26176 and incorporated herein by reference).
4.3 Form of First Supplemental Indenture, dated as of
March 16 1992, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.2 to Registration
No. 33-46418 and incorporated herein by reference).
4.4 Form of Second Supplemental Indenture, dated as of
March 16, 1995, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.3 to
the Company's Annual Report on Form 10-K for
<PAGE> 49
the year ended December 31, 1994 and incorporated herein by
reference).
4.5 Indenture, dated as of December 1, 1986, between the Company and
National City Bank of Minneapolis, as trustee, relating to
$25,000,000 principal amount of Subordinated Debentures Series
87/88 (filed as Exhibit 4.1 to Registration No. 33-10558 and
incorporated herein by reference).
4.6 Indenture, dated as of September, 1985, between the Company and
American National Bank and Trust Company, as trustee, relating to
$14,000,000 principal amount of Subordinated Debentures, Series
1985 (filed as Exhibit 4 to Registration No. 2-99100 and
incorporated herein by reference).
10.1 Michael Foods, Inc. 1987 Incentive Stock Option Plan and Incentive
Stock Option Agreement (filed as Exhibit 10.15 to Michael Foods,
Inc., a Delaware corporation's Registration Statement on Form S-1
Registration No. 33-12949 and incorporated herein by reference).
10.2 Michael Foods, Inc. 1987 Non-Qualified Stock Option Plan and
Non-Qualified Stock Option Agreement (filed as Exhibit 10.16 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-1 Registration No. 33-12949 and incorporated
herein by reference).
10.3 Form of Michael Foods, Inc. Director Stock Option Agreement (filed
as Exhibit 10.25 to Michael Foods, Inc., a Delaware corporation's
Registration Statement on Form S-1 Registration No. 33-12949 and
incorporated herein by reference).
10.4 Retirement Compensation Agreement between Milton G. Waldbaum Company
and Daniel W. Gardner, dated September 24, 1987 (filed as Exhibit
10.40 to Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1989 and incorporated
herein by reference).
10.5 Loan Agreement and Promissory Note between Metropolitan Life
Insurance Company and Michael Foods, Inc., dated December 1, 1989
(filed as Exhibit 10.43 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference).
10.6 Amendment to Michael Foods, Inc. Incentive and Non-Qualified Stock
Option Plans, dated November 21, 1989 (filed as Exhibit 4.6 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective November 21, 1989, Registration No.
33-31914 and incorporated herein by reference).
10.7 License Agreement between Michael Foods, Inc. and North Carolina
State University, dated November 28, 1989 (filed as Exhibit 10.56
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference).
10.8 * Amendment dated December 18, 1996 to License Agreement between
Michael Foods, Inc., a Delaware corporation, and North Carolina
State University, dated November 28, 1989.
10.9 Severance Plan for Eligible Employees of Michael Foods, Inc. and
its Subsidiaries (incorporated by reference from the Michael
Foods, Inc., a Delaware corporation's Form 8, Amendment No. 1 to
Report on Form 10-K for the year ended December 31, 1990).
10.10 First Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated October 14, 1992 (filed as Exhibit 10.67 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1992 and incorporated herein
by reference).
<PAGE> 50
10.11 Amendment to the Michael Foods, Inc. Non-Qualified Stock Option
Plan (filed as Exhibit 4.7 to the Michael Foods, Inc., a Delaware
corporation's Registration Statement on Form S-8 effective June 9,
1993 Registration No. 33-64078 and incorporated by reference).
10.12 Stock Option Plan for Non-Employee Directors (filed as Exhibit 4.1
to the Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective June 9, 1993 Registration No.
33-64076 and incorporated herein by reference).
10.13 Michael Foods, Inc. 1994 Executive Incentive Plan (filed as
Exhibit 10.76 to Michael Foods, Inc., a Delaware corporation's
Annual Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.14 Michael Foods, Inc. 1994 Executive Performance Stock Award Plan
(filed as Exhibit 10.77 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31,1993 and incorporated herein by reference).
10.15 Employment Agreement between Michael Foods, Inc. and Gregg A.
Ostrander, dated January 31, 1994 (filed as Exhibit 10.79 to
Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.16 Second Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated February 23, 1994 (filed as Exhibit 10.81 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated herein by
reference).
10.17 Michael Foods, Inc. Employee Stock Purchase Plan (filed as Exhibit
10.88 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.18 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1994 (filed as Exhibit
10.89 to the Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.19 Employment Agreement between Michael Foods, Inc. and Jeffrey M.
Shapiro, dated December 31, 1994 (filed as Exhibit 10.90 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.20 Employment Agreement between Michael Foods, Inc. and Norman A.
Rodriguez, dated December 31, 1994 (filed as Exhibit 10.92 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.21 Employment Agreement between Michael Foods, Inc. and James J.
Kohler dated December 31, 1994 (filed as Exhibit 10.93 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.22 Employment Agreement between Michael Foods, Inc. and Kevin O.
Kelly, dated December 31, 1994 (filed as Exhibit 10.94 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.23 Employment Agreement between Michael Foods, Inc. and John D. Reedy,
dated December 31, 1994 (filed as Exhibit 10.95 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).
<PAGE> 51
10.24 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1995 (filed as Exhibit 10.97 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference).
10.25 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1996 (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference).
10.26 Employment Agreement between Michael Foods, Inc. and Bill L.
Goucher, dated December 31, 1995 (filed as Exhibit 10.99 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein
by reference).
10.27 Resolution adopted by the Michael Foods, Inc. Board of Directors on
July 27, 1995 extending the termination date of the Severance Plan
for Eligible Employees of Michael Foods, Inc. and its Subsidiaries
for one additional year (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 and incorporated herein by
reference).
10.28 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Jeffrey M. Shapiro, dated December 31, 1995 (filed as Exhibit
10.101 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.29 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Norman A. Rodriguez, dated December 31, 1995 (filed as Exhibit
10.102 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.30 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and James J. Kohler, dated December 31, 1995 (filed as Exhibit
10.103 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.31 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Kevin O. Kelly, dated December 31, 1995 (filed as Exhibit
10.104 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.32 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and John D. Reedy, dated December 31, 1995 (filed as Exhibit 10.105
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10.33 Amendment No. 2 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1995 (filed as Exhibit
10.106 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.34 Resolution adopted by the Board of Directors on June 26, 1996,
amending the Severance Plan for Eligible Employees of Michael
Foods, Inc. and Subsidiaries and extending its termination date for
one additional year (filed as Exhibit 10.107 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, and incorporated herein by
reference).
10.35 Agreement and Plan of Reorganization, and Amendment No. 1, by and
among Michael Foods, Inc., M. G. Waldbaum Company and Papetti's
Hygrade Egg Products, Inc., and Quaker State Farms, Inc., Papetti's
of Iowa Food Products, Inc., Monark Egg
<PAGE> 52
Corporation, Egg Specialties, Inc., Papetti Foods, Inc.,
Casa Trucking Limited Partnership, Papetti Transport Leasing
Limited Partnership, and Papetti Equipment Leasing Partnership
(filed as Exhibit 10.111 to Michael Foods, Inc., a Delaware
corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated herein by
reference).
10.36 Amendment No. 2, dated February 26, 1997, to Agreement and Plan of
Reorganization by and among Michael Foods, Inc., a Delaware
corporation, M. G. Waldbaum Company and Papetti's Hygrade Egg
Products, Inc., and Quaker State Farms, Inc., Papetti's of Iowa Food
Products, Inc., Monark Egg Corporation, Egg Specialties, Inc.,
Papetti Foods, Inc., Casa Trucking Limited Partnership, Papetti
Transport Leasing Limited Partnership, and Papetti Equipment Leasing
Partnership (filed as Exhibit B to Arthur J. Papetti Schedule 13D
relating to Michael Foods, Inc. filed March 7, 1997 and incorporated
herein by reference).
10.37 * Form of Employment Agreement, dated February 26, 1997, by and
between Arthur J. Papetti and Michael Foods, Inc.
10.38 Shareholder Agreement, dated February 26, 1997, by and among Michael
Foods, Inc., a Delaware corporation and Arthur N. Papetti as
Representative of and attorney-in-fact for the Shareholders and
Sellers Listed on Schedule I (filed as Exhibit D to Arthur J.
Papetti Schedule 13D filed March 7, 1997 and incorporated herein by
reference).
10.39 * Form of Loan Agreement dated as of February 26, 1997 between Michael
Foods, Inc., a Delaware corporation and various Lenders with regard
to $125,000,000 of 7.58% Senior Notes due February 26, 2009,
including form of Note and Novation and Assumption Agreement.
10.40 * Form of Amendment Agreement dated as of February 26, 1997 between
Michael Foods, Inc., a Delaware corporation and Metropolitan Life
Insurance Company regarding up to $50,000,000 of 9.5% Senior Notes
due December 1, 1999, including form of Note and Novation and
Assumption Agreement.
10.41 * Form of Revolving Loan Agreement dated as of February 28, 1997 among
Michael Foods, Inc., a Delaware corporation, the Listed Banks and
Bank of America National Trust, including exhibits.
10.42 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Stephen Papetti dated February 26, 1997.
10.43 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Arthur N. Papetti dated February 26, 1997.
10.44 * Lease by and between ASA Company, as Landlord and Michael Foods,
Inc., a Delaware corporation as Tenant dated February 26, 1997.
10.45 * Lease by and between Rechsteiner/Papetti, et al., as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.46 * Lease by and between Jersey Pride Urban Renewal, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.47 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.48 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.49 * Lease by and between Papetti Holding Company, Jack Bernstein,
Sherwood Weiser and Estate of David Levinson, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.50 * Lease by and between A & A Urban Renewal, as Landlord and Michael
Foods, Inc., a Delaware corporation as Tenant dated February 26,
1997.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
NORTH STAR UNIVERSAL, INC.
The undersigned President of North Star Universal, Inc., a corporation
subject to the provisions of Minnesota Statutes Chapter 302A., known as the
Minnesota Business Corporation Act, do hereby certify that at a meeting of the
shareholders of said corporation duly called and held at the Marriot Southwest,
5801 Opus Parkway, Minneapolis, Minnesota, at 1:00 p.m. on December 30,
1997, pursuant to notice mailed to all shareholders entitled to vote thereon,
the following Amended and Restated Articles of Incorporation were adopted by a
majority vote of all of the shares of stock present at such meeting and
entitled to vote to supersede and take the place of the existing articles of
incorporation and all amendments and restatements thereto, to wit:
ARTICLE I.
Name
----
The name of this corporation shall be Michael Foods, Inc.
ARTICLE II.
Purpose
-------
This corporation shall have general business purposes.
ARTICLE III.
Registered Office
-----------------
The registered office of this corporation shall be 324 Park National Bank
Building, 5353 Wayzata Boulevard, Minneapolis, Minnesota, 55416, County of
Hennepin.
ARTICLE IV.
Capital Stock
-------------
This corporation shall have authorized capital stock consisting of
50,000,000 shares, which shall be composed of 40,000,000 shares of common stock
having a par value of $.01 per share and 10,000,000 undesignated shares. Each
share of common stock shall be entitled to one vote on all matters presented to
the shareholders for a vote.
The Board of Directors may, from time to time, establish by resolution,
different classes or series of shares and may fix the rights and preferences of
said shares in any class or series. The Board of Directors shall have the
authority to issue shares of a class or series, shares of which may then be
outstanding to holders of shares of another class or to effectuate share
dividends, splits, or conversions of its outstanding shares.
ARTICLE V.
Certain Shareholder Rights.
---------------------------
Shareholders shall have no preemptive rights to purchase, subscribe for or
otherwise acquire any new or additional securities of the corporation. No
shareholder shall be entitled to cumulative voting rights.
-1-
<PAGE> 2
ARTICLE VI.
Directors
---------
1. The business of this corporation shall be managed by or under the
direction of a board of directors consisting of not less than three (3)
directors. Directors need not be shareholders of the corporation. The Board of
Directors in its discretion may elect honorary directors who shall serve
without voting power.
2. Directors shall be elected for a term of one (1) year and until their
successors are elected and qualified. If any vacancy occurs in the board of
directors, the remaining directors, by the affirmative vote of a majority
thereof, shall elect a director or directors to fill the vacancy until the next
regular meeting of the shareholders.
3. The directors shall have all of the powers conferred upon directors by
the Minnesota Business Corporation Act.
4. An action required or permitted to be taken by the board of directors
of this corporation may be taken by written action signed by the number of
directors that would be required to take the same action at a meeting of the
board at which all directors are present except as to those matters which
require shareholder approval, in which case the written action must be signed by
all members of the board of directors.
5. To the full extent permitted by the Minnesota Business Corporation Act,
as it exists on the date hereof or may hereafter be amended, a director of this
corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director. No amendment to or
repeal of this section shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to acts
or omissions of such director occurring prior to such amendment or repeal.
ARTICLE VII.
Indemnification
---------------
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the corporation) to the full extent
permitted by the Minnesota Business Corporation Act.
ARTICLE VIII.
The private property of the shareholders of this corporation shall not be
subject to the payment of corporate debts to any extent whatsoever.
I have hereunto set my hand this 28th day of February, 1997.
/s/ Gregg A. Ostrander
------------------------------
GREGG A. OSTRANDER
President
-2-
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER SHARES
FBU
CUSIP 594079 10 5
See reverse for certain definitions
MICHAEL FOODS INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
This certificate is transferrable in the states of Massachusetts and New York
THIS CERTIFIES THAT
is the owner and registered holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF ONE
CENT ($.01) OF MICHAEL FOODS, INC. transferable only on the books of the
corporation by the holder hereof in person or by a duly authorized attorney upon
surrender of this certificate properly endorsed. This Certificate is not valid
unless countersigned by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ Jeffrey M. Shapiro /s/ Gregg A. Ostrander
SECRETARY PRESIDENT
[Merrill Corporation Seal]
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT -- _____ Custodian _____
(Cust) (Minor)
TEN ENT -as tenants by the under Uniform Gifts to
entireties Minors
JT TEN -as joint tenants with
right of survivorship
and not as tenants in
common
Additional abbreviations may also be used though not in the above
list.
For value received ______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said stock on the books of the within-named Corporation with full
power of substitution in the premises.
Dated _________________________________
_________________________________
NOTICE THE SIGNATURE TO THE
ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE PAGE
OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER
SIGNATURE GUARANTEED BY:
<PAGE> 1
EXHIBIT 10.8
AMENDMENT TO LICENSE AGREEMENTS
THIS AGREEMENT dated this 18th day December, 1996, by and between North
Carolina State University ("UNIVERSITY") and Michael Foods, Inc., a Delaware
corporation ("LICENSEE");
WHEREAS, under date of April 22, 1988, UNIVERSITY entered into a
License Agreement with Morning Glory Eggs, Inc., the predecessor in interest of
LICENSEE, which license was previously amended under date of November 28, 1989
and September 12, 1991; and
WHEREAS, UNIVERSITY and LICENSEE entered into two related License
Agreements: One dated November 28, 1989, and amended September 12, 1991, and
the second dated September 1, 1991 (collectively with the April 22, 1988
Agreement, the "License Agreements"); and
WHEREAS, pursuant to the terms of the License Agreements, LICENSEE has
initiated and, with UNIVERSITY, pursued certain legal actions to enforce the
Patent Rights covered by the License Agreements and in connection therewith has
expended funds in protecting and enforcing the Patent Rights pursuant to Section
9.3 of the License Agreements; and
WHEREAS, under date of June 28, 1996, LICENSEE entered into an
Agreement and Plan of Reorganization between and among LICENSEE and Papetti's
High Grade Egg Products, Inc. and certain other related parties, the completion
of which is conditioned, among other things, upon the execution and delivery of
a Settlement Agreement and Mutual Release in substantially the form attached
hereto as Exhibit A (the "Settlement Agreement"); and
WHEREAS, the parties agree that the execution and delivery of the
Settlement Agreement and the modification and clarification of the License
Agreements hereinafter provided is in the best interest of the parties and will
be useful to promote the commercialization of the Licensed Product and Licensed
Process;
NOW, THEREFORE, UNIVERSITY AND LICENSEE, for good and valuable
consideration, hereby agree to modify the terms of the License Agreements as
set forth herein.
1. Unless the context otherwise requires, capitalized terms used
herein shall have the meanings provided in the License Agreements.
2. Article I of the License Agreements shall be modified by adding a
new Section 1.8, as follows:
"1.8 'Active Litigation' means any civil action or proceeding in
a regularly established court, whereby LICENSEE seeks to protect and enforce
the Patent Rights pursuant to Section 9.3 hereof, so long as such action or
proceeding is not stayed by the court or by agreement of the parties to the
litigation."
<PAGE> 2
3. Article IX, Section 9.3, of each of the License Agreements (as
previously amended) is hereby deleted in its entirety, and the following
substituted therefor:
"9.3 In the event LICENSEE shall undertake the enforcement and/or
defense of the Patent Rights by litigation, including any declaratory
judgment action, LICENSEE may withhold certain portions of royalty payments
otherwise due UNIVERSITY under Articles IV an V of this Agreement, as
follows:
"(a) in any calendar quarter in which there is no Active
Litigation, LICENSEE may withhold up to twenty-five percent (25%) of
such royalty payments; and
"(b) in any calendar quarter in which there is Active
Litigation, LICENSEE may withhold up to fifty percent (50%) of such
royalty payments.
"In no event shall LICENSEE's withholding under 9.3(a) or (b), above,
exceed the total of the legal expenses, including reasonable attorneys'
fees, incurred by LICENSEE in the enforcement or defense of the Patent
Rights for the calendar quarter involved plus any such legal expenses which
were incurred in previous quarters but which have not been recovered."
"All royalty payments withheld pursuant to this Section 9.3 shall be
applied by LICENSEE to offset any legal expenses, including reasonable
attorneys' fees, incurred in the enforcement or defense of the Patent
Rights, including all such expenses incurred prior to the date of this
amendment. LICENSEE's right to withhold royalties shall extend only until
all of LICENSEE's legal expenses, including reasonable attorneys' fees,
incurred in the enforcement or defense of the Patent Rights, are
recovered. Any recovery by LICENSEE, whether by judgment, settlement or
otherwise, shall be applied first in satisfaction of any unreimbursed
legal expenses including reasonable attorneys' fees of LICENSEE; second,
toward reimbursement of UNIVERSITY's legal expenses, including reasonable
attorneys' fees, relating to the enforcement or defense of the Patent
Rights, which have not been previously reimbursed by LICENSEE; and third,
toward reimbursement of UNIVERSITY for any amounts past due or withheld
and applied in accordance with this Article IX. The balance, if any,
remaining from any such recovery or settlement shall be distributed to
LICENSEE; provided, that LICENSEE shall pay royalties to UNIVERSITY out of
said balance in accordance with the royalty rates set forth in Article IV
for that portion of any remaining recovery which is attributable to
LICENSEE's lost sales. LICENSEE shall be entitled to settle any such
litigation by agreement, consent judgment, voluntary dismissal or
otherwise, with the consent of the UNIVERSITY, which shall not be
unreasonably withheld; provided, however, that LICENSEE hereby agrees to
advise UNIVERSITY as soon as practicable
-2-
<PAGE> 3
after it has entered into any settlement discussions so that UNIVERSITY
has a reasonable opportunity to provide LICENSEE with its views on any
proposed settlement of any such action or proceeding."
4. UNIVERSITY agrees to execute and deliver the Settlement Agreement in
substantially the form attached hereto as Exhibit A on or before the closing
date of the Agreement and Plan of Reorganization between and among LICENSEE and
Papetti's High Grade Egg Products, Inc. and certain other parties dated June
28, 1996 and the payment to be made pursuant to said Settlement Agreement and
Mutual Release shall, under the provisions of Section 9.3 of the License
Agreements as herein amended, be applied to reduce the accrued unreimbursed
expenses of LICENSEE as herein described. The execution and delivery of the
Settlement Agreement shall not affect any other contractual agreement between
UNIVERSITY and LICENSEE regarding the responsibility for payment of costs and
expenses of litigation as set forth in this Agreement.
5. This Agreement shall be effective as of the date of closing of the
Agreement and Plan of Reorganization by and among Michael Foods, Inc. and
Papetti's High Grade Egg Products, Inc. and certain related entities referred
to above. This Agreement shall terminate and be of no effect upon the
termination or abandonment of the foregoing Agreement and Plan of
Reorganization.
6. The foregoing constitutes the only amendments to the License Agreements
made under this Agreement. In all other respects the License Agreements are
hereby republished and reaffirmed.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the day
and year first above written.
NORTH CAROLINA STATE MICHAEL FOODS, INC.
UNIVERSITY
By: /s/ CHARLES G. MORELAND By: /s/ JEFFREY M. SHAPIRO
-------------------------- ------------------------
Charles G. Moreland Jeffrey M. Shapiro
Vice Chancellor for Research, Executive Vice President
Outreach, Extension and Economic
Development
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<PAGE> 4
EXHIBIT F
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement is entered into between Michael Foods, Inc.
("Michael") and North Carolina State University ("NCSU") and their subsidiaries,
affiliates, successors, assigns, insurers, shareholders, directors, officers,
employees, agents, and representatives, on the one hand, and Papetti's Hygrade
Egg Products, Inc., and its subsidiaries, affiliates, successors, assigns,
insurers, shareholders, directors, officers, employees, agents, and
representatives ("Papetti's Hygrade"), on the other hand.
RECITALS
A. The following litigation and claims are pending:
1. Michael Foods, Inc. and North Carolina State University vs.
Papetti's Hygrade Egg Products, Inc., U.S. District Court for the District of
New Jersey, Civil Action No. 89-4645.
2. Papetti's Hygrade Egg Products, Inc. vs. Michael Foods, Inc.,
U.S. District Court for the District of New Jersey, Civil Action No. 91-1849.
B. In connection with an Agreement and Plan of Reorganization between
Michael and Papetti's Hygrade and certain other related entities dated
____________________, 1996 (the "Reorganization Agreement"), the parties desire
to fully and finally compromise and settle the above litigation and claims,
thereby resolving all issues between and among the parties in respect thereto.
C. For the consideration provided herein and the mutual covenants and
agreements contained herein, the sufficiency of which is hereby acknowledged,
the parties agree as follows:
EXHIBIT A
<PAGE> 5
AGREEMENTS
1. At the Closing of the transactions contemplated by the
Reorganization Agreement, Papetti's Hygrade shall pay to Michael for the benefit
of Michael and NCSU the sum of $6,000,000. Payment of the aforesaid amount
shall not be deemed an admission of liability by any party but shall be paid
solely to fully settle and compromise the claims of the parties as hereafter
provided.
2. The following patents held by NCSU and exclusively licensed to
Michael are valid and enforceable in all respects:
(1) United States Patent No. 4,808,425
(2) United States Patent No. 4,957,759
(3) United States Patent No. 4,994,291
(4) United States Patent No. 5,019,408
3. The parties will affirmatively and fully cooperate with and assist
one another in defending the validity and enforceability of the aforesaid
patents in the United States Patent and Trademark Office and in the courts,
including pursuing claims that said patents have been infringed by other
persons.
4. Michael and NCSU, on the one hand, and Papetti's Hygrade, on the
other hand, hereby release and forever discharge each other and their
subsidiaries, affiliates, successors, heirs, assigns, insurers, shareholders,
directors, officers, employees, agents, and representatives, of and from any and
all past and present claims, demands, liabilities, judgments, losses, damages,
expenses, and causes of action, at law or in equity, known or unknown, asserted
or unasserted, liquidated or unliquidated, fixed or contingent, direct or
indirect, accrued or
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<PAGE> 6
unaccrued, which they have ever had, presently have, claim to have, or claim to
have had against one another relating to or as a result of any competition
between them or any aspect of the referenced patents or any other patents,
including, but not limited to, all claims that have been made or could have been
made in the litigation referenced in Recital A hereof; provided however, that
this mutual release is expressly contingent upon the Reorganization Agreement
being finally consummated.
5. Each party shall be responsible for and shall pay its own costs and
expenses, including all attorneys' fees and other professional fees and
expenses, incurred in connection with the litigation and claims referenced in
Recital A hereof.
6. This agreement shall not constitute an admission of liability by any
party.
7. Each party represents and warrants that it is duly authorized to
execute this agreement on its behalf and that this Agreement, when executed and
delivered, will be binding upon each party and enforceable in accordance with
its term, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting creditors'
rights generally or to equitable principles relating to enforceability of
agreements.
8. Each party warrants and represents that it has consulted with its
attorneys regarding the effect of this agreement, and that he or it has
executed this agreement fully aware of its contents, purposes, and effects,
based upon his or its sole judgment, belief, and knowledge, and upon the advice
of its own attorneys, and that it is not relying on any representations or
statements made by any other party or anyone representing any other party.
9. This agreement shall be governed by the law of the State of New Jersey.
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<PAGE> 7
10. In the event that the Reorganization Agreement is not finally
consummated, then this agreement shall be null, void, and of no further force or
effect, as if it had never been entered into by the parties, and the parties
shall be restored to all rights and obligations that they possessed before this
agreement was executed.
11. Promptly upon completion of the Reorganization Agreement, the
parties shall cause their respective counsel to execute and file Stipulations
of Dismissal with Prejudice directing the Court to dismiss the litigation
described in Recital A on the merits and without costs to any party.
12. This agreement may be executed in counterparts, with the same
force and effect as if the signatures were upon the same instrument.
MICHAEL FOODS, INC.
Dated:______________, 1996 By___________________________
Its__________________________
NORTH CAROLINA STATE UNIVERSITY
Dated:______________, 1996 By___________________________
Its__________________________
PAPETTI'S HYGRADE EGG PRODUCTS, INC.
Dated:______________, 1996 By___________________________
Its__________________________
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<PAGE> 1
EXHIBIT 10.37
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the 26th day of February,
1997 (the "Agreement"), by and between MICHAEL FOODS, INC., a Delaware
corporation (hereinafter referred to as "Michael Foods") and STEPHEN PAPETTI
(hereinafter referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods
(the "Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into
this Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive
to serve as Executive Vice President of the Papetti's Hygrade Foods Division
and in such capacity Executive shall perform such duties as were being
performed prior to and as of the date of this Agreement subject at all times to
the direction of the President of Papetti's Hygrade Foods Division.
2. TERM. This Agreement shall be effective as of February 26,
1997 and shall continue through February 25, 2000, unless earlier terminated as
provided herein. This Agreement may be extended thereafter upon the written
agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from February 26, 1997 through February 25, 2000 of at least
$180,000 payable in substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical
insurance and shall permit Executive to participate in other fringe
benefit plans as Michael Foods may from time to time provide for its
other executive officers. The terms of said benefits in all cases
shall be no less favorable to Executive than those offered to other
executive officers of Michael Foods.
b. Executive is entitled to take up to 4 weeks of
vacation per annum at reasonable times and for customary and reasonable
lengths of time consistent with his overall responsibilities hereunder.
<PAGE> 2
c. Michael Foods shall reimburse Executive for all
reasonable expenses incurred by Executive in connection with Michael
Foods' business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of three years following termination of employment, Executive shall not
directly or indirectly, whether as an employee, agent, contractor, partner,
shareholder or otherwise, engage in the business of egg production, processing
or distribution in any geographic area where Michael Foods produces or
processes eggs or distributes egg products, except as specified in Schedule I
to this Agreement, nor shall Executive solicit the business of any customer of
Michael Foods on behalf of any company or business entity (other than Michael
Foods or its affiliates) which is engaged in the egg production, processing or
distribution business, whether or not such company or business directly
competes with Michael Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party
or by Executive if Executive's Duties Have Been Substantially Reduced
or Negatively Altered without Executive's prior written consent; or
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael
Foods that Executive has committed an illegal act that directly reflects upon
his fitness to act as an Executive of Michael Foods.
"Incapacity" for purposes hereof shall mean a determination by
Michael Foods in its sole discretion that Executive is unable to perform his
job responsibilities hereunder as a result of chronic illness, physical, mental
or any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon
the fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment an amount equal to the Base Salary for the remaining term
of this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the
month following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without Executive's prior written
consent or by Michael under subsection (c), Executive shall receive no
termination payment.
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<PAGE> 3
"Duties are Substantially Reduced or Negatively Altered" means,
without Executive's express written consent:
(i) the assignment to Executive of any duties
inconsistent with Executive's positions, duties, responsibilities and
status with Michael Foods or a change in Executive's reporting
responsibilities, titles or offices, or any removal of Executive from,
or any failure to re-elect Executive to, any of such positions, except
in connection with the termination of Executive's employment for
Cause, upon the Incapacity or death of Executive, or upon the
voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the
minimum Base Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based
anywhere other than the geographic location at which Executive was
based at the effective date of this Agreement except for required
travel on business to an extent substantially consistent with the
business travel obligations of Executive;
(iv) the failure by Michael Foods to continue in effect
benefit and compensation plans substantially equivalent to the benefit
or compensation plans or arrangements in effect at the effective date
of this Agreement; the taking of any action by Michael Foods not
required by law which would adversely affect Executive's participation
in or materially reduce Executive's benefits under any of such plans
or deprive Executive of any material fringe benefit enjoyed by
Executive; or the failure by Michael Foods to provide Executive with
the number of paid vacation days, holidays and personal days to which
Executive was then entitled in accordance with Michael Foods' normal
leave policy in effect at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
9. NOTICES. All communications with respect to this agreement
shall be considered given if delivered or sent as follows:
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<PAGE> 4
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Stephen Papetti
c/o Papetti Hygrade Foods Division
100 Trumbull Street
Elizabeth, New Jersey 07206
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage
prepaid, return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement of the parties hereto with respect to the subject matter hereof and
no party shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at
any time may by written agreement extend or modify this Agreement. This
Agreement shall not be altered or otherwise amended except pursuant to an
instrument in writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision
of this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall
inure to the
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<PAGE> 5
benefit of and be binding upon the respective legal representatives,
successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be
construed under the laws of the State of Minnesota.
c. This Agreement may be executed in one or more
counterparts and each of such counterparts shall for all purposes be
deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
MICHAEL FOODS, INC.
By: Greg A. Ostrander
---------------------------------
Its: President
---------------------------------
Stephen Papetti
-------------------------------------
Executive
Stephen Papetti
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<PAGE> 6
SCHEDULE I
(STEPHEN PAPETTI)
1. Together, Alfred Papetti (25%), Arthur J. Papetti (25%), Tina Marie Noll
(25%) and Stephen Papetti (25%) own Shell Egg Technology, L.L.C., which
entity owns 0.5% of Pasteurized Egg, L.P.
2. Together, William T. Rechsteiner (25%), David Rechsteiner (8.33%), Arthur
J. Papetti (22.23%), Alfred Papetti (22.22%) and Stephen Papetti (22.22%)
own Papetti Farms, Inc., which entity owns 50% of Sunbest-Papetti Farms.
<PAGE> 1
EXHIBIT 10.39
================================================================================
MICHAEL FOODS, INC.
---------------------------
LOAN AGREEMENT
Dated as of February 26, 1997
---------------------------
7.58% Senior Notes Due February 26, 2009
================================================================================
<PAGE> 2
TABLE OF CONTENTS
LOAN AGREEMENT
SECTION 1. ISSUE OF NOTES ....................................... 1
Section 1.1. Authorization ..................................... 1
Section 1.2. Loan; Closing ..................................... 1
Section 1.3. Other Agreements .................................. 2
SECTION 2. REPRESENTATIONS AND WARRANTIES ....................... 2
Section 2.1. Financial Statements of Company and
its Subsidiaries .................................. 2
Section 2.2. Financial Statements of the Papetti
Companies ......................................... 2
Section 2.3. No Material Changes ............................... 3
Section 2.4. Liens ............................................. 3
Section 2.5. Organization, Authority and Good
Standing .......................................... 3
Section 2.6. Title to Properties ............................... 4
Section 2.7. Leases and Liens .................................. 4
Section 2.8. Licenses .......................................... 4
Section 2.9. Litigation ........................................ 5
Section 2.10. No Burdensome Provisions .......................... 5
Section 2.11. Compliance with Other Instruments ................. 5
Section 2.12. Foreign Asset Control Regulations ................. 6
Section 2.13. ERISA ............................................. 6
Section 2.14. Tax Liability ..................................... 7
Section 2.15. Regulation G; Use of Proceeds; Hart-
Scott Rodino ...................................... 7
Section 2.16. Investment Company Act ............................ 7
Section 2.17. Governmental Action ............................... 7
Section 2.18. Environmental Matters ............................. 7
Section 2.19. Disclosure ........................................ 8
Section 2.20. Offering of Notes ................................. 8
Section 2.21. Priority of Notes ................................. 9
SECTION 3. CONDITIONS OF THE LOANS .............................. 9
Section 3.1. Opinion of Company Counsel ........................ 9
Section 3.2. Opinion of Lenders' Special Counsel ............... 11
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<PAGE> 3
Section 3.3. Closing Certificate ............................... 12
Section 3.4. Legality .......................................... 12
Section 3.5. Related Transactions .............................. 13
Section 3.6. Payment of Lenders' Special Counsel
Fees .............................................. 13
Section 3.7. Proceedings ...................................... 13
SECTION 4. REPRESENTATIONS OF LENDERS ........................... 13
Section 4.1. ................................................... 13
Section 4.2. ................................................... 13
SECTION 5. FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES;
ADDITIONAL INFORMATION; INSPECTION ................... 15
Section 5.1. Financial Statements and Reports .................. 15
Section 5.2. Right to Inspect Properties, Books, Etc. .......... 18
SECTION 6. MISCELLANEOUS ........................................ 18
Section 6.1. Expenses .......................................... 18
Section 6.2. Stamp Taxes, etc .................................. 19
Section 6.3. Successors and Assigns ............................ 19
Section 6.4. Direct Payment .................................... 19
Section 6.5. Notices ........................................... 19
Section 6.6. Defined Terms ..................................... 20
Section 6.7. Pending Reorganization ............................ 20
Section 6.8. Confidential Information .......................... 21
Section 6.9. Law Governing ..................................... 22
Section 6.10. Headings .......................................... 22
Section 6.11. Counterparts ...................................... 22
EXHIBIT A TO LOAN AGREEMENT - FORM OF NOTE ............................... 1
SECTION 1. THE NOTES; TRANSFERS, EXCHANGE, ETC .................. 1
Section 1.01. The Notes ................................... 1
Section 1.02. Registration, Transfer or
Exchange of Notes ........................... 1
Section 1.03. Loss, Theft, Destruction or
Mutilation of Notes ......................... 2
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<PAGE> 4
SECTION 2. PREPAYMENT OF NOTES ................................ 2
Section 2.01. Mandatory Prepayments ....................... 2
Section 2.02. Optional Prepayments ....................... 2
Section 2.03. Prepayment Upon Event Risk Occurrence ....... 4
Section 2.04. Interest After Date Fixed for Prepayment .... 7
Section 2.05. Allocation of Prepayments ................... 7
Section 2.06. Surrender of Notes; Notation Thereon ........ 8
SECTION 3. AFFIRMATIVE COVENANTS .............................. 8
Section 3.01. Maintenance of Company Office ............... 8
Section 3.02. To Keep Books ............................... 8
Section 3.03. Payment of Taxes; Corporate
Existence; Maintenance of
Properties .................................. 8
Section 3.04. Insurance ................................... 9
Section 3.05. Payment of Indebtedness ..................... 9
Section 3.06. Compliance with Laws ........................ 10
SECTION 4. RESTRICTIVE COVENANTS .............................. 10
Section 4.01. Limitation on Indebtedness .................. 10
Section 4.02. Limitation on Liens ......................... 11
Section 4.03. Maintenance of Net Worth .................... 12
Section 4.04. Maintenance of Interest Expense
Coverage .................................... 12
Section 4.05. Restricted Payments ......................... 12
Section 4.06. Limitation on Disposition of
Assets ...................................... 13
Section 4.07. Merger, Consolidation, Sale or
Lease ....................................... 13
Section 4.08. Transactions with Affiliates ................ 14
Section 4.09. Restrictions on Subsidiaries ................ 14
Section 4.10. Restrictions on Investments ................. 15
Section 4.11. Acquisition of Notes; No
Reissuance .................................. 15
SECTION 5. CONSENTS, WAIVERS AND AMENDMENTS ................... 16
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<PAGE> 5
SECTION 6. DEFINITIONS ........................................ 17
SECTION 7. DEFAULTS AND REMEDIES .............................. 23
Section 7.0l. Events of Default ............................. 23
Section 7.02. Suits for Enforcement ......................... 26
Section 7.03. Remedies Not Exclusive, Etc ................... 26
SECTION 8. MISCELLANEOUS ...................................... 27
Section 8.01. Costs and Expenses ............................ 27
Section 8.02. Notices ....................................... 27
Section 8.03. Covenants Bind Successors and
Assigns ....................................... 27
Section 8.04. Governing Law ................................. 27
Section 8.05. Headings ...................................... 27
EXHIBIT B TO LOAN AGREEMENT -- LIENS SECURING INDEBTEDNESS OF THE
COMPANY FOR MONEY BORROWED
EXHIBIT C TO LOAN AGREEMENT -- SUBSIDIARIES
EXHIBIT D TO LOAN AGREEMENT -- LITIGATION
EXHIBIT E TO LOAN AGREEMENT -- FORM OF NOVATION AND ASSUMPTION
AGREEMENT
EXHIBIT F TO LOAN AGREEMENT -- ERISA AFFILIATES
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<PAGE> 6
MICHAEL FOODS, INC.
LOAN AGREEMENT
Re: $125,000,000 7.58% Senior Notes
due February 26, 2009
Dated as of February 26, 1997
To the Lender named
in Schedule I
hereto which is a
signatory to this
Loan Agreement
Ladies and Gentlemen:
MICHAEL FOODS, INC. a Delaware corporation (herein called the "Company"),
agrees with you as follows:
SECTION 1. ISSUE OF NOTES.
Section 1.1. Authorization. The Company has duly authorized an issue of
$125,000,000 aggregate principal amount of its 7.58% senior notes due February
26, 2009 (herein called the "Notes"), such Notes to be in the form and have
terms and provisions substantially as set forth in Exhibit A hereto. The term
"Notes" as used herein shall include all notes delivered pursuant to the
provisions of this Agreement and each of the notes delivered pursuant to the
separate agreements with the other lenders named in Schedule I hereto and all
notes delivered in substitution or exchange therefor or in lieu thereof, and,
where applicable, shall include the singular number as well as the plural. The
term "Note" shall mean one of the Notes. You are herein sometimes referred to
as a Lender and you and the other lenders named in Schedule I hereto are herein
sometimes collectively referred to as the "Lenders".
<PAGE> 7
Section 1.2. Loan; Closing. The Company hereby agrees to borrow from you,
and you, subject to the terms and conditions herein set forth, hereby agree to
lend to the Company, the principal amount set opposite your name on Schedule I
hereto on February 26, 1997 (the "Closing", and the date of such Closing to be
herein referred to as the "Closing Date").
Your loan will be evidenced by and be made against delivery to you at
10:00 A.M. Minneapolis time, on the Closing Date, at the principal offices of
Maun & Simon, PLC, 2000 Midwest Plaza Building West, 801 Nicollet Mall,
Minneapolis, Minnesota 55402, of a single registered Note in the full amount of
your loan (unless different denominations are specified by you), registered in
your name or in the name of such nominee as you may specify at any time prior
to the Closing Date. Delivery of the Notes hereunder shall be made against
payment to the Company by wire transfer of immediately available funds to its
account number 75-83613 at Bank of America-Illinois in Chicago, Illinois (ABA #
071000039), in the aggregate principal amount of such loan.
Section 1.3. Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Company is entering into similar agreements
with the other Lenders under which such other Lenders agree to loan to the
Company the principal amounts set opposite such Lenders' names in Schedule I
hereto, and your obligation and the obligations of the Company hereunder are
subject to the execution and delivery of the similar agreements by the Lenders
of the entire $125,000,000 aggregate principal amount. This Agreement and said
similar agreements with the other Lenders are herein collectively referred to
as the "Agreements". The obligations of each Lender shall be several and not
joint and no Lender shall be liable or responsible for the acts of any other
Lender.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants that:
Section 2.1. Financial Statements of Company and its Subsidiaries. You
have been furnished with copies of (a) the
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<PAGE> 8
consolidated balance sheets of the Company and its Subsidiaries at December 31,
1994 and December 31, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal periods ended on said dates, accompanied in each case by the opinion of
Grant Thornton LLP, its independent certified public accountants, and (b) the
consolidated balance sheet and related consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries as of
the end of the nine months' fiscal period ended September 30, 1996, certified
by an authorized financial officer of the Company.
Said financial statements, including the related schedules and notes, to
the Company's best knowledge and belief, are complete and correct and fairly
present (a) the financial condition of the Company and its Subsidiaries as at
the respective dates of said balance sheets and (b) the results of the
operations of the Company and its Subsidiaries for the fiscal periods ended on
said dates, all in conformity with generally accepted accounting principles
applied on a consistent basis (except as otherwise stated therein or in the
notes thereto) throughout the periods involved. The consolidated balance
sheets as of December 31, 1994 and December 31, 1995 and the related schedules
and notes show all material liabilities, direct and contingent, of the Company
and its Subsidiaries as of such dates.
Section 2.2. Financial Statements of the Papetti Companies. You have
been furnished with copies of the combined balance sheets of the Papetti
Companies at December 31, 1995 and December 31, 1994, and the related combined
statements of income, equity and cash flows of the Papetti Companies for the
fiscal periods ended on said dates, accompanied by (i) the opinion of Coopers &
Lybrand LLP in the case of the fiscal period ended December 31, 1995 and (ii)
the opinion of Ehrenkrantz and Company in the case of the fiscal period ended
December 31, 1994.
Said financial statements, including the related notes, to the Company's
best knowledge and belief, are complete and correct and fairly present (a) the
financial condition of the Papetti Companies as at the respective dates of said
balance sheets and
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<PAGE> 9
(b) the results of the operations of the Papetti Companies for the fiscal
periods ended on said dates, all in conformity with generally accepted
accounting principles applied on a consistent basis (except as otherwise stated
therein or in the notes thereto) throughout the periods involved. To the best
knowledge and belief of the Company the combined balance sheets as of December
31, 1994 and December 31, 1995 and the related schedules and notes show all
material liabilities, direct and contingent, of the Papetti Companies as of
such dates.
Section 2.3. No Material Changes. There has been no material and adverse
change in the business, operations, properties, prospects, assets or condition,
financial or other, of the Company and its Subsidiaries subsequent to December
31, 1995 except for matters discussed in "management's discussion and analysis
of financial condition and results of operations" which accompanied the
financial statements of the Company and its Subsidiaries for the nine month
period ended September 30, 1996 referred to in Section 2.1 above. To the best
knowledge and belief of the Company, there has been no material and adverse
change in the business, operations, properties, prospects, assets or condition,
financial or otherwise, of the Papetti Companies subsequent to December 31,
1995.
Section 2.4. Liens. Exhibit B hereto correctly sets forth all Liens
securing Indebtedness of the Company or its Subsidiaries for money borrowed
existing on, January 31, 1997 and there has been no material change in such
information as at the date hereof. Exhibit B also correctly sets forth all
Liens securing Indebtedness of the Papetti Companies which will be outstanding
at the time of the acquisition of the Papetti Companies by the Company or
Subsidiary.
Section 2.5. Organization, Authority and Good Standing. Exhibit C hereto
correctly sets forth (a) the name and jurisdiction of incorporation of each
Subsidiary of the Company, (b) a statement of the capitalization of each such
Subsidiary and (c) the name, form of organization and, in the case of
corporations, the jurisdiction of incorporation of each of the Papetti
Companies. All of the shares of stock listed in
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Section A of Exhibit C, other than directors qualifying shares, are owned by
the Company and/or the Subsidiaries and are owned as of the date of this
Agreement, free and clear of all Liens, and all such shares have been duly
issued and are fully paid and non-assessable. The Company, each of its
Subsidiaries and each of the Papetti Companies which has been organized in
corporate form is a duly organized and validly existing corporation in good
standing under the laws of its respective jurisdiction of incorporation and has
full power and authority to own the properties and assets and to carry on the
business which it now owns and carries on. The Company, each of its
Subsidiaries and each of such Papetti Companies is duly qualified and in good
standing as a foreign corporation in each jurisdiction wherein the nature of
the property owned or leased by it or the nature of the business transacted by
it makes such qualification necessary, except where the failure to so qualify
would not have a material and adverse effect on the business, operations,
properties, prospects, assets or condition, financial or other, of the Company,
its Subsidiaries and the Papetti Companies, taken as a whole.
Section 2.6. Title to Properties. (a) The Company and its Subsidiaries
have good and marketable fee title to all the real properties and good and
marketable title to all other property reflected on the consolidated balance
sheet of the Company and its Subsidiaries as at December 31, 1995 referred to
in Section 2.1, or purported to have been acquired by the Company or any of its
Subsidiaries after said date, excepting, however, property sold or otherwise
disposed of subsequent to said date in the ordinary course of business.
(b) The Papetti Companies have good and marketable fee title to all the
real properties and good and marketable title to all other property reflected
on the combined balance sheet of the Papetti Companies as at December 31, 1995
referred to in Section 2.2, or purported to have been acquired by any of the
Papetti Companies after said date, excepting, however, property sold or
otherwise disposed of subsequent to said date in the ordinary course of
business.
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Section 2.7. Leases and Liens. (a) None of the properties or assets
reflected in the consolidated balance sheet of the Company and its Subsidiaries
as at December 31, 1995 referred to in Section 2.1, or purported to have been
acquired by the Company or any of its Subsidiaries after said date, is held
subject to any Lien which would not be permitted by Section 3.03A or Section
4.02 of the Notes. The Company and its Subsidiaries enjoy peaceful and
undisturbed possession under all of the material leases under which they are
operating and all such leases are valid and subsisting and in full force and
effect.
(b) None of the properties or assets reflected in the combined balance
sheet of the Papetti Companies as at December 31, 1995 referred to in Section
2.2, or acquired by any of the Papetti Companies after said date or purported
to have been acquired by any of the Papetti Companies after said date, is held
subject to any Lien which, after giving effect to the acquisition of the
Papetti Companies by the Company or a Subsidiary, would not be permitted by
Section 3.03A or Section 4.02 of the Notes. To the best knowledge and belief
of the Company, the Papetti Companies enjoy peaceful and undisturbed possession
under all of the material leases under which they are operating and all such
leases are valid and subsisting and in full force and effect.
Section 2.8. Licenses. The Company, its Subsidiaries and, to the best
knowledge and belief of the Company, the Papetti Companies possess all
trademarks, trade names, copyrights, patents, governmental licenses,
franchises, certificates, consents, permits and approvals necessary to enable
them to carry on their business in all material respects as now conducted and
to own and operate the properties material to their business as now owned and
operated, without known conflict with the rights of others. All such
trademarks, trade names, copyrights, patents, licenses, franchises,
certificates, consents, permits and approvals which are material to the
Company, its Subsidiaries and the Papetti Companies are valid and subsisting.
To the best knowledge and belief of the Company, except as specifically set
forth in Exhibit D hereto, there is no violation by any Person of any right of
the Company or any of its Subsidiaries with respect
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to any trademark, trade name, copyright, patent or other right owned or used by
the Company or any of its Subsidiaries which involves the likelihood of any
material and adverse change in the business, operations, properties, prospects,
assets or condition, financial or other, of the Company, its Subsidiaries and
the Papetti Companies, taken as a whole.
Section 2.9. Litigation. Except as set forth in Exhibit D hereto, there
are no actions, suits or proceedings (whether or not purportedly on behalf of
the Company, any of its Subsidiaries or any of the Papetti Companies) pending
or, to the knowledge of the Company, threatened against or affecting the
Company, any of its Subsidiaries or any of the Papetti Companies, at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, which involve any of the
transactions herein contemplated or the likelihood of any material and adverse
change in the business, operations, properties, prospects, assets or condition,
financial or other, of the Company, its Subsidiaries and the Papetti Companies,
taken as a whole; and neither the Company, nor any of its Subsidiaries, nor any
of the Papetti Companies is in default or violation of any judgment, order,
writ, injunction, decree or award or in violation in any way which would have a
material and adverse effect on the business, operations, properties, prospects,
assets or condition, financial or other, of the Company, its Subsidiaries and
the Papetti Companies, taken as a whole, of any statute, rule or regulation of
any court, arbitrator or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
Section 2.10. No Burdensome Provisions. Neither the Company, nor any
Subsidiary, nor any of the Papetti Companies is a party to any agreement or
instrument or subject to any charter or other corporate restriction or statute
or any judgment, order, writ, injunction, decree, award, rule or regulation
which materially and adversely affects or in the future may (so far as the
Company can now foresee) materially and adversely affect the business,
operations, properties, prospects, assets or condition, financial
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or other, of the Company, its Subsidiaries and the Papetti Companies, taken as
a whole.
Section 2.11. Compliance with Other Instruments. Except as may have been
permanently waived in writing and except for nonmonetary defaults with respect
to Indebtedness outstanding under that certain Loan Agreement dated as of
September 1, 1989 between the City of Lenox, Iowa and Papetti's of Iowa Food
Products, Inc., which Indebtedness will be paid in full by the Company or a
Subsidiary in connection with the acquisition of the Papetti Companies, neither
the Company, nor any Subsidiary, nor any of the Papetti Companies is in default
in the performance, observance or fulfillment of any of the material
obligations, covenants or conditions contained in any bond, debenture, note or
other evidence of indebtedness of the Company, any Subsidiary or any of the
Papetti Companies or contained in any instrument under or pursuant to which any
thereof has been issued or made and delivered the effect of which would
materially and adversely affect the business, operations, properties,
prospects, assets or condition, financial or other, of the Company, its
Subsidiaries and the Papetti Companies, taken as a whole. Neither the
execution and delivery of the Agreements by the Company, the consummation by
the Company of the transactions herein contemplated nor compliance by the
Company with the terms, conditions and provisions of the Agreements and of the
Notes will violate any provision of law or rule or regulation thereunder or any
order, injunction or decree of any court or other governmental body to which
the Company is a party or by which the Company is bound or conflict with or
result in a breach of any of the terms, conditions or provisions of the
corporate charter or by-laws of the Company or of any agreement or instrument
to which the Company is a party or by which the Company is bound, or constitute
a default thereunder, or result in the creation or imposition of any Lien of
any nature whatsoever upon any of the properties or assets of the Company. No
consent of the stockholders of the Company is required for the execution,
delivery and performance of the Agreements or the Notes by the Company.
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Section 2.12. Foreign Asset Control Regulations. Neither the Agreements
nor any of the transactions contemplated thereby will result in a violation of
any of the foreign asset control regulations of the United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any ruling issued
thereunder or any enabling legislation or Presidential Executive Order in
connection therewith.
Section 2.13. ERISA. The Company and its ERISA Affiliates have fulfilled
each of their obligations under the minimum funding standards of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal
Revenue Code of 1986, as amended (the "Code") with respect to each Plan, as
defined in Section 4021(a) of ERISA, in respect of which the Company or its
ERISA Affiliates is an "employer" or a "substantial employer", as such terms
are defined in Sections 3(5) and 4001(a)(2) of ERISA (a "Plan"). The Company
and its ERISA Affiliates are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and neither the Company
nor any ERISA Affiliate has incurred any liability to the Pension Benefit
Guaranty Corporation (the "PBGC") (other than for the payment of premiums) or
to any Plan which, in the aggregate, would have a material and adverse effect
on the business or financial condition of the Company and its Subsidiaries,
taken as a whole. Each Plan is in compliance in all material respects with,
and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other applicable federal or
state law, and no event or condition is occurring or exists with respect to any
Plan concerning which the Company would be under an obligation to furnish a
report to you in accordance with Section 5.1(g) hereof. The execution and
delivery of the Agreements and the issuance of the Notes hereunder will not
involve any transaction that is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975(c)(1)(A)-(D) of the Code. Attached hereto as Exhibit F is a complete list
of all ERISA "affiliates" (as hereinafter defined) and all "employee benefit
plans" with respect to which the Company or any "affiliate" (as hereinafter
defined) is a "party in interest" (as
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hereinafter defined) or in respect of which the Notes could constitute an
"employer security" (as hereinafter defined). The Company will, concurrently
with the delivery of financial statements pursuant to Section 5.1(b), update
such list to add any ERISA "affiliate" and "employee benefit plan" with respect
to which the Company or any "affiliate" become "parties in interest" after the
Closing Date and before the full prepayment of the Notes. As used in this
Section 2.13, the terms "employee benefit plan" and "party in interest" have
the meanings specified in section 3 of ERISA, and "affiliate" and "employer
security" have the meanings specified in Section V(a)(1) of Prohibited
Transaction Exemption 95-60, published at 60 FR 35925, July 12, 1995, provided,
however, that the term "affiliate" shall not include any individual Person.
Section 2.14. Tax Liability. The Company, its Subsidiaries and, to the
best knowledge and belief of the Company, the Papetti Companies have filed all
tax returns which are required to be filed and have paid (i) all taxes which
have become due pursuant to such returns, and (ii) all taxes, assessments, fees
and other governmental charges upon the Company, its Subsidiaries and the
Papetti Companies, or upon their respective properties, assets, income and
franchises which have become due and payable by the Company, its Subsidiaries
and the Papetti Companies (except those wherein the amount, applicability or
validity are being contested by the Company, or any of its Subsidiaries or any
of the Papetti Companies by appropriate proceedings in good faith and in
respect of which adequate reserves have been established). In the opinion of
the Company, all tax liabilities of the Company, its Subsidiaries and the
Papetti Companies are adequately provided for on the books of the Company, its
Subsidiaries and the Papetti Companies.
Section 2.15. Regulation G; Use of Proceeds; Hart-Scott Rodino. The
proceeds from the issuance of the Notes will be used by the Company to finance
the cash portion of the acquisition of the Papetti Companies, to prepay
Indebtedness of the Company and Indebtedness to be assumed in the acquisition
of the Papetti Companies, to prepay all or a portion of the Indebtedness of
North Star Universal, Inc., a Minnesota corporation ("NSU") in
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connection with the Pending Reorganization, and for general corporate
expenditures. None of such proceeds will be used, directly or indirectly, for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulation G (12 C.F.R., Chapter II, Part 207) of the Board of Governors of the
Federal Reserve System (herein called "margin stock") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of said Regulation G.
Neither the Company nor any agent acting on its behalf has taken or will take
any action which might cause the transaction contemplated herein to violate
said Regulation G, Regulation T (12 C.F.R., Chapter II, Part 220) or Regulation
X (12 C.F.R., Chapter II, Part 224) or to violate any provision of the
Securities Exchange Act of 1934, regulating the Company's use of proceeds from
the issuance of the Notes. The Company has made all filings, if any, required
to be made under, and has no reason to believe that the acquisition of the
Papetti Companies will be in violation of, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
Section 2.16. Investment Company Act. The Company is not an "investment
company," or a Person "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
Section 2.17. Governmental Action. No action of, or filing with, any
governmental or public body or authority is required to authorize, or is
otherwise required in connection with, the execution, delivery and (except for
such filings as may be required in connection with the acquisition of the
Papetti Companies) performance of the Agreements or the Notes by the Company.
Section 2.18. Environmental Matters. To the best of the Company's
knowledge and belief, the Company, its Subsidiaries and the Papetti Companies
have complied in all material respects with all Federal, state, local and other
statutes, ordinances, orders, judgments, rulings and regulations relating to
environmental pollution or to environmental regulation or control and neither
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the Company, nor any Subsidiary, nor any of the Papetti Companies has received
notice of any failure so to comply which alone or together with any other such
failure could result in a material and adverse effect on the business,
operations, properties, prospects, assets or condition, financial or other, of
the Company, its Subsidiaries and the Papetti Companies, taken as a whole. To
the best knowledge and belief of the Company, the Company's, the Subsidiaries'
and the Papetti Companies' plants do not manage any hazardous wastes, hazardous
substances, hazardous materials, toxic substances or toxic pollutants, as those
terms are used in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act or the
Clean Water Act, in violation of any regulation promulgated thereunder or in
any other applicable law where such violation would result, individually or
together with other violations in a material and adverse effect on the
business, operations, properties, prospects, assets or condition, financial or
other, of the Company, its Subsidiaries and the Papetti Companies, taken as a
whole.
Section 2.19. Disclosure. Neither this Agreement, nor any of the Exhibits
hereto, nor the Memorandum (exclusive of Appendix G and the provisions of
Section III which constitute opinions, forecasts or forward looking
information, as to which the Company makes no representation or warranty) or
any other certificate or other data furnished to you in writing by or on behalf
of the Company in connection with the transactions contemplated by this
Agreement, when taken as a whole, contains any untrue statement of a material
fact or omits a material fact necessary to make the statements contained herein
or therein not misleading. There is no fact now known to the Company which
materially and adversely affects or in the future may (so far as the Company
can now reasonably foresee) materially and adversely affect the business,
operations, properties, prospects, assets or condition, financial or other, of
the Company, its Subsidiaries and the Papetti Companies, taken as a whole,
which has not been disclosed to you.
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Section 2.20. Offering of Notes. Neither the Company nor any agent acting
in its behalf has, either directly or indirectly, sold or offered for sale or
disposed of, or attempted or offered to dispose of, the Notes or any part
thereof, or any similar obligation of the Company, to, or has solicited any
offers to buy any thereof from, or has otherwise approached or negotiated in
respect thereof with, any Person or Persons other than the Lenders and not more
than 69 other Persons, all of whom were institutional investors; and the
Company agrees that, for a period of one year after the Closing Date, neither
it nor any agent acting on its behalf and pursuant to instructions received
from the Company, will sell or offer for sale or dispose of, or attempt or
offer to dispose of, any thereof to, or solicit any offers to buy any thereof
from, or otherwise approach or negotiate in respect thereof with, any Person or
Persons so as thereby to bring the issuance or delivery of the Notes within the
provisions of Section 5 of the Securities Act of 1933, as amended.
Section 2.21. Priority of Notes. The obligations of the Company under the
Notes, when issued, will rank at least pari passu with all other unsecured,
unsubordinated Current Indebtedness and Funded Indebtedness of the Company.
SECTION 3. CONDITIONS OF THE LOANS.
Your obligation to make your loan, as provided in Section 1.2, on the
Closing Date shall be subject to the performance by the Company of all its
agreements theretofore to be performed hereunder, to the accuracy of its
representations and warranties herein contained and to the satisfaction, prior
thereto or concurrently therewith, of the following further conditions:
Section 3.1. Opinion of Company Counsel. You shall have received on the
Closing Date from Maun & Simon, PLC, special counsel for the Company (who may
rely on (i) the opinion of local counsel as to matters of state laws other than
the laws of the State of Minnesota, and the general business corporation laws
of the State of Delaware and (ii) the opinion of O'Connor, Morss &
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O'Connor as to matters concerning the Papetti Companies), a favorable opinion,
dated the Closing Date and in form and substance satisfactory to you,
substantially to the effect that:
(i) the Company is a duly incorporated and validly existing
corporation in good standing under the laws of the State of Delaware and
has the corporate power and authority to own its property and assets and
to carry on its business as presently conducted and to enter into the
Agreements and perform its obligations as contemplated thereby;
(ii) each of the Company's Subsidiaries set forth in Exhibit C
hereto and each of the Papetti Companies which is organized as a
corporation is a duly incorporated and validly existing corporation in
good standing under the laws of the jurisdiction of its incorporation and
has the corporate power and authority to own its property and assets and
to carry on its business as presently conducted;
(iii) the Agreements have been duly authorized, executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms
(except as enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and by general
principles of equity and except that no opinion need be expressed as to
the availability to the holders of the Notes of equitable remedies); and
that no consent of shareholders is required for the execution and
delivery of the Agreements or the Notes;
(iv) the Notes delivered by the Company on the Closing Date have
been duly authorized, executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms (except as enforceability may
be limited by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and by general principles of equity and
except that no opinion need be expressed as to
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the availability to the holders of the Notes of equitable remedies);
(v) it is not necessary, in connection with the offering, issuance
and delivery of the Notes under the circumstances contemplated by the
Agreements, to register the Notes under the Securities Act of 1933, as
presently in effect, or to qualify an indenture in respect of the Notes
under the Trust Indenture Act of 1939, as presently in effect;
(vi) no action of, or filing with, any governmental or public body
or authority is required to authorize, or is otherwise required in
connection with, the execution, delivery and (except for such filings as
may be required in connection with the acquisition of the Papetti
Companies) performance of the Agreements or the Notes by the Company;
(vii) the Company, each of its Subsidiaries, and each of the Papetti
Companies which is organized as a corporation is, to the best of such
counsel's knowledge, duly qualified and in good standing as a foreign
corporation in each jurisdiction wherein the nature of the property owned
or leased by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure so to qualify would not
have a material and adverse effect on the business, operations,
properties, prospects, assets or condition, financial or other, of the
Company, its Subsidiaries and the Papetti Companies, taken as a whole;
(viii) all of the outstanding shares of capital stock of all classes
of the Subsidiaries listed in Exhibit C hereto as owned by the Company or
a Subsidiary are so owned free of any Liens, and all such shares are
validly issued;
(ix) there are, to the best knowledge of such counsel (having made
inquiry of management with respect thereto) and except as set forth in
Exhibit D hereto, no actions, suits or proceedings (whether or not
purportedly on behalf of the Company, any of its Subsidiaries or any of
the Papetti
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Companies) pending or threatened against or affecting the Company, any
of its Subsidiaries, or any of the Papetti Companies at law or in equity
or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, which involve
any of the transactions contemplated by the Agreements or the likelihood
of any material and adverse change in the business, operations,
properties, prospects, assets or condition, financial or other, of the
Company, its Subsidiaries and the Papetti Companies, taken as a whole;
and, to the best knowledge of such counsel (having made inquiry of
management with respect thereto), neither the Company, nor any
Subsidiary, nor any of the Papetti Companies is in default or violation
of any law or any judgment, order, writ, injunction, decree or award or
in violation of any statute, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, which default or violation involves the likelihood of any
material and adverse change in the business, operations, properties,
prospects, assets or condition, financial or other, of the Company, its
Subsidiaries and the Papetti Companies, taken as a whole; and
(x) neither the execution and delivery of the Agreements by the
Company, the performance by the Company of its obligations thereunder nor
compliance by the Company with the terms, conditions and provisions
thereof will violate any order, injunction or decree of any court or
other governmental body to which the Company is a party or by which it is
bound, or conflict with or result in a breach of any of the terms,
conditions or provisions of the corporate charter or by-laws of the
Company or any agreement or instrument, known to such counsel, to which
the Company is a party or by which the Company is bound, or constitute a
default thereunder, or result in the creation or imposition of any Lien
of any nature whatsoever upon any of the properties or assets of the
Company;
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and as to such other matters incident to the transactions contemplated by this
Agreement as you may reasonably request.
Section 3.2. Opinion of Lenders' Special Counsel. You shall have received
on the Closing Date from Chapman and Cutler, special counsel to the Lenders, a
favorable opinion, dated the Closing Date and in form and substance
satisfactory to you, substantially to the effect that:
(i) The Company is a corporation, validly existing and in good
standing under the laws of the State of Delaware, has the corporate power
and the corporate authority to execute and deliver the Agreements and to
issue the Notes.
(ii) The Agreements have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding
contracts of the Company enforceable in accordance with their terms
(except that no opinion need be expressed as to the availability to the
holders of the Notes of equitable remedies), subject to bankruptcy,
insolvency and 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).
(iii) The Notes have been duly authorized by all necessary corporate
action on the part of the Company, and the Notes being delivered on the
date hereof have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms (except that no opinion need
be expressed as to the availability to the holders of the Notes of
equitable remedies), subject to bankruptcy, insolvency 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).
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(iv) The issuance and delivery of the Notes under the circumstances
contemplated by the Agreements does not, under existing law, require the
registration of the Notes under the Securities Act of 1933, as amended,
or the qualification of an indenture under the Trust Indenture Act of
1939, as amended;
and as to such other matters incident to the transactions contemplated by this
Agreement as you may reasonably request.
The opinion of Chapman and Cutler shall also state that the opinion of
Maun & Simon, PLC is satisfactory in scope and form to Chapman and Cutler and
that, in their opinion, the Lenders are justified in relying thereon.
In rendering the opinion set forth in paragraph (i) above, Chapman and
Cutler may rely solely upon an examination of the Certificate of Incorporation
certified by, and a certificate of good standing of the Company from, the
Secretary of State of the State of Delaware, the By-laws of the Company and the
general business corporation law of the State of Delaware. With respect to
matters of fact upon which such opinion is based, Chapman and Cutler may rely
on appropriate certificates of public officials and officers of the Company and
upon representatives of the Company and the Lenders delivered in connection
with the issuance and delivery of the Notes. With respect to matters of
Minnesota law covered by such opinion, Chapman and Cutler may rely upon the
opinion of Maun & Simon, PLC described in Section 3.1 hereof.
Section 3.3. Closing Certificate. On the Closing Date you shall have
received a certificate dated the Closing Date, signed by the President or a
Vice President of the Company, the truth and accuracy of which shall be a
condition to your obligation to purchase the Notes proposed to be sold to you
and to the effect that (i) the representations and warranties of the Company
set forth in Section 2 hereof are true and correct on and with respect to the
Closing Date, (ii) all of the filings and other conditions precedent (other
than the payment of the purchase price and any filings which, in accordance
with standard practice, are to be made subsequent to the closing of such
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transaction) to the completion of the acquisition, by the Company or a
Subsidiary, of the Papetti Companies have been satisfied, (iii) the Company has
performed all of its obligations hereunder which are to be performed on or
prior to the Closing Date, and (iv) no Event of Default or event which, with
the passage of time or the giving of notice, or both, would constitute an Event
of Default has occurred and is continuing.
Section 3.4. Legality. On the Closing Date you shall have satisfied
yourself that your acquisition of Notes shall be permitted by the laws and
regulations of each jurisdiction to which you are subject, (without resort to
any provision, such as Section 1405(a)(8) of the New York Insurance Law,
permitting limited investments by you without restriction as to the character
of the particular investment) and such acquisition shall not subject you to any
penalty or other onerous condition under or pursuant to any applicable law or
governmental regulation. If requested by you, you shall have received from the
Company such information as you may reasonably specify in order to enable you
to determine whether such acquisition is so permitted.
Section 3.5. Related Transactions. The Company shall have concurrently
consummated all of the loans scheduled to be made on the Closing Date pursuant
to the Agreements.
Section 3.6. Payment of Lenders' Special Counsel Fees. To the extent
reflected in a statement of the Lenders' special counsel rendered at least one
Business Day prior to the Closing Date, the Company shall have paid the
reasonable fees and disbursements of such special counsel incurred in
connection with the negotiation of this Agreement and the closing of the
transactions contemplated hereby.
Section 3.7. Proceedings. All proceedings to be taken in connection with
the transactions contemplated by the Agreements, and all documents incidental
thereto, shall be satisfactory in form and substance to you and your special
counsel; and you and your special counsel shall have received copies of all
documents which you may reasonably request in connection with said
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transactions and copies of the records of all corporate proceedings in
connection therewith, all in form and substance satisfactory to you and such
special counsel.
SECTION 4. REPRESENTATIONS OF LENDERS.
Section 4.1. You represent, and in entering into this Agreement the
Company understands, that you are acquiring the Notes for the purpose of
investment and not with a view to, or in connection with, the distribution
thereof (as such term is used in Section 2(11) of the Securities Act); it being
understood, however, that the disposition of your property shall at all times
be and remain within your control.
Section 4.2. You further represent that at least one of the following
statements concerning each source of funds to be used by you to provide your
loan to the Company (a "Source") is accurate on and as of the Closing Date:
(1) the Source is an "insurance company general account," as such
term is defined in the Department of Labor Prohibited Transaction Class
Exemption 95-60 (issued July 12, 1995) ("PTCE 95-60") and as of the date
of this Agreement there is no "employee benefit plan" established or
maintained by the Company (and affiliates thereof as defined in Section
V(a)(1) of PTCE 95-60) with respect to which the aggregate amount of such
general account's reserves and liabilities for the contracts held by or
on behalf of such plan exceeds 10% of the total reserves and liabilities
of such general account (as determined under PTCE 95-60) (exclusive of
separate account liabilities)) plus surplus as set forth in the National
Association of Insurance Commissioners Annual Statement filed with your
state of domicile; or
(2) the Source is either (i) an insurance company pooled separate
account, within the meaning of Department of Labor Prohibited
Transactions Exemptions ("PTE") 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38
(issued
-25-
<PAGE> 26
July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (2), no employee benefit plan or
group of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(3) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part l(c) and (g) of the QPAM Exemption are
satisfied, and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment fund
have been disclosed to the Company in writing pursuant to this paragraph
(3); or
(4) the Source is a governmental plan; or
(5) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this paragraph (5); or
(6) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA; or
(7) the Source is an insurance company pooled separate account that
is maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to an employee
benefit plan and to any participant or beneficiary of such plan
(including any
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<PAGE> 27
annuitant) are not affected in any manner by the investment performance
of the separate account.
If any Lender indicates that such Lender is relying on any representation
contained in paragraph (2), (3) or (5) above, the Company shall deliver a
certificate on the date of the Closing, which certificate shall state whether
(i) with respect to any plan identified pursuant to paragraph (2) or (5) above,
it is a "party in interest" (as defined in Title I, Section 3(14) of ERISA) or
a "disqualified person" (as defined in Section 4975(e)(2) of the Code), or (ii)
with respect to any plan identified pursuant to paragraph (3) above, it or any
"affiliate" (as defined in Section V(c) of the QPAM Exemption) has at such
time, and during the immediately preceding one year, exercised the authority to
appoint or terminate said QPAM as manager of the assets of any plan identified
in writing pursuant to paragraph (3) above or to negotiate the terms of said
QPAM's management agreement on behalf of any such identified plans.
As used in this Section 4.2 the terms "employee benefit plan,"
"governmental plan," "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
SECTION 5. FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES; ADDITIONAL
INFORMATION; INSPECTION.
Section 5.1. Financial Statements and Reports. From and after the date
hereof the Company will deliver to each Institutional Holder, in duplicate:
(a) as soon as practicable, and in any event within 60 days after
the end of each quarterly period (other than the last quarterly period)
in each fiscal year of the Company, the consolidated statement of income
of the Company and its Subsidiaries for such period and for that part of
the fiscal year ended with such quarterly period, the consolidated
statement of cash flows of the Company and its Subsidiaries for that part
of the fiscal year ended with such quarterly period and the consolidated
balance sheet of the Company and
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<PAGE> 28
its Subsidiaries as at the end of such period, setting forth in each case
in comparative form the corresponding figures as of the end of and for
the corresponding quarterly period of the preceding fiscal year (or, in
the case of the consolidated balance sheet, as of the end of and for the
then most recent fiscal year), all in reasonable detail, prepared in
conformity with generally accepted accounting principles applied on a
basis consistent with that of previous years (except as otherwise stated
therein or in the notes thereto and except that footnotes shall not be
required) and certified by the chief financial officer of the Company as
presenting fairly the financial condition and results of operations of
the Company and its Subsidiaries as at the end of and for the fiscal
periods to which they relate, subject to the Company's year end
adjustments;
(b) as soon as practicable, and in any event within 90 days after
the end of each fiscal year of the Company, the consolidated balance
sheet and related consolidated statements of income, stockholders' equity
and cash flows of the Company and its Subsidiaries as at the end of and
for such year, setting forth in each case in comparative form the
corresponding figures as at the end of and for the previous fiscal year,
all in reasonable detail, prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that of previous
years (except as otherwise stated therein or in the notes thereto) and
certified by the chief financial officer of the Company as presenting
fairly the financial condition, results of operations and cash flows of
the Company and its Subsidiaries as at the end of and for the fiscal year
to which such financial statements relate, and accompanied by a report or
opinion of independent certified public accountants of recognized
national standing selected by the Company stating that such financial
statements present fairly the consolidated financial condition, results
of operations and cash flows of the Company and its Subsidiaries in
accordance with generally accepted accounting principles consistently
applied (except for changes with which such accountants concur) and that
the
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<PAGE> 29
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards;
(c) concurrently with the financial statements delivered pursuant to
Section 5.1(b), the written statement of said accountants that in making
the examination necessary for their report or opinion on said financial
statements they have obtained no knowledge of any Event of Default or any
event which, with notice or lapse of time or both, would constitute such
an Event of Default, or, if such accountants shall have obtained
knowledge of any such Event of Default or event, they shall disclose in
such statement the Event of Default or event and the nature and status
thereof;
(d) concurrently with the financial statements delivered pursuant to
Sections 5.1(a) and 5.1(b), a certificate of the chief financial officer
of the Company (1) stating that a review of the activities of the Company
and its Subsidiaries during such fiscal period has been made under such
officer's supervision to determine whether the Company has fulfilled all
of its obligations under this Agreement and the Notes, (2) setting forth,
where applicable, the figures and computations demonstrating the
compliance by the Company with the requirements of Section 4 of the Notes
as at the end of such fiscal period; provided, that, as at the end of
each of the first three quarterly fiscal periods, the Company need only
demonstrate compliance with Sections 4.03 and 4.04, and (3) stating that,
to the best of such officer's knowledge, there exists no Event of Default
under this Agreement or under the Notes or event which, with notice or
lapse of time or both, would constitute such an Event of Default, or, if
any such Event of Default or event exists, specifying such Event of
Default or event and the nature and status thereof;
(e) as soon as practicable, copies of all financial statements,
proxy statements and reports as the Company shall send or make available
generally to its security holders and all registration statements and
regular periodic
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<PAGE> 30
reports, if any, which it or any of its Subsidiaries may file with the
Securities and Exchange Commission or any governmental agency or agencies
substituted therefor or with any national securities exchange;
(f) as soon as practicable, and in any event within three days after
a responsible officer of the Company becomes aware of the existence of an
Event of Default under the Notes or any other evidence of Indebtedness of
the Company or any of its Subsidiaries, or an event which, with notice or
lapse of time or both, would constitute such an Event of Default, written
notice specifying the nature and period of existence thereof and what
action the Company or such Subsidiary, as the case may be, is taking or
proposes to take with respect thereto;
(g) as soon as practicable, and in any event within thirty days
after the Company or any of its ERISA Affiliates knows or reasonably
should know that any of the events or conditions specified below with
respect to any Plan, as defined in Section 2.13 hereof, or Multiemployer
Plan, as defined in Section 4001(a)(3) of ERISA (as defined in Section
2.13 hereof), has occurred or exists, a statement, signed by a financial
officer of the company setting forth details respecting such event or
condition, and the action, if any, that the Company or its ERISA
Affiliate proposes to take with respect thereto and a copy of any report
or notice required to be filed with or given to the PBGC, as defined in
Section 2.13 hereof, by the Company or its ERISA Affiliate with respect
to such event or condition;
(i) any "Reportable Event," as defined in Section 4043 (b) of
ERISA with respect to a Plan or Multiemployer Plan, as to which the
PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event; provided, however, that the failure to
meet the minimum funding standard of Section 412 of the Code, as
defined in Section 2.13 hereof, or Section 302 of ERISA shall be a
Reportable Event
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<PAGE> 31
regardless of the issuance of any waivers in accordance with
Section 303 of ERISA or Section 412(d) of the Code;
(ii) the filing under Section 4041(b) or 4041(c) of ERISA by
the Company or any of its ERISA Affiliates of a notice of intent to
terminate any Plan or the termination of any Plan or the treatment
of a Plan amendment as a Plan termination under Section 4041(e) of
ERISA;
(iii) the institution by the PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or
any of its ERISA Affiliates of a notice from a Multiemployer Plan
that such action has been taken by the PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal by the Company or any
of its ERISA Affiliates under Section 4203 or 4205 of ERISA from a
Multiemployer Plan, or the receipt by the Company or any of its
ERISA Affiliates of notice from a Multiemployer Plan that such
Multiemployer Plan is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or
has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any of its ERISA
Affiliates to enforce Section 515 of ERISA, which proceeding is not
dismissed within 30 days;
(vi) any event or series of events has occurred or exists
which could reasonably be expected to result in liability to the
Company or any of its ERISA Affiliates under Title IV of ERISA
pursuant to Section 4069(a) or 4212(c) of ERISA; and
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<PAGE> 32
(vii) any statutory lien, under the Code or ERISA, shall have
been placed upon the assets of the Company or any of its ERISA
Affiliates in respect to any Plan or Multiemployer Plan;
(h) as soon as practicable, and in any event within thirty days of
receipt thereof, copies of any notice to the Company or any Subsidiary
from any Federal or state governmental authority relating to any order,
ruling, statute or other law or regulation which involves the likelihood
of any material and adverse change in the business, operations,
properties, prospects, assets or condition, financial or other, of the
Company and its Subsidiaries, taken as a whole; and
(i) such other information as to the business and properties of the
Company and of its Subsidiaries, consolidated financial statements of the
Company and its Subsidiaries and financial statements and other reports
filed by the Company or any of its Subsidiaries with any governmental
department, bureau, commission or agency, as any Institutional Holder may
from time to time reasonably request.
Section 5.2. Right to Inspect Properties, Books, Etc. From and after the
date hereof each Institutional Holder (or such Persons as such Institutional
Holder may designate) shall have the right to visit and inspect any of the
properties of the Company and its Subsidiaries, to examine the books of account
and records of the Company and its Subsidiaries, to make copies and extracts
therefrom of financial records of the Company and its Subsidiaries, to discuss
the affairs, finances, accounts and condition of the Company and its
Subsidiaries with, and to be advised as to the same by, their respective
officers, employees and independent accountants, all at such reasonable times
and intervals as such Institutional Holder may desire. The Company shall be
required to pay or reimburse any Institutional Holder for all reasonable
expenses which it may incur in connection with any such visitation or
inspection if an Event of Default shall have occurred and be continuing at the
time thereof.
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<PAGE> 33
SECTION 6. MISCELLANEOUS.
Section 6.1. Expenses. Whether or not the transactions herein
contemplated shall be consummated, the Company agrees to pay all reasonable
costs and expenses (including stamp and other taxes, if any, payable in
connection with the execution and delivery of the Agreements or the Notes and
reasonable attorney's fees of a special counsel) reasonably incurred by each
Lender in connection with such transactions and incurred by any holder of a
Note in connection with the Pending Reorganization and any amendments, waivers
or consents under or in respect of the Agreements or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending any
rights under the Agreements or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
the Agreements or the Notes, or by reason of being a holder of any Note, and
(b) the costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Subsidiary
or in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The Company shall not, in connection
with any of the matters described in this Section 6.1, be liable for the costs
and expenses of more than one separate legal firm, unless a holder of a Note
reasonably determines that its interests as a holder of Notes differs from the
interests of other holders so as to require separate legal advice. The Company
also agrees to pay, and save each holder of a Note harmless from, all claims in
respect of any fees, costs or expenses, if any, of brokers and finders (other
than any retained by a Lender). The obligations of the Company under this
Section 6.1 shall survive the transfer of any Note or portion thereof or
interest therein by any holder and the payment or prepayment of any Note.
Section 6.2. Stamp Taxes, etc. The Company will pay, and save you and any
subsequent holder of the Notes harmless against, any and all liability
(including any interest or penalty for non-payment or delay in payment) with
respect to stamp taxes (other than any such stamp taxes incurred upon a
transfer of the Notes
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<PAGE> 34
by you or any other holder of the Notes), if any, which may be payable or
determined to be payable in connection with the transactions contemplated by
the Agreements, including, without limitation, the issue and delivery of the
Notes, the acquisition thereof or any modification, amendment or alteration
thereof made at the request of the Company. The obligations of the Company
under this Section 6.2 shall survive the transfer of any Note or portion
thereof or interest therein by any holder and the payment or prepayment of any
Note.
Section 6.3. Successors and Assigns. All covenants, agreements,
representations and warranties made herein or in certificates delivered in
connection herewith by or on behalf of the Company shall survive the issue and
delivery of the Notes to you, the making of the loan by you as provided in
Section 1.2 and payment therefor, and shall bind the successors and assigns of
the Company, whether so expressed or not, and all such covenants, agreements,
representations and warranties shall inure to the benefit of your successors
and assigns, including any subsequent holder of any of the Notes.
Section 6.4. Direct Payment. Notwithstanding anything to the contrary
contained in the Agreements or the Notes, in the case of any Note owned by any
holder that is a Lender or owned by any other Institutional Holder which has
given written notice to the Company requesting that the provisions of this
Section 6.4 shall apply, the Company will punctually pay when due and payable
the principal amount thereof then to be prepaid, interest thereon and premium,
if any, due with respect to said principal, without any presentment thereof,
directly to such holder at its address set forth in Schedule I hereto or such
other address as such holder may from time to time designate in writing to the
Company or, if a bank account with a United States bank is set forth in
Schedule I hereto or so designated, the Company will make such payments in
immediately available funds to such bank account, marked for attention as
indicated, or in such other manner or to such other account in any bank in the
United States as such holder may from time to time direct in writing. With
respect to any Notes to which this Section 6.4 applies, the Company shall be
entitled to presume conclusively that any Lender or any
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<PAGE> 35
Institutional Holder which has requested the provisions of this Section 6.4 to
apply to its Notes remains the holder of such Notes until such Notes shall have
been presented to the Company as evidence of the transfer thereof. Prior to
any sale or other disposition of any Note to which this Section 6.4 applies,
the holder thereof shall make a notation thereon of the aggregate amount of all
payments of principal, if any, theretofore made and of the date to which
interest has been paid. If requested by the Company, the holder of any Note
which has been paid in full shall promptly return such Note to the Company for
cancellation.
Section 6.5. Notices. All communications provided for hereunder shall be
in writing and, if to a holder of a Note, delivered by overnight air courier,
or by facsimile communication confirmed by overnight air courier, in each case
addressed to such holder at its address set forth on Schedule I hereto or such
other address as any holder may designate to the Company in writing, and, if to
the Company, delivered by overnight air courier, or by facsimile communication
confirmed by overnight air courier, to the Company at 324 Park National Bank
Building 5353 Wayzata Blvd., Minneapolis, Minnesota 55416, Attention: Vice
President-Finance, or to such other address as the Company may in writing
designate to the holders.
Section 6.6. Defined Terms. The terms used herein and in certificates
delivered pursuant hereto shall have the meanings assigned thereto in Exhibit A
hereto, unless otherwise defined herein.
Section 6.7. Pending Reorganization. By your acceptance hereof you shall
be deemed to have agreed to enter into an agreement substantially in the form
of the Novation and Assumption Agreement (the "Assumption Agreement") attached
hereto as Exhibit E; provided that such Assumption Agreement shall become
effective only upon the receipt by you of a favorable opinion of Maun & Simon,
PLC, dated the Effective Date of the Michael Reorganization (as such terms are
used in the Assumption Agreement) and in form and substance satisfactory to you
substantially to the effect that:
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<PAGE> 36
(i) New Michael (as defined in the Assumption Agreement) is a duly
incorporated and validly existing corporation in good standing under the
laws of the State of Minnesota and has the corporate power and authority
to own its property and assets and to carry on its business as presently
conducted and to enter into the Assumption Agreement and perform its
obligations as contemplated therein;
(ii) the Assumption Agreement has been duly authorized, executed and
delivered by New Michael and constitutes the legal, valid and binding
obligation of New Michael enforceable in accordance with its terms
(except as enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and by general
principles of equity); and that no consent of shareholders is required
for the execution and delivery of the Assumption Agreements;
(iii) no action of, or filing with, any governmental or public body
or authority is required to authorize, or is otherwise required in
connection with, the execution, delivery and (except for such filings as
may be required in connection with the Pending Reorganization)
performance of the Assumption Agreement by New Michael;
(iv) New Michael is, to the best of such counsel's knowledge, duly
qualified and in good standing as a foreign corporation in each
jurisdiction wherein the nature of the property owned or leased by it or
the nature of the business transacted by it makes such qualification
necessary, except where the failure so to qualify would not have a
material and adverse effect on the business, operations, properties,
prospects, assets or condition, financial or other, of New Michael and
its Subsidiaries taken as a whole;
(v) neither the execution and delivery of the Assumption Agreement
by New Michael, the performance by New Michael of its obligations
thereunder nor compliance by New Michael with the terms, conditions and
provisions thereof
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<PAGE> 37
will violate any order, injunction or decree of any court or other
governmental body to which New Michael is a party or by which it is
bound, or conflict with or result in a breach of any of the terms,
conditions or provisions of the corporate charter or by-laws of New
Michael or any agreement or instrument, known to such counsel, to which
New Michael is a party or by which New Michael is bound, or constitute a
default thereunder, or result in the creation or imposition of any Lien
of any nature whatsoever upon any of the properties or assets of New
Michael;
and as to such other matters incident to the transactions contemplated by the
Pending Reorganization as you may reasonably request.
Section 6.8. Confidential Information. For the purposes of this Section
6.8, "Confidential Information" means information delivered to you by or on
behalf of the Company or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled or otherwise adequately
identified in writing when received by you as being confidential information of
the Company or such Subsidiary, provided that such term does not include
information that (a) was publicly known or otherwise known to you prior to the
time of such disclosure, (b) subsequently becomes publicly known through no act
or omission by you or any person acting on your behalf, (c) otherwise becomes
known to you other than through disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to you under Section 5.1 hereof
that are otherwise publicly available. You will maintain the confidentiality
of such Confidential Information in accordance with procedures adopted by you
in good faith to protect confidential information of third parties delivered to
you, provided that you may deliver or disclose Confidential Information to (i)
your directors, trustees, officers, employees, agents, attorneys and affiliates
(to the extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and other
professional advisors who agree to hold confidential the
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<PAGE> 38
Confidential Information substantially in accordance with the terms of this
Section 6.8, (iii) any other holder of any Note, (iv) any institutional
investor to which you sell or offer to sell such Note or any part thereof or
any participation therein (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 6.8), (v) any Person from which you offer to purchase any security of
the Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 6.8),
(vi) any Federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access
to information about your investment portfolio or (viii) any other Person to
which such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 6.8 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions
of this Section 6.8.
Section 6.9. Law Governing. This Agreement shall be construed in
accordance with and governed by laws of the State of Minnesota.
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<PAGE> 39
Section 6.10. Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part of this Agreement.
Section 6.11. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
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<PAGE> 40
If the foregoing is satisfactory to you, please sign the form of
acceptance on the enclosed counterpart of this letter agreement and forward the
same to the Company, whereupon this letter agreement will become a binding
agreement between you and the Company as of the date first above written.
Yours very truly,
MICHAEL FOODS, INC.
By
Its
The foregoing agreement is
hereby accepted as of the
date first above written.
[VARIATION]
By___________________________________
Its
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<PAGE> 41
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
METROPOLITAN LIFE INSURANCE COMPANY $20,000,000
P.O. Box 633
334 Madison Avenue
Convent Station, New Jersey 07961-0633
Attention: Private Placement Unit
Telecopier Number: (201) 254-3050
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
The Chase Manhattan Bank
(ABA #021000021)
Metropolitan Branch
33 East 23rd Street
New York, New York 10010
for credit to: Metropolitan Life
Insurance Company--Corporate
Investments
Account Number 002-2-410591
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above
with duplicate notice to:
SCHEDULE I
(to Loan Agreement)
<PAGE> 42
Metropolitan Life Insurance Company
Fixed Income Investments
334 Madison Avenue, P.O. Box 633
Convent Station, New Jersey
07961-0633
Attention: Private Placement Unit
Telecopier Number: (201) 254-3050
Name of Nominee in which Notes are to be issued:
None
Taxpayer I.D. Number: 13-5581829
I-42
<PAGE> 43
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
THE LINCOLN NATIONAL LIFE $3,125,000 (UNA)
INSURANCE COMPANY $3,125,000 (IAL)
c/o Lincoln Investment Management, Inc. $2,125,000 (REO)
200 East Berry Street
Renaissance Square
Fort Wayne, Indiana 46802
Attention: Investments/Private Placements
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company
ABA #021001033
Private Placement Processing
New York, New York
Account Number 99-911-145
for the account of: The Lincoln
National Life Insurance Company (UNA)
Custody Account Number 98437
for the account of: The Lincoln
National Life Insurance Company (IAL)
Custody Account Number 98194
I-43
<PAGE> 44
for the account of: The Lincoln
National Life Insurance Company (REO)
Custody Account Number 98149
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above
with duplicate notices with respect to
payments to:
Bankers Trust Company
P. O. Box 998
Bowling Green Station
New York, New York 10274
Attention: Private Placement Unit
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 35-0472300
I-44
<PAGE> 45
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
LINCOLN LIFE & ANNUITY COMPANY $375,000
OF NEW YORK
c/o Lincoln Investment Management, Inc.
200 East Berry Street
Renaissance Square
Fort Wayne, Indiana 46802
Attention: Investments/Private Placements
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company
ABA #021001033
Private Placement Processing
New York, New York
Account Number 99-911-145
for the account of: Lincoln Life &
Annuity Company of New York
Custody Account Number 98269
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed
I-45
<PAGE> 46
as first provided above
with duplicate notices with respect to
payments to:
Bankers Trust Company
P. O. Box 998
Bowling Green Station
New York, New York 10274
Attention: Private Placement Unit
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 16-1505436
I-46
<PAGE> 47
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
SECURITY-CONNECTICUT LIFE $625,000
INSURANCE COMPANY
c/o Lincoln Investment Management, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attention: Investments--Private Placements
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Chase Manhattan Bank
New York, NY
ABA Routing #021-000-021
Beneficiary A/C: 544755102
Further Credit: Sec.-Conn. Life Ins.
Co.
A/C #02500084010
Notices
All notices of payment on or in respect of
the Notes and written confirmation of each
such payment to:
I-47
<PAGE> 48
Security-Connecticut Life Insurance
Company
20 Security Drive
Avon, CT 06001
Attention: Jodi Dean
and
Sigler & Co
c/o Chase Manhattan Bank
Dept. #3492
P.O. Box 50000
Newark, NJ 07101-8006
All notices and communications other than
those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued:
SIGLER & CO
Taxpayer I.D. Number: 35-1468921
I-48
<PAGE> 49
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
FEDERAL WARRANTY SERVICE CORPORATION $625,000
c/o Lincoln Investment Management, Inc.
200 East Berry Street
Renaissance Square
Fort Wayne, Indiana 46802
Attention: Investments/Private Placements
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Chase Manhattan Bank
New York, NY
ABA #021 000 021
Attn: Investment Dept.
for the account of: Federal Warranty
Service Corp.
A/C #N7631139
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above
with duplicate notices with respect to
payments to:
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<PAGE> 50
American Bankers Insurance Group
for A/C: Federal Warranty Service
Corporation
11222 Quail Roost Drive
Miami, FL 33157
Attn: Investment Department
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 36-3596362
I-50
<PAGE> 51
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
THE NORTHWESTERN MUTUAL LIFE $10,000,000
INSURANCE COMPANY
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telecopier Number: (414) 299-7124
Payments
All Payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company (ABA #0210-01033)
16 Wall Street
Insurance Unit, 4th Floor
New York, New York 10005
for credit to: The Northwestern Mutual
Life Insurance Company
Account Number 00-000-027
Notices
All notices and communications to be
addressed as first provided above, except
notices with respect to payments and
written confirmation of each such payment
to be addressed,
I-51
<PAGE> 52
Attention: Public Markets
Department, Investment Operations,
FAX: (414) 299-5714.
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 39-0509570
I-52
<PAGE> 53
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
SUNAMERICA LIFE INSURANCE COMPANY $5,000,000
c/o SunAmerica Inc.
1 SunAmerica Center
Los Angeles, California 90067-6022
Attention: Investment Accounting 36-05
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company
ABA #021-001-033
New York, New York
Account Number 99-911-145
FFC: A/C 099530
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above.
Name of Nominee in which Notes are to be
issued: OKGBD & CO.
Taxpayer I.D. Number for SunAamerica: 52-0502540
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<PAGE> 54
Taxpayer I.D. Number for OKGBD & CO.: 22-2933761
I-54
<PAGE> 55
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
ANCHOR NATIONAL LIFE INSURANCE COMPANY $3,000,000
c/o SunAmerica Inc.
1 SunAmerica Center
Los Angeles, California 90067-6022
Attention: Investment Accounting 36-05
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company
ABA #021-001-033
New York, New York
Account Number 99-911-145
FFC: A/C 099527
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above.
Name of Nominee in which Notes are to be
issued: OKGBD & CO.
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<PAGE> 56
Taxpayer I.D. Number for Anchor National: 86-0198983
Taxpayer I.D. Number for OKGBD & CO.: 13-3020293
I-56
<PAGE> 57
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
CAL FARM LIFE INSURANCE COMPANY $1,000,000
c/o SunAmerica Inc.
1 SunAmerica Center
Los Angeles, California 90067-6022
Attention: Investment Accounting 36-05
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company
ABA #021-001-033
New York, New York
Account Number 99-911-145
FFC: A/C 099545
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above.
Name of Nominee in which notes are to be
issued: OKGBD & CO.
Taxpayer I.D. Number for Cal Farm: 94-1190655
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<PAGE> 58
Taxpayer I.D. Number for OKGBD & Co.: 22-2933761
I-58
<PAGE> 59
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
FIRST SUNAMERICA LIFE INSURANCE COMPANY $1,000,000
c/o SunAmerica Inc.
1 SunAmerica Center
Los Angeles, California 90067-6022
Attention: Investment Accounting 36-05
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company
ABA #021-001-033
New York, New York
Account Number 99-911-145
FFC: A/C 099537
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above.
Name of Nominee in which Notes are to be
issued: OKGBD & Co.
Taxpayer I.D. Number for First SunAamerica: 06-0992729
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<PAGE> 60
Taxpayer I.D. Number for OKGBD & Co.: 22-2933761
I-60
<PAGE> 61
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
USAA CASUALTY INSURANCE COMPANY $10,000,000
USAA IMCO
USAA Building BKD04N
9800 Fredericksburg Road
San Antonio, Texas 78288
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael Foods,
Inc., 7.58% Senior Notes due February 26,
2009, PPN 594074 B* 6, principal or
interest") to:
Bankers Trust Company/USAA
(ABA #021001033)
Private Placement Processing
AC #99 911 145
for credit to: USAA Casualty
Insurance Company
Account Number 99731
Notices
All notices with respect to payments and
written confirmation of each such payment,
to be addressed to:
USAA Casualty Insurance Company
c/o Asset Accounting
USAA Building, B1W
9800 Fredericksburg Road
San Antonio, Texas 78288
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<PAGE> 62
All other communications:
Insurance Company Portfolios
USAA IMCO
USAA Building BKD04N
9800 Fredericksburg Road
San Antonio, Texas 78288
Name of Nominee in which Notes are to be
issued: SALKELD & CO.
Taxpayer I.D. Number 59-3019540
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<PAGE> 63
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY $7,500,000
c/o American General Corporation
P. O. Box 3247
Houston, Texas 77253-3247
Attention: Investment Research Department, A37-01
Facsimile Number: (713) 831-1366
Overnight Mailing Address:
2929 Allen Parkway
Houston, Texas 77019-2155
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest or premium, if any")
to:
State Street Bank and Trust Company
ABA #011000028
Boston, Massachusetts 02101
Re: The Variable Annuity Life
Insurance Company
AC-0125-821-9
OBI=PPN Number and description
of payment
Fund Number PA 54
Notices
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<PAGE> 64
All notices of payment on or in respect of
the notes and written confirmation of each
such payment to:
The Variable Annuity Life
Insurance Company and PA 54
c/o State Street Bank and Trust
Company
Insurance Services Custody (AH2)
1776 Heritage Drive
North Quincy, Massachusetts 02171
Facsimile Number: (617) 985-4923
Duplicate payment notices and all other
correspondences to be addressed as first
provided above.
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 74-1625348
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<PAGE> 65
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
JOHN HANCOCK MUTUAL LIFE $4,500,000
INSURANCE COMPANY $3,000,000
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
The First National Bank of
Boston (ABA #011000390)
Boston, Massachusetts 02110
For the account of: John Hancock Mutual
Life Insurance Company
Private Placement Collection Account
Account Number 541-55417
On Order of: [Name of Issuer and PPN Number]
Notices
Contemporaneous with the above wire
transfer, advice setting forth (1) the full
name, interest rate and maturity date of
the notes or other
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<PAGE> 66
obligations; (2) allocation of payment
between principal and interest and any
special payment; and (3) name and address
of bank (or trustee) from which wire transfer
was sent, shall be delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting
Division T-10
All notices with respect to prepayments,
both scheduled and unscheduled, whether
partial or in full, and notice of maturity
shall be delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting
Division T-10
All other communications which shall
include, but not be limited to, financial
statements and certificates of compliance
with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
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<PAGE> 67
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate
Finance Department, T-57
Name of Nominee in which Notes are to be
issued: John Hancock Mutual Life Insurance
Company
Taxpayer I.D. Number: 04-1414660
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<PAGE> 68
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
MASSACHUSETTS MUTUAL LIFE INSURANCE $5,000,000
COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Ms. Kathleen Lynch
Securities Investment Division
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA #021000089
For MassMutual Long Term Pool
Account No. 4067-3488
Re: Description of security,
principal and interest split
with telephone advice to the Securities
Custody and Collection Department of
Massachusetts Mutual Life Insurance Company
at (413) 744-3878.
Notices
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<PAGE> 69
All notices and communications to be
addressed as first provided above, except
notices with respect to payments, to be
addressed to attention: Securities Custody
and Collection Department, F 381.
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 04-1590850
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<PAGE> 70
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
MASSACHUSETTS MUTUAL LIFE INSURANCE $2,500,000
COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Ms. Kathleen Lynch
Securities Investment Division
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Chase Manhattan Bank
4 Chase MetroTech Center
New York, New York 10081
ABA #021000021
For MassMutual Pension Management
Account No. 910-2594018
Re: Description of security, principal
and interest split
with telephone advice to the Securities
Custody and Collection Department of
Massachusetts Mutual Life Insurance Company
at (413) 744-3878.
Notices
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<PAGE> 71
All notices and communications to be
addressed as first provided above, except
notices with respect to payments, to be
addressed attention: Securities Custody
and Collection Department, F 381.
Name of Nominee in which Notes are to be
issued: None
TAXPAYER I.D. NUMBER: 04-1590850
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<PAGE> 72
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY $5,000,000
c/o American Express Financial Corporation
3000 IDS Tower
Minneapolis, Minnesota 55440
Attention: Director - Senior Securities Research, Research Department
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Norwest Bank Minneapolis, N.A.
(ABA #091 000 019)
7th and Marquette Avenue
Minneapolis, Minnesota 55480
for credit to: American Express
Trust Co.
Account Number 00-38-500 for the
benefit of: WRAP TWO & CO.
Notices
All notices of payment, on or in respect of
the notes and written confirmation of each
such payment to:
WRAP TWO & CO.
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<PAGE> 73
c/o American Express Trust Co. NW-9744
P.O. Box 1450
Minneapolis, Minnesota 55485
All notices and communications other than
those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be
issued: WRAP TWO & CO.
Taxpayer I.D. Number: 94-2786905
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<PAGE> 74
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
LUTHERAN BROTHERHOOD $5,000,000
625 Fourth Avenue South, 10th Floor
Minneapolis, Minnesota 55415
Attention: Investment Division/Trading Administrator
Payments
All payments on or in respect of the notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes Due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Norwest Bank Minnesota
ABA: 091000019
Trust Clearing Account #08-40-245
Attention: Income Collection
For credit to: Lutheran Brotherhood
Account Number 12651300
All income payments must include the
following information:
A/C Lutheran Brotherhood
Account No.: 12561300
Security Description
PPN 594074 B* 6
Reference Purpose of Payment
Interest and/or Principal Breakdown
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<PAGE> 75
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above.
Name of Nominee in which notes are to be
issued: None
Taxpayer I.D. Number: 41-0385700
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<PAGE> 76
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
THE LUTHERAN CHURCH-MISSOURI
SYNOD FOUNDATION $5,000,000
1333 S. Kirkwood Road
St. Louis, Missouri 63122-7295
Telephone Number: 314-965-9917 x-1456
Facsimile Number: 314-965-2656
Attention: Mr. Fred Sticht
Vice President, Treasury & Investments
Payments
All payments on or in respect OF the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bankers Trust Company
New York, New York
ABA #021001033
for credit to: Boatmen's Trust Company
Account #92558
Ref: A/C #55587-000
Notices
All notices and communications to be
addressed as first provided above, except
notices with respect to payments and
written confirmation of such payment, to be
addressed:
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<PAGE> 77
The LCMS Foundation
Attn: Mary Boyer, Trust & Investments
1333 South Kirkwood Road
St. Louis, MO 63122-7295
Name of Nominee in which Notes are to be
issued: AUER & Co.
Taxpayer I.D. Number for LCMS Foundation: 43-6034481
Taxpayer I.D. Number for Auer & Co.: 13-6064419
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<PAGE> 78
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
EMPLOYERS LIFE INSURANCE COMPANY $3,000,000
OF WAUSAU
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Bank of New York
ABA #021-000-018
BNF: IOC566
F/A/O Employers Life Custody
A/C #267827
Attention: P&I Department
Notices
All notices on or in respect of the notes
and written confirmation of each such
payment to:
Ms. Cindy Peterson
Employers Life Insurance
Company of Wausau
2000 Westwood Drive
Wausau, Wisconsin 54401
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<PAGE> 79
All notices and communications other than
those in respect to payments to be addressed
to:
Employers Life Insurance Company of Wausau
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed--Income Securities
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 39-1049873
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<PAGE> 80
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
NATIONWIDE LIFE INSURANCE COMPANY $1,000,000
SEPARATE ACCOUNT OH
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, INC., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
The Bank of New York
ABA #021-000-018
BNF: IOC566
F/A/O Nationwide Life Insurance
Co. - S/A OH
Attention: P&I Department
Notices
All notices of payment on or in respect of
the notes and written confirmation of each
such payment to:
Nationwide Life Insurance Company-S/A OH
c/o The Bank of New York
P. O. Box 19266
Attention: P&I Department
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<PAGE> 81
Newark, New Jersey 07195
With a copy to:
Nationwide Life Insurance Company-S/A OH
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
Attention: Investment Accounting
All notices and communications other than
those in respect to payments to be
addressed:
Nationwide Life Insurance Company Separate Account OH
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
Name of Nominee in which Notes are to be
issued: NONE
Taxpayer I.D. Number: 31-4156830
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<PAGE> 82
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
NATIONWIDE LIFE INSURANCE COMPANY $1,000,000
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
The Bank of New York
ABA #021-000-018
BNF: IOC566
F/A/O Nationwide Life Insurance Company
Attention: P&I Department
Notices
All notices of payment on or in respect of
the Notes and written confirmation of each
such payment to:
Nationwide Life Insurance Company
c/o The Bank of New York
P. O. Box 19266
Attention: P&I Department
Newark, New Jersey 07195
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<PAGE> 83
With a copy to:
Nationwide Life Insurance Company
Attention: Investment Accounting
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
All notices and communications other than
those in respect to payments to be
addressed:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 31-4156830
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<PAGE> 84
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
PACIFIC MUTUAL LIFE INSURANCE $5,000,000
COMPANY
700 Newport Center Drive
Newport Beach, California 92658-9000
Attention: Fixed Income Securities Department
Telephone: (714) 640-3379; Facsimile: (714) 640-3199
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
The Chase Manhattan Bank
ABA #021-000-021
A/C = 900-9-002206
BNF = Funds Pending - DNI/ABS
BBK = Chase Manhattan Bank/SSTO
A/C Name: General Account
A/C Number: 47363300
Regarding: Security Description and PPN
Notices
All notices and communications to be
addressed as first provided above, except
notices with respect to payments and
written confirmation of each such payment,
to be addressed:
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<PAGE> 85
Pacific Mutual Life Insurance Company
Attention: Securities Administration
P.O. Box 9000
Newport Beach, California 92658-9000
With a copy to:
The Chase Manhattan Bank
P.O. Box 456, Wall Street Station
New York, New York 10005
Name of Nominee in which Notes are to be issued: ATWELL & CO
General Taxpayer I.D. Number: 95-4229487
Private Placement Taxpayer I.D.
Number: 13-6065575
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<PAGE> 86
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
PHOENIX HOME LIFE MUTUAL $5,000,000
INSURANCE COMPANY
One American Row
Hartford, Connecticut 06115
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
Principal or Interest") to:
ABA #021 000 021
Chase Manhattan Bank
New York, New York
Account Number: 900 9000 200
Account Name: Income Processing
Reference: Phoenix Home Life
Account #G05143
OBI=[Name of Issuer],
PPN=________, RATE=___%,
DUE=________ (include principal
and interest breakdown and premium, if any)
Notices
All notices and communications, including
notices with respect to
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<PAGE> 87
payments and written confirmation of
each such payment, to be addressed:
Phoenix Home Life Mutual Insurance Company
c/o Phoenix Duff & Phelps, Inc.
56 Prospect Street
P. O. Box 150480
Hartford, Connecticut 06115-0480
Attention: Private Placements Division
Telecopier Number: (860) 403-5451
Name of Nominee in which Notes are to be
issued: None
Taxpayer I.D. Number: 06-0493340
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<PAGE> 88
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
UNITED FARM FAMILY LIFE $4,500,000
INSURANCE COMPANY
225 South East Street
Indianapolis, Indiana 46202
Attention: Steven B. Ratliff
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael Foods,
INC., 7.58% Senior Notes due February 26,
2009, PPN 594074 B* 6, principal or
interest") to:
Northern CHGO/Trust
ABA #071-0001-52
Credit wire acct. #5186041000
Ref ELL and Co
Acct. #26-30866
Notices
All notices and communications, including
notices with respect to payments and written
confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be
issued: Ell and Co
Taxpayer I.D. Number 35-1097117
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PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
THE CANADA LIFE ASSURANCE COMPANY $2,250,000
Corporate Treasury, SP-11
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
Attention: U.S. Private Placements
Brian Lynch
Associate Treasurer
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Chase Manhattan Bank
ABA #021-000-021
Account #544-755-102
For benefit of F/A/O AR78-63909
Attn: Mr. Richard Boxer
Include account no.
for: The Canada Life Assurance Company
(CLA) POC: CTL (Replaces Morgan #41233)
Trust Account No. AR78-63909
Notices
All notices and communications to be
addressed as first provided above, except
notice with respect to
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payment, and written confirmation of each
such payment, to be addressed:
Chase Manhattan Bank
Institutional Client Services
4 New York Plaza - 4th Floor
New York, NY 10004-2477
Attn: Mr. Richard Boxer
with a copy to:
The Canada Life Assurance Company
330 University Avenue, SP-12
Toronto, Ontario, Canada M5G 1R8
Attention: Supervisor,
Securities Accounting
Name of Nominee in which Notes are to be
issued: CUMMINGS & Co.
Taxpayer I.D. Number: 38-0397420
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PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
CANADA LIFE INSURANCE COMPANY OF NEW YORK $750,000
Corporate Treasury, SP-11
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
Attention: U.S. Private Placements
Brian Lynch
Associate Treasurer
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Chase Manhattan Bank
ABA #021-000-021
Account #544-755-102
For benefit of F/A/O MR-76-37266
Attn: Mr. Richard Boxer
Include account no.
for: Canada Life Insurance
Company of New York (CLNY) POC:
CNY (Replaces Morgan #33370)
Custody Account No. MR-76-37266
Notices
All notices and communications to be
addressed as first provided above, except
notice with respect to
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payment, and written confirmation of
each such payment, to be addressed:
Chase Manhattan Bank
Institutional Client Services
4 New York Plaza - 4th Floor
New York, NY 10004-2477
Attn: Mr. Richard Boxer
with a copy to:
The Canada Life Assurance Company
330 University Avenue, SP-12
Toronto, Ontario, Canada M5G 1R8
Attention: Supervisor, Securities
Accounting
Name of Nominee in which Notes are to be
issued: Cummings & Co.
Taxpayer I.D. Number: 13-2690792
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PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
CUNA MUTUAL INSURANCE SOCIETY $3,000,000
c/o CUNA Mutual Group
Securities Management Department
5910 Mineral Point Road
Madison, Wisconsin 53705
Attention: Private Placements
Telecopier Number: (608) 238-2316
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
Chase Manhattan Bank
ABA #021000021
A/C: 900-9-002206
A/C: 473-63300
BNF = Funds Pending DNI/ABS
BBK = Chase Manhattan Bank/SSTO
Notices
All notices and communications to be
addressed as first provided above, except
notices with respect to payments and
written confirmation of each such payment,
to be addressed as follows:
CUNA Mutual Group
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Attention: Investment
Accounting, GG-12
P. O. Box 391
Madison, Wisconsin 53701
Name of Nominee in which Notes are to be
issued: Atwell & Co.
Taxpayer I.D. Number for Atwell:
13-6065575
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PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES
OF LENDER TO BE ACQUIRED
PROVIDENT MUTUAL LIFE $2,000,000
INSURANCE COMPANY
P.O. Box 1717
Valley Forge, Pennsylvania 19482-1717
Attention: Securities Investment Department
Telefacsimile: (610) 407-1322
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 7.58% Senior Notes due
February 26, 2009, PPN 594074 B* 6,
principal or interest") to:
PNC Bank (ABA #031-000-053)
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
for credit to: Provident Mutual Life
Insurance Company
Account Number 85-4084-2176
Notices
All notices and communications requiring
overnight express delivery service should
be addressed to:
1205 Westlakes Drive
Berwyn, PA 19312-2405
Attention: Treasurer
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Name of Nominee in which Notes are to be
issued: none
Taxpayer I.D. Number: 23-0990450
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MICHAEL FOODS, INC.
7.58% Senior Note
Due February 26, 2009
PPN 594074 B* 6
No. R- Minneapolis, Minnesota
$ ___________, ____
MICHAEL FOODS, INC., a corporation duly organized and existing under the
laws of the State of Delaware (hereinafter called the "Company"), for value
received, hereby promises to pay to _____________________, or registered
assigns, on February 26, 2009 the principal amount of ____________________
Dollars (or so much thereof as shall not have been prepaid) in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for public and private debts, at the principal office of the
Company in Minnesota, and to pay interest (computed on the basis of a 360-day
year of twelve 30-day months) at said office, in like coin or currency, on the
unpaid portion of said principal amount from the date hereof, semi-annually on
the twenty-sixth day of February and August in each year, commencing on the
first such day after the date hereof, at the rate of 7.58% until such unpaid
portion of such principal amount shall have become due and payable and at the
Overdue Interest Rate thereafter and, so far as may be lawful, on any unpaid
premium or any overdue installment of interest at the Overdue Interest Rate.
SECTION 1. THE NOTES; TRANSFERS, EXCHANGE, ETC.
Section 1.01. The Notes. This Note is one of an authorized issue of senior
notes (hereinafter called the "Notes") made by the Company in an aggregate
principal amount of $125,000,000, maturing on February 26, 2009, bearing
interest payable at the
EXHIBIT A
(to Loan Agreement)
<PAGE> 98
same rate and on the same dates as the interest on the principal amount of
this Note and issued pursuant to the Agreements.
Section 1.02. Registration, Transfer or Exchange of Notes. The Notes are
issuable only as registered Notes. The Company will keep at its office or
agency maintained as provided in Section 3.01 a register in which the Company
shall provide for the registration and registration of transfer of the Notes.
The holder of this Note may, at its option and either in person or by duly
authorized attorney, surrender the same at said office or agency for
registration of transfer or exchange, accompanied if surrendered for transfer by
a written instrument of transfer duly executed by such holder or attorney. In
case such holder shall so request a transfer or exchange of this Note, the
Company shall deliver to or upon such holder's order one or more Notes in the
same aggregate unpaid principal amount as this Note, each dated as of the date
of, or, if later, the date to which interest has been paid on, this Note, in the
principal amount of $1,000,000 or a multiple of $100,000 in excess thereof,
(provided that one such new Note so issued to any holder may be issued in any
amount), as requested by such holder (provided that if such aggregate unpaid
principal amount is less than $1,000,000, the Company will deliver one Note in
exchange for the Note), and registered in such name or names as shall be
specified by such holder. The reasonable and customary expenses of such
exchange shall be borne by the requesting holder. Every new Note so made and
delivered upon transfer or in exchange for this Note shall be in the form of
Exhibit A to the Agreements.
Prior to due presentation for registration of transfer of this Note, the
Company may deem and treat the registered holder hereof as the absolute owner of
this Note for the purpose of receiving payment of or on account of the principal
of and premium, if any, and interest on this Note, and for the purpose of any
notice, waiver or consent hereunder, and payment of this Note shall be made only
to or upon the order in writing of such holder.
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Section 1.03. Loss, Theft, Destruction or Mutilation of Notes. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of a bond of indemnity reasonably satisfactory to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of this Note, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Note, a new Note of like tenor and unpaid principal
amount and dated the date of, or, if later, the date to which interest has been
paid on, the lost, stolen, destroyed or mutilated Note. In the case of an
Institutional Holder of the Notes, its own unsecured agreement of indemnity
shall be deemed satisfactory to the Company.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.01. Mandatory Prepayments. On February 26 in each year, commencing
February 26, 2005 and ending February 26, 2008, both inclusive, the Company will
pay and apply and there shall become due and payable on the principal
Indebtedness evidenced by the Notes an amount equal to the lesser of (x)
$25,000,000 or (y) the principal amount of the Notes then outstanding; provided,
that upon any partial prepayment of the Notes pursuant to Section 2.02 or
Section 2.03 or any partial prepayment, redemption, retirement, purchase or
other acquisition of the Notes pursuant to clause (d) of Section 4.11, the
principal amount of each required prepayment of the Notes becoming due under
this Section 2.01 on and after the date of such prepayment, redemption,
retirement, purchase or other acquisition shall be reduced in the same
proportion as the aggregate principal amount of the Notes is reduced as a result
of such prepayment, redemption, retirement, purchase or other acquisition.
Section 2.02. Optional Prepayments. In addition to the prepayments required
by Section 2.01 and Section 2.03:
A. Unconditional Optional Prepayments. The Company may at its
option, from time to time on any Business Day, prepay the Notes then
outstanding as a whole at any time, or in part in a minimum amount of
$5,000,000 or in $1,000,000
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multiples in excess thereof from time to time, by giving each holder
thereof written notice, not less than 30 days nor more than 60 days prior
to the date fixed therein for such prepayment (an "Optional Prepayment
Date"), which notice shall also specify the principal amount of the Notes
held by such holder so to be prepaid.
B. Optional Prepayments on Failure of Holders to Grant Certain
Consents. In the event the Company shall request the holders of the Notes
in writing (with such request making specific reference to the optional
prepayment provisions set forth in this Section 2.02(B)) to consent to a
merger or consolidation of the Company not permitted pursuant to the
provisions of Section 4.07 hereof and the holder or holders of 50% or more
in aggregate principal amount of the then outstanding Notes shall have
failed or refused for a period of 30 days following the receipt of such
request, to consent in writing to such merger or consolidation, then the
Company may, on a Business Day (the "Optional Prepayment Date") selected by
the Company and occurring within 65 days after the expiration of such 30
day period, and upon not less than 30 nor more than 60 days prior written
notice, prepay all Notes held by each holder which has failed or refused to
consent to such merger or consolidation. Any request by the Company made
pursuant to this Section 2.02B shall set forth such financial and other
information as is, in the best judgment of the Company, necessary for each
holder to make an informed decision with respect to such requested consent.
C. Prepayment Out of Proceeds of Asset Disposition. In the event
that the Company shall elect to apply all or any portion of the proceeds of
sales, transfers or other dispositions of assets or property to the
repayment or prepayment of unsubordinated Funded Indebtedness of the
Company or a Subsidiary as contemplated in Section 4.06, the Company will
give written notice ("Company Notice") of such election to all holders of
the Notes. The Company Notice shall (i) describe the facts and
circumstances of such sales, transfers or other dispositions in reasonable
detail,
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(ii) set forth the aggregate principal amount of such proceeds (the
"Designated Proceeds") which it intends to apply to the prepayment or
repayment of unsubordinated Funded Indebtedness, (iii) contain an offer by
the Company to prepay on a stated date (the "Optional Prepayment Date"),
which shall be a Business Day not more than 60 days and not less than 30
days after such Company Notice, the principal amount of Notes held by each
holder which bears the same relationship to the aggregate amount of such
Designated Proceeds as the aggregate principal amount of all Notes held by
such holder bears to the aggregate principal amount of all then outstanding
Funded Indebtedness (including the Notes) with respect to which a portion
of such Designated Proceeds is to be applied, and (iv) request each holder
to notify the Company in writing by a stated date, which date shall be not
less than 15 days after such holder's receipt of the Company Notice, of its
acceptance or rejection of such prepayment offer. If a holder does not
notify the Company as provided in subclause (iv) above, then such holder
shall be deemed to have accepted such offer.
For purposes of any prepayment pursuant to the provisions of subsection A
or subsection B or subsection C of this Section 2.02, the Computing Holder, as
defined in Section 2.03 herein, shall give written notice to the Company, on the
fifth Business Day prior to any Optional Prepayment Date determined pursuant to
subsection A or subsection B or subsection C above, of the amount of the
Prepayment Price, as defined in Section 2.03 herein, of the principal amount of
the Notes held by such Computing Holder so to be prepaid, which notice shall set
forth in reasonable detail the computation thereof.
The Company shall deliver to each holder then to be prepaid, at least two
Business Days before such Optional Prepayment Date, a certificate signed by a
principal financial officer of the Company setting forth the Prepayment Price of
the principal amount of the Notes held by such holder so to be prepaid,
accompanied by a copy of the written notice by the Computing Holder referred to
above (which sets forth the computation of the Prepayment Price of the Notes
held by the Computing Holder).
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Thereupon, the Company covenants and agrees that it will on such Optional
Prepayment Date prepay the principal amount of the Notes held by such holder so
to be prepaid by payment to such holder of the Prepayment Price of such
principal amount, together with interest accrued on such principal amount to
such Optional Prepayment Date. No prepayment of less than all of the Notes
pursuant to this Section 2.02 shall be credited to or relieve the Company to any
extent from its obligation to make any prepayments required by Section 2.01.
Section 2.03. Prepayment Upon Event Risk Occurrence. The Company covenants
and agrees to, promptly after the occurrence of an Event Risk Occurrence,
but in any event within 10 days thereafter, give written notice to each holder
of a Note. Such notice shall (a) describe in reasonable detail the facts and
circumstances giving rise to such Event Risk Occurrence and the effect thereof
on the Company, (b) offer to prepay, on a date (the "Event Risk Occurrence
Prepayment Date") which shall be not less than 30 days nor more than 60 days
after the date of such notice, all of the Notes held by such holder, (c)
request such holder to notify the Company in writing, not less than 10 days
prior to the Event Risk Occurrence Prepayment Date, of its acceptance or
rejection of such offer and (d) inform such holder that, upon its receipt of
such notice from the Company, failure to reject such offer in writing on or
before the 10th day prior to the Event Risk Occurrence Prepayment Date shall be
deemed acceptance of such offer. The notice to the Computing Holder shall also
set forth the respective names and addresses of, and the principal amounts of
the Notes held by, the other holders.
The Computing Holder shall give written notice to the Company and the other
holders, on the fifth Business Day prior to the Event Risk Occurrence Prepayment
Date, of the amount of the Prepayment Price of the Notes held by it and such
other holders, which notice shall set forth in reasonable detail the computation
thereof. Such notice in itself shall constitute neither an acceptance nor a
rejection by the Computing Holder of such prepayment offer.
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Thereupon, the Company covenants and agrees that it will on the Event Risk
Occurrence Prepayment Date prepay all of the Notes held by each holder who has
accepted the prepayment offer in accordance with this Section, by payment of the
Prepayment Price of such Notes, together with interest accrued on the unpaid
principal amount of such Notes to the Event Risk Occurrence Prepayment Date. No
prepayment of less than all of the Notes pursuant to this Section 2.03 shall be
credited to or relieve the Company to any extent from its obligation to make any
prepayments required by Section 2.01.
The following terms shall have the following definitions:
"Business Day" means any day on which banks are required to be open to
carry on their normal business in the States of Minnesota and New York.
"Change of Control" means any Acquisition subsequent to February 26, 1997
by any Person, or related Persons constituting a "group" for purposes of Section
13(d) of the Securities Exchange Act of 1934, of (a) the power to elect, appoint
or cause the election or appointment of at least a majority of the members of
the Board of Directors of the Company, through beneficial ownership of the
capital stock of the Company or otherwise, or (b) all or substantially all of
the properties and assets of the Company; provided, however, that a Change of
Control shall not be deemed to have occurred as a result of the consummation of
the Pending Reorganization or if (x) the Acquisition of such power or properties
and assets is pursuant to a transaction in compliance with the provisions of
Section 4.07 hereof and (y) no Person, or related Persons constituting a "group"
for purposes of Section 13(d) of the Securities Exchange Act of 1934, shall have
the power to elect, appoint or cause the election or appointment of at least a
majority of the members of the Board of Directors of such successor or
transferee. For the purposes of this definition, "Acquisition" of the power or
properties and assets stated in the preceding sentence means the earlier of (i)
the actual possession thereof and (ii) the consummation of any transaction or
series of related transactions which, with the
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passage of time, will give such Person or Persons the actual possession thereof.
"Computing Holder" means, as of the date of notice, the holder who holds
Notes with an aggregate principal amount outstanding higher than that of Notes
held by any other holder; provided , however, that for purposes of any
prepayment made pursuant to the provisions of this Section 2.03 or Section
2.02B, "Computing Holder" means the holder who holds Notes then to be prepaid
pursuant to this Section 2.03 or Section 2.02B with an aggregate amount
outstanding higher than that of Notes held by any other holder then to be
prepaid. For purposes determining the Computing Holder, the Notes then held by
affiliated holders shall be aggregated.
"Designated Event" means any of the following:
(a) the majority of the members of the Company's Board of Directors at
any time being different from the majority of the members of its Board of
Directors at any other time within the immediately preceding two calendar
years; provided that for purposes of this clause (a), a member of the
Company's Board of Directors shall not be deemed to be "different" if such
board member is a member or designee of either the Michael Family or the
Papetti Family and has replaced another member or designee of the same
family, or
(b) the authorization by the Company's Board of Directors of
(i) a consolidation or merger of the Company (other than the
Pending Reorganization) or a sale of all or substantially all of its
properties and assets,
(ii) a dividend or other distribution by the Company to its
shareholders, in one transaction or a series of related transactions,
of cash, property or securities (other than a dividend or other
distribution payable solely in capital stock of the Company that is
not convertible into or exchangeable for any securities
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that are not capital stock of the Company) having an aggregate fair
market value at the time of distribution that is 30% or more of the
fair market value of the common stock of the Company outstanding
immediately prior to such distribution (both such fair market values
as determined by its Board of Directors) or
(iii) an acquisition by the Company for cash, property or
securities (other than capital stock of the Company that is not
convertible into or exchangeable for any securities that are not
capital stock of the Company), in one transaction or a series of
related transactions, of more than 30% of common stock of the Company
outstanding immediately prior to the commencement of such acquisition;
provided that any event described above in this clause (b) shall be a
designated event only if at any time within 12 months of the occurrence of
such event, the company's consolidated net worth as of such time shall be
less than 50% of its consolidated net worth as of the fiscal year-end
immediately preceding the earlier of such event and such time.
"Event Risk Occurrence" means (a) a Change of Control or (b) a Designated
Event or (c) the failure of the Company to pay the purchase price and otherwise
effect the acquisition of the Papetti Companies on the Closing Date (except for
any filings which, in accordance with standard practice, are to be made
subsequent to the closing of such transaction) all substantially as contemplated
in the Memorandum and, within five business days thereafter, to provide to each
holder of a Note an opinion of Maun & Simon PLC to such effect (in form and
substance reasonably satisfactory to the holders of the Notes).
"Michael Family" means and includes (i) James H. Michael, (ii) any Person
who is a lineal descendent of James H. Michael, (iii) the spouse, children or
grandchildren of any such Person, (iv) any trust of which any of such Persons
are the sole
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beneficiaries and (v) the estate, executor, administrator or legal guardian of
any such Person.
"Papetti Family" means and includes (i) Arthur M. Papetti and Anthony
Papetti, (ii) any Person who is a lineal descendent of Arthur M. Papetti or
Anthony Papetti, (iii) the spouse, children or grandchildren of any such Person,
(iv) any trust of which any of such Persons are the sole beneficiaries and (v)
the estate, executor, administrator or legal guardian of any such Person.
"Prepayment Price" means, for purposes of calculations required by this
Section and Section 2.02 hereof, the higher of (1) the unpaid principal amount
of the Notes to be prepaid on the Event Risk Occurrence Prepayment Date or
Optional Prepayment Date, as the case may be, and (2) the sum of the respective
Payment Values of each prospective interest payment, prospective mandatory
prepayment and the principal payment at maturity in respect of such Notes (the
amount of each such payment being herein referred to as a "Payment"). The
"Payment Value" of each Payment shall be determined by discounting such Payment
at the Adjusted Reinvestment Rate, for the period from the scheduled date of
such Payment to the Event Risk Occurrence Prepayment Date or Optional Prepayment
Date, as the case may be. The "Adjusted Reinvestment Rate" is the sum of (a) 50
basis points and (b) the yield which shall be imputed from the yields (as
reported on the Telerate Access Service (Page 500-offer side) or such other
display as may replace Page 500) of those actively traded United States Treasury
securities having maturities as close as practicable to the Weighted Average
Life to Final Maturity of the Notes so to be prepaid. The yields of such United
States Treasury securities shall be determined as of 10 A.M. Eastern Time on the
fifth Business Day prior to the Event Risk Occurrence Prepayment Date or
Optional Prepayment Date, as the case may be.
"Weighted Average Life to Final Maturity" of the Notes as of the time of
determination thereof means the number of years (rounded to the nearest
one-twelfth) obtained by dividing the then Remaining Dollar-Years of the Notes
by the then outstanding principal amount of the Notes. For the purposes of
this
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definition, "Remaining Dollar-Years" means the sum of the amounts obtained by
multiplying the amount of each then remaining required prepayment, including
prepayment at final maturity, by the number of years (calculated to the nearest
one-twelfth) which will elapse between the time of such determination and the
date of such prepayment.
Section 2.04. Interest After Date Fixed for Prepayment. This Note or any
portion hereof to be prepaid shall cease to bear interest on and after the date
fixed for such prepayment unless the Company shall fail to pay this Note or such
portion, as the case may be, on the date fixed for such prepayment, in which
event this Note or such portion, as the case may be, shall bear interest at the
Overdue Interest Rate from and after such date until paid and, so far as may be
lawful, any unpaid premium and overdue installment of interest shall bear
interest at said rate.
Section 2.05. Allocation of Prepayments. In the event of any prepayment of
less than all of the outstanding Notes (other than any prepayment pursuant to
Section 2.02B or Section 2.03) the Company will allocate the principal amount so
to be prepaid (but only in units of $1,000) among the registered holders of
Notes in proportion, as nearly as may be, to the respective principal amounts of
such Notes, not theretofore called for prepayment, of which they shall be
registered holders.
Section 2.06. Surrender of Notes; Notation Thereon. Upon any prepayment of a
portion of the principal amount of this Note, the registered holder hereof, at
its option, may require the Company to execute and deliver, upon surrender of
this Note, a new Note registered in the name of such person or persons as may be
designated by such holder for the principal amount of this Note then remaining
unpaid, dated as of the date to which interest has been paid on the principal
amount of this Note then remaining unpaid, or may present this Note to the
Company for notation hereon of the payment of the portion of the principal
amount of this Note so prepaid. The reasonable and customary expenses of such
exchange or notation shall be borne by the requesting holder. Every new Note
made and delivered pursuant to the
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provisions of this Section 2.06 shall in all other respects be in the same form
and have the same terms as this Note.
SECTION 3. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that so long as this Note shall be
outstanding:
Section 3.01. Maintenance of Company Office. The Company will maintain an
office or agency at 324 Park National Bank Building, 5353 Wayzata Boulevard,
Minneapolis, Minnesota 55416 (or such other place in the United States of
America as the Company may designate in writing to the holder hereof), where
notices, presentations and demands to or upon the Company in respect of the
Notes may be given or made.
Section 3.02. To Keep Books. The Company will, and will cause each of its
Subsidiaries to, at all times keep proper books of record and account in which
full, true and correct entries will be made of its transactions in accordance
with generally accepted accounting principles.
Section 3.03. Payment of Taxes; Corporate Existence; Maintenance of
Properties. The Company will, and will cause each of its Subsidiaries to,
A. pay and discharge promptly all taxes, assessments and other
governmental charges or levies imposed upon it or upon its income or upon
any of its property, real, personal or mixed or upon any part thereof, as
well as all claims of any kind (including claims for labor, materials and
supplies) which, if unpaid, might by law become a Lien upon its property;
provided, however, that neither the Company nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim if the
amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company or any such
Subsidiary, as the case may be, shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting
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principles) deemed by it to be adequate with respect thereto;
B. do all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises; provided, however,
that nothing in this Section 3.03B shall prevent the abandonment or
termination of the corporate existence, rights and franchises of any
Subsidiary if, in the opinion of the Company, such abandonment or
termination would not have a material and adverse effect on the business,
operations, properties, prospects, assets or condition, financial or other,
of the Company and its Subsidiaries, taken as a whole;
C. maintain and keep its properties, in good repair, working order and
condition and from time to time make all needful and proper repairs,
renewals and replacements, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
Section 3.04. Insurance. The Company will, and will cause each Subsidiary to,
keep adequately insured, by financially sound and reputable insurers, all
property of a character usually insured by corporations engaged in the same or a
similar business similarly situated against loss or damage of the kinds
customarily insured against by such corporations, and carry such other insurance
as is usually carried by corporations engaged in the same or a similar business
similarly situated; provided that the Company and its Subsidiaries may maintain
a system or systems of self-insurance which, in the opinion of the chief
financial officer of the Company, will accord with sound practices of
corporations maintaining such systems engaged in the same or a similar business
similarly situated and under which the Company or such Subsidiaries shall
maintain adequate reserves in accordance with sound actuarial and insurance
principles and practice.
Section 3.05. Payment of Indebtedness. The Company will, and will cause each
Subsidiary (but only to the extent that such Subsidiary's assets shall be
sufficient for the purpose) to,
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A. pay or cause to be paid the principal of and the interest on all
Indebtedness heretofore or hereafter incurred or assumed by it when and as
the same shall become due and payable, unless such Indebtedness shall be
renewed, extended or refunded in accordance with the provisions of Sections
4.01 and 4.02, and
B. faithfully perform, observe and discharge all the covenants,
conditions and obligations which are imposed on it by any and all
indentures and other agreements securing or evidencing such Indebtedness or
pursuant to which such Indebtedness is issued, and not permit the
occurrence of any act or omission which is or may be declared to be a
default thereunder;
provided, however, that neither the company nor any such subsidiary shall be
required to make any payment or to take any other action by reason of this
section 3.05 at any time while it shall be contesting in good faith by
appropriate proceedings its obligations to do so, if it shall set aside on its
books reserves (segregated to the extent required by generally accepted
accounting principles) deemed by it to be adequate with respect thereto.
Section 3.06. Compliance with Laws. The Company and each of its Subsidiaries
will use their best efforts to comply in all respects with all applicable
statutes, rules, regulations and orders of all governmental authorities with
respect to the conduct of their businesses and the ownership of properties
(including, without limitation, all applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls), except to the
extent that any of the foregoing are contested in good faith by appropriate
proceedings.
SECTION 4. RESTRICTIVE COVENANTS.
The Company covenants and agrees that so long as this Note shall be
outstanding:
Section 4.01. Limitation on Indebtedness.
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A. Incurrence of Funded Indebtedness. The Company will not, and will
not permit any Subsidiary to, create, assume, incur or otherwise become
liable, in each case contingently or otherwise, in respect of any Funded
Indebtedness, whether secured or unsecured other than:
(i) the Notes;
(ii) Funded Indebtedness of the Company or a Subsidiary,
provided that, at the time of the creation, assumption, incurrence or
otherwise becoming liable in respect thereof and after giving effect
thereto and to the application of the proceeds thereof, (x)
Consolidated Funded Indebtedness does not exceed 55% of Total
Capitalization and (y) no Event of Default or event which with the
passage of time or the giving of notice, or both, would constitute an
Event of Default has occurred and is continuing; and
(iii) Funded Indebtedness of the Company or a Subsidiary
which has been extended, renewed or refunded so long as (x) the
principal amount of such Indebtedness is not increased, and (y) no
Event of Default or event which with the passage of time or the giving
of notice, or both, would constitute an Event of Default has occurred
and is continuing.
Any corporation which becomes a Subsidiary after the date hereof shall, for
all purposes of this Section 4.01A, be deemed to have created, assumed or
incurred, at the time it becomes a Subsidiary, all Indebtedness of such
corporation existing immediately after it becomes a Subsidiary.
B. Current Indebtedness and Funded Indebtedness. The Company will not
and will not permit any Subsidiary to, at any time be liable with respect
to any Funded Indebtedness or Current Indebtedness unless, on each of 45
consecutive days within the period of the 12 consecutive months immediately
preceding the date of any determination hereunder, the aggregate unpaid
principal amount of
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Consolidated Funded Indebtedness and Consolidated Current Indebtedness does
not exceed an amount equal to 55% of the sum of Total Capitalization and
Consolidated Current Indebtedness.
C. Priority Indebtedness. The Company will not at any time permit any
Subsidiary to create, assume, incur or otherwise become liable in respect
of any Priority Indebtedness unless, at the time of such creation,
assumption or incurrence and immediately after giving effect thereto and to
the application of the proceeds thereof, (x) the then outstanding principal
amount of Priority Indebtedness shall not exceed 25% of Consolidated Net
Worth as of the end of the immediately preceding fiscal year of the
Company, and (y) the Company could incur at least $1 of additional Funded
Indebtedness in compliance with Section 4.01A.
Section 4.02. Limitation on Liens. The Company will not, and will not permit
any Subsidiary to, (i) create, assume, incur or suffer to exist any Lien upon
(or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject,
or permit any Subsidiary or Affiliate to subject, to the prior payment of any
Indebtedness other than that represented by the Notes) any property or assets
(real or personal, tangible or intangible) of the Company or any Subsidiary,
whether now owned or hereafter acquired, or any income or profits therefrom, or
(ii) own or acquire or agree to acquire any property or assets (real or
personal, tangible or intangible) subject to or upon any Lien; provided,
however, that the foregoing restrictions shall not prevent the Company or any
Subsidiary from:
A. (1) making pledges or deposits under workmen's compensation laws,
unemployment insurance laws or similar legislation or good faith deposits
in connection with bids, tenders, contracts (other than for the repayment
of money borrowed) or under leases to which the Company or such Subsidiary
is a party, (2) making deposits to secure public or statutory obligations
of the Company or such Subsidiary or deposits of cash or obligations of the
United States of
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America to secure surety and appeal bonds to which the Company or such
Subsidiary is a party or deposits in lieu of such bonds, (3) incurring
Liens or priorities imposed by law, such as employees', carriers',
warehousemen's, labor mechanics', materialmen's and vendors' liens or
priorities, and Liens arising out of judgments or awards against the
Company or such Subsidiary with respect to which the Company or such
Subsidiary at the time shall be prosecuting an appeal or proceedings for
review and with respect to which it shall have secured a stay of execution
pending such appeal or proceedings for review or (4) entering into leases
and from incurring landlords' liens on fixtures and movable property
located on premises leased in the ordinary course of business so long as
the rent secured thereby is not in default and any applicable grace period
has not expired; or
B. creating, incurring or suffering to exist (1) Liens for taxes or
import duties not yet subject to penalties for nonpayment or the nonpayment
of which shall be permitted by the proviso to Section 3.03A or (2) minor
survey exceptions, minor encumbrances, easements or reservations of, or
rights of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions
as to the use of real properties, which Liens, exceptions, encumbrances,
easements, reservations, rights and restrictions do not, in the opinion of
the Company, in the aggregate materially detract from the value of such
properties or materially impair their use in the operation of the business
of the Company or such Subsidiary; or
C. suffering to exist the Liens existing on the date hereof securing
Indebtedness in an aggregate principal amount outstanding on the date
hereof not in excess of $3,000,000, and extensions, renewals or
replacements of any such Lien upon the same property theretofore subject
thereto without increase in the principal amount of the Indebtedness then
secured or evidenced thereby; or
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D. in the case of a Subsidiary, creating, incurring, assuming or
suffering to exist any Lien solely to secure Indebtedness owing to the
Company or a Wholly-owned Subsidiary; or
E. creating, incurring, assuming or suffering to exist Liens not
otherwise permitted by the foregoing clauses A through D, inclusive, of
this Section 4.02; provided, however, that at the time of the creation,
incurrence or assumption thereof, and immediately after giving effect to
the Indebtedness secured or evidenced by any such Lien, (1) the then
outstanding aggregate principal amount of Priority Indebtedness shall not
exceed 25% of Consolidated Net Worth as of the end of the immediately
preceding fiscal year of the Company, and (2) the Company could incur at
least $1 of additional Funded Indebtedness in compliance with Section
4.01A.
Section 4.03. Maintenance of Net Worth. The Company will at all times
maintain Consolidated Net Worth at an amount not less than the sum of
(i) $140,000,000 plus (ii) 50% of positive Consolidated Net Income for each
fiscal year of the Company ending on or after December 31, 1997 and prior to
the date of determination thereof, computed on a cumulative basis for said
entire period. If Consolidated Net Income is a deficit figure for any fiscal
year of the Company, such deficit shall not reduce the amount of Consolidated
Net Worth required to be maintained pursuant to this Section 4.03.
Section 4.04. Maintenance of Interest Expense Coverage. The Company will
maintain the ratio of Consolidated Net Earnings Available for Fixed Charges to
Fixed Charges determined for the immediately preceding four fiscal quarters of
the Company at not less than 1.75 to 1.
Section 4.05. Restricted Payments. The Company will not, directly or
indirectly (i) declare or pay any dividend or make any other distribution
(whether by reduction of capital or otherwise) on any shares of any class of its
capital stock (other than a dividend or distribution payable in shares of common
stock
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of the Company), (ii) purchase, redeem, retire or otherwise acquire, or cause or
permit any Subsidiary or Affiliate to purchase, redeem, retire, otherwise
acquire or make any payment in respect of, any such shares, or (iii) pay, repay,
redeem, retire, repurchase or otherwise acquire the principal of any
Subordinated Debt (or any installment thereof) prior to the regularly scheduled
maturity dates thereof (as in effect on the date such Subordinated Debt was
originally incurred) unless, immediately after giving effect to such action,
A. Consolidated Net Worth is not less than the level established
pursuant to the provisions of Section 4.03;
B. the Company shall not be in default in the performance or
observance of any other term, covenant, provision or condition contained in
the Notes; and
C. the Company could incur at least $1 of additional Funded
Indebtedness in compliance with the provisions of Section 4.01A;
provided that the provisions of this Section 4.05 shall not preclude the
prepayment of the presently outstanding subordinated debentures of NSU in
connection with the Pending Reorganization by the application of up to
$21,250,000 aggregate principal amount of the proceeds from the issuance of the
Notes together with a cash contribution from NSU.
Section 4.06. Limitation on Disposition of Assets. Subject to Section 4.07,
the Company will not at any time sell, transfer or otherwise dispose of, other
than in the ordinary course of business, all or any part of its assets and
properties if, immediately after giving effect thereto, the aggregate value of
all such properties and assets so disposed of (valued at the book value thereof)
during the immediately preceding 365 days exceeds 20% of Total Capitalization as
of the end of the then most recently ended fiscal year of the Company.
Computations under this Section 4.06 shall not include, sales, transfers, or
other dispositions for fair market value (as determined in good faith by the
Company), to the extent that all or a portion of the net
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after-tax proceeds of such transaction is applied, within 12 months after the
date of such transaction, to
(i) the purchase, acquisition or construction of assets or properties
which are to be used in the business of the Company or a Subsidiary; or
(ii) the repayment or prepayment of unsubordinated Funded Indebtedness
of the Company or a Subsidiary; provided that the Company has, on or prior
to the application of any such proceeds to the repayment or prepayment of
any other unsubordinated Funded Indebtedness pursuant to this subclause
(ii), offered to prepay the Notes, pro rata with all other unsubordinated
Funded Indebtedness then being repaid or prepaid (which prepayment of the
Notes shall be made in accordance with the terms of Section 2.02C hereof).
Section 4.07. Merger, Consolidation, Sale or Lease. Except for the Pending
Reorganization, the Company will not consolidate with or merge into any Person,
or permit any Person to merge into it, or sell, transfer or otherwise dispose of
all or substantially all of its properties and assets, unless;
(1) the Company shall be the surviving corporation; and
(2) immediately after giving effect to such transaction, (i) the
Company shall not be in default in the performance or observance of any of
the terms, covenants, provisions or conditions contained in the Notes or
the Agreements and (ii) the Company could incur at least $1 of additional
Funded Indebtedness in compliance with the provisions of Section 4.01A.
Section 4.08. Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, enter into or be a party to any transaction or
arrangement with any Affiliate (except (i) the Pending Reorganization and (ii)
other transactions or arrangements existing on the date hereof, including any
renewals or extensions thereof under terms and
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provisions which are no more adverse to the Company or such Subsidiary than the
terms and provisions under the transactions and arrangements so renewed or
extended) including, without limitation, the purchase of property from, sale of
property to or exchange of property with, the rendering of any service by or
for, or the making of any loan or advance to, any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of the Company or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would exist in a comparable arm's-length
transaction with a person other than an Affiliate.
Section 4.09. Restrictions on Subsidiaries. A. The Company will not cause,
suffer or permit any Subsidiary to
(1) issue or dispose of any shares of such Subsidiary's capital stock
to any Person other than the Company or a Wholly-owned Subsidiary, except
to the extent that any such shares are required to qualify directors under
any applicable law or required to be issued to other stockholders of such
Subsidiary by virtue of their exercise of preemptive rights or as their pro
rata share of any stock dividend; or
(2) sell, assign, pledge, transfer, dispose of, or in any way part
with control of, any shares of capital stock of another Subsidiary, or any
Indebtedness owing to such Subsidiary from another Subsidiary, to any
Person other than the Company or a Wholly-owned Subsidiary, except in
connection with a transaction which complies with Section 4.09B; and, in
the case of shares of capital stock, to the extent, if any, required to
qualify directors of such other Subsidiary under any applicable law; or
(3) sell, assign, lease, pledge, transfer or otherwise dispose of any
substantial part of such Subsidiary's properties and assets to any Person
or consolidate with or merge into any other Person or permit any other
Person to merge into it; provided, however, that
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(a) any Subsidiary may sell all or substantially all of its
properties and assets for cash in an amount not less than their fair
market value (as determined in good faith by the Company) if (i) such
Subsidiary does not own any capital stock or any Indebtedness of the
Company or any other Subsidiary not simultaneously being disposed of,
(ii) such sale is not prohibited by the provisions of Section 4.06,
and (iii) at the time of such transaction and immediately after giving
effect thereto, (x) the Company shall not be in default in the
performance or observance of any of the terms, covenants, provisions
or conditions contained in the Notes, and (y) the Company could incur
at least $1 of additional Funded Indebtedness in compliance with
Section 4.01A; and
(b) any Subsidiary may sell, lease, transfer or otherwise dispose
of all or any part of its properties and assets to, or consolidate
with or merge into, the Company (subject to the provisions of Section
4.07) or a Wholly-owned Subsidiary.
B. The Company will not sell, assign, pledge, transfer, dispose of, or in
any way part with control of, any shares of capital stock of any Subsidiary or
any Indebtedness owing from any Subsidiary to the Company, except, in the case
of shares of capital stock, to the extent, if any, required to qualify directors
of such Subsidiary under any applicable law; provided, however, that all shares
of capital stock of all classes, together with all Indebtedness, of any
Subsidiary owned by the Company and/or one or more Subsidiaries may be sold if
such sale, if deemed a sale of properties and assets by such Subsidiary, would
not be prohibited by the provisions of Section 4.09A(3)(a).
C. The Company will not, and will not cause, suffer or permit any
Subsidiary to, acquire, directly or indirectly, any stock of any other
corporation which immediately after such acquisition would become a Subsidiary,
unless immediately after giving effect to such acquisition:
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(1) the Company shall not be in default in the fulfillment of any of
the terms, covenants, provisions or conditions of the Notes; and
(2) the Company could incur at least $1 of additional Indebtedness
secured or evidenced by Liens in compliance with the provisions of Section
4.02E.
Section 4.10. Restrictions on Investments. The Company will not and will not
permit any Subsidiary to, make any Restricted Investment if, after giving effect
thereto, the Aggregate Amount of all Restricted Investments of the Company and
its Subsidiaries exceeds 30% of Consolidated Net Worth as of the end of the
Company's then most recently completed fiscal year, provided, however, that the
Aggregate Amount of all Restricted Investments of the Company and its
Subsidiaries in businesses not related to the food industry shall not exceed 5%
of Consolidated Net Worth as of the end of the Company's then most recently
completed fiscal year.
Section 4.11. Acquisition of Notes; No Reissuance. The Company will not, and
will not permit any Subsidiary or Affiliate to directly or indirectly, prepay,
redeem, retire, purchase or otherwise acquire any Note, except pursuant to (a)
Section 2.01, (b) Section 2.02, (c) Section 2.03 or (d) an offer to all holders
of the Notes to prepay, redeem, retire, purchase or otherwise acquire the Notes,
pro rata, from all such holders at the same time and on the same terms and
conditions. Any Note prepaid in full pursuant to Sections 2.01, 2.02, 2.03 or
clause (d) of this Section, shall be surrendered to the Company for cancellation
and shall not be reissued and no Note shall be issued in lieu of any principal
amount of any Note so prepaid.
SECTION 5. CONSENTS, WAIVERS AND AMENDMENTS.
Any term, covenant, agreement or condition of the Notes may, with the
consent of the Company, be amended or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by one or more written instruments signed by the holder or
holders of not
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less than a majority in aggregate principal amount of the Notes at the time
outstanding; provided, however, that
A. no such amendment or waiver shall, without the consent of the
holders of all outstanding Notes,
(1) change the maturity of the principal of, or any installment
of interest on, any of the Notes, or reduce the principal amount
thereof or the interest or premium thereon, or subordinate or
otherwise modify the terms of, or rights to, payment of the principal
thereof or interest or premium thereon including, without limitation,
extend the time for any such payment or modify any of the provisions
of Section 2, or
(2) give to any Note any preference over any other Note, or
(3) reduce the percentage of holders of Notes required to approve
any such amendment or effectuate any such waiver; and
B. no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
Any amendment or waiver pursuant to this Section 5 shall apply equally to
all the holders of the Notes and shall be binding upon them, upon each future
holder of any Note and upon the Company, whether or not a notation of such
amendment or waiver shall have been made on such Notes. In the case of an
amendment or waiver of the character described in Section 5A, the holder of this
Note agrees to make a notation on this Note to indicate that such amendment or
waiver has been effected. In the case of any other amendment or waiver, no
notation need be made on the Notes at the time outstanding, but any Note
executed and delivered thereafter may, at the option of the Company, bear a
notation referring to any such amendment or waiver then in effect. For purposes
of determining whether the holders of
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outstanding Notes of the requisite aggregate principal amount at any time have
agreed or consented to any amendment or waiver pursuant to the provisions of
this Section 5, any Notes owned by the Company, any Subsidiary or any Affiliate
shall be disregarded and deemed not to be outstanding.
So long as there are any Notes outstanding, the Company will not solicit,
request or negotiate for or with respect to any proposed waiver or amendment of
any of the provisions of the Notes unless each holder of Notes (irrespective of
the amount of Notes then owned by it) shall be informed thereof by the Company
and shall be afforded the opportunity of considering the same and shall be
supplied by the Company with sufficient information to enable it to make an
informed decision with respect thereto. The Company will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of Notes as
consideration for or as an inducement to entering into by any holder of Notes of
any waiver or amendment of any of the terms and provisions of this Agreement or
the Notes unless such remuneration is concurrently offered, on the same terms,
ratably to the holders of all Notes then outstanding.
SECTION 6. DEFINITIONS.
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires:
"Acceleration Calculation Date" has the meaning specified in Section 7.01
hereof.
"Affiliate" means any Person (other than the Company or any Subsidiary)
which, directly or indirectly, (A) controls or is controlled by or is under
common control with the Company or any Subsidiary, or (B) beneficially owns or
holds or has the power to direct the voting power of 5% or more of any class of
voting stock of the Company or any Subsidiary or (C) has 5% or more of its
voting stock (or in the case of a Person which is not a corporation, 5% or more
of its equity interest) beneficially owned or held, directly or indirectly, by
the Company or any
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Subsidiary or (D) is a director or officer of the Company or any Subsidiary.
For purposes of this definition, "control" means the power to direct the
management and policies of a Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Aggregate Amount," when used with respect to any Investment of any Person
as of the date of determination thereof, means an amount (which may be a
positive or negative figure, as the case may be) equal to (i) the greater of the
amount carried on the books of such Person as at such date with respect to such
Investment and the cost of such Investment to such Person, minus (ii) the net
proceeds (after the deduction of income taxes applicable thereto) realized from
the sale or liquidation of such Investment or any part thereof, or otherwise.
"Agreements" means the Loan Agreements, each dated as of February 26, 1997,
between the Company and each of the Lenders (as therein defined) entered into in
connection with the issuance of the Notes.
"Assumption Agreement" has the meaning specified in Section 6.7 of the
Agreements.
"Board of Directors" means either the board of directors of the Company
(or, when so specified or the context so indicates, a Subsidiary) or, if duly
authorized to exercise the power of the Board of Directors, any duly authorized
committee thereof.
"Business Day" has the meaning specified in Section 2.03 hereof.
"Capital Lease" means and includes at any time any lease of property, real
or personal, which in accordance with GAAP would at such time be required to be
capitalized on a balance sheet of the lessee.
"Capital Lease Obligation" means at any time the capitalized amount of the
rental commitment under a Capital Lease which in
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accordance with GAAP would at such time be required to be shown on a balance
sheet of the lessee.
"Change of Control" has the meaning specified in Section 2.03 hereof.
"Closing" and "Closing Date" have the respective meanings specified in
Section 1.2 of the Agreements.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computing Holder" has the meaning specified in Section 2.03 hereof.
"Consolidated Current Indebtedness," "Consolidated Funded Indebtedness,"
"Consolidated Net Income" and "Consolidated Net Worth," means the Current
Indebtedness, Funded Indebtedness, Net Income and Net Worth, as the case may be,
of the Company and its Subsidiaries, after eliminating intercompany items, all
as consolidated and determined in accordance with GAAP.
"Consolidated Net Earnings Available for Fixed Charges" means, for the
period of determination, Consolidated Net Income of the Company and its
Subsidiaries, plus cash dividends received from Unconsolidated Subsidiaries,
plus income taxes, plus extraordinary items of expense or minus extraordinary
items of income which are included in the determination of Net Income, plus any
loss from discontinued operations or minus any gain from discontinued operations
which is included in the determination of Net Income, plus any charge or minus
any credit which results from the cumulative effect of a change in accounting
principle which is included in the determination of Net Income, plus all Fixed
Charges. Prior to January 1, 1999, in any determination of "Consolidated Net
Earnings Available for Fixed Charges" there shall be an addition for any loss
(and a deduction for any gain) on "disposal of a product line" (or
"restructuring charges" relating to such disposal) which are included in
determination of Net Income. For purposes hereof, the terms "disposal of a
product line" and "restructuring charges" shall have such meanings as are viewed
as acceptable to the Securities and
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Exchange Commission when such terms are used for financial reporting.
"Current Indebtedness" means all Indebtedness other than Funded
Indebtedness.
"Designated Event" has the meaning specified in Section 2.03 hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person that is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Code) as the
Company or is under common control (within the meaning of Section 414(e) of the
Code) with the Company.
"Events of Default" has the meaning specified in Section 7.01 hereof.
"Event Risk Occurrence" has the meaning specified in Section 2.03 hereof.
"Event Risk Occurrence Prepayment Date" has the meaning specified in
Section 2.03 hereof.
"Fixed Charges" means, for any period of calculation, the sum of (i) all
interest on Indebtedness incurred by the Company and its Subsidiaries, including
interest payments partially or entirely contingent on earnings and the portion
of rents payable under Capital Leases allocable to interest, and (ii) all debt
discount or premium amortized or required to be amortized during such period by
the Company or any of its Subsidiaries.
"Funded Indebtedness" means, without duplication, all Indebtedness which
would, in accordance with GAAP, constitute long-term debt, including (i) all
Indebtedness which by its terms matures more than one year from the date as of
which any determination of Funded Indebtedness is made, (ii) any
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Indebtedness maturing within one year from such date which is renewable at the
option of the obligor beyond one year from such date, including any Indebtedness
renewable or extendible (whether or not theretofore renewed or extended) under,
or payable from the proceeds of other Indebtedness which may be incurred
pursuant to the provisions of, any revolving credit agreement or other similar
agreement and (iii) Capital Lease Obligations in excess of one year.
"GAAP" means generally accepted accounting principles at the time in the
United States.
"Indebtedness" means and includes, without duplication, (i) all
indebtedness or obligations for money borrowed (and any notes payable and drafts
accepted representing extensions of credit, whether or not representing
indebtedness or obligations for money borrowed), (ii) indebtedness or
obligations owed for all or any part of the purchase price of property or other
assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary course
of business, (iii) indebtedness or obligations secured or evidenced by any Lien
existing on property owned by the corporation whose Indebtedness is being
determined, whether or not the indebtedness or obligations secured or evidenced
thereby shall have been assumed, (iv) Capital Lease Obligations, (v) guarantees
and endorsements of (other than endorsements for purposes of collection in the
ordinary course of business), and obligations to purchase goods or services for
the purpose of supplying funds for the purchase or payment of, or measured by,
indebtedness, liabilities or obligations of others (whether or not representing
money borrowed) and other contingent obligations in respect of, or to purchase
or otherwise acquire or service, indebtedness, liabilities or obligations of
others (whether or not representing money borrowed) and (vi) all indebtedness,
liabilities or obligations (whether or not representing money borrowed) in
effect guaranteed by an agreement, contingent or otherwise, to make a loan,
advance or capital contribution to or other investment in the debtor for the
purpose of assuring or maintaining a minimum equity, asset base,
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working capital or other balance sheet condition for any date, or to provide
funds for the payment of any liability, dividend or stock liquidation payment,
or otherwise to supply funds to or in any manner invest in the debtor for such
purpose. The guarantees, endorsements, obligations and agreements referred to
in clauses (v) and (vi) of the preceding sentence shall constitute (a) Current
Indebtedness to the extent the indebtedness, liabilities or obligations of
another Person to which they relate are Current Indebtedness of such other
Person and (b) Funded Indebtedness to the extent such related indebtedness,
liabilities or obligations of such other Person are Funded Indebtedness of such
other Person.
"Institutional Holder" means any insurance company, bank, savings and loan
association, trust company, investment company, charitable foundation, employee
benefit plan (as defined in ERISA) or other institutional investor or financial
institution which, in any case is, at the time of determination, the holder of a
Note.
"Investment" of any Person means any investment made by such Person in any
other Person by acquisition of stock or indebtedness, loan, advance, transfer or
purchase of property, capital contribution or otherwise (other than a direct or
indirect guarantee of such other Person's indebtedness or any agreement to pay,
purchase or service such other Person's indebtedness).
"Lenders" has the meaning specified in Section 1.1 of the Agreements.
"Lien" means any mortgage, lien, pledge, security interest, encumbrance or
charge of any kind, any conditional sale or other title retention agreement or
any Capital Lease.
"Memorandum" means the Private Placement Memorandum dated January 1997 and
relating to the Notes which was prepared by Prudential Securities Incorporated.
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<PAGE> 127
"Michael Family" has the meaning specified in Section 2.03 hereof.
"NSU" has the meaning specified in Section 2.15 of the Agreements.
"Net Income" means, with respect to any Person for any period, the net
income (or the net deficit, if expenses and charges exceed revenues and other
proper income credits) of such Person for such period determined in accordance
with GAAP as in effect from time to time, provided, however, that the Net Income
of the Company or any Subsidiary shall not include (i) extraordinary items, (ii)
any equity interest of the Company on unremitted earnings of any Unconsolidated
Subsidiary, and (iii) the Net Income of any Subsidiary prior to the date it
becomes a Subsidiary.
"Net Worth" means, with respect to any Person as of the date of
determination, the sum of redeemable preferred stock and common stockholders'
equity accounts of such Person as of such date, as determined in accordance with
GAAP.
"Optional Prepayment Date" has the meaning specified in Section 2.02
hereof.
"Overdue Interest Rate" means the greater (determined on a daily basis) of
8.58% per annum or the rate per annum which The Chase Manhattan Bank (or its
successor) announces publicly from time to time as its corporate base rate of
interest.
"PBGC" has the meaning specified in Section 2.13 of the Agreements.
"Papetti Companies" means Papetti's Hygrade Egg Products, Inc., Papetti
Foods, Inc., Quaker State Farms, Inc., Papetti's of Iowa Food Products, Inc.,
Monark Egg Corporation, Casa Trucking Limited Partnership, Egg Specialties,
Inc., Papetti Transport Leasing Limited Partnership and Papetti Equipment
Leasing Limited Partnership.
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"Papetti Family" has the meaning specified in Section 2.03 hereof.
"Pending Reorganization" means the several transactions among the Company
and North Star Universal, Inc., a Minnesota corporation, and its affiliates, all
substantially as described in the Memorandum.
"Person" includes an individual, a corporation, a partnership, a joint
venture, a trust, an unincorporated organization or a government or any agency
or political subdivision thereof.
"Plan" has the meaning specified in Section 2.13 of the Agreements.
"Prepayment Price" has the meaning set forth in Section 2.03 hereof.
"Priority Indebtedness" means the sum (without duplication) of the amounts
described in the following clauses (i), (ii) and (iii) and outstanding at the
time of computation: (i) the aggregate principal amount of all Indebtedness of
the Company and its Subsidiaries secured or evidenced by Liens permitted by
Section 4.02E outstanding at such time, (ii) the aggregate principal amount of
unsecured Indebtedness of all Subsidiaries, other than Indebtedness owned by the
Company or a Subsidiary, and (iii) the Aggregate Amount of all outstanding
capital stock of any Subsidiary acquired pursuant to Section 4.09C not owned by
the Company or any Subsidiary having preference as to dividends or upon
liquidation, and all rights, options and warrants to acquire any such preference
stock.
"Restricted Investment" means any Investment by the Company or any
Subsidiary in any other Person other than:
(i) marketable obligations issued or guaranteed by the United States
of America or by any agency of the United States of America, and maturing
not later than twelve months from the date of acquisition thereof,
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(ii) commercial paper which has the highest credit rating by Standard
& Poor's Rating Group, a division of McGraw-Hill, Inc. or Moody's Investors
Service, Inc., and maturing not later than 270 days from the date of
acquisition thereof,
(iii) negotiable certificates of deposit or bankers' acceptances which
have at least an A rating by Standard & Poor's Rating Group, a division of
McGraw-Hill, Inc. or Moody's Investors Service, Inc., are issued by or
drawn on a United States commercial bank or trust company which has capital
and surplus of at least $150,000,000, and which mature not later than
twelve months from the date of acquisition thereof,
(iv) any Investment in any Subsidiary or in any corporation which by
reason thereof will become a Subsidiary, and
(v) variable rate demand municipal securities rated AAA by Standard &
Poor's Rating Group, a division of McGraw-Hill, Inc. or Aaa by Moody's
Investors Service, Inc., provided however, that such securities must be
redeemable at par upon 30 days or less notice.
"Subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
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<PAGE> 130
"Subordinated Debt" means any Indebtedness that is in any manner
subordinated in right of payment or security in respect to the Indebtedness
evidenced by the Notes.
"Total Capitalization" means, as of any particular time, the sum of (i)
Consolidated Net Worth and (ii) Consolidated Funded Indebtedness.
"Unconsolidated Subsidiary" means any corporation less than a majority of
whose outstanding stock having ordinary voting power for the election of the
members of the board of directors (or other governing body) of such corporation
(other than stock having such power only by reason of the happening of a
contingency) shall at the time be owned by the Company and/or one or more
Subsidiaries of the Company.
"Weighted Average Life to Final Maturity" has the meaning specified in
Section 2.03 hereof.
"Wholly-owned" when used in connection with any Subsidiary means a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by the Company
and/or one or more of its Wholly-owned Subsidiaries.
"Yield Maintenance Price" has the meaning set forth in Section 7.01 hereof.
All accounting terms used herein and not expressly defined in this Note
shall have the meanings respectively given to them in accordance with GAAP as
they exist at the date of applicability thereof.
SECTION 7. DEFAULTS AND REMEDIES.
Section 7.0l. Events of Default. If one or more of the following events
(herein called "Events of Default") shall happen for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any
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<PAGE> 131
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body and be continuing:
A. Default shall be made in the payment of principal of (or premium,
if any, on) any Note when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment (including, without
limitation, a prepayment as provided in Section 2.01, 2.02 or 2.03), or by
acceleration or otherwise; or
B. Default shall be made in the payment of any interest on any Note
when such interest becomes due and payable and such default shall continue
for more than 5 days; or
C. Default shall be made in the due observance or performance of any
covenant, condition or agreement contained in Sections 4.01 to Section 4.11
and such default shall continue for more than 10 days; or
D. Default shall be made in the due observance or performance of any
other covenant, condition or agreement contained in this Note or in the
Agreement, and such default shall continue for 30 days after the earlier of
(1) written notice thereof, specifying such default and requesting that the
same be remedied, shall have been given to the Company by the holder of any
Note, and (2) a responsible officer of the Company's obtaining knowledge of
the occurrence of such default; or
E. The Company or any Subsidiary shall be adjudicated a bankrupt or
insolvent, or shall consent to the appointment of a receiver, trustee,
custodian or liquidator of itself or of any part of its property, or shall
admit in writing its inability, or shall fail, to pay its debts generally
as they come due, or shall make a general assignment for the benefit of
creditors, or shall file a voluntary petition in reorganization or
arrangement in a proceeding under any bankruptcy law (as now or hereafter
in effect) or an answer
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<PAGE> 132
admitting the material allegations of a petition filed against the Company
or any Subsidiary in any such proceeding, or shall, by voluntary petition,
answer or consent, seek relief under the provisions of any other now
existing or future bankruptcy or other similar law providing for the
reorganization or winding up of corporations, or the Company or any
Subsidiary or its directors or majority stockholders shall take action
looking to the dissolution or liquidation of the Company or such Subsidiary
(other than as contemplated by Section 4.09); or
F. An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of the Company or
any Subsidiary, a receiver, trustee, custodian or liquidator of the Company
or such Subsidiary or of any part of its property, and such receiver,
trustee, custodian or liquidator shall not have been removed or discharged
within 30 days thereafter, or any part of the property of the Company or
any Subsidiary shall, in any judicial proceeding, be sequestered and shall
not be returned to the possession of the Company or such Subsidiary within
30 days thereafter; or
G. A petition against the Company or any Subsidiary in a proceeding
under any bankruptcy law (as now or hereafter in effect) shall be filed and
shall not be dismissed within 30 days after such filing, or, in case the
approval of such petition by a court of competent jurisdiction is required,
shall be filed and approved by such a court as properly filed and such
approval shall not be withdrawn or the proceeding dismissed within 30 days
thereafter, or if, under the provisions of any other similar law providing
for reorganization or winding up of corporations and which may apply to the
Company or any Subsidiary, any court of competent jurisdiction shall assume
jurisdiction, custody or control of the Company or such Subsidiary or of
any part of its property and such jurisdiction, custody or control shall
not be relinquished or terminated within 30 days thereafter; or
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<PAGE> 133
H. The Company or any Subsidiary shall default in the payment of
principal or interest on any evidence of Indebtedness for money borrowed
in excess of $2,500,000 or shall default in the performance or observance
of any other term, condition or agreement contained in any such evidence
of Indebtedness (other than the Notes) or in any agreement relating
thereto, the effect of which is to cause or permit any holder of such
Indebtedness or a trustee to cause the same to become or be declared due
prior to its stated maturity; or
I. Final judgment for the payment of money in excess of $250,000
shall be rendered against the Company or any Subsidiary and the same
shall remain undischarged for a period of 30 days during which execution
shall not be effectively stayed; or
J. An event or condition specified in Section 5.1(g) of the
Agreements shall occur or exist with respect to any Plan or Multiemployer
Plan, as defined therein, and, as a result of such event or condition,
together with all other such events or conditions, the Company or any of
its ERISA Affiliates shall incur or shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan, the Internal Revenue Service
or the Pension Benefit Guaranty Corporation (or any combination of the
foregoing) that is material in relation to the financial condition of the
Company and its Subsidiaries, taken as a whole; or
K. Any representation or warranty made by the Company in the
Agreement or in any writing furnished in connection with the transactions
contemplated hereby shall prove to have been false or incorrect in a
material respect as of the date made;
then (i) upon the occurrence of any event of default described in items e, f or
g of this section (each a "bankruptcy default"), all of the notes shall
automatically become immediately due and payable, (ii) upon the occurrence of
any event of default described in items a or b of this section, the holder of
this
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<PAGE> 134
Note may at any time during its continuance, by written notice to the
company, declare this note to be due and payable, whereupon this note shall
forthwith mature and become due and payable or (iii) upon the occurrence of any
event of default other than a bankruptcy default, the holder or holders of at
least 66-2/3% in principal amount of the notes then outstanding (exclusive of
any notes held by the company, any subsidiary or any affiliate) may at any time
during its continuance, by written notice to the company, declare all of the
notes to be due and payable, whereupon in each case all of the notes shall
forthwith mature and become due and payable.
The amount payable upon the occurrence of a Bankruptcy Default shall be the
entire unpaid principal amount of the Notes, together with interest accrued
thereon to the date of the occurrence of such Bankruptcy Default, and such
amount shall be payable without presentment, demand, protest or other
requirement of any kind, all of which are expressly waived by the Company. The
amount payable upon an acceleration based on any other Event of Default shall
be, to the extent permitted by law, the Yield Maintenance Price, as defined
below, of the Notes so accelerated, together with interest accrued on the
unpaid principal amount of the Notes so accelerated to the date of
acceleration, and such amount shall be payable without presentment, demand,
protest or further notice, all of which are expressly waived by the Company.
On the Acceleration Calculation Date, as defined below, the Computing
Holder shall give written notice to the Company and all other holders of the
amount of the Yield Maintenance Price of the Notes so accelerated, which notice
shall set forth in reasonable detail the computation thereof.
For purposes of this Section 7.01, the following terms shall have the
following definitions.
"Acceleration Calculation Date" means the date on which the Yield
Maintenance Price of the Notes accelerated pursuant to this Section is
determined. The Acceleration Calculation Date shall be the date of the notice
given by the requisite holders of Notes
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<PAGE> 135
to the Company declaring all of the Notes due and payable pursuant to this
Section.
"Yield Maintenance Price" means the higher of (1) the entire unpaid
principal amount of the Notes so accelerated, or (2) the sum of the respective
Payment Values of each prospective interest payment, prospective mandatory
prepayment and the principal payment at maturity in respect of such Notes (the
amount of each such payment being herein referred to as a "Payment"). The
Payment Value of each Payment shall be determined by discounting such Payment at
the Reinvestment Rate, for the period from the scheduled date of such Payment to
the applicable date of acceleration. The "Reinvestment Rate" is the yield (as
reported on the Telerate Access Service (Page 500-offer side) or such other
display as may replace Page 500) which shall be imputed from the yields of those
actively traded United States Treasury securities having maturities as close as
practicable to the Weighted Average Life to Final Maturity of the Notes so
accelerated. The yields of such United States Treasury securities shall be
determined as of 10 A.M. Eastern Time on the Acceleration Calculation Date.
The terms "Computing Holder," "Payment Values," "Payment" and "Weighted
Average Life to Final Maturity" shall have the meanings set forth in Section
2.03 hereof.
Section 7.02. Suits for Enforcement. In case an Event of Default shall occur
and be continuing, the holder of this Note may proceed to protect and enforce
its rights by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant contained in this Note or
in aid of the exercise of any power granted in this Note, or may proceed to
enforce the payment of this Note or to enforce any other legal or equitable
right of the holder of this Note. The Company agrees that its obligations under
Section 2.03 of the Note are of the essence of such Note, and upon application
to any court of equity having jurisdiction in the premises, the holder of the
Notes shall be entitled to a decree against the Company requiring specific
performance of such obligations. If any holder of a Note shall demand payment
thereof or take any other
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<PAGE> 136
action in respect of an Event of Default, the Company will forthwith give
written notice, as provided in Section 8.02, to the other holders of Notes
specifying such action and the nature and status of the Event of Default.
Section 7.03. Remedies Not Exclusive, Etc. No remedy herein or in the
Agreement conferred upon or reserved to any holder of any of the Notes is
intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given under the Agreement or the Notes or now or hereafter existing at
law or in equity. No delay in exercising or omission to exercise any right or
power accruing upon any default, omission or failure of performance hereunder or
under the Agreement shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle any holder
of any of the Notes to exercise any remedy reserved to it in the Notes or in the
Agreement, it shall not be necessary to give any notice to any person. In the
event any provision contained in the Notes should be breached by the Company and
thereafter duly waived by the holders from time to time of the Notes in
compliance with Section 5, such waiver shall be limited to the particular breach
so waived and shall not be deemed to waive any other breach hereunder. No
waiver, amendment, release, termination or modification of the Notes shall be
established by conduct, custom or course of dealing but solely by an instrument
in writing in compliance with Section 5.
SECTION 8. MISCELLANEOUS.
Section 8.01. Costs and Expenses. Without limiting the provisions of Section
6.1 of the Agreements, if any Event of Default shall occur, the Company shall
pay to each holder of the Notes, to the extent permitted under applicable law,
all reasonable out-of-pocket expenses incurred by such holder in connection with
such Event of Default and such further amount as shall be sufficient to cover
the cost and expense of enforcement and collection, including reasonable
compensation to the
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<PAGE> 137
attorneys and counsel of such holder for any services rendered in that
connection, upon the Notes, held by such holder.
Section 8.02. Notices. All notices to be given to any holder of this Note
shall be given by overnight air courier, or by facsimile communication confirmed
by overnight air courier to such holder at its address designated on the date of
such notice on the register or other record maintained by the Company.
Section 8.03. Covenants Bind Successors and Assigns. All covenants and
agreements in this Note by the Company shall bind its successors and assigns,
whether so expressed or not.
Section 8.04. Governing Law. This Note shall be construed in accordance with
and governed by the laws of the State of Minnesota.
Section 8.05. Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
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<PAGE> 138
IN WITNESS WHEREOF, MICHAEL FOODS, INC. has caused this Note to be signed
in its corporate name by one of its officers thereunto duly authorized, and to
be dated as of the day and year first above written.
MICHAEL FOODS, INC.
By
Its
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<PAGE> 139
MICHAEL FOODS, INC.
LIENS SECURING INDEBTEDNESS FOR MONEY BORROWED
OF THE COMPANY AND ITS SUBSIDIARIES
AS AT JANUARY 31, 1997 AND OF
THE PAPETTI COMPANIES ON THE DATE
OF THEIR ACQUISITION
A. Liens Securing Indebtedness for borrowed money of the Company and its
Subsidiaries as at January 31, 1997.
<TABLE>
<CAPTION>
NATURE AMOUNT OF
OF INDEBTEDNESS
OBLIGOR OBLIGEE SECURITY SECURED
<S> <C> <C> <C>
Kohler Mix City of White Bear Utility $ 14,220
Specialties, Inc. Lake Assessments
Northern Star Ryder Tractor/Trailers $ 67,149
Company
M. G. Waldbaum Company Erwin and Delores Real estate $ 54,164
Siebrandt
M. G. Waldbaum Company Bloomfield Community Real estate $ 211,362
Development
</TABLE>
EXHIBIT B
(to Loan Agreement)
<PAGE> 140
B. Liens Securing Indebtedness for borrowed money of the Papetti Companies to
be outstanding on the date of their acquisition.
<TABLE>
<CAPTION>
NATURE AMOUNT OF
OF INDEBTEDNESS
OBLIGOR OBLIGEE SECURITY SECURED
<S> <C> <C> <C>
Papetti's Hygrade GE Capital Fleet Tractor/Trailers $600,000
Egg Products, Inc. Services
Papetti's of Iowa City of Lenox, Jobs Training $350,000
Food Products, Inc. Iowa Agreement
CASA Trucking First Union Tractor/Trailers $677,000
Limited Partnership Commercial
(to be assumed by Corporation
Papetti's
Acquisition, Inc.)
</TABLE>
B-140
<PAGE> 141
COMPANY SUBSIDIARIES AND CERTAIN PAPETTI COMPANIES
A. Subsidiaries
SUBSIDIARY NAME JURISDICTION CAPITALIZATION
Common stock ($0.01 PV) -
Crystal Farms Refrigerated 1,000 shares authorized,
Distribution Company Minnesota issued and outstanding
M. G. Waldbaum Company Nebraska Voting preferred stock
($0.10 PV) - 585,800
shares authorized, 468,640
shares issued and
outstanding;
Non-voting preferred stock
($0.10 PV) - 1,180, 866
shares authorized,
1,001,102 shares issued
and outstanding;
Voting common stock ($0.10
PV) - 12,000 shares
authorized, issued and
outstanding;
Non-voting common stock
($0.10 PV) - 1,000 shares
authorized, no shares
issued and outstanding
Including: Minnesota Common stock ($0.01 PV) -
Papetti's 1,000 shares authorized,
Acquisition, Inc. issued and outstanding
Casa Trucking, Inc. Minnesota Common stock ($0.01 PV)
1,000 shares authorized,
issued and outstanding
Farm Fresh Foods, Inc. California Common stock (No PV) -
2,500 shares authorized,
EXHIBIT C
(to Loan Agreement)
<PAGE> 142
1,000 shares issued and
outstanding
Drallos Potato Co., Inc. Michigan Common stock ($1.00 PV) -
50,000 shares authorized,
issued and outstanding
Kohler Mix Specialties, Inc. Minnesota Common stock (No PV) -
2,500 shares authorized,
1,000 shares issued and
outstanding
Including Minnesota Common stock (No PV) -
Midwest Mix, Inc. 2,500 shares authorized,
1,000 shares issued and
outstanding
Northern Star Co. Minnesota Preferred stock ($100.00
PV) - 100,000 shares
authorized, no shares
issued and outstanding;
Common stock ($0.01 PV) -
25,000,000 shares
authorized, 200,000 shares
issued and outstanding
Including:
Minnesota Products, Minnesota Common stock ($1.00 PV) -
Inc. 25,000 shares authorized,
10,000 shares issued and
outstanding
B.C.K. Co. Minnesota Common stock ($25.00 PV) -
1,000 shares authorized,
300 shares issued and
outstanding
WFC, Inc. Wisconsin Common stock ($0.01 PV) -
10,000 shares authorized,
issued and outstanding
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<PAGE> 143
Including: Wisconsin Common stock ($1,000 PV) -
Wisco Farm 200 shares authorized,
Cooperative issued and outstanding
MIKLFS Corporation Virgin Islands Common stock ($1.00 PV) -
1,000 shares authorized,
issued and outstanding
B. Papetti Companies which are organized as corporations.
NAME JURISDICTION
Papetti's Hygrade Egg Products, Inc. New Jersey
Quaker State Farms, Inc. Pennsylvania
Papetti's of Iowa Food Products, Inc. Iowa
Monark Egg Corporation Missouri
Egg Specialities, Inc. Pennsylvania
Papetti Foods, Inc. New Jersey
C. Papetti Companies which are organized as limited Partnerships.
NAME
CASA Trucking Limited Partnership
Papetti Transport Leasing Limited Partnership
Papetti Equipment Leasing Limited Partnership
Papetti's Hygrade Egg Products, Inc. will be merged into Michael Foods,
Inc. upon the acquisition of the Papetti Companies. Each of the other Papetti
Companies set forth in Section B above will be merged into Papetti's
Acquisition, Inc.,
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<PAGE> 144
a wholly-owned subsidiary of M. G. Waldbaum Company upon the acquisition of the
Papetti Companies. Substantially all of the assets of each of the Papetti
Companies set forth in Section C above will be acquired by Papetti's
Acquisition, Inc. upon the acquisition of the Papetti Companies. Following the
acquisition of the Papetti Companies, Papetti's Acquisition, Inc. will change
its name to "Papetti's Hygrade Egg Products, Inc."
C-144
<PAGE> 145
LITIGATION
1. Michael Foods, Inc. and North Carolina State University vs. Papetti's
Hygrade Egg Products, Inc., U.S. District Court for the District of New Jersey,
File No. 89-4645. This action arises out of the alleged breach by the Defendant
of certain patents owned by North Carolina State University and licensed to the
Company. The Company obtained summary judgment affirming the validity of one of
the patents and finding the defendant to have infringed the patent. This
judgment was affirmed on appeal to the Federal Circuit Court of Appeals.
Discovery on the question of damages has been suspended pending a reexamination
of the patent in the Patent Office. As a condition precedent to the acquisition
of the Papetti Companies (including the Defendant herein), this litigation will
be dismissed.
2. NuLaid Foods, Inc. vs. Michael Foods, Inc. and North Carolina State
University, U.S. District Court for the Eastern District of California, Civil
Action No. CIV-S-93-1319 WBS JFM. This is an action commenced by NuLaid Foods,
Inc. seeking a declaratory judgment that the patents which are the subject of
the patent litigation described in No. 1 above are invalid. The Company and
North Carolina State University have counterclaimed for infringement of the
patent by the Plaintiff. Further proceedings in this litigation have been
stayed pending a reexamination of the patent in the Patent Office.
3. Schwan's Sales Enterprises, Inc. vs. Kohler Mix Specialties, Inc., et.
al., Lyon County District Court, 5th Judicial District, File No. C6-95-357. In
May, 1995 an action was commenced against the Company's subsidiary, Kohler Mix
Specialties, Inc. ("Kohler Mix") and certain other parties by Schwan's Sales
Enterprises, Inc. ("Schwan's") seeking recovery of damages arising out of
alleged salmonella contamination of Schwan's ice cream that had been distributed
to the public in the summer and fall of 1994. Following an investigation by
Schwan's and various government agencies, it was determined that Schwan's ice
cream product evidenced the presence of salmonella bacteria.
EXHIBIT D
(to Loan Agreement)
<PAGE> 146
Schwan's operations were interrupted for a period of time and Schwan's has made
settlements with customers who claimed injury from consuming Schwan's ice cream.
Kohler Mix and others supplied ice cream mix to Schwan's in tanker trucks
operated by the same transporter during the time in question. The complaint
seeks to recover all or a portion of the loss sustained by Schwan's as a result
of the incident. Discovery is on-going. A mediation conference is scheduled
for April, 1997. The Company's and Kohler Mix's products liability carrier,
Liberty Mutual Insurance Company has undertaken defense of the litigation
without waiving coverage defenses. Underlying insurance and excess insurance
provides $55,000,000 in coverage.
-146-
<PAGE> 147
NOVATION AND ASSUMPTION AGREEMENT
THIS NOVATION AND ASSUMPTION AGREEMENT ("Agreement") made this 26th day of
February, 1997 by and between MICHAEL FOODS, INC., a Delaware corporation, whose
name will be changed to "Michael Foods of Delaware, Inc." upon the occurrence of
the Michael Reorganization ("Old Michael"), North Star Universal, Inc. a
Minnesota corporation, whose name will be changed to "Michael Foods, Inc." upon
the occurrence of the Michael Reorganization ("New Michael") and
_________________________ ("Holder").
WITNESSETH:
WHEREAS, pursuant to a certain Loan Agreement between Old Michael and
Holder dated as of February 26, 1997 (as said Loan Agreement may have been
amended from time to time, the "Loan Agreement"), Old Michael did issue to
Holder ____________ Dollars ($_____________) in aggregate principal amount of
Old Michael's 7.58% Senior Notes due February 26, 2009 (the "Notes"), all of
which are outstanding as of the date hereof; and
WHEREAS, pursuant to a certain Agreement and Plan of Reorganization between
Old Michael, New Michael and NSU Merger Co., a Delaware corporation and a
wholly-owned subsidiary of New Michael ("Merger Sub") dated December 21, 1995
(as said Agreement and Plan of Reorganization may have been amended from time to
time, the "Reorganization Agreement"), the parties thereto have agreed to enter
into a tax-free reorganization under the terms of which (i) Merger Sub will
merge with and into Old Michael, (ii) Old Michael will become a wholly-owned
subsidiary of New Michael, (iii) Old Michael will change its name to "Michael
Foods of Delaware, Inc.", and (iv) New Michael will change its name to "Michael
Foods, Inc." (hereinafter referred to as the "Michael Reorganization"); and
WHEREAS, the parties hereto have agreed that subject to the terms and
conditions hereinafter set forth, immediately upon the occurrence of the Michael
Reorganization in accordance with the
EXHIBIT E
(to Loan Agreement)
<PAGE> 148
provisions of the Reorganization Agreement, New Michael will be substituted for,
and will assume all obligations of Old Michael under the Loan Agreement, Notes
and related documents and New Michael will be entitled to all of the benefits
thereof.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto hereby agree as follows:
1. Recitals. The aforesaid recitals are hereby made a part of this
Agreement.
2. Definitions. Capitalized terms in this Agreement not otherwise defined
herein shall have the meanings assigned to them in the Loan Agreement and the
Reorganization Agreement.
3. Novation and Assumption. As of the Effective Time on the Effective Date
of the Michael Reorganization, (a) New Michael shall without further act or deed
of the parties hereto, be entitled to all of the benefits and rights of Old
Michael under the Loan Agreement, Notes and all documents executed and delivered
by Old Michael pursuant thereto (collectively, the "Loan Documents"), (b) New
Michael shall, and it hereby does without further act or deed of the parties
hereto unconditionally and expressly, (i) assume all liabilities and obligations
of Old Michael under the Loan Documents and (ii) agree to perform all
liabilities and obligations of Old Michael under said Loan Documents, as if said
Loan Documents were originally executed and delivered by New Michael, and (c)
all references in the Loan Documents to the "Company" shall refer to New Michael
except for references to the Company relating to its status prior to the
consummation of the Michael Reorganization.
4. Release of Old Michael. As of the Effective Time on the Effective Date
of the Michael Reorganization, Holder shall, and it hereby does without further
act or deed of the parties hereto other than the satisfaction of the conditions
precedent set forth in Section 6.7 of the Loan Agreement and the receipt from
New Michael of a certificate, dated as of the Effective Date, of the President
or any Vice President of New Michael
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<PAGE> 149
stating that the Michael Reorganization has been effected and that the
representations and warranties set forth in paragraph 5(b) hereof are true and
correct on and with respect to such Effective Date, release Old Michael from all
liabilities and obligations under the Loan Documents.
5. Representations and Warranties. As of the Effective Time on the
Effective Date of the Michael Reorganization, New Michael shall, and it hereby
does without any further act or deed of the parties hereto, (a) accept and
assume all obligations and liabilities of Old Michael related to each
representation or warranty made by Old Michael in the Loan Agreement or any
other document, instrument or agreement executed and delivered or furnished in
connection therewith, and (b) further represent, warrant and affirm for the
benefit of the Holder that:
(i) Organization, Authority and Good Standing. New Michael is a duly
organized and validly existing corporation in good standing under the laws
of its jurisdiction of incorporation and has full power and authority to
own the properties and assets and to carry on the business which it now
owns and carries on. New Michael is duly qualified and in good standing as
a foreign corporation in each jurisdiction wherein the nature of the
property owned or leased by it or the nature of the business transacted by
it makes such qualification necessary, except where the failure to so
qualify would not have a material and adverse effect on the business,
operations, properties, prospects, assets or condition, financial or other,
of New Michael and its Subsidiaries taken as a whole.
(ii) Compliance with Other Instruments. Except as may have been
permanently waived in writing, neither New Michael nor any of its
Subsidiaries is in default in the performance, observance or fulfillment of
any of the material obligations, covenants or conditions contained in any
bond, debenture, note or other evidence of indebtedness of New Michael or
any such Subsidiary or contained in any instrument under or pursuant to
which any thereof has been issued or made and delivered the effect of which
would
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<PAGE> 150
materially and adversely affect the business, operations, properties,
prospects, assets or condition, financial or other, of New Michael and its
Subsidiaries taken as a whole. Neither the execution and delivery of this
Agreement by New Michael, the consummation by New Michael of the
transactions herein contemplated nor compliance by New Michael with the
terms, conditions and provisions of the Loan Documents will violate any
provision of law or rule or regulation thereunder or any order, injunction
or decree of any court or other governmental body to which New Michael is a
party or by which New Michael is bound or conflict with or result in a
breach of any of the terms, conditions or provisions of the corporate
charter or by-laws of New Michael or of any agreement or instrument to
which New Michael is a party or by which New Michael is bound, or
constitute a default thereunder, or result in the creation or imposition of
any Lien of any nature whatsoever upon any of the properties or assets of
New Michael. No consent of the stockholders of New Michael is required for
the execution, delivery and performance of this Agreement by New Michael.
(iii) Foreign Asset Control Regulations. Neither this Agreement nor
any of the transactions contemplated hereby will result in a violation of
any of the foreign asset control regulations of the United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any ruling
issued thereunder or any enabling legislation or Presidential Executive
Order in connection therewith.
(iv) Investment Company Act. New Michael is not an "investment
company," or a Person "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
(v) Governmental Action. No action of, or filing with, any
governmental or public body or authority is required to authorize, or is
otherwise required in connection with, the execution, delivery and (except
for such filings as may be required in connection with the
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<PAGE> 151
Michael Reorganization) performance of this Agreement by New Michael.
(vi) Indebtedness. After giving effect to the Michael Reorganization,
New Michael and its Subsidiaries shall not be liable with respect to any
material amount of Indebtedness which was not outstanding with respect to
Old Michael, its Subsidiaries and the Papetti Companies at the Closing Date
under the Loan Agreement or disclosed in the Memorandum.
(vii) Events of Default. After giving effect to the Michael
Reorganization, no Event of Default or event which with the passage of time
or giving of notice, or both, would become an Event of Default, has
occurred and is continuing under the Loan Agreement and New Michael has the
capacity to incur at least $1 of additional Funded Indebtedness in
compliance with Section 4.01A of the Notes.
6. Further Assurances. At any time and from time to time, upon the request
of any holder of a Note and at the sole expense of New Michael, New Michael will
promptly execute and deliver any and all further instruments and documents and
will take such further action as such holder may reasonably deem necessary to
effect the purposes of this Agreement.
7. Continuing Effectiveness. Except only as provided in paragraphs 3 and 4
above, all of the terms, covenants and conditions of the Loan Documents shall
remain in full force and effect and are hereby ratified and confirmed.
8. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Agreement.
9. Termination of Agreement. Notwithstanding anything in this Agreement to
the contrary, in the event the Effective Time of the Effective Date of the
Michael Reorganization does not
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<PAGE> 152
occur on or before 11:59 o'clock p.m., Minnesota time on May 31, 1997, this
Agreement shall, without further act or deed of the parties hereto, become null
and void and of no further force or effect.
10. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of Old Michael, New Michael and Holder and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
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<PAGE> 153
"OLD MICHAEL"
MICHAEL FOODS, INC.
By: ___________________________
Its: _______________________
By: ___________________________
Its: _______________________
"NEW MICHAEL"
NORTH STAR UNIVERSAL, INC.
By: ___________________________
Its: ________________________
By: ___________________________
Its: ________________________
"HOLDER"
[VARIATION]
By: ___________________________
Its: ________________________
By: ___________________________
Its: ________________________
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<PAGE> 154
ERISA AFFILIATES
Affiliates (other than employees):
Each of the Subsidiaries of Michael Foods, Inc. listed on Exhibit C to the
Loan Agreement;
The following directors of Michael Foods, Inc.:
Richard A. Coonrod
Miles E. Efron
Arvid C. Knudtson
Joseph D. Marshburn
James H. Michael
Jeffrey J. Michael
Maureen B. Bellantoni
Gregg A. Ostrander
Arthur J. Papetti - upon acquisition of Papetti
Companies
Stephen Papetti - upon acquisition of Papetti
Companies;
The following officers of Michael Foods, Inc. who are not also directors:
Jeffrey M. Shapiro
John D. Reedy
Mark D. Witmer
Employee Benefit Plans:
Michael Foods, Inc. Retirement Savings Plan;
Northern Star Company 401(K) Salary Reduction Plan;
Kohler Mix Specialties, Inc. Retirement Plan;
Michael Foods, Inc. Employee Health Benefit Plan (Health and Dental);
EXHIBIT F
(to Loan Agreement)
<PAGE> 155
Michael Foods, Inc. Flexible Benefits Plan (Health Care Reimbursement
Plan and Dependent Care Assistance Plan);
Michael Foods, Inc. Long-Term Disability Plan;
Michael Foods, Inc. Health and Welfare Benefit Plan Survivor Benefits
(Life and Accidental Death and Dismemberment);
Michael Foods, Inc. Short Term Disability Plan
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<PAGE> 1
EXHIBIT 10.40
MICHAEL FOODS, INC.
AMENDMENT AGREEMENT
Re: Loan Agreement dated December 1, 1989
Dated as of
February 26, 1997
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010-3690
Ladies and Gentlemen:
Reference is made to the Loan Agreement dated December 1, 1989 (the
"Outstanding Agreement"), between MICHAEL FOODS, INC., a Delaware corporation
(the "Company"), and you, under and pursuant to which you loaned $50,000,000 to
the Company and the Company evidenced such loan by a like aggregate principal
amount of the Company's 9.50% senior notes due December 1, 1999. $26,000,000
aggregate principal amount of such senior notes, as heretofore amended, (the
"Outstanding Notes") is presently outstanding.
The Company now desires to amend certain provisions of the Outstanding
Agreement and the Outstanding Notes. You are the owner and holder of 100% of
the Outstanding Notes. The Company hereby requests that from and after your
acceptance hereof in the manner hereinafter provided, said Outstanding
Agreement and Outstanding Notes shall be amended in the respects, but only in
the respects, hereinafter set forth.
ARTICLE I
AMENDMENTS TO OUTSTANDING AGREEMENT
I-A. Section 5 of the Outstanding Agreement is hereby amended and restated
in its entirety to read as follows:
<PAGE> 2
"SECTION 5. FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES;
ADDITIONAL INFORMATION; INSPECTION.
Section 5.1. Financial Statements and Reports. From and after
February 26, 1997, the Company will deliver to each Institutional Holder,
in duplicate:
(a) as soon as practicable, and in any event within 60 days
after the end of each quarterly period (other than the last
quarterly period) in each fiscal year of the Company, the
consolidated statement of income of the Company and its
Subsidiaries for such period and for that part of the fiscal year
ended with such quarterly period, the consolidated statement of
cash flows of the Company and its Subsidiaries for that part of the
fiscal year ended with such quarterly period and the consolidated
balance sheet of the Company and its Subsidiaries as at the end of
such period, setting forth in each case in comparative form the
corresponding figures as of the end of and for the corresponding
quarterly period of the preceding fiscal year (or, in the case of
the consolidated balance sheet, as of the end of and for the then
most recent fiscal year), all in reasonable detail, prepared in
conformity with generally accepted accounting principles applied on
a basis consistent with that of previous years (except as otherwise
stated therein or in the notes thereto and except that footnotes
shall not be required) and certified by the chief financial officer
of the Company as presenting fairly the financial condition and
results of operations of the Company and its Subsidiaries as at the
end of and for the fiscal periods to which they relate, subject to
the Company's year end adjustments;
(b) as soon as practicable, and in any event within 90 days
after the end of each fiscal year of the Company, the consolidated
balance sheet and related consolidated statements of income,
stockholders' equity and cash flows of the Company and its
Subsidiaries as
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<PAGE> 3
at the end of and for such year, setting forth in each case in
comparative form the corresponding figures as at the end of and for
the previous fiscal year, all in reasonable detail, prepared in
conformity with generally accepted accounting principles applied on
a basis consistent with that of previous years (except as otherwise
stated therein or in the notes thereto) and certified by the chief
financial officer of the Company as presenting fairly the financial
condition, results of operations and cash flows of the Company and
its Subsidiaries as at the end of and for the fiscal year to which
such financial statements relate, and accompanied by a report or
opinion of independent certified public accountants of recognized
national standing selected by the Company stating that such
financial statements present fairly the consolidated financial
condition, results of operations and cash flows of the Company and
its Subsidiaries in accordance with generally accepted accounting
principles consistently applied (except for changes with which such
accountants concur) and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards;
(c) concurrently with the financial statements delivered
pursuant to Section 5.1(b), the written statement of said
accountants that in making the examination necessary for their
report or opinion on said financial statements they have obtained
no knowledge of any Event of Default or any event which, with
notice or lapse of time or both, would constitute such an Event of
Default, or, if such accountants shall have obtained knowledge of
any such Event of Default or event, they shall disclose in such
statement the Event of Default or event and the nature and status
thereof;
(d) concurrently with the financial statements delivered
pursuant to Sections 5.1(a) and 5.1(b), a certificate of the chief
financial officer of the
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<PAGE> 4
Company (1) stating that a review of the activities of the Company
and its Subsidiaries during such fiscal period has been made under
such officer's supervision to determine whether the Company has
fulfilled all of its obligations under this Agreement and the
Notes, (2) setting forth, where applicable, the figures and
computations demonstrating the compliance by the Company with the
requirements of Section 4 of the Notes as at the end of such fiscal
period; provided, that, as at the end of each of the first three
quarterly fiscal periods, the Company need only demonstrate
compliance with Sections 4.03 and 4.04, and (3) stating that, to
the best of such officer's knowledge, there exists no Event of
Default under this Agreement or under the Notes or event which,
with notice or lapse of time or both, would constitute such an
Event of Default, or, if any such Event of Default or event exists,
specifying such Event of Default or event and the nature and status
thereof;
(e) as soon as practicable, copies of all financial
statements, proxy statements and reports as the Company shall send
or make available generally to its security holders and all
registration statements and regular periodic reports, if any, which
it or any of its Subsidiaries may file with the Securities and
Exchange Commission or any governmental agency or agencies
substituted therefor or with any national securities exchange;
(f) as soon as practicable, and in any event within three days
after a responsible officer of the Company becomes aware of the
existence of an Event of Default under the Notes or any other
evidence of Indebtedness of the Company or any of its Subsidiaries,
or an event which, with notice or lapse of time or both, would
constitute such an Event of Default, written notice specifying the
nature and period of existence thereof and what action the Company
or such
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<PAGE> 5
Subsidiary, as the case may be, is taking or proposes to take with
respect thereto;
(g) as soon as practicable, and in any event within thirty
days after the Company or any of its ERISA Affiliates knows or
reasonably should know that any of the events or conditions
specified below with respect to any Plan, as defined in Section
2.12 hereof, or Multiemployer Plan, as defined in Section
4001(a)(3) of ERISA (as defined in Section 2.12 hereof), has
occurred or exists, a statement, signed by a financial officer of
the company setting forth details respecting such event or
condition, and the action, if any, that the Company or its ERISA
Affiliate proposes to take with respect thereto and a copy of any
report or notice required to be filed with or given to the PBGC, as
defined in Section 2.12 hereof, by the Company or its ERISA
Affiliate with respect to such event or condition;
(i) any "Reportable Event," as defined in Section 4043
(b) of ERISA with respect to a Plan or Multiemployer Plan, as
to which the PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event; provided,
however, that the failure to meet the minimum funding
standard of Section 412 of the Code, as defined in Section
2.12 hereof, or Section 302 of ERISA shall be a Reportable
Event regardless of the issuance of any waivers in accordance
with Section 303 of ERISA or Section 412(d) of the Code;
(ii) the filing under Section 4041(b) or 4041(c) of
ERISA by the Company or any of its ERISA Affiliates of a
notice of intent to terminate any Plan or the termination of
any Plan or the treatment of a Plan amendment as a Plan
termination under Section 4041(e) of ERISA;
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<PAGE> 6
(iii) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any of its ERISA Affiliates of a
notice from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the Company
or any of its ERISA Affiliates under Section 4203 or 4205 of
ERISA from a Multiemployer Plan, or the receipt by the
Company or any of its ERISA Affiliates of notice from a
Multiemployer Plan that such Multiemployer Plan is in
reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against the Company or any of its
ERISA Affiliates to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days;
(vi) any event or series of events has occurred or
exists which could reasonably be expected to result in
liability to the Company or any of its ERISA Affiliates under
Title IV of ERISA pursuant to Section 4069(a) or 4212(c) of
ERISA; and
(vii) any statutory lien, under the Code or ERISA, shall
have been placed upon the assets of the Company or any of its
ERISA Affiliates in respect to any Plan or Multiemployer
Plan;
(h) as soon as practicable, and in any event within thirty
days of receipt thereof, copies of any
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<PAGE> 7
notice to the Company or any Subsidiary from any Federal or state
governmental authority relating to any order, ruling, statute or
other law or regulation which involves the likelihood of any
material and adverse change in the business, operations,
properties, prospects, assets or condition, financial or other, of
the Company and its Subsidiaries, taken as a whole; and
(i) such other information as to the business and properties
of the Company and of its Subsidiaries, consolidated financial
statements of the Company and its Subsidiaries and financial
statements and other reports filed by the Company or any of its
Subsidiaries with any governmental department, bureau, commission
or agency, as any Institutional Holder may from time to time
reasonably request.
Section 5.2. Right to Inspect Properties, Books, Etc. From and
after February 26, 1997 each Institutional Holder (or such Persons as
such Institutional Holder may designate) shall have the right to visit
and inspect any of the properties of the Company and its Subsidiaries, to
examine the books of account and records of the Company and its
Subsidiaries, to make copies and extracts therefrom of financial records
of the Company and its Subsidiaries, to discuss the affairs, finances,
accounts and condition of the Company and its Subsidiaries with, and to
be advised as to the same by, their respective officers, employees and
independent accountants, all at such reasonable times and intervals as
such Institutional Holder may desire. The Company shall be required to
pay or reimburse any Institutional Holder for all reasonable expenses
which it may incur in connection with any such visitation or inspection
if an Event of Default shall have occurred and be continuing at the time
thereof."
I-B. Section 6 of the Outstanding Agreement is hereby amended and restated
in its entirety to read as follows:
"SECTION 6. MISCELLANEOUS.
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<PAGE> 8
Section 6.1. Expenses. The Company agrees to pay all reasonable
costs and expenses (including stamp and other taxes, if any, payable in
connection with the execution and delivery of the Agreements or the Notes
and reasonable attorney's fees of a special counsel) reasonably incurred
by you in connection with such transactions and incurred by any holder of
a Note in connection with the Pending Reorganization and any amendments,
waivers or consents under or in respect of the Agreements or the Notes
(whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in
enforcing or defending any rights under the Agreements or the Notes or in
responding to any subpoena or other legal process or informal
investigative demand issued in connection with the Agreements or the
Notes, or by reason of being a holder of any Note, and (b) the costs and
expenses, including financial advisors' fees, incurred in connection with
the insolvency or bankruptcy of the Company or any Subsidiary or in
connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The Company shall not, in
connection with any of the matters described in this Section 6.1, be
liable for the costs and expenses of more than one separate legal firm,
unless a holder of a Note reasonably determines that its interests as a
holder of Notes differs from the interests of other holders so as to
require separate legal advice. The Company also agrees to pay, and save
each holder of a Note harmless from, all claims in respect of any fees,
costs or expenses, if any, of brokers and finders (other than any
retained by you). The obligations of the Company under this Section 6.1
shall survive the transfer of any Note or portion thereof or interest
therein by any holder and the payment or prepayment of any Note.
Section 6.2. Stamp Taxes, etc. The Company will pay, and save you
and any subsequent holder of the Notes harmless against, any and all
liability (including any interest or penalty for non-payment or delay in
payment) with respect to stamp taxes (other than any such stamp taxes
incurred upon a transfer of the Notes by you or any other holder of the
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<PAGE> 9
Notes), if any, which may be payable or determined to be payable in
connection with the transactions contemplated by the Agreements,
including, without limitation, the issue and delivery of the Notes, the
acquisition thereof or any modification, amendment or alteration thereof
made at the request of the Company. The obligations of the Company under
this Section 6.2 shall survive the transfer of any Note or portion
thereof or interest therein by any holder and the payment or prepayment
of any Note.
Section 6.3. Successors and Assigns. All covenants, agreements,
representations and warranties made herein or in certificates delivered
in connection herewith by or on behalf of the Company shall survive the
issue and delivery of the Notes to you, the making of the loan by you as
provided in Section 1.2 and payment therefor, and shall bind the
successors and assigns of the Company, whether so expressed or not, and
all such covenants, agreements, representations and warranties shall
inure to the benefit of your successors and assigns, including any
subsequent holder of any of the Notes.
Section 6.4. Direct Payment. Notwithstanding anything to the
contrary contained in the Agreements or the Notes, in the case of any
Note owned by you or owned by any other Institutional Holder which has
given written notice to the Company requesting that the provisions of
this Section 6.4 shall apply, the Company will punctually pay when due
and payable the principal amount thereof then to be prepaid, interest
thereon and premium, if any, due with respect to said principal, without
any presentment thereof, directly to such holder at its address set forth
in Schedule I hereto or such other address as such holder may from time
to time designate in writing to the Company or, if a bank account with a
United States bank is set forth in Schedule I hereto or so designated,
the Company will make such payments in immediately available funds to
such bank account, marked for attention as indicated, or in such other
manner or to such other account in any bank in the United States as such
holder may from time to time direct in
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<PAGE> 10
writing. With respect to any Notes to which this Section 6.4 applies,
the Company shall be entitled to presume conclusively that you or any
Institutional Holder which has requested the provisions of this Section
6.4 to apply to its Notes remains the holder of such Notes until such
Notes shall have been presented to the Company as evidence of the
transfer thereof. Prior to any sale or other disposition of any Note to
which this Section 6.4 applies, the holder thereof shall make a notation
thereon of the aggregate amount of all payments of principal, if any,
theretofore made and of the date to which interest has been paid. If
requested by the Company, the holder of any Note which has been paid in
full shall promptly return such Note to the Company for cancellation.
Section 6.5. Notices. All communications provided for hereunder
shall be in writing and, if to a holder of a Note, delivered by overnight
air courier, or by facsimile communication confirmed by overnight air
courier, in each case addressed to such holder at its address set forth
on Schedule I hereto or such other address as any holder may designate to
the Company in writing, and, if to the Company, delivered by overnight
air courier, or by facsimile communication confirmed by overnight air
courier, to the Company at 324 Park National Bank Building, 5353 Wayzata
Blvd., Minneapolis, Minnesota 55416, Attention: Vice President-Finance,
or to such other address as the Company may in writing designate to the
holders.
Section 6.6. Defined Terms. The terms used herein and in
certificates delivered pursuant hereto shall have the meanings assigned
thereto in Exhibit A hereto, unless otherwise defined herein.
Section 6.7. Pending Reorganization. By your acceptance hereof you
shall be deemed to have agreed to enter into an agreement substantially
in the form of the Novation and Assumption Agreement (the "Assumption
Agreement") attached hereto as Exhibit E; provided that such Assumption
Agreement shall become effective only upon the
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<PAGE> 11
receipt by you of a favorable opinion of Maun & Simon, PLC, dated the
Effective Date of the Michael Reorganization (as such terms are used in
the Assumption Agreement) and in form and substance satisfactory to you
substantially to the effect that:
(i) New Michael (as defined in the Assumption Agreement) is a
duly incorporated and validly existing corporation in good standing
under the laws of the State of Minnesota and has the corporate
power and authority to own its property and assets and to carry on
its business as presently conducted and to enter into the
Assumption Agreement and perform its obligations as contemplated
therein;
(ii) the Assumption Agreement has been duly authorized,
executed and delivered by New Michael and constitutes the legal,
valid and binding obligation of New Michael enforceable in
accordance with its terms (except as enforceability may be limited
by bankruptcy, insolvency or other similar laws affecting
creditors' rights generally and by general principles of equity);
and that no consent of shareholders is required for the execution
and delivery of the Assumption Agreement;
(iii) no action of, or filing with, any governmental or public
body or authority is required to authorize, or is otherwise
required in connection with, the execution, delivery and (except
for such filings as may be required in connection with the Pending
Reorganization) performance of the Assumption Agreement by New
Michael;
(iv) New Michael is, to the best of such counsel's knowledge,
duly qualified and in good standing as a foreign corporation in
each jurisdiction wherein the nature of the property owned or
leased by it or the nature of the business transacted by it makes
such qualification necessary, except where the failure so to
qualify would not have a material and adverse effect on
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<PAGE> 12
the business, operations, properties, prospects, assets or
condition, financial or other, of New Michael and its Subsidiaries
taken as a whole;
(v) neither the execution and delivery of the Assumption
Agreement by New Michael, the performance by New Michael of its
obligations thereunder nor compliance by New Michael with the
terms, conditions and provisions thereof will violate any order,
injunction or decree of any court or other governmental body to
which New Michael is a party or by which it is bound, or conflict
with or result in a breach of any of the terms, conditions or
provisions of the corporate charter or by-laws of New Michael or
any agreement or instrument, known to such counsel, to which New
Michael is a party or by which New Michael is bound, or constitute
a default thereunder, or result in the creation or imposition of
any Lien of any nature whatsoever upon any of the properties or
assets of New Michael;
and as to such other matters incident to the transactions contemplated by
the Pending Reorganization as you may reasonably request.
Section 6.8. Confidential Information. For the purposes of this
Section 6.8, "Confidential Information" means information delivered to
you by or on behalf of the Company or any Subsidiary in connection with
the transactions contemplated by or otherwise pursuant to this Agreement
that is proprietary in nature and that was clearly marked or labeled or
otherwise adequately identified in writing when received by you as being
confidential information of the Company or such Subsidiary, provided that
such term does not include information that (a) was publicly known or
otherwise known to you prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by you or
any person acting on your behalf, (c) otherwise becomes known to you
other than through disclosure by the Company or any Subsidiary or
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<PAGE> 13
(d) constitutes financial statements delivered to you under Section 5.1
hereof that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may
deliver or disclose Confidential Information to (i) your directors,
trustees, officers, employees, agents, attorneys and affiliates (to the
extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and
other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of
this Section 6.8, (iii) any other holder of any Note, (iv) any
institutional investor to which you sell or offer to sell such Note or
any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 6.8), (v) any Person from which
you offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information
to be bound by the provisions of this Section 6.8), (vi) any Federal or
state regulatory authority having jurisdiction over you, (vii) the
National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires
access to information about your investment portfolio or (viii) any other
Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or
order applicable to you, (x) in response to any subpoena or other legal
process, (y) in connection with any litigation to which you are a party
or (z) if an Event of Default has occurred and is continuing, to the
extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the
rights and remedies under your Notes and this Agreement. Each holder of
a Note, by its acceptance of a Note, will be deemed to have agreed to be
bound by and to be entitled to the benefits of this Section 6.8 as though
it were a party
-13-
<PAGE> 14
to this Agreement. On reasonable request by the Company in connection
with the delivery to any holder of a Note of information required to be
delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee),
such holder will enter into an agreement with the Company embodying the
provisions of this Section 6.8.
Section 6.9. Law Governing. This Agreement shall be construed in
accordance with and governed by laws of the State of Minnesota.
Section 6.10. Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall
not be deemed to constitute a part of this Agreement.
Section 6.11. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed
an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart."
I-C. The Outstanding Agreement is hereby amended to add Schedule I thereto
which Schedule I shall read as set forth on Annex X attached hereto.
I-D. Exhibit A to the Outstanding Agreement is hereby amended and restated
in its entirety so that the same shall read as set forth on Annex Y attached
hereto.
I-E. The Outstanding Agreement is hereby amended to add Exhibit E thereto
which Exhibit E shall read as set forth on Annex Z attached hereto.
ARTICLE II
AMENDMENTS TO OUTSTANDING NOTES
-14-
<PAGE> 15
Sections 1 through 8, both inclusive, of, and Schedule I to, the
Outstanding Notes shall, without any further action by you or the Company, be
amended to be in the form of Sections 1 through 8 and Schedule I as set forth
in Exhibit A to the Outstanding Agreement, as amended hereby.
ARTICLE III
MISCELLANEOUS
II-A. If the foregoing is acceptable to you, kindly note your acceptance
in the space provided below, and the Outstanding Agreement and Outstanding
Notes shall, as of February 26, 1997, be amended and restated as set forth
above, but all other terms and provisions of the Outstanding Agreement and the
Outstanding Notes shall remain unchanged and are in all respects ratified,
confirmed and approved.
-15-
<PAGE> 16
II-B. By your acceptance hereof you also agree that you shall, prior to
any sale, assignment, transfer, pledge, or other disposition by you of any
Outstanding Notes, either (i) place on the Outstanding Notes so to be disposed
of an appropriate endorsement referring to this Amendment Agreement as binding
upon the parties hereto and upon any and all future holders of such Outstanding
Notes, or (ii) (at your option) surrender such Outstanding Notes for new notes
in the form set forth in Annex Y attached hereto (the "New Notes"), which New
Notes shall be in an aggregate principal amount equal to the unpaid principal
amount of the surrendered Outstanding Notes and shall be dated and bear
interest from the date to which interest shall have been paid on the
surrendered Outstanding Notes. All expenses for the preparation of such New
Notes and the exchange of such Outstanding Notes are to be borne by the
Company.
Very truly yours,
MICHAEL FOODS, INC.
By
Its
-16-
<PAGE> 17
The foregoing Amendment Agreement and the amendments referred to therein
are hereby accepted and agreed to on the date of execution hereof and are
effective as of February 26, 1997, and the undersigned hereby confirms that on
February 26, 1997 it held $26,000,000 aggregate principal amount of Outstanding
Notes of the Company and that on the date of execution hereof it continues to
hold such Outstanding Notes.
METROPOLITAN LIFE
INSURANCE COMPANY
By _______________________________
Its
-17-
<PAGE> 18
"SCHEDULE I
METROPOLITAN LIFE INSURANCE COMPANY
P.O. Box 633
334 Madison Avenue
Convent Station, New Jersey 07961-0633
Attention: Private Placement Unit
Telecopier Number: (201) 254-3050
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as "Michael
Foods, Inc., 9.50% Senior Notes due
December 1, 1999, principal or interest")
to:
The Chase Manhattan Bank
(ABA #021000021)
Metropolitan Branch
33 East 23rd Street
New York, New York 10010
for credit to: Metropolitan Life
Insurance Company--Corporate
Investments
Account Number 002-2-410591
Notices
All notices and communications, including
notices with respect to payments and
written confirmation of each such payment,
to be addressed as first provided above
with duplicate notice to:
Metropolitan Life Insurance
Company
ANNEX X
(to Amendment Agreement)
<PAGE> 19
Fixed Income Investments
334 Madison Avenue, P.O. Box 633
Convent Station, New Jersey
07961-0633
Attention: Private Placement Unit
Telecopier Number: (201) 254-3050
Taxpayer I.D. Number: 13-5581829"
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<PAGE> 20
"EXHIBIT A
MICHAEL FOODS, INC.
9.50% Senior Note
Due December 1, 1999
No. R- Minneapolis, Minnesota
$ ___________,____
MICHAEL FOODS, INC., a corporation duly organized and existing under the
laws of the State of Delaware (hereinafter called the "Company"), for value
received, hereby promises to pay to _____________________, or registered
assigns, on December 1, 1999 the principal amount of ____________________
Dollars (or so much thereof as shall not have been prepaid) in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for public and private debts, at the principal office of the
Company in Minnesota, and to pay interest (computed on the basis of a 360-day
year of twelve 30-day months) at said office, in like coin or currency, on the
unpaid portion of said principal amount from the date hereof, semi-annually on
the first day of June and December in each year, commencing on the first such
day after the date hereof, at the rate of 9.50% until such unpaid portion of
such principal amount shall have become due and payable and at the Overdue
Interest Rate thereafter and, so far as may be lawful, on any unpaid premium or
any overdue installment of interest at the Overdue Interest Rate.
SECTION 1. THE NOTES; TRANSFERS, EXCHANGE, ETC.
Section 1.01. The Notes. This Note is one of an authorized issue of
senior notes (hereinafter called the "Notes") made by the Company in an
aggregate principal amount of $50,000,000, maturing on December 1, 1999,
bearing interest payable at the same rate and on the same dates as the interest
on the principal amount of this Note and issued pursuant to the Agreement.
ANNEX Y
(to Amendment Agreement)
<PAGE> 21
Section 1.02. Registration, Transfer or Exchange of Notes. The Notes are
issuable only as registered Notes. The Company will keep at its office or
agency maintained as provided in Section 3.01 a register in which the Company
shall provide for the registration and registration of transfer of the Notes.
The holder of this Note may, at its option and either in person or by duly
authorized attorney, surrender the same at said office or agency for
registration of transfer or exchange, accompanied if surrendered for transfer
by a written instrument of transfer duly executed by such holder or attorney.
In case such holder shall so request a transfer or exchange of this Note, the
Company shall deliver to or upon such holder's order one or more Notes in the
same aggregate unpaid principal amount as this Note, each dated as of the date
of, or, if later, the date to which interest has been paid on, this Note, in
the principal amount of $1,000,000 or a multiple of $100,000 in excess thereof,
(provided that one such new Note so issued to any holder may be issued in any
amount), as requested by such holder (provided that if such aggregate unpaid
principal amount is less than $1,000,000, the Company will deliver one Note in
exchange for the Note), and registered in such name or names as shall be
specified by such holder. The reasonable and customary expenses of such
exchange shall be borne by the requesting holder. Every new Note so made and
delivered upon transfer or in exchange for this Note shall be in the form of
Exhibit A to the Agreement and shall have attached thereto a Schedule I
providing a schedule for the prepayment of the principal portion thereof that
is in the same proportion, as nearly as may be, to the schedule of prepayments
of principal set forth in Schedule I to the Note so surrendered as the
outstanding principal amount of such new Note bears to the then outstanding
(after giving effect to any concurrent prepayment thereof) principal amount of
the Note so surrendered.
Prior to due presentation for registration of transfer of this Note, the
Company may deem and treat the registered holder hereof as the absolute owner
of this Note for the purpose of receiving payment of or on account of the
principal of and premium, if any, and interest on this Note, and for the
purpose of any notice, waiver or consent hereunder, and payment of this
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<PAGE> 22
Note shall be made only to or upon the order in writing of such holder.
Section 1.03. Loss, Theft, Destruction or Mutilation of Notes. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of a bond of indemnity reasonably satisfactory to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of this Note, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Note, a new Note of like tenor and unpaid principal
amount and dated the date of, or, if later, the date to which interest has been
paid on, the lost, stolen, destroyed or mutilated Note. In the case of an
Institutional Holder of the Notes, its own unsecured agreement of indemnity
shall be deemed satisfactory to the Company.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.01. Mandatory Prepayments. On June 1 and December 1 in each
year, commencing June 1, 1991, and continuing until the Notes shall be redeemed
in whole or December 1, 1999, whichever shall first occur, the Company will
prepay, at a prepayment price of 100%, an aggregate principal amount of the
Notes equal to the respective principal amount of such Notes set forth opposite
such date on Schedule I hereto, in each case together with interest accrued
thereon to such prepayment date, but without premium; provided, that upon any
partial prepayment of the Notes pursuant to Section 2.02 or Section 2.03 or any
partial prepayment, redemption, retirement, purchase or other acquisition of
the Notes pursuant to clause (d) of Section 4.11, the principal amount of each
required prepayment of the Notes becoming due under this Section 2.01 on and
after the date of such prepayment, redemption, retirement, purchase or other
acquisition shall be reduced in the same proportion as the aggregate principal
amount of the Notes is reduced as a result of such prepayment, redemption,
retirement, purchase or other acquisition.
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<PAGE> 23
Section 2.02. Optional Prepayments. In addition to the prepayments
required by Section 2.01 and Section 2.03:
A. Unconditional Optional Prepayments. The Company may at its
option, from time to time on any Business Day, prepay the Notes then
outstanding as a whole at any time, or in part in a minimum amount of
$1,000,000 or in $100,000 multiples in excess thereof from time to time,
by giving each holder thereof written notice, not less than 30 days nor
more than 60 days prior to the date fixed therein for such prepayment (an
"Optional Prepayment Date"), which notice shall also specify the
principal amount of the Notes held by such holder so to be prepaid.
B. Optional Prepayments on Failure of Holders to Grant Certain
Consents. In the event the Company shall request the holders of the
Notes in writing (with such request making specific reference to the
optional prepayment provisions set forth in this Section 2.02(B)) to
consent to a merger or consolidation of the Company not permitted
pursuant to the provisions of Section 4.07 hereof and the holder or
holders of 50% or more in aggregate principal amount of the then
outstanding Notes shall have failed or refused for a period of 30 days
following the receipt of such request, to consent in writing to such
merger or consolidation, then the Company may, on a Business Day (the
"Optional Prepayment Date") selected by the Company and occurring within
65 days after the expiration of such 30 day period, and upon not less
than 30 nor more than 60 days prior written notice, prepay all Notes held
by each holder which has failed or refused to consent to such merger or
consolidation. Any request by the Company made pursuant to this Section
2.02B shall set forth such financial and other information as is, in the
best judgment of the Company, necessary for each holder to make an
informed decision with respect to such requested consent.
C. Prepayment Out of Proceeds of Asset Disposition. In the event
that the Company shall elect to apply all or any portion of the proceeds
of sales, transfers or other
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<PAGE> 24
dispositions of assets or property to the repayment or prepayment of
unsubordinated Funded Indebtedness of the Company or a Subsidiary as
contemplated in Section 4.06, the Company will give written notice
("Company Notice") of such election to all holders of the Notes. The
Company Notice shall (i) describe the facts and circumstances of such
sales, transfers or other dispositions in reasonable detail, (ii) set
forth the aggregate principal amount of such proceeds (the "Designated
Proceeds") which it intends to apply to the prepayment or repayment of
unsubordinated Funded Indebtedness, (iii) contain an offer by the Company
to prepay on a stated date (the "Optional Prepayment Date"), which shall
be a Business Day not more than 60 days and not less than 30 days after
such Company Notice, the principal amount of Notes held by each holder
which bears the same relationship to the aggregate amount of such
Designated Proceeds as the aggregate principal amount of all Notes held
by such holder bears to the aggregate principal amount of all then
outstanding Funded Indebtedness (including the Notes) with respect to
which a portion of such Designated Proceeds is to be applied, and (iv)
request each holder to notify the Company in writing by a stated date,
which date shall be not less than 15 days after such holder's receipt of
the Company Notice, of its acceptance or rejection of such prepayment
offer. If a holder does not notify the Company as provided in subclause
(iv) above, then such holder shall be deemed to have accepted such offer.
For purposes of any prepayment pursuant to the provisions of subsection A
or subsection B or subsection C of this Section 2.02, the Computing Holder, as
defined in Section 2.03 herein, shall give written notice to the Company, on
the fifth Business Day prior to any Optional Prepayment Date determined
pursuant to subsection A or subsection B or subsection C above, of the amount
of the Prepayment Price, as defined in Section 2.03 herein, of the principal
amount of the Notes held by such Computing Holder so to be prepaid, which
notice shall set forth in reasonable detail the computation thereof.
Y-24
<PAGE> 25
The Company shall deliver to each holder then to be prepaid, at least two
Business Days before such Optional Prepayment Date, a certificate signed by a
principal financial officer of the Company setting forth the Prepayment Price
of the principal amount of the Notes held by such holder so to be prepaid,
accompanied by a copy of the written notice by the Computing Holder referred to
above (which sets forth the computation of the Prepayment Price of the Notes
held by the Computing Holder).
Thereupon, the Company covenants and agrees that it will on such Optional
Prepayment Date prepay the principal amount of the Notes held by such holder so
to be prepaid by payment to such holder of the Prepayment Price of such
principal amount, together with interest accrued on such principal amount to
such Optional Prepayment Date. No prepayment of less than all of the Notes
pursuant to this Section 2.02 shall be credited to or relieve the Company to
any extent from its obligation to make any prepayments required by Section
2.01.
Section 2.03. Prepayment Upon Event Risk Occurrence. The Company
covenants and agrees to, promptly after the occurrence of an Event Risk
Occurrence, but in any event within 10 days thereafter, give written notice to
each holder of a Note. Such notice shall (a) describe in reasonable detail the
facts and circumstances giving rise to such Event Risk Occurrence and the
effect thereof on the Company, (b) offer to prepay, on a date (the "Event Risk
Occurrence Prepayment Date") which shall be not less than 30 days nor more than
60 days after the date of such notice, all of the Notes held by such holder,
(c) request such holder to notify the Company in writing, not less than 10 days
prior to the Event Risk Occurrence Prepayment Date, of its acceptance or
rejection of such offer and (d) inform such holder that, upon its receipt of
such notice from the Company, failure to reject such offer in writing on or
before the 10th day prior to the Event Risk Occurrence Prepayment Date shall be
deemed acceptance of such offer. The notice to the Computing Holder shall also
set forth the respective names and addresses of, and the principal amounts of
the Notes held by, the other holders.
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<PAGE> 26
The Computing Holder shall give written notice to the Company and the
other holders, on the fifth Business Day prior to the Event Risk Occurrence
Prepayment Date, of the amount of the Prepayment Price of the Notes held by it
and such other holders, which notice shall set forth in reasonable detail the
computation thereof. Such notice in itself shall constitute neither an
acceptance nor a rejection by the Computing Holder of such prepayment offer.
Thereupon, the Company covenants and agrees that it will on the Event Risk
Occurrence Prepayment Date prepay all of the Notes held by each holder who has
accepted the prepayment offer in accordance with this Section, by payment of
the Prepayment Price of such Notes, together with interest accrued on the
unpaid principal amount of such Notes to the Event Risk Occurrence Prepayment
Date. No prepayment of less than all of the Notes pursuant to this Section
2.03 shall be credited to or relieve the Company to any extent from its
obligation to make any prepayments required by Section 2.01.
The following terms shall have the following definitions:
"Business Day" means any day on which banks are required to be open to
carry on their normal business in the States of Minnesota and New York.
"Change of Control" means any Acquisition subsequent to February 26, 1997
by any Person, or related Persons constituting a "group" for purposes of
Section 13(d) of the Securities Exchange Act of 1934, of (a) the power to
elect, appoint or cause the election or appointment of at least a majority of
the members of the Board of Directors of the Company, through beneficial
ownership of the capital stock of the Company or otherwise, or (b) all or
substantially all of the properties and assets of the Company; provided,
however, that a Change of Control shall not be deemed to have occurred as a
result of the consummation of the Pending Reorganization or if (x) the
Acquisition of such power or properties and assets is pursuant to a transaction
in compliance with the provisions of Section 4.07 hereof and (y) no Person, or
related Persons constituting a "group" for purposes of
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<PAGE> 27
Section 13(d) of the Securities Exchange Act of 1934, shall have the power to
elect, appoint or cause the election or appointment of at least a majority of
the members of the Board of Directors of such successor or transferee. For the
purposes of this definition, "Acquisition" of the power or properties and
assets stated in the preceding sentence means the earlier of (i) the actual
possession thereof and (ii) the consummation of any transaction or series of
related transactions which, with the passage of time, will give such Person or
Persons the actual possession thereof.
"Computing Holder" means, as of the date of notice, the holder who holds
Notes with an aggregate principal amount outstanding higher than that of Notes
held by any other holder; provided , however, that for purposes of any
prepayment made pursuant to the provisions of this Section 2.03 or Section
2.02B, "Computing Holder" means the holder who holds Notes then to be prepaid
pursuant to this Section 2.03 or Section 2.02B with an aggregate amount
outstanding higher than that of Notes held by any other holder then to be
prepaid. For purposes of determining the Computing Holder, the Notes then held
by affiliated holders shall be aggregated.
"Designated Event" means any of the following:
(a) the majority of the members of the Company's Board of Directors
at any time being different from the majority of the members of its Board
of Directors at any other time within the immediately preceding two
calendar years; provided that for purposes of this clause (a), a member
of the Company's Board of Directors shall not be deemed to be "different"
if such board member is a member or designee of either the Michael Family
or the Papetti Family and has replaced another member or designee of the
same family, or
(b) the authorization by the Company's Board of Directors of
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<PAGE> 28
(i) a consolidation or merger of the Company (other than the
Pending Reorganization) or a sale of all or substantially all of
its properties and assets,
(ii) a dividend or other distribution by the Company to its
shareholders, in one transaction or a series of related
transactions, of cash, property or securities (other than a
dividend or other distribution payable solely in capital stock of
the Company that is not convertible into or exchangeable for any
securities that are not capital stock of the Company) having an
aggregate fair market value at the time of distribution that is 30%
or more of the fair market value of the common stock of the Company
outstanding immediately prior to such distribution (both such fair
market values as determined by its Board of Directors) or
(iii) an acquisition by the Company for cash, property or
securities (other than capital stock of the Company that is not
convertible into or exchangeable for any securities that are not
capital stock of the Company), in one transaction or a series of
related transactions, of more than 30% of common stock of the
Company outstanding immediately prior to the commencement of such
acquisition;
provided that any event described above in this clause (b) shall be a
Designated Event only if at any time within 12 months of the occurrence
of such event, the Company's Consolidated Net Worth as of such time shall
be less than 50% of its Consolidated Net Worth as of the fiscal year-end
immediately preceding the earlier of such event and such time.
"Event Risk Occurrence" means (a) a Change of Control or (b) a Designated
Event or (c) the failure of the Company to pay the purchase price and otherwise
effect the acquisition of the Papetti Companies on February 26, 1997 (except
for any filings which, in accordance with standard practice, are to be made
subsequent to the closing of such transaction) all substantially
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<PAGE> 29
as contemplated in the Memorandum and, within five business days thereafter, to
provide to each holder of a Note an opinion of Maun & Simon PLC to such effect
(in form and substance reasonably satisfactory to the holders of the Notes).
"Michael Family" means and includes (i) James H. Michael, (ii) any Person
who is a lineal descendent of James H. Michael, (iii) the spouse, children or
grandchildren of any such Person, (iv) any trust of which any of such Persons
are the sole beneficiaries and (v) the estate, executor, administrator or legal
guardian of any such Person.
"Papetti Family" means and includes (i) Arthur M. Papetti and Anthony
Papetti, (ii) any Person who is a lineal descendent of Arthur M. Papetti or
Anthony Papetti, (iii) the spouse, children or grandchildren of any such
Person, (iv) any trust of which any of such Persons are the sole beneficiaries
and (v) the estate, executor, administrator or legal guardian of any such
Person.
"Prepayment Price" means, for purposes of calculations required by this
Section and Section 2.02 hereof, the higher of (1) the unpaid principal amount
of the Notes to be prepaid on the Event Risk Occurrence Prepayment Date or
Optional Prepayment Date, as the case may be, and (2) the sum of the respective
Payment Values of each prospective interest payment, prospective mandatory
prepayment and the principal payment at maturity in respect of such Notes (the
amount of each such payment being herein referred to as a "Payment"). The
"Payment Value" of each Payment shall be determined by discounting such Payment
at the Adjusted Reinvestment Rate, for the period from the scheduled date of
such Payment to the Event Risk Occurrence Prepayment Date or Optional
Prepayment Date, as the case may be. The "Adjusted Reinvestment Rate" is the
sum of (a) 50 basis points and (b) the yield which shall be imputed from the
yields (as reported on the Telerate Access Service (Page 500-offer side) or
such other display as may replace Page 500) of those actively traded United
States Treasury securities having maturities as close as practicable to the
Weighted Average Life to Final Maturity of the Notes so to be prepaid. The
yields of such United States
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<PAGE> 30
Treasury securities shall be determined as of 10 A.M. Eastern Time on the fifth
Business Day prior to the Event Risk Occurrence Prepayment Date or Optional
Prepayment Date, as the case may be.
"Weighted Average Life to Final Maturity" of the Notes as of the time of
determination thereof means the number of years (rounded to the nearest
one-twelfth) obtained by dividing the then Remaining Dollar-Years of the Notes
by the then outstanding principal amount of the Notes. For the purposes of
this definition, "Remaining Dollar-Years" means the sum of the amounts obtained
by multiplying the amount of each then remaining required prepayment, including
prepayment at final maturity, by the number of years (calculated to the nearest
one-twelfth) which will elapse between the time of such determination and the
date of such prepayment.
Section 2.04. Interest After Date Fixed for Prepayment. This Note or any
portion hereof to be prepaid shall cease to bear interest on and after the date
fixed for such prepayment unless the Company shall fail to pay this Note or
such portion, as the case may be, on the date fixed for such prepayment, in
which event this Note or such portion, as the case may be, shall bear interest
at the Overdue Interest Rate from and after such date until paid and, so far as
may be lawful, any unpaid premium and overdue installment of interest shall
bear interest at said rate.
Section 2.05. Allocation of Prepayments. In the event of any prepayment
of less than all of the outstanding Notes (other than any prepayment pursuant
to Section 2.02B or Section 2.03) the Company will allocate the principal
amount so to be prepaid (but only in units of $1,000) among the registered
holders of Notes in proportion, as nearly as may be, to the respective
principal amounts of such Notes, not theretofore called for prepayment, of
which they shall be registered holders.
Section 2.06. Surrender of Notes; Notation Thereon. Upon any prepayment
of a portion of the principal amount of this Note, the registered holder
hereof, at its option, may require the Company to execute and deliver, upon
surrender of this Note, a new Note registered in the name of such person or
persons as may be
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<PAGE> 31
designated by such holder for the principal amount of this Note then remaining
unpaid, dated as of the date to which interest has been paid on the principal
amount of this Note then remaining unpaid, or may present this Note to the
Company for notation hereon of the payment of the portion of the principal
amount of this Note so prepaid. The reasonable and customary expenses of such
exchange or notation shall be borne by the requesting holder. Every new Note
made and delivered pursuant to the provisions of this Section 2.06 shall in all
other respects be in the same form and have the same terms as this Note.
SECTION 3. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that so long as this Note shall be
outstanding:
Section 3.01. Maintenance of Company Office. The Company will maintain an
office or agency at 324 Park National Bank Building, 5353 Wayzata Boulevard,
Minneapolis, Minnesota 55416 (or such other place in the United States of
America as the Company may designate in writing to the holder hereof), where
notices, presentations and demands to or upon the Company in respect of the
Notes may be given or made.
Section 3.02. To Keep Books. The Company will, and will cause each of its
Subsidiaries to, at all times keep proper books of record and account in which
full, true and correct entries will be made of its transactions in accordance
with generally accepted accounting principles.
Section 3.03. Payment of Taxes; Corporate Existence; Maintenance of
Properties. The Company will, and will cause each of its Subsidiaries to,
A. pay and discharge promptly all taxes, assessments and other
governmental charges or levies imposed upon it or upon its income or upon
any of its property, real, personal or mixed or upon any part thereof, as
well as all claims of any kind (including claims for labor, materials and
supplies) which, if unpaid, might by law become a Lien upon
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<PAGE> 32
its property; provided, however, that neither the Company nor any
Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings and if
the Company or any such Subsidiary, as the case may be, shall have set
aside on its books reserves (segregated to the extent required by
generally accepted accounting principles) deemed by it to be adequate
with respect thereto;
B. do all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises; provided, however,
that nothing in this Section 3.03B shall prevent the abandonment or
termination of the corporate existence, rights and franchises of any
Subsidiary if, in the opinion of the Company, such abandonment or
termination would not have a material and adverse effect on the business,
operations, properties, prospects, assets or condition, financial or
other, of the Company and its Subsidiaries, taken as a whole;
C. maintain and keep its properties, in good repair, working order
and condition and from time to time make all needful and proper repairs,
renewals and replacements, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
Section 3.04. Insurance. The Company will, and will cause each Subsidiary
to, keep adequately insured, by financially sound and reputable insurers, all
property of a character usually insured by corporations engaged in the same or
a similar business similarly situated against loss or damage of the kinds
customarily insured against by such corporations, and carry such other
insurance as is usually carried by corporations engaged in the same or a
similar business similarly situated; provided that the Company and its
Subsidiaries may maintain a system or systems of self-insurance which, in the
opinion of the chief financial officer of the Company, will accord with sound
practices of corporations maintaining such systems engaged in the same or a
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similar business similarly situated and under which the Company or such
Subsidiaries shall maintain adequate reserves in accordance with sound
actuarial and insurance principles and practice.
Section 3.05. Payment of Indebtedness. The Company will, and will cause
each Subsidiary (but only to the extent that such Subsidiary's assets shall be
sufficient for the purpose) to,
A. pay or cause to be paid the principal of and the interest on all
Indebtedness heretofore or hereafter incurred or assumed by it when and
as the same shall become due and payable, unless such Indebtedness shall
be renewed, extended or refunded in accordance with the provisions of
Sections 4.01 and 4.02, and
B. faithfully perform, observe and discharge all the covenants,
conditions and obligations which are imposed on it by any and all
indentures and other agreements securing or evidencing such Indebtedness
or pursuant to which such Indebtedness is issued, and not permit the
occurrence of any act or omission which is or may be declared to be a
default thereunder;
provided, however, that neither the Company nor any such Subsidiary shall be
required to make any payment or to take any other action by reason of this
Section 3.05 at any time while it shall be contesting in good faith by
appropriate proceedings its obligations to do so, if it shall set aside on its
books reserves (segregated to the extent required by generally accepted
accounting principles) deemed by it to be adequate with respect thereto.
Section 3.06. Compliance with Laws. The Company and each of its
Subsidiaries will use their best efforts to comply in all respects with all
applicable statutes, rules, regulations and orders of all governmental
authorities with respect to the conduct of their businesses and the ownership
of properties (including, without limitation, all applicable statutes,
regulations, orders and restrictions relating to environmental
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standards and controls), except to the extent that any of the foregoing are
contested in good faith by appropriate proceedings.
SECTION 4. RESTRICTIVE COVENANTS.
The Company covenants and agrees that so long as this Note shall be
outstanding:
Section 4.01. Limitation on Indebtedness.
A. Incurrence of Funded Indebtedness. The Company will not, and
will not permit any Subsidiary to, create, assume, incur or otherwise
become liable, in each case contingently or otherwise, in respect of any
Funded Indebtedness, whether secured or unsecured other than:
(i) the Notes;
(ii) Funded Indebtedness of the Company or a Subsidiary,
provided that, at the time of the creation, assumption, incurrence
or otherwise becoming liable in respect thereof and after giving
effect thereto and to the application of the proceeds thereof, (x)
Consolidated Funded Indebtedness does not exceed 55% of Total
Capitalization and (y) no Event of Default or event which with the
passage of time or the giving of notice, or both, would constitute
an Event of Default has occurred and is continuing; and
(iii) Funded Indebtedness of the Company or a Subsidiary which
has been extended, renewed or refunded so long as (x) the principal
amount of such Indebtedness is not increased, and (y) no Event of
Default or event which with the passage of time or the giving of
notice, or both, would constitute an Event of Default has occurred
and is continuing.
Any corporation which becomes a Subsidiary after February 26, 1997 shall,
for all purposes of this Section 4.01A, be deemed to have created,
assumed or
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incurred, at the time it becomes a Subsidiary, all Indebtedness of such
corporation existing immediately after it becomes a Subsidiary.
B. Current Indebtedness and Funded Indebtedness. The Company will
not and will not permit any Subsidiary to, at any time be liable with
respect to any Funded Indebtedness or Current Indebtedness unless, on
each of 45 consecutive days within the period of the 12 consecutive
months immediately preceding the date of any determination hereunder, the
aggregate unpaid principal amount of Consolidated Funded Indebtedness and
Consolidated Current Indebtedness does not exceed an amount equal to 55%
of the sum of Total Capitalization and Consolidated Current Indebtedness.
C. Priority Indebtedness. The Company will not at any time permit
any Subsidiary to create, assume, incur or otherwise become liable in
respect of any Priority Indebtedness unless, at the time of such
creation, assumption or incurrence and immediately after giving effect
thereto and to the application of the proceeds thereof, (x) the then
outstanding principal amount of Priority Indebtedness shall not exceed
25% of Consolidated Net Worth as of the end of the immediately preceding
fiscal year of the Company, and (y) the Company could incur at least $1
of additional Funded Indebtedness in compliance with Section 4.01A.
Section 4.02. Limitation on Liens. The Company will not, and will not
permit any Subsidiary to, (i) create, assume, incur or suffer to exist any Lien
upon (or, whether by transfer to any Subsidiary or Affiliate or otherwise,
subject, or permit any Subsidiary or Affiliate to subject, to the prior payment
of any Indebtedness other than that represented by the Notes) any property or
assets (real or personal, tangible or intangible) of the Company or any
Subsidiary, whether now owned or hereafter acquired, or any income or profits
therefrom, or (ii) own or acquire or agree to acquire any property or assets
(real or personal, tangible or intangible) subject to or upon any Lien;
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provided, however, that the foregoing restrictions shall not prevent the
Company or any Subsidiary from:
A. (1) making pledges or deposits under workmen's compensation laws,
unemployment insurance laws or similar legislation or good faith deposits
in connection with bids, tenders, contracts (other than for the repayment
of money borrowed) or under leases to which the Company or such
Subsidiary is a party, (2) making deposits to secure public or statutory
obligations of the Company or such Subsidiary or deposits of cash or
obligations of the United States of America to secure surety and appeal
bonds to which the Company or such Subsidiary is a party or deposits in
lieu of such bonds, (3) incurring Liens or priorities imposed by law,
such as employees', carriers', warehousemen's, labor mechanics',
materialmen's and vendors' liens or priorities, and Liens arising out of
judgments or awards against the Company or such Subsidiary with respect
to which the Company or such Subsidiary at the time shall be prosecuting
an appeal or proceedings for review and with respect to which it shall
have secured a stay of execution pending such appeal or proceedings for
review or (4) entering into leases and from incurring landlords' liens on
fixtures and movable property located on premises leased in the ordinary
course of business so long as the rent secured thereby is not in default
and any applicable grace period has not expired; or
B. creating, incurring or suffering to exist (1) Liens for taxes or
import duties not yet subject to penalties for nonpayment or the
nonpayment of which shall be permitted by the proviso to Section 3.03A or
(2) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties, which
Liens, exceptions, encumbrances, easements, reservations, rights and
restrictions do not, in the opinion of the Company, in the aggregate
materially detract from the value of such
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properties or materially impair their use in the operation of the
business of the Company or such Subsidiary; or
C. suffering to exist the Liens existing on February 26, 1997
securing Indebtedness in an aggregate principal amount outstanding on
February 26, 1997 not in excess of $3,000,000, and extensions, renewals
or replacements of any such Lien upon the same property theretofore
subject thereto without increase in the principal amount of the
Indebtedness then secured or evidenced thereby; or
D. in the case of a Subsidiary, creating, incurring, assuming or
suffering to exist any Lien solely to secure Indebtedness owing to the
Company or a Wholly-owned Subsidiary; or
E. creating, incurring, assuming or suffering to exist Liens not
otherwise permitted by the foregoing clauses A through D, inclusive, of
this Section 4.02; provided, however, that at the time of the creation,
incurrence or assumption thereof, and immediately after giving effect to
the Indebtedness secured or evidenced by any such Lien, (1) the then
outstanding aggregate principal amount of Priority Indebtedness shall not
exceed 25% of Consolidated Net Worth as of the end of the immediately
preceding fiscal year of the Company, and (2) the Company could incur at
least $1 of additional Funded Indebtedness in compliance with Section
4.01A.
Section 4.03. Maintenance of Net Worth. The Company will at all times
maintain Consolidated Net Worth at an amount not less than the sum of (i)
$140,000,000 plus (ii) 50% of positive Consolidated Net Income for each fiscal
year of the Company ending on or after December 31, 1997 and prior to the date
of determination thereof, computed on a cumulative basis for said entire
period. If Consolidated Net Income is a deficit figure for any fiscal year of
the Company, such deficit shall not reduce the amount of Consolidated Net Worth
required to be maintained pursuant to this Section 4.03.
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Section 4.04. Maintenance of Interest Expense Coverage. The Company will
maintain the ratio of Consolidated Net Earnings Available for Fixed Charges to
Fixed Charges determined for the immediately preceding four fiscal quarters of
the Company at not less than 1.75 to 1.
Section 4.05. Restricted Payments. The Company will not, directly or
indirectly (i) declare or pay any dividend or make any other distribution
(whether by reduction of capital or otherwise) on any shares of any class of
its capital stock (other than a dividend or distribution payable in shares of
common stock of the Company), (ii) purchase, redeem, retire or otherwise
acquire, or cause or permit any Subsidiary or Affiliate to purchase, redeem,
retire, otherwise acquire or make any payment in respect of, any such shares,
or (iii) pay, repay, redeem, retire, repurchase or otherwise acquire the
principal of any Subordinated Debt (or any installment thereof) prior to the
regularly scheduled maturity dates thereof (as in effect on the date such
Subordinated Debt was originally incurred) unless, immediately after giving
effect to such action,
A. Consolidated Net Worth is not less than the level established
pursuant to the provisions of Section 4.03;
B. the Company shall not be in default in the performance or
observance of any other term, covenant, provision or condition contained
in the Notes; and
C. the Company could incur at least $1 of additional Funded
Indebtedness in compliance with the provisions of Section 4.01A;
provided that the provisions of this Section 4.05 shall not preclude the
prepayment of the presently outstanding subordinated debentures of NSU in
connection with the Pending Reorganization by the application of up to
$21,250,000 aggregate principal amount of the proceeds from the issuance of the
Company's 7.58% Senior Notes due February 26, 2009 together with a cash
contribution from NSU.
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Section 4.06. Limitation on Disposition of Assets. Subject to Section
4.07, the Company will not at any time sell, transfer or otherwise dispose of,
other than in the ordinary course of business, all or any part of its assets
and properties if, immediately after giving effect thereto, the aggregate value
of all such properties and assets so disposed of (valued at the book value
thereof) during the immediately preceding 365 days exceeds 20% of Total
Capitalization as of the end of the then most recently ended fiscal year of the
Company. Computations under this Section 4.06 shall not include, sales,
transfers, or other dispositions for fair market value (as determined in good
faith by the Company), to the extent that all or a portion of the net after-tax
proceeds of such transaction is applied, within 12 months after the date of
such transaction, to
(i) the purchase, acquisition or construction of assets or
properties which are to be used in the business of the Company or a
Subsidiary; or
(ii) the repayment or prepayment of unsubordinated Funded
Indebtedness of the Company or a Subsidiary; provided that the Company
has, on or prior to the application of any such proceeds to the repayment
or prepayment of any other unsubordinated Funded Indebtedness pursuant to
this subclause (ii), offered to prepay the Notes, pro rata with all other
unsubordinated Funded Indebtedness then being repaid or prepaid (which
prepayment of the Notes shall be made in accordance with the terms of
Section 2.02C hereof).
Section 4.07. Merger, Consolidation, Sale or Lease. Except for the
Pending Reorganization, the Company will not consolidate with or merge into any
Person, or permit any Person to merge into it, or sell, transfer or otherwise
dispose of all or substantially all of its properties and assets, unless;
(1) the Company shall be the surviving corporation; and
(2) immediately after giving effect to such transaction, (i) the
Company shall not be in default in the
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performance or observance of any of the terms, covenants, provisions or
conditions contained in the Notes or the Agreement and (ii) the Company
could incur at least $1 of additional Funded Indebtedness in compliance
with the provisions of Section 4.01A.
Section 4.08. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into or be a party to any transaction
or arrangement with any Affiliate (except (i) the Pending Reorganization and
(ii) other transactions or arrangements existing on February 26, 1997,
including any renewals or extensions thereof under terms and provisions which
are no more adverse to the Company or such Subsidiary than the terms and
provisions under the transactions and arrangements so renewed or extended)
including, without limitation, the purchase of property from, sale of property
to or exchange of property with, the rendering of any service by or for, or the
making of any loan or advance to, any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of the Company or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would exist in a comparable arm's-length
transaction with a person other than an Affiliate.
Section 4.09. Restrictions on Subsidiaries. A. The Company will not
cause, suffer or permit any Subsidiary to
(1) issue or dispose of any shares of such Subsidiary's capital
stock to any Person other than the Company or a Wholly-owned Subsidiary,
except to the extent that any such shares are required to qualify
directors under any applicable law or required to be issued to other
stockholders of such Subsidiary by virtue of their exercise of preemptive
rights or as their pro rata share of any stock dividend; or
(2) sell, assign, pledge, transfer, dispose of, or in any way part
with control of, any shares of capital stock of another Subsidiary, or
any Indebtedness owing to such Subsidiary from another Subsidiary, to any
Person other than
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the Company or a Wholly-owned Subsidiary, except in connection with a
transaction which complies with Section 4.09B; and, in the case of shares
of capital stock, to the extent, if any, required to qualify directors of
such other Subsidiary under any applicable law; or
(3) sell, assign, lease, pledge, transfer or otherwise dispose of
any substantial part of such Subsidiary's properties and assets to any
Person or consolidate with or merge into any other Person or permit any
other Person to merge into it; provided, however, that
(a) any Subsidiary may sell all or substantially all of its
properties and assets for cash in an amount not less than their
fair market value (as determined in good faith by the Company) if
(i) such Subsidiary does not own any capital stock or any
Indebtedness of the Company or any other Subsidiary not
simultaneously being disposed of, (ii) such sale is not prohibited
by the provisions of Section 4.06, and (iii) at the time of such
transaction and immediately after giving effect thereto, (x) the
Company shall not be in default in the performance or observance of
any of the terms, covenants, provisions or conditions contained in
the Notes, and (y) the Company could incur at least $1 of
additional Funded Indebtedness in compliance with Section 4.01A;
and
(b) any Subsidiary may sell, lease, transfer or otherwise
dispose of all or any part of its properties and assets to, or
consolidate with or merge into, the Company (subject to the
provisions of Section 4.07) or a Wholly-owned Subsidiary.
B. The Company will not sell, assign, pledge, transfer, dispose of, or in
any way part with control of, any shares of capital stock of any Subsidiary or
any Indebtedness owing from any Subsidiary to the Company, except, in the case
of shares of capital stock, to the extent, if any, required to qualify
directors of such Subsidiary under any applicable law; provided,
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however, that all shares of capital stock of all classes, together with all
Indebtedness, of any Subsidiary owned by the Company and/or one or more
Subsidiaries may be sold if such sale, if deemed a sale of properties and
assets by such Subsidiary, would not be prohibited by the provisions of Section
4.09A(3)(a).
C. The Company will not, and will not cause, suffer or permit any
Subsidiary to, acquire, directly or indirectly, any stock of any other
corporation which immediately after such acquisition would become a Subsidiary,
unless immediately after giving effect to such acquisition:
(1) the Company shall not be in default in the fulfillment of any of
the terms, covenants, provisions or conditions of the Notes; and
(2) the Company could incur at least $1 of additional Indebtedness
secured or evidenced by Liens in compliance with the provisions of
Section 4.02E.
Section 4.10. Restrictions on Investments. The Company will not and will
not permit any Subsidiary to, make any Restricted Investment if, after giving
effect thereto, the Aggregate Amount of all Restricted Investments of the
Company and its Subsidiaries exceeds 30% of Consolidated Net Worth as of the
end of the Company's then most recently completed fiscal year, provided,
however, that the Aggregate Amount of all Restricted Investments of the Company
and its Subsidiaries in businesses not related to the food industry shall not
exceed 5% of Consolidated Net Worth as of the end of the Company's then most
recently completed fiscal year.
Section 4.11. Acquisition of Notes; No Reissuance. The Company will not,
and will not permit any Subsidiary or Affiliate to directly or indirectly,
prepay, redeem, retire, purchase or otherwise acquire any Note, except pursuant
to (a) Section 2.01, (b) Section 2.02, (c) Section 2.03 or (d) an offer to all
holders of the Notes to prepay, redeem, retire, purchase or otherwise acquire
the Notes, pro rata, from all such holders at the same time and on the same
terms and conditions. Any Note prepaid in
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full pursuant to Sections 2.01, 2.02, 2.03 or clause (d) of this Section, shall
be surrendered to the Company for cancellation and shall not be reissued and no
Note shall be issued in lieu of any principal amount of any Note so prepaid.
SECTION 5. CONSENTS, WAIVERS AND AMENDMENTS.
Any term, covenant, agreement or condition of the Notes may, with the
consent of the Company, be amended or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by one or more written instruments signed by the holder or
holders of not less than a majority in aggregate principal amount of the Notes
at the time outstanding; provided, however, that
A. no such amendment or waiver shall, without the consent of the
holders of all outstanding Notes,
(1) change the maturity of the principal of, or any
installment of interest on, any of the Notes, or reduce the
principal amount thereof or the interest or premium thereon, or
subordinate or otherwise modify the terms of, or rights to, payment
of the principal thereof or interest or premium thereon including,
without limitation, extend the time for any such payment or modify
any of the provisions of Section 2, or
(2) give to any Note any preference over any other Note, or
(3) reduce the percentage of holders of Notes required to
approve any such amendment or effectuate any such waiver; and
B. no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
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Any amendment or waiver pursuant to this Section 5 shall apply equally to
all the holders of the Notes and shall be binding upon them, upon each future
holder of any Note and upon the Company, whether or not a notation of such
amendment or waiver shall have been made on such Notes. In the case of an
amendment or waiver of the character described in Section 5A, the holder of
this Note agrees to make a notation on this Note to indicate that such
amendment or waiver has been effected. In the case of any other amendment or
waiver, no notation need be made on the Notes at the time outstanding, but any
Note executed and delivered thereafter may, at the option of the Company, bear
a notation referring to any such amendment or waiver then in effect. For
purposes of determining whether the holders of outstanding Notes of the
requisite aggregate principal amount at any time have agreed or consented to
any amendment or waiver pursuant to the provisions of this Section 5, any Notes
owned by the Company, any Subsidiary or any Affiliate shall be disregarded and
deemed not to be outstanding.
So long as there are any Notes outstanding, the Company will not solicit,
request or negotiate for or with respect to any proposed waiver or amendment of
any of the provisions of the Notes unless each holder of Notes (irrespective of
the amount of Notes then owned by it) shall be informed thereof by the Company
and shall be afforded the opportunity of considering the same and shall be
supplied by the Company with sufficient information to enable it to make an
informed decision with respect thereto. The Company will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of Notes
as consideration for or as an inducement to entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions of this
Agreement or the Notes unless such remuneration is concurrently offered, on the
same terms, ratably to the holders of all Notes then outstanding.
SECTION 6. DEFINITIONS.
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires:
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"Acceleration Calculation Date" has the meaning specified in Section 7.01
hereof.
"Affiliate" means any Person (other than the Company or any Subsidiary)
which, directly or indirectly, (A) controls or is controlled by or is under
common control with the Company or any Subsidiary, or (B) beneficially owns or
holds or has the power to direct the voting power of 5% or more of any class of
voting stock of the Company or any Subsidiary or (C) has 5% or more of its
voting stock (or in the case of a Person which is not a corporation, 5% or more
of its equity interest) beneficially owned or held, directly or indirectly, by
the Company or any Subsidiary or (D) is a director or officer of the Company or
any Subsidiary. For purposes of this definition, "control" means the power to
direct the management and policies of a Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aggregate Amount," when used with respect to any Investment of any Person
as of the date of determination thereof, means an amount (which may be a
positive or negative figure, as the case may be) equal to (i) the greater of
the amount carried on the books of such Person as at such date with respect to
such Investment and the cost of such Investment to such Person, minus (ii) the
net proceeds (after the deduction of income taxes applicable thereto) realized
from the sale or liquidation of such Investment or any part thereof, or
otherwise.
"Agreement" means the Loan Agreement dated as of December 1, 1989, between
the Company and Metropolitan Life Insurance Company entered into in connection
with the issuance of the Notes, as amended by an Amendment Agreement dated as
of February 26, 1997.
"Assumption Agreement" has the meaning specified in Section 6.7 of the
Agreement.
"Board of Directors" means either the board of directors of the Company
(or, when so specified or the context so indicates, a
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Subsidiary) or, if duly authorized to exercise the power of the Board of
Directors, any duly authorized committee thereof.
"Business Day" has the meaning specified in Section 2.03 hereof.
"Capital Lease" means and includes at any time any lease of property, real
or personal, which in accordance with GAAP would at such time be required to be
capitalized on a balance sheet of the lessee.
"Capital Lease Obligation" means at any time the capitalized amount of the
rental commitment under a Capital Lease which in accordance with GAAP would at
such time be required to be shown on a balance sheet of the lessee.
"Change of Control" has the meaning specified in Section 2.03 hereof.
"Closing" and "Closing Date" have the respective meanings specified in
Section 1.2 of the Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computing Holder" has the meaning specified in Section 2.03 hereof.
"Consolidated Current Indebtedness," "Consolidated Funded Indebtedness,"
"Consolidated Net Income" and "Consolidated Net Worth," means the Current
Indebtedness, Funded Indebtedness, Net Income and Net Worth, as the case may
be, of the Company and its Subsidiaries, after eliminating intercompany items,
all as consolidated and determined in accordance with GAAP.
"Consolidated Net Earnings Available for Fixed Charges" means, for the
period of determination, Consolidated Net Income of the Company and its
Subsidiaries, plus cash dividends received from Unconsolidated Subsidiaries,
plus income taxes, plus extraordinary items of expense or minus extraordinary
items of income which are included in the determination of Net Income,
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plus any loss from discontinued operations or minus any gain from discontinued
operations which is included in the determination of Net Income, plus any
charge or minus any credit which results from the cumulative effect of a change
in accounting principle which is included in the determination of Net Income,
plus all Fixed Charges. Prior to January 1, 1999, in any determination of
"Consolidated Net Earnings Available for Fixed Charges" there shall be an
addition for any loss (and a deduction for any gain) on "disposal of a product
line" (or "restructuring charges" relating to such disposal) which are included
in determination of Net Income. For purposes hereof, the terms "disposal of a
product line" and "restructuring charges" shall have such meanings as are
viewed as acceptable to the Securities and Exchange Commission when such terms
are used for financial reporting.
"Current Indebtedness" means all Indebtedness other than Funded
Indebtedness.
"Designated Event" has the meaning specified in Section 2.03 hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person that is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Code) as the
Company or is under common control (within the meaning of Section 414(e) of the
Code) with the Company.
"Events of Default" has the meaning specified in Section 7.01 hereof.
"Event Risk Occurrence" has the meaning specified in Section 2.03 hereof.
"Event Risk Occurrence Prepayment Date" has the meaning specified in
Section 2.03 hereof.
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"Fixed Charges" means, for any period of calculation, the sum of (i) all
interest on Indebtedness incurred by the Company and its Subsidiaries,
including interest payments partially or entirely contingent on earnings and
the portion of rents payable under Capital Leases allocable to interest, and
(ii) all debt discount or premium amortized or required to be amortized during
such period by the Company or any of its Subsidiaries.
"Funded Indebtedness" means, without duplication, all Indebtedness which
would, in accordance with GAAP, constitute long-term debt, including (i) all
Indebtedness which by its terms matures more than one year from the date as of
which any determination of Funded Indebtedness is made, (ii) any Indebtedness
maturing within one year from such date which is renewable at the option of the
obligor beyond one year from such date, including any Indebtedness renewable or
extendible (whether or not theretofore renewed or extended) under, or payable
from the proceeds of other Indebtedness which may be incurred pursuant to the
provisions of, any revolving credit agreement or other similar agreement and
(iii) Capital Lease Obligations in excess of one year.
"GAAP" means generally accepted accounting principles at the time in the
United States.
"Indebtedness" means and includes, without duplication, (i) all
indebtedness or obligations for money borrowed (and any notes payable and
drafts accepted representing extensions of credit, whether or not representing
indebtedness or obligations for money borrowed), (ii) indebtedness or
obligations owed for all or any part of the purchase price of property or other
assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary
course of business, (iii) indebtedness or obligations secured or evidenced by
any Lien existing on property owned by the corporation whose Indebtedness is
being determined, whether or not the indebtedness or obligations secured or
evidenced thereby shall have been assumed, (iv) Capital Lease Obligations, (v)
guarantees and endorsements of (other than
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endorsements for purposes of collection in the ordinary course of business),
and obligations to purchase goods or services for the purpose of supplying
funds for the purchase or payment of, or measured by, indebtedness, liabilities
or obligations of others (whether or not representing money borrowed) and other
contingent obligations in respect of, or to purchase or otherwise acquire or
service, indebtedness, liabilities or obligations of others (whether or not
representing money borrowed) and (vi) all indebtedness, liabilities or
obligations (whether or not representing money borrowed) in effect guaranteed
by an agreement, contingent or otherwise, to make a loan, advance or capital
contribution to or other investment in the debtor for the purpose of assuring
or maintaining a minimum equity, asset base, working capital or other balance
sheet condition for any date, or to provide funds for the payment of any
liability, dividend or stock liquidation payment, or otherwise to supply funds
to or in any manner invest in the debtor for such purpose. The guarantees,
endorsements, obligations and agreements referred to in clauses (v) and (vi) of
the preceding sentence shall constitute (a) Current Indebtedness to the extent
the indebtedness, liabilities or obligations of another Person to which they
relate are Current Indebtedness of such other Person and (b) Funded
Indebtedness to the extent such related indebtedness, liabilities or
obligations of such other Person are Funded Indebtedness of such other Person.
"Institutional Holder" means any insurance company, bank, savings and loan
association, trust company, investment company, charitable foundation, employee
benefit plan (as defined in ERISA) or other institutional investor or financial
institution which, in any case is, at the time of determination, the holder of
a Note.
"Investment" of any Person means any investment made by such Person in any
other Person by acquisition of stock or indebtedness, loan, advance, transfer
or purchase of property, capital contribution or otherwise (other than a direct
or indirect guarantee of such other Person's indebtedness or any agreement to
pay, purchase or service such other Person's indebtedness).
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"Lien" means any mortgage, lien, pledge, security interest, encumbrance or
charge of any kind, any conditional sale or other title retention agreement or
any Capital Lease.
"Memorandum" means the Private Placement Memorandum dated January 1997 and
relating to the Company's 7.58% Senior Notes due February 26, 2009 which was
prepared by Prudential Securities Incorporated.
"Michael Family" has the meaning specified in Section 2.03 hereof.
"NSU" means North Star Universal, Inc., a Minnesota corporation.
"Net Income" means, with respect to any Person for any period, the net
income (or the net deficit, if expenses and charges exceed revenues and other
proper income credits) of such Person for such period determined in accordance
with GAAP as in effect from time to time, provided, however, that the Net
Income of the Company or any Subsidiary shall not include (i) extraordinary
items, (ii) any equity interest of the Company on unremitted earnings of any
Unconsolidated Subsidiary, and (iii) the Net Income of any Subsidiary prior to
the date it becomes a Subsidiary.
"Net Worth" means, with respect to any Person as of the date of
determination, the sum of redeemable preferred stock and common stockholders'
equity accounts of such Person as of such date, as determined in accordance
with GAAP.
"Optional Prepayment Date" has the meaning specified in Section 2.02
hereof.
"Overdue Interest Rate" means the greater (determined on a daily basis) of
10.50% per annum or the rate per annum which The Chase Manhattan Bank (or its
successor) announces publicly from time to time as its corporate base rate of
interest.
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"PBGC" has the meaning specified in Section 2.12 of the Agreement.
"Papetti Companies" means Papetti's Hygrade Egg Products, Inc., Papetti
Foods, Inc., Quaker State Farms, Inc., Papetti's of Iowa Food Products, Inc.,
Monark Egg Corporation, Casa Trucking Limited Partnership, Egg Specialties,
Inc., Papetti Transport Leasing Limited Partnership and Papetti Equipment
Leasing Limited Partnership.
"Papetti Family" has the meaning specified in Section 2.03 hereof.
"Pending Reorganization" means the several transactions among the Company
and North Star Universal, Inc., a Minnesota corporation, and its affiliates,
all substantially as described in the Memorandum.
"Person" includes an individual, a corporation, a partnership, a joint
venture, a trust, an unincorporated organization or a government or any agency
or political subdivision thereof.
"Plan" has the meaning specified in Section 2.12 of the Agreement.
"Prepayment Price" has the meaning set forth in Section 2.03 hereof.
"Priority Indebtedness" means the sum (without duplication) of the amounts
described in the following clauses (i), (ii) and (iii) and outstanding at the
time of computation: (i) the aggregate principal amount of all Indebtedness of
the Company and its Subsidiaries secured or evidenced by Liens permitted by
Section 4.02E outstanding at such time, (ii) the aggregate principal amount of
unsecured Indebtedness of all Subsidiaries, other than Indebtedness owned by
the Company or a Subsidiary, and (iii) the Aggregate Amount of all outstanding
capital stock of any Subsidiary acquired pursuant to Section 4.09C not owned by
the Company or any Subsidiary having preference as to dividends
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or upon liquidation, and all rights, options and warrants to acquire any such
preference stock.
"Restricted Investment" means any Investment by the Company or any
Subsidiary in any other Person other than:
(i) marketable obligations issued or guaranteed by the United States
of America or by any agency of the United States of America, and maturing
not later than twelve months from the date of acquisition thereof,
(ii) commercial paper which has the highest credit rating by
Standard & Poor's Rating Group, a division of McGraw-Hill, Inc. or
Moody's Investors Service, Inc., and maturing not later than 270 days
from the date of acquisition thereof,
(iii) negotiable certificates of deposit or bankers' acceptances
which have at least an A rating by Standard & Poor's Rating Group, a
division of McGraw-Hill, Inc. or Moody's Investors Service, Inc., are
issued by or drawn on a United States commercial bank or trust company
which has capital and surplus of at least $150,000,000, and which mature
not later than twelve months from the date of acquisition thereof,
(iv) any Investment in any Subsidiary or in any corporation which by
reason thereof will become a Subsidiary, and
(v) variable rate demand municipal securities rated AAA by Standard
& Poor's Rating Group, a division of McGraw-Hill, Inc. or Aaa by Moody's
Investors Service, Inc., provided however, that such securities must be
redeemable at par upon 30 days or less notice.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable
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it or them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
entity, and any partnership or joint venture if more than a 50% interest in the
profits or capital thereof is owned by such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries (unless such
partnership can and does ordinarily take major business actions without the
prior approval of such Person or one or more of its Subsidiaries). Unless the
context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Company.
"Subordinated Debt" means any Indebtedness that is in any manner
subordinated in right of payment or security in respect to the Indebtedness
evidenced by the Notes.
"Total Capitalization" means, as of any particular time, the sum of (i)
Consolidated Net Worth and (ii) Consolidated Funded Indebtedness.
"Unconsolidated Subsidiary" means any corporation less than a majority of
whose outstanding stock having ordinary voting power for the election of the
members of the board of directors (or other governing body) of such corporation
(other than stock having such power only by reason of the happening of a
contingency) shall at the time be owned by the Company and/or one or more
Subsidiaries of the Company.
"Weighted Average Life to Final Maturity" has the meaning specified in
Section 2.03 hereof.
"Wholly-owned" when used in connection with any Subsidiary means a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by the Company
and/or one or more of its Wholly-owned Subsidiaries.
"Yield Maintenance Price" has the meaning set forth in Section 7.01
hereof.
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All accounting terms used herein and not expressly defined in this Note
shall have the meanings respectively given to them in accordance with GAAP as
they exist at the date of applicability thereof.
SECTION 7. DEFAULTS AND REMEDIES.
Section 7.0l. Events of Default. If one or more of the following events
(herein called "Events of Default") shall happen for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body and be continuing:
A. Default shall be made in the payment of principal of (or premium,
if any, on) any Note when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment (including, without
limitation, a prepayment as provided in Section 2.01, 2.02 or 2.03), or
by acceleration or otherwise; or
B. Default shall be made in the payment of any interest on any Note
when such interest becomes due and payable and such default shall
continue for more than 5 days; or
C. Default shall be made in the due observance or performance of any
covenant, condition or agreement contained in Sections 4.01 to Section
4.11 and such default shall continue for more than 10 days; or
D. Default shall be made in the due observance or performance of any
other covenant, condition or agreement contained in this Note or in the
Agreement, and such default shall continue for 30 days after the earlier
of (1) written notice thereof, specifying such default and requesting
that the same be remedied, shall have been given to the Company by the
holder of any Note, and (2) a responsible officer of
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the Company's obtaining knowledge of the occurrence of such default; or
E. The Company or any Subsidiary shall be adjudicated a bankrupt or
insolvent, or shall consent to the appointment of a receiver, trustee,
custodian or liquidator of itself or of any part of its property, or
shall admit in writing its inability, or shall fail, to pay its debts
generally as they come due, or shall make a general assignment for the
benefit of creditors, or shall file a voluntary petition in
reorganization or arrangement in a proceeding under any bankruptcy law
(as now or hereafter in effect) or an answer admitting the material
allegations of a petition filed against the Company or any Subsidiary in
any such proceeding, or shall, by voluntary petition, answer or consent,
seek relief under the provisions of any other now existing or future
bankruptcy or other similar law providing for the reorganization or
winding up of corporations, or the Company or any Subsidiary or its
directors or majority stockholders shall take action looking to the
dissolution or liquidation of the Company or such Subsidiary (other than
as contemplated by Section 4.09); or
F. An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of the Company or
any Subsidiary, a receiver, trustee, custodian or liquidator of the
Company or such Subsidiary or of any part of its property, and such
receiver, trustee, custodian or liquidator shall not have been removed or
discharged within 30 days thereafter, or any part of the property of the
Company or any Subsidiary shall, in any judicial proceeding, be
sequestered and shall not be returned to the possession of the Company or
such Subsidiary within 30 days thereafter; or
G. A petition against the Company or any Subsidiary in a proceeding
under any bankruptcy law (as now or hereafter in effect) shall be filed
and shall not be dismissed within 30 days after such filing, or, in case
the approval of such petition by a court of competent
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jurisdiction is required, shall be filed and approved by such a court as
properly filed and such approval shall not be withdrawn or the proceeding
dismissed within 30 days thereafter, or if, under the provisions of any
other similar law providing for reorganization or winding up of
corporations and which may apply to the Company or any Subsidiary, any
court of competent jurisdiction shall assume jurisdiction, custody or
control of the Company or such Subsidiary or of any part of its property
and such jurisdiction, custody or control shall not be relinquished or
terminated within 30 days thereafter; or
H. The Company or any Subsidiary shall default in the payment of
principal or interest on any evidence of Indebtedness for money borrowed
in excess of $2,500,000 or shall default in the performance or observance
of any other term, condition or agreement contained in any such evidence
of Indebtedness (other than the Notes) or in any agreement relating
thereto, the effect of which is to cause or permit any holder of such
Indebtedness or a trustee to cause the same to become or be declared due
prior to its stated maturity; or
I. Final judgment for the payment of money in excess of $250,000
shall be rendered against the Company or any Subsidiary and the same
shall remain undischarged for a period of 30 days during which execution
shall not be effectively stayed; or
J. An event or condition specified in Section 5.1(g) of the
Agreement shall occur or exist with respect to any Plan or Multiemployer
Plan, as defined therein, and, as a result of such event or condition,
together with all other such events or conditions, the Company or any of
its ERISA Affiliates shall incur or shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan, the Internal Revenue Service
or the Pension Benefit Guaranty Corporation (or any combination of the
foregoing) that is material in relation to the financial condition of the
Company and its Subsidiaries, taken as a whole; or
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K. Any representation or warranty made by the Company in the
Agreement or in any writing furnished in connection with the transactions
contemplated hereby shall prove to have been false or incorrect in a
material respect as of the date made;
then (i) upon the occurrence of any Event of Default described in items E, F or
G of this Section (each a "Bankruptcy Default"), all of the Notes shall
automatically become immediately due and payable, (ii) upon the occurrence of
any Event of Default described in items A or B of this Section, the holder of
this Note may at any time during its continuance, by written notice to the
Company, declare this Note to be due and payable, whereupon this Note shall
forthwith mature and become due and payable or (iii) upon the occurrence of any
Event of Default other than a Bankruptcy Default, the holder or holders of at
least 66-2/3% in principal amount of the Notes then outstanding (exclusive of
any Notes held by the Company, any Subsidiary or any Affiliate) may at any time
during its continuance, by written notice to the Company, declare all of the
Notes to be due and payable, whereupon in each case all of the Notes shall
forthwith mature and become due and payable.
The amount payable upon the occurrence of a Bankruptcy Default shall be
the entire unpaid principal amount of the Notes, together with interest accrued
thereon to the date of the occurrence of such Bankruptcy Default, and such
amount shall be payable without presentment, demand, protest or other
requirement of any kind, all of which are expressly waived by the Company. The
amount payable upon an acceleration based on any other Event of Default shall
be, to the extent permitted by law, the Yield Maintenance Price, as defined
below, of the Notes so accelerated, together with interest accrued on the
unpaid principal amount of the Notes so accelerated to the date of
acceleration, and such amount shall be payable without presentment, demand,
protest or further notice, all of which are expressly waived by the Company.
On the Acceleration Calculation Date, as defined below, the Computing
Holder shall give written notice to the Company and all other holders of the
amount of the Yield Maintenance Price of the
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Notes so accelerated, which notice shall set forth in reasonable detail the
computation thereof.
For purposes of this Section 7.01, the following terms shall have the
following definitions.
"Acceleration Calculation Date" means the date on which the Yield
Maintenance Price of the Notes accelerated pursuant to this Section is
determined. The Acceleration Calculation Date shall be the date of the notice
given by the requisite holders of Notes to the Company declaring all of the
Notes due and payable pursuant to this Section.
"Yield Maintenance Price" means the higher of (1) the entire unpaid
principal amount of the Notes so accelerated, or (2) the sum of the respective
Payment Values of each prospective interest payment, prospective mandatory
prepayment and the principal payment at maturity in respect of such Notes (the
amount of each such payment being herein referred to as a "Payment"). The
Payment Value of each Payment shall be determined by discounting such Payment
at the Reinvestment Rate, for the period from the scheduled date of such
Payment to the applicable date of acceleration. The "Reinvestment Rate" is the
yield (as reported on the Telerate Access Service (Page 500-offer side) or such
other display as may replace Page 500) which shall be imputed from the yields
of those actively traded United States Treasury securities having maturities as
close as practicable to the Weighted Average Life to Final Maturity of the
Notes so accelerated. The yields of such United States Treasury securities
shall be determined as of 10 A.M. Eastern Time on the Acceleration Calculation
Date.
The terms "Computing Holder," "Payment Values," "Payment" and "Weighted
Average Life to Final Maturity" shall have the meanings set forth in Section
2.03 hereof.
Section 7.02. Suits for Enforcement. In case an Event of Default shall
occur and be continuing, the holder of this Note may proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the
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specific performance of any covenant contained in this Note or in aid of the
exercise of any power granted in this Note, or may proceed to enforce the
payment of this Note or to enforce any other legal or equitable right of the
holder of this Note. The Company agrees that its obligations under Section
2.03 of the Note are of the essence of such Note, and upon application to any
court of equity having jurisdiction in the premises, the holder of the Notes
shall be entitled to a decree against the Company requiring specific
performance of such obligations. If any holder of a Note shall demand payment
thereof or take any other action in respect of an Event of Default, the Company
will forthwith give written notice, as provided in Section 8.02, to the other
holders of Notes specifying such action and the nature and status of the Event
of Default.
Section 7.03. Remedies Not Exclusive, Etc. No remedy herein or in the
Agreement conferred upon or reserved to any holder of any of the Notes is
intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given under the Agreement or the Notes or now or hereafter
existing at law or in equity. No delay in exercising or omission to exercise
any right or power accruing upon any default, omission or failure of
performance hereunder or under the Agreement shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle any holder of any of the Notes to exercise any
remedy reserved to it in the Notes or in the Agreement, it shall not be
necessary to give any notice to any person. In the event any provision
contained in the Notes should be breached by the Company and thereafter duly
waived by the holders from time to time of the Notes in compliance with Section
5, such waiver shall be limited to the particular breach so waived and shall
not be deemed to waive any other breach hereunder. No waiver, amendment,
release, termination or modification of the Notes shall be established by
conduct, custom or course of dealing but solely by an instrument in writing in
compliance with Section 5.
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SECTION 8. MISCELLANEOUS.
Section 8.01. Costs and Expenses. Without limiting the provisions of
Section 6.1 of the Agreement, if any Event of Default shall occur, the Company
shall pay to each holder of the Notes, to the extent permitted under applicable
law, all reasonable out-of-pocket expenses incurred by such holder in
connection with such Event of Default and such further amount as shall be
sufficient to cover the cost and expense of enforcement and collection,
including reasonable compensation to the attorneys and counsel of such holder
for any services rendered in that connection, upon the Notes, held by such
holder.
Section 8.02. Notices. All notices to be given to any holder of this Note
shall be given by overnight air courier, or by facsimile communication
confirmed by overnight air courier to such holder at its address designated on
the date of such notice on the register or other record maintained by the
Company.
Section 8.03. Covenants Bind Successors and Assigns. All covenants and
agreements in this Note by the Company shall bind its successors and assigns,
whether so expressed or not.
Section 8.04. Governing Law. This Note shall be construed in accordance
with and governed by the laws of the State of Minnesota.
Section 8.05. Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
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IN WITNESS WHEREOF, MICHAEL FOODS, INC. has caused this Note to be signed
in its corporate name by one of its officers thereunto duly authorized, and to
be dated as of the day and year first above written.
MICHAEL FOODS, INC.
By
Its
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SCHEDULE I
PREPAYMENT SCHEDULE FOR THE NOTES
DATE OF PAYMENT PRINCIPAL AMOUNT TO BE PREPAID
June 1, 1997 $4,000,000
December 1, 1997 $4,000,000
June 1, 1998 $4,000,000
December 1, 1998 $4,000,000
June 1, 1999 $5,000,000"
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"EXHIBIT E
NOVATION AND ASSUMPTION AGREEMENT
THIS NOVATION AND ASSUMPTION AGREEMENT ("Agreement") made this 26th day of
February, 1997 by and between MICHAEL FOODS, INC., a Delaware corporation,
whose name will be changed to "Michael Foods of Delaware, Inc." upon the
occurrence of the Michael Reorganization ("Old Michael"), North Star Universal,
Inc. a Minnesota corporation, whose name will be changed to "Michael Foods,
Inc." upon the occurrence of the Michael Reorganization ("New Michael") and
_________________________ ("Holder").
WITNESSETH:
WHEREAS, pursuant to a certain Loan Agreement between Old Michael and
Holder dated December 1, 1989 (as said Loan Agreement may have been amended
from time to time, the "Loan Agreement"), Old Michael did issue to Holder Fifty
Million Dollars ($50,000,000) in aggregate principal amount of Old Michael's
9.50% Senior Notes due December 1, 1999 (the "Notes"), of which $26,000,000 are
outstanding as of the date hereof; and
WHEREAS, pursuant to a certain Agreement and Plan of Reorganization
between Old Michael, New Michael and NSU Merger Co., a Delaware corporation and
a wholly-owned subsidiary of New Michael ("Merger Sub") dated December 21, 1995
(as said Agreement and Plan of Reorganization may have been amended from time
to time, the "Reorganization Agreement"), the parties thereto have agreed to
enter into a tax-free reorganization under the terms of which (i) Merger Sub
will merge with and into Old Michael, (ii) Old Michael will become a
wholly-owned subsidiary of New Michael, (iii) Old Michael will change its name
to "Michael Foods of Delaware, Inc.", and (iv) New Michael will change its name
to "Michael Foods, Inc." (hereinafter referred to as the "Michael
Reorganization"); and
ANNEX Z
(to Amendment Agreement)
<PAGE> 64
WHEREAS, the parties hereto have agreed that subject to the terms and
conditions hereinafter set forth, immediately upon the occurrence of the
Michael Reorganization in accordance with the provisions of the Reorganization
Agreement, New Michael will be substituted for, and will assume all obligations
of Old Michael under the Loan Agreement, Notes and related documents and New
Michael will be entitled to all of the benefits thereof.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto hereby agree as follows:
1. Recitals. The aforesaid recitals are hereby made a part of this
Agreement.
2. Definitions. Capitalized terms in this Agreement not otherwise defined
herein shall have the meanings assigned to them in the Loan Agreement and the
Reorganization Agreement.
3. Novation and Assumption. As of the Effective Time on the Effective
Date of the Michael Reorganization, (a) New Michael shall without further act
or deed of the parties hereto, be entitled to all of the benefits and rights of
Old Michael under the Loan Agreement, Notes and all documents executed and
delivered by Old Michael pursuant thereto (collectively, the "Loan Documents"),
(b) New Michael shall, and it hereby does without further act or deed of the
parties hereto unconditionally and expressly, (i) assume all liabilities and
obligations of Old Michael under the Loan Documents and (ii) agree to perform
all liabilities and obligations of Old Michael under said Loan Documents, as if
said Loan Documents were originally executed and delivered by New Michael, and
(c) all references in the Loan Documents to the "Company" shall refer to New
Michael except for references to the Company relating to its status prior to
the consummation of the Michael Reorganization.
4. Release of Old Michael. As of the Effective Time on the Effective Date
of the Michael Reorganization, Holder shall, and it hereby does without further
act or deed of the parties hereto other than the satisfaction of the conditions
precedent
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set forth in Section 6.7 of the Loan Agreement and the receipt from New Michael
of a certificate, dated as of the Effective Date, of the President or any Vice
President of New Michael stating that the Michael Reorganization has been
effected and that the representations and warranties set forth in paragraph
5(b) hereof are true and correct on and with respect to such Effective Date,
release Old Michael from all liabilities and obligations under the Loan
Documents.
5. Representations and Warranties. As of the Effective Time on the
Effective Date of the Michael Reorganization, New Michael shall, and it hereby
does without any further act or deed of the parties hereto, (a) accept and
assume all obligations and liabilities of Old Michael related to each
representation or warranty made by Old Michael in the Loan Agreement or any
other document, instrument or agreement executed and delivered or furnished in
connection therewith, and (b) further represent, warrant and affirm for the
benefit of the Holder that:
(i) Organization, Authority and Good Standing. New Michael is a
duly organized and validly existing corporation in good standing under
the laws of its jurisdiction of incorporation and has full power and
authority to own the properties and assets and to carry on the business
which it now owns and carries on. New Michael is duly qualified and in
good standing as a foreign corporation in each jurisdiction wherein the
nature of the property owned or leased by it or the nature of the
business transacted by it makes such qualification necessary, except
where the failure to so qualify would not have a material and adverse
effect on the business, operations, properties, prospects, assets or
condition, financial or other, of New Michael and its Subsidiaries taken
as a whole.
(ii) Compliance with Other Instruments. Except as may have been
permanently waived in writing, neither New Michael nor any of its
Subsidiaries is in default in the performance, observance or fulfillment
of any of the material obligations, covenants or conditions contained in
any bond, debenture, note or other evidence of indebtedness
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of New Michael or any such Subsidiary or contained in any instrument
under or pursuant to which any thereof has been issued or made and
delivered the effect of which would materially and adversely affect the
business, operations, properties, prospects, assets or condition,
financial or other, of New Michael and its Subsidiaries taken as a whole.
Neither the execution and delivery of this Agreement by New Michael, the
consummation by New Michael of the transactions herein contemplated nor
compliance by New Michael with the terms, conditions and provisions of
the Loan Documents will violate any provision of law or rule or
regulation thereunder or any order, injunction or decree of any court or
other governmental body to which New Michael is a party or by which New
Michael is bound or conflict with or result in a breach of any of the
terms, conditions or provisions of the corporate charter or by-laws of
New Michael or of any agreement or instrument to which New Michael is a
party or by which New Michael is bound, or constitute a default
thereunder, or result in the creation or imposition of any Lien of any
nature whatsoever upon any of the properties or assets of New Michael.
No consent of the stockholders of New Michael is required for the
execution, delivery and performance of this Agreement by New Michael.
(iii) Foreign Asset Control Regulations. Neither this Agreement nor
any of the transactions contemplated hereby will result in a violation of
any of the foreign asset control regulations of the United States
Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any
ruling issued thereunder or any enabling legislation or Presidential
Executive Order in connection therewith.
(iv) Investment Company Act. New Michael is not an "investment
company," or a Person "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
(v) Governmental Action. No action of, or filing with, any
governmental or public body or authority is required to authorize, or is
otherwise required in
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connection with, the execution, delivery and (except for such filings as
may be required in connection with the Michael Reorganization)
performance of this Agreement by New Michael.
(vi) Indebtedness. After giving effect to the Michael
Reorganization, New Michael and its Subsidiaries shall not be liable with
respect to any material amount of Indebtedness which was not outstanding
with respect to Old Michael, its Subsidiaries and the Papetti Companies
at February 26, 1997 under the Loan Agreement or disclosed in the
Memorandum.
(vii) Events of Default. After giving effect to the Michael
Reorganization, no Event of Default or event which with the passage of
time or giving of notice, or both, would become an Event of Default, has
occurred and is continuing under the Loan Agreement and New Michael has
the capacity to incur at least $1 of additional Funded Indebtedness in
compliance with Section 4.01A of the Notes.
6. Further Assurances. At any time and from time to time, upon the
request of any holder of a Note and at the sole expense of New Michael, New
Michael will promptly execute and deliver any and all further instruments and
documents and will take such further action as such holder may reasonably deem
necessary to effect the purposes of this Agreement.
7. Continuing Effectiveness. Except only as provided in paragraphs 3 and
4 above, all of the terms, covenants and conditions of the Loan Documents shall
remain in full force and effect and are hereby ratified and confirmed.
8. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Agreement.
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9. Termination of Agreement. Notwithstanding anything in this Agreement
to the contrary, in the event the Effective Time of the Effective Date of the
Michael Reorganization does not occur on or before 11:59 o'clock p.m.,
Minnesota time on May 31, 1997, this Agreement shall, without further act or
deed of the parties hereto, become null and void and of no further force or
effect.
10. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of Old Michael, New Michael and Holder and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
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"OLD MICHAEL"
MICHAEL FOODS, INC.
By:_____________________________
Its:__________________________
By:_____________________________
Its:__________________________
"NEW MICHAEL"
NORTH STAR UNIVERSAL, INC.
By:_____________________________
Its:__________________________
By:_____________________________
Its:__________________________
"HOLDER"
[VARIATION]
By:_____________________________
Its:__________________________
By:_____________________________
Its:__________________________
Z-69
<PAGE> 1
EXHIBIT 10.41
________________________________________________________________________________
________________________________________________________________________________
REVOLVING LOAN AGREEMENT
DATED AS OF FEBRUARY 28, 1997
AMONG
MICHAEL FOODS, INC.,
THE BANKS LISTED HEREIN
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS AGENT
ARRANGED BY BANCAMERICA, SECURITIES, INC.
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
1. DEFINITIONS AND TERMS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Agent-Related Persons" . . . . . . . . . . . . . . . . . . . . . 2
"Aggregate Amount" . . . . . . . . . . . . . . . . . . . . . . . 2
"Arranger" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Banking Day" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"BofA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Capital Lease" . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Capital Lease Obligation" . . . . . . . . . . . . . . . . . . . 3
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Commitment" . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Computation Period" . . . . . . . . . . . . . . . . . . . . . . 4
"Consolidated Funded Indebtedness" . . . . . . . . . . . . . . . 4
"Consolidated Net Earnings Available for Fixed Charges" . . . . 4
"Consolidated Net Income" . . . . . . . . . . . . . . . . . . . . 4
"Consolidated Net Worth" . . . . . . . . . . . . . . . . . . . . 5
"Credit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Dollars" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Domestic Advance" . . . . . . . . . . . . . . . . . . . . . . . . 5
"Eligible Assignee" . . . . . . . . . . . . . . . . . . . . . . . 5
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"ERISA Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . 6
"Eurocurrency Reserve Percentage" . . . . . . . . . . . . . . . . 6
"Eurodollar Advance" . . . . . . . . . . . . . . . . . . . . . . 7
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . 7
"Event Risk Occurrence" . . . . . . . . . . . . . . . . . . . . . 7
"Federal Funds Rate" . . . . . . . . . . . . . . . . . . . . . . . 7
"Fixed Charges" . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Governmental Authority" . . . . . . . . . . . . . . . . . . . . 8
"Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Interbank Rate" . . . . . . . . . . . . . . . . . . . . . . . . 9
"Interbank Rate (Reserve Adjusted)" . . . . . . . . . . . . . . . 10
"Interest Period" . . . . . . . . . . . . . . . . . . . . . . . . 10
"Investment" . . . . . . . . . . . . . . . . . . . . . . . . . . 10
"Lien" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Majority Banks" . . . . . . . . . . . . . . . . . . . . . . . . 11
"Margin" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
"Net Income" . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
__________________________________
* The Table of Contents is not a part of this Agreement.
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<TABLE>
<S> <C> <C>
"Net Worth" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
"New Michael" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Note Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"NSU" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Old Michael" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Papetti Companies" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Pending Reorganization" . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Priority Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Reference Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Related Party" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Reportable Event" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Restricted Investment" . . . . . . . . . . . . . . . . . . . . . . . . . . 16
"Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Termination Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Total Capitalization" . . . . . . . . . . . . . . . . . . . . . . . . . . 17
"Total Debt to Capitalization Ratio" . . . . . . . . . . . . . . . . . . . . 17
"Unconsolidated Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . 17
"Unmatured Event of Default" . . . . . . . . . . . . . . . . . . . . . . . 18
1.2 Financial Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 18
2. COMMITMENTS OF THE BANKS AND CERTAIN LOAN TERMS
2.1 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Advance Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3 Borrowing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.4 Continuation and/or Conversion of Advances . . . . . . . . . . . . . . . . 20
2.5 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.7 Increase of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 22
3. NOTES EVIDENCING BORROWINGS
4. INTEREST AND FEES
4.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Domestic Advances. . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Eurodollar Advances. . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Interest After Maturity . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3 Agency and Arrangement Fees. . . . . . . . . . . . . . . . . . . . . . . . 27
4.4 Method of Calculating Interest and Fees . . . . . . . . . . . . . . . . . 27
5. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT AND SETOFF
5.1 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3 Reduction or Termination of the Credit . . . . . . . . . . . . . . . . . . 29
</TABLE>
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5.4 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.5 Proration of Payments. . . . . . . . . . . . . . . . . . . . . . . 30
6. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR ADVANCES
6.1 Increased Cost . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Eurodollar Deposits Unavailable or Interest Rate Unascertainable . 32
6.3 Changes in Law Rendering Eurodollar Advances Unlawful. . . . . . . 33
6.4 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7. WARRANTIES
7.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 Validity and Binding Effect . . . . . . . . . . . . . . . . . . . 35
7.5 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.8 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.10 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.11 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.12 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.13 Pension and Welfare Plans. . . . . . . . . . . . . . . . . . . . . 39
7.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.15 Investment Company Act Representation. . . . . . . . . . . . . . . 40
7.16 Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.17 No Burdensome Provisions . . . . . . . . . . . . . . . . . . . . . 40
7.18 Trading with the Enemy Act, etc. . . . . . . . . . . . . . . . . . 41
7.19 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 41
7.20 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.21 Governmental Action. . . . . . . . . . . . . . . . . . . . . . . . 42
7.22 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 42
8. COMPANY'S COVENANTS
8.1 Financial Statements and Other Reports. . . . . . . . . . . . . . . 43
(a) Quarterly Financial Statements . . . . . . . . . . . . . . . . 43
(b) Annual Audited Statements. . . . . . . . . . . . . . . . . . . 44
(c) Accountants' Statements. . . . . . . . . . . . . . . . . . . . 45
(d) Officer's Certificates . . . . . . . . . . . . . . . . . . . . 46
(e) SEC and Other Reports . . . . . . . . . . . . . . . . . . . . 46
(f) Report of Change in Subsidiaries . . . . . . . . . . . . . . . 47
(g) Requested Information. . . . . . . . . . . . . . . . . . . . . 47
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(b) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(c) Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(d) Pension and Welfare Plans . . . . . . . . . . . . . . . . . . 48
(e) Material Adverse Change . . . . . . . . . . . . . . . . . . . 48
(f) Other Events . . . . . . . . . . . . . . . . . . . . . . . . . 48
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8.3 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.4 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . 49
8.5 Books, Records and Access . . . . . . . . . . . . . . . . . . . . 49
8.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.7 Insurance Reports . . . . . . . . . . . . . . . . . . . . . . . . 50
8.8 Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.10 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.11 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.12 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.13 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.14 Maximum Consolidated Total Indebtedness to Capitalization Ratio. . 55
8.15 Maintenance of Interest Expense Coverage . . . . . . . . . . . . 55
8.16 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . 55
8.17 Limitation on Disposition of Assets . . . . . . . . . . . . . . . 56
8.18 Merger, Consolidation, Sale or Lease . . . . . . . . . . . . . . . 56
8.19 Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . 56
8.20 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.21 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . 59
8.22 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.23 Transactions with Related Parties . . . . . . . . . . . . . . . . 60
9. CONDITIONS PRECEDENT TO ALL ADVANCES
9.1 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.2 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.3 Certification . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10. CONDITIONS PRECEDENT TO INITIAL ADVANCE
10.1 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.2 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.3 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.4 Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.5 Note Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.6 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.7 NSU Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . 63
11. EVENTS OF DEFAULT AND REMEDIES
11.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 63
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . . . . 63
(b) Non-Payment of other Indebtedness . . . . . . . . . . . . . . 63
(c) Insolvency. . . . . . . . . . . . . . . . . . . . . . . . . . 64
(d) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(e) Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 65
(f) Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(g) Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(h) Event Risk Occurrence . . . . . . . . . . . . . . . . . . . . 66
(i) Material Adverse Change . . . . . . . . . . . . . . . . . . . 66
11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12. THE AGENT
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12.1 Appointment and Authorization . . . . . . . . . . . . . . . . . 67
12.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . 67
12.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . 67
12.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . 68
12.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 69
12.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . 70
12.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 71
12.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . 73
12.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . 74
12.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . 75
13. ASSIGNMENT AND ASSUMPTION.
14. GENERAL
14.1 Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
14.2 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
14.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
14.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 81
14.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 81
14.6 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 81
14.7 U.S. Withholding Tax Exemptions . . . . . . . . . . . . . . . . 82
14.8 Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
14.9 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . 82
14.10 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
14.11 Assignments, Participations, etc. . . . . . . . . . . . . . . . 83
14.12 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . 87
EXHIBIT A - Revolving Note
EXHIBIT B - Schedule of Litigation
EXHIBIT C - Schedule of Liens
EXHIBIT D - Schedule of Subsidiaries
EXHIBIT E - Schedule of Contingent Liabilities with Respect to
Post-Retirement Welfare Benefit Plans
EXHIBIT F - Form of Opinion of Counsel
EXHIBIT G - [Form of] Assignment and Acceptance Agreement
||
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REVOLVING LOAN AGREEMENT
THIS AGREEMENT, dated as of February 28, 1997, is entered into among MICHAEL
FOODS, INC., a Delaware corporation (the "Company"), the banks listed on the
signature pages hereof (each called a "Bank" and collectively called the
"Banks") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national
banking association having its principal office at 1455 Market Street, Agency
Management Services #5596, San Francisco, California 94103, as Agent.
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
1. DEFINITIONS AND TERMS.
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the meanings indicated for purposes
of this Agreement (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Advance" means an advance by a Bank to the Company under Section 2.1
and shall be a Domestic Advance or a Eurodollar Advance.
"Affiliate" means any Person (other than the Company or any Subsidiary)
which, directly or indirectly, (a) controls or is controlled by or is under
common control with the Company or any Subsidiary, or (b) beneficially owns or
holds or has the power to direct the voting power of five percent (5%) or more
of any class
<PAGE> 8
of voting stock of the Company or any Subsidiary or (c) has five
percent (5%) or more of its voting stock (or in the case of a Person which is
not a corporation, five percent (5%) or more of its equity interest)
beneficially owned or held, directly or indirectly, by the Company or any
Subsidiary or (d) is a director or officer of the Company or any Subsidiary.
For purposes of this definition, "control" means the power to direct the
management and policies of a Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means BofA as Agent for the Banks hereunder and each successor,
as provided in Section 12.8, who shall act as Agent.
"Agent-Related Persons" means BofA and any successor agent arising
under Section 12.9, together with their respective Affiliates (including, in
the case of BofA, the Arranger), and the officers, directors, employees, agents
and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Amount", when used with respect to any Investment of any
Person as of the date of determination thereof, means an amount (which may be a
positive or negative figure, as the case may be) equal to (i) the greater of
the amount carried on the books of such Person as at such date with respect to
such Investment and the cost of such Investment to such Person, minus (ii) the
net proceeds (after the deduction of income taxes applicable thereto) realized
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from the sale or liquidation of such Investment or any part thereof, or
otherwise.
"Arranger" means BancAmerica Securities, Inc., a Delaware corporation.
"Banking Day" means any day on which banks are open for business in
Chicago, Illinois and San Francisco, California and, with respect to Eurodollar
Advances, on which dealings in foreign currencies and exchange may be carried
on by the Banks in the interbank eurodollar market.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
"Capital Lease" means and includes at any time any lease of property,
real or personal, which in accordance with generally accepted accounting
principles would at such time be required to be capitalized on a balance sheet
of the lessee.
"Capital Lease Obligation" means at any time the capitalized amount of
the rental commitment under a Capital Lease which in accordance with generally
accepted accounting principles would at such time be required to be shown on a
balance sheet.
"Code" means the Internal Revenue Code of 1986 and any successor
statute of similar import, together with the regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall
be construed to also refer to any successor sections.
"Commitment" means the maximum amount that any Bank has agreed to lend
under Section 2.1 as set forth on the signature pages
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<PAGE> 10
hereof as such amount may be reduced pursuant to Section 5.3, increased
pursuant to Section 2.7, or increased or reduced pursuant to Section 14.11.
"Computation Period" means as at the end of any fiscal quarter or
fiscal year the shorter of: (a) the period from April 1, 1997 to such fiscal
quarter end or fiscal year end or (b) the four fiscal quarter period then
ending.
"Consolidated Funded Indebtedness" means, without duplication, all
Indebtedness of the Company and its Subsidiaries, as consolidated and
determined in accordance with generally accepted accounting principles.
"Consolidated Net Earnings Available for Fixed Charges" means, for the
period of determination, Consolidated Net Income of the Company and its
Subsidiaries, plus cash dividends received from Unconsolidated Subsidiaries,
plus income taxes, plus extraordinary items of expense or minus extraordinary
items of income which are included in the determination of Net Income, plus any
loss from discontinued operations or minus any gain from discontinued
operations which is included in the determination of Net Income, plus any
charge or minus any credit which results from the cumulative effect of a change
in accounting principle which is included in the determination of Net Income,
plus all Fixed Charges. Prior to January 1, 1999, in any determination of
"Consolidated Net Earnings Available for Fixed Charges" there shall be an
addition for any loss (and a deduction for any gain) on "disposal of a product
line" (or "restructuring charges" relating
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<PAGE> 11
to such disposal) which are included in determination of Net Income. For
purposes hereof, the terms "disposal of a product line" and "restructuring
charges" shall have such meanings as are viewed as acceptable to the Securities
and Exchange Commission when such terms are used for financial reporting.
"Consolidated Net Income" means, for any period, the Net Income of the
Company and its Subsidiaries, as consolidated and determined in accordance with
generally accepted accounting principles.
"Consolidated Net Worth" means the Net Worth of the Company and its
Subsidiaries, as consolidated and determined in accordance with generally
accepted accounting principles.
"Credit" means the aggregate Commitments of the Banks to make Advances
under the terms of this Agreement.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"Domestic Advance" means any Advance which bears interest at a rate
determined with reference to the Reference Rate.
"Eligible Assignee" means (i) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (ii) a commercial bank organized under
the laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political subdivision
of any such country, and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting
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<PAGE> 12
through a branch or agency located in the United States; and (iii) a Person
that is primarily engaged in the business of commercial banking and that is (A)
a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a
Subsidiary, or (C) a Person of which a Bank is a Subsidiary; (iv) any other
financial institution in good standing under the laws of any country which is a
member of the OECD and which has a combined capital and surplus of at least
$100,000,000 and (v) any other Person to which the Company and the Agent may in
their discretion consent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor
sections.
"ERISA Affiliate" means any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in sections 414(b) and
414(c), respectively, of the Code or section 4001 of ERISA.
"Eurocurrency Reserve Percentage" means, with respect to each Interest
Period, a percentage equal to the daily average during such Interest Period of
the percentages in effect on each day of such Interest Period, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor), for
determining reserve requirements applicable to "Eurocurrency liabilities"
pursuant to Regulation D or any other then applicable regulation of
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<PAGE> 13
the Board of Governors which prescribes reserve requirements applicable to
"Eurocurrency liabilities," as presently defined in Regulation D. For purposes
of this definition, any Eurodollar Advances hereunder shall be deemed to be
"Eurocurrency liabilities" as defined in Regulation D.
"Eurodollar Advance" means any Advance which bears interest at a rate
determined with reference to the Interbank Rate (Reserve Adjusted).
"Event of Default" means any of the events described in Section 11.1.
"Event Risk Occurrence" shall have the meaning ascribed to such terms
in the note(s) issued by the Company pursuant to the terms and provisions of
the Note Agreement.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor publication, "H.15(519)") on the preceding Banking Day opposite
the caption "Federal Funds (Effective)"; or, if for any relevant day such rate
is not so published on any such preceding Banking Day, the rate for such day
will be the arithmetic mean as determined by the Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
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<PAGE> 14
"Fixed Charges" means, for any period of calculation, the sum of (i)
all interest on Indebtedness incurred by the Company and its Subsidiaries,
including interest payments partially or entirely contingent on earnings and
the portion of rents payable under Capital Leases allocable to interest, and
(ii) all debt discount or premium amortized or required to be amortized during
such period by the Company or any of its Subsidiaries.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Indebtedness" of any Person means and includes, without duplication,
(i) all indebtedness or obligations of such Person for money borrowed (and any
notes payable and drafts accepted representing extensions of credit, whether or
not representing indebtedness or obligations for money borrowed), (ii)
indebtedness or obligations of such Person owed for all or any part of the
purchase price of property or other assets or for the cost of property or other
assets constructed or of improvements thereto, other than accounts payable
included in current liabilities and incurred in respect of property purchased
in the ordinary course of business, (iii) indebtedness or obligations secured
or evidenced by any Lien existing on property owned by such Person, whether or
not
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<PAGE> 15
the indebtedness or obligations secured or evidenced thereby shall have been
assumed by such Person, (iv) Capital Lease Obligations of such Person, (v)
guarantees and endorsements by such Person of (other than endorsements for
purposes of collection in the ordinary course of business), and obligations of
such Person to purchase goods or services for the purpose of supplying funds
for the purchase or payment of, or measured by, indebtedness, liabilities or
obligations of others (whether or not representing money borrowed) and other
contingent obligations of such Person in respect of, or to purchase or
otherwise acquire or service, indebtedness, liabilities or obligations of
others (whether or not representing money borrowed) and (vi) all indebtedness,
liabilities or obligations (whether or not representing money borrowed) in
effect guaranteed by such Person by an agreement, contingent or otherwise, to
make a loan, advance or capital contribution to or other investment in the
debtor for the purpose of assuring or maintaining a minimum equity, asset base,
working capital or other balance sheet condition for any date, or to provide
funds for the payment of any liability, dividend or stock liquidation payment,
or otherwise to supply funds to or in any manner invest in the debtor for such
purpose. A renewal or extension of any Indebtedness without increase in the
principal amount thereof shall not be deemed to be the incurrence of the
Indebtedness so renewed or extended. In case any Person shall become a
Subsidiary, such Person shall be deemed to have incurred at the time it becomes
a
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<PAGE> 16
Subsidiary all Indebtedness of such Person outstanding immediately thereafter.
"Interbank Rate" means, with respect to each Interest Period, the rate
per annum at which Dollar deposits in immediately available funds are offered
to the Agent two Banking Days prior to the beginning of such Interest Period by
major banks in the interbank eurodollar market as at or about 10:00 a.m.,
Chicago time, for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount equal to the aggregate amount
of the Eurodollar Advance to be outstanding during such Interest Period.
"Interbank Rate (Reserve Adjusted)" means, with respect to any
Eurodollar Advance for any Interest Period, a rate per annum (rounded upwards,
if necessary, to the nearest 1/16 of 1%) determined pursuant to the following
formula:
Interbank Rate = Interbank Rate
(Reserve Adjusted) 1-Eurocurrency Reserve Percentage
"Interest Period" means, with respect to any Eurodollar Advance, the
seven (7) day, the one (1) month, two (2) month, three (3) month or six (6)
month period selected by the Company pursuant to Sections 2.3 or 2.4 and
commencing on the applicable borrowing date or conversion date of any
Eurodollar Advance or the last day of the prior Interest Period for such
Advance, as the case may be; provided, however, that no Interest Period shall
extend beyond the Termination Date. Each Interest Period which would otherwise
end on a day which is not a Banking Day shall end on the next
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<PAGE> 17
succeeding Banking Day unless such next succeeding Banking Day is the first
Banking Day of a calendar month, in which case it shall end on the next
preceding Banking Day.
"Investment" of any Person means any investment made by such Person in
any other Person by acquisition of stock or indebtedness, loan, advance,
transfer or purchase of property, capital contribution or otherwise (other than
a direct or indirect guarantee of such other Person's indebtedness or any
agreement to pay, purchase or service such other Person's indebtedness).
"Lien" means any mortgage, pledge, hypothecation, judgment lien or
similar legal process, title retention lien, or other lien or security
interest, including, without limitation, the interest of a vendor under any
conditional sale or other title retention agreement and the interest of a
lessor under any Capital Lease.
"Majority Banks" means those Banks whose interest in the Credit
constitutes (or if the Credit has been terminated, whose share in the aggregate
Advances outstanding constitutes) at least fifty-one percent (51%).
"Margin" means the rate per annum set forth in the schedule below
opposite the applicable Total Debt to Capitalization Ratio:
<TABLE>
<CAPTION>
Total Debt to Capitalization
Ratio Margin
<S> <C>
Less than or equal to .30 to 1 0.25%
Less than or equal to .40 to 1 but 0.30%
greater than .30 to 1
</TABLE>
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<PAGE> 18
<TABLE>
<S> <C>
Less than or equal to .50 to 1 but 0.35%
greater than .40 to 1
Greater than .50 to 1.0 0.475%
</TABLE>
The Margin shall be 0.35% commencing on the date of the effectiveness
of this Agreement and thereafter shall be adjusted 60 days or, in the case of
the last fiscal quarter of any fiscal year, 90 days after the end of each
fiscal quarter (beginning with the fiscal quarter ended March 31, 1997) based
on the Total Debt to Capitalization Ratio as of the last day of such fiscal
quarter; it being understood that (a) if the Company fails to deliver the
financial statements required by Section 8.1(a) or (b) by the 60th (or, if
applicable, the 90th) day after any fiscal quarter, the Margin shall be 0.475%
until such financial statements are delivered; and (b) no decrease in the
Margin shall be effected on any date on which an Event of Default exists (but
shall be delayed until the first date on which no Event of Default exists).
Any change in the Margin shall be immediately effective for all outstanding
Eurodollar Advances.
"Net Income" means, with respect to any Person for any period, the net
income (or the net deficit, if expenses and charges exceed revenues and other
proper income credits) of such Person for such period determined in accordance
with generally accepted accounting principles as in effect from time to time,
provided, however, that the Net Income of the Company or any Subsidiary shall
not include
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<PAGE> 19
the Net Income of any Subsidiary prior to the date it becomes a Subsidiary.
"Net Worth" means, with respect to any Person as of the date of
determination, the sum of redeemable preferred stock and common stockholders'
equity accounts of such Person as of such date, as determined in accordance
with generally accepted accounting principles.
"New Michael" means NSU after giving effect to the merger of NSU Merger
Co. into Michael Foods, Inc.
"Note Agreement" means collectively the various loan agreements, each
dated as of February 26, 1997, between the Company and certain lenders entered
into in connection with the issuance of certain notes not in excess of
$125,000,000.
"Notes" means the Notes referred to in Section 3.
"NSU" means North Star Universal, Inc., a Minnesota corporation.
"NSU Merger Co." means NSU Merger Co., a Delaware corporation.
"Old Michael" means Michael Foods, Inc. prior to its merger with NSU
Merger Co.
"Papetti Companies" means Papetti's Hygrade Egg Products, Inc., Papetti
Foods, Inc., Quaker State Farms, Inc., Papetti's of Iowa Food Products, Inc.,
Monark Egg Corporation, Casa Trucking Limited Partnership, Egg Specialties,
Inc., Papetti Transport Leasing Limited Partnership and Papetti Equipment
Leasing Partnership.
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<PAGE> 20
"Payment Date" means (a) as to any Eurodollar Advance, the last day of
each Interest Period with respect thereto and, if such Interest Period is in
excess of three (3) months, the day three (3) months after the commencement of
such Interest Period, and (b) as to any Domestic Advance, the first day of each
January, April, July and October commencing on the first of such dates to occur
hereafter.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pending Reorganization" means the merger of NSU Merger Co. with and
into Old Michael, the transfer by NSU of certain of its assets and liabilities
to ENStar, Inc., and the distribution of the stock of ENStar, Inc. to the
shareholders of NSU as more fully described in the proxy statement of the
Company dated November 26, 1996.
"Person" means an individual, partnership, corporation, trust, joint
venture, joint stock company, association, unincorporated organization,
government or agency or political subdivision thereof, or other entity.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributes or is a member or otherwise may
have any liability. "Priority Indebtedness" means the sum (without duplication)
of the amounts described in the following clauses (i), (ii) and (iii) and
outstanding at the time of computation: (i) the aggregate
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<PAGE> 21
principal amount of all Indebtedness of the Company and its Subsidiaries
secured or evidenced by Liens permitted by Section 8.13(e) outstanding at such
time, (ii) the aggregate principal amount of unsecured Indebtedness of all
Subsidiaries, other than Indebtedness owed to the Company or a Subsidiary, and
(iii) the Aggregate Amount of all outstanding capital stock of any Subsidiary
acquired pursuant to Section 8.19(c) not owned by the Company or any Subsidiary
having preference as to dividends or upon liquidation, and all rights, options
and warrants to acquire any such preference stock.
"Reference Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate." (The "reference rate" is a
rate set by BofA based upon various factors, including BofA's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.) Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in the public
announcement of such change.
"Related Party" means, for purposes of Section 8.23 only, any Person
(other than a Subsidiary) (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company, (ii) which beneficially owns or holds five percent (5%) or more of
the equity
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<PAGE> 22
interest of the Company, or (iii) five percent (5%) or more of the equity
interest of which is beneficially owned or held by the Company or a Subsidiary.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Reportable Event" has the meaning given to such term in ERISA.
"Restricted Investment" means any Investment by the Company or any
Subsidiary in any other Person other than:
(i) marketable obligations issued or guaranteed by the United States
of America or by any agency of the United States of America, and maturing not
later than twelve (12) months from the date of acquisition thereof;
(ii) commercial paper which has the highest credit rating by Standard
& Poor's Corporation or Moody's Investors Service, Inc., and maturing not later
than 270 days from the date of acquisition thereof;
(iii) (a) negotiable certificates of deposit or bankers' acceptances
issued by or drawn on BofA or any Affiliate thereof and which mature not later
than twelve (12) months from the date of acquisition thereof and (b) negotiable
certificates of deposit or bankers' acceptances which have at least an A rating
by Standard & Poor's Corporation or Moody's Investors Service, Inc., are issued
by or drawn on a United
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<PAGE> 23
States commercial bank (other than BofA or any Affiliate thereof) or trust
company which has capital and surplus of at least $150,000,000, and which
mature not later than twelve (12) months from the date of acquisition thereof;
(iv) any Investment in any Subsidiary or in any corporation
which by reason thereof will become a Subsidiary; and
(v) variable rate demand municipal securities rated AAA by
Standard & Poor's Corporation or Aaa by Moody's Investors Service, Inc.,
provided, however, that such securities must be redeemable at par upon
thirty (30) days or less notice.
"Subsidiary" means any corporation, voluntary association, joint stock
company, voting trust or similar organization of which the Company and its
other Subsidiaries own directly or indirectly more than 50% of the shares of
stock having general voting power under ordinary circumstances to elect a
majority of the board of directors, managers, trustees or others performing
similar functions.
"Taxes" with respect to any Person means taxes, assessments or other
governmental charges or levies imposed upon such Person, its income or any of
its properties, franchises or assets.
"Termination Date" means February 28, 2002, or such earlier date as may
be fixed by the Company on at least ten (10) Banking Days' written notice to
the Agent.
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<PAGE> 24
"Total Capitalization" means, as of any particular time, the sum of (i)
Consolidated Net Worth and (ii) Consolidated Funded Indebtedness.
"Total Debt to Capitalization Ratio" means at any time the ratio of
Consolidated Funded Indebtedness to Total Capitalization.
"Unconsolidated Subsidiary" means any corporation less than a majority
of whose outstanding stock having ordinary voting power for the election of
the members of the board of directors (or other governing body) of such
corporation (other than stock having such power only by reason of the happening
of a contingency) shall at the time be owned by the Company and/or one or more
Subsidiaries of the Company.
"Unmatured Event of Default" means an event or condition which with the
lapse of time or giving of notice to the Company, or both, would constitute an
Event of Default.
1.2 Financial Terms. Unless otherwise defined or the context
otherwise requires, all financial and accounting terms shall be defined under
generally accepted accounting principles.
2. COMMITMENTS OF THE BANKS AND CERTAIN LOAN TERMS.
2.1 Advances. Subject to the terms and conditions of this
Agreement, each Bank, severally but not jointly, agrees to make loans
(collectively called the "Advances" and individually called an "Advance") to
the Company on any Banking Day, which Advances the Company may repay and
reborrow during the period from the date hereof to, but not including, the
Termination Date, in such amounts as the Company may from time to time request,
but not
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<PAGE> 25
exceeding in the aggregate at any one time outstanding the amount set forth
opposite each Bank's name on the signature pages hereof (or such reduced amount
as may be fixed by the Company pursuant to Section 5.3 or such increased amount
as may be provided for pursuant to Section 2.7 hereof).
2.2 Advance Options. Each Advance shall be either a Domestic Advance
or a Eurodollar Advance as shall be selected by the Company, except as
otherwise provided herein. Any combination of types of Advances may be
outstanding at the same time. As to any Eurodollar Advance, each Bank may, if
it so elects, fulfill its commitment by causing a foreign branch or affiliate
to make or continue such Advance, provided that in such event such Advance
shall be deemed for the purposes of this Agreement to have been made by such
Bank and the obligation of the Company to repay such Advance shall nevertheless
be to such Bank and shall be deemed held by the Bank, to the extent of such
Advance, for the account of such branch or affiliate.
2.3 Borrowing Procedures. The Company shall give the Agent prior
telephonic notice (on or before 11:30 a.m., Chicago time, in the case of a same
day borrowing), promptly confirmed in writing, of each Domestic Advance and at
least three (3) Banking Days' prior telephonic notice (on or before 11:30 a.m.,
Chicago time, in the case of a notice given three (3) Banking Days prior to the
proposed borrowing date), promptly confirmed in writing, of each Eurodollar
Advance, in each case specifying the date (which day shall be a Banking Day),
amount and type of Advance and, if
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<PAGE> 26
such Advance is to be a Eurodollar Advance, the initial Interest Period for
such Advance and the Agent shall promptly advise each Bank thereof. Not later
than 12:30 p.m., Chicago time, on the date of a proposed borrowing, each Bank
shall provide the Agent at its principal office in Chicago with immediately
available funds covering such Bank's ratable share of the borrowing and the
Agent shall pay over such funds to the Company upon the Agent's receipt of the
documents required under Sections 9 and 10 with respect to such Advance. Each
borrowing of Advances shall be in aggregate principal amount of $500,000 or a
higher integral multiple of $100,000.
2.4 Continuation and/or Conversion of Advances. The Company may elect
(a) to continue any outstanding Eurodollar Advance from the current Interest
Period of such Advance into a subsequent Interest Period to begin on the last
day of such current Interest Period, or (b) to convert any outstanding Domestic
Advance into a Eurodollar Advance or, on the last day of the current Interest
Period, vice versa, by giving (i) at least three (3) Banking Days' prior
telephonic notice (on or before 11:30 a.m., Chicago time, in the case of a
notice given three (3) Banking Days prior to the proposed continuation or
conversion date), promptly confirmed in writing, to the Agent (which
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<PAGE> 27
shall promptly advise each Bank) if the Advance, after such conversion, is to
be a Domestic Advance, in each case specifying the date, amount and the
Interest Period, if applicable. Absent notice of continuation or conversion,
each Eurodollar Advance shall automatically convert into a Domestic Advance on
the last day of the current Interest Period for such Advance, unless paid in
full on such last day. No Domestic Advance shall be converted into a
Eurodollar Advance and no Eurodollar Advance shall be continued less than seven
(7) days before the Termination Date or at any time that an Event of Default or
an Unmatured Event of Default shall exist. Each conversion or continuation of
Advances shall be in an aggregate principal amount of $500,000 or a higher
integral multiple of $100,000.
2.5 Funding Losses. The Company will indemnify each Bank upon demand
against any loss or expense which such Bank may sustain or incur (including,
without limitation, any loss or expense sustained or incurred in obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Advance) as a consequence of any failure of the Company to borrow,
continue or convert a Eurodollar Advance on the date specified therefor in a
notice thereof.
2.6 Capital Adequacy. If any Bank shall reasonably determine that
the application or adoption of any law, rule, regulation, directive,
interpretation, treaty or guideline regarding capital adequacy, or any change
therein or in the interpretation or administration thereof, whether or not
having the
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<PAGE> 28
force of law increases the amount of capital required or expected to be
maintained by such Bank or any Person controlling such Bank, and such increase
is based upon the existence of such Bank's obligations hereunder and other
commitments of this type, then from time to time, within ten (10) days after
demand from such Bank, the Company shall pay to such Bank such amount or
amounts as will compensate such Bank or such controlling Person, as the case
may be, for such increased capital requirement. The determination of any
amount to be paid by the Company under this Section 2.6 shall take into
consideration the policies of such Bank or any Person controlling such Bank
with respect to capital adequacy and shall be based upon any reasonable
averaging, attribution and allocation methods. A certificate of such Bank
setting forth the amount or amounts as shall be necessary to compensate such
Bank as specified in this Section 2.6 shall be delivered to the Company and
shall be conclusive in the absence of manifest error.
SECTION 2.7 Increase of Commitments. The Company may from time
to time, by notice to the Agent (which shall promptly deliver a copy to each of
the Banks), request that the aggregate Commitments be increased by an amount
that will not result in the aggregate Commitments under this Agreement exceeding
$100,000,000. Each such notice shall set forth the requested amount of the
increase in the aggregate Commitments and the date on which such increase is to
become effective (which shall be not fewer than 20 days after the date of such
notice), and shall offer each Bank the opportunity to increase its Commitment by
its pro rata share of
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<PAGE> 29
such requested increase in the aggregate Commitments. Each Bank shall, by
notice to the Company and the Agent given not more than 10 Banking Days after
the date of the Company's notice, either agree to increase its Commitment by
all or a portion of the offered amount or decline to increase its Commitment
(and any Bank that does not deliver such a notice within such period of 10
Banking Days shall be deemed to have declined to increase its Commitment). In
the event that, on the 10th Banking Day after the Company shall have delivered
a notice pursuant to the first sentence of this paragraph, the Banks shall have
agreed pursuant to the preceding sentence to increase their Commitments by an
aggregate amount less than the increase in the aggregate Commitments requested
by the Company, the Company shall have the right, but not the obligation, to
arrange for one or more commercial banks or other financial institutions (any
such bank or other financial institution being called an "Augmenting Bank"),
which may include any Bank, to extend Commitments or increase their existing
Commitments in an aggregate amount up to, but not greater than, the
unsubscribed amount, provided that each Augmenting Bank, if not already a Bank
hereunder, (i) shall extend a new Commitment of not less than $5,000,000 and
(ii) shall execute all such documentation as the Agent shall specify to
evidence its status as a Bank hereunder. If (and only if) Banks (including
Augmenting Banks) shall have agreed to increase their aggregate Commitments or
to extend new Commitments in an aggregate amount not less than $5,000,000 in
the aggregate, such increases and such Commitments shall become
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<PAGE> 30
effective on the date specified in the notice delivered by the Company pursuant
to the first sentence of this paragraph. Notwithstanding the foregoing, no
increase in the aggregate Commitments (or in the Commitment of any Bank) shall
become effective under this paragraph unless, on the date of such increase, the
conditions set forth in Section 9 shall be satisfied (with all references in
such Section to an Advance being deemed to be references to such increase), the
Agent shall have received a certificate to that effect dated such date and
executed by the chief financial officer of the Company, any Augmenting Bank
(not already a Bank) shall be satisfactory to the Agent in its reasonable
discretion and any increase in the aggregate Commitments requested after May
31, 1997 or any increase causing the aggregate Commitments to exceed
$85,000,000 shall have been agreed to by the Majority Banks.
Upon the effectiveness of any increase pursuant to this Section 2.7 of the
aggregate Commitments and any resulting adjustment in any Bank's pro rata share,
the Banks and the Augmenting Banks will purchase from each other and sell to
each other outstanding Advances sufficient to cause the Advances of each Bank
and Augmenting Bank to equal its pro rata share (as so adjusted) of the
aggregate outstanding Advances. Such purchase and sale shall be made pursuant
to Section 14.11 except that no minimum amount shall be required, no processing
fee shall be charged and, if any Bank shall suffer a loss or incur an expense as
a result of the effectiveness of such purchase or sale being during an Interest
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<PAGE> 31
Period, the Company shall reimburse such Bank the amount of such loss or
expense. Each such Bank shall furnish the Company with a certificate setting
forth the basis for determining the amount to be paid to it hereunder.
3. NOTES EVIDENCING BORROWINGS. The Advances shall be evidenced by
the Company's promissory notes (the "Notes") in the form set forth as Exhibit A
hereto, with appropriate insertions, each of which shall be dated the date of
this Agreement, made payable to the order of the Bank making the Advance and
each of which shall mature on the Termination Date. All Advances made by the
Banks to the Company pursuant to this Agreement and all payments of principal
shall be evidenced by each Bank in its records, or, at such Bank's option, on
the schedule attached to its respective Note, which records or schedule shall be
rebuttable presumptive evidence of the subject matter thereof.
4. INTEREST AND FEES.
4.1 Interest.
(a) Domestic Advances. The unpaid principal of the
Domestic Advances shall bear interest prior to maturity at a rate per annum
equal to the Reference Rate in effect from time to time. Interest on Domestic
Advances prior to maturity shall be payable on each Payment Date and at
maturity.
(b) Eurodollar Advances. The unpaid principal of the Eurodollar
Advances shall bear interest prior to maturity at a rate per annum equal to the
Interbank Rate (Reserve Adjusted) in effect
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for each Interest Period plus the Margin. Interest on Eurodollar Advances prior
to maturity shall be payable on each Payment Date.
(c) Interest After Maturity. The Company shall pay to the Banks
interest on any amount of principal of any Advance which is not paid when due,
whether at the Termination Date, by acceleration or otherwise, accruing from and
including the date such amount shall have become due to (but not including) the
date of payment thereof in full at the rate per annum which is equal to the
greater of (i) one percent (1%) in excess of the rate applicable to the unpaid
amount immediately before it became due, or (ii) one percent (1%) in excess of
the Reference Rate from time to time in effect. Interest after maturity shall be
payable on demand.
4.2 Facility Fee. The Company agrees to pay to the Agent, for the
ratable benefit of the Banks, a facility fee at a rate per annum equal to the
Facility Fee Rate on the daily average amount of the Credit (whether used or
unused). Such facility fee shall be payable in arrears on (i) the first day of
each January, April, July and October and (ii) on the Termination Date or, if
earlier, the date the Credit terminates for any period then ending for which
such facility fee shall not have been theretofore paid. For purposes of this
Section 4.2, "Facility Fee Rate" means the rate per annum set forth in the
schedule below opposite the applicable Total Debt to Capitalization Ratio:
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<PAGE> 33
<TABLE>
<CAPTION>
=================================================================
Total Debt to Capitalization Facility Fee Rate
Ratio -------------------
-----------------
- -----------------------------------------------------------------
<S> <C>
Less than or equal to .30 to 1 0.125%
- -----------------------------------------------------------------
Less than or equal to .40 to 1 but 0.15%
greater than .30 to 1
- -----------------------------------------------------------------
Less than or equal to .50 to 1 but 0.20%
greater than .40 to 1
=================================================================
Greater than .50 to 1 0.225%
=================================================================
</TABLE>
The Facility Fee Rate shall be 0.20% commencing on the date of the
effectiveness of this Agreement and thereafter shall be adjusted 60 days or, in
the case of the last fiscal quarter of any fiscal year, 90 days after the end
of each fiscal quarter (beginning with the fiscal quarter ended March 31, 1997)
based on the Total Debt to Capitalization Ratio as of the last day of such
fiscal quarter; it being understood that (a) if the Company fails to deliver
the financial statements required by Section 8.1(a) or (b) by the 60th (or, if
applicable, the 90th) day after any fiscal quarter, the Facility Fee Rate shall
be 0.225% until such statements are delivered; and (b) no decrease in the
Facility Fee Rate shall be effected on any date on which an Event of Default
exists (but shall be delayed until the first date on which no Event of Default
exists). Any change in the Facility Fee Rate shall be immediately effective
for computation of the facility fee.
4.3 Agency and Arrangement Fees. The Company agrees to pay BofA
for its own account as Agent and for the account of the
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<PAGE> 34
Arranger such fees as shall have been mutually agreed upon between the Company,
BofA and the Arranger.
4.4 Method of Calculating Interest and Fees. Interest on each
Domestic Advance shall be computed on the basis of a year consisting of 365 days
and paid for actual days elapsed. All other computations of interest and fees
shall be computed on the basis of a year consisting of 360 days and paid for
actual days elapsed. Interest and fees shall accrue for the period during which
interest or fees are computed from and including the first day thereof to but
excluding the last day thereof.
5. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT AND
SETOFF.
5.1 Place of Payment. All payments hereunder (including payments
with respect to the Notes) shall be made without set-off or counterclaim and
shall be made in immediately available funds by the Company to the Agent for the
respective accounts of the Banks, in accordance with the amount owed to each
Bank. All such payments shall be made to the Agent, prior to 12:30 p.m.,
Chicago time, on the date due at the Agent's office at Agency Administrative
Services #5596, 1455 Market Street, 12th Floor, San Francisco, California
94103, Account No. 12336-14460, Re: Michael Foods, Inc., or at such other
place as may be designated by the Agent to the Company in writing. The Agent
shall promptly remit in immediately available funds to each Bank its share of
all payments of principal, interest and fees received by the Agent for the
account of such Bank. Any payments received after 12:30 p.m.,
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<PAGE> 35
Chicago time, shall be deemed received on the next Banking Day. Subject to the
definition of "Interest Period", whenever any payment to be made hereunder or
under any Note shall be stated to be due on a date other than a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall be included in the computation of payment of interest or any
fees.
5.2 Prepayments. The Company may from time to time, upon prior
telephonic notice (on or before 11:30 a.m., Chicago time, in the case of a same
day prepayment) (to be confirmed in writing promptly thereafter) received by the
Agent (which shall promptly advise each Bank thereof), prepay the principal of
the Domestic Advances in whole or in part without penalty or premium and may
prepay the principal of the Eurodollar Advances on the last day of any Interest
Period with respect to such Eurodollar Advances without penalty or premium,
except as provided in Section 6.4; provided, however, any partial prepayment of
principal shall be in a minimum amount of $500,000 or a higher integral multiple
of $100,000.
5.3 Reduction or Termination of the Credit. The Company may from
time to time, upon at least five (5) Banking Days' prior written notice received
by the Agent (which shall promptly advise each Bank thereof), permanently reduce
the amount of the Credit (such reduction to be made among the Banks according to
their respective pro rata share of the Credit), but only upon payment of the
outstanding principal of the Notes in excess of the then
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<PAGE> 36
reduced amount of the Credit, plus accrued interest to the date of such payment
on the principal amount being repaid; provided, however, that any reduction of
the Credit which would require payment of a Eurodollar Advance may be made only
on the last day of the relevant Interest Period for such Eurodollar Advance.
Any such reduction shall be in a minimum amount of $1,000,000 or in an integral
multiple of $1,000,000. The Company may at any time on like notice terminate
the Credit upon payment in full of the outstanding Notes and other liabilities
of the Company hereunder.
5.4 Setoff. In addition to and not in limitation of all rights of
offset that any Bank or other holder of any Note may have under applicable law,
each Bank or other holder of any Note shall, upon the occurrence of any Event of
Default described in Section 11.1 or any Unmatured Event of Default described in
Section 11.1(c), have the right to appropriate and apply to the payment of each
Note any and all balances, credits, deposits, accounts or moneys of the Company
then or thereafter with such Bank or other holder.
5.5 Proration of Payments. If any Bank or other holder of a Note
shall obtain any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of principal of or interest on
any Note in excess of its pro rata share of payments and other recoveries
obtained by all Banks or other holders on account of principal of and interest
on Notes then held by them, such Bank or other holder shall purchase from the
other Banks or holders such participation in the Notes
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<PAGE> 37
held by them as shall be necessary to cause such purchasing Bank or other
holder to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing holder, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, but without interest. The Company agrees that the Bank so purchasing
a participation from the other Banks under this Section 5.5 may exercise all
its rights of payment, including the right of set-off, with respect to such
participation as fully as if such Bank were the direct creditor of the Company
in the amount of such participation.
6. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR ADVANCES.
6.1 Increased Cost. If, as a result of any law, regulation, treaty
or directive, or any change therein, or in the interpretation or application
thereof or compliance by any Bank with any request or directive (whether or not
having the force of law) from any court, central bank, governmental authority,
agency or instrumentality or comparable agency:
(i) any tax, duty or other charge with respect to any
Eurodollar Advance, the Note of any Bank or any Bank's
obligation to make any Eurodollar Advance is imposed,
modified or deemed applicable, or the basis of taxation of
payments to any Bank of the principal of or interest on any
Eurodollar Advance (other than taxes imposed on the overall
net income of such Bank by the jurisdiction
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<PAGE> 38
in which such Bank has its principal office) is changed;
(ii) any reserve, special deposit, special assessment or similar
requirements against assets of, deposits with or for the
account of, or credit extended by, any Bank are imposed,
modified or deemed applicable; or
(iii) any other condition affecting this Agreement or the
Eurodollar Advances is imposed on any Bank or the interbank
eurodollar market;
and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining any of the Eurodollar Advances is increased, or the amount
of any sum receivable by such Bank hereunder in respect of any of the Eurodollar
Advances is reduced;
then, the Company shall pay to any such affected Bank upon demand such
additional amount or amounts as will compensate such Bank for such additional
cost or reduction (provided such amount has not been compensated for in the
calculation of the Eurocurrency Reserve Percentage). Determinations by such
Bank for purposes of this section of the additional amounts required to
compensate such Bank in respect of the foregoing shall be conclusive, absent
manifest error. In determining such amounts, the affected Bank may use any
reasonable averaging, attribution and allocation methods.
6.2 Eurodollar Deposits Unavailable or Interest Rate Unascertainable.
If the Company has any Eurodollar Advance outstanding, or has notified the Agent
of its intention to borrow
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<PAGE> 39
a Eurodollar Advance as provided herein, then in the event that prior to any
Interest Period any Bank shall have determined (which determination shall be
conclusive and binding on the parties hereto) that deposits of the necessary
amount for the relevant Interest Period are not available to such Bank in the
interbank eurodollar market or that, by reason of circumstances affecting such
market, adequate and reasonable means do not exist for ascertaining the
Interbank Rate applicable to such period or term, as the case may be, the
affected Bank shall promptly give notice of such determination to the Company,
the Agent and the other Bank, and (i) any notice of new Eurodollar Advances
previously given by the Company and not yet borrowed or converted shall be
deemed a notice to make a Domestic Advance, to the extent of the affected
Bank's ratable share of the proposed Eurodollar Advance, and (ii) the Company
shall be obligated either to prepay or to convert any outstanding Eurodollar
Advances to Domestic Advances on the last day of the then current Interest
Period with respect thereof for the affected Bank's ratable share of the
outstanding Eurodollar Advance.
6.3 Changes in Law Rendering Eurodollar Advances Unlawful. If at any
time due to any new law, rule, regulation, treaty or directive, or any change
therein or in the interpretation or administration thereof by any court, central
bank, governmental authority, agency or instrumentality or comparable agency
charged with the interpretation or administration thereof, or for any other
reason arising subsequent to the date hereof, it shall become
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<PAGE> 40
unlawful for any Bank to make or fund any Eurodollar Advance which it is
committed to make hereunder, the obligation of such Bank to provide Eurodollar
Advances shall, upon the happening of such event, forthwith be suspended for
the duration of such illegality. If any such event shall make it unlawful for
any Bank to continue Eurodollar Advances previously made by it hereunder, such
Bank shall, upon the happening of such event, notify the Agent, the Company and
the other Bank thereof in writing stating the reasons therefor, and the Company
shall, on the earlier of (i) the last day of the then current Interest Period
with respect thereto or (ii) if required by such law, rule, regulation, treaty,
directive or interpretation, on such date as shall be specified in such notice,
either convert such unlawful Eurodollar Advances to Domestic Advances or prepay
all such Eurodollar Advances, without any penalty or premium whatsoever (except
as provided in Section 6.4), to such Bank in full.
6.4 Indemnity. The Company will indemnify each Bank against any loss
or expense which such Bank may sustain due to any payment, prepayment or
conversion of any Eurodollar Advance on a date other than the last day of the
Interest Period for such Advance.
7. WARRANTIES. To induce the Banks to grant the Credit and to make
the Advances, the Company warrants that:
7.1 Existence. The Company and all of its Subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of the states of their respective
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<PAGE> 41
incorporation. The Company and all of its Subsidiaries are in good standing
and are duly qualified to do business in each state where, because of the
nature of their respective activities or properties, such qualification is
required.
7.2 Authorization. The Company is duly authorized to execute and
deliver this Agreement and the Notes and is and will continue to be duly
authorized to borrow monies hereunder and to perform its obligations under this
Agreement and the Notes. The execution, delivery and performance by the Company
of this Agreement and the Notes and the borrowings hereunder do not and will not
require any consent or approval of any governmental agency or authority.
7.3 No Conflicts. The execution, delivery and performance by the
Company of this Agreement and the Notes do not and will not conflict with (i)
any provision of law, (ii) the charter or by-laws of the Company, (iii) any
agreement binding upon the Company, or (iv) any court or administrative order or
decree applicable to the Company, and do not and will not require, or result in,
the creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
7.4 Validity and Binding Effect. This Agreement is, and each of the
Notes when duly executed and delivered will be, a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
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<PAGE> 42
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
7.5 No Default. Except as may have been waived in writing, neither
the Company nor any of its Subsidiaries is in default under any agreement or
instrument to which the Company or any Subsidiary is a party or by which any of
their respective properties or assets is bound or affected, which default might
materially and adversely affect the financial condition or operations of the
Company and its Subsidiaries taken as a whole.
7.6 Financial Statements. (a) The Company's audited consolidated
financial statements as at December 31, 1995 and the Company's unaudited
consolidated financial statements as at September 30, 1996, copies of which have
been furnished to the Banks, have been prepared in conformity with generally
accepted accounting principles applied on a basis consistent with that of the
preceding fiscal year and present fairly the financial condition of the Company
and its Subsidiaries as at such dates and the results of their operations for
the periods then ended. Since September 30, 1996, there has been no material
adverse change in the financial condition of the Company and its Subsidiaries
taken as a whole.
(b) To the best of the Company's knowledge, the audited consolidated
financial statements of the Papetti Companies as at December 31, 1995 and the
unaudited consolidated financial statements of Papetti Companies as at September
30, 1996, included in the pro forma financial statements of the Company, copies
of
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<PAGE> 43
which have been furnished to the Banks, have been prepared in conformity with
generally accepted accounting principles applied on a basis consistent with
that of the preceding fiscal year and present fairly the financial condition of
the Papetti Companies as at such dates and the results of their operations for
the periods then ended. To the best of the Company's knowledge, since December
31, 1995, there has been no material adverse change in the financial condition
of the Papetti Companies taken as a whole.
7.7 Litigation. No claims, litigation, arbitration proceedings or
governmental proceedings are pending or, to the knowledge of the Company,
threatened against or are affecting the Company or any of its Subsidiaries, the
results of which might materially and adversely affect the financial condition
or operations of the Company and its Subsidiaries taken as a whole, except those
referred to in the schedule attached hereto as Exhibit B. Other than any
liability incident to such claims, litigation or proceedings or provided for or
disclosed in the financial statements referred to in Section 7.6 neither the
Company nor any of its Subsidiaries has any known contingent liabilities which
are material to the Company and its Subsidiaries taken as a whole.
7.8 Liens. None of the property, revenues or assets of the Company
or any of its Subsidiaries is subject to any Lien, except:
(a) Liens for current Taxes not delinquent or Taxes being
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions
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as may be required by generally accepted accounting principles are
being maintained;
(b) carriers', warehousemen's, mechanics', materialmen's and
other like statutory Liens arising in the ordinary course of business
securing obligations which are not overdue for a period of more than
thirty (30) days or which are being contested in good faith and by
appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by generally accepted
accounting principles are being maintained;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, and other obligations of a
like nature incurred in the ordinary course of business;
(e) Liens disclosed in the financial statements referred to
in Section 7.6; and
(f) Liens listed on Exhibit C.
7.9 Subsidiaries. The Company has no Subsidiaries except as
listed on Exhibit D. The Company and its Subsidiaries own 100% of the stock of
their Subsidiaries, except any required directors' qualifying shares.
7.10 Purpose. The proceeds of the Advances will be used by the
Company for general working capital purposes.
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7.11 Regulation U. The Company is not engaged in the business of
purchasing or selling "margin stock," as such term is defined in Regulation U of
the Federal Reserve Board, or extending credit to others for the purpose of
purchasing or carrying margin stock, and no part of the proceeds of any Advance
will be used to purchase or carry any margin stock or for any other purpose
which would violate any of the margin regulations of the Federal Reserve Board.
7.12 Compliance. The Company and all of its Subsidiaries are, to the
best of the Company's knowledge, in material compliance with all statutes and
governmental rules and regulations applicable to them.
7.13 Pension and Welfare Plans. Each Plan complies in all material
respects with all applicable statutes and governmental rules and regulations,
and (i) no Reportable Event has occurred and is continuing with respect to any
Plan, (ii) neither the Company nor any ERISA Affiliate has withdrawn from any
Plan or instituted steps to do so, and (iii) no steps have been instituted to
terminate any Plan. No condition exists or event or transaction has occurred in
connection with any Plan which could result in the incurrence by the Company or
any ERISA Affiliate of any material liability, fine or penalty. Neither the
Company nor any ERISA Affiliate is a member of, or contributes to, any multiple
employer Plan as described in section 4064 of ERISA. Neither the Company nor
any of its Subsidiaries has any contingent liability with
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<PAGE> 46
respect to any post-retirement "welfare benefit plans," as such term is defined
in ERISA, except as listed on Exhibit E.
7.14 Taxes. Each of the Company and its Subsidiaries has filed all
tax returns which are required to have been filed and has paid, or made adequate
provisions for the payment of, all of its Taxes which are due and payable,
except such Taxes, if any, as are being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by generally accepted accounting principles have
been maintained. The Company is not aware of any proposed assessment against
the Company or any of its Subsidiaries for additional Taxes (or any basis for
any such assessment) which might be material to the Company and its Subsidiaries
taken as a whole.
7.15 Investment Company Act Representation. The Company is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
7.16 Licenses. The Company and its Subsidiaries possess all
trademarks, trade names, copyrights, patents, governmental licenses, franchises,
certificates, consents, permits and approvals necessary to enable them to
carry on their business in all material respects as now conducted and to own
and operate the properties material to their business as now owned and
operated, without known conflict with the rights of others. All such
trademarks, trade names, copyrights, patents, licenses, franchises,
certificates,
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consents, permits and approvals which are material to the Company and its
Subsidiaries taken as a whole are valid and subsisting.
7.17 No Burdensome Provisions. Neither the Company nor any
Subsidiary is a party to any agreement or instrument or subject to any charter
or other corporate restriction or statute or any judgment, order, writ,
injunction, decree, award, rule or regulation which materially and adversely
affects or in the future may (so far as the Company can now foresee) materially
and adversely affect the business, operations, properties, prospects, assets or
condition, financial or other, of the Company and its Subsidiaries taken as a
whole.
7.18 Trading with the Enemy Act, etc. Neither this Agreement nor any
of the transactions contemplated hereby is in violation of any of the foreign
asset control regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) or any ruling issued thereunder or any
enabling legislation or Presidential Executive Order in connection therewith.
7.19 Environmental Matters. To the best of the Company's knowledge,
the Company and its Subsidiaries have complied in all material respects with all
federal, state, local and other statutes, ordinances, orders, judgments, rulings
and regulations relating to environmental pollution or to environmental
regulation or control and neither the Company nor any Subsidiary has received
notice of any failure to comply which alone or together with any other such
failure could result in a material and adverse effect on
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the business, operations, properties, prospects, assets or condition, financial
or other, of the Company and its Subsidiaries, taken as a whole. To the best
of the Company's knowledge, the Company's and its Subsidiaries' plants do not
manage any hazardous wastes, hazardous substances, hazardous materials, toxic
substances or toxic pollutants, as those terms are used in the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substance Control Act, the Clean Air Act or the Clean Water Act, in
violation of any regulation promulgated thereunder or in any other applicable
law where such violation would result, individually or together with other
violations, in a material and adverse effect on the business, operations,
properties, prospects, assets or condition, financial or other, of the Company
and its Subsidiaries, taken as a whole.
7.20 Disclosure. Neither this Agreement, nor any of the Exhibits
hereto, nor any certificate or other data furnished to the Banks in writing by
or on behalf of the Company in connection with the transactions contemplated by
this Agreement, when taken as a whole, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading. There is no fact now known to the
Company which materially and adversely affects or in the future may (so far as
the Company can now reasonably foresee) materially and adversely affect the
business, operations, properties, prospects, assets or
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condition, financial or other, of the Company and its Subsidiaries, taken as a
whole, which has not been disclosed to the Banks.
7.21 Governmental Action. No action of, or filing with, any
governmental or public body or authority is required to authorize, or is
otherwise required in connection with, the execution, delivery and performance
of the Agreements or the Notes by the Companies.
7.22 Compliance with Other Instruments. Except as may have been
waived in writing, neither the Company nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any bond, debenture, note or other evidence
of indebtedness of the Company or any Subsidiary or contained in any instrument
under or pursuant to which any thereof has been issued or made and delivered,
the effect of which would materially and adversely affect the business,
operations, properties, prospects, assets or condition, financial or other, of
the Company and its Subsidiaries, taken as a whole. No consent of the
stockholders of the Company is required for the execution, delivery and
performance of this Agreement or the Notes by the Company.
8. COMPANY'S COVENANTS. From the date of this Agreement and
thereafter until the expiration or termination of the Credit and until the
Notes and other liabilities of the Company hereunder are paid in full, the
Company agrees that, unless the Majority Banks shall otherwise expressly
consent in writing, it will:
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8.1 Financial Statements and Other Reports. Furnish to each Bank and
to the Agent:
(a) Quarterly Financial Statements. As soon as practicable, and
in any event within sixty (60) days after the end of each quarterly period
(other than the last quarterly period) in each fiscal year of the Company,
the consolidated statement of income of the Company and its Subsidiaries
for such period and for that part of the fiscal year ended with such
quarterly period and the consolidated statement of cash flows of the
Company and its Subsidiaries for that part of the fiscal year ended with
such quarterly period and the consolidated balance sheet of the Company and
its Subsidiaries as at the end of such period, setting forth in each case
in comparative form the corresponding figures for the corresponding periods
of the preceding fiscal year (or in the case of the consolidated balance
sheet, as of the end of the then most recent fiscal year) all in reasonable
detail, prepared in conformity with generally accepted accounting
principles applied on a basis consistent with that of the previous year
(except as otherwise stated therein or in the notes thereto and except that
footnotes shall not be required) and certified by the chief financial
officer of the Company as presenting fairly the financial condition and
results of operations of the Company and its Subsidiaries as at the end of
and for the fiscal periods to which they relate, subject to the Company's
year end adjustments;
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(b) Annual Audited Statements. As soon as practicable, and in
any event within ninety (90) days after the end of each fiscal year, the
consolidated balance sheet and related consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries as
at the end of and for such fiscal year, setting forth in each case in
comparative form the corresponding figures of the previous fiscal year, all
in reasonable detail, prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that of the
previous year (except as otherwise stated therein or in the notes thereto)
and certified by the chief financial officer of the Company as presenting
fairly the financial condition, results of operations and cash flows of the
Company and its Subsidiaries as at the end of and for the fiscal year to
which such financial statements relate, and accompanied by a report or
opinion of independent certified public accountants of recognized national
standing selected by the Company stating that such financial statements
present fairly the consolidated financial condition, results of operations
and cash flows of the Company and its Subsidiaries in accordance with
generally accepted accounting principles consistently applied (except for
changes with which such accountants concur) and that the examination of
such accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards;
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(c) Accountants' Statements. Concurrently with the financial
statements delivered pursuant to Section 8.1(b), the written statement of
said accountants that in making the examination necessary for their report
or opinion on said financial statements they have obtained no knowledge of
any Event of Default or Unmatured Event of Default or, if such accountants
shall have obtained knowledge of any such Event of Default or Unmatured
Event of Default, they shall disclose in such statement the Event of
Default or Unmatured Event of Default and the nature and status thereof,
but such accountants shall not be liable, directly or indirectly, to anyone
for any failure to obtain knowledge of any such Event of Default or
Unmatured Event of Default;
(d) Officer's Certificates. Concurrently with the financial
statements delivered pursuant to Sections 8.1(a) and 8.1(b), a certificate
of the chief financial officer of the Company (1) stating that a review of
the activities of the Company and its Subsidiaries during such fiscal
quarter or fiscal year, as appropriate, has been made under his supervision
to determine whether the Company has fulfilled all of its obligations under
this Agreement and the Notes, (2) stating that, to the best of his
knowledge, there exists no Event of Default or Unmatured Event of Default,
or, if any such Event of Default or Unmatured Event of Default exists,
specifying such Event of Default or Unmatured Event of Default and the
nature and status thereof and (3) (i) in the case of
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a financial statement delivered pursuant to Section 8.1(a), containing a
computation of, and showing compliance with, Sections 8.14 and 8.15 and
(ii) in the case of a financial statement delivered pursuant to Section
8.1(b), containing a computation of, and showing compliance with, each of
the financial ratios and restrictions contained in this Section 8;
(e) SEC and Other Reports. Copies of each filing and report made
by the Company or any Subsidiary with or to any securities exchange or the
Securities and Exchange Commission and of each communication from the
Company or any Subsidiary to shareholders generally, promptly upon the
filing or making thereof;
(f) Report of Change in Subsidiaries. Promptly from time to
time, a written report of any change in the list of the Company's
Subsidiaries set forth on Exhibit D; and
(g) Requested Information. Promptly from time to time, such
other reports or information as the Agent or any Bank may reasonably
request.
8.2 Notices. Notify the Agent in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken by the Person(s) affected with respect
thereto:
(a) Default. The occurrence of an Event of Default or an
Unmatured Event of Default;
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(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which is material to the Company and
its Subsidiaries taken as a whole;
(c) Judgment. The entry of any judgment or decree against the
Company or any Subsidiary if the aggregate amount of all judgments and
decrees then outstanding against the Company and all Subsidiaries exceeds
$250,000 after deducting (i) the amount with respect to which the Company
or any Subsidiary is insured and with respect to which the insurer has
assumed responsibility in writing and (ii) the amount for which the Company
or any Subsidiary is otherwise indemnified if the terms of such
indemnification and the Person providing such indemnification are
satisfactory to the Majority Banks;
(d) Pension and Welfare Plans. The occurrence of a Reportable
Event with respect to any Plan; the institution of any steps by the
Company, any ERISA Affiliate, the PBGC or any other Person to terminate any
Plan; the institution of any steps by the Company or any ERISA Affiliate to
withdraw from any Plan; or the incurrence of any material increase in the
contingent liability of the Company or any Subsidiary with respect to any
post-retirement welfare benefits;
(e) Material Adverse Change. The occurrence of a material
adverse change in the business, operations or financial condition of the
Company and its Subsidiaries taken as a whole; or
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(f) Other Events. The occurrence of such other events as any Bank
may from time to time reasonably specify.
The Agent will promptly notify each of the Banks of the receipt by the
Agent of any notice from the Company pursuant to this Section
8.3 Existence. Except as otherwise set forth in this Agreement, do
all things, and cause each of its Subsidiaries to do all things, necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises; provided, however, that nothing in this Section 8.3 shall prevent
the abandonment or termination of the corporate existence, rights and franchises
of any such Subsidiary if, in the opinion of the Company, such abandonment or
termination would not have a material and adverse effect on the business,
operations, properties, prospects, assets or condition, financial or other, of
the Company and its Subsidiaries taken as a whole; and provided, further, that
nothing in this Section 8.3 shall prevent the merger of the Company with NSU
Merger Co., pursuant to the terms of the Agreement and Plan of Reorganization,
dated as of December 21, 1995 and amended as of September 27, 1996, as more
fully described in that certain proxy statement of the Company dated November
26, 1996.
8.4 Nature of Business. Engage, and cause each Subsidiary to engage,
in substantially the same fields of business as it is engaged in on the date
hereof.
8.5 Books, Records and Access. Maintain, and cause each Subsidiary
to maintain, complete and accurate books and records in
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which full and correct entries in conformity with generally accepted accounting
principles shall be made of all dealings and transactions in relation to its
respective business and activities; permit, and cause each Subsidiary to permit,
access by the Agent or any Bank to the books and records of the Company and such
Subsidiary during normal business hours; and permit, and cause each Subsidiary
to permit, any Bank to make copies of such books and records. All information
provided to any Bank that is not of public record will be kept confidential by
such Bank except as may be necessary in any litigation involving this Agreement
and any Note or as may be required by any applicable regulatory authorities or
by any court order or subpoena.
8.6 Insurance. Maintain, and cause each Subsidiary to maintain,
insurance to such extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated or as the Majority Banks may
reasonably request from time to time; provided that the Company and its
Subsidiaries may maintain a system or systems of self-insurance which, in the
opinion of the chief financial officer of the Company, will accord with sound
practices of corporations maintaining such systems engaged in the same or a
similar business similarly situated and under which the Company or such
Subsidiaries shall maintain adequate reserves in accordance with sound actuarial
and insurance principles and practice.
8.7 Insurance Reports. Provide to the Agent and the Banks at least
annually within ninety (90) days of the end of the
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Company's fiscal year, a certificate signed by its chief financial officer that
attests to and summarizes the property and casualty insurance program carried
by the Company and its Subsidiaries.
8.8 Repair. Maintain, preserve and keep, and cause each Subsidiary
to maintain, preserve and keep, its properties in good repair, working order and
condition; and from time to time make, and cause each Subsidiary to make, all
necessary and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained.
8.9 Taxes. Pay, and cause each Subsidiary to pay, when due, all of
its Taxes, unless and only to the extent that the Company or such Subsidiary, as
the case may be, is contesting such Taxes in good faith and by appropriate
proceedings and the Company or such Subsidiary has set aside on its books such
reserves or other appropriate provisions therefor as may be required by
generally accepted accounting principles.
8.10 Compliance. Use, and cause each of its Subsidiaries to use, its
best efforts to comply in all respects with all applicable statutes, rules,
regulations and orders of all governmental authorities with respect to the
conduct of its businesses and the ownership of properties (including, without
limitation, all applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls), except to the extent that any
of the foregoing are contested in good faith by appropriate proceedings.
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8.11 Pension Plans. Not permit, and not permit any Subsidiary to
permit, any condition to exist in connection with any Plan which might
constitute grounds for the PBGC to institute proceedings to have such Plan
terminated or a trustee appointed to administer such Plan; and not engage in, or
permit to exist or occur, or permit any of its Subsidiaries to engage in, or
permit to exist or occur, any other condition, event or transaction with respect
to any Plan which could result in the incurrence by the Company or any of its
Subsidiaries of any material liability, fine or penalty.
8.12 Indebtedness. Not, and not permit any Subsidiary to, create,
assume, incur or otherwise become liable, in each case contingently or
otherwise, in respect of any Indebtedness, whether secured or unsecured, other
than:
(a) in the case of the Company, unsecured Indebtedness;
(b) in the case of any Subsidiary (other than Old Michael after
the effectiveness of the Pending Reorganization and the assignment and
assumption set forth in Section 13), (i) unsecured Indebtedness, provided
that at the time of the creation, assumption or incurrence thereof and
immediately after giving effect thereto, the Company would be in compliance
with Section 8.14 hereof and the then outstanding aggregate principal
amount of Priority Indebtedness shall not exceed twenty-five percent (25%)
of the Consolidated Net Worth of the Company and its Subsidiaries and (ii)
Indebtedness owing to the Company or a Subsidiary; and
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(c) in the case of the Company or any Subsidiary (other than Old
Michael after the effectiveness of the Pending Reorganization and the
assignment and assumption set forth in Section 13), Indebtedness secured by
Liens as and to the extent permitted by Section 8.13.
8.13 Liens. Not, and not permit any Subsidiary to, (i) create,
assume, incur or suffer to exist any Lien upon (or, whether by transfer to any
Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or
Affiliate to subject, to the prior payment of any Indebtedness other than that
represented by the Notes) any property or assets (real or personal, tangible or
intangible) of the Company or any Subsidiary, whether now owned or hereafter
acquired, or any income or profits therefrom, or (ii) own or acquire or agree to
acquire any property or assets (real or personal, tangible or intangible)
subject to or upon any Lien; provided; however, that the foregoing restrictions
shall not prevent the Company or any Subsidiary from:
(a) (i) making pledges or deposits under workmen's compensation
laws, unemployment insurance laws or similar legislation or good faith
deposits in connection with bids, tenders, contracts (other than for the
repayment of money borrowed) or under leases to which the Company or such
Subsidiary is a party, (ii) making deposits to secure public or statutory
obligations of the Company or such Subsidiary or deposits of cash or
obligations of the United States of America to secure surety and appeal
bonds to which the Company
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or such Subsidiary is a party or deposits in lieu of such bonds, (iii)
incurring Liens or priorities imposed by law, such as employees' carriers'
warehousemen's, mechanics', materialmen's and vendors' liens or priorities,
and Liens arising out of judgments or awards against the Company or such
Subsidiary with respect to which the Company or such Subsidiary at the time
shall be prosecuting an appeal or proceedings for review and with respect
to which it shall have secured a stay of execution pending such appeal or
proceedings for review or (iv) entering into leases and from incurring
landlords' liens on fixtures and movable property located on premises
leased in the ordinary course of business so long as the rent secured
thereby is not in default and any applicable grace period has not expired;
(b) creating, incurring or suffering to exist (i) Liens for Taxes
or import duties not yet subject to penalties for nonpayment or the
nonpayment of which shall be permitted by Section 7.14 or (ii) minor survey
exceptions, minor encumbrances, easements or reservations of, or rights of
others for, rights of way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other restrictions as to the
use of real properties, which Liens, exceptions, encumbrances, easements,
reservations, rights and restrictions do not, in the opinion of the
Company, in the aggregate materially detract from the value of such
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properties or materially impair their use in the operation of the business
of the Company or such Subsidiary;
(c) suffering to exist the Liens existing on the date hereof
securing Indebtedness in an aggregate principal amount outstanding on the
date hereof not in excess of $3,000,000 and extensions, renewals or
replacements of any such Lien upon the same property theretofore subject
thereto without increase in the principal amount of the Indebtedness then
secured or evidenced thereby;
(d) in case of a Subsidiary, creating, incurring, assuming or
suffering to exist any Lien solely to secure Indebtedness owing to the
Company or a Subsidiary; or
(e) creating, incurring, assuming or suffering to exist Liens not
otherwise permitted by the foregoing clauses (a) through (d), inclusive, of
this Section 8.13; provided, however, that at the time of the creation,
incurrence or assumption thereof, and immediately after giving effect to
the Indebtedness secured or evidenced by any such Lien, (x) the then
outstanding aggregate principal amount of Priority Indebtedness shall not
exceed twenty-five percent (25%) of Consolidated Net Worth of the Company
and its Subsidiaries as of the end of the previous fiscal year of the
Company and (y) the Company would be in compliance with Section 8.14
hereof.
8.14 Maximum Consolidated Total Indebtedness to Capitalization Ratio.
Not permit the Total Debt to Capitalization Ratio at any time to exceed .55 to
1.
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8.15 Maintenance of Interest Expense Coverage. Maintain the ratio of
Consolidated Net Earnings Available for Fixed Charges to Fixed Charges
determined as of the last day of each fiscal quarter ending on or after June 30,
1997 for the Computation Period then ending at not less than 2.0 to 1.
8.16 Restricted Payments. Not, directly or indirectly, (a) declare
or pay any dividend or make any other distribution (whether by reduction of
capital or otherwise) on any shares of any class of its capital stock (other
than a dividend or distribution payable in shares of common stock of the
Company) or (b) purchase, redeem, retire or otherwise acquire, or cause or
permit any Subsidiary or Affiliate to purchase, otherwise acquire or make any
payment in respect of, any such shares, unless, immediately after giving effect
to such action No Event of Default or Unmatured Event of Default shall have
occurred and be continuing.
8.17 Limitation on Disposition of Assets. Subject to Section 8.18,
not at any time sell, transfer or otherwise dispose of, other than in the
ordinary course of business, all or any part of its assets and properties, for
less than the fair market value (as determined in good faith by the Company) of
the properties and assets so disposed of if, immediately after giving effect
thereto, the aggregate value of all such properties and assets so disposed of
(valued at the book value thereof) during the immediately preceding 365 days
exceeds twenty percent (20%) of Total Capitalization as of the end of the then
most recently ended fiscal year of the Company.
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8.18 Merger, Consolidation, Sale or Lease. Not consolidate with or
merge into any Person, or permit any Person to merge into it, or sell, transfer
or otherwise dispose of all or substantially all of its properties and assets,
unless:
(a) the Company shall be the surviving corporation; and
(b) immediately after giving effect to such transaction, no Event
of Default or Unmatured Event of Default shall have occurred and be
continuing.
8.19 Restrictions on Subsidiaries.
(a) Not cause, suffer or permit any Subsidiary to:
(i) issue or dispose of any shares of such Subsidiary's
capital stock to any Person other than the Company or a Subsidiary,
except to the extent that any such shares are required to qualify
directors under any applicable law or required to be issued to other
stockholders of such Subsidiary by virtue of their exercise of
preemptive rights or as their pro rata share of any stock dividend;
(ii) sell, assign, pledge, transfer, dispose of, or in any
way part with control of, any shares of capital stock of another
Subsidiary, or any Indebtedness owing to such Subsidiary from another
Subsidiary, to any Person other than the Company or a Subsidiary,
except in connection with a transaction which complies with Section
8.19(b); and, in the case of shares of capital stock, to
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the extent, if any, required to qualify directors of such other
Subsidiary under any applicable law; or
(iii) sell, assign, lease, pledge, transfer or otherwise dispose
of any substantial part of such Subsidiary's properties and assets to
any Person or consolidate with or merge into any other Person or
permit any other Person to merge into it; provided, however, that
(x) any Subsidiary may sell all or substantially all of its
properties and assets for cash in an amount not less than their fair
market value (as determined in good faith by the Company) if (1) such
Subsidiary does not own any capital stock or any Indebtedness of the
Company or any other Subsidiary not simultaneously being disposed of,
(2) such sale is not prohibited by the provisions of Section 8.17, and
(3) at the time of such transaction and immediately after giving
effect thereto, no Event of Default or Unmatured Event of Default
shall have occurred and be continuing; and
(y) any Subsidiary may sell, lease, transfer or otherwise
dispose of all or any part of its properties and assets to, or
consolidate with or merge into, the Company (subject to the provisions
of Section 8.18) or a Subsidiary.
(b) Not sell, assign, pledge, transfer, dispose of, or in any way
part with control of, any shares of capital stock of any
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Subsidiary or any Indebtedness owing from any Subsidiary to the Company, except,
in the case of shares of capital stock, to the extent, if any, required to
qualify directors of such Subsidiary under any applicable law; provided,
however, that all shares of capital stock of all classes, together with all
Indebtedness, of any Subsidiary owned by the Company and/or one or more
Subsidiaries may be sold if such sale, if deemed a sale of properties and assets
by such Subsidiary, would not be prohibited by the provisions of Section
8.19(a)(iii)(x).
(c) Not, and not cause, suffer or permit any Subsidiary to,
acquire, directly or indirectly, any stock of any other corporation which
immediately after such acquisition would become a Subsidiary, unless immediately
after giving effect to such acquisition:
(i) no Event of Default or Unmatured Event of Default shall have
occurred and be continuing; and
(ii) the Company could incur at least $1 of additional Indebtedness
secured or evidenced by Liens in compliance with the provisions of
Section 8.13(e).
8.20 Investments. Not, and not permit any Subsidiary to, make any
Restricted Investment if, after giving effect thereto, the Aggregate Amount of
all Restricted Investments of the Company and its Subsidiaries exceeds thirty
percent (30%) of Consolidated Net Worth as of the end of the Company's most
recently completed fiscal year; provided, however, that the Aggregate Amount of
all Restricted Investments of the Company and its Subsidiaries in
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businesses not related to the food industry shall not exceed five percent (5%)
of Consolidated Net Worth for such fiscal year.
8.21 Other Agreements. Not, and not permit any Subsidiary to, enter
into any agreement containing any provision which would be violated or breached
by the Company's performance of its obligations hereunder or under any
instrument or document delivered or to be delivered by the Company hereunder or
in connection herewith.
8.22 Use of Proceeds. Not permit any proceeds of the Advances to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of (i) "purchasing or carrying any margin stock" within
the meaning of Regulation U of the Federal Reserve Board, as amended from time
to time or (ii) acquiring any of the outstanding shares of capital stock of any
corporation unless, at the time such proceeds are so used, the Board of
Directors (or persons exercising similar functions) of the issuer of the shares
to be acquired shall have approved such acquisition and recommended it to its
shareholders. The Company will furnish to any Bank, upon its request, a
statement in conformity with the requirements of Federal Reserve Form U1
referred to in Regulation U.
8.23 Transactions with Related Parties. Not, and not permit any
Subsidiary to, enter into or be a party to any transaction or arrangement with
any Affiliate (except (i) the Pending Reorganization) including, without
limitation, the purchase, sale, lease or exchange of property or the rendering
of
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any service, with any Related Party (except those transactions or arrangements
existing on the date hereof, including any renewals or extensions thereof),
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not a Related Party.
9. CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of the Banks
to make any Advance is subject to the satisfaction of each of the following
conditions precedent:
9.1 Default. Before and after giving effect to such Advance, no
Event of Default or Unmatured Event of Default shall have occurred and be
continuing.
9.2 Warranties. Before and after giving effect to such Advance, the
warranties in Section 7 shall be true and correct as though made on the date of
such Advance, except for such changes as are specifically permitted hereunder.
9.3 Certification. The Company shall have delivered to the Agent and
each Bank a certificate of the Company's chief financial officer as to the
matters set out in Sections 9.1 and 9.2.
10. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of the
Banks to make the initial Advance hereunder is subject to the satisfaction of
the condition precedent, in addition to the
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applicable conditions precedent set forth in Section 9 above, that the Company
shall have delivered to each Bank:
10.1 Notes. Its duly executed Note, payable to such Bank's order in
the amount of such Bank's share of the Credit.
10.2 Resolutions. A copy, duly certified as of the date of this
Agreement by the Company's secretary or vice president - finance, of (a) the
resolutions of the Company's Board of Directors authorizing the borrowings
hereunder and the execution and delivery of this Agreement and the Notes, (b)
all documents evidencing other necessary corporate action and (c) all approvals
or consents, if any, with respect to this Agreement and the Notes.
10.3 Incumbency. A certificate of the Company's secretary or vice
president - finance, dated the date of this Agreement, certifying the names of
the Company's officers authorized to sign this Agreement, the Notes and all
other documents or certificates to be delivered hereunder, together with the
true signatures of such officers.
10.4 Opinion. An opinion of Maun & Simon, PLC counsel to the
Company, addressed to the Agent and the Banks and dated the date of this
Agreement, in substantially the form of Exhibit F.
10.5 Note Agreement. A copy, duly certified as of the date of this
Agreement by the Company's secretary or vice president - finance, of the duly
executed Note Agreement, together with all amendments or modifications thereto,
if any, as of the date of such certification.
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10.6 Certificate. A Certificate of the Company, duly executed by
the Company's Secretary or Vice President-Finance that: (a) Not less than
$125,000,000 of notes shall have been issued pursuant to the Note Agreement on
terms and conditions in the form of the Note Agreement delivered to the Banks;
(b) The Company shall have purchased the Papetti Companies
pursuant to an Agreement and Plan of Reorganization dated June 28, 1996, as
amended.
(c) The Revolving Loan Agreement dated as of March 30, 1990 as
amended, among the Company, certain banks and Bank of America National Trust and
Savings Association, as agent shall have been terminated and all obligations
thereunder shall have been paid in full.
10.7 NSU Resolutions. A copy, duly certified as of the date of
this Agreement by NSU's Secretary or Assistant Secretary, of (a) the resolutions
of the NSU's Board of Directors authorizing the execution and delivery of this
Agreement; (b) all documents evidencing other necessary corporate action of NSU;
and (c) all approvals or consents, if any, with respect to Section 13 of this
Agreement.
11. EVENTS OF DEFAULT AND REMEDIES.
11.1 Events of Default. Each of the following shall constitute an
Event of Default under this Agreement.
(a) Non-Payment. Default, and the continuance thereof for five
(5) days, in the payment of principal of, or interest on, the Note when due, or
any fee hereunder.
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(b) Non-Payment of other Indebtedness. Default in the
payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any other Indebtedness of, or guaranteed
by, the Company or any Subsidiary (except any such Indebtedness of any
Subsidiary to the Company or to any other Subsidiary) in an amount
equal to or greater than $2,500,000 or default in the performance or
observance of any obligation or condition with respect to any such
other Indebtedness if the effect of such default is to accelerate the
maturity of any such Indebtedness or to permit the holder or holders
thereof, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed
maturity.
(c) Insolvency. The Company or any of its Subsidiaries
becomes insolvent or generally fails to pay, or admits in writing its
inability to pay, its debts as they mature, or applies for, consents
to, or acquiesces in the appointment of a trustee, receiver or other
custodian for the Company, such Subsidiary or any other property
thereof; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for
the Company, any of its Subsidiaries or for a substantial part of the
property of the Company or any of its Subsidiaries and is not
discharged within thirty (30) days; or any bankruptcy, reorganization,
debt arrangement, or other proceeding under any bankruptcy or
insolvency law, or any dissolution or
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liquidation proceeding is instituted by or against the Company or any of
its Subsidiaries and if instituted against the Company or any of its
Subsidiaries is consented to or acquiesced in by the Company or such
Subsidiaries or remains for thirty (30) days undismissed; or any warrant of
attachment is issued against any substantial portion of the property of the
Company or any of its Subsidiaries which is not released within thirty (30)
days of service.
(d) ERISA. The PBGC applies to a United States District Court
for the appointment of a trustee to administer any Plan or for a decree
adjudicating that any such Plan must be terminated; a trustee is appointed
pursuant to ERISA to administer any such Plan; any action is taken to
terminate any such Plan or any such Plan is permitted or caused to be
terminated if, at the time such action is taken or such termination of any
such Plan occurs, the Plan's "vested liabilities", as defined in Section
3(25) of ERISA, exceed the then value of its assets at the time of such
termination.
(e) Agreements. Default in the performance of any of the
Company's agreements herein set forth (and not constituting an Event of
Default under any of the preceding subsections of this Section 11.1) and
continuance of such default for thirty (30) days after the earlier of (i)
written notice thereof to the Company from the Agent and (ii) a responsible
officer of the Company's obtaining knowledge of the occurrence of such
default.
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(f) Warranty. Any warranty made by the Company herein is untrue
in any material respect, or any schedule, statement, report, notice,
writing or certification furnished by the Company to any Bank is untrue in
any material respect on the date as of which the facts set forth are stated
or certified.
(g) Judgments. Any final judgment for the payment of money in
excess of $250,000 shall be rendered against the Company or any Subsidiary
and the same shall remain undischarged for a period of not less than thirty
(30) days during which execution shall not be effectively stayed.
(h) Event Risk Occurrence. Any Event Risk Occurrence shall have
occurred.
(i) Material Adverse Change. The Banks shall have determined in
good faith that (i) a material adverse change has occurred in the business,
operations or financial condition of the Company or (ii) the prospect of
payment or performance of any obligation or agreement of the Company
hereunder or under the Notes is materially impaired, and the condition
giving rise to such determination (which does not constitute an Event of
Default under any of the other subsections of this Section 11.1) continues
for at least thirty (30) days after notice to the Company from the Agent.
11.2 Remedies. If any Event of Default described in Section 11.1
shall be continuing, the Agent, upon request of the Majority Banks, may declare
the Credit to be terminated and all Notes to be due and payable, whereupon the
Credit shall immediately
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terminate and any outstanding Note shall become immediately due and payable,
all without notice of any kind (except that if an event described in Section
11.1(c) occurs, the Credit shall immediately terminate and any outstanding Note
shall become immediately due and payable without declaration or notice of any
kind). The Agent shall promptly advise the Company of any such declaration,
but failure to do so shall not impair the effect of such declaration.
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12. THE AGENT
12.1 Appointment and Authorization. Each Bank hereby irrevocably
(subject to Section 12.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
document executed in connection with this Agreement (herein, a "Loan Document")
and to exercise such powers and perform such duties as are expressly delegated
to it by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
12.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys in fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects with
reasonable care.
12.3 Liability of Agent. None of the Agent Related Persons shall (i)
be liable for any action taken or omitted to be
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taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Banks for any recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Company or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent Related Person shall
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
12.4 Reliance by Agent. (a) The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel
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(including counsel to the Company), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Majority Banks
as it deems appropriate and, if it so requests, confirmation from the Banks of
their obligation to indemnify the Agent against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 10, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
12.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default or Unmatured Event
of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Agent for the account of the Banks,
unless the Agent
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shall have received written notice from a Bank or the Company referring to this
Agreement, describing such Event of Default or Unmatured Event of Default and
stating that such notice is a "notice of default". The Agent will notify the
Banks of its receipt of any such notice. The Agent shall take such action with
respect to such Event of Default or Unmatured Event of Default as may be
requested by the Majority Banks in accordance with Section 11; provided,
however, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable or in the best interest of the Banks.
12.6 Credit Decision. Each Bank acknowledges that none of the Agent
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent Related Person to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon any Agent Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this
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Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any Agent
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Company which may come into the possession of any of the Agent Related Persons.
12.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Bank shall be liable
for the payment to the Agent Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Agent upon demand for its
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ratable share of any costs or out of pocket expenses (including reasonable fees
of attorneys for the Agent (including the allocable costs of internal legal
services and all disbursements of internal counsel)) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that the Agent is
not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the expiration or termination of the
Credit and payment of the Notes and other liabilities of the Company hereunder
and the resignation or replacement of the Agent.
For the purposes of this Section 12.7, "Indemnified Liabilities" shall
mean: "any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
reasonable fees of attorneys for the Agent (including the allocable costs of
internal legal services and all disbursements of internal counsel)) of any kind
or nature whatsoever which may at any time (including at any time following
repayment of the Advances and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
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contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code or appellate proceeding) related to or arising
out of this Agreement or the Advances or the use of the proceeds thereof,
whether or not any Agent-Related Person, any Bank or any of their respective
officers, directors, employees, counsel, agents or attorneys-in-fact is a party
thereto."
12.8 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
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confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to their Loans, BofA and its Affiliates
shall have the same rights and powers under this Agreement as any other Bank
and may exercise the same as though BofA were not the Agent, and the terms
"Bank" and "Banks" include BofA and its Affiliates, to the extent applicable,
in their individual capacities.
12.9 Successor Agent. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent resigns under this Agreement, the Majority Banks shall appoint from among
the Banks a successor agent for the Banks. If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Banks and the Company, a successor agent from
among the Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Section 12 and Section 14.3 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
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retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above.
12.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed
IRS Forms 1001 and W 8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two
properly completed and executed copies of IRS Form 4224 before the
payment of any interest is due in the first taxable year of such Bank
and in each succeeding taxable year of such Bank during which interest
may be paid under this Agreement, and IRS Form W 9; and
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(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from,
or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Company to such Bank, such Bank agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the
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applicable withholding tax after taking into account such reduction. If the
forms or other documentation required by subsection (a) of this Section are not
delivered to the Agent, then the Agent may withhold from any interest payment
to such Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including reasonable fees of attorneys for the Agent (including the allocable
costs of internal legal services and all disbursements of internal counsel)).
The obligation of the Banks under this subsection shall survive the expiration
or termination of the Credit and payment of the Notes and other liabilities of
the Company hereunder and the resignation or replacement of the Agent.
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13. ASSIGNMENT AND ASSUMPTION.
Effective upon the Pending Reorganization, (a) NSU shall without
further act or deed of the parties hereto, be entitled to all of the benefits
and rights of the Company under this Agreement, the Notes and all documents
executed and delivered by the Company pursuant thereto (collectively, the "Loan
Documents"), (b) NSU shall, and it hereby does without further act or deed of
the parties hereto unconditionally and expressly, (i) assume all liabilities and
obligations of the Company under the Loan Documents and (ii) agree to perform
all liabilities and obligations of the Company under said Loan Documents, as if
said Loan Documents were originally executed and delivered by NSU, and (c) all
references in the Loan Documents to the "Company" shall refer to NSU except for
references to the Company relating to its status prior to the consummation of
the Pending Reorganization. NSU shall effective upon the Pending Reorganization
change its name to "Michael Foods, Inc." and give immediate notice of the
effectiveness thereof to the Agent. Upon (i) such notice and (ii) the delivery
to the Agent of an opinion of Maun & Simon, PLC, counsel to NSU upon the
consummation of the Pending Reorganization, addressed to the Agent and the Banks
and dated as of the effective date of the Pending Reorganization, in
substantially the form of Exhibit H, and so long as no Event of Default or
Unmatured Event of Default shall then have occurred and be continuing, Old
Michael shall be released from all liabilities and obligations under the Loan
Documents. As of the effectiveness of the Pending Reorganization, NSU
represents,
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warrants and affirms that each of the representations and warranties contained
in Section 7 of this Agreement is true and correct as of the effective date of
the Pending Reorganization.
14. GENERAL.
14.1 Delay. No delay on the part of any Bank or the holder of any
Note in the exercise of any power or right shall operate as a waiver thereof,
nor shall any single or partial exercise of any power or right preclude other or
further exercise thereof, or the exercise of any other power or right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
14.2 Notice. Any notice between the parties hereto or notices
provided herein to be given shall be in writing (unless otherwise provided
herein) and, if mailed, shall be deemed to be given when sent by registered or
certified mail, postage prepaid, and addressed to the Company, the Agent or the
Banks at the respective address set forth on the signature pages hereof.
14.3 Expenses. The Company agrees, whether or not any Advance is
made hereunder, to pay the Agent and the Banks upon demand for all reasonable
expenses, including reasonable fees of attorneys for the Agent and the Banks
(who may be employees of the Agent and the Banks), incurred by (i) the Agent in
connection with the preparation, negotiation and execution of this Agreement,
the Notes and any document required to be furnished therewith, (ii) the Agent in
connection with the preparation of any and all amendments to this Agreement or
the Notes and all other instruments or
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documents provided for herein or delivered or to be delivered hereunder or in
connection herewith, and (iii) the Agent and the Banks in connection with the
enforcement of the Company's obligations hereunder or under any Note. The
Company also agrees (iv) to indemnify and hold the Agent harmless from any loss
or expense which may arise or be created by the acceptance of telephonic or
other instructions for making Advances and (v) to pay, and save the Agent and
the Banks harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Agreement or the
issuance of the Notes or of any other instruments or documents provided for
herein or to be delivered hereunder or in connection herewith. The Company
further agrees to indemnify, defend, reimburse and hold harmless the Agent, each
Bank and all directors, officers, employees, agents and advisors of the Agent
and the Banks (each, an "Indemnified Party") from and against all claims,
actions, proceedings, suits, damages, losses, liabilities, costs and expenses,
including the reasonable fees and expenses of counsel (who may be employees of
the Agent and the Banks), which may be incurred by or asserted against any
Indemnified Party in connection with, or arising out of, or relating to, any
transaction or proposed transaction (whether or not consummated) financed or to
be financed, in whole or in part, directly or indirectly with the proceeds of
any Advance(s), provided such Indemnified Party has acted in good faith and is
not in breach of this Agreement. The
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Company's obligations as set forth in this section shall survive any
termination of this Agreement.
14.4 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
14.5 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same instrument.
14.6 Investment. Each Bank represents and warrants that: (i) it is
acquiring any Note to be issued to it hereunder for its own account as a result
of making loans in the ordinary course of its commercial banking business and
not with a view to the public distribution or sale thereof, nor with any present
intention of selling or distributing such Note, but subject, nevertheless, to
any legal or administrative requirement that the disposition of such Bank's
property at all times be within its control and (ii) in good faith it has not
and will not rely upon any margin stock (as such term is defined in Regulation U
of the Board of Governors of the Federal Reserve System) as collateral in the
making and maintaining of the Advances.
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14.7 U.S. Withholding Tax Exemptions. Each Bank represents that, on
the date of this Agreement, either (a) it is a bank organized under the laws of
the United States or any state thereof or (b) if it is not a bank organized
under the laws of the United States or any state thereof, it is entitled to
complete exemption from United States withholding tax imposed on or with respect
to payment of principal, interest and fees under this Agreement and the Notes
under an applicable provision of a tax convention to which the United States is
a party and either (i) it is entitled to complete exemption from United States
withholding tax imposed on or with respect to payments of principal, interest
and fees under this Agreement and the Notes under an applicable provision of a
tax convention to which the United States is a party or (ii) it is acting
through a branch, agency or office in the United States (including only the
states and the District of Columbia) and any payment received or to be received
by it with respect to payments of principal, interest and fees under this
Agreement and the Notes is effectively connected with the conduct of a trade or
business in the United States.
14.8 Law. This Agreement and each Note shall be contracts made under
and governed by the laws of the State of Illinois.
14.9 Successors. This Agreement shall be binding upon the Company,
the Banks and the Agent and their respective successors and assigns, and shall
inure to the benefit of the Company, the Banks and the Agent and the successors
and assigns of
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the Banks and the Agent. The Company shall not assign its rights or duties
hereunder without the consent of the Banks.
14.10 Amendments. No amendment or waiver of any provision of this
Agreement or the Notes, nor consent to any departure therefrom by the Company
shall be effective unless the same shall be in writing and signed by the Company
and the Majority Banks, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Banks, do any of the following: (a) waive any of the
conditions specified in Sections 9 and 10, (b) increase the amounts or extend
the terms of the Banks' Commitments or subject the Banks to any additional
obligations, (c) reduce the principal of, or interest on, the Notes or any fees
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees hereunder, (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
number of Banks which shall be required to take action hereunder, or (f) change
any provisions of this Section 14.10; provided, further, that no amendment,
waiver or consent to Section 12 shall be effective unless signed by the Agent.
14.11 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the Company at all
times other than during the existence of an Event of Default and the Agent,
which consents shall not be unreasonably
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withheld, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company or the Agent shall be required
in connection with any assignment and delegation by a Bank to an Eligible
Assignee that is an affiliate of such Bank) (each an "Assignee") all, or any
ratable part of all, of the Advances, its Commitment hereunder and the other
rights and obligations of such Bank hereunder, in a minimum amount of
$5,000,000; provided, however, that the Company and the Agent may continue to
deal solely and directly with such Bank in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Company and the Agent by such Bank and
the Assignee; (ii) such Bank and its Assignee shall have delivered to the
Company and the Agent an Assignment and Acceptance in the form of Exhibit G
("Assignment and Acceptance") and (iii) the assignor Bank or Assignee has paid
to the Agent a processing fee in the amount of $2,500. The Company shall not be
responsible for reimbursing any costs related to any assignment hereunder.
(b) From and after the date that the Agent notifies the assignor
Bank that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of
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a Bank under this Agreement and the Notes, and (ii) the assignor Bank shall, to
the extent that rights and obligations hereunder and under the Notes have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement and the Notes.
(c) Within five Banking Days after its receipt of notice by the Agent
that it has received an executed Assignment and Acceptance and payment of the
processing fee, (and provided that it consents to such assignment in accordance
with subsection 14.11), the Company shall execute and deliver to the Agent, new
Notes evidencing such Assignee's assigned Advances and Commitment and, if the
assignor Bank has retained a portion of its Advances and its commitment,
replacement Notes in the principal amount of the Advances retained by the
assignor Bank (such Notes to be in exchange for, but not in payment of, the
Notes held by such Bank). Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce the Commitment
of the assigning Bank by the amount of the Commitment assigned.
(d) Any Bank may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Company (a "Participant") participating
interests in any Advances, the Commitment of that Bank and the other interests
of that Bank (the
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"Originating Bank") hereunder and under the Notes; provided, however, that (i)
the Originating Bank's obligations under this Agreement shall remain unchanged,
(ii) the Originating Bank shall remain solely responsible for the performance of
such obligations, (iii) the Company and the Agent shall continue to deal solely
and directly with the Originating Bank in connection with the Originating Bank's
rights and obligations under this Agreement and the Notes, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any Note, except to the extent such amendment, consent or
waiver would require unanimous consent of the Banks. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections 6
and 14.3 as though it were also a Bank hereunder, but shall not have any rights
under this Agreement, or any of the Notes, and all amounts payable by the
Company hereunder shall be determined as if such Bank had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement.
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(e) Notwithstanding any other provision in this Agreement, any Bank may at
any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement and any Note held by it in favor of
any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
14.12 WAIVER OF JURY TRIAL. THE COMPANY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed at Chicago, Illinois by their respective officers thereunto duly
authorized as of the date first written above.
MICHAEL FOODS, INC.
By: /s/ John Reedy
-----------------------------
Title: VICE PRESIDENT -FINANCE
--------------------------
Address: 324 Park National
Bank Building
5353 Wayzata Boulevard
Minneapolis, MN 55416
S-1
<PAGE> 96
For the purposes of Section 13
only, NORTH STAR UNIVERSAL, INC.
By: /s/ Peter E. Flynn
-----------------------------
Title: EVP/CFO
--------------------------
Address: 6479 City West Parkway
Eden Prairie, Minnesota
55344-3246
S-2
<PAGE> 97
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as agent
By: /s/ R. Guy Stapleton
-----------------------------
Title: R. Guy Stapleton
Managing Director
--------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
S-3
<PAGE> 98
Amount of
Commitment Share
$25,000,000 31.25% BANK OF AMERICA ILLINOIS
By: /s/ R. Guy Stapleton
-----------------------------
Title: R. Guy Stapleton
Managing Director
--------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
S-4
<PAGE> 99
Amount of
Commitment Share
$20,000,000 25.00% COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND"
By: /s/ W. Jeffrey Vollack
Vice President, Manager
------------------------------
By: /s/ Angela R. Reilly
Vice President
------------------------------
Address: 245 Park Avenue
New York, New York 10167
S-5
<PAGE> 100
Amount of
Commitment Share
$15,000,000 18.75% BOATMEN'S NATIONAL BANK
By: /s/ Ellen M. Isch
--------------------------
Title: VP
-----------------------
Address: 10th & Baltimore
Kansas City, Missouri
64105
S-6
<PAGE> 101
Amount of
Commitment Share
$10,000,000 12.50% NORWEST BANK MINNESOTA, N.A.
By: /s/ Perry T. Larson
-----------------------------
Title: Vice President
--------------------------
Address: Norwest Center
Sixth and Marquette Ave.
Minneapolis, MN 55479-
0079
S-7
<PAGE> 102
Amount of
Commitment Share
$10,000,000 12.50% THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By: /s/ Armund J. Schoen
----------------------------------
Title: V.P. & Deputy General Manager
-------------------------------
Address: 190 S. LaSalle Street
Suite #800
Chicago, Illinois 60603
S-8
<PAGE> 103
EXHIBIT A
REVOLVING NOTE
$____________ Chicago, Illinois: February 28, 1997
FOR VALUE RECEIVED, the undersigned MICHAEL FOODS, INC. (the
"Company") hereby promises to pay to the order of _____________ (the "Bank") on
the Termination Date (as such term is defined in the Revolving Loan Agreement
hereinafter referred to), the principal sum of _______ DOLLARS ($________), or
if less, the then aggregate unpaid principal amount of all Domestic Advances
and Eurodollar Advances (as such terms are defined in the Revolving Loan
Agreement) as may be borrowed by the Company under the Revolving Loan
Agreement. The Company may borrow, repay and reborrow hereunder in accordance
with the provisions of the Revolving Loan Agreement.
The Company promises to pay interest on the unpaid principal amount of
the Advances from time to time outstanding from the date hereof until payment
in full at the rates per annum which shall be determined in accordance with the
provisions of the Revolving Loan Agreement. Said interest shall be payable on
each date provided for in the Revolving Loan Agreement; provided, however, that
interest on any principal portion which is not paid when due shall be payable
on demand.
The portions of the principal sum hereof from time to time
representing Domestic Advances or Eurodollar Advances, and payments of
principal thereof, shall be noted by the holder of this Note on the grid
schedule attached hereto.
All payments of principal and interest under this Note shall be made
in immediately available funds at the office of Bank of America National Trust
and Savings Association ("BofA") at 231 South LaSalle Street, Chicago, Illinois
60697 or at such other address as BofA shall notify the Company in writing.
This Note is one of the Notes referred to in, and is subject to the
terms and provisions of, the Revolving Loan Agreement dated as of February 28,
1997 (as the same may be amended, modified or supplemented from time to time,
herein called the "Revolving Loan Agreement") among the Company, certain banks
(including the Bank) and BofA, as Agent, to which Revolving Loan Agreement
reference is hereby made for a statement of said terms and provisions. The
Company expressly waives any presentment, demand, protest or notice in
connection with this Note.
<PAGE> 104
This Note is made under and governed by the internal laws of the State of
Illinois
Address: 324 Park National MICHAEL FOODS, INC.
Bank Building
5353 Wayzata Boulevard By:___________________
Minneapolis, MN 55416
Title:________________
A-2
<PAGE> 105
Schedule attached to Note dated as of February 28, 1997 of MICHAEL FOODS, INC.,
payable to the order of ________________.
ADVANCES AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
======================================================================================================
Date Amount of Type of Advance & Amount of Unpaid Notation Made
Advance Made Applicable Principal Principal by
Interest Rate Repaid Balance
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
======================================================================================================
</TABLE>
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
this Note. The failure to record the date and amount of any advance on this
schedule shall not, however, limit or otherwise affect the obligations of the
Company under the Revolving Loan Agreement or under this Note to repay the
principal amount of the advances together with all interest accruing thereon.
A-3
<PAGE> 106
1. Michael Foods, Inc. and North Carolina State University vs.
Papetti's Hygrade Egg Products, Inc., U.S. District Court for the District of
New Jersey, File No. 89-4645. This action arises out of the alleged breach by
the Defendant of certain patents owned by North Carolina State University and
licensed to the Company. The Company obtained summary judgment affirming the
validity of one of the patents and finding the defendant to have infringed the
patent. This judgment was affirmed on appeal to the Federal Circuit Court of
Appeals. Discovery on the question of damages had been suspended pending a
reexamination of the patent in the Patent Office. As a condition precedent to
the acquisition of the Papetti Companies (including the Defendant herein), this
litigation was dismissed.
2. NuLaid Foods, Inc. vs. Michael Foods, Inc. and North Carolina
State University, U.S. District Court for the Eastern District of California,
Civil Action No. CIV-S-93-1319 WBS JFM. This is an action commenced by NuLaid
Foods, Inc. seeking a declaratory judgment that the patents which are the
subject of the patent litigation described in No. 1 above are invalid. The
Company and North Carolina State University have counterclaimed for
infringement of the patent by the Plaintiff. Further proceedings in this
litigation have been stayed pending a reexamination of the patent in the Patent
Office.
3. Schwan's Sales Enterprises, Inc. vs. Kohler Mix Specialties,
Inc., et. al., Lyon County District Court, 5th Judicial District, File No.
C6-95-357. In May, 1995 an action was commenced against the Company's
subsidiary, Kohler Mix Specialties, Inc. ("Kohler Mix") and certain other
parties by Schwan's Sales Enterprises, Inc. ("Schwan's") seeking recovery of
damages arising out of alleged salmonella contamination of Schwan's ice cream
that had been distributed to the public in the summer and fall of 1994.
Following an investigation by Schwan's and various governmental agencies, it
was determined that Schwan's ice cream product evidenced the presence of
salmonella bacteria. Schwan's operations were interrupted for a period of time
and Schwan's has made settlements with customers who claimed injury from
consuming Schwan's ice cream. Kohler Mix and others supplied ice cream mix to
Schwan's in tanker trucks operated by the same transporter during the time in
question. The complaint seeks to recover all or a portion of the loss
sustained by Schwan's as a result of the incident. Discovery is on-going. A
mediation conference is scheduled for April, 1997. The Company's and Kohler
Mix's products liability carrier, Liberty Mutual Insurance Company has
undertaken defense of the litigation without waiving coverage defenses.
Underlying insurance and excess insurance provides $55,000,000 in coverage.
EXHIBIT B
<PAGE> 107
EXHIBIT C
LIENS SECURING INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
============================================================================================
Amount of
Obligor Obligee Nature of Indebtedness
Security Secured
============================================================================================
<S> <C> <C> <C>
Kohler Mix City of White Bear Utility Assessments $ 14,200.00
Specialties Lake
--------------------------------------------------------------------------------------------
Northern Star Ryder Tractor/Trailers $ 67,149.00
Company
--------------------------------------------------------------------------------------------
M.G. Waldbaum Erwin and Delores Real estate $ 54,164.00
Company Siebrandt
--------------------------------------------------------------------------------------------
M.G. Waldbaum Bloomfield Real estate $211,362.00
Company Community
Development
============================================================================================
============================================================================================
Casa Trucking, Inc. Fleet Capital Tractor/Trailers $600,000.00
Leasing
--------------------------------------------------------------------------------------------
Papetti's Hygrade City of Lenox, Iowa Jobs Training $350,000.00
Egg Products, Inc. Agreement
--------------------------------------------------------------------------------------------
Papetti's Hygrade First Union Tractor/Trailers $677,000.00
Egg Products, Inc. Commercial
Corporation
============================================================================================
</TABLE>
<PAGE> 108
COMPANY SUBSIDIARIES
<TABLE>
<S> <C>
SUBSIDIARY NAME JURISDICTION
Crystal Farms Refrigerated
Distribution Company Minnesota
M.G. Waldbaum Company Nebraska
Including:
Papetti's Hygrade Egg
Products, Inc. Minnesota
Casa Trucking, Inc. Minnesota
Farm Fresh Foods, Inc. California
Drallos Potato Co., Inc. Michigan
Kohler Mix Specialties, Inc. Minnesota
Including:
Midwest Mix, Inc. Minnesota
Northern Star Co. Minnesota
Including:
Minnesota Products, Inc. Minnesota
B.C.K. Co. Minnesota
WFC, Inc. Wisconsin
Including:
Wisco Farm Cooperative Wisconsin
MIKLFS Corporation Virgin Islands
</TABLE>
EXHIBIT D
<PAGE> 109
EXHIBIT E
NONE
<PAGE> 110
EXHIBIT F
FORM OF OPINION OF COUNSEL*
_______________, 1997
Bank of America National Trust
and Savings Association, as agent
and the Banks referred to below
231 South LaSalle Street
Chicago, Illinois 60697
Re: Michael Foods, Inc.
Ladies and Gentlemen:
We have acted as counsel to Michael Foods, Inc. (the "Company") and
North Star Universal, Inc. ("NSU"), and we are delivering to you this opinion
of counsel upon which you may rely, in connection with a Revolving Loan
Agreement, dated as of _______, 1997, entered into between the Company, Bank of
America National Trust and Savings Association, as Agent and certain banks (the
"Banks") (the "Revolving Loan Agreement"), and the transactions and other
documents and instruments described therein. Unless otherwise defined herein,
capitalized terms used herein shall have the respective meanings assigned to
such terms in the Revolving Loan Agreement.
In so acting, we, as counsel to the Company and NSU have made such
factual inquiries, and we have examined or caused to be examined such questions
or law, as we have considered necessary or appropriate for the purposes of this
opinion and, upon the basis of such inquiries and examinations, advise you
that, in our opinion:
1. NSU and the Company, and each of their Subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of the state of their respective incorporation, and each is duly qualified
and in good standing as a foreign corporation in all other jurisdictions in
which its respective present operations or properties require such
qualification.
__________________________________
* This opinion, as it relates to North Star Universal, Inc. may be given
by separate counsel.
<PAGE> 111
2. NSU and the Company have full corporate power and authority to
own and operate their properties and assets, carry on its business as presently
conducted, and enter into and perform its obligations under the Revolving Loan
Agreement and the Notes.
3. The execution and delivery of the Revolving Loan Agreement and
the Notes, the performance by the Company and NSU of their obligations
thereunder, and the borrowings under the Revolving Loan Agreement, have been
duly authorized by all necessary corporate action, and all of said documents
and instruments have been duly executed and delivered on behalf of the Company
and NSU and constitute valid and binding obligations of the Company and NSU,
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
4. There is no provision in the Company's or NSU's articles of
incorporation or by-laws, nor any provision in any indenture, mortgage,
contract or agreement known to us to which the Company or NSU is a party or by
which it or its properties may be bound, nor any law, statute, rule or
regulation, nor any writ, order or decision of any court or governmental
instrumentality binding on the Company or NSU, which would be contravened by
the execution and delivery of the Revolving Loan Agreement or the Notes, nor do
any of the foregoing prohibit the Company's or NSU's performance of any term,
provision, condition, covenant or any other obligation of the Company or NSU
contained therein.
5. There are no actions, suits or proceedings pending or, to the
best of our knowledge after due inquiry, threatened against or affecting the
Company or NSU before any court or arbitrator or by or before any
administrative agency or governmental authority, which, if adversely
determined, would have a material adverse effect on the Company's or NSU's
financial condition or business or the Company's or NSU's ability to perform or
otherwise comply with its obligations set forth in the Revolving Loan Agreement
or the Notes.
6. Neither the making nor performance of the Revolving Loan
Agreement or the Notes, nor the borrowings under the Revolving Loan Agreement
or the Notes, requires the consent or approval of any governmental
instrumentality.
7. Neither NSU or the Company is an "investment company" or a
company "controlled" by an "investment company" within the meanings of the
Investment Company Act of 1940, as amended.
F-2
<PAGE> 112
8. Neither the Company nor NSU 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 Federal Reserve Board.
Very truly yours,
F-3
<PAGE> 113
EXHIBIT G
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________, 199__ is made between
______________________________ (the "Assignor") and __________________________
(the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain
Revolving Loan Agreement dated as of February 28, 1997 (as amended, amended and
restated, modified, supplemented or renewed, the "Credit Agreement") among
Michael Foods, Inc., a Delaware corporation (the "Company"), the several
financial institutions from time to time party thereto (including the Assignor,
the "Banks"), and Bank of America National Trust and Savings Association, as
agent for the Banks (the "Agent"). Any terms defined in the Credit Agreement
and not defined in this Assignment and Acceptance are used herein as defined in
the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor
has committed to making Loans (the "Committed Loans") to the Company in an
aggregate amount not to exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Committed Loans in the
aggregate principal amount of $__________ to the Company] [no Committed Loans
are outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part
of the] [all] rights and obligations of the Assignor under the Credit Agreement
in respect of its Commitment, in an amount equal to $__________ (the "Assigned
Amount") on the terms and subject to the conditions set forth herein and the
Assignee wishes to accept assignment of such rights and to assume such
obligations from the Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
<PAGE> 114
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this
Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns
to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes
from the Assignor, without recourse and without representation or warranty
(except as provided in this Assignment and Acceptance) __% (the "Assignee's
Percentage Share") of (A) the Commitment [and the Committed Loans] of the
Assignor and (B) all related rights, benefits, obligations, liabilities and
indemnities of the Assignor under and in connection with the Credit Agreement
and the Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor
by Assignee of outstanding principal of, accrued interest on, and fees with
respect to, Committed Loans assigned.]
(b) With effect on and after the Effective Date (as
defined in Section 5 hereof), the Assignee shall be a party to the Credit
Agreement and succeed to all of the rights and be obligated to perform all of
the obligations of a Bank under the Credit Agreement, including the payment of
indemnification, with a commitment in an amount equal to the Assigned Amount.
The Assignee 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 Bank. It is the intent of the parties hereto that the
Commitment of the Assignor shall, as of the Effective Date, be reduced by an
amount equal to the Assigned Amount and the Assignor shall relinquish its
rights and be released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee; provided, however,
the Assignor shall not relinquish its rights under Section 14.13 of the Credit
Agreement to the extent such rights relate to the time prior to the Effective
Date.
(c) After giving effect to the assignment and assumption
set forth herein, on the Effective Date the Assignee's commitment will be
$__________.
(d) After giving effect to the assignment and assumption
set forth herein, on the Effective Date the Assignor's commitment will be
$__________.
2. Payments.
(a) As consideration for the sale, assignment and
transfer contemplated in Section 1 hereof, the Assignee shall pay to the
Assignor on the Effective Date in immediately available
G-2
<PAGE> 115
funds an amount equal to $__________, representing the Assignee's pro rata
share of the principal amount of all Committed Loans.
(b) The [Assignor] [Assignee] further agrees to pay to
the Agent a processing fee in the amount specified in Section 14.11(a) of the
Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment and Committed Loans shall be for the account of
the Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that it will hold
in trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the
Credit Agreement and the Schedules and Exhibits thereto, together with copies
of the most recent financial statements referred to in Section 8.1 of the
Credit Agreement, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter
into this Assignment and Acceptance; and (b) agrees that it will, independently
and without reliance upon the Assignor, the Agent or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the
effective date for this Assignment and Acceptance shall be __________, 199__
(the "Effective Date"); provided that the following conditions precedent have
been satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be
executed and delivered by the Assignor and the Assignee;
(ii) the consent of the Company and the Agent
required for an effective assignment of the Assigned Amount by the Assignor to
the Assignee under Section 14.11(a) of the Credit
G-3
<PAGE> 116
Agreement shall have been duly obtained and shall be in full force and effect
as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due
to the Assignor under this Assignment and Acceptance; and
(iv) the processing fee referred to in Section 2(b) hereof
and in Section 14.11(a) of the Credit Agreement shall have been paid to the
Agent.
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in the form
attached hereto as Schedule 1.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the Assignor to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement.
(b) The Assignee shall assume no duties or obligations
held by the Assignor in its capacity as Agent under the Credit Agreement.]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Bank, the Agent and the
Company that under applicable law and treaties no tax will be required to be
withheld by the Bank with respect to any payments to be made to the Assignee
hereunder, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
the Company prior to the time that the Agent or Company is required to make any
payment of principal, interest or fees hereunder, duplicate executed originals
of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a
tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by the Assignee, and (c) agrees to comply
with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.
G-4
<PAGE> 117
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) 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 Lien or other adverse claim; (ii) it is
duly organized and existing and it has the full power and authority to take, and
has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor 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. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Company, or the performance or observance by the Company, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by
G-5
<PAGE> 118
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; (iii)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee,
enforceable against the Assignee in accordance with the terms hereof, subject,
as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and
other laws of general application relating to or affecting creditors' rights
and to general equitable principles; and (iv) it is an Eligible Assignee.
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF ILLINOIS. The
Assignor and the Assignee each irrevocably submits to the non-exclusive
jurisdiction of any State or Federal court sitting in Illinois over any suit,
action or proceeding arising
G-6
<PAGE> 119
out of or relating to this Assignment and Acceptance and irrevocably agrees
that all claims in respect of such action or proceeding may be heard and
determined in such Illinois State or Federal court. Each party to this
Assignment and Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
--------------------------
Title:
------------------------
By:
---------------------------
Title:
------------------------
Address:
G-7
<PAGE> 120
[ASSIGNEE]
By:
----------------------------
Title:
-------------------------
By:
----------------------------
Title:
-------------------------
Address:
G-8
<PAGE> 121
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, 19__
Bank of America National Trust
and Savings Association, as Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Global Agency #5596
Michael Foods, Inc.
324 Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, MN 55416
Ladies and Gentlemen:
We refer to the Revolving Credit Agreement dated as of February 27,
1997 (as amended, amended and restated, modified, supplemented or renewed from
time to time the "Credit Agreement") among Michael Foods, Inc., (the
"Company"), the Banks referred to therein and Bank of America National Trust
and Savings Association as agent for the Banks (the "Agent"). Terms defined in
the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and
to the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor[,] [and] all
outstanding Loans made by the Assignor pursuant to the Assignment and
Acceptance Agreement attached hereto (the "Assignment and Acceptance"). Before
giving effect to such assignment the Assignor's Commitment is $ ___________[,]
[and] the aggregate amount of its outstanding Loans is $_____________.
2. The Assignee agrees that, upon receiving the consent of the
Agent, and, if applicable, Michael Foods, Inc. to such assignment, the Assignee
will be bound by the terms of the Credit Agreement as fully and to the same
extent as if the Assignee were the Bank originally holding such interest in the
Credit Agreement.
<PAGE> 122
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name:___________________________
Address:_________________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
Telex (Answerback):______________________
(B) Payment Instructions:
Account No.:_____________________________
At: _____________________________
_____________________________
Reference: _____________________________
Attention: _____________________________
4. You are entitled to rely upon the representations, warranties
and covenants of each of the Assignor and Assignee contained in the Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
Title:_______________________
By:__________________________
Title:_______________________
[NAME OF ASSIGNEE]
By:__________________________
Title:_______________________
-2-
<PAGE> 123
By:____________________________
Title:_________________________
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
MICHAEL FOODS, INC.
By: _____________________________
Title: __________________________
By: _____________________________
Title: __________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: __________________________
Its: _________________________
-3-
<PAGE> 1
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the 26th day of February, 1997
(the "Agreement"), by and between MICHAEL FOODS, INC., a Delaware corporation
(hereinafter referred to as "Michael Foods") and ARTHUR J. PAPETTI (hereinafter
referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products, Inc.
which will be merged as of the date hereof with and into Michael Foods (the
"Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of the
services of the Executive following the Reorganization, and it is a condition to
the Reorganization that Executive and Michael Foods enter into this Agreement
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive to serve
as Executive Vice President of the Papetti's Hygrade Foods Division and in such
capacity Executive shall perform such duties as were being performed prior to
and as of the date of this Agreement subject at all times to the direction of
the President of Papettis' Hygrade Foods Division.
2. TERM. This Agreement shall be effective as of February 26, 1997 and
shall continue through February 25, 2000, unless earlier terminated as provided
herein. This Agreement may be extended thereafter upon the written agreement of
the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael Foods
agrees to pay Executive an annual Base Salary for each year of this Agreement
from February 26, 1997 through February 25, 2000 of at least $180,000 payable in
substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical insurance and
shall permit Executive to participate in other fringe benefit plans as
Michael Foods may from time to time provide for its other executive
officers. The terms of said benefits in all cases shall be no less
favorable to Executive than those offered to other executive officers to
Michael Foods.
b. Executive is entitled to take up to 4 weeks of vacation per annum
at reasonable times and for customary and reasonable lengths of time
consistent with his overall responsibilities hereunder.
<PAGE> 2
c. Michael Foods shall reimburse Executive for all reasonable
expenses incurred by Executive in connection with Michael Foods' business,
including but not limited to, expenses of travel and entertainment, upon
presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a period
of three years following termination of employment, Executive shall not directly
or indirectly, whether as an employee, agent, contractor, partner, shareholder
or otherwise, engage in the business of egg production, processing or
distribution in any geographic area where Michael Foods produces or processes
eggs or distributes egg products, except as specified in Schedule I to this
Agreement, nor shall Executive solicit the business of any customer of Michael
Foods on behalf of any company or business entity (other than Michael Foods or
its affiliates) which is engaged in the egg production, processing or
distribution business, whether or not such company or business directly competes
with Michael Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder shall
terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party or by
Executive if Executive's Duties Have Been Substantially Reduced or
Negatively Altered without Executive's prior written consent; or
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael Foods
that Executive has committed an illegal act that directly reflects upon his
fitness to act as an Executive of Michael Foods.
"Incapacity" for purposes hereof shall mean a determination by Michael
Foods in its sole discretion that Executive is unable to perform his job
responsibilities hereunder as a result of chronic illness, physical, mental or
any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by Michael
under subsection (b) or by Executive under subsection (b) based upon the fact
the Executive's Duties Have Been Substantially Reduced or Negatively Altered
without Executive's prior written consent, Executive shall receive as a
termination payment, an amount equal to the Base Salary for the remaining term
of this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the month
following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without
-2-
<PAGE> 3
Executive's prior written consent or by Michael under subsection (c), Executive
shall receive no termination payment.
"Duties are Substantially Reduced or Negatively Altered" means, without
Executive's express written consent:
(i) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities and status with Michael
Foods or a change in Executive's reporting responsibilities, titles or
offices, or any removal of Executive from, or any failure to re-elect
Executive to, any of such positions, except in connection with the
termination of Executive's employment for Cause, upon the Incapacity or
death of Executive, or upon the voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the minimum Base
Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based anywhere other
than the geographic location at which Executive was based at the effective
date of this Agreement except for required travel on business to an extent
substantially consistent with the business travel obligations of Executive;
(iv) the failure by Michael Foods to continue in effect benefit and
compensation plans substantially equivalent to the benefit or compensation
plans or arrangements in effect at the effective date of this Agreement;
the taking of any action by Michael Foods not required by law which would
adversely affect Executive's participation in or materially reduce
Executive's benefits under any of such plans or deprive Executive of any
material fringe benefit enjoyed by Executive; or the failure by Michael
Foods to provide Executive with the number of paid vacation days, holidays
and personal days to which Executive was then entitled in accordance with
Michael Foods' normal leave policy in effect at the effective date of this
Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement shall
not operate as a waiver of any other breach of such term or condition, or of any
other term or condition, nor shall any failure to enforce a provision hereof
operate as a waiver of such provisions or of any other provision hereof.
-3-
<PAGE> 4
9. NOTICES. All communications with respect to this agreement shall be
considered given if delivered or sent as follows:
8. To Executive by first class, certified mail, postage prepaid, return
receipt requested, addressed as follows:
Arthur J. Papetti
c/o Papetti Hygrade Foods Division
100 Trumbull Street
Elizabeth, New Jersey
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
give in like manner. Notice shall be effective three (3) days after mailing or
upon personal deliver.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement of
the parties hereto with respect to the subject matter hereof and no party shall
be liable or bound to another in any manner by any warranties, representations
or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at any
time may by written agreement extend or modify this Agreement. This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision of this
Agreement is invalid or enforceable shall affect the validity or enforceability
of the remaining provisions herein, and this Agreement shall be construed as
though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
-4-
<PAGE> 5
a. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective legal representatives,
successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be construed under
the laws of the State of Minnesota.
c. This Agreement may be executed in one or more counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, but all such counterparts shall together constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MICHAEL FOODS, INC.
By: /s/ Gregg A. Ostrander
-------------------------
Its: President
---------------------
/s/ Arthur J. Papetti
-------------------------
Executive
Arthur J. Papetti
-5-
<PAGE> 6
SCHEDULE I
(ARTHUR J. PAPETTI)
1. Together, Alfred Papetti (25%), Arthur J. Papetti (25%), Tina Marie
Noll (25%) and Stephen Papetti (25%) own Shell Egg Technology, L.L.C.,
which entity owns 0.5% of Pasteurized Egg, L.P.
2. Together, William T. Rechsteiner (25%), David Rechsteiner (8.33%),
Arthur J. Papetti (22.23%), Alfred Papetti (22.22%) and Stephen Papetti
(22.22%) own Papetti Farms, Inc., which entity owns 50% of
Sunbest-Papetti Farms.
<PAGE> 1
EXHIBIT 10.43
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the 26th day of February,
1997 (the "Agreement"), by and between MICHAEL FOODS, INC., a Delaware
corporation (hereinafter referred to as "Michael Foods") and ARTHUR N. PAPETTI
(hereinafter referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods
(the "Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into
this Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive
to serve as President of the Papetti's Hygrade Foods Division and in such
capacity Executive shall perform such duties as were being performed prior to
and as of the date of this Agreement subject at all times to the direction of
the CEO of Michael Foods.
2. TERM. This Agreement shall be effective as of February 26,
1997 and shall continue through February 25, 2000, unless earlier terminated as
provided herein. This Agreement may be extended thereafter upon the written
agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from February 26, 1997 through February 25, 2000 of at least
$225,000 payable in substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical
insurance and shall permit Executive to participate in other fringe
benefit plans as Michael Foods may from time to time provide for its
other executive officers. The terms of said benefits in all cases
shall be no less favorable to Executive than those offered to other
executive officers of Michael Foods.
b. Executive is entitled to take up to 4 weeks of
vacation per annum at reasonable times and for customary and
reasonable lengths of time consistent with his overall
responsibilities hereunder.
<PAGE> 2
c. Michael Foods shall reimburse Executive for all
reasonable expenses incurred by Executive in connection with Michael
Foods' business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of three years following termination of employment, Executive shall not
directly or indirectly, whether as an employee, agent, contractor, partner,
shareholder or otherwise, engage in the business of egg production, processing
or distribution in any geographic area where Michael Foods produces or
processes eggs or distributes egg products, except as specified in Schedule I
to this Agreement, nor shall Executive solicit the business of any customer of
Michael Foods on behalf of any company or business entity (other than Michael
Foods or its affiliates) which is engaged in the egg production, processing or
distribution business, whether or not such company or business directly
competes with Michael Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party
or by Executive if Executive's Duties Have Been Substantially Reduced
or Negatively Altered without Executive's prior written consent;
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael
Foods that Executive has committed an illegal act that directly reflects upon
his fitness to act as an Executive of Michael Foods.
"Incapacity" for purposes hereof shall mean a determination by
Michael Foods in its sole discretion that Executive is unable to perform his
job responsibilities hereunder as a result of chronic illness, physical, mental
or any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon
the fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment, an amount equal to the Base Salary for the remaining term
of this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the
month following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without
-2-
<PAGE> 3
Executive's prior written consent or by Michael under subsection (c), Executive
shall receive no termination payment.
"Duties are Substantially Reduced or Negatively Altered" means,
without Executive's express written consent:
(i) the assignment to Executive of any duties
inconsistent with Executive's positions, duties, responsibilities and
status with Michael Foods or a change in Executive's reporting
responsibilities, titles or offices, or any removal of Executive from,
or any failure to re-elect Executive to, any of such positions, except
in connection with the termination of Executive's employment for
Cause, upon the Incapacity or death of Executive, or upon the
voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the
minimum Base Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based
anywhere other than the geographic location at which Executive was
based at the effective date of this Agreement except for required
travel on business to an extent substantially consistent with the
business travel obligations of Executive;
(iv) the failure by Michael Foods to continue in effect
benefit and compensation plans substantially equivalent to the benefit
or compensation plans or arrangements in effect at the effective date
of this Agreement; the taking of any action by Michael Foods not
required by law which would adversely affect Executive's participation
in or materially reduce Executive's benefits under any of such plans
or deprive Executive of any material fringe benefit enjoyed by
Executive; or the failure by Michael Foods to provide Executive with
the number of paid vacation days, holidays and personal days to which
Executive was then entitled in accordance with Michael Foods' normal
leave policy in effect at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
-3-
<PAGE> 4
9. NOTICES. All communications with respect to this agreement
shall be considered given if delivered or sent as follows:
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Arthur N. Papetti
c/o Papetti Hygrade Foods Division
100 Trumbull Street
Elizabeth, New Jersey 07206
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage
prepaid, return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement of the parties hereto with respect to the subject matter hereof and
no party shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at
any time may by written agreement extend or modify this Agreement. This
Agreement shall not be altered or otherwise amended except pursuant to an
instrument in writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision
of this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
-4-
<PAGE> 5
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective legal
representatives, successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be
construed under the laws of the State of Minnesota.
c. This Agreement may be executed in one or more
counterparts and each of such counterparts shall for all purposes be
deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
MICHAEL FOODS, INC.
By: /s/ Gregg A. Ostrander
----------------------------------
Its: President
------------------------------
/s/ Arthur N. Papetti
--------------------------------------
Executive
Arthur N. Papetti
-5-
<PAGE> 6
SCHEDULE I
(ARTHUR N. PAPETTI)
NONE
<PAGE> 1
EXHIBIT 10.44
EXECUTION COPY
LEASE BY AND BETWEEN
ASA COMPANY,
AS LANDLORD
AND
MICHAEL FOODS, INC.,
AS TENANT
DATED FEBRUARY 26, 1997
<PAGE> 2
INDEX
Article Page
1 Leased Premises; Lease Term . . . . . . . . . . . . . . . . . . . . . . 1
2 Rent Payments; Net Lease . . . . . . . . . . . . . . . . . . . . . . . 1
3 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . 2
4 No Representations . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Compliance with Laws; Insurance Regulations . . . . . . . . . . . . . . 3
6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Repair, Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Covenant Against Liens . . . . . . . . . . . . . . . . . . . . . . . . 9
10 Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . . . 9
11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . 15
16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Mortgaging; Assignment; Subletting . . . . . . . . . . . . . . . . . . 17
18 Subordination and Attornment . . . . . . . . . . . . . . . . . . . . . 18
19 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 19
20 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21 Cure of Tenant's Default . . . . . . . . . . . . . . . . . . . . . . . 20
22 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 24
25 Surrender of Premises; Holding Over . . . . . . . . . . . . . . . . . . 24
i
<PAGE> 3
26 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . 25
27 Successors and Assigns; Provisions Binding . . . . . . . . . . . . . . 26
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
30 Entire Agreement; Construction . . . . . . . . . . . . . . . . . . . . 27
31 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 27
32 Choice of Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 29
33 Joint Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
34 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . 29
35 Term Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ii
<PAGE> 4
L E A S E
THIS LEASE made and entered into as of the 26th day of February, 1997,
between ASA COMPANY, a Pennsylvania general partnership, having its principal
office at One Papetti Plaza, Elizabeth, New Jersey 07027 (hereinafter called
"Landlord") and MICHAEL FOODS, INC., a Delaware corporation, having its
principal office at 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota
55416 (hereinafter called "Tenant").
A. Landlord is the owner of certain land and improvements more
particularly described on Exhibit A attached hereto (the "Real Estate").
B. Tenant desires to lease from Landlord, and Landlord is willing
to lease to Tenant the Real Estate and improvements thereon upon and subject to
the terms, provisions and conditions of this Lease.
NOW THEREFORE, Landlord and Tenant, for and in consideration of the
rents, agreements, terms, covenants and conditions hereinafter mentioned and
hereby agreed to be paid, kept and performed by Landlord and Tenant, their
legal representatives, successors and assigns, do hereby mutually agree as
follows:
Article 1
Leased Premises; Lease Term
Upon and subject to the agreements, terms, covenants and conditions
hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby
rents and leases from Landlord, the Real Estate, together with any and all
buildings, fixtures, structures and other improvements located thereon
(collectively with the Real Estate, the "Leased Premises"), subject to existing
restrictions, covenants, easements, rights and encumbrances of record.
TO HAVE AND TO HOLD for a term commencing on the date hereof and
ending on midnight of the day preceding the tenth (10th) annual anniversary of
the "Rent Commencement Date" as hereinafter defined (the "Lease Term") unless
sooner terminated or extended as herein provided. The "Rent Commencement Date"
shall mean March 1, 1997.
Article 2
Rent Payments; Net Lease
Tenant, during the Lease Term, will pay to Landlord an annual rental
of Five Hundred Forty Thousand Dollars ($540,000.00) in equal monthly
installments of Forty-Five Thousand Dollars ($45,000.00) in advance on or
before the first day of each calendar month. The rent for any partial month at
the commencement hereof shall be prorated and paid upon Tenant's execution of
this Lease.
1
<PAGE> 5
Landlord may assess a charge of five percent (5%) of the monthly rent
installment due for any monthly payment that is received more than five (5)
days after it is due.
Tenant will pay to Landlord the rent herein reserved, without prior
demand or notice and without any setoffs, abatements, or deductions whatsoever,
at the office of Landlord or at such other place as Landlord shall designate in
writing. All other sums that may become due or be payable to Landlord
hereunder shall be paid at the time and in the manner herein provided at the
office of Landlord. All of such other sums so to be paid may, at Landlord's
option, be deemed to be additional rent to be added to any fixed rent then due
or thereafter falling due, and in the event of non-payment, Landlord shall have
all the rights and remedies herein provided.
If Tenant fails the net worth requirement of Article 13, then Tenant
shall deliver to Landlord the sum equal to one month's base rent as security
payment for the performance by Tenant of every covenant and condition of this
Lease. If Tenant shall default with respect to any covenant or condition of
this Lease, including, but not limited to, the payment of rent, Landlord may
apply the whole or any part of such security payment to the payment of any sum
in default or any other sum which Landlord may be required to spend by reason
of Tenant's default, and Tenant shall thereafter upon demand of Landlord fully
restore the original amount of the security deposit. After all of the Tenant's
obligations under this Lease shall have been satisfied, the security payment or
any remaining balance thereof shall be returned to Tenant. In the event of a
bona fide sale of the property of which the Leased Premises are a part,
Landlord shall have the obligation to transfer such security to the purchaser
to be held by such purchaser under the terms of this Lease, and Landlord shall
be released from all obligation and liability for the return of such security
to Tenant provided such transferee assumes such obligation.
Tenant acknowledges that the rent and other payments to Landlord
hereunder are intended to be "net" to Landlord and that this Lease is a so
called "triple net" or "net net net" lease to Landlord.
Article 3
Use of Leased Premises
Tenant shall occupy the Leased Premises during the Lease Term for the
purposes set forth on Exhibit A hereto and for no other purpose or use without
Landlord's prior written consent. Tenant shall not use or occupy or permit the
Leased Premises or any part thereof to be used or occupied for any other
business, use or purpose without Landlord's prior written consent, which shall
not be unreasonably withheld. Tenant shall apply for, secure, maintain and
comply with all licenses, permits, or accreditations which may
2
<PAGE> 6
be required for the conduct by Tenant of the use of the Leased Premises, as
herein permitted.
Article 4
No Representations
Tenant is fully familiar with the physical condition of the Leased
Premises, and Tenant accepts and takes the Leased Premises in their "as is" and
"where is" condition. Landlord has made no representations whatsoever in
connection with the condition of the Leased Premises or any part thereof, and
Landlord shall not be liable for any latent or patent defects therein.
Article 5
Compliance with Laws; Insurance Regulations
Throughout the Lease Term, Tenant shall, at its sole cost and expense,
promptly observe and comply with all laws, ordinances, orders, regulations,
rules, standards and requirements of every government (whether federal, state
or local), municipality or other governmental authority, including but not
limited to CERCLA, RCRA, TOSCA, FIFRA, OSHA and SARA (as the same are commonly
referred to under the federal environmental laws), and the Americans with
Disabilities Act of 1990, as amended (the "ADA"), and including any agency or
department thereof, having jurisdiction over Tenant or the Leased Premises
(collectively, "Governmental Regulations"), and of the local fire insurance
rating organization, and of all insurance companies writing policies covering
the Leased Premises or any part thereof, relating to the Leased Premises, or
the facilities, fixtures or equipment therein, or the use and occupation or
franchises and privileges connected therewith; whether or not such laws,
ordinances, orders, regulations, rules or requirements shall necessitate
improvements, interference with the use and enjoyment of the Leased Premises,
replacements or repairs, extraordinary as well as ordinary, foreseen or
unforeseen, and whether the same now are in force or may, at any time in the
future, be enacted or directed; and Tenant shall pay all costs, expenses,
claims, fines, penalties and damages that may in any manner arise out of or be
imposed because of the failure of Tenant to comply with any of the foregoing.
Landlord, its agents and representatives, may at any time during the
term of the Lease enter upon the Leased Premises, or any part thereof, for the
purpose of determining and ascertaining the environmental status of the same,
including but not limited to the performing of environmental audits or surveys
of the condition of the Leased Premises; and may further video tape, from time
to time, the condition of the Leased Premises, or any building or other
improvements thereon, for the purpose of better assuring and determining
Tenant's fulfillment of its obligations hereunder.
3
<PAGE> 7
Tenant shall be responsible for and shall bear all costs and expenses
associated with any and all alterations to the Leased Premises, which may be
required by the ADA for the accommodation of disabled individuals who may be
employed from time to time by Tenant, or any disabled customers, clients,
guests, or invitees or sublessees. Tenant shall indemnify and hold Landlord
harmless from and against any and all costs incurred arising from the failure
of the Leased Premises to conform with the ADA, including the cost of making
any alterations, renovations or accommodations required by the ADA, or any
government enforcement agency, or any court, any and all fines, civil
penalties, and damages awarded against Landlord resulting from a violation or
violations of the ADA, and all reasonable legal expenses and court costs
incurred in defending claims made under the ADA, including reasonable
attorneys' fees.
Tenant shall not (i) use, store, generate, treat, sell or dispose in,
on or about the Leased Premises, any "Hazardous Substances" (hereinafter
defined), or (ii) permit the use, storage, generation, treatment, selling or
disposal in, on or about the Leased Premises of any Hazardous Substances,
except Hazardous Substances in such amounts and of such types that are commonly
and customarily used in compliance with Governmental Regulations in the
operation, cleaning and maintenance of Tenant's business operated in the
ordinary course. "Hazardous Substances" or "Hazardous Substance" as used in
this Lease shall mean any substances, waste or substance now or hereafter
designated as, or containing components designated as, hazardous, dangerous,
toxic or harmful and/or subject to any Governmental Regulations, including,
without limitation, asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment which contains dielectric fluid or other fluids
containing levels of polychlorinated biphenyls in excess of fifty (50) parts
per million and petroleum products in any form. Tenant shall (i) promptly
comply with all Governmental Regulations now or hereafter pertaining to the
use, discharge, handling, transportation, disposal, treatment, generation,
storage, sale or presence on the Leased Premises of Hazardous Substances; and
(ii) allow Landlord or Landlord's agents or representatives to enter onto the
Leased Premises at all times to check Tenant's compliance with all applicable
Governmental Regulations regarding Hazardous Substances should Landlord have a
reasonable belief that Tenant is not in compliance with all applicable
Governmental Regulations regarding Hazardous Substances. If Tenant is found to
not be in compliance with all applicable Governmental Regulations regarding
Hazardous Substances, all reasonable costs incurred by Landlord and associated
with Landlord's inspection of the Leased Premises and Landlord's monitoring of
Tenant's compliance with this Article, including Landlord's reasonable
attorneys' fees and costs shall be deemed additional rent and shall be due and
payable to Landlord immediately upon demand by Landlord. Tenant shall
indemnify, defend and save Landlord, its officers, directors, shareholders,
managers, agents and employees harmless from and against any and all damages,
penalties, costs and other liabilities (including Landlord's attorneys' fees
and costs and the cost of any remedial
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or abatement activities), arising during the term of this Lease or anytime
thereafter, directly or indirectly, from the use, discharge, handling,
transportation, disposal, treatment, generation, storage, existence or sale of
Hazardous Substances, during the term of this Lease in, on or about the Leased
Premises except to the extent such use, discharge, handling, transportation,
disposal, treatment, generation, storage, existence or sale of Hazardous
Substances resulted solely from the actions of Landlord. Tenant's obligations
under this Article shall survive the termination of this Lease.
Tenant shall, at Tenant's sole expense, comply with all laws, rules,
regulations, requirements, standards and ordinances enacted or imposed by any
governmental unit having jurisdiction over Tenant, the Leased Premises, signage
at the Leased Premises or Tenant's business. Tenant shall not use or occupy
the Leased Premises nor permit its use or occupancy for any unlawful use or
purpose, nor for any purpose which may be hazardous on account of fire,
environmental concerns or otherwise, nor for any use or purpose which might
render Landlord's insurance on the Leased Premises void.
Tenant agrees that if its storage, accumulation, transportation,
treatment or disposal of such Hazardous Substances results in (i) contamination
of the soil or surface or groundwater or (ii) loss or damage to any person(s)
or property, Tenant shall (a) notify Landlord immediately of any contamination,
claim of contamination, loss or damage, (b) proceed with due diligence to clean
up any such contamination in full compliance with all applicable federal, state
and local statutes, regulations and standards, and (c) indemnify, defend and
hold Landlord harmless from and against any and all claims, suits, causes of
action, penalties, fines, costs and fees, including attorney's fees, arising
from or connected with any such contamination, claim of contamination, loss or
damage. The foregoing provision shall survive the termination of the Lease.
The parties hereto shall use their best efforts to resolve any
disputes regarding the origin of any contamination or claim of contamination or
the responsibility as between Landlord and Tenant of clean up of any such
contamination or claim of contamination. Landlord and Tenant agree that if
they are unable to resolve such a dispute, then the provisions of Article 31
governing resolution of disputes shall apply. The parties agree that the
arbitrator shall be retained only to resolve the dispute and in no event will
be retained by either party to conduct any resulting cleanup or remediation of
any suspected release of hazardous waste.
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To the extent applicable, Tenant at its cost and in a timely manner
shall (i) maintain evidence of financial responsibility which satisfies state
requirements for underground storage tank utilization (See 25 Pa. Code Sections
245.701-.708, inclusive); (ii) comply with the "Hazardous Sites Cleanup Act",
Pa. Stat. Ann. tit. 35 Sections 6020.101-.1305, and the regulations promulgated
thereunder; and (iii) comply with "The Storage Tank and Spill Prevention Act",
Pa. Stat. Ann. tit. 35 Sections 6021.101-.2104, and the regulations promulgated
thereunder. The enumeration of specific state statutes and regulations above
shall in no way limit the obligation of Tenant to otherwise comply with all
other state laws and regulations applicable to it, and Tenant expressly
covenants to so comply at all times and in all material respects during the
term of this Lease.
Article 6
Utilities
Tenant shall make application for and arrange for the installation of
all utility meters or other devices as it may deem necessary for its purposes,
and Tenant shall be solely responsible for and promptly pay, as and when the
same become due and payable, all charges for water, sewer, sprinkler,
electricity, gas, telephone or other communication, fire or burglar alarm
systems, and any other utility or service supplied, used or consumed in
connection with the Leased Premises. Tenant shall use any utilities supplied
to or serving the Leased Premises in accordance with the regulations of the
public utility company or the governmental agency supplying the same, and
Tenant shall not at any time overburden or exceed the capacity of the mains,
feeders, ducts, conduits or other facilities by which such utilities are
supplied to, distributed in or serve the Leased Premises. Landlord shall not
be liable in damages or otherwise for any interruption in the supply of any
utility or service to the Leased Premises, nor shall any such interruption
constitute any ground for constructive eviction or an abatement of any of the
rents reserved hereunder.
Article 7
Repair, Maintenance and Replacement
Tenant, at its sole cost and expense, shall take good care of the
Leased Premises and of all buildings, structures, improvements, fixtures and
equipment now or hereafter located thereon, interior and exterior, and keep the
same and all parts thereof, including without limiting the generality thereof,
the roof, roof membrane and subroofing, foundations, exterior walls, parking
areas, the grounds, landscaped areas, (grass cutting, lawn and shrubbery
maintenance, tree and plant watering and care), drainage ditches, and swales,
gutters, downspouts, glass, structural and interior and exterior portions of
the buildings and the plumbing, sprinkler system, heating, air conditioning,
wiring
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and other systems therein and facilities thereof and all sidewalks, parking
areas, driveways, passageways and alleys adjacent thereto and other
appurtenances thereunto belonging, and all fixtures, machinery and equipment
which constitute any part of the Leased Premises, together with any and all
alterations, additions and improvements therein and thereto, in at least as
good order and condition as exists on the date hereof, suffering no waste or
injury; and shall, at Tenant's sole cost and expense, perform all maintenance
and promptly make all needed repairs and replacements, extraordinary as well as
ordinary, structural or otherwise, foreseen or unforeseen, in and to any of the
foregoing and the buildings, structures or improvements now or hereafter
located thereon, including streets, sidewalks, curbs and gutters, vaults,
water, sprinkler systems, sewer and gas connections, plumbing, pipes and mains,
and all other fixtures, machinery and equipment (including the lighting,
electrical, heating, ventilation and air-conditioning systems) now or hereafter
belonging to or connected with the Leased Premises or used in their operation.
All such maintenance, repairs and replacements shall be of first-class quality
sufficient for the proper maintenance and operation of the Leased Premises.
Tenant shall keep and maintain the Leased Premises in a clean and safe
condition, and Tenant shall not permit the accumulation of waste or refuse
matter, nor permit anything to be done or allow any condition to exist which
would invalidate or prevent the procurement of any insurance policies which may
at any time be required pursuant to the provisions of this Lease. Tenant shall
not obstruct or permit the obstruction of any parking areas, streets or
sidewalks located on or adjoining the Leased Premises, and shall keep such
parking areas, streets and sidewalks free of snow and ice.
In addition, Tenant shall, during the term of this Lease, perform the
periodic preventive maintenance recommended by such systems' manufacturers.
Both maintenance and preventive maintenance shall be performed by such
contractors as are recommended by Landlord or such other entities as are
mutually agreed upon by the parties hereto. Tenant shall, on January 1 of each
year while Tenant is in occupancy of the Premises, provide Landlord with
evidence of an executed preventive maintenance contract for all mechanical
equipment (HVAC) provided. Tenant shall pay for the annual mechanical
equipment inspection fees, if any, imposed by any governmental authority.
Tenant agrees to keep the interior of the Leased Premises, including
all plate glass windows, doors, dock bumpers, levelers, and seals in good
repair as well as the floors and floor drains.
Landlord reserves the right to take video footage of the condition of
the Leased Premises as of the Commencement Date, a copy of which shall be
provided to Tenant and shall be an exhibit hereto.
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On the default of Tenant of its obligations to maintain and repair the
Leased Premises as set forth above for a period of fifteen (15) days after
written notice from Landlord demanding cure of same, Landlord may, but shall
not be required to, cause all required maintenance, repairs or replacements to
be made, for Tenant's account, and Tenant shall promptly pay Landlord all costs
incurred plus an administrative fee of fifteen percent (15%) of such costs and
said amount shall constitute and be collectible as additional rent hereunder.
Article 8
Alterations
Tenant shall not make any exterior or structural alterations,
improvements, or additions to the Leased Premises in excess of $125,000 without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld. Such exterior or structural alterations, improvements,
or additions, if consented to by Landlord, shall be made under the supervision
of an architect or engineer reasonably satisfactory to Landlord and in
accordance with plans and specifications approved by Landlord. Tenant shall
not make any interior or nonstructural alterations, improvements, or additions
to the Leased Premises in excess of $125,000 without obtaining Landlord's prior
written consent which shall not be unreasonably withheld.
All alterations, improvements, and additions made to the Leased
Premises shall be effected with due diligence, in a good and workmanlike manner
employing appropriate new materials and in compliance with all applicable
governmental and insurance requirements and shall be promptly and fully paid
for by Tenant; and no alterations, improvements, or additions made to the
Leased Premises shall change the general character of the Leased Premises,
impair its usefulness, or reduce the fair market value thereof below its value
immediately before such alteration, improvement, or addition. Prior to
proceeding with any alteration, improvement or addition requiring Landlord's
consent hereunder, Tenant shall at Landlord's request furnish Landlord with
satisfactory evidence of worker's compensation insurance in statutory limits of
Tenant, or any contractor or subcontractor performing work for Tenant on the
Leased Premises, as well as satisfactory evidence of all insurance coverage
required to be maintained by Tenant under this Lease. In addition, Landlord
may require that before commencement or continuance of such alteration,
improvement or addition, Tenant furnish Landlord with such security or
performance bond as Landlord shall request in order to assure completion of
same and protect against any and all liens, chattel mortgages and security
interests arising in connection therewith.
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Article 9
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of any
mechanics', materialmen's or other liens against the Leased Premises by reason
of any work, labor, services or materials performed or supplied or claimed to
have been performed or supplied to Tenant, or anyone holding the Leased
Premises, or any part thereof, through or under Tenant. Tenant shall pay and
obtain a release of record of any such lien, by payment thereof or if Tenant
intends to contest the lien by filing a bond or other security or collateral
reasonably acceptable to Landlord, within thirty (30) days after the date of
filing thereof, failing which, and in addition to any other rights of Landlord
hereunder, Landlord shall have the right to vacate and release the same and
charge the cost thereof (including attorneys' fees) to Tenant, such charge to
be due and payable upon demand. Tenant shall defend, indemnify and hold
Landlord harmless from and against any and all liability, loss, damage, cost
and expense (including court costs and attorneys' fees) arising out of or in
connection with any such lien or the enforcement or removal thereof.
Article 10
Landlord's Right of Entry
Landlord and Landlord's employees, agents and contractors, and their
respective employees and agents, shall be permitted during the Lease Term to
inspect the Leased Premises, after first giving Tenant such notice as is
reasonable under the circumstances, (except in the case of an emergency when
prior notice shall not be required), during reasonable business hours (except
in the case of an emergency) for the purposes of (a) ascertaining the condition
of the Leased Premises; (b) making semi-annual mutual inspections; (c)
inspecting any replacements or repairs or the performing any other act as may
be required of Landlord or Tenant under the terms of this Lease; and (d)
showing the Leased Premises to prospective tenants, purchasers or mortgagees.
Article 11
Taxes
Tenant shall, (subject to Tenant's right to contest as set forth
hereafter), in all instances, pay and discharge at its sole expense, all
duties, taxes, assessments, impositions, or charges of any kind, license and
permit fees, and other governmental levies and charges of every kind and nature
whatsoever, general and special, extraordinary as well as ordinary, whether
foreseen or unforeseen, which shall during the Lease Term be laid, levied,
assessed, imposed, become due and payable, or
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liens upon, or arise in connection with the ownership, use, occupancy or
possession of the Leased Premises, or any part thereof, or any appurtenances
thereto, or the streets, sidewalks, vaults, curbs and gutters adjoining the
Leased Premises, or the leasehold estate hereby created, by virtue of any
present or future law, ordinance, order, regulation, rule or requirement of any
government (whether federal, state or local), municipality or other
governmental authority, including any agency or department thereof. In
addition, Tenant shall pay and discharge any and all taxes and other charges
levied, assessed or imposed upon the fixtures, furnishings, equipment and all
other personal property of Tenant in, upon or about the Leased Premises, and
any license or excise covering business conducted in the Leased Premises. The
duties, taxes, assessments, impositions, charges, fees and payments
above-described are sometimes referred to herein collectively as "Impositions".
Nothing contained herein shall require Tenant to pay any inheritance, estate,
succession, transfer, gift, franchise, corporation, income or profit tax or
capital levy that is or may be imposed upon Landlord, unless such described tax
shall be levied upon the rent herein reserved, or otherwise imposed on
Landlord, in replacement of or substitution for any Impositions as are
presently levied, assessed or imposed.
All Impositions shall be paid by Tenant to the governmental
authorities charged with the collection thereof on or before the last day upon
which the same may be paid without interest or penalty for the late payment
thereof and Tenant shall forward a copy of the paid tax bill to Landlord within
thirty (30) days of such payment to the applicable governmental authority. In
the case of Impositions which may be payable in installments, installments
shall be payable within the longest period provided by law, be prorated with
Tenant charged during the term hereof, and Tenant shall only be obligated to
pay such installments as the same fall due during the Lease Term.
Any real estate taxes or water and sewer rents imposed for the
applicable fiscal tax period in which the Lease Term begins or ends shall be
prorated and adjusted between Landlord and Tenant.
Landlord shall forthwith forward to Tenant all applicable tax bills as
received by Landlord or cause the same to be directly sent to Tenant and Tenant
shall provide to Landlord within sixty days (60) after the due date for payment
of such Imposition, reasonable evidence that such Imposition has been timely
paid. If the present method of assessing, levying or charging general public
revenue or taxes against or upon the Leased Premises shall be changed during
the term of this Lease so that such taxes, assessments or charges, instead of
being assessed or levied directly against the land or improvements constituting
the Leased Premises, be levied, assessed or charged in lieu thereof, in whole
or in part, against Landlord's reversionary interest in the same or against the
rent or income arising from the use or occupancy of the Leased Premises, then
in such event, Landlord shall forthwith timely advise Tenant of each such
change, and Tenant shall pay
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every such Imposition so made, subject always to Tenant's right to contest such
change as permitted hereafter. All such Impositions for any fractional year
within the term of this Lease shall be prorated between Landlord and Tenant on
a pro rata basis, with Tenant paying only such portions thereof which are
properly allocable to the term of this Lease.
Tenant shall have the right, in its or Landlord's name, to contest in
good faith the validity of any Imposition, or the method of assessment thereof,
which Tenant is required to bear, pay and discharge hereunder, and for that
purpose shall have the right to institute such proceedings in name of Landlord
as it may deem necessary, provided that expenses incurred by reason thereof
shall be paid by Tenant. Tenant further agrees that it shall diligently
prosecute such contest, at all times effectually stay or prevent any official
or judicial sale of the Leased Premises, under execution or otherwise, and pay
any final judgment enforcing such contested Imposition and thereafter promptly
procure record satisfaction or release thereof. Tenant further agrees that if
it becomes necessary to institute an action in a court of competent
jurisdiction in order to contest such Imposition then, in that event, it shall
give Landlord at least ten (10) days' prior written notice of its intention to
institute such action and at the same time furnish Landlord a bond in such
amount as Landlord may designate, executed by a corporate surety licensed to do
business in the state where the Leased Premises are located and acceptable to
Landlord, indemnifying and protecting Landlord and any other person now or
hereafter having any interest, whether as security for indebtedness or
otherwise, in the Leased Premises from and against all liability, loss, damage,
cost and expense of whatever kind or nature growing out of or in any way
connected with the fee, tax, assessment or other charge complained of or the
contest thereof.
Article 12
Insurance
Tenant agrees to secure, maintain and keep in force at all times
during the Lease Term, at Tenant's sole cost and expense, the following
policies of insurance:
(a) Direct Property Damage Insurance covering the
building and other improvements (including leasehold improvements) on
the Leased Premises to the extent of one hundred percent (100%) of the
full replacement cost thereof, exclusive of the cost of excavations,
foundations, and footings and all improvements and fixtures required
to be insured by Tenant pursuant to Article 12(c) hereof, providing
protection against perils that are covered under standard insurance
industry practices within the classification of all risk property
damage insurance. Such insurance shall name as an
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additional insured Landlord and any other parties in interest as may be
from time to time designated in writing by notice from Landlord to
Tenant. In addition, such insurance shall be made payable to Tenant,
Landlord and such additional parties in interest from time to time
designated by Landlord to Tenant, as their interest may appear.
(b) Comprehensive General Liability Insurance covering
the Leased Premises and Tenant's use thereof against claims for bodily
injury or death, property damage or personal injury, however caused,
with a combined single limit of not less than two million dollars
($2,000,000) for bodily injury and property damage. Such insurance
shall, in addition to premises and operations liability, include
contractual liability insurance to cover all contractual liability
assumed by Tenant under or by virtue of this Lease (including, without
limitation, Article 15 hereof), broad form property damage, loss of
rental income, Product and Completed operations liability. In
addition, motor vehicle liability coverage with not less than $1
million dollar policy limits shall be kept in force by Tenant at all
times during the term of this Lease. All such insurance shall name as
an additional insured Landlord and any other parties in interest as
may be from time to time designated in writing by notice from Landlord
to Tenant. In addition, such insurance shall be made payable to
Tenant, Landlord and such additional parties in interest from time to
time designated by Landlord to Tenant, as their interest may appear.
Tenant shall further maintain, at its sole cost during the
term of this Lease Excess or Umbrella Liability insurance with minimum
limits of $10 million; naming Landlord as an additional insured.
(c) [RESERVED]
(d) Comprehensive Boiler and Machinery insurance coverage,
covering all boilers, pressure vessels, production equipment,
air-conditioning equipment and electrical equipment which serve the
Leased Premises, with per occurrence limits of not less than two
million dollars ($2,000,000).
(e) Workers' Compensation Insurance (including
occupational disease insurance) as may be from time to time required
by the laws of the state in which the Leased Premises are located;
(f) Employers' Liability Insurance with a per occurrence
limit of not less than $500,000;
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All such policies of insurance shall be issued by insurance companies
licensed and admitted to do business in the State in which the Leased Premises
are located, which are reasonably acceptable to Landlord and having a rating of
A+ or better. In addition, all such policies of insurance shall contain an
endorsement providing that such insurance may not be materially changed,
amended or cancelled except after thirty (30) days' prior written notice from
the insurance company to Landlord, sent by registered mail or nationally
recognized overnight courier (e.g. Federal Express). The original policy or
policies shall be made available, from time to time, upon request of Landlord
to review and/or copy and Tenant shall deliver to Landlord together reasonably
satisfactory evidence of payment of the premium thereof, on or before the
commencement date of the Lease Term. Prior to expiration of each policy term,
Tenant shall deliver to Landlord written proof of renewal or continuation of
the policies and will deliver to Landlord certificates of insurance within 20
days after renewal or issuance of the policies. If Tenant at any time fails or
refuses to procure and maintain the required amount of insurance, then Landlord
may, immediately and without notice to Tenant, obtain same for and on behalf of
Tenant and charge the cost thereof to Tenant, such charge to be due and payable
upon demand.
Except for the intentional acts of the Landlord, Tenant, and all
parties claiming under or through Tenant, hereby expressly releases and
discharges Landlord from any claim or liability, whether based on negligence or
any reason whatsoever, for any personal injury, property damage, or other loss
covered by Tenant's insurance. The aforesaid release shall apply only when
permitted by the applicable policy of insurance. All policies of Tenant shall
contain an endorsement containing an express waiver of any right of subrogation
by the insurance company against Landlord, provided that this waiver shall not
be applicable if it has the effect of invalidating any insurance coverage of
Landlord or Tenant, or if the applicable insurance policies do not contain a
clause to the effect that this waiver shall not affect the right of the insured
to recover under such policies.
Article 13
Escrow
Notwithstanding the provisions of this Lease, if Tenant, or any
successor or assignee then a tenant under this Lease as the Tenant, shall fail
at any time during the term of this Lease to maintain a net worth in excess of
one hundred million dollars (as determined in accordance with generally
accepted accounting principles), then Landlord may upon written notice to
Tenant require Tenant for the remainder of the Lease Term, (notwithstanding a
subsequent net worth in excess of one hundred million dollars) to (i) deliver
the security deposit required under Article 2; (ii) carry a deductible not
greater than $10,000 under the property damage insurance described in Article
12(a); and (iii) pay to Landlord for each calendar year during the Lease Term
the
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amount of the Impositions imposed upon the Leased Premises and the amount of
premiums for all insurance policies required to be provided by Tenant
hereunder, in equal monthly installments on the first day of each month during
the Lease Term. Such monthly payments shall in the first instance be
reasonably estimated by Landlord based on the Impositions and premiums paid for
the prior year, with appropriate adjustments made at least annually thereafter.
No interest shall be paid by Landlord to Tenant on such monthly payments, but
they will be kept by Landlord in a separate escrow account, the funds thereof
shall be employed by Landlord to pay Impositions and premiums as they mature.
If at any time the funds held by Landlord shall be insufficient to pay any and
all Impositions and premiums as the same shall mature, Tenant shall, within ten
(10) days after notice thereof from Landlord, deposit with Landlord an amount
sufficient to make up any deficiency therefor. Tenant represents that its
present net worth is in excess of one hundred million dollars.
Article 14
Indemnity
Tenant hereby agrees to defend, pay, indemnify and save free and
harmless Landlord, its officers, directors, agents and employees, from and
against any and all claims, demands, fines, suits, actions, proceedings,
orders, decrees and judgments of any kind or nature by or in favor of anyone
whomsoever and from and against any and all costs and expenses incurred by
Landlord, including attorneys' and other professional fees, resulting from or
in connection with any of the following unless the same are caused by
Landlord's intentional acts: (a) any accident, bodily injury, death, personal
injury of any kind, or property damage arising, directly or indirectly, out of
or from or on account of any occurrence in, upon, at or about the Leased
Premises and the adjoining parking areas, sidewalks, streets, vaults and
passageways; (b) any accident, bodily injury, death, personal injury or
property damage arising, directly or indirectly, in connection with Tenant's
operation and conduct of business in the Leased Premises; (c) any use,
occupancy, nonuse or condition of the Leased Premises; and (d) any failure on
the part of Tenant to perform or comply with any of the agreements, terms,
covenants and conditions of this Lease.
Except for the intentional acts of Landlord, Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other personal property of Tenant,
Tenant's employees, agents, invitees and customers, or any other occupant of
the Leased Premises; nor for any failure of a water supply, gas, electric
current or any other utility, nor for any damage occasioned by failure to keep
the building, property or Leased Premises in repair. Landlord shall not be
liable to Tenant for any damage to person or property done or occasioned by or
from electric current, plumbing, gas, water, steam or sewage, odors, or the
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bursting, leaking, running or failure of operation of any radiator, tank, water
closet, washstand, waste pipe, air conditioning or any other apparatus in,
above, upon or about the building, property or Leased Premises, nor for damage
or injury to person or property occasioned by water, snow, or ice being upon
any roof, sidewalk or entrance way, or being upon or coming through such
entrance way or any skylight, trap door or any other opening in the building,
property or Leased Premises, nor for loss resulting from theft or mysterious
disappearance, action of the elements, or any interference with light or air,
nor for any damages arising from the omission, action or negligence of Tenant,
co-Tenants or other occupants of the building or of any owners or occupants of
adjacent or contiguous property or acts of negligence by Landlord.
In case any action, suit or proceeding is brought against Landlord by
reason of any such occurrence as described in this Article 14, Tenant or
Tenant's insurer, upon Landlord's request, will at no expense to Landlord
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by Tenant and approved by Landlord.
The obligations of Tenant under this Article shall survive any termination of
this Lease.
Article 15
Damage or Destruction
In the event of any damage or loss to the Leased Premises, Tenant
shall give immediate written notice thereof to Landlord. If the building on
the Leased Premises shall at any time be damaged or destroyed by fire or other
cause whatsoever, Tenant shall promptly repair or rebuild same at Tenant's
expense, so as to make the building at least equal in value to the building
existing immediately prior to such occurrence and as nearly similar to it in
character as shall be practicable and reasonable; and Tenant shall do so, even
though the proceeds of any insurance policies shall be insufficient to
reimburse Tenant therefor.
There shall be no abatement of rent pending any repairs or rebuilding,
nor shall Tenant's obligations hereunder be terminated, notwithstanding any
destruction or damage to the Leased Premises.
Before beginning such repairs or rebuilding, or letting any contracts
in connection therewith, Tenant shall submit for Landlord's approval, which
approval shall not be unreasonably withheld or delayed, complete and detailed
plans and specifications thereof and a listing of all contractors and
subcontractors intended to perform any part of the work. Promptly after
receiving Landlord's approval, Tenant shall begin such repairs or rebuilding
and shall prosecute the same to completion with due diligence. All work shall
be done in a good and workmanlike manner employing appropriate new materials in
accordance with the plans and specifications approved by Landlord, and in
compliance with all
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applicable governmental and insurance requirements. Landlord, its employees,
agents and authorized architects and engineers shall have the right, at any
time during the performance of the work, to inspect the building and the
contracts, plans, specifications, drawings and all other records of Tenant, its
architect, contractors and subcontractors, relating to such repairs or
rebuilding. If Landlord or its authorized representative shall determine that
the work is not being done in accordance with the plans and specifications
approved by Landlord, then upon notice to Tenant specifying any deficiency,
Tenant shall take all steps necessary to promptly correct any such deficiency.
The reasonable charges of any architect or engineer of Landlord employed to
pass upon any plans and specifications and to supervise and approve any
construction shall be paid by Tenant as a cost of the repair or rebuilding.
Notwithstanding the foregoing in this Article 15, in the event of a
casualty for which the amount of damages to the improvements of the Leased
Premises exceeds an amount equal to eighty percent (80%) of the assessed fair
market value of such improvements on the Leased Premises (as determined by the
Real Estate Tax Assessor's office of the county in which the Leased Premises is
located), immediately prior to such casualty; then Landlord may elect within
sixty (60) days of such casualty upon written notice to Tenant to either (i)
require Tenant to rebuild as set forth above in Article 15; or (ii) terminate
the Lease and retain the insurance proceeds; whereupon neither party shall have
any further liability or obligation to the other, except as otherwise provided
elsewhere in this Lease.
Article 16
Condemnation
If the whole of the Leased Premises shall be acquired or taken by
eminent domain for any public or quasi-public use or purpose, or by private
purchase in lieu thereof, then this Lease and the Lease Term hereof shall
automatically cease and terminate as of the date of title vesting in such
proceedings. If only a part of the Leased Premises shall be so acquired or
taken and the remainder is untenantable for the purpose for which Tenant has
been using the Leased Premises then either party shall have the option to
terminate this Lease upon ninety (90) days prior written notice to the other.
If only a part of the Leased Premises shall be so acquired or taken and the
remainder is tenantable for the purpose for which Tenant has been using the
Leased Premises, then this Lease and all of the terms and provisions hereof
shall continue in full force and effect, except that the net annual rental
shall be reduced in the same proportion that the floor area of the building
forming a part of the Leased Premises taken bears to the original floor area of
such building demised hereunder, and Landlord shall, upon receipt of the award
in condemnation, make all necessary repairs or alterations to the building so
as to constitute the remaining premises a complete architectural unit;
provided,
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however, that Landlord, in any event, shall not be required to spend for such
repair and alteration work an amount in excess of the respective amounts
received by Landlord (free and clear of all claims of mortgagees and ground or
underlying lessors and Landlord's costs and professional fees from the action)
as damages for the taking of such part of the Leased Premises. The taking or
condemnation of any parking areas or other open space of the Leased Premises or
any sale, grant, dedication or taking of peripheral or perimeter parts or
portions of the Leased Premises for road widening or road improvement purposes
or for the installation of utilities shall not affect this Lease and Tenant
shall not, in any such event, be entitled to compensation, diminution or
abatement of any rent or other charges.
All damages or compensation awarded or paid for any taking or
condemnation, whether for the whole or a part of the Leased Premises or any
part of the land, buildings and improvements constituting the Leased Premises,
shall belong to and be the property of Landlord without any participation by
Tenant, whether such damages or compensation shall be awarded or paid for
diminution in value of the fee or any interest of Landlord in any ground or
underlying lease covering the Leased Premises or in the leasehold estate
created hereby. Tenant hereby expressly waives and relinquishes all claims to
such award or compensation, or any part thereof, and of the right to
participate in any such condemnation proceedings against the owners of any
interest in the Leased Premises; provided, however, that nothing herein
contained shall be construed to preclude Tenant from prosecuting any claim
directly against the condemning authority, but not against Landlord, for the
value of or damages to and/or the cost of removal of Tenant's property upon the
expiration of the Lease Term, as may be recoverable by Tenant in Tenant's own
right so long as no such claim shall diminish or otherwise affect Landlord's
award. Provided, however, that if as a result of such taking Tenant is
required to replace the parking area or provide new access, in order to use the
Premises in substantially the same manner as before the taking, the cost
incurred by Tenant for such replacement shall be prorated against the rent
becoming due over the remainder of the Lease Term. Tenant shall provide
Landlord with written documentation of such costs reasonably acceptable to
Landlord prior to any such adjustment of rent. Landlord may also elect to
provide an adjacent replacement area, in lieu of the above remedy for Tenant.
Article 17
Mortgaging; Assignment; Subletting
Neither Tenant nor its legal representatives or successors in
interest, by operation of law or otherwise, shall assign, mortgage or otherwise
transfer or encumber this Lease or any interest therein, or sublet or otherwise
permit the Leased Premises or any part thereof to be used or occupied by others
except (i) with the prior written consent of Landlord, which shall
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not be unreasonably withheld, or (ii) to another entity controlled by Tenant.
Any consent by Landlord to any act of mortgaging, assignment or subletting
shall apply only to the specific action authorized. Such consent shall not be
construed as a waiver of the duty of Tenant, its representatives, successors or
assigns, to obtain Landlord's consent to any other or subsequent mortgaging,
assignment or subletting. Any attempted mortgaging, assignment or subletting
without Landlord's prior written consent shall be void and be deemed an Event
of Default hereunder. Any mortgaging, assignment or subletting as permitted by
(i) or (ii) above, will not release or discharge Tenant from any liability
whatsoever under this Lease, and Tenant will remain liable for the performance
and observance of each and every agreement, term, covenant and condition of
this Lease.
In the event that Tenant, upon Landlord's prior written consent, shall
sublet the Leased Premises for a rental in excess of the rent provided for
herein from Tenant to Landlord, then notwithstanding any other provision
contained in this Lease to the contrary, the rent provided for herein shall
automatically be increased during the term of such sublease to a sum equal to
the amount of rent payable under such sublease. In the event that Tenant shall
receive any valuable consideration for an assignment of the Tenant's interest
in this Lease, then, notwithstanding any other provision contained in this
Lease to the contrary, Tenant shall pay to Landlord as additional rent
hereunder the amount of consideration thereby received.
Landlord shall have the right to assign this lease at any time, upon
written notice to Tenant, whereupon Landlord shall be released from all further
or other obligations or liabilities subsequently arising from and after the
date of such assignment. Assignee will assume the Landlord's obligations under
the terms of the Lease. The Assignee of the Landlord shall have a net worth
equal to the then net worth of the Landlord as determined in accordance with
generally accepted accounting practices. Landlord shall provide Tenant with
written notice of any assignment of this Lease.
Article 18
Subordination and Attornment
The rights of Tenant under this Lease shall, at Landlord's election,
be subject and subordinate at all times to all ground leases and/or underlying
leases, if any, now or hereafter in force against the Leased Premises or any
part thereof, and to the lien of any mortgage or mortgages now or hereafter in
force against such leases and/or the Leased Premises, and to all advances made
or hereafter to be made upon the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. The term
"mortgages" as used in this Lease shall be deemed to include trust indentures
and deeds of trust.
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The aforesaid provisions shall be self-operative upon notice of election by
Landlord to Tenant and no further instrument of subordination shall be
required. Tenant hereby irrevocably appoints Landlord attorney-in-fact for
Tenant with full power and authority to execute and deliver in the name of the
Tenant any such instrument or instruments.
Tenant agrees that in the event of a sale, transfer or assignment of
Landlord's interest in the Leased Premises, or in the event that any
proceedings are brought for the foreclosure of or exercise of any power of sale
under any mortgage affecting the Leased Premises, or if a deed in lieu thereof
be given, or in the event any ground or underlying lease is cancelled or
terminated, Tenant shall attorn to and recognize such transferee, purchaser,
mortgagee or other party in interest as Landlord under this Lease and to affirm
this Lease so long as such transferee agrees not to disturb Tenant's rights
under this Lease.
Article 19
Estoppel Certificates
Tenant agrees, at any time and from time to time, upon not less than
ten (10) days prior written notice from Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and stating the
modifications), the dates to which the rent and other charges have been paid in
advance, if any, and such other matters pertaining to this Lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificate in a timely fashion is a material inducement
for Landlord's execution of this Lease. Tenant does hereby appoint Landlord as
its attorney-in-fact to execute any such estoppel certificate. It is intended
that any such statement delivered pursuant to this Article may be relied upon
by present or prospective mortgagees, purchasers, ground lessors or any
assignee of any of the foregoing in connection with Landlord's interest in the
Leased Premises.
Article 20
Quiet Enjoyment
Tenant upon paying the rents reserved and performing and observing all
other agreements, terms, covenants and conditions of this Lease on Tenant's
part to be performed and observed hereunder, shall peaceably and quietly have,
hold and enjoy the Leased Premises during the Lease Term, subject, nevertheless
to any ground leases, mortgages, agreements or encumbrances to which this Lease
is or may be subordinated.
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Article 21
Cure of Tenant's Default
If Tenant shall fail to make any payment or perform any act required
hereunder to be made or performed by Tenant hereunder, then Landlord may, but
shall be under no obligation to, after such notice to Tenant and expiration of
any applicable cure period as may be provided for under Article 22 of this
Lease, make such payment or perform such act with the same effect as if made or
performed by Tenant. Entry by Landlord upon the Leased Premises for such
purpose shall not waive or release Tenant from any default or obligation
hereunder. Tenant shall reimburse Landlord for all sums so paid and all costs
incurred, including attorneys' fees, upon Landlord's demand therefor.
Article 22
Default
If any one or more of the following events (herein referred to as an
"Event of Default") shall occur:
(a) if default be made in the due and punctual payment of
any rent or other charges, or any part hereof, payable to Landlord
hereunder, when and as the same shall become due, and such default
shall continue for a period of five (5) days;
(b) if this Lease be mortgaged, assigned or the Leased
Premises or any part thereof be sublet, either voluntarily or by
operation of law, without Landlord's prior written consent as set forth
in Article 17 hereof;
(c) [RESERVED]
(d) if Tenant shall fail to observe, perform or comply
with any of the terms, covenants and conditions in this Lease other
than those provided in subparagraphs (a), (b) and (c) above, within
thirty (30) days after notice from Landlord specifying the nature of
such default; provided, however, that no Event of Default shall be
deemed to occur so long as the curing of such default reasonably may
not be completed within such thirty (30) day period and Tenant has
commenced to cure such default and thereafter with reasonable
diligence pursues its efforts to cure and does so cure within ninety
(90) days;
(e) if Tenant shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall
file any petition or answer seeking any reorganization, readjustment,
liquidation, dissolution or similar relief under any bankruptcy or
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insolvency statute or law of the United States or any State, or shall
seek or consent to or acquiesce in the appointment of any bankruptcy or
insolvency trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties or of the Leased Premises;
(f) if within sixty (60) days after the commencement of
any involuntary proceeding against Tenant seeking any reorganization,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy or insolvency statute or law, Tenant fails to secure a
dismissal and discharge thereof; or
(g) if there shall be an "Event of Default" (as defined
therein) under the Lease dated February 26, 1997, between Papetti
Holding Company and Michael Foods, Inc. (relating to certain premises
located in Pennsylvania) which Event of Default under such other lease
is not promptly cured within the applicable cure period, if any.
then and in any such event Landlord, at its option, may at any time thereafter
(in addition to and/or as an alternative to all other legal remedies):
(a) immediately terminate this Lease and Tenant's right to
possession of the Leased Premises; or
(b) terminate only the Tenant's right to possession of
the Leased Premises, without terminating this Lease or releasing
Tenant in whole or in part from Tenant's obligations hereunder for the
full term hereof; or
(c) without terminating this Lease or Tenant's right to
possession of the Leased Premises, enter upon the Leased Premises and
do and perform whatever Tenant is obligated to do under the terms of
this Lease.
In the event Landlord exercises its rights under subparagraph (a) or
(b) immediately above, Tenant shall quit and peacefully surrender the Leased
Premises to Landlord, and Landlord, upon or at any such expiration or
termination, may without further notice, enter upon and reenter the Leased
Premises and possess and repossess itself thereof, as provided by law,
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold and enjoy the Leased Premises and the right
to receive all rental income of and from the same, and further, Landlord may
collect damages in accordance with the law.
If Tenant's right to possession of the Leased Premises shall be
terminated pursuant to this Article 22, by summary proceedings or otherwise,
Landlord may in its own name, as agent for Tenant if this Lease not be
terminated, or if this Lease be terminated, in its own behalf, enter into
possession of and relet
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the Leased Premises or any part thereof, or said premises with additional
premises, for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the Lease Term) and on
such conditions (which may include concessions, free rent and/or alterations of
the Leased Premises) as Landlord, in its uncontrolled discretion, may determine
and may collect and receive the rents therefor. Landlord shall in no way be
responsible or liable for any failure to relet the Leased Premises or any part
thereof, or of any failure to collect any rent due upon such reletting.
No such expiration or termination of this Lease, or termination of
Tenant's right of possession thereunder, shall relieve Tenant of its liability
and obligations under this Lease, unless otherwise agreed to in writing by
Landlord, whether or not the Leased Premises shall be relet. Upon an event of
default, Tenant shall pay Landlord the rent and all other charges required to
be paid hereunder by Tenant up to the time of such event. Thereafter:
(a) Tenant, until the end of the Lease Term, or what
would have been such term in the absence of any such event, shall be
liable to Landlord as damages for Tenant's default, the equivalent of
the amount of the rent and other charges which would be payable under
this Lease by Tenant if this Lease were still in effect, less the net
proceeds of any reletting effected pursuant to the provisions hereof,
after deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession costs,
brokerage and management commissions, operating expenses, legal
expenses, reasonable attorneys' fees, and expenses of preparation of
such reletting. Tenant shall pay such damages (herein called
"deficiency") to Landlord monthly on the days on which the net rent
would have been payable under this Lease if this Lease were still in
effect, and Landlord shall be entitled to recover from Tenant each
monthly deficiency as the same shall arise.
(b) At any time after the expiration or termination of
this Lease, in lieu of collecting any further monthly deficiencies as
aforesaid, Landlord shall be entitled to recover from Tenant, and
Tenant shall pay to Landlord, on demand, as liquidated damages and not
as a penalty, an amount equal to the difference between the total
rental and other benefits which would have accrued to Landlord under
this Lease from the date of termination to the date of the expiration
of the original term demised and the then fair and reasonable rental
value of the Leased Premises for the same period. Tenant shall
remain liable for any monthly deficiencies not previously recovered by
Landlord. In the computation of such liquidated damages, the
difference between any installment of rent thereafter becoming due and
the fair and reasonable rental value of
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the Leased Premises for the period for which such installment was
payable shall be discounted to the date of termination at the rate of
not more than five percent (5%) per annum.
If the Leased Premises or any part thereof be relet by Landlord for
the unexpired term of this Lease, or any part thereof, before presentation of
proof of such liquidated damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall prima facie be the fair and
reasonable rental value for the part or the whole of the Leased Premises so
relet during the term of the reletting. Nothing herein contained shall limit
or prejudice the right of Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
If this Lease be terminated by summary proceedings or otherwise, or if
Tenant's right to possession of the Leased Premises shall be terminated, and
whether or not the Leased Premises be relet, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord, in addition to any
damages becoming due under this Article 22, the following: an amount equal to
all expenses, if any, including reasonable attorneys' fees, incurred by
Landlord in recovering possession of the Leased Premises, (whether or not
litigation be commenced in aid thereof), and all costs and charges for the care
of said Leased Premises while vacant, which damages shall be due and payable by
Tenant to Landlord at such time or times as such expenses are incurred by
Landlord.
Tenant hereby expressly waives, so far as permitted by law, the
service of any notice of intention to reenter provided for in any statute and
except as is herein otherwise provided Tenant, for and on behalf of itself and
all persons claiming through or under Tenant (including any leasehold mortgagee
or other creditor), also waives any and all right of redemption or reentry or
repossession in case Tenant shall be dispossessed by a judgment or by warrant
of any court or judge or in case of reentry or repossession by Landlord or in
case of any expiration or termination of this Lease. The terms "enter,"
"reenter," "entry" or "reentry" as used in this Lease are not restricted to
their technical legal meanings.
Tenant hereby waives all right to trial by jury in any action or
proceeding hereafter instituted by Landlord against Tenant with respect to this
Lease or the Leased Premises. Tenant agrees not to interpose any counterclaim
of any nature or description in any action or proceeding. The foregoing,
however, shall not be construed as a waiver of Tenant's right to assert any
claim in a separate action or proceeding instituted by Tenant.
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In the event of any breach or threatened breach by Tenant of any of
the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though reentry, summary proceedings, and other remedies
were not provided for in this Lease.
Article 23
No Waiver
No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of such agreement, term, covenant or condition. No
agreement, term, covenant or condition hereof to be performed or complied with
by Tenant, and no breach thereof, shall be waived, altered or modified except
by a written instrument executed by Landlord. No waiver of any breach shall
affect or alter this Lease, but each and every agreement, term, covenant and
condition hereof shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
Article 24
Remedies Cumulative
Each right and remedy provided for in this Lease shall be cumulative
and shall be in addition to every other right or remedy provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise.
Article 25
Surrender of Premises; Holding Over
Upon the expiration or sooner termination of the Lease Term, Tenant
agrees to quit and surrender the Leased Premises, clean and in good condition
and repair, normal wear and tear and insured casualty excepted, together with
all keys and combinations to locks, safes and vaults and all improvements,
alterations, additions, fixtures, equipment and decorations at any time made or
installed in, upon or to the interior or exterior of the Leased Premises
(except movable furniture, furnishings, equipment and other personal property
of Tenant put in at Tenant's expense), all
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of which shall thereupon become the property of Landlord without any claim by
Tenant therefor, but the surrender of such property to Landlord shall not be
deemed to be a payment of rent or in lieu of any rent reserved hereunder.
Before surrendering the Leased Premises, Tenant shall remove all of Tenant's
said personal property and, at Landlord's option, Tenant shall also, at
Tenant's expense, remove any alterations, additions, fixtures or equipment that
contains or constitutes a "Hazardous Substance" (as defined in Article 5 such
that the disposal of the same to a sanitary landfill is not permitted or is
otherwise regulated under applicable law), at any time made or installed by
Tenant in, upon or to the Leased Premises, and Tenant further agrees to repair
any damage caused thereby. If Tenant shall fail to remove any of Tenant's said
personal property or other property required by Landlord to be removed, said
property shall, at the option of Landlord, either be deemed abandoned and may
be disposed of by Landlord at Tenant's expense, or Landlord shall have the
right to remove and store said property, at the expense of Tenant, without
further notice to or demand upon Tenant and hold Tenant responsible for any and
all charges and expenses incurred by Landlord therefor. If the Leased Premises
be not surrendered as and when aforesaid, Tenant shall indemnify Landlord
against all loss or liability resulting from the delay by Tenant in so
surrendering the same, including without limitation, any claims made by any
succeeding occupant founded on such delay. If Tenant shall remain in
possession of the Leased Premises, or any part thereof, for any period after
the termination of this Lease in any of the ways above-named, Tenant shall pay
one and one-half (1.5) times the rent as a month-to-month hold over tenant
until such holding over shall cease. Tenant's obligations under this Article
shall survive the expiration or sooner termination of the Lease Term.
Article 26
Relationship of Parties
Nothing contained in this Lease shall be deemed to constitute or be
construed or implied to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties
hereto, other than the relationship of Landlord and Tenant.
The term "Landlord" as used in this Lease means only the owner of the
current interest of Landlord in the Leased Premises or, as the case may be, the
successor thereto from time to time. In the event of any transfer at any time
of the interest of Landlord, the transferor shall be and is hereby entirely
freed and relieved of all covenants and obligations of Landlord hereunder
accruing from and after the date of such transfer, and it shall be deemed and
construed without further agreement between the parties or their respective
successors in interest or between the parties and the transferee that the
transferee of Landlord's interest has assumed and agreed to carry out any and
all covenants and obligations of Landlord thereafter accruing hereunder.
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Article 27
Successors and Assigns; Provisions Binding
Except as otherwise expressly provided in this Lease, all covenants,
conditions and provisions of this Lease shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
Each provision of this Lease to be performed by Tenant shall be
construed to be both a covenant and a condition, and if there shall be more
than one Tenant, they shall all be bound, jointly and severally, by the
provisions of this Lease. The persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly incorporated and
duly qualified corporation and is authorized to do business in the State of its
incorporation and that the person or persons executing this Lease on behalf of
Tenant is an officer or are officers of such Tenant, and that he or they as
such officers are duly authorized to sign and execute this Lease.
Article 28
Notices
Every notice, demand, request or other communication which may be or
is required to be given under this Lease or by law shall be in writing and
shall be sent by United States Certified or Registered Mail, postage prepaid,
return receipt requested, or by nationally recognized overnight courier (e.g.
Federal Express) and shall be addressed: (a) if to Tenant, to Michael Foods,
Inc. 5353 Wayzata Blvd., Suite 324, Minneapolis, MN 55416, Attention: Jeffrey
M. Shapiro; and (b) if to Landlord, to ASA Company, One Papetti Plaza,
Elizabeth, New Jersey 07207, Attention: Arthur N. Papetti, with a copy to
Martin B. O'Connor, II, O'Connor, Morss & O'Connor, Liberty Hall Center, 1085
Morris Avenue, Union, NJ 07083-7136, and the same shall be deemed delivered
one (1) business day after being sent via nationally recognized overnight
courier (e.g., Federal Express) or three (3) business days after being mailed
by U.S. Certified or Registered mail, return receipt requested. Either party
may designate, by similar written notice to the other party, any other address
for such purposes.
Article 29
Miscellaneous
Tenant agrees not to record this Lease or any memorandum thereof
without the prior written consent of Landlord.
Each party covenants, warrants and represents to the other that there
was no broker instrumental in consummating this Lease and that no conversations
or prior negotiations were had by such party with any broker concerning the
renting of the Leased
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Premises. Each party agrees to indemnify and hold the other harmless against
and from all liabilities, including attorneys' fees, arising from any claims
for brokerage commissions or finders' fees resulting from or arising out of any
conversations or negotiations had by such party with any broker.
Tenant agrees to annually make available for review by Landlord and
its lenders such financial information and statements as the same may
reasonably request, provided, Landlord and its lenders agree to keep such
information and statements confidential to the extent the same is not public
information.
Article 30
Entire Agreement; Construction
This Lease sets forth the entire agreement between the parties
respecting the Leased Premises. There are no understandings, agreements,
statements, promises, representations or warranties, express or implied, not
specified herein respecting the Leased Premises and all prior conversations and
writings by or between the parties or their representatives are merged herein
and extinguished. This Lease shall not be modified except by a writing
subscribed to by the party to be charged, nor may this Lease be cancelled by
Tenant or the Leased Premises surrendered except with the express written
authorization of Landlord.
This Lease shall be construed, as to both validity and performance,
and enforced in accordance with and shall be governed by the laws of the
jurisdiction in which the Leased Premises are located, without regard to such
jurisdiction's principles of conflicts of law. If any provision of this Lease
or the application thereof to any person or circumstance shall to any extent be
held void or invalid, then the remainder of this Lease or the application of
such provision to persons or circumstances other than those as to which it is
held void or invalid shall not be affected thereby, and each provision of this
Lease shall be valid and enforced to the fullest extent permitted by law.
The headings in this Lease are for purposes of reference only and
shall not limit or define the meaning hereof. This Lease may be executed in
any number of counterparts, each of which is an original, but all of which
shall constitute one instrument.
Article 31
Binding Arbitration
In the event that a dispute arises between Landlord and Tenant such
matter shall be submitted to binding arbitration as follows:
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(1) Any arbitration hereunder shall be held pursuant to
the Commercial Arbitration Rules of the American Arbitration Association except
that:
(i) Landlord and Tenant shall each select one
arbitrator. The two appointed arbitrators shall jointly choose
a third arbitrator from a list provided by the American
Arbitration Association and the third arbitrator shall be the
sole arbitrator to hear the dispute. If either party fails to
appoint an arbitrator within twenty (20) days after demand by
the other party, or the appointed arbitrators fail to agree to
the third arbitrator within twenty (20) days after a list of
potential arbitrators is provided by the American Arbitration
Association, the American Arbitration Association shall select
an arbitrator for the party failing to make appointment or
shall appoint the third arbitrator, as the case may be.
(ii) The arbitration shall be held in the City in
which any facility leased hereunder is located, or such other
location as the parties shall mutually agree.
(iii) The parties shall bear their own expenses of
the arbitration, including attorneys fees and costs of expert
witnesses.
(iv) The filing or other fees of the American
Arbitration Association shall be paid one-half by the Landlord
and one-half by the Tenant.
(v) The award of the arbitrators shall be binding
and shall be enforceable in any court of the state in which
the Premises are located.
(2) If the American Arbitration Association is not then
in existence or refuses to administer the arbitration, the arbitration shall be
administered by the most nearly comparable organization as shall be agreed by
the parties, or failing agreement, as shall be determined by the Union County
Superior Court of Elizabeth, New Jersey.
(3) Notwithstanding anything herein to the contrary,
either party shall have the right to seek injunctive relief to maintain the
status quo until a dispute between the parties can be arbitrated.
In the event that a dispute arises between Landlord and Tenant
involving an amount which is greater than the then current annual base rent
under this Lease, such matter shall be litigated by the parties.
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Article 32
Choice of Law; Jurisdiction.
This Lease shall be governed, construed, applied and enforced in
accordance with the laws of the state in which the Premises are located
(without regards to principles of conflicts of laws).
Landlord and Tenant each (i) irrevocably submits to personal
jurisdiction in the courts of the state in which the Premises are located and
the applicable United States District Court serving the county in which the
Premises are located, and appellate courts from any thereof, and (ii)
irrevocably waives any objection which it may have at any time to the laying on
venue of any suit, action or proceeding arising out of or relating to this
Lease brought in any such court, and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Landlord and Tenant each hereby agree that to the extent permitted by
local court rules, any summons, complaint and other process and notice in
connection with the commencement of or any other proceeding in any such suit,
action or proceeding may be served on it by using the notification procedure
set forth in this Lease.
LANDLORD AND TENANT EACH HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS LEASE OR ANY ACTS OR OMISSIONS OF LANDLORD, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 33
Joint Preparation
This Lease is to be deemed to have been prepared jointly by the
parties hereto, and any uncertainty or ambiguity existing herein, if any, shall
not be interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's length agreements.
Article 34
Time Is of the Essence
Time is of the essence with respect to all matters provided in this
Lease.
29
<PAGE> 33
Article 35
Term Renewal
Tenant is granted the right to extend the term of this Lease for two
(2) period(s) of five (5) years each (the "Option Period(s)") on the terms and
conditions set forth herein; provided, however, that each said right to extend
for each such Option Period (the "Option(s)") may be exercised only in the
event Tenant is not in default at the time each said Option right is exercised
and provided, further, that the Option for the immediately preceding Option
Period, if any, has been exercised. The phrase "Lease Term" as used in this
Lease shall mean the term of this Lease as extended by Tenant pursuant to this
Article.
To exercise each Option, Tenant shall notify Landlord in writing no
later than one (1) year prior to the expiration of the initial Lease Term or
the Option Period then expiring, if any.
In the event Tenant properly exercises its Option as provided herein:
(1) all of the terms and conditions of this Lease shall apply during the Option
Period(s) (except the Option then exercised), including, but not limited to,
Tenant's obligation to pay all costs, charges and expenses provided for in the
Lease; (2) the Option exercised by Tenant in order to extend the Term of the
Lease shall terminate and be of no further force and effect and may not be
exercised again by Tenant; (3) no concession previously granted Tenant by
Landlord in the initial term shall be due or payable to Tenant during or with
respect to such Option Period; and (4) the monthly base rent payable under
Article 2 during the particular Option Period shall be determined as set forth
below. At Landlord's request, prior to the commencement of the particular
Option Period, Tenant shall execute, acknowledge, and deliver to Landlord an
amendment to lease evidencing Tenant's exercise of its Option and setting forth
the commencement and expiration dates of the Option Period and term of the
Lease and the monthly base rent payable during the Option Period.
The Annual Rent payable monthly under Article 2 during each Option
Period shall be such amount as may be agreed upon by the parties and which is
not less than 110%, nor more than 135%, of the Annual Rent for the twelve (12)
months immediately preceding the commencement of the applicable Option Period
(the "Option Period Rent").
If the parties are unable, within sixty (60) days of notice by Tenant
electing to extend the term of the Lease, to agree on the amount of the Option
Period Rent then each party shall within ten (10) days thereafter designate and
select an M.A.I. certified appraiser and submit to them what such party
believes the Option Period Rent should be. The two appraisers shall then
together within thirty (30) days determine and agree upon the Option Period
Rent by selecting either the Option Period Rent
30
<PAGE> 34
proposed by Landlord or that proposed by Tenant, with no other variation.
If the two appraisers are unable within said thirty (30) days to agree
on either Landlord's or Tenant's proposed Option Period Rent, then they shall
together designate a third M.A.I. appraiser, who alone shall select either
Landlord's or Tenant's proposed Option Period Rent as the Annual Rent, which
determination shall be binding and enforceable upon all parties.
Each party shall pay the cost of the appraisers selected by such party
and the costs of the third appraiser (if retained) shall be paid equally by
each party.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW
31
<PAGE> 35
TENANT:
MICHAEL FOODS, INC., a Delaware corporation
(Seal) By: /s/ Gregg A. Ostrander
-------------------------------------
Attest: Gregg A. Ostrander, President
-------------------------------------
Print Name Here
- -------------------------------
(Ass't) Secretary
LANDLORD:
PAPETTI HOLDING COMPANY and JACK BERNSTEIN,
representing Jack Bernstein, Sherwood Weiser
and David Levinson
Witness: By: /s/ Anthony Papetti
--------------------------------------
Anthony Papetti, on behalf of said parties
- -------------------------------
- -------------------------------
[SIGNATURE PAGE TO LEASE AGREEMENT]
STATE OF )
-------------- )
OF )
- ----------- --------
On this day of , 1997, before me personally
appeared , to me personally known, who, being
by me duly sworn, did say that he is the of MICHAEL FOODS,
INC., a Delaware corporation, and that said instrument was signed on behalf of
said corporation by authority of its Board of Directors; and said officer
acknowledged said instrument to be the free act and deed of said corporation.
<PAGE> 36
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the ____________ and State aforesaid, the day and year first
above written.
_____________________
Notary Public
(SEAL)
My Commission Expires:
STATE OF _________________ )
)
___________ OF ___________ )
On this ______ day of _____________, 1997, before me personally
appeared ARTHUR N. PAPETTI, to me personally known, who, being by me duly sworn,
did say that he is a partner of ASA COMPANY, a New Jersey general partnership,
and that said instrument was signed by him as partner on behalf of said general
partnership; and said ARTHUR N. PAPETTI acknowledged said instrument to be the
free act and deed of said general partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the ____________ and State aforesaid, the day and year first
above written.
___________________________________
Notary Public
(SEAL)
My Commission Expires:
<PAGE> 37
EXHIBIT A
DESCRIPTION OF PREMISES
Spain Road, Klingerstown, Pennsylvania (Building: 7,700 sq. ft.; single and 5
floors areas; Land: 80 acres); Spain Road, Klingerstown, Pennsylvania (Land:
2.02 acres); Spain Road, Klingerstown, Pennsylvania; (Building: Residence -
Land: 1.1 acres) RD#1, Coleman Church Road, (Spring Glen), Hegins, Pennsylvania
(Building: 18,000 sq. ft.; 1 floor; also contains a residence (400 sq. ft.) -
Land: 209 acres); PA Route 25, Spring Glen, Pennsylvania (Building: 5,000 sq.
ft.; 1 floor - Land: 2.2377 acres); PA Route 25, Spring Glen, Pennsylvania
(Building: Residence - Land: 14.7852 acres)
(LEGAL TO FOLLOW)
<PAGE> 1
EXHIBIT 10.45
EXECUTION COPY
LEASE BY AND BETWEEN
RECHSTEINER/PAPETTI, ET AL.
AS LANDLORD
AND
MICHAEL FOODS, INC.,
AS TENANT
DATED FEBRUARY 26, 1997
<PAGE> 2
INDEX
Article Page
1 Leased Premises; Lease Term . . . . . . . . . . . . . . . . . . . . 1
2 Rent Payments; Net Lease . . . . . . . . . . . . . . . . . . . . . 1
3 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . 2
4 No Representations . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Compliance with Laws; Insurance Regulations . . . . . . . . . . . . 3
6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Repair, Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 6
8 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Covenant Against Liens . . . . . . . . . . . . . . . . . . . . . . 9
10 Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . 9
11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . 15
16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Mortgaging; Assignment; Subletting . . . . . . . . . . . . . . . . 17
18 Subordination and Attornment . . . . . . . . . . . . . . . . . . . 18
19 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . 19
20 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21 Cure of Tenant's Default . . . . . . . . . . . . . . . . . . . . . 20
22 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 24
25 Surrender of Premises; Holding Over . . . . . . . . . . . . . . . . 24
i
<PAGE> 3
26 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . 25
27 Successors and Assigns; Provisions Binding . . . . . . . . . . . . 25
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
30 Entire Agreement; Construction . . . . . . . . . . . . . . . . . . 27
31 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 27
32 Choice of Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . 28
33 Joint Preparation . . . . . . . . . . . . . . . . . . . . . . . . . 29
34 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . 29
35 Term Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ii
<PAGE> 4
L E A S E
THIS LEASE made and entered into as of the 26th day of February, 1997,
between RECHSTEINER/PAPETTI, ET AL, an Iowa general partnership, having its
principal office at One Papetti Plaza, Elizabeth, New Jersey 07027 (hereinafter
called "Landlord") and MICHAEL FOODS, INC., a Delaware corporation, having its
principal office at 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota
55416 (hereinafter called "Tenant").
A. Landlord is the owner of certain land and improvements more
particularly described on Exhibit A attached hereto (the "Real Estate").
B. Tenant desires to lease from Landlord, and Landlord is willing to
lease to Tenant the Real Estate and improvements thereon upon and subject to
the terms, provisions and conditions of this Lease.
NOW THEREFORE, Landlord and Tenant, for and in consideration of the rents,
agreements, terms, covenants and conditions hereinafter mentioned and hereby
agreed to be paid, kept and performed by Landlord and Tenant, their legal
representatives, successors and assigns, do hereby mutually agree as follows:
Article 1
Leased Premises; Lease Term
Upon and subject to the agreements, terms, covenants and conditions
hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby
rents and leases from Landlord, the Real Estate, together with any and all
buildings, fixtures, structures and other improvements located thereon
(collectively with the Real Estate, the "Leased Premises"), subject to existing
restrictions, covenants, easements, rights and encumbrances of record.
TO HAVE AND TO HOLD for a term commencing on the date hereof and ending on
midnight of the day preceding the tenth (10th) annual anniversary of the "Rent
Commencement Date" as hereinafter defined (the "Lease Term") unless sooner
terminated or extended as herein provided. The "Rent Commencement Date" shall
mean March 1, 1997.
Article 2
Rent Payments; Net Lease
Tenant, during the Lease Term, will pay to Landlord an annual rental of
Twenty-Four Thousand Dollars ($24,000.00) in equal monthly installments of Two
Thousand Dollars ($2,000.00) in advance on or before the first day of each
calendar month. Therent for any partial month at the commencement hereof shall
be prorated and paid upon Tenant's execution of this Lease. Landlord may
assess a
1
<PAGE> 5
charge of five percent (5%) of the monthly rent installment due for any monthly
payment that is received more than five (5) days after it is due.
Tenant will pay to Landlord the rent herein reserved, without prior demand
or notice and without any setoffs, abatements, or deductions whatsoever, at the
office of Landlord or at such other place as Landlord shall designate in
writing. All other sums that may become due or be payable to Landlord
hereunder shall be paid at the time and in the manner herein provided at the
office of Landlord. All of such other sums so to be paid may, at Landlord's
option, be deemed to be additional rent to be added to any fixed rent then due
or thereafter falling due, and in the event of non-payment, Landlord shall have
all the rights and remedies herein provided.
If Tenant fails the net worth requirement of Article 13, then Tenant shall
deliver to Landlord the sum equal to one month's base rent as security payment
for the performance by Tenant of every covenant and condition of this Lease.
If Tenant shall default with respect to any covenant or condition of this
Lease, including, but not limited to, the payment of rent, Landlord may apply
the whole or any part of such security payment to the payment of any sum in
default or any other sum which Landlord may be required to spend by reason of
Tenant's default, and Tenant shall thereafter upon demand of Landlord fully
restore the original amount of the security deposit. After all of the Tenant's
obligations under this Lease shall have been satisfied, the security payment or
any remaining balance thereof shall be returned to Tenant. In the event of a
bona fide sale of the property of which the Leased Premises are a part,
Landlord shall have the obligation to transfer such security to the purchaser
to be held by such purchaser under the terms of this Lease, and Landlord shall
be released from all obligation and liability for the return of such security
to Tenant provided such transferee assumes such obligation.
Tenant acknowledges that the rent and other payments to Landlord hereunder
are intended to be "net" to Landlord and that this Lease is a so called "triple
net" or "net net net" lease to Landlord.
Article 3
Use of Leased Premises
Tenant shall occupy the Leased Premises during the Lease Term for the
purposes set forth on Exhibit A hereto and for no other purpose or use without
Landlord's prior written consent. Tenant shall not use or occupy or permit the
Leased Premises or any part thereof to be used or occupied for any other
business, use or purpose without Landlord's prior written consent, which shall
not be unreasonably withheld. Tenant shall apply for, secure, maintain and
comply with all licenses, permits, or accreditations which may
2
<PAGE> 6
be required for the conduct by Tenant of the use of the Leased Premises, as
herein permitted.
Article 4
No Representations
Tenant is fully familiar with the physical condition of the Leased
Premises, and Tenant accepts and takes the Leased Premises in their "as is" and
"where is" condition. Landlord has made no representations whatsoever in
connection with the condition of the Leased Premises or any part thereof, and
Landlord shall not be liable for any latent or patent defects therein.
Article 5
Compliance with Laws; Insurance Regulations
Throughout the Lease Term, Tenant shall, at its sole cost and expense,
promptly observe and comply with all laws, ordinances, orders, regulations,
rules, standards and requirements of every government (whether federal, state
or local), municipality or other governmental authority, including but not
limited to CERCLA, RCRA, TOSCA, FIFRA, OSHA and SARA (as the same are commonly
referred to under the federal environmental laws), and the Americans with
Disabilities Act of 1990, as amended (the "ADA"), and including any agency or
department thereof, having jurisdiction over Tenant or the Leased Premises
(collectively, "Governmental Regulations"), and of the local fire insurance
rating organization, and of all insurance companies writing policies covering
the Leased Premises or any part thereof, relating to the Leased Premises, or
the facilities, fixtures or equipment therein, or the use and occupation or
franchises and privileges connected therewith; whether or not such laws,
ordinances, orders, regulations, rules or requirements shall necessitate
improvements, interference with the use and enjoyment of the Leased Premises,
replacements or repairs, extraordinary as well as ordinary, foreseen or
unforeseen, and whether the same now are in force or may, at any time in the
future, be enacted or directed; and Tenant shall pay all costs, expenses,
claims, fines, penalties and damages that may in any manner arise out of or be
imposed because of the failure of Tenant to comply with any of the foregoing.
Landlord, its agents and representatives, may at any time during the term
of the Lease enter upon the Leased Premises, or any part thereof, for the
purpose of determining and ascertaining the environmental status of the same,
including but not limited to the performing of environmental audits or surveys
of the condition of the Leased Premises; and may further video tape, from time
to time, the condition of the Leased Premises, or any building or other
improvements thereon, for the purpose of better assuring and determining
Tenant's fulfillment of its obligations hereunder.
3
<PAGE> 7
Tenant shall be responsible for and shall bear all costs and expenses
associated with any and all alterations to the Leased Premises, which may be
required by the ADA for the accommodation of disabled individuals who may be
employed from time to time by Tenant, or any disabled customers, clients,
guests, or invitees or sublessees. Tenant shall indemnify and hold Landlord
harmless from and against any and all costs incurred arising from the failure
of the Leased Premises to conform with the ADA, including the cost of making
any alterations, renovations or accommodations required by the ADA, or any
government enforcement agency, or any court, any and all fines, civil
penalties, and damages awarded against Landlord resulting from a violation or
violations of the ADA, and all reasonable legal expenses and court costs
incurred in defending claims made under the ADA, including reasonable
attorneys' fees.
Tenant shall not (i) use, store, generate, treat, sell or dispose in, on
or about the Leased Premises, any "Hazardous Substances" (hereinafter defined),
or (ii) permit the use, storage, generation, treatment, selling or disposal in,
on or about the Leased Premises of any Hazardous Substances, except Hazardous
Substances in such amounts and of such types that are commonly and customarily
used in compliance with Governmental Regulations in the operation, cleaning and
maintenance of Tenant's business operated in the ordinary course. "Hazardous
Substances" or "Hazardous Substance" as used in this Lease shall mean any
substances, waste or substance now or hereafter designated as, or containing
components designated as, hazardous, dangerous, toxic or harmful and/or subject
to any Governmental Regulations, including, without limitation, asbestos in any
form, urea formaldehyde foam insulation, transformers or other equipment which
contains dielectric fluid or other fluids containing levels of polychlorinated
biphenyls in excess of fifty (50) parts per million and petroleum products in
any form. Tenant shall (i) promptly comply with all Governmental Regulations
now or hereafter pertaining to the use, discharge, handling, transportation,
disposal, treatment, generation, storage, sale or presence on the Leased
Premises of Hazardous Substances; and (ii) allow Landlord or Landlord's agents
or representatives to enter onto the Leased Premises at all times to check
Tenant's compliance with all applicable Governmental Regulations regarding
Hazardous Substances should Landlord have a reasonable belief that Tenant is
not in compliance with all applicable Governmental Regulations regarding
Hazardous Substances. If Tenant is found to not be in compliance with all
applicable Governmental Regulations regarding Hazardous Substances, all
reasonable costs incurred by Landlord and associated with Landlord's inspection
of the Leased Premises and Landlord's monitoring of Tenant's compliance with
this Article, including Landlord's reasonable attorneys' fees and costs shall
be deemed additional rent and shall be due and payable to Landlord immediately
upon demand by Landlord. Tenant shall indemnify, defend and save Landlord, its
officers, directors, shareholders, managers, agents and employees harmless from
and against any and all damages, penalties, costs and other liabilities
(including Landlord's attorneys' fees and costs and the cost of any remedial
4
<PAGE> 8
or abatement activities), arising during the term of this Lease or anytime
thereafter, directly or indirectly, from the use, discharge, handling,
transportation, disposal, treatment, generation, storage, existence or sale of
Hazardous Substances, during the term of this Lease in, on or about the Leased
Premises except to the extent such use, discharge, handling, transportation,
disposal, treatment, generation, storage, existence or sale of Hazardous
Substances resulted solely from the actions of Landlord. Tenant's obligations
under this Article shall survive the termination of this Lease.
Tenant shall, at Tenant's sole expense, comply with all laws, rules,
regulations, requirements, standards and ordinances enacted or imposed by any
governmental unit having jurisdiction over Tenant, the Leased Premises, signage
at the Leased Premises or Tenant's business. Tenant shall not use or occupy
the Leased Premises nor permit its use or occupancy for any unlawful use or
purpose, nor for any purpose which may be hazardous on account of fire,
environmental concerns or otherwise, nor for any use or purpose which might
render Landlord's insurance on the Leased Premises void.
Tenant agrees that if its storage, accumulation, transportation, treatment
or disposal of such Hazardous Substances results in (i) contamination of the
soil or surface or groundwater or (ii) loss or damage to any person(s) or
property, Tenant shall (a) notify Landlord immediately of any contamination,
claim of contamination, loss or damage, (b) proceed with due diligence to clean
up any such contamination in full compliance with all applicable federal, state
and local statutes, regulations and standards, and (c) indemnify, defend and
hold Landlord harmless from and against any and all claims, suits, causes of
action, penalties, fines, costs and fees, including attorney's fees, arising
from or connected with any such contamination, claim of contamination, loss or
damage. The foregoing provision shall survive the termination of the Lease.
The parties hereto shall use their best efforts to resolve any disputes
regarding the origin of any contamination or claim of contamination or the
responsibility as between Landlord and Tenant of clean up of any such
contamination or claim of contamination. Landlord and Tenant agree that if
they are unable to resolve such a dispute, then the provisions of Article 31
governing resolution of disputes shall apply. The parties agree that the
arbitrator shall be retained only to resolve the dispute and in no event will
be retained by either party to conduct any resulting cleanup or remediation of
any suspected release of hazardous waste.
5
<PAGE> 9
To the extent applicable, Tenant at its cost and in a timely manner shall
(i) comply with the Iowa Administrative Code in filing a "Groundwater Hazard
Statement" pursuant to Rules 561-9.1(558) and 561-9.2(558); (ii) pay all fees,
charges and costs imposed or assessed by the state for underground storage
tanks (See Iowa Admin. code r. 591-6.1(424) through 591-6.17(424)); (iii) pay
any "annual storage tank management fee" (See Section 455B.479 of Iowa Code)
and maintain the required evidence of financial responsibility (See Iowa Admin.
Code r. 567- 136.1(455B) to .24(455B)); and (iv) comply with the requirements
of Sections 455B.101 through 455B.701,inclusive, and Sections 455E.1 through
455E.11, inclusive, of the Iowa Code and regulations promulgated thereunder.
The enumeration of specific state statutes and regulations above shall in no
way limit the obligation of Tenant to otherwise comply with all other state
laws and regulations applicable to it, and Tenant expressly covenants to so
comply at all times and in all material respects during the term of this Lease.
Article 6
Utilities
Tenant shall make application for and arrange for the installation of all
utility meters or other devices as it may deem necessary for its purposes, and
Tenant shall be solely responsible for and promptly pay, as and when the same
become due and payable, all charges for water, sewer, sprinkler, electricity,
gas, telephone or other communication, fire or burglar alarm systems, and any
other utility or service supplied, used or consumed in connection with the
Leased Premises. Tenant shall use any utilities supplied to or serving the
Leased Premises in accordance with the regulations of the public utility
company or the governmental agency supplying the same, and Tenant shall not at
any time overburden or exceed the capacity of the mains, feeders, ducts,
conduits or other facilities by which such utilities are supplied to,
distributed in or serve the Leased Premises. Landlord shall not be liable in
damages or otherwise for any interruption in the supply of any utility or
service to the Leased Premises, nor shall any such interruption constitute any
ground for constructive eviction or an abatement of any of the rents reserved
hereunder.
Article 7
Repair, Maintenance and Replacement
Tenant, at its sole cost and expense, shall take good care of the Leased
Premises and of all buildings, structures, improvements, fixtures and equipment
now or hereafter located thereon, interior and exterior, and keep the same and
all parts thereof, including without limiting the generality thereof, the roof,
roof membrane and subroofing, foundations, exterior walls, parking areas, the
grounds, landscaped areas, (grass cutting, lawn
6
<PAGE> 10
and shrubbery maintenance, tree and plant watering and care), drainage ditches,
and swales, gutters, downspouts, glass, structural and interior and exterior
portions of the buildings and the plumbing, sprinkler system, heating, air
conditioning, wiring and other systems therein and facilities thereof and all
sidewalks, parking areas, driveways, passageways and alleys adjacent thereto
and other appurtenances thereunto belonging, and all fixtures, machinery and
equipment which constitute any part of the Leased Premises, together with any
and all alterations, additions and improvements therein and thereto, in at
least as good order and condition as exists on the date hereof, suffering no
waste or injury; and shall, at Tenant's sole cost and expense, perform all
maintenance and promptly make all needed repairs and replacements,
extraordinary as well as ordinary, structural or otherwise, foreseen or
unforeseen, in and to any of the foregoing and the buildings, structures or
improvements now or hereafter located thereon, including streets, sidewalks,
curbs and gutters, vaults, water, sprinkler systems, sewer and gas connections,
plumbing, pipes and mains, and all other fixtures, machinery and equipment
(including the lighting, electrical, heating, ventilation and air-conditioning
systems) now or hereafter belonging to or connected with the Leased Premises or
used in their operation. All such maintenance, repairs and replacements shall
be of first-class quality sufficient for the proper maintenance and operation
of the Leased Premises. Tenant shall keep and maintain the Leased Premises in
a clean and safe condition, and Tenant shall not permit the accumulation of
waste or refuse matter, nor permit anything to be done or allow any condition
to exist which would invalidate or prevent the procurement of any insurance
policies which may at any time be required pursuant to the provisions of this
Lease. Tenant shall not obstruct or permit the obstruction of any parking
areas, streets or sidewalks located on or adjoining the Leased Premises, and
shall keep such parking areas, streets and sidewalks free of snow and ice.
In addition, Tenant shall, during the term of this Lease, perform the
periodic preventive maintenance recommended by such systems' manufacturers.
Both maintenance and preventive maintenance shall be performed by such
contractors as are recommended by Landlord or such other entities as are
mutually agreed upon by the parties hereto. Tenant shall, on January 1 of each
year while Tenant is in occupancy of the Premises, provide Landlord with
evidence of an executed preventive maintenance contract for all mechanical
equipment (HVAC) provided. Tenant shall pay for the annual mechanical
equipment inspection fees, if any, imposed by any governmental authority.
Tenant agrees to keep the interior of the Leased Premises, including all
plate glass windows, doors, dock bumpers, levelers, and seals in good repair as
well as the floors and floor drains.
Landlord reserves the right to take video footage of the condition of the
Leased Premises as of the Commencement Date, a
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<PAGE> 11
copy of which shall be provided to Tenant and shall be an exhibit hereto.
On the default of Tenant of its obligations to maintain and repair the
Leased Premises as set forth above for a period of fifteen (15) days after
written notice from Landlord demanding cure of same, Landlord may, but shall
not be required to, cause all required maintenance, repairs or replacements to
be made, for Tenant's account, and Tenant shall promptly pay Landlord all costs
incurred plus an administrative fee of fifteen percent (15%) of such costs and
said amount shall constitute and be collectible as additional rent hereunder.
Article 8
Alterations
Tenant shall not make any exterior or structural alterations,
improvements, or additions to the Leased Premises in excess of $125,000 without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld. Such exterior or structural alterations, improvements,
or additions, if consented to by Landlord, shall be made under the supervision
of an architect or engineer reasonably satisfactory to Landlord and in
accordance with plans and specifications approved by Landlord. Tenant shall
not make any interior or nonstructural alterations, improvements, or additions
to the Leased Premises in excess of $125,000 without obtaining Landlord's prior
written consent which shall not be unreasonably withheld.
All alterations, improvements, and additions made to the Leased Premises
shall be effected with due diligence, in a good and workmanlike manner
employing appropriate new materials and in compliance with all applicable
governmental and insurance requirements and shall be promptly and fully paid
for by Tenant; and no alterations, improvements, or additions made to the
Leased Premises shall change the general character of the Leased Premises,
impair its usefulness, or reduce the fair market value thereof below its value
immediately before such alteration, improvement, or addition. Prior to
proceeding with any alteration, improvement or addition requiring Landlord's
consent hereunder, Tenant shall at Landlord's request furnish Landlord with
satisfactory evidence of worker's compensation insurance in statutory limits of
Tenant, or any contractor or subcontractor performing work for Tenant on the
Leased Premises, as well as satisfactory evidence of all insurance coverage
required to be maintained by Tenant under this Lease. In addition, Landlord
may require that before commencement or continuance of such alteration,
improvement or addition, Tenant furnish Landlord with such security or
performance bond as Landlord shall request in order to assure completion of
same and protect against any and all liens, chattel mortgages and security
interests arising in connection therewith.
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Article 9
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of any
mechanics', materialmen's or other liens against the Leased Premises by reason
of any work, labor, services or materials performed or supplied or claimed to
have been performed or supplied to Tenant, or anyone holding the Leased
Premises, or any part thereof, through or under Tenant. Tenant shall pay and
obtain a release of record of any such lien, by payment thereof or if Tenant
intends to contest the lien by filing a bond or other security or collateral
reasonably acceptable to Landlord, within thirty (30) days after the date of
filing thereof, failing which, and in addition to any other rights of Landlord
hereunder, Landlord shall have the right to vacate and release the same and
charge the cost thereof (including attorneys' fees) to Tenant, such charge to
be due and payable upon demand. Tenant shall defend, indemnify and hold
Landlord harmless from and against any and all liability, loss, damage, cost
and expense (including court costs and attorneys' fees) arising out of or in
connection with any such lien or the enforcement or removal thereof.
Article 10
Landlord's Right of Entry
Landlord and Landlord's employees, agents and contractors, and their
respective employees and agents, shall be permitted during the Lease Term to
inspect the Leased Premises, after first giving Tenant such notice as is
reasonable under the circumstances, (except in the case of an emergency when
prior notice shall not be required), during reasonable business hours (except
in the case of an emergency) for the purposes of (a) ascertaining the condition
of the Leased Premises; (b) making semi-annual mutual inspections; (c)
inspecting any replacements or repairs or the performing any other act as may
be required of Landlord or Tenant under the terms of this Lease; and (d)
showing the Leased Premises to prospective tenants, purchasers or mortgagees.
Article 11
Taxes
Tenant shall, (subject to Tenant's right to contest as set forth
hereafter), in all instances, pay and discharge at its sole expense, all
duties, taxes, assessments, impositions, or charges of any kind, license and
permit fees, and other governmental levies and charges of every kind and nature
whatsoever, general and special, extraordinary as well as ordinary,
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whether foreseen or unforeseen, which shall during the Lease Term be laid,
levied, assessed, imposed, become due and payable, or liens upon, or arise in
connection with the ownership, use, occupancy or possession of the Leased
Premises, or any part thereof, or any appurtenances thereto, or the streets,
sidewalks, vaults, curbs and gutters adjoining the Leased Premises, or the
leasehold estate hereby created, by virtue of any present or future law,
ordinance, order, regulation, rule or requirement of any government (whether
federal, state or local), municipality or other governmental authority,
including any agency or department thereof. In addition, Tenant shall pay and
discharge any and all taxes and other charges levied, assessed or imposed upon
the fixtures, furnishings, equipment and all other personal property of Tenant
in, upon or about the Leased Premises, and any license or excise covering
business conducted in the Leased Premises. The duties, taxes, assessments,
impositions, charges, fees and payments above-described are sometimes referred
to herein collectively as "Impositions". Nothing contained herein shall
require Tenant to pay any inheritance, estate, succession, transfer, gift,
franchise, corporation, income or profit tax or capital levy that is or may be
imposed upon Landlord, unless such described tax shall be levied upon the rent
herein reserved, or otherwise imposed on Landlord, in replacement of or
substitution for any Impositions as are presently levied, assessed or imposed.
All Impositions shall be paid by Tenant to the governmental authorities
charged with the collection thereof on or before the last day upon which the
same may be paid without interest or penalty for the late payment thereof and
Tenant shall forward a copy of the paid tax bill to Landlord within thirty (30)
days of such payment to the applicable governmental authority. In the case of
Impositions which may be payable in installments, installments shall be payable
within the longest period provided by law, be prorated with Tenant charged
during the term hereof, and Tenant shall only be obligated to pay such
installments as the same fall due during the Lease Term.
Any real estate taxes or water and sewer rents imposed for the applicable
fiscal tax period in which the Lease Term begins or ends shall be prorated and
adjusted between Landlord and Tenant.
Landlord shall forthwith forward to Tenant all applicable tax bills as
received by Landlord or cause the same to be directly sent to Tenant and Tenant
shall provide to Landlord within sixty days (60) after the due date for payment
of such Imposition, reasonable evidence that such Imposition has been timely
paid. If the present method of assessing, levying or charging general public
revenue or taxes against or upon the Leased Premises shall be changed during
the term of this Lease so that such taxes, assessments or charges, instead of
being assessed or levied directly against the land or improvements constituting
the Leased Premises, be levied, assessed or charged in lieu thereof, in whole
or in part, against Landlord's reversionary interest in the same or against the
rent or income arising from the use or occupancy of the
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Leased Premises, then in such event, Landlord shall forthwith timely advise
Tenant of each such change, and Tenant shall pay every such Imposition so made,
subject always to Tenant's right to contest such change as permitted hereafter.
All such Impositions for any fractional year within the term of this Lease
shall be prorated between Landlord and Tenant on a pro rata basis, with Tenant
paying only such portions thereof which are properly allocable to the term of
this Lease.
Tenant shall have the right, in its or Landlord's name, to contest in good
faith the validity of any Imposition, or the method of assessment thereof,
which Tenant is required to bear, pay and discharge hereunder, and for that
purpose shall have the right to institute such proceedings in name of Landlord
as it may deem necessary, provided that expenses incurred by reason thereof
shall be paid by Tenant. Tenant further agrees that it shall diligently
prosecute such contest, at all times effectually stay or prevent any official
or judicial sale of the Leased Premises, under execution or otherwise, and pay
any final judgment enforcing such contested Imposition and thereafter promptly
procure record satisfaction or release thereof. Tenant further agrees that if
it becomes necessary to institute an action in a court of competent
jurisdiction in order to contest such Imposition then, in that event, it shall
give Landlord at least ten (10) days' prior written notice of its intention to
institute such action and at the same time furnish Landlord a bond in such
amount as Landlord may designate, executed by a corporate surety licensed to do
business in the state where the Leased Premises are located and acceptable to
Landlord, indemnifying and protecting Landlord and any other person now or
hereafter having any interest, whether as security for indebtedness or
otherwise, in the Leased Premises from and against all liability, loss, damage,
cost and expense of whatever kind or nature growing out of or in any way
connected with the fee, tax, assessment or other charge complained of or the
contest thereof.
Article 12
Insurance
Tenant agrees to secure, maintain and keep in force at all times during
the Lease Term, at Tenant's sole cost and expense, the following policies of
insurance:
(a) Direct Property Damage Insurance covering the building and other
improvements (including leasehold improvements) on the Leased Premises to
the extent of one hundred percent (100%) of the full replacement cost
thereof, exclusive of the cost of excavations, foundations, and footings
and all improvements and fixtures required to be insured by Tenant
pursuant to Article 12(c) hereof, providing protection against perils that
are covered under standard insurance industry
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practices within the classification of all risk property damage insurance.
Such insurance shall name as an additional insured Landlord and any other
parties in interest as may be from time to time designated in writing by
notice from Landlord to Tenant. In addition, such insurance shall be made
payable to Tenant, Landlord and such additional parties in interest from
time to time designated by Landlord to Tenant, as their interest may
appear.
(b) Comprehensive General Liability Insurance covering the Leased
Premises and Tenant's use thereof against claims for bodily injury or
death, property damage or personal injury, however caused, with a combined
single limit of not less than two million dollars ($2,000,000) for bodily
injury and property damage. Such insurance shall, in addition to premises
and operations liability, include contractual liability insurance to cover
all contractual liability assumed by Tenant under or by virtue of this
Lease (including, without limitation, Article 15 hereof), broad form
property damage, loss of rental income, Product and Completed operations
liability. In addition, motor vehicle liability coverage with not less
than $1 million dollar policy limits shall be kept in force by Tenant at
all times during the term of this Lease. All such insurance shall name as
an additional insured Landlord and any other parties in interest as may be
from time to time designated in writing by notice from Landlord to Tenant.
In addition, such insurance shall be made payable to Tenant, Landlord and
such additional parties in interest from time to time designated by
Landlord to Tenant, as their interest may appear.
Tenant shall further maintain, at its sole cost during the term of
this Lease Excess or Umbrella Liability insurance with minimum limits of
$10 million; naming Landlord as an additional insured.
(c) [RESERVED]
(d) Comprehensive Boiler and Machinery insurance coverage, covering
all boilers, pressure vessels, production equipment, air-
conditioning equipment and electrical equipment which serve the
Leased Premises, with per occurrence limits of not less than two
million dollars ($2,000,000).
(e) Workers' Compensation Insurance (including occupational disease
insurance) as may be from time to time required by the laws of the state
in which the Leased Premises are located;
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(f) Employers' Liability Insurance with a per occurrence limit of
not less than $500,000;
All such policies of insurance shall be issued by insurance companies
licensed and admitted to do business in the State in which the Leased Premises
are located, which are reasonably acceptable to Landlord and having a rating of
A+ or better. In addition, all such policies of insurance shall contain an
endorsement providing that such insurance may not be materially changed,
amended or cancelled except after thirty (30) days' prior written notice from
the insurance company to Landlord, sent by registered mail or nationally
recognized overnight courier (e.g. Federal Express). The original policy or
policies shall be made available, from time to time, upon request of Landlord
to review and/or copy and Tenant shall deliver to Landlord together reasonably
satisfactory evidence of payment of the premium thereof, on or before the
commencement date of the Lease Term. Prior to expiration of each policy term,
Tenant shall deliver to Landlord written proof of renewal or continuation of
the policies and will deliver to Landlord certificates of insurance within 20
days after renewal or issuance of the policies. If Tenant at any time fails or
refuses to procure and maintain the required amount of insurance, then Landlord
may, immediately and without notice to Tenant, obtain same for and on behalf of
Tenant and charge the cost thereof to Tenant, such charge to be due and payable
upon demand.
Except for the intentional acts of the Landlord, Tenant, and all parties
claiming under or through Tenant, hereby expressly releases and discharges
Landlord from any claim or liability, whether based on negligence or any reason
whatsoever, for any personal injury, property damage, or other loss covered by
Tenant's insurance. The aforesaid release shall apply only when permitted by
the applicable policy of insurance. All policies of Tenant shall contain an
endorsement containing an express waiver of any right of subrogation by the
insurance company against Landlord, provided that this waiver shall not be
applicable if it has the effect of invalidating any insurance coverage of
Landlord or Tenant, or if the applicable insurance policies do not contain a
clause to the effect that this waiver shall not affect the right of the insured
to recover under such policies.
Article 13
Escrow
Notwithstanding the provisions of this Lease, if Tenant, or any successor
or assignee then a tenant under this Lease as the Tenant, shall fail at any
time during the term of this Lease to maintain a net worth in excess of one
hundred million dollars (as determined in accordance with generally accepted
accounting principles), then Landlord may upon written notice to Tenant require
Tenant for the remainder of the Lease Term, (notwithstanding a subsequent net
worth in excess of one hundred million dollars) to (i) deliver the security
deposit required under
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Article 2; (ii) carry a deductible not greater than $10,000 under the property
damage insurance described in Article 12(a); and (iii) pay to Landlord for each
calendar year during the Lease Term the amount of the Impositions imposed upon
the Leased Premises and the amount of premiums for all insurance policies
required to be provided by Tenant hereunder, in equal monthly installments on
the first day of each month during the Lease Term. Such monthly payments shall
in the first instance be reasonably estimated by Landlord based on the
Impositions and premiums paid for the prior year, with appropriate adjustments
made at least annually thereafter. No interest shall be paid by Landlord to
Tenant on such monthly payments, but they will be kept by Landlord in a
separate escrow account, the funds thereof shall be employed by Landlord to pay
Impositions and premiums as they mature. If at any time the funds held by
Landlord shall be insufficient to pay any and all Impositions and premiums as
the same shall mature, Tenant shall, within ten (10) days after notice thereof
from Landlord, deposit with Landlord an amount sufficient to make up any
deficiency therefor. Tenant represents that its present net worth is in excess
of one hundred million dollars.
Article 14
Indemnity
Tenant hereby agrees to defend, pay, indemnify and save free and harmless
Landlord, its officers, directors, agents and employees, from and against any
and all claims, demands, fines, suits, actions, proceedings, orders, decrees
and judgments of any kind or nature by or in favor of anyone whomsoever and
from and against any and all costs and expenses incurred by Landlord, including
attorneys' and other professional fees, resulting from or in connection with
any of the following unless the same are caused by Landlord's intentional acts:
(a) any accident, bodily injury, death, personal injury of any kind, or
property damage arising, directly or indirectly, out of or from or on account
of any occurrence in, upon, at or about the Leased Premises and the adjoining
parking areas, sidewalks, streets, vaults and passageways; (b) any accident,
bodily injury, death, personal injury or property damage arising, directly or
indirectly, in connection with Tenant's operation and conduct of business in
the Leased Premises; (c) any use, occupancy, nonuse or condition of the Leased
Premises; and (d) any failure on the part of Tenant to perform or comply with
any of the agreements, terms, covenants and conditions of this Lease.
Except for the intentional acts of Landlord, Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other personal property of Tenant,
Tenant's employees, agents, invitees and customers, or any other occupant of
the Leased Premises; nor for any failure of a water supply, gas, electric
current or any other utility, nor for any damage occasioned by failure to keep
the building, property or Leased
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Premises in repair. Landlord shall not be liable to Tenant for any damage to
person or property done or occasioned by or from electric current, plumbing,
gas, water, steam or sewage, odors, or the bursting, leaking, running or
failure of operation of any radiator, tank, water closet, washstand, waste
pipe, air conditioning or any other apparatus in, above, upon or about the
building, property or Leased Premises, nor for damage or injury to person or
property occasioned by water, snow, or ice being upon any roof, sidewalk or
entrance way, or being upon or coming through such entrance way or any
skylight, trap door or any other opening in the building, property or Leased
Premises, nor for loss resulting from theft or mysterious disappearance, action
of the elements, or any interference with light or air, nor for any damages
arising from the omission, action or negligence of Tenant, co-Tenants or other
occupants of the building or of any owners or occupants of adjacent or
contiguous property or acts of negligence by Landlord.
In case any action, suit or proceeding is brought against Landlord by
reason of any such occurrence as described in this Article 14, Tenant or
Tenant's insurer, upon Landlord's request, will at no expense to Landlord
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by Tenant and approved by Landlord.
The obligations of Tenant under this Article shall survive any termination of
this Lease.
Article 15
Damage or Destruction
In the event of any damage or loss to the Leased Premises, Tenant shall
give immediate written notice thereof to Landlord. If the building on the
Leased Premises shall at any time be damaged or destroyed by fire or other
cause whatsoever, Tenant shall promptly repair or rebuild same at Tenant's
expense, so as to make the building at least equal in value to the building
existing immediately prior to such occurrence and as nearly similar to it in
character as shall be practicable and reasonable; and Tenant shall do so, even
though the proceeds of any insurance policies shall be insufficient to
reimburse Tenant therefor.
There shall be no abatement of rent pending any repairs or rebuilding, nor
shall Tenant's obligations hereunder be terminated, notwithstanding any
destruction or damage to the Leased Premises.
Before beginning such repairs or rebuilding, or letting any contracts in
connection therewith, Tenant shall submit for Landlord's approval, which
approval shall not be unreasonably withheld or delayed, complete and detailed
plans and specifications thereof and a listing of all contractors and
subcontractors intended to perform any part of the work. Promptly after
receiving Landlord's approval, Tenant shall begin such repairs or rebuilding
and shall prosecute the same to completion with due diligence. All
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work shall be done in a good and workmanlike manner employing appropriate new
materials in accordance with the plans and specifications approved by Landlord,
and in compliance with all applicable governmental and insurance requirements.
Landlord, its employees, agents and authorized architects and engineers shall
have the right, at any time during the performance of the work, to inspect the
building and the contracts, plans, specifications, drawings and all other
records of Tenant, its architect, contractors and subcontractors, relating to
such repairs or rebuilding. If Landlord or its authorized representative shall
determine that the work is not being done in accordance with the plans and
specifications approved by Landlord, then upon notice to Tenant specifying any
deficiency, Tenant shall take all steps necessary to promptly correct any such
deficiency. The reasonable charges of any architect or engineer of Landlord
employed to pass upon any plans and specifications and to supervise and approve
any construction shall be paid by Tenant as a cost of the repair or rebuilding.
Notwithstanding the foregoing in this Article 15, in the event of a
casualty for which the amount of damages to the improvements of the Leased
Premises exceeds an amount equal to eighty percent (80%) of the assessed fair
market value of such improvements on the Leased Premises (as determined by the
Real Estate Tax Assessor's office of the county in which the Leased Premises is
located), immediately prior to such casualty; then Landlord may elect within
sixty (60) days of such casualty upon written notice to Tenant to either (i)
require Tenant to rebuild as set forth above in Article 15; or (ii) terminate
the Lease and retain the insurance proceeds; whereupon neither party shall have
any further liability or obligation to the other, except as otherwise provided
elsewhere in this Lease.
Article 16
Condemnation
If the whole of the Leased Premises shall be acquired or taken by eminent
domain for any public or quasi-public use or purpose, or by private purchase in
lieu thereof, then this Lease and the Lease Term hereof shall automatically
cease and terminate as of the date of title vesting in such proceedings. If
only a part of the Leased Premises shall be so acquired or taken and the
remainder is untenantable for the purpose for which Tenant has been using the
Leased Premises then either party shall have the option to terminate this Lease
upon ninety (90) days prior written notice to the other. If only a part of the
Leased Premises shall be so acquired or taken and the remainder is tenantable
for the purpose for which Tenant has been using the Leased Premises, then this
Lease and all of the terms and provisions hereof shall continue in full force
and effect, except that the net annual rental shall be reduced in the same
proportion that the floor area of the building forming a part of the Leased
Premises taken bears to the original floor area of such building demised
hereunder, and Landlord shall,
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upon receipt of the award in condemnation, make all necessary repairs or
alterations to the building so as to constitute the remaining premises a
complete architectural unit; provided, however, that Landlord, in any event,
shall not be required to spend for such repair and alteration work an amount in
excess of the respective amounts received by Landlord (free and clear of all
claims of mortgagees and ground or underlying lessors and Landlord's costs and
professional fees from the action) as damages for the taking of such part of
the Leased Premises. The taking or condemnation of any parking areas or other
open space of the Leased Premises or any sale, grant, dedication or taking of
peripheral or perimeter parts or portions of the Leased Premises for road
widening or road improvement purposes or for the installation of utilities
shall not affect this Lease and Tenant shall not, in any such event, be
entitled to compensation, diminution or abatement of any rent or other charges.
All damages or compensation awarded or paid for any taking or
condemnation, whether for the whole or a part of the Leased Premises or any
part of the land, buildings and improvements constituting the Leased Premises,
shall belong to and be the property of Landlord without any participation by
Tenant, whether such damages or compensation shall be awarded or paid for
diminution in value of the fee or any interest of Landlord in any ground or
underlying lease covering the Leased Premises or in the leasehold estate
created hereby. Tenant hereby expressly waives and relinquishes all claims to
such award or compensation, or any part thereof, and of the right to
participate in any such condemnation proceedings against the owners of any
interest in the Leased Premises; provided, however, that nothing herein
contained shall be construed to preclude Tenant from prosecuting any claim
directly against the condemning authority, but not against Landlord, for the
value of or damages to and/or the cost of removal of Tenant's property upon the
expiration of the Lease Term, as may be recoverable by Tenant in Tenant's own
right so long as no such claim shall diminish or otherwise affect Landlord's
award. Provided, however, that if as a result of such taking Tenant is
required to replace the parking area or provide new access, in order to use the
Premises in substantially the same manner as before the taking, the cost
incurred by Tenant for such replacement shall be prorated against the rent
becoming due over the remainder of the Lease Term. Tenant shall provide
Landlord with written documentation of such costs reasonably acceptable to
Landlord prior to any such adjustment of rent. Landlord may also elect to
provide an adjacent replacement area, in lieu of the above remedy for Tenant.
Article 17
Mortgaging; Assignment; Subletting
Neither Tenant nor its legal representatives or successors in interest, by
operation of law or otherwise, shall assign, mortgage or otherwise transfer or
encumber this Lease or
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any interest therein, or sublet or otherwise permit the Leased Premises or any
part thereof to be used or occupied by others except (i) with the prior written
consent of Landlord, which shall not be unreasonably withheld, or (ii) to
another entity controlled by Tenant. Any consent by Landlord to any act of
mortgaging, assignment or subletting shall apply only to the specific action
authorized. Such consent shall not be construed as a waiver of the duty of
Tenant, its representatives, successors or assigns, to obtain Landlord's
consent to any other or subsequent mortgaging, assignment or subletting. Any
attempted mortgaging, assignment or subletting without Landlord's prior written
consent shall be void and be deemed an Event of Default hereunder. Any
mortgaging, assignment or subletting as permitted by (i) or (ii) above, will
not release or discharge Tenant from any liability whatsoever under this Lease,
and Tenant will remain liable for the performance and observance of each and
every agreement, term, covenant and condition of this Lease.
In the event that Tenant, upon Landlord's prior written consent, shall
sublet the Leased Premises for a rental in excess of the rent provided for
herein from Tenant to Landlord, then notwithstanding any other provision
contained in this Lease to the contrary, the rent provided for herein shall
automatically be increased during the term of such sublease to a sum equal to
the amount of rent payable under such sublease. In the event that Tenant shall
receive any valuable consideration for an assignment of the Tenant's interest
in this Lease, then, notwithstanding any other provision contained in this
Lease to the contrary, Tenant shall pay to Landlord as additional rent
hereunder the amount of consideration thereby received.
Landlord shall have the right to assign this lease at any time, upon
written notice to Tenant, whereupon Landlord shall be released from all further
or other obligations or liabilities subsequently arising from and after the
date of such assignment. Assignee will assume the Landlord's obligations under
the terms of the Lease. The Assignee of the Landlord shall have a net worth
equal to the then net worth of the Landlord as determined in accordance with
generally accepted accounting practices. Landlord shall provide Tenant with
written notice of any assignment of this Lease.
Article 18
Subordination and Attornment
The rights of Tenant under this Lease shall, at Landlord's election, be
subject and subordinate at all times to all ground leases and/or underlying
leases, if any, now or hereafter in force against the Leased Premises or any
part thereof, and to the lien of any mortgage or mortgages now or hereafter in
force against such leases and/or the Leased Premises, and to all advances made
or hereafter to be made upon the security thereof, and to all
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renewals, modifications, consolidations, replacements and extensions thereof.
The term "mortgages" as used in this Lease shall be deemed to include trust
indentures and deeds of trust. The aforesaid provisions shall be
self-operative upon notice of election by Landlord to Tenant and no further
instrument of subordination shall be required. Tenant hereby irrevocably
appoints Landlord attorney-in-fact for Tenant with full power and authority to
execute and deliver in the name of the Tenant any such instrument or
instruments.
Tenant agrees that in the event of a sale, transfer or assignment of
Landlord's interest in the Leased Premises, or in the event that any
proceedings are brought for the foreclosure of or exercise of any power of sale
under any mortgage affecting the Leased Premises, or if a deed in lieu thereof
be given, or in the event any ground or underlying lease is cancelled or
terminated, Tenant shall attorn to and recognize such transferee, purchaser,
mortgagee or other party in interest as Landlord under this Lease and to affirm
this Lease so long as such transferee agrees not to disturb Tenant's rights
under this Lease.
Article 19
Estoppel Certificates
Tenant agrees, at any time and from time to time, upon not less than ten
(10) days prior written notice from Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and stating the
modifications), the dates to which the rent and other charges have been paid in
advance, if any, and such other matters pertaining to this Lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificate in a timely fashion is a material inducement
for Landlord's execution of this Lease. Tenant does hereby appoint Landlord as
its attorney-in-fact to execute any such estoppel certificate. It is intended
that any such statement delivered pursuant to this Article may be relied upon
by present or prospective mortgagees, purchasers, ground lessors or any
assignee of any of the foregoing in connection with Landlord's interest in the
Leased Premises.
Article 20
Quiet Enjoyment
Tenant upon paying the rents reserved and performing and observing all
other agreements, terms, covenants and conditions of this Lease on Tenant's
part to be performed and observed hereunder, shall peaceably and quietly have,
hold and enjoy the Leased Premises during the Lease Term, subject, nevertheless
to any ground leases, mortgages, agreements or encumbrances to which this Lease
is or may be subordinated.
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Article 21
Cure of Tenant's Default
If Tenant shall fail to make any payment or perform any act required
hereunder to be made or performed by Tenant hereunder, then Landlord may, but
shall be under no obligation to, after such notice to Tenant and expiration of
any applicable cure period as may be provided for under Article 22 of this
Lease, make such payment or perform such act with the same effect as if made or
performed by Tenant. Entry by Landlord upon the Leased Premises for such
purpose shall not waive or release Tenant from any default or obligation
hereunder. Tenant shall reimburse Landlord for all sums so paid and all costs
incurred, including attorneys' fees, upon Landlord's demand therefor.
Article 22
Default
If any one or more of the following events (herein referred to as an
"Event of Default") shall occur:
(a) if default be made in the due and punctual payment of any rent
or other charges, or any part hereof, payable to Landlord hereunder, when
and as the same shall become due, and such default shall continue for a
period of five (5) days;
(b) if this Lease be mortgaged, assigned or the Leased Premises or
any part thereof be sublet, either voluntarily or by operation of law,
without Landlord's prior written consent as set forth in Article 17
hereof;
(c) [RESERVED]
(d) if Tenant shall fail to observe, perform or comply with any of
the terms, covenants and conditions in this Lease other than those
provided in subparagraphs (a), (b) and (c) above, within thirty (30) days
after notice from Landlord specifying the nature of such default;
provided, however, that no Event of Default shall be deemed to occur so
long as the curing of such default reasonably may not be completed within
such thirty (30) day period and Tenant has commenced to cure such default
and thereafter with reasonable diligence pursues its efforts to cure and
does so cure within ninety (90) days;
(e) if Tenant shall file a voluntary petition in bankruptcy or shall
be adjudicated a bankrupt or insolvent, or shall file any petition or
answer seeking any reorganization, readjustment, liquidation, dissolution
or similar relief under any bankruptcy or
20
<PAGE> 24
insolvency statute or law of the United States or any State, or shall
seek or consent to or acquiesce in the appointment of any bankruptcy or
insolvency trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties or of the Leased Premises; or
(f) if within sixty (60) days after the commencement of any
involuntary proceeding against Tenant seeking any reorganization,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy or insolvency statute or law, Tenant fails to secure a
dismissal and discharge thereof;
then and in any such event Landlord, at its option, may at any time thereafter
(in addition to and/or as an alternative to all other legal remedies):
(a) immediately terminate this Lease and Tenant's right to
possession of the Leased Premises; or
(b) terminate only the Tenant's right to possession of the Leased
Premises, without terminating this Lease or releasing Tenant in whole or
in part from Tenant's obligations hereunder for the full term hereof; or
(c) without terminating this Lease or Tenant's right to possession
of the Leased Premises, enter upon the Leased Premises and do and perform
whatever Tenant is obligated to do under the terms of this Lease.
In the event Landlord exercises its rights under subparagraph (a) or (b)
immediately above, Tenant shall quit and peacefully surrender the Leased
Premises to Landlord, and Landlord, upon or at any such expiration or
termination, may without further notice, enter upon and reenter the Leased
Premises and possess and repossess itself thereof, as provided by law,
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold and enjoy the Leased Premises and the right
to receive all rental income of and from the same, and further, Landlord may
collect damages in accordance with the law.
If Tenant's right to possession of the Leased Premises shall be terminated
pursuant to this Article 22, by summary proceedings or otherwise, Landlord may
in its own name, as agent for Tenant if this Lease not be terminated, or if
this Lease be terminated, in its own behalf, enter into possession of and relet
the Leased Premises or any part thereof, or said premises with additional
premises, for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the Lease Term) and on
such conditions (which may include concessions, free rent and/or alterations of
the Leased Premises) as Landlord, in its uncontrolled discretion, may determine
and may collect and receive the rents therefor. Landlord
21
<PAGE> 25
shall in no way be responsible or liable for any failure to relet the Leased
Premises or any part thereof, or of any failure to collect any rent due upon
such reletting.
No such expiration or termination of this Lease, or termination of
Tenant's right of possession thereunder, shall relieve Tenant of its liability
and obligations under this Lease, unless otherwise agreed to in writing by
Landlord, whether or not the Leased Premises shall be relet. Upon an event of
default, Tenant shall pay Landlord the rent and all other charges required to
be paid hereunder by Tenant up to the time of such event. Thereafter:
(a) Tenant, until the end of the Lease Term, or what would have been
such term in the absence of any such event, shall be liable to Landlord as
damages for Tenant's default, the equivalent of the amount of the rent and
other charges which would be payable under this Lease by Tenant if this
Lease were still in effect, less the net proceeds of any reletting
effected pursuant to the provisions hereof, after deducting all of
Landlord's expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage and management commissions,
operating expenses, legal expenses, reasonable attorneys' fees, and
expenses of preparation of such reletting. Tenant shall pay such damages
(herein called "deficiency") to Landlord monthly on the days on which the
net rent would have been payable under this Lease if this Lease were still
in effect, and Landlord shall be entitled to recover from Tenant each
monthly deficiency as the same shall arise.
(b) At any time after the expiration or termination of this Lease,
in lieu of collecting any further monthly deficiencies as aforesaid,
Landlord shall be entitled to recover from Tenant, and Tenant shall pay to
Landlord, on demand, as liquidated damages and not as a penalty, an amount
equal to the difference between the total rental and other benefits which
would have accrued to Landlord under this Lease from the date of
termination to the date of the expiration of the original term demised and
the then fair and reasonable rental value of the Leased Premises for the
same period. Tenant shall remain liable for any monthly deficiencies not
previously recovered by Landlord. In the computation of such liquidated
damages, the difference between any installment of rent thereafter
becoming due and the fair and reasonable rental value of the Leased
Premises for the period for which such installment was payable shall be
discounted to the date of termination at the rate of not more than five
percent (5%) per annum.
If the Leased Premises or any part thereof be relet by Landlord for the
unexpired term of this Lease, or any part thereof,
22
<PAGE> 26
before presentation of proof of such liquidated damages to any court,
commission or tribunal, the amount of rent reserved upon such reletting shall
prima facie be the fair and reasonable rental value for the part or the
whole of the Leased Premises so relet during the term of the reletting.
Nothing herein contained shall limit or prejudice the right of Landlord to
prove for and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the
amount of the difference referred to above.
If this Lease be terminated by summary proceedings or otherwise, or if
Tenant's right to possession of the Leased Premises shall be terminated, and
whether or not the Leased Premises be relet, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord, in addition to any
damages becoming due under this Article 22, the following: an amount equal to
all expenses, if any, including reasonable attorneys' fees, incurred by
Landlord in recovering possession of the Leased Premises, (whether or not
litigation be commenced in aid thereof), and all costs and charges for the care
of said Leased Premises while vacant, which damages shall be due and payable by
Tenant to Landlord at such time or times as such expenses are incurred by
Landlord.
Tenant hereby expressly waives, so far as permitted by law, the service of
any notice of intention to reenter provided for in any statute and except as is
herein otherwise provided Tenant, for and on behalf of itself and all persons
claiming through or under Tenant (including any leasehold mortgagee or other
creditor), also waives any and all right of redemption or reentry or
repossession in case Tenant shall be dispossessed by a judgment or by warrant
of any court or judge or in case of reentry or repossession by Landlord or in
case of any expiration or termination of this Lease. The terms "enter,"
"reenter," "entry" or "reentry" as used in this Lease are not restricted to
their technical legal meanings.
Tenant hereby waives all right to trial by jury in any action or
proceeding hereafter instituted by Landlord against Tenant with respect to this
Lease or the Leased Premises. Tenant agrees not to interpose any counterclaim
of any nature or description in any action or proceeding. The foregoing,
however, shall not be construed as a waiver of Tenant's right to assert any
claim in a separate action or proceeding instituted by Tenant.
In the event of any breach or threatened breach by Tenant of any of the
agreements, terms, covenants or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise as though reentry, summary proceedings, and other remedies were
not provided for in this Lease.
23
<PAGE> 27
Article 23
No Waiver
No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of such agreement, term, covenant or condition. No
agreement, term, covenant or condition hereof to be performed or complied with
by Tenant, and no breach thereof, shall be waived, altered or modified except
by a written instrument executed by Landlord. No waiver of any breach shall
affect or alter this Lease, but each and every agreement, term, covenant and
condition hereof shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
Article 24
Remedies Cumulative
Each right and remedy provided for in this Lease shall be cumulative and
shall be in addition to every other right or remedy provided for in this Lease
or now or hereafter existing at law or in equity or by statute or otherwise,
and the exercise or beginning of the exercise by Landlord of any one or more of
the rights or remedies provided for in this Lease or now or hereafter existing
at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by Landlord of any or all other rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise.
Article 25
Surrender of Premises; Holding Over
Upon the expiration or sooner termination of the Lease Term, Tenant agrees
to quit and surrender the Leased Premises, clean and in good condition and
repair, normal wear and tear and insured casualty excepted, together with all
keys and combinations to locks, safes and vaults and all improvements,
alterations, additions, fixtures, equipment and decorations at any time made or
installed in, upon or to the interior or exterior of the Leased Premises
(except movable furniture, furnishings, equipment and other personal property
of Tenant put in at Tenant's expense), all of which shall thereupon become the
property of Landlord without any claim by Tenant therefor, but the surrender of
such property to Landlord shall not be deemed to be a payment of rent or in
lieu of any rent reserved hereunder. Before surrendering the Leased Premises,
Tenant shall remove all of Tenant's said personal property and, at Landlord's
option, Tenant shall also, at Tenant's expense, remove any alterations,
additions, fixtures or equipment that contains or constitutes a "Hazardous
Substance" (as defined in
24
<PAGE> 28
Article 5 such that the disposal of the same to a sanitary landfill is not
permitted or is otherwise regulated under applicable law), at any time made or
installed by Tenant in, upon or to the Leased Premises, and Tenant further
agrees to repair any damage caused thereby. If Tenant shall fail to remove any
of Tenant's said personal property or other property required by Landlord to be
removed, said property shall, at the option of Landlord, either be deemed
abandoned and may be disposed of by Landlord at Tenant's expense, or Landlord
shall have the right to remove and store said property, at the expense of
Tenant, without further notice to or demand upon Tenant and hold Tenant
responsible for any and all charges and expenses incurred by Landlord therefor.
If the Leased Premises be not surrendered as and when aforesaid, Tenant shall
indemnify Landlord against all loss or liability resulting from the delay by
Tenant in so surrendering the same, including without limitation, any claims
made by any succeeding occupant founded on such delay. If Tenant shall remain
in possession of the Leased Premises, or any part thereof, for any period after
the termination of this Lease in any of the ways above-named, Tenant shall pay
one and one-half (1.5) times the rent as a month-to-month hold over tenant
until such holding over shall cease. Tenant's obligations under this Article
shall survive the expiration or sooner termination of the Lease Term.
Article 26
Relationship of Parties
Nothing contained in this Lease shall be deemed to constitute or be
construed or implied to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties
hereto, other than the relationship of Landlord and Tenant.
The term "Landlord" as used in this Lease means only the owner of the
current interest of Landlord in the Leased Premises or, as the case may be, the
successor thereto from time to time. In the event of any transfer at any time
of the interest of Landlord, the transferor shall be and is hereby entirely
freed and relieved of all covenants and obligations of Landlord hereunder
accruing from and after the date of such transfer, and it shall be deemed and
construed without further agreement between the parties or their respective
successors in interest or between the parties and the transferee that the
transferee of Landlord's interest has assumed and agreed to carry out any and
all covenants and obligations of Landlord thereafter accruing hereunder.
Article 27
Successors and Assigns; Provisions Binding
Except as otherwise expressly provided in this Lease, all covenants,
conditions and provisions of this Lease shall be binding
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<PAGE> 29
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
Each provision of this Lease to be performed by Tenant shall be construed
to be both a covenant and a condition, and if there shall be more than one
Tenant, they shall all be bound, jointly and severally, by the provisions of
this Lease. The persons executing this Lease on behalf of Tenant hereby
covenant, represent and warrant that Tenant is a duly incorporated and duly
qualified corporation and is authorized to do business in the State of its
incorporation and that the person or persons executing this Lease on behalf of
Tenant is an officer or are officers of such Tenant, and that he or they as
such officers are duly authorized to sign and execute this Lease.
Article 28
Notices
Every notice, demand, request or other communication which may be or is
required to be given under this Lease or by law shall be in writing and shall
be sent by United States Certified or Registered Mail, postage prepaid, return
receipt requested, or by nationally recognized overnight courier (e.g. Federal
Express) and shall be addressed: (a) if to Tenant, to Michael Foods, Inc. 5353
Wayzata Blvd., Suite 324, Minneapolis, MN 55416, Attention: Jeffrey M.
Shapiro; and (b) if to Landlord, to Rechsteiner/Papetti, et al, One Papetti
Plaza, Elizabeth, New Jersey 07207, Attention: Arthur N. Papetti, with a copy
to Martin B. O'Connor, II, O'Connor, Morss & O'Connor, Liberty Hall Center,
1085 Morris Avenue, Union, NJ 07083-7136, and the same shall be deemed
delivered one (1) business day after being sent via nationally recognized
overnight courier (e.g., Federal Express) or three (3) business days after
being mailed by U.S. Certified or Registered mail, return receipt requested.
Either party may designate, by similar written notice to the other party, any
other address for such purposes.
Article 29
Miscellaneous
Tenant agrees not to record this Lease or any memorandum thereof without
the prior written consent of Landlord.
Each party covenants, warrants and represents to the other that there was
no broker instrumental in consummating this Lease and that no conversations or
prior negotiations were had by such party with any broker concerning the
renting of the Leased Premises. Each party agrees to indemnify and hold the
other harmless against and from all liabilities, including attorneys' fees,
arising from any claims for brokerage commissions or finders' fees resulting
from or arising out of any conversations or negotiations had by such party with
any broker.
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<PAGE> 30
Tenant agrees to annually make available for review by Landlord and its
lenders such financial information and statements as the same may reasonably
request, provided, Landlord and its lenders agree to keep such information and
statements confidential to the extent the same is not public information.
Article 30
Entire Agreement; Construction
This Lease sets forth the entire agreement between the parties respecting
the Leased Premises. There are no understandings, agreements, statements,
promises, representations or warranties, express or implied, not specified
herein respecting the Leased Premises and all prior conversations and writings
by or between the parties or their representatives are merged herein and
extinguished. This Lease shall not be modified except by a writing subscribed
to by the party to be charged, nor may this Lease be cancelled by Tenant or the
Leased Premises surrendered except with the express written authorization of
Landlord.
This Lease shall be construed, as to both validity and performance, and
enforced in accordance with and shall be governed by the laws of the
jurisdiction in which the Leased Premises are located, without regard to such
jurisdiction's principles of conflicts of law. If any provision of this Lease
or the application thereof to any person or circumstance shall to any extent be
held void or invalid, then the remainder of this Lease or the application of
such provision to persons or circumstances other than those as to which it is
held void or invalid shall not be affected thereby, and each provision of this
Lease shall be valid and enforced to the fullest extent permitted by law.
The headings in this Lease are for purposes of reference only and shall
not limit or define the meaning hereof. This Lease may be executed in any
number of counterparts, each of which is an original, but all of which shall
constitute one instrument.
Article 31
Binding Arbitration
In the event that a dispute arises between Landlord and Tenant such matter
shall be submitted to binding arbitration as follows:
(1) Any arbitration hereunder shall be held pursuant to the
Commercial Arbitration Rules of the American Arbitration Association except
that:
(i) Landlord and Tenant shall each select one arbitrator. The
two appointed arbitrators shall jointly choose a third arbitrator
from a list
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<PAGE> 31
provided by the American Arbitration Association and the third
arbitrator shall be the sole arbitrator to hear the dispute. If
either party fails to appoint an arbitrator within twenty (20) days
after demand by the other party, or the appointed arbitrators fail to
agree to the third arbitrator within twenty (20) days after a list of
potential arbitrators is provided by the American Arbitration
Association, the American Arbitration Association shall select an
arbitrator for the party failing to make appointment or shall appoint
the third arbitrator, as the case may be.
(ii) The arbitration shall be held in the City in which any
facility leased hereunder is located, or such other location as the
parties shall mutually agree.
(iii) The parties shall bear their own expenses of the
arbitration, including attorneys fees and costs of expert witnesses.
(iv) The filing or other fees of the American Arbitration
Association shall be paid one-half by the Landlord and one-half by
the Tenant.
(v) The award of the arbitrators shall be binding and shall be
enforceable in any court of the state in which the Premises are
located.
(2) If the American Arbitration Association is not then in existence
or refuses to administer the arbitration, the arbitration shall be administered
by the most nearly comparable organization as shall be agreed by the parties,
or failing agreement, as shall be determined by the Union County Superior Court
of Elizabeth, New Jersey.
(3) Notwithstanding anything herein to the contrary, either party
shall have the right to seek injunctive relief to maintain the status quo until
a dispute between the parties can be arbitrated.
In the event that a dispute arises between Landlord and Tenant involving
an amount which is greater than the then current annual base rent under this
Lease, such matter shall be litigated by the parties.
Article 32
Choice of Law; Jurisdiction.
This Lease shall be governed, construed, applied and enforced in
accordance with the laws of the state in which the
28
<PAGE> 32
Premises are located (without regards to principles of conflicts of laws).
Landlord and Tenant each (i) irrevocably submits to personal jurisdiction
in the courts of the state in which the Premises are located and the applicable
United States District Court serving the county in which the Premises are
located, and appellate courts from any thereof, and (ii) irrevocably waives any
objection which it may have at any time to the laying on venue of any suit,
action or proceeding arising out of or relating to this Lease brought in any
such court, and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Landlord and Tenant each hereby agree that to the extent permitted by
local court rules, any summons, complaint and other process and notice in
connection with the commencement of or any other proceeding in any such suit,
action or proceeding may be served on it by using the notification procedure
set forth in this Lease.
LANDLORD AND TENANT EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS LEASE OR ANY ACTS OR OMISSIONS OF LANDLORD, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 33
Joint Preparation
This Lease is to be deemed to have been prepared jointly by the parties
hereto, and any uncertainty or ambiguity existing herein, if any, shall not be
interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's length agreements.
Article 34
Time Is of the Essence
Time is of the essence with respect to all matters provided in this Lease.
Article 35
Term Renewal
Tenant is granted the right to extend the term of this Lease for two (2)
period(s) of five (5) years each (the "Option Period(s)") on the terms and
conditions set forth herein; provided, however, that each said right to extend
for each such Option Period (the "Option(s)") may be exercised only in the
event Tenant is not
29
<PAGE> 33
in default at the time each said Option right is exercised and provided,
further, that the Option for the immediately preceding Option Period, if any,
has been exercised. The phrase "Lease Term" as used in this Lease shall mean
the term of this Lease as extended by Tenant pursuant to this Article.
To exercise each Option, Tenant shall notify Landlord in writing no later
than one (1) year prior to the expiration of the initial Lease Term or the
Option Period then expiring, if any.
In the event Tenant properly exercises its Option as provided herein: (1)
all of the terms and conditions of this Lease shall apply during the Option
Period(s) (except the Option then exercised), including, but not limited to,
Tenant's obligation to pay all costs, charges and expenses provided for in the
Lease; (2) the Option exercised by Tenant in order to extend the Term of the
Lease shall terminate and be of no further force and effect and may not be
exercised again by Tenant; (3) no concession previously granted Tenant by
Landlord in the initial term shall be due or payable to Tenant during or with
respect to such Option Period; and (4) the monthly base rent payable under
Article 2 during the particular Option Period shall be determined as set forth
below. At Landlord's request, prior to the commencement of the particular
Option Period, Tenant shall execute, acknowledge, and deliver to Landlord an
amendment to lease evidencing Tenant's exercise of its Option and setting forth
the commencement and expiration dates of the Option Period and term of the
Lease and the monthly base rent payable during the Option Period.
The Annual Rent payable monthly under Article 2 during each Option Period
shall be such amount as may be agreed upon by the parties and which is not less
than 110%, nor more than 135%, of the Annual Rent for the twelve (12) months
immediately preceding the commencement of the applicable Option Period (the
"Option Period Rent").
If the parties are unable, within sixty (60) days of notice by Tenant
electing to extend the term of the Lease, to agree on the amount of the Option
Period Rent then each party shall within ten (10) days thereafter designate and
select an M.A.I. certified appraiser and submit to them what such party
believes the Option Period Rent should be. The two appraisers shall then
together within thirty (30) days determine and agree upon the Option Period
Rent by selecting either the Option Period Rent proposed by Landlord or that
proposed by Tenant, with no other variation.
If the two appraisers are unable within said thirty (30) days to agree on
either Landlord's or Tenant's proposed Option Period Rent, then they shall
together designate a third M.A.I. appraiser, who alone shall select either
Landlord's or Tenant's proposed Option Period Rent as the Annual Rent, which
determination shall be binding and enforceable upon all parties.
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<PAGE> 34
Each party shall pay the cost of the appraisers selected by such party and
the costs of the third appraiser (if retained) shall be paid equally by each
party.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW
31
<PAGE> 35
TENANT:
MICHAEL FOODS, INC., a Delaware corporation
(Seal) By: /s/ Gregg A. Ostrander
-------------------------------------
Attest: Gregg A. Ostrander
-------------------------------------
Print Name Here
_______________________________
(Ass't) Secretary
LANDLORD:
RECHSTEINER and PAPETTI, et al, an Iowa
general partnership
Witness: By: /s/ William T. Rechsteiner, General Partner
-------------------------------------------
William T. Rechsteiner, General Partner
/s/ Wanda L. Rechsteiner
- -------------------------------
/s/ Janet U. Macy
- -------------------------------
[SIGNATURE PAGE TO LEASE AGREEMENT]
STATE OF )
----------------------
)
OF
- ----------- --------------- )
On this _____ day of _______________, 1997, before me personally
appeared ________________________________ , to me personally known, who, being
by me duly sworn, did say that he is the ____________________ of MICHAEL FOODS,
INC., a Delaware corporation, and that said instrument was signed on behalf of
said corporation by authority of its Board of Directors; and said officer
acknowledged said instrument to be the free act and deed of said corporation.
<PAGE> 36
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the ____________ and State aforesaid, the day and year first
above written.
_____________________
Notary Public
(SEAL)
My Commission Expires:
STATE OF IOWA )
)
COUNTY OF TAYLOR )
On this 21st day of February, 1997, before me personally appeared
WILLIAM T. RECHSTEINER, to me personally known, who, being by me duly sworn,
did say that he is a partner of RECHSTEINER and PAPETTI, et al, an Iowa general
partnership, and that said instrument was signed by him as partner on behalf of
said general partnership; and said WILLIAM T. RECHSTEINER acknowledged said
instrument to be the free act and deed of said general partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the County and State aforesaid, the day and year first
above written.
/s/ Thomas C. O'Kane
--------------------------
Notary Public
(SEAL)
THOMAS C. O'KANE
My Commission Expires: May 8, 1997
<PAGE> 37
EXHIBIT A
DESCRIPTION OF PREMISES
104 West Ohio Street, Lenox, Iowa (storage facility, processing
plant and pallet repair shop)
(LEGAL TO FOLLOW)
<PAGE> 1
EXHIBIT 10.46
EXECUTION COPY
LEASE BY AND BETWEEN
JERSEY PRIDE URBAN RENEWAL
AS LANDLORD,
AND
MICHAEL FOODS, INC.,
AS TENANT
DATED FEBRUARY 26, 1997
<PAGE> 2
INDEX
Article Page
- ------- ----
1 Leased Premises; Lease Term . . . . . . . . . . . . . . . . . . . . 1
2 Rent Payments; Net Lease . . . . . . . . . . . . . . . . . . . . . 1
3 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . 2
4 No Representations . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Compliance with Laws; Insurance Regulations . . . . . . . . . . . . 3
6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Repair, Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 6
8 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Covenant Against Liens . . . . . . . . . . . . . . . . . . . . . . 8
10 Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . 9
11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . 15
16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Mortgaging; Assignment; Subletting . . . . . . . . . . . . . . . . 17
18 Subordination and Attornment . . . . . . . . . . . . . . . . . . . 18
19 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . 19
20 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21 Cure of Tenant's Default . . . . . . . . . . . . . . . . . . . . . 20
22 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 24
25 Surrender of Premises; Holding Over . . . . . . . . . . . . . . . . 24
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26 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . 25
27 Successors and Assigns; Provisions Binding . . . . . . . . . . . . 26
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
30 Entire Agreement; Construction . . . . . . . . . . . . . . . . . . 27
31 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 28
32 Choice of Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . 29
33 Joint Preparation . . . . . . . . . . . . . . . . . . . . . . . . . 29
34 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . 30
35 Term Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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L E A S E
THIS LEASE made and entered into as of the 26th day of February, 1997,
between JERSEY PRIDE URBAN RENEWAL, a New Jersey general partnership, having its
principal office at One Papetti Plaza, Elizabeth, New Jersey 07027 (hereinafter
called "Landlord") and MICHAEL FOODS, INC., a Delaware corporation, having its
principal office at 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota
55416 (hereinafter called "Tenant").
A. Landlord is the owner of certain land and improvements more
particularly described on Exhibit A attached hereto (the "Real Estate").
B. Tenant desires to lease from Landlord, and Landlord is willing to
lease to Tenant the Real Estate and improvements thereon upon and subject to the
terms, provisions and conditions of this Lease.
NOW THEREFORE, Landlord and Tenant, for and in consideration of the rents,
agreements, terms, covenants and conditions hereinafter mentioned and hereby
agreed to be paid, kept and performed by Landlord and Tenant, their legal
representatives, successors and assigns, do hereby mutually agree as follows:
Article 1
Leased Premises; Lease Term
Upon and subject to the agreements, terms, covenants and conditions
hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby rents
and leases from Landlord, the Real Estate, together with any and all buildings,
fixtures, structures and other improvements located thereon (collectively with
the Real Estate, the "Leased Premises"), subject to existing restrictions,
covenants, easements, rights and encumbrances of record.
TO HAVE AND TO HOLD for a term commencing on the date hereof and ending on
midnight of the day preceding the tenth (10th) annual anniversary of the "Rent
Commencement Date" as hereinafter defined (the "Lease Term") unless sooner
terminated or extended as herein provided. The "Rent Commencement Date" shall
mean March 1, 1997.
Article 2
Rent Payments; Net Lease
Tenant, during the Lease Term, will pay to Landlord an annual rental of
Four Hundred Thirty-Two Thousand Dollars ($432,000.00) in equal monthly
installments of Thirty-Six Thousand Dollars ($36,000.00) in advance on or before
the first day of each calendar month. The rent for any partial month at the
commencement hereof shall be prorated and paid upon Tenant's execution of this
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Lease. Landlord may assess a charge of five percent (5%) of the monthly rent
installment due for any monthly payment that is received more than five (5)
days after it is due.
Tenant will pay to Landlord the rent herein reserved, without prior demand
or notice and without any setoffs, abatements, or deductions whatsoever, at the
office of Landlord or at such other place as Landlord shall designate in
writing. All other sums that may become due or be payable to Landlord hereunder
shall be paid at the time and in the manner herein provided at the office of
Landlord. All of such other sums so to be paid may, at Landlord's option, be
deemed to be additional rent to be added to any fixed rent then due or
thereafter falling due, and in the event of non-payment, Landlord shall have all
the rights and remedies herein provided.
If Tenant fails the net worth requirement of Article 13, then Tenant shall
deliver to Landlord the sum equal to one month's base rent as security payment
for the performance by Tenant of every covenant and condition of this Lease. If
Tenant shall default with respect to any covenant or condition of this Lease,
including, but not limited to, the payment of rent, Landlord may apply the whole
or any part of such security payment to the payment of any sum in default or any
other sum which Landlord may be required to spend by reason of Tenant's default,
and Tenant shall thereafter upon demand of Landlord fully restore the original
amount of the security deposit. After all of the Tenant's obligations under
this Lease shall have been satisfied, the security payment or any remaining
balance thereof shall be returned to Tenant. In the event of a bona fide sale of
the property of which the Leased Premises are a part, Landlord shall have the
obligation to transfer such security to the purchaser to be held by such
purchaser under the terms of this Lease, and Landlord shall be released from all
obligation and liability for the return of such security to Tenant provided such
transferee assumes such obligation.
Tenant acknowledges that the rent and other payments to Landlord hereunder
are intended to be "net" to Landlord and that this Lease is a so called "triple
net" or "net net net" lease to Landlord.
Article 3
Use of Leased Premises
Tenant shall occupy the Leased Premises during the Lease Term for the
purposes set forth on Exhibit A hereto and for no other purpose or use without
Landlord's prior written consent. Tenant shall not use or occupy or permit the
Leased Premises or any part thereof to be used or occupied for any other
business, use or purpose without Landlord's prior written consent, which shall
not be unreasonably withheld. Tenant shall apply for, secure, maintain and
comply with all licenses, permits, or accreditations which may
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be required for the conduct by Tenant of the use of the Leased Premises, as
herein permitted.
Article 4
No Representations
Tenant is fully familiar with the physical condition of the Leased
Premises, and Tenant accepts and takes the Leased Premises in their "as is" and
"where is" condition. Landlord has made no representations whatsoever in
connection with the condition of the Leased Premises or any part thereof, and
Landlord shall not be liable for any latent or patent defects therein.
Article 5
Compliance with Laws; Insurance Regulations
Throughout the Lease Term, Tenant shall, at its sole cost and expense,
promptly observe and comply with all laws, ordinances, orders, regulations,
rules, standards and requirements of every government (whether federal, state or
local), municipality or other governmental authority, including but not limited
to CERCLA, RCRA, TOSCA, FIFRA, OSHA and SARA (as the same are commonly referred
to under the federal environmental laws), and the Americans with Disabilities
Act of 1990, as amended (the "ADA"), and including any agency or department
thereof, having jurisdiction over Tenant or the Leased Premises (collectively,
"Governmental Regulations"), and of the local fire insurance rating
organization, and of all insurance companies writing policies covering the
Leased Premises or any part thereof, relating to the Leased Premises, or the
facilities, fixtures or equipment therein, or the use and occupation or
franchises and privileges connected therewith; whether or not such laws,
ordinances, orders, regulations, rules or requirements shall necessitate
improvements, interference with the use and enjoyment of the Leased Premises,
replacements or repairs, extraordinary as well as ordinary, foreseen or
unforeseen, and whether the same now are in force or may, at any time in the
future, be enacted or directed; and Tenant shall pay all costs, expenses,
claims, fines, penalties and damages that may in any manner arise out of or be
imposed because of the failure of Tenant to comply with any of the foregoing.
Landlord, its agents and representatives, may at any time during the term
of the Lease enter upon the Leased Premises, or any part thereof, for the
purpose of determining and ascertaining the environmental status of the same,
including but not limited to the performing of environmental audits or surveys
of the condition of the Leased Premises; and may further video tape, from time
to time, the condition of the Leased Premises, or any building or other
improvements thereon, for the purpose of better assuring and determining
Tenant's fulfillment of its obligations hereunder.
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Tenant shall be responsible for and shall bear all costs and expenses
associated with any and all alterations to the Leased Premises, which may be
required by the ADA for the accommodation of disabled individuals who may be
employed from time to time by Tenant, or any disabled customers, clients,
guests, or invitees or sublessees. Tenant shall indemnify and hold Landlord
harmless from and against any and all costs incurred arising from the failure of
the Leased Premises to conform with the ADA, including the cost of making any
alterations, renovations or accommodations required by the ADA, or any
government enforcement agency, or any court, any and all fines, civil penalties,
and damages awarded against Landlord resulting from a violation or violations of
the ADA, and all reasonable legal expenses and court costs incurred in defending
claims made under the ADA, including reasonable attorneys' fees.
Tenant shall not (i) use, store, generate, treat, sell or dispose in, on or
about the Leased Premises, any "Hazardous Substances" (hereinafter defined), or
(ii) permit the use, storage, generation, treatment, selling or disposal in, on
or about the Leased Premises of any Hazardous Substances, except Hazardous
Substances in such amounts and of such types that are commonly and customarily
used in compliance with Governmental Regulations in the operation, cleaning and
maintenance of Tenant's business operated in the ordinary course. "Hazardous
Substances" or "Hazardous Substance" as used in this Lease shall mean any
substances, waste or substance now or hereafter designated as, or containing
components designated as, hazardous, dangerous, toxic or harmful and/or subject
to any Governmental Regulations, including, without limitation, asbestos in any
form, urea formaldehyde foam insulation, transformers or other equipment which
contains dielectric fluid or other fluids containing levels of polychlorinated
biphenyls in excess of fifty (50) parts per million and petroleum products in
any form. Tenant shall (i) promptly comply with all Governmental Regulations
now or hereafter pertaining to the use, discharge, handling, transportation,
disposal, treatment, generation, storage, sale or presence on the Leased
Premises of Hazardous Substances; and (ii) allow Landlord or Landlord's agents
or representatives to enter onto the Leased Premises at all times to check
Tenant's compliance with all applicable Governmental Regulations regarding
Hazardous Substances should Landlord have a reasonable belief that Tenant is not
in compliance with all applicable Governmental Regulations regarding Hazardous
Substances. If Tenant is found to not be in compliance with all applicable
Governmental Regulations regarding Hazardous Substances, all reasonable costs
incurred by Landlord and associated with Landlord's inspection of the Leased
Premises and Landlord's monitoring of Tenant's compliance with this Article,
including Landlord's reasonable attorneys' fees and costs shall be deemed
additional rent and shall be due and payable to Landlord immediately upon demand
by Landlord. Tenant shall indemnify, defend and save Landlord, its officers,
directors, shareholders, managers, agents and employees harmless from and
against any and all damages, penalties, costs and other liabilities (including
Landlord's attorneys' fees and costs and the cost of any remedial
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or abatement activities), arising during the term of this Lease or anytime
thereafter, directly or indirectly, from the use, discharge, handling,
transportation, disposal, treatment, generation, storage, existence or sale of
Hazardous Substances, during the term of this Lease in, on or about the Leased
Premises except to the extent such use, discharge, handling, transportation,
disposal, treatment, generation, storage, existence or sale of Hazardous
Substances resulted solely from the actions of Landlord. Tenant's obligations
under this Article shall survive the termination of this Lease.
Tenant shall, at Tenant's sole expense, comply with all laws, rules,
regulations, requirements, standards and ordinances enacted or imposed by any
governmental unit having jurisdiction over Tenant, the Leased Premises, signage
at the Leased Premises or Tenant's business. Tenant shall not use or occupy the
Leased Premises nor permit its use or occupancy for any unlawful use or purpose,
nor for any purpose which may be hazardous on account of fire, environmental
concerns or otherwise, nor for any use or purpose which might render Landlord's
insurance on the Leased Premises void.
Tenant agrees that if its storage, accumulation, transportation, treatment
or disposal of such Hazardous Substances results in (i) contamination of the
soil or surface or groundwater or (ii) loss or damage to any person(s) or
property, Tenant shall (a) notify Landlord immediately of any contamination,
claim of contamination, loss or damage, (b) proceed with due diligence to clean
up any such contamination in full compliance with all applicable federal, state
and local statutes, regulations and standards, and (c) indemnify, defend and
hold Landlord harmless from and against any and all claims, suits, causes of
action, penalties, fines, costs and fees, including attorney's fees, arising
from or connected with any such contamination, claim of contamination, loss or
damage. The foregoing provision shall survive the termination of the Lease.
The parties hereto shall use their best efforts to resolve any disputes
regarding the origin of any contamination or claim of contamination or the
responsibility as between Landlord and Tenant of clean up of any such
contamination or claim of contamination. Landlord and Tenant agree that if they
are unable to resolve such a dispute, then the provisions of Article 31
governing resolution of disputes shall apply. The parties agree that the
arbitrator shall be retained only to resolve the dispute and in no event will be
retained by either party to conduct any resulting cleanup or remediation of any
suspected release of hazardous waste.
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To the extent applicable or may become applicable based on Tenant's use of
the Leased Premises or the termination of the Lease, Tenant at its cost and in a
timely manner shall (i) comply with "The Industrial Site Recovery Act", N.J.
Stat. Ann. Sections 13:1K-6 to -14, and the regulations promulgated thereunder
or obtain an exemption from compliance (See N.J. Admin. Code 7:26B-1.9(a)); (ii)
comply with "The Spill Compensation and Control Act", N.J. Stat. Ann. Sections
58.10-23.11 to .24, and the regulations promulgated thereunder, "The Pollution
Prevention Act", N.J. Stat. Ann. Sections 13.1D-35 et seq. and Sections 34:5A-1
et seq., and the regulations promulgated thereunder, and Sections 58:10A-21
through 58:10A-37 of the New Jersey Statutes, and the regulations promulgated
thereunder. The enumeration of specific state statutes and regulations above
shall in no way limit the obligation of Tenant to otherwise comply with all
other state laws and regulations applicable to it, and Tenant expressly
covenants to so comply at all times and in all material respects during the term
of this Lease.
Article 6
Utilities
Tenant shall make application for and arrange for the installation of all
utility meters or other devices as it may deem necessary for its purposes, and
Tenant shall be solely responsible for and promptly pay, as and when the same
become due and payable, all charges for water, sewer, sprinkler, electricity,
gas, telephone or other communication, fire or burglar alarm systems, and any
other utility or service supplied, used or consumed in connection with the
Leased Premises. Tenant shall use any utilities supplied to or serving the
Leased Premises in accordance with the regulations of the public utility company
or the governmental agency supplying the same, and Tenant shall not at any time
overburden or exceed the capacity of the mains, feeders, ducts, conduits or
other facilities by which such utilities are supplied to, distributed in or
serve the Leased Premises. Landlord shall not be liable in damages or otherwise
for any interruption in the supply of any utility or service to the Leased
Premises, nor shall any such interruption constitute any ground for constructive
eviction or an abatement of any of the rents reserved hereunder.
Article 7
Repair, Maintenance and Replacement
Tenant, at its sole cost and expense, shall take good care of the Leased
Premises and of all buildings, structures, improvements, fixtures and equipment
now or hereafter located thereon, interior and exterior, and keep the same and
all parts thereof, including without limiting the generality thereof, the roof,
roof membrane and subroofing, foundations, exterior walls, parking areas, the
grounds, landscaped areas, (grass cutting, lawn and shrubbery maintenance, tree
and plant watering and care),
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drainage ditches, and swales, gutters, downspouts, glass, structural and
interior and exterior portions of the buildings and the plumbing, sprinkler
system, heating, air conditioning, wiring and other systems therein and
facilities thereof and all sidewalks, parking areas, driveways, passageways and
alleys adjacent thereto and other appurtenances thereunto belonging, and all
fixtures, machinery and equipment which constitute any part of the Leased
Premises, together with any and all alterations, additions and improvements
therein and thereto, in at least as good order and condition as exists on the
date hereof, suffering no waste or injury; and shall, at Tenant's sole cost and
expense, perform all maintenance and promptly make all needed repairs and
replacements, extraordinary as well as ordinary, structural or otherwise,
foreseen or unforeseen, in and to any of the foregoing and the buildings,
structures or improvements now or hereafter located thereon, including streets,
sidewalks, curbs and gutters, vaults, water, sprinkler systems, sewer and gas
connections, plumbing, pipes and mains, and all other fixtures, machinery and
equipment (including the lighting, electrical, heating, ventilation and
air-conditioning systems) now or hereafter belonging to or connected with the
Leased Premises or used in their operation. All such maintenance, repairs and
replacements shall be of first-class quality sufficient for the proper
maintenance and operation of the Leased Premises. Tenant shall keep and
maintain the Leased Premises in a clean and safe condition, and Tenant shall not
permit the accumulation of waste or refuse matter, nor permit anything to be
done or allow any condition to exist which would invalidate or prevent the
procurement of any insurance policies which may at any time be required pursuant
to the provisions of this Lease. Tenant shall not obstruct or permit the
obstruction of any parking areas, streets or sidewalks located on or adjoining
the Leased Premises, and shall keep such parking areas, streets and sidewalks
free of snow and ice.
In addition, Tenant shall, during the term of this Lease, perform the
periodic preventive maintenance recommended by such systems' manufacturers.
Both maintenance and preventive maintenance shall be performed by such
contractors as are recommended by Landlord or such other entities as are
mutually agreed upon by the parties hereto. Tenant shall, on January 1 of each
year while Tenant is in occupancy of the Premises, provide Landlord with
evidence of an executed preventive maintenance contract for all mechanical
equipment (HVAC) provided. Tenant shall pay for the annual mechanical equipment
inspection fees, if any, imposed by any governmental authority.
Tenant agrees to keep the interior of the Leased Premises, including all
plate glass windows, doors, dock bumpers, levelers, and seals in good repair as
well as the floors and floor drains.
Landlord reserves the right to take video footage of the condition of the
Leased Premises as of the Commencement Date, a
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copy of which shall be provided to Tenant and shall be an exhibit hereto.
On the default of Tenant of its obligations to maintain and repair the
Leased Premises as set forth above for a period of fifteen (15) days after
written notice from Landlord demanding cure of same, Landlord may, but shall not
be required to, cause all required maintenance, repairs or replacements to be
made, for Tenant's account, and Tenant shall promptly pay Landlord all costs
incurred plus an administrative fee of fifteen percent (15%) of such costs and
said amount shall constitute and be collectible as additional rent hereunder.
Article 8
Alterations
Tenant shall not make any exterior or structural alterations, improvements,
or additions to the Leased Premises in excess of $125,000 without obtaining
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Such exterior or structural alterations, improvements, or additions,
if consented to by Landlord, shall be made under the supervision of an architect
or engineer reasonably satisfactory to Landlord and in accordance with plans and
specifications approved by Landlord. Tenant shall not make any interior or
nonstructural alterations, improvements, or additions to the Leased Premises in
excess of $125,000 without obtaining Landlord's prior written consent which
shall not be unreasonably withheld.
All alterations, improvements, and additions made to the Leased Premises
shall be effected with due diligence, in a good and workmanlike manner employing
appropriate new materials and in compliance with all applicable governmental and
insurance requirements and shall be promptly and fully paid for by Tenant; and
no alterations, improvements, or additions made to the Leased Premises shall
change the general character of the Leased Premises, impair its usefulness, or
reduce the fair market value thereof below its value immediately before such
alteration, improvement, or addition. Prior to proceeding with any alteration,
improvement or addition requiring Landlord's consent hereunder, Tenant shall at
Landlord's request furnish Landlord with satisfactory evidence of worker's
compensation insurance in statutory limits of Tenant, or any contractor or
subcontractor performing work for Tenant on the Leased Premises, as well as
satisfactory evidence of all insurance coverage required to be maintained by
Tenant under this Lease. In addition, Landlord may require that before
commencement or continuance of such alteration, improvement or addition, Tenant
furnish Landlord with such security or performance bond as Landlord shall
request in order to assure completion of same and protect against any and all
liens, chattel mortgages and security interests arising in connection therewith.
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Article 9
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of any
mechanics', materialmen's or other liens against the Leased Premises by reason
of any work, labor, services or materials performed or supplied or claimed to
have been performed or supplied to Tenant, or anyone holding the Leased
Premises, or any part thereof, through or under Tenant. Tenant shall pay and
obtain a release of record of any such lien, by payment thereof or if Tenant
intends to contest the lien by filing a bond or other security or collateral
reasonably acceptable to Landlord, within thirty (30) days after the date of
filing thereof, failing which, and in addition to any other rights of Landlord
hereunder, Landlord shall have the right to vacate and release the same and
charge the cost thereof (including attorneys' fees) to Tenant, such charge to be
due and payable upon demand. Tenant shall defend, indemnify and hold Landlord
harmless from and against any and all liability, loss, damage, cost and expense
(including court costs and attorneys' fees) arising out of or in connection with
any such lien or the enforcement or removal thereof.
Article 10
Landlord's Right of Entry
Landlord and Landlord's employees, agents and contractors, and their
respective employees and agents, shall be permitted during the Lease Term to
inspect the Leased Premises, after first giving Tenant such notice as is
reasonable under the circumstances, (except in the case of an emergency when
prior notice shall not be required), during reasonable business hours (except in
the case of an emergency) for the purposes of (a) ascertaining the condition of
the Leased Premises; (b) making semi-annual mutual inspections; (c) inspecting
any replacements or repairs or the performing any other act as may be required
of Landlord or Tenant under the terms of this Lease; and (d) showing the Leased
Premises to prospective tenants, purchasers or mortgagees.
Article 11
Taxes
Tenant shall, (subject to Tenant's right to contest as set forth
hereafter), in all instances, pay and discharge at its sole expense, all duties,
taxes, assessments, impositions, or charges of any kind, license and permit
fees, and other governmental levies and charges of every kind and nature
whatsoever, general and special, extraordinary as well as ordinary, whether
foreseen or unforeseen, which shall during the Lease Term be laid, levied,
assessed, imposed, become due and payable, or
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liens upon, or arise in connection with the ownership, use, occupancy or
possession of the Leased Premises, or any part thereof, or any appurtenances
thereto, or the streets, sidewalks, vaults, curbs and gutters adjoining the
Leased Premises, or the leasehold estate hereby created, by virtue of any
present or future law, ordinance, order, regulation, rule or requirement of any
government (whether federal, state or local), municipality or other governmental
authority, including any agency or department thereof. In addition, Tenant
shall pay and discharge any and all taxes and other charges levied, assessed or
imposed upon the fixtures, furnishings, equipment and all other personal
property of Tenant in, upon or about the Leased Premises, and any license or
excise covering business conducted in the Leased Premises. The duties, taxes,
assessments, impositions, charges, fees and payments above-described are
sometimes referred to herein collectively as "Impositions". Nothing contained
herein shall require Tenant to pay any inheritance, estate, succession,
transfer, gift, franchise, corporation, income or profit tax or capital levy
that is or may be imposed upon Landlord, unless such described tax shall be
levied upon the rent herein reserved, or otherwise imposed on Landlord, in
replacement of or substitution for any Impositions as are presently levied,
assessed or imposed.
All Impositions shall be paid by Tenant to the governmental authorities
charged with the collection thereof on or before the last day upon which the
same may be paid without interest or penalty for the late payment thereof and
Tenant shall forward a copy of the paid tax bill to Landlord within thirty (30)
days of such payment to the applicable governmental authority. In the case of
Impositions which may be payable in installments, installments shall be payable
within the longest period provided by law, be prorated with Tenant charged
during the term hereof, and Tenant shall only be obligated to pay such
installments as the same fall due during the Lease Term.
Any real estate taxes or water and sewer rents imposed for the applicable
fiscal tax period in which the Lease Term begins or ends shall be prorated and
adjusted between Landlord and Tenant.
Landlord shall forthwith forward to Tenant all applicable tax bills as
received by Landlord or cause the same to be directly sent to Tenant and Tenant
shall provide to Landlord within sixty days (60) after the due date for payment
of such Imposition, reasonable evidence that such Imposition has been timely
paid. If the present method of assessing, levying or charging general public
revenue or taxes against or upon the Leased Premises shall be changed during the
term of this Lease so that such taxes, assessments or charges, instead of being
assessed or levied directly against the land or improvements constituting the
Leased Premises, be levied, assessed or charged in lieu thereof, in whole or in
part, against Landlord's reversionary interest in the same or against the rent
or income arising from the use or occupancy of the Leased Premises, then in such
event, Landlord shall forthwith timely advise Tenant of each such change, and
Tenant shall pay
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every such Imposition so made, subject always to Tenant's right to contest such
change as permitted hereafter. All such Impositions for any fractional year
within the term of this Lease shall be prorated between Landlord and Tenant on a
pro rata basis, with Tenant paying only such portions thereof which are properly
allocable to the term of this Lease.
Tenant shall have the right, in its or Landlord's name, to contest in good
faith the validity of any Imposition, or the method of assessment thereof, which
Tenant is required to bear, pay and discharge hereunder, and for that purpose
shall have the right to institute such proceedings in name of Landlord as it may
deem necessary, provided that expenses incurred by reason thereof shall be paid
by Tenant. Tenant further agrees that it shall diligently prosecute such
contest, at all times effectually stay or prevent any official or judicial sale
of the Leased Premises, under execution or otherwise, and pay any final judgment
enforcing such contested Imposition and thereafter promptly procure record
satisfaction or release thereof. Tenant further agrees that if it becomes
necessary to institute an action in a court of competent jurisdiction in order
to contest such Imposition then, in that event, it shall give Landlord at least
ten (10) days' prior written notice of its intention to institute such action
and at the same time furnish Landlord a bond in such amount as Landlord may
designate, executed by a corporate surety licensed to do business in the state
where the Leased Premises are located and acceptable to Landlord, indemnifying
and protecting Landlord and any other person now or hereafter having any
interest, whether as security for indebtedness or otherwise, in the Leased
Premises from and against all liability, loss, damage, cost and expense of
whatever kind or nature growing out of or in any way connected with the fee,
tax, assessment or other charge complained of or the contest thereof.
Article 12
Insurance
Tenant agrees to secure, maintain and keep in force at all times during the
Lease Term, at Tenant's sole cost and expense, the following policies of
insurance:
(a) Direct Property Damage Insurance covering the building
and other improvements (including leasehold improvements) on the
Leased Premises to the extent of one hundred percent (100%) of the
full replacement cost thereof, exclusive of the cost of excavations,
foundations, and footings and all improvements and fixtures required
to be insured by Tenant pursuant to Article 12(c) hereof, providing
protection against perils that are covered under standard insurance
industry practices within the classification of all risk property
damage insurance. Such insurance shall name as an
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additional insured Landlord and any other parties in interest as may
be from time to time designated in writing by notice from Landlord to
Tenant. In addition, such insurance shall be made payable to Tenant,
Landlord and such additional parties in interest from time to time
designated by Landlord to Tenant, as their interest may appear.
(b) Comprehensive General Liability Insurance covering the
Leased Premises and Tenant's use thereof against claims for bodily
injury or death, property damage or personal injury, however caused,
with a combined single limit of not less than two million dollars
($2,000,000) for bodily injury and property damage. Such insurance
shall, in addition to premises and operations liability, include
contractual liability insurance to cover all contractual liability
assumed by Tenant under or by virtue of this Lease (including, without
limitation, Article 15 hereof), broad form property damage, loss of
rental income, Product and Completed operations liability. In
addition, motor vehicle liability coverage with not less than $1
million dollar policy limits shall be kept in force by Tenant at all
times during the term of this Lease. All such insurance shall name as
an additional insured Landlord and any other parties in interest as
may be from time to time designated in writing by notice from Landlord
to Tenant. In addition, such insurance shall be made payable to
Tenant, Landlord and such additional parties in interest from time to
time designated by Landlord to Tenant, as their interest may appear.
Tenant shall further maintain, at its sole cost during the term
of this Lease Excess or Umbrella Liability insurance with minimum
limits of $10 million; naming Landlord as an additional insured.
(c) [RESERVED]
(d) Comprehensive Boiler and Machinery insurance coverage,
covering all boilers, pressure vessels, production equipment,
air-conditioning equipment and electrical equipment which serve the
Leased Premises, with per occurrence limits of not less than two
million dollars ($2,000,000).
(e) Workers' Compensation Insurance (including occupational
disease insurance) as may be from time to time required by the laws of
the state in which the Leased Premises are located;
(f) Employers' Liability Insurance with a per occurrence
limit of not less than $500,000;
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All such policies of insurance shall be issued by insurance companies
licensed and admitted to do business in the State in which the Leased Premises
are located, which are reasonably acceptable to Landlord and having a rating of
A+ or better. In addition, all such policies of insurance shall contain an
endorsement providing that such insurance may not be materially changed, amended
or cancelled except after thirty (30) days' prior written notice from the
insurance company to Landlord, sent by registered mail or nationally recognized
overnight courier (e.g. Federal Express). The original policy or policies shall
be made available, from time to time, upon request of Landlord to review and/or
copy and Tenant shall deliver to Landlord together reasonably satisfactory
evidence of payment of the premium thereof, on or before the commencement date
of the Lease Term. Prior to expiration of each policy term, Tenant shall
deliver to Landlord written proof of renewal or continuation of the policies and
will deliver to Landlord certificates of insurance within 20 days after renewal
or issuance of the policies. If Tenant at any time fails or refuses to procure
and maintain the required amount of insurance, then Landlord may, immediately
and without notice to Tenant, obtain same for and on behalf of Tenant and charge
the cost thereof to Tenant, such charge to be due and payable upon demand.
Except for the intentional acts of the Landlord, Tenant, and all parties
claiming under or through Tenant, hereby expressly releases and discharges
Landlord from any claim or liability, whether based on negligence or any reason
whatsoever, for any personal injury, property damage, or other loss covered by
Tenant's insurance. The aforesaid release shall apply only when permitted by
the applicable policy of insurance. All policies of Tenant shall contain an
endorsement containing an express waiver of any right of subrogation by the
insurance company against Landlord, provided that this waiver shall not be
applicable if it has the effect of invalidating any insurance coverage of
Landlord or Tenant, or if the applicable insurance policies do not contain a
clause to the effect that this waiver shall not affect the right of the insured
to recover under such policies.
Article 13
Escrow
Notwithstanding the provisions of this Lease, if Tenant, or any successor
or assignee then a tenant under this Lease as the Tenant, shall fail at any time
during the term of this Lease to maintain a net worth in excess of one hundred
million dollars (as determined in accordance with generally accepted accounting
principles), then Landlord may upon written notice to Tenant require Tenant for
the remainder of the Lease Term, (notwithstanding a subsequent net worth in
excess of one hundred million dollars) to (i) deliver the security deposit
required under Article 2; (ii) carry a deductible not greater than $10,000 under
the property damage insurance described in Article 12(a); and (iii) pay to
Landlord for each calendar year during the Lease Term the
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amount of the Impositions imposed upon the Leased Premises and the amount of
premiums for all insurance policies required to be provided by Tenant hereunder,
in equal monthly installments on the first day of each month during the Lease
Term. Such monthly payments shall in the first instance be reasonably estimated
by Landlord based on the Impositions and premiums paid for the prior year, with
appropriate adjustments made at least annually thereafter. No interest shall be
paid by Landlord to Tenant on such monthly payments, but they will be kept by
Landlord in a separate escrow account, the funds thereof shall be employed by
Landlord to pay Impositions and premiums as they mature. If at any time the
funds held by Landlord shall be insufficient to pay any and all Impositions and
premiums as the same shall mature, Tenant shall, within ten (10) days after
notice thereof from Landlord, deposit with Landlord an amount sufficient to make
up any deficiency therefor. Tenant represents that its present net worth is in
excess of one hundred million dollars.
Article 14
Indemnity
Tenant hereby agrees to defend, pay, indemnify and save free and harmless
Landlord, its officers, directors, agents and employees, from and against any
and all claims, demands, fines, suits, actions, proceedings, orders, decrees and
judgments of any kind or nature by or in favor of anyone whomsoever and from and
against any and all costs and expenses incurred by Landlord, including
attorneys' and other professional fees, resulting from or in connection with any
of the following unless the same are caused by Landlord's intentional acts: (a)
any accident, bodily injury, death, personal injury of any kind, or property
damage arising, directly or indirectly, out of or from or on account of any
occurrence in, upon, at or about the Leased Premises and the adjoining parking
areas, sidewalks, streets, vaults and passageways; (b) any accident, bodily
injury, death, personal injury or property damage arising, directly or
indirectly, in connection with Tenant's operation and conduct of business in the
Leased Premises; (c) any use, occupancy, nonuse or condition of the Leased
Premises; and (d) any failure on the part of Tenant to perform or comply with
any of the agreements, terms, covenants and conditions of this Lease.
Except for the intentional acts of Landlord, Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other personal property of Tenant,
Tenant's employees, agents, invitees and customers, or any other occupant of the
Leased Premises; nor for any failure of a water supply, gas, electric current or
any other utility, nor for any damage occasioned by failure to keep the
building, property or Leased Premises in repair. Landlord shall not be liable
to Tenant for any damage to person or property done or occasioned by or from
electric current, plumbing, gas, water, steam or sewage, odors, or the
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bursting, leaking, running or failure of operation of any radiator, tank, water
closet, washstand, waste pipe, air conditioning or any other apparatus in,
above, upon or about the building, property or Leased Premises, nor for damage
or injury to person or property occasioned by water, snow, or ice being upon any
roof, sidewalk or entrance way, or being upon or coming through such entrance
way or any skylight, trap door or any other opening in the building, property or
Leased Premises, nor for loss resulting from theft or mysterious disappearance,
action of the elements, or any interference with light or air, nor for any
damages arising from the omission, action or negligence of Tenant, co-Tenants or
other occupants of the building or of any owners or occupants of adjacent or
contiguous property or acts of negligence by Landlord.
In case any action, suit or proceeding is brought against Landlord by
reason of any such occurrence as described in this Article 14, Tenant or
Tenant's insurer, upon Landlord's request, will at no expense to Landlord resist
and defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by Tenant and approved by Landlord. The
obligations of Tenant under this Article shall survive any termination of this
Lease.
Article 15
Damage or Destruction
In the event of any damage or loss to the Leased Premises, Tenant shall
give immediate written notice thereof to Landlord. If the building on the
Leased Premises shall at any time be damaged or destroyed by fire or other cause
whatsoever, Tenant shall promptly repair or rebuild same at Tenant's expense, so
as to make the building at least equal in value to the building existing
immediately prior to such occurrence and as nearly similar to it in character as
shall be practicable and reasonable; and Tenant shall do so, even though the
proceeds of any insurance policies shall be insufficient to reimburse Tenant
therefor.
There shall be no abatement of rent pending any repairs or rebuilding, nor
shall Tenant's obligations hereunder be terminated, notwithstanding any
destruction or damage to the Leased Premises.
Before beginning such repairs or rebuilding, or letting any contracts in
connection therewith, Tenant shall submit for Landlord's approval, which
approval shall not be unreasonably withheld or delayed, complete and detailed
plans and specifications thereof and a listing of all contractors and
subcontractors intended to perform any part of the work. Promptly after
receiving Landlord's approval, Tenant shall begin such repairs or rebuilding and
shall prosecute the same to completion with due diligence. All work shall be
done in a good and workmanlike manner employing appropriate new materials in
accordance with the plans and specifications approved by Landlord, and in
compliance with all
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applicable governmental and insurance requirements. Landlord, its employees,
agents and authorized architects and engineers shall have the right, at any time
during the performance of the work, to inspect the building and the contracts,
plans, specifications, drawings and all other records of Tenant, its architect,
contractors and subcontractors, relating to such repairs or rebuilding. If
Landlord or its authorized representative shall determine that the work is not
being done in accordance with the plans and specifications approved by Landlord,
then upon notice to Tenant specifying any deficiency, Tenant shall take all
steps necessary to promptly correct any such deficiency. The reasonable charges
of any architect or engineer of Landlord employed to pass upon any plans and
specifications and to supervise and approve any construction shall be paid by
Tenant as a cost of the repair or rebuilding.
Notwithstanding the foregoing in this Article 15, in the event of a
casualty for which the amount of damages to the improvements of the Leased
Premises exceeds an amount equal to eighty percent (80%) of the assessed fair
market value of such improvements on the Leased Premises (as determined by the
Real Estate Tax Assessor's office of the county in which the Leased Premises is
located), immediately prior to such casualty; then Landlord may elect within
sixty (60) days of such casualty upon written notice to Tenant to either (i)
require Tenant to rebuild as set forth above in Article 15; or (ii) terminate
the Lease and retain the insurance proceeds; whereupon neither party shall have
any further liability or obligation to the other, except as otherwise provided
elsewhere in this Lease.
Article 16
Condemnation
If the whole of the Leased Premises shall be acquired or taken by eminent
domain for any public or quasi-public use or purpose, or by private purchase in
lieu thereof, then this Lease and the Lease Term hereof shall automatically
cease and terminate as of the date of title vesting in such proceedings. If
only a part of the Leased Premises shall be so acquired or taken and the
remainder is untenantable for the purpose for which Tenant has been using the
Leased Premises then either party shall have the option to terminate this Lease
upon ninety (90) days prior written notice to the other. If only a part of the
Leased Premises shall be so acquired or taken and the remainder is tenantable
for the purpose for which Tenant has been using the Leased Premises, then this
Lease and all of the terms and provisions hereof shall continue in full force
and effect, except that the net annual rental shall be reduced in the same
proportion that the floor area of the building forming a part of the Leased
Premises taken bears to the original floor area of such building demised
hereunder, and Landlord shall, upon receipt of the award in condemnation, make
all necessary repairs or alterations to the building so as to constitute the
remaining premises a complete architectural unit; provided,
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however, that Landlord, in any event, shall not be required to spend for such
repair and alteration work an amount in excess of the respective amounts
received by Landlord (free and clear of all claims of mortgagees and ground or
underlying lessors and Landlord's costs and professional fees from the action)
as damages for the taking of such part of the Leased Premises. The taking or
condemnation of any parking areas or other open space of the Leased Premises or
any sale, grant, dedication or taking of peripheral or perimeter parts or
portions of the Leased Premises for road widening or road improvement purposes
or for the installation of utilities shall not affect this Lease and Tenant
shall not, in any such event, be entitled to compensation, diminution or
abatement of any rent or other charges.
All damages or compensation awarded or paid for any taking or condemnation,
whether for the whole or a part of the Leased Premises or any part of the land,
buildings and improvements constituting the Leased Premises, shall belong to and
be the property of Landlord without any participation by Tenant, whether such
damages or compensation shall be awarded or paid for diminution in value of the
fee or any interest of Landlord in any ground or underlying lease covering the
Leased Premises or in the leasehold estate created hereby. Tenant hereby
expressly waives and relinquishes all claims to such award or compensation, or
any part thereof, and of the right to participate in any such condemnation
proceedings against the owners of any interest in the Leased Premises; provided,
however, that nothing herein contained shall be construed to preclude Tenant
from prosecuting any claim directly against the condemning authority, but not
against Landlord, for the value of or damages to and/or the cost of removal of
Tenant's property upon the expiration of the Lease Term, as may be recoverable
by Tenant in Tenant's own right so long as no such claim shall diminish or
otherwise affect Landlord's award. Provided, however, that if as a result of
such taking Tenant is required to replace the parking area or provide new
access, in order to use the Premises in substantially the same manner as before
the taking, the cost incurred by Tenant for such replacement shall be prorated
against the rent becoming due over the remainder of the Lease Term. Tenant
shall provide Landlord with written documentation of such costs reasonably
acceptable to Landlord prior to any such adjustment of rent. Landlord may also
elect to provide an adjacent replacement area, in lieu of the above remedy for
Tenant.
Article 17
Mortgaging; Assignment; Subletting
Neither Tenant nor its legal representatives or successors in interest, by
operation of law or otherwise, shall assign, mortgage or otherwise transfer or
encumber this Lease or any interest therein, or sublet or otherwise permit the
Leased Premises or any part thereof to be used or occupied by others except (i)
with the prior written consent of Landlord, which shall
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not be unreasonably withheld, or (ii) to another entity controlled by Tenant.
Any consent by Landlord to any act of mortgaging, assignment or subletting shall
apply only to the specific action authorized. Such consent shall not be
construed as a waiver of the duty of Tenant, its representatives, successors or
assigns, to obtain Landlord's consent to any other or subsequent mortgaging,
assignment or subletting. Any attempted mortgaging, assignment or subletting
without Landlord's prior written consent shall be void and be deemed an Event of
Default hereunder. Any mortgaging, assignment or subletting as permitted by (i)
or (ii) above, will not release or discharge Tenant from any liability
whatsoever under this Lease, and Tenant will remain liable for the performance
and observance of each and every agreement, term, covenant and condition of this
Lease.
In the event that Tenant, upon Landlord's prior written consent, shall
sublet the Leased Premises for a rental in excess of the rent provided for
herein from Tenant to Landlord, then notwithstanding any other provision
contained in this Lease to the contrary, the rent provided for herein shall
automatically be increased during the term of such sublease to a sum equal to
the amount of rent payable under such sublease. In the event that Tenant shall
receive any valuable consideration for an assignment of the Tenant's interest in
this Lease, then, notwithstanding any other provision contained in this Lease to
the contrary, Tenant shall pay to Landlord as additional rent hereunder the
amount of consideration thereby received.
Landlord shall have the right to assign this lease at any time, upon
written notice to Tenant, whereupon Landlord shall be released from all further
or other obligations or liabilities subsequently arising from and after the date
of such assignment. Assignee will assume the Landlord's obligations under the
terms of the Lease. The Assignee of the Landlord shall have a net worth equal
to the then net worth of the Landlord as determined in accordance with generally
accepted accounting practices. Landlord shall provide Tenant with written
notice of any assignment of this Lease.
Article 18
Subordination and Attornment
The rights of Tenant under this Lease shall, at Landlord's election, be
subject and subordinate at all times to all ground leases and/or underlying
leases, if any, now or hereafter in force against the Leased Premises or any
part thereof, and to the lien of any mortgage or mortgages now or hereafter in
force against such leases and/or the Leased Premises, and to all advances made
or hereafter to be made upon the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. The term
"mortgages" as used in this Lease shall be deemed to include trust indentures
and deeds of trust.
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The aforesaid provisions shall be self-operative upon notice of election by
Landlord to Tenant and no further instrument of subordination shall be required.
Tenant hereby irrevocably appoints Landlord attorney-in-fact for Tenant with
full power and authority to execute and deliver in the name of the Tenant any
such instrument or instruments.
Tenant agrees that in the event of a sale, transfer or assignment of
Landlord's interest in the Leased Premises, or in the event that any proceedings
are brought for the foreclosure of or exercise of any power of sale under any
mortgage affecting the Leased Premises, or if a deed in lieu thereof be given,
or in the event any ground or underlying lease is cancelled or terminated,
Tenant shall attorn to and recognize such transferee, purchaser, mortgagee or
other party in interest as Landlord under this Lease and to affirm this Lease so
long as such transferee agrees not to disturb Tenant's rights under this Lease.
Article 19
Estoppel Certificates
Tenant agrees, at any time and from time to time, upon not less than ten
(10) days prior written notice from Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and stating the
modifications), the dates to which the rent and other charges have been paid in
advance, if any, and such other matters pertaining to this Lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificate in a timely fashion is a material inducement
for Landlord's execution of this Lease. Tenant does hereby appoint Landlord as
its attorney-in-fact to execute any such estoppel certificate. It is intended
that any such statement delivered pursuant to this Article may be relied upon by
present or prospective mortgagees, purchasers, ground lessors or any assignee of
any of the foregoing in connection with Landlord's interest in the Leased
Premises.
Article 20
Quiet Enjoyment
Tenant upon paying the rents reserved and performing and observing all
other agreements, terms, covenants and conditions of this Lease on Tenant's part
to be performed and observed hereunder, shall peaceably and quietly have, hold
and enjoy the Leased Premises during the Lease Term, subject, nevertheless to
any ground leases, mortgages, agreements or encumbrances to which this Lease is
or may be subordinated.
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Article 21
Cure of Tenant's Default
If Tenant shall fail to make any payment or perform any act required
hereunder to be made or performed by Tenant hereunder, then Landlord may, but
shall be under no obligation to, after such notice to Tenant and expiration of
any applicable cure period as may be provided for under Article 22 of this
Lease, make such payment or perform such act with the same effect as if made or
performed by Tenant. Entry by Landlord upon the Leased Premises for such
purpose shall not waive or release Tenant from any default or obligation
hereunder. Tenant shall reimburse Landlord for all sums so paid and all costs
incurred, including attorneys' fees, upon Landlord's demand therefor.
Article 22
Default
If any one or more of the following events (herein referred to as an "Event
of Default") shall occur:
(a) if default be made in the due and punctual payment of any
rent or other charges, or any part hereof, payable to Landlord
hereunder, when and as the same shall become due, and such default
shall continue for a period of five (5) days;
(b) if this Lease be mortgaged, assigned or the Leased
Premises or any part thereof be sublet, either voluntarily or by
operation of law, without Landlord's prior written consent as set
forth in Article 17 hereof;
(c) [RESERVED]
(d) if Tenant shall fail to observe, perform or comply with
any of the terms, covenants and conditions in this Lease other than
those provided in subparagraphs (a), (b) and (c) above, within thirty
(30) days after notice from Landlord specifying the nature of such
default; provided, however, that no Event of Default shall be deemed
to occur so long as the curing of such default reasonably may not be
completed within such thirty (30) day period and Tenant has commenced
to cure such default and thereafter with reasonable diligence pursues
its efforts to cure and does so cure within ninety (90) days;
(e) if Tenant shall file a voluntary petition in bankruptcy
or shall be adjudicated a bankrupt or insolvent, or shall file any
petition or answer seeking any reorganization, readjustment,
liquidation, dissolution or similar relief under any bankruptcy or
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insolvency statute or law of the United States or any State, or shall
seek or consent to or acquiesce in the appointment of any bankruptcy
or insolvency trustee, receiver or liquidator of Tenant or of all or
any substantial part of its properties or of the Leased Premises;
(f) if within sixty (60) days after the commencement of any
involuntary proceeding against Tenant seeking any reorganization,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy or insolvency statute or law, Tenant fails to secure a
dismissal and discharge thereof; or
(g) if there shall be an "Event of Default" (as defined
therein) under the Lease dated February 26, 1997, between A & A Urban
Renewal and Michael Foods, Inc. and the Lease dated February 26, 1997,
between Papetti Holding Company and Michael Foods, Inc. (relating to
certain premises located in New Jersey) which Event of Default under
such other lease is not promptly cured within the applicable cure
period, if any.
then and in any such event Landlord, at its option, may at any time thereafter
(in addition to and/or as an alternative to all other legal remedies):
(a) immediately terminate this Lease and Tenant's right to
possession of the Leased Premises; or
(b) terminate only the Tenant's right to possession of the
Leased Premises, without terminating this Lease or releasing Tenant in
whole or in part from Tenant's obligations hereunder for the full term
hereof; or
(c) without terminating this Lease or Tenant's right to
possession of the Leased Premises, enter upon the Leased Premises and
do and perform whatever Tenant is obligated to do under the terms of
this Lease.
In the event Landlord exercises its rights under subparagraph (a) or (b)
immediately above, Tenant shall quit and peacefully surrender the Leased
Premises to Landlord, and Landlord, upon or at any such expiration or
termination, may without further notice, enter upon and reenter the Leased
Premises and possess and repossess itself thereof, as provided by law,
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold and enjoy the Leased Premises and the right
to receive all rental income of and from the same, and further, Landlord may
collect damages in accordance with the law.
If Tenant's right to possession of the Leased Premises shall be terminated
pursuant to this Article 22, by summary proceedings or otherwise, Landlord may
in its own name, as agent
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for Tenant if this Lease not be terminated, or if this Lease be terminated, in
its own behalf, enter into possession of and relet the Leased Premises or any
part thereof, or said premises with additional premises, for such term or terms
(which may be greater or less than the period which would otherwise have
constituted the balance of the Lease Term) and on such conditions (which may
include concessions, free rent and/or alterations of the Leased Premises) as
Landlord, in its uncontrolled discretion, may determine and may collect and
receive the rents therefor. Landlord shall in no way be responsible or liable
for any failure to relet the Leased Premises or any part thereof, or of any
failure to collect any rent due upon such reletting.
No such expiration or termination of this Lease, or termination of Tenant's
right of possession thereunder, shall relieve Tenant of its liability and
obligations under this Lease, unless otherwise agreed to in writing by Landlord,
whether or not the Leased Premises shall be relet. Upon an event of default,
Tenant shall pay Landlord the rent and all other charges required to be paid
hereunder by Tenant up to the time of such event. Thereafter:
(a) Tenant, until the end of the Lease Term, or what would
have been such term in the absence of any such event, shall be liable
to Landlord as damages for Tenant's default, the equivalent of the
amount of the rent and other charges which would be payable under this
Lease by Tenant if this Lease were still in effect, less the net
proceeds of any reletting effected pursuant to the provisions hereof,
after deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession costs,
brokerage and management commissions, operating expenses, legal
expenses, reasonable attorneys' fees, and expenses of preparation of
such reletting. Tenant shall pay such damages (herein called
"deficiency") to Landlord monthly on the days on which the net rent
would have been payable under this Lease if this Lease were still in
effect, and Landlord shall be entitled to recover from Tenant each
monthly deficiency as the same shall arise.
(b) At any time after the expiration or termination of this
Lease, in lieu of collecting any further monthly deficiencies as
aforesaid, Landlord shall be entitled to recover from Tenant, and
Tenant shall pay to Landlord, on demand, as liquidated damages and not
as a penalty, an amount equal to the difference between the total
rental and other benefits which would have accrued to Landlord under
this Lease from the date of termination to the date of the expiration
of the original term demised and the then fair and reasonable rental
value of the Leased Premises for the same period. Tenant shall remain
liable for any monthly deficiencies not previously recovered by
Landlord. In the computation of such liquidated damages,
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the difference between any installment of rent thereafter becoming due and
the fair and reasonable rental value of the Leased Premises for the period
for which such installment was payable shall be discounted to the date of
termination at the rate of not more than five percent (5%) per annum.
If the Leased Premises or any part thereof be relet by Landlord for the
unexpired term of this Lease, or any part thereof, before presentation of proof
of such liquidated damages to any court, commission or tribunal, the amount of
rent reserved upon such reletting shall prima facie be the fair and reasonable
rental value for the part or the whole of the Leased Premises so relet during
the term of the reletting. Nothing herein contained shall limit or prejudice
the right of Landlord to prove for and obtain as liquidated damages by reason of
such termination, an amount equal to the maximum allowed by any statute or rule
of law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
If this Lease be terminated by summary proceedings or otherwise, or if
Tenant's right to possession of the Leased Premises shall be terminated, and
whether or not the Leased Premises be relet, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord, in addition to any
damages becoming due under this Article 22, the following: an amount equal to
all expenses, if any, including reasonable attorneys' fees, incurred by Landlord
in recovering possession of the Leased Premises, (whether or not litigation be
commenced in aid thereof), and all costs and charges for the care of said Leased
Premises while vacant, which damages shall be due and payable by Tenant to
Landlord at such time or times as such expenses are incurred by Landlord.
Tenant hereby expressly waives, so far as permitted by law, the service of
any notice of intention to reenter provided for in any statute and except as is
herein otherwise provided Tenant, for and on behalf of itself and all persons
claiming through or under Tenant (including any leasehold mortgagee or other
creditor), also waives any and all right of redemption or reentry or
repossession in case Tenant shall be dispossessed by a judgment or by warrant of
any court or judge or in case of reentry or repossession by Landlord or in case
of any expiration or termination of this Lease. The terms "enter," "reenter,"
"entry" or "reentry" as used in this Lease are not restricted to their technical
legal meanings.
Tenant hereby waives all right to trial by jury in any action or proceeding
hereafter instituted by Landlord against Tenant with respect to this Lease or
the Leased Premises. Tenant agrees not to interpose any counterclaim of any
nature or description in any action or proceeding. The foregoing, however,
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shall not be construed as a waiver of Tenant's right to assert any claim in a
separate action or proceeding instituted by Tenant.
In the event of any breach or threatened breach by Tenant of any of the
agreements, terms, covenants or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise as though reentry, summary proceedings, and other remedies were not
provided for in this Lease.
Article 23
No Waiver
No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof or to exercise any right or remedy
consequent upon a breach thereof, and no acceptance of full or partial rent
during the continuance of any such breach, shall constitute a waiver of any such
breach or of such agreement, term, covenant or condition. No agreement, term,
covenant or condition hereof to be performed or complied with by Tenant, and no
breach thereof, shall be waived, altered or modified except by a written
instrument executed by Landlord. No waiver of any breach shall affect or alter
this Lease, but each and every agreement, term, covenant and condition hereof
shall continue in full force and effect with respect to any other then existing
or subsequent breach thereof.
Article 24
Remedies Cumulative
Each right and remedy provided for in this Lease shall be cumulative and
shall be in addition to every other right or remedy provided for in this Lease
or now or hereafter existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by Landlord of any one or more of the
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by Landlord of any or all other rights or remedies provided
for in this Lease or now or hereafter existing at law or in equity or by statute
or otherwise.
Article 25
Surrender of Premises; Holding Over
Upon the expiration or sooner termination of the Lease Term, Tenant agrees
to quit and surrender the Leased Premises, clean and in good condition and
repair, normal wear and tear and insured casualty excepted, together with all
keys and combinations to locks, safes and vaults and all improvements,
alterations, additions, fixtures, equipment and decorations at any time made or
24
<PAGE> 28
installed in, upon or to the interior or exterior of the Leased Premises (except
movable furniture, furnishings, equipment and other personal property of Tenant
put in at Tenant's expense), all of which shall thereupon become the property of
Landlord without any claim by Tenant therefor, but the surrender of such
property to Landlord shall not be deemed to be a payment of rent or in lieu of
any rent reserved hereunder. Before surrendering the Leased Premises, Tenant
shall remove all of Tenant's said personal property and, at Landlord's option,
Tenant shall also, at Tenant's expense, remove any alterations, additions,
fixtures or equipment that contains or constitutes a "Hazardous Substance" (as
defined in Article 5 such that the disposal of the same to a sanitary landfill
is not permitted or is otherwise regulated under applicable law), at any time
made or installed by Tenant in, upon or to the Leased Premises, and Tenant
further agrees to repair any damage caused thereby. If Tenant shall fail to
remove any of Tenant's said personal property or other property required by
Landlord to be removed, said property shall, at the option of Landlord, either
be deemed abandoned and may be disposed of by Landlord at Tenant's expense, or
Landlord shall have the right to remove and store said property, at the expense
of Tenant, without further notice to or demand upon Tenant and hold Tenant
responsible for any and all charges and expenses incurred by Landlord therefor.
If the Leased Premises be not surrendered as and when aforesaid, Tenant shall
indemnify Landlord against all loss or liability resulting from the delay by
Tenant in so surrendering the same, including without limitation, any claims
made by any succeeding occupant founded on such delay. If Tenant shall remain
in possession of the Leased Premises, or any part thereof, for any period after
the termination of this Lease in any of the ways above-named, Tenant shall pay
one and one-half (1.5) times the rent as a month-to-month hold over tenant until
such holding over shall cease. Tenant's obligations under this Article shall
survive the expiration or sooner termination of the Lease Term.
Article 26
Relationship of Parties
Nothing contained in this Lease shall be deemed to constitute or be
construed or implied to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties hereto,
other than the relationship of Landlord and Tenant.
The term "Landlord" as used in this Lease means only the owner of the
current interest of Landlord in the Leased Premises or, as the case may be, the
successor thereto from time to time. In the event of any transfer at any time
of the interest of Landlord, the transferor shall be and is hereby entirely
freed and relieved of all covenants and obligations of Landlord hereunder
accruing from and after the date of such transfer, and it shall be deemed and
construed without further agreement between the parties or their respective
successors in interest or between the parties
25
<PAGE> 29
and the transferee that the transferee of Landlord's interest has assumed and
agreed to carry out any and all covenants and obligations of Landlord thereafter
accruing hereunder.
Article 27
Successors and Assigns; Provisions Binding
Except as otherwise expressly provided in this Lease, all covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
Each provision of this Lease to be performed by Tenant shall be construed
to be both a covenant and a condition, and if there shall be more than one
Tenant, they shall all be bound, jointly and severally, by the provisions of
this Lease. The persons executing this Lease on behalf of Tenant hereby
covenant, represent and warrant that Tenant is a duly incorporated and duly
qualified corporation and is authorized to do business in the State of its
incorporation and that the person or persons executing this Lease on behalf of
Tenant is an officer or are officers of such Tenant, and that he or they as such
officers are duly authorized to sign and execute this Lease.
Article 28
Notices
Every notice, demand, request or other communication which may be or is
required to be given under this Lease or by law shall be in writing and shall be
sent by United States Certified or Registered Mail, postage prepaid, return
receipt requested, or by nationally recognized overnight courier (e.g. Federal
Express) and shall be addressed: (a) if to Tenant, to Michael Foods, Inc. 5353
Wayzata Blvd., Suite 324, Minneapolis, MN 55416, Attention: Jeffrey M.
Shapiro; and (b) if to Landlord, to Jersey Pride Urban Renewal, One Papetti
Plaza, Elizabeth, New Jersey 07207, Attention: Arthur N. Papetti, with a copy
to Martin B. O'Connor, II, O'Connor, Morss & O'Connor, Liberty Hall Center, 1085
Morris Avenue, Union, NJ 07083-7136, and the same shall be deemed delivered one
(1) business day after being sent via nationally recognized overnight courier
(e.g., Federal Express) or three (3) business days after being mailed by U.S.
Certified or Registered mail, return receipt requested. Either party may
designate, by similar written notice to the other party, any other address for
such purposes.
Article 29
Miscellaneous
Tenant agrees not to record this Lease or any memorandum thereof without
the prior written consent of Landlord.
26
<PAGE> 30
Each party covenants, warrants and represents to the other that there was
no broker instrumental in consummating this Lease and that no conversations or
prior negotiations were had by such party with any broker concerning the renting
of the Leased Premises. Each party agrees to indemnify and hold the other
harmless against and from all liabilities, including attorneys' fees, arising
from any claims for brokerage commissions or finders' fees resulting from or
arising out of any conversations or negotiations had by such party with any
broker.
Tenant agrees to annually make available for review by Landlord and its
lenders such financial information and statements as the same may reasonably
request, provided, Landlord and its lenders agree to keep such information and
statements confidential to the extent the same is not public information.
Article 30
Entire Agreement; Construction
This Lease sets forth the entire agreement between the parties respecting
the Leased Premises. There are no understandings, agreements, statements,
promises, representations or warranties, express or implied, not specified
herein respecting the Leased Premises and all prior conversations and writings
by or between the parties or their representatives are merged herein and
extinguished. This Lease shall not be modified except by a writing subscribed
to by the party to be charged, nor may this Lease be cancelled by Tenant or the
Leased Premises surrendered except with the express written authorization of
Landlord.
This Lease shall be construed, as to both validity and performance, and
enforced in accordance with and shall be governed by the laws of the
jurisdiction in which the Leased Premises are located, without regard to such
jurisdiction's principles of conflicts of law. If any provision of this Lease
or the application thereof to any person or circumstance shall to any extent be
held void or invalid, then the remainder of this Lease or the application of
such provision to persons or circumstances other than those as to which it is
held void or invalid shall not be affected thereby, and each provision of this
Lease shall be valid and enforced to the fullest extent permitted by law.
The headings in this Lease are for purposes of reference only and shall not
limit or define the meaning hereof. This Lease may be executed in any number of
counterparts, each of which is an original, but all of which shall constitute
one instrument.
27
<PAGE> 31
Article 31
Binding Arbitration
In the event that a dispute arises between Landlord and Tenant such matter
shall be submitted to binding arbitration as follows:
(1) Any arbitration hereunder shall be held pursuant to the
Commercial Arbitration Rules of the American Arbitration Association except
that:
(i) Landlord and Tenant shall each select one arbitrator.
The two appointed arbitrators shall jointly choose a third arbitrator
from a list provided by the American Arbitration Association and the
third arbitrator shall be the sole arbitrator to hear the dispute. If
either party fails to appoint an arbitrator within twenty (20) days
after demand by the other party, or the appointed arbitrators fail to
agree to the third arbitrator within twenty (20) days after a list of
potential arbitrators is provided by the American Arbitration
Association, the American Arbitration Association shall select an
arbitrator for the party failing to make appointment or shall appoint
the third arbitrator, as the case may be.
(ii) The arbitration shall be held in the City in which any
facility leased hereunder is located, or such other location as the
parties shall mutually agree.
(iii) The parties shall bear their own expenses of the
arbitration, including attorneys fees and costs of expert witnesses.
(iv) The filing or other fees of the American Arbitration
Association shall be paid one-half by the Landlord and one-half by the
Tenant.
(v) The award of the arbitrators shall be binding and shall be
enforceable in any court of the state in which the Premises are
located.
(2) If the American Arbitration Association is not then in existence
or refuses to administer the arbitration, the arbitration shall be administered
by the most nearly comparable organization as shall be agreed by the parties, or
failing agreement, as shall be determined by the Union County Superior Court of
Elizabeth, New Jersey.
(3) Notwithstanding anything herein to the contrary, either party
shall have the right to seek injunctive
28
<PAGE> 32
relief to maintain the status quo until a dispute between the parties can be
arbitrated.
In the event that a dispute arises between Landlord and Tenant involving an
amount which is greater than the then current annual base rent under this Lease,
such matter shall be litigated by the parties.
Article 32
Choice of Law; Jurisdiction.
This Lease shall be governed, construed, applied and enforced in accordance
with the laws of the state in which the Premises are located (without regards to
principles of conflicts of laws).
Landlord and Tenant each (i) irrevocably submits to personal jurisdiction
in the courts of the state in which the Premises are located and the applicable
United States District Court serving the county in which the Premises are
located, and appellate courts from any thereof, and (ii) irrevocably waives any
objection which it may have at any time to the laying on venue of any suit,
action or proceeding arising out of or relating to this Lease brought in any
such court, and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Landlord and Tenant each hereby agree that to the extent permitted by local
court rules, any summons, complaint and other process and notice in connection
with the commencement of or any other proceeding in any such suit, action or
proceeding may be served on it by using the notification procedure set forth in
this Lease.
LANDLORD AND TENANT EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM,
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THIS
LEASE OR ANY ACTS OR OMISSIONS OF LANDLORD, ITS OFFICERS, EMPLOYEES, DIRECTORS
OR AGENTS IN CONNECTION THEREWITH.
Article 33
Joint Preparation
This Lease is to be deemed to have been prepared jointly by the parties
hereto, and any uncertainty or ambiguity existing herein, if any, shall not be
interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's length agreements.
29
<PAGE> 33
Article 34
Time Is of the Essence
Time is of the essence with respect to all matters provided in this Lease.
Article 35
Term Renewal
Tenant is granted the right to extend the term of this Lease for two (2)
period(s) of five (5) years each (the "Option Period(s)") on the terms and
conditions set forth herein; provided, however, that each said right to extend
for each such Option Period (the "Option(s)") may be exercised only in the event
Tenant is not in default at the time each said Option right is exercised and
provided, further, that the Option for the immediately preceding Option Period,
if any, has been exercised. The phrase "Lease Term" as used in this Lease shall
mean the term of this Lease as extended by Tenant pursuant to this Article.
To exercise each Option, Tenant shall notify Landlord in writing no later
than one (1) year prior to the expiration of the initial Lease Term or the
Option Period then expiring, if any.
In the event Tenant properly exercises its Option as provided herein: (1)
all of the terms and conditions of this Lease shall apply during the Option
Period(s) (except the Option then exercised), including, but not limited to,
Tenant's obligation to pay all costs, charges and expenses provided for in the
Lease; (2) the Option exercised by Tenant in order to extend the Term of the
Lease shall terminate and be of no further force and effect and may not be
exercised again by Tenant; (3) no concession previously granted Tenant by
Landlord in the initial term shall be due or payable to Tenant during or with
respect to such Option Period; and (4) the monthly base rent payable under
Article 2 during the particular Option Period shall be determined as set forth
below. At Landlord's request, prior to the commencement of the particular
Option Period, Tenant shall execute, acknowledge, and deliver to Landlord an
amendment to lease evidencing Tenant's exercise of its Option and setting forth
the commencement and expiration dates of the Option Period and term of the Lease
and the monthly base rent payable during the Option Period.
The Annual Rent payable monthly under Article 2 during each Option Period
shall be such amount as may be agreed upon by the parties and which is not less
than 110%, nor more than 135%, of the Annual Rent for the twelve (12) months
immediately preceding the commencement of the applicable Option Period (the
"Option Period Rent").
If the parties are unable, within sixty (60) days of notice by Tenant
electing to extend the term of the Lease, to agree
30
<PAGE> 34
on the amount of the Option Period Rent then each party shall within ten (10)
days thereafter designate and select an M.A.I. certified appraiser and submit to
them what such party believes the Option Period Rent should be. The two
appraisers shall then together within thirty (30) days determine and agree upon
the Option Period Rent by selecting either the Option Period Rent proposed by
Landlord or that proposed by Tenant, with no other variation.
If the two appraisers are unable within said thirty (30) days to agree on
either Landlord's or Tenant's proposed Option Period Rent, then they shall
together designate a third M.A.I. appraiser, who alone shall select either
Landlord's or Tenant's proposed Option Period Rent as the Annual Rent, which
determination shall be binding and enforceable upon all parties.
Each party shall pay the cost of the appraisers selected by such party and
the costs of the third appraiser (if retained) shall be paid equally by each
party.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW
31
<PAGE> 35
TENANT:
MICHAEL FOODS, INC.,
a Delaware corporation
(SEAL)
By [sig]
Gregg A. Ostrander
----------------------------------
Attest: Gregg A. Ostrander, President
-------------------------------------
Print Name Here
_______________________
(Ass't) Secretary
LANDLORD:
JERSEY PRIDE FOODS URBAN RENEWAL, a
New Jersey general partnership
By [sig] Anthony Papetti
-----------------------------------
Witness: Anthony Papetti, General Partner
- ------------------------------------
- ------------------------------------
[SIGNATURE PAGE TO LEASE AGREEMENT]
STATE OF ______________ )
)
______ OF _____________ )
On this ____ day of __________________, 1997, before me
personally appeared ____________________________________________, to me
personally known, who, being by me duly sworn, did say that he is the
_________________________________ of MICHAEL FOODS, INC., a Delaware
corporation, and that said instrument was signed on behalf of said corporation
by authority of its Board of Directors; and said officer acknowledged said
instrument to be the free act and deed of said corporation.
<PAGE> 36
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the _______________________ and State aforesaid, the day and year first
above written.
________________________________________
Notary Public
(SEAL)
My Commission Expires:
STATE OF ______________ )
)
______ OF _____________ )
On this ____ day of __________________, 1997, before me personally appeared
ANTHONY PAPETTI, to me personally known, who, being by me duly sworn, did say
that he is a general partner of JERSEY PRIDE FOODS URBAN RENEWAL, a New Jersey
general partnership, and that said instrument was signed by him as a partner on
behalf of said general partnership; and said ANTHONY PAPETTI acknowledged said
instrument to be the free act and deed of said general partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the ______ and State aforesaid, the day and year first above written.
________________________________________
Notary Public
(SEAL)
My Commission Expires:
<PAGE> 37
EXHIBIT A
DESCRIPTION OF PREMISES
One Papetti Plaza, Elizabeth, New Jersey
(Legal to Follow)
<PAGE> 1
EXHIBIT 10.47
LEASE BY AND BETWEEN
PAPETTI HOLDING COMPANY,
AS LANDLORD
AND
MICHAEL FOODS, INC.,
AS TENANT
DATED FEBRUARY 26, 1997
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
1 Leased Premises; Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Rent Payments; Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4 No Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Compliance with Laws; Insurance Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Repair, Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Covenant Against Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10 Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Mortgaging; Assignment; Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18 Subordination and Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
19 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
20 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21 Cure of Tenant's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
22 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
25 Surrender of Premises; Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
26 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
27 Successors and Assigns; Provisions Binding . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
30 Entire Agreement; Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
31 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
32 Choice of Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
33 Joint Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
34 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
35 Term Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
ii
<PAGE> 4
L E A S E
THIS LEASE made and entered into as of the 26th day of
February, 1997, between PAPETTI HOLDING COMPANY, a Pennsylvania general
partnership, having its principal office at One Papetti Plaza, Elizabeth, New
Jersey 07027 (hereinafter called "Landlord") and MICHAEL FOODS, INC., a
Delaware corporation, having its principal office at 5353 Wayzata Boulevard,
Suite 324, Minneapolis, Minnesota 55416 (hereinafter called "Tenant").
A. Landlord is the owner of certain land and
improvements more particularly described on Exhibit A attached hereto (the
"Real Estate").
B. Tenant desires to lease from Landlord, and Landlord
is willing to lease to Tenant the Real Estate and improvements thereon upon and
subject to the terms, provisions and conditions of this Lease.
NOW THEREFORE, Landlord and Tenant, for and in consideration
of the rents, agreements, terms, covenants and conditions hereinafter mentioned
and hereby agreed to be paid, kept and performed by Landlord and Tenant, their
legal representatives, successors and assigns, do hereby mutually agree as
follows:
Article 1
Leased Premises; Lease Term
Upon and subject to the agreements, terms, covenants and
conditions hereinafter set forth, Landlord hereby leases to Tenant, and Tenant
hereby rents and leases from Landlord, the Real Estate, together with any and
all buildings, fixtures, structures and other improvements located thereon
(collectively with the Real Estate, the "Leased Premises"), subject to existing
restrictions, covenants, easements, rights and encumbrances of record.
TO HAVE AND TO HOLD for a term commencing on the date hereof
and ending on midnight of the day preceding the tenth (10th) annual anniversary
of the "Rent Commencement Date" as hereinafter defined (the "Lease Term")
unless sooner terminated or extended as herein provided. The "Rent
Commencement Date" shall mean March 1, 1997.
Article 2
Rent Payments; Net Lease
Tenant, during the Lease Term, will pay to Landlord an annual
rental of Four Thousand Eight Hundred Dollars ($4,800.00) in equal monthly
installments of Four Hundred Dollars ($400.00) in advance on or before the
first day of each calendar month. The rent for any partial month at the
commencement hereof shall be prorated and paid upon Tenant's execution of this
Lease. Landlord
1
<PAGE> 5
may assess a charge of five percent (5%) of the monthly rent installment due
for any monthly payment that is received more than five (5) days after it is
due.
Tenant will pay to Landlord the rent herein reserved, without
prior demand or notice and without any setoffs, abatements, or deductions
whatsoever, at the office of Landlord or at such other place as Landlord shall
designate in writing. All other sums that may become due or be payable to
Landlord hereunder shall be paid at the time and in the manner herein provided
at the office of Landlord. All of such other sums so to be paid may, at
Landlord's option, be deemed to be additional rent to be added to any fixed
rent then due or thereafter falling due, and in the event of non-payment,
Landlord shall have all the rights and remedies herein provided.
If Tenant fails the net worth requirement of Article 13, then
Tenant shall deliver to Landlord the sum equal to one month's base rent as
security payment for the performance by Tenant of every covenant and condition
of this Lease. If Tenant shall default with respect to any covenant or
condition of this Lease, including, but not limited to, the payment of rent,
Landlord may apply the whole or any part of such security payment to the
payment of any sum in default or any other sum which Landlord may be required
to spend by reason of Tenant's default, and Tenant shall thereafter upon demand
of Landlord fully restore the original amount of the security deposit. After
all of the Tenant's obligations under this Lease shall have been satisfied, the
security payment or any remaining balance thereof shall be returned to Tenant.
In the event of a bona fide sale of the property of which the Leased Premises
are a part, Landlord shall have the obligation to transfer such security to the
purchaser to be held by such purchaser under the terms of this Lease, and
Landlord shall be released from all obligation and liability for the return of
such security to Tenant provided such transferee assumes such obligation.
Tenant acknowledges that the rent and other payments to
Landlord hereunder are intended to be "net" to Landlord and that this Lease is
a so called "triple net" or "net net net" lease to Landlord.
Article 3
Use of Leased Premises
Tenant shall occupy the Leased Premises during the Lease Term
for the purposes set forth on Exhibit A hereto and for no other purpose or use
without Landlord's prior written consent. Tenant shall not use or occupy or
permit the Leased Premises or any part thereof to be used or occupied for any
other business, use or purpose without Landlord's prior written consent, which
shall not be unreasonably withheld. Tenant shall apply for, secure, maintain
and comply with all licenses, permits, or accreditations which may
2
<PAGE> 6
be required for the conduct by Tenant of the use of the Leased Premises, as
herein permitted.
Article 4
No Representations
Tenant is fully familiar with the physical condition of the
Leased Premises, and Tenant accepts and takes the Leased Premises in their "as
is" and "where is" condition. Landlord has made no representations whatsoever
in connection with the condition of the Leased Premises or any part thereof,
and Landlord shall not be liable for any latent or patent defects therein.
Article 5
Compliance with Laws; Insurance Regulations
Throughout the Lease Term, Tenant shall, at its sole cost and
expense, promptly observe and comply with all laws, ordinances, orders,
regulations, rules, standards and requirements of every government (whether
federal, state or local), municipality or other governmental authority,
including but not limited to CERCLA, RCRA, TOSCA, FIFRA, OSHA and SARA (as the
same are commonly referred to under the federal environmental laws), and the
Americans with Disabilities Act of 1990, as amended (the "ADA"), and including
any agency or department thereof, having jurisdiction over Tenant or the Leased
Premises (collectively, "Governmental Regulations"), and of the local fire
insurance rating organization, and of all insurance companies writing policies
covering the Leased Premises or any part thereof, relating to the Leased
Premises, or the facilities, fixtures or equipment therein, or the use and
occupation or franchises and privileges connected therewith; whether or not
such laws, ordinances, orders, regulations, rules or requirements shall
necessitate improvements, interference with the use and enjoyment of the Leased
Premises, replacements or repairs, extraordinary as well as ordinary, foreseen
or unforeseen, and whether the same now are in force or may, at any time in the
future, be enacted or directed; and Tenant shall pay all costs, expenses,
claims, fines, penalties and damages that may in any manner arise out of or be
imposed because of the failure of Tenant to comply with any of the foregoing.
Landlord, its agents and representatives, may at any time
during the term of the Lease enter upon the Leased Premises, or any part
thereof, for the purpose of determining and ascertaining the environmental
status of the same, including but not limited to the performing of
environmental audits or surveys of the condition of the Leased Premises; and
may further video tape, from time to time, the condition of the Leased
Premises, or any building or other improvements thereon, for the purpose of
better assuring and determining Tenant's fulfillment of its obligations
hereunder.
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Tenant shall be responsible for and shall bear all costs and
expenses associated with any and all alterations to the Leased Premises, which
may be required by the ADA for the accommodation of disabled individuals who
may be employed from time to time by Tenant, or any disabled customers,
clients, guests, or invitees or sublessees. Tenant shall indemnify and hold
Landlord harmless from and against any and all costs incurred arising from the
failure of the Leased Premises to conform with the ADA, including the cost of
making any alterations, renovations or accommodations required by the ADA, or
any government enforcement agency, or any court, any and all fines, civil
penalties, and damages awarded against Landlord resulting from a violation or
violations of the ADA, and all reasonable legal expenses and court costs
incurred in defending claims made under the ADA, including reasonable
attorneys' fees.
Tenant shall not (i) use, store, generate, treat, sell or
dispose in, on or about the Leased Premises, any "Hazardous Substances"
(hereinafter defined), or (ii) permit the use, storage, generation, treatment,
selling or disposal in, on or about the Leased Premises of any Hazardous
Substances, except Hazardous Substances in such amounts and of such types that
are commonly and customarily used in compliance with Governmental Regulations
in the operation, cleaning and maintenance of Tenant's business operated in the
ordinary course. "Hazardous Substances" or "Hazardous Substance" as used in
this Lease shall mean any substances, waste or substance now or hereafter
designated as, or containing components designated as, hazardous, dangerous,
toxic or harmful and/or subject to any Governmental Regulations, including,
without limitation, asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment which contains dielectric fluid or other fluids
containing levels of polychlorinated biphenyls in excess of fifty (50) parts
per million and petroleum products in any form. Tenant shall (i) promptly
comply with all Governmental Regulations now or hereafter pertaining to the
use, discharge, handling, transportation, disposal, treatment, generation,
storage, sale or presence on the Leased Premises of Hazardous Substances; and
(ii) allow Landlord or Landlord's agents or representatives to enter onto the
Leased Premises at all times to check Tenant's compliance with all applicable
Governmental Regulations regarding Hazardous Substances should Landlord have a
reasonable belief that Tenant is not in compliance with all applicable
Governmental Regulations regarding Hazardous Substances. If Tenant is found to
not be in compliance with all applicable Governmental Regulations regarding
Hazardous Substances, all reasonable costs incurred by Landlord and associated
with Landlord's inspection of the Leased Premises and Landlord's monitoring of
Tenant's compliance with this Article, including Landlord's reasonable
attorneys' fees and costs shall be deemed additional rent and shall be due and
payable to Landlord immediately upon demand by Landlord. Tenant shall
indemnify, defend and save Landlord, its officers, directors, shareholders,
managers, agents and employees harmless from and against any and all damages,
penalties, costs and other liabilities (including Landlord's attorneys' fees
and costs and the cost of any remedial
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or abatement activities), arising during the term of this Lease or anytime
thereafter, directly or indirectly, from the use, discharge, handling,
transportation, disposal, treatment, generation, storage, existence or sale of
Hazardous Substances, during the term of this Lease in, on or about the Leased
Premises except to the extent such use, discharge, handling, transportation,
disposal, treatment, generation, storage, existence or sale of Hazardous
Substances resulted solely from the actions of Landlord. Tenant's obligations
under this Article shall survive the termination of this Lease.
Tenant shall, at Tenant's sole expense, comply with all laws,
rules, regulations, requirements, standards and ordinances enacted or imposed
by any governmental unit having jurisdiction over Tenant, the Leased Premises,
signage at the Leased Premises or Tenant's business. Tenant shall not use or
occupy the Leased Premises nor permit its use or occupancy for any unlawful use
or purpose, nor for any purpose which may be hazardous on account of fire,
environmental concerns or otherwise, nor for any use or purpose which might
render Landlord's insurance on the Leased Premises void.
Tenant agrees that if its storage, accumulation,
transportation, treatment or disposal of such Hazardous Substances results in
(i) contamination of the soil or surface or groundwater or (ii) loss or damage
to any person(s) or property, Tenant shall (a) notify Landlord immediately of
any contamination, claim of contamination, loss or damage, (b) proceed with due
diligence to clean up any such contamination in full compliance with all
applicable federal, state and local statutes, regulations and standards, and
(c) indemnify, defend and hold Landlord harmless from and against any and all
claims, suits, causes of action, penalties, fines, costs and fees, including
attorney's fees, arising from or connected with any such contamination, claim
of contamination, loss or damage. The foregoing provision shall survive the
termination of the Lease.
The parties hereto shall use their best efforts to resolve any
disputes regarding the origin of any contamination or claim of contamination or
the responsibility as between Landlord and Tenant of clean up of any such
contamination or claim of contamination. Landlord and Tenant agree that if
they are unable to resolve such a dispute, then the provisions of Article 31
governing resolution of disputes shall apply. The parties agree that the
arbitrator shall be retained only to resolve the dispute and in no event will
be retained by either party to conduct any resulting cleanup or remediation of
any suspected release of hazardous waste.
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To the extent applicable, Tenant at its cost and in a timely
manner shall (i) maintain evidence of financial responsibility which satisfies
state requirements for underground storage tank utilization (See 25 Pa. Code
Sections 245.701-.708, inclusive); (ii) comply with the "Hazardous Sites
Cleanup Act", Pa. Stat. Ann. tit. 35 Sections 6020.101-.1305, and the
regulations promulgated thereunder; and (iii) comply with "The Storage Tank and
Spill Prevention Act", Pa. Stat. Ann. tit. 35 Sections 6021.101-.2104, and the
regulations promulgated thereunder. The enumeration of specific state statutes
and regulations above shall in no way limit the obligation of Tenant to
otherwise comply with all other state laws and regulations applicable to it,
and Tenant expressly covenants to so comply at all times and in all material
respects during the term of this Lease.
Article 6
Utilities
Tenant shall make application for and arrange for the
installation of all utility meters or other devices as it may deem necessary
for its purposes, and Tenant shall be solely responsible for and promptly pay,
as and when the same become due and payable, all charges for water, sewer,
sprinkler, electricity, gas, telephone or other communication, fire or burglar
alarm systems, and any other utility or service supplied, used or consumed in
connection with the Leased Premises. Tenant shall use any utilities supplied
to or serving the Leased Premises in accordance with the regulations of the
public utility company or the governmental agency supplying the same, and
Tenant shall not at any time overburden or exceed the capacity of the mains,
feeders, ducts, conduits or other facilities by which such utilities are
supplied to, distributed in or serve the Leased Premises. Landlord shall not
be liable in damages or otherwise for any interruption in the supply of any
utility or service to the Leased Premises, nor shall any such interruption
constitute any ground for constructive eviction or an abatement of any of the
rents reserved hereunder.
Article 7
Repair, Maintenance and Replacement
Tenant, at its sole cost and expense, shall take good care of
the Leased Premises and of all buildings, structures, improvements, fixtures
and equipment now or hereafter located thereon, interior and exterior, and keep
the same and all parts thereof, including without limiting the generality
thereof, the roof, roof membrane and subroofing, foundations, exterior walls,
parking areas, the grounds, landscaped areas, (grass cutting, lawn and
shrubbery maintenance, tree and plant watering and care), drainage ditches, and
swales, gutters, downspouts, glass, structural and interior and exterior
portions of the buildings and the plumbing, sprinkler system, heating, air
conditioning, wiring
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and other systems therein and facilities thereof and all sidewalks, parking
areas, driveways, passageways and alleys adjacent thereto and other
appurtenances thereunto belonging, and all fixtures, machinery and equipment
which constitute any part of the Leased Premises, together with any and all
alterations, additions and improvements therein and thereto, in at least as
good order and condition as exists on the date hereof, suffering no waste or
injury; and shall, at Tenant's sole cost and expense, perform all maintenance
and promptly make all needed repairs and replacements, extraordinary as well as
ordinary, structural or otherwise, foreseen or unforeseen, in and to any of the
foregoing and the buildings, structures or improvements now or hereafter
located thereon, including streets, sidewalks, curbs and gutters, vaults,
water, sprinkler systems, sewer and gas connections, plumbing, pipes and mains,
and all other fixtures, machinery and equipment (including the lighting,
electrical, heating, ventilation and air-conditioning systems) now or hereafter
belonging to or connected with the Leased Premises or used in their operation.
All such maintenance, repairs and replacements shall be of first-class quality
sufficient for the proper maintenance and operation of the Leased Premises.
Tenant shall keep and maintain the Leased Premises in a clean and safe
condition, and Tenant shall not permit the accumulation of waste or refuse
matter, nor permit anything to be done or allow any condition to exist which
would invalidate or prevent the procurement of any insurance policies which may
at any time be required pursuant to the provisions of this Lease. Tenant shall
not obstruct or permit the obstruction of any parking areas, streets or
sidewalks located on or adjoining the Leased Premises, and shall keep such
parking areas, streets and sidewalks free of snow and ice.
In addition, Tenant shall, during the term of this Lease,
perform the periodic preventive maintenance recommended by such systems'
manufacturers. Both maintenance and preventive maintenance shall be performed
by such contractors as are recommended by Landlord or such other entities as
are mutually agreed upon by the parties hereto. Tenant shall, on January 1 of
each year while Tenant is in occupancy of the Premises, provide Landlord with
evidence of an executed preventive maintenance contract for all mechanical
equipment (HVAC) provided. Tenant shall pay for the annual mechanical
equipment inspection fees, if any, imposed by any governmental authority.
Tenant agrees to keep the interior of the Leased Premises,
including all plate glass windows, doors, dock bumpers, levelers, and seals in
good repair as well as the floors and floor drains.
Landlord reserves the right to take video footage of the
condition of the Leased Premises as of the Commencement Date, a copy of which
shall be provided to Tenant and shall be an exhibit hereto.
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On the default of Tenant of its obligations to maintain and
repair the Leased Premises as set forth above for a period of fifteen (15) days
after written notice from Landlord demanding cure of same, Landlord may, but
shall not be required to, cause all required maintenance, repairs or
replacements to be made, for Tenant's account, and Tenant shall promptly pay
Landlord all costs incurred plus an administrative fee of fifteen percent (15%)
of such costs and said amount shall constitute and be collectible as additional
rent hereunder.
Article 8
Alterations
Tenant shall not make any exterior or structural alterations,
improvements, or additions to the Leased Premises in excess of $125,000 without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld. Such exterior or structural alterations, improvements,
or additions, if consented to by Landlord, shall be made under the supervision
of an architect or engineer reasonably satisfactory to Landlord and in
accordance with plans and specifications approved by Landlord. Tenant shall
not make any interior or nonstructural alterations, improvements, or additions
to the Leased Premises in excess of $125,000 without obtaining Landlord's prior
written consent which shall not be unreasonably withheld.
All alterations, improvements, and additions made to the
Leased Premises shall be effected with due diligence, in a good and workmanlike
manner employing appropriate new materials and in compliance with all
applicable governmental and insurance requirements and shall be promptly and
fully paid for by Tenant; and no alterations, improvements, or additions made
to the Leased Premises shall change the general character of the Leased
Premises, impair its usefulness, or reduce the fair market value thereof below
its value immediately before such alteration, improvement, or addition. Prior
to proceeding with any alteration, improvement or addition requiring Landlord's
consent hereunder, Tenant shall at Landlord's request furnish Landlord with
satisfactory evidence of worker's compensation insurance in statutory limits of
Tenant, or any contractor or subcontractor performing work for Tenant on the
Leased Premises, as well as satisfactory evidence of all insurance coverage
required to be maintained by Tenant under this Lease. In addition, Landlord
may require that before commencement or continuance of such alteration,
improvement or addition, Tenant furnish Landlord with such security or
performance bond as Landlord shall request in order to assure completion of
same and protect against any and all liens, chattel mortgages and security
interests arising in connection therewith.
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Article 9
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of
any mechanics', materialmen's or other liens against the Leased Premises by
reason of any work, labor, services or materials performed or supplied or
claimed to have been performed or supplied to Tenant, or anyone holding the
Leased Premises, or any part thereof, through or under Tenant. Tenant shall
pay and obtain a release of record of any such lien, by payment thereof or if
Tenant intends to contest the lien by filing a bond or other security or
collateral reasonably acceptable to Landlord, within thirty (30) days after the
date of filing thereof, failing which, and in addition to any other rights of
Landlord hereunder, Landlord shall have the right to vacate and release the
same and charge the cost thereof (including attorneys' fees) to Tenant, such
charge to be due and payable upon demand. Tenant shall defend, indemnify and
hold Landlord harmless from and against any and all liability, loss, damage,
cost and expense (including court costs and attorneys' fees) arising out of or
in connection with any such lien or the enforcement or removal thereof.
Article 10
Landlord's Right of Entry
Landlord and Landlord's employees, agents and contractors, and
their respective employees and agents, shall be permitted during the Lease Term
to inspect the Leased Premises, after first giving Tenant such notice as is
reasonable under the circumstances, (except in the case of an emergency when
prior notice shall not be required), during reasonable business hours (except
in the case of an emergency) for the purposes of (a) ascertaining the condition
of the Leased Premises; (b) making semi-annual mutual inspections; (c)
inspecting any replacements or repairs or the performing any other act as may
be required of Landlord or Tenant under the terms of this Lease; and (d)
showing the Leased Premises to prospective tenants, purchasers or mortgagees.
Article 11
Taxes
Tenant shall, (subject to Tenant's right to contest as set
forth hereafter), in all instances, pay and discharge at its sole expense, all
duties, taxes, assessments, impositions, or charges of any kind, license and
permit fees, and other governmental levies and charges of every kind and nature
whatsoever, general and special, extraordinary as well as ordinary, whether
foreseen or unforeseen, which shall during the Lease Term be laid, levied,
assessed, imposed, become due and payable, or
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liens upon, or arise in connection with the ownership, use, occupancy or
possession of the Leased Premises, or any part thereof, or any appurtenances
thereto, or the streets, sidewalks, vaults, curbs and gutters adjoining the
Leased Premises, or the leasehold estate hereby created, by virtue of any
present or future law, ordinance, order, regulation, rule or requirement of any
government (whether federal, state or local), municipality or other
governmental authority, including any agency or department thereof. In
addition, Tenant shall pay and discharge any and all taxes and other charges
levied, assessed or imposed upon the fixtures, furnishings, equipment and all
other personal property of Tenant in, upon or about the Leased Premises, and
any license or excise covering business conducted in the Leased Premises. The
duties, taxes, assessments, impositions, charges, fees and payments
above-described are sometimes referred to herein collectively as "Impositions".
Nothing contained herein shall require Tenant to pay any inheritance, estate,
succession, transfer, gift, franchise, corporation, income or profit tax or
capital levy that is or may be imposed upon Landlord, unless such described tax
shall be levied upon the rent herein reserved, or otherwise imposed on
Landlord, in replacement of or substitution for any Impositions as are
presently levied, assessed or imposed.
All Impositions shall be paid by Tenant to the governmental
authorities charged with the collection thereof on or before the last day upon
which the same may be paid without interest or penalty for the late payment
thereof and Tenant shall forward a copy of the paid tax bill to Landlord within
thirty (30) days of such payment to the applicable governmental authority. In
the case of Impositions which may be payable in installments, installments
shall be payable within the longest period provided by law, be prorated with
Tenant charged during the term hereof, and Tenant shall only be obligated to
pay such installments as the same fall due during the Lease Term.
Any real estate taxes or water and sewer rents imposed for the
applicable fiscal tax period in which the Lease Term begins or ends shall be
prorated and adjusted between Landlord and Tenant.
Landlord shall forthwith forward to Tenant all applicable tax
bills as received by Landlord or cause the same to be directly sent to Tenant
and Tenant shall provide to Landlord within sixty days (60) after the due date
for payment of such Imposition, reasonable evidence that such Imposition has
been timely paid. If the present method of assessing, levying or charging
general public revenue or taxes against or upon the Leased Premises shall be
changed during the term of this Lease so that such taxes, assessments or
charges, instead of being assessed or levied directly against the land or
improvements constituting the Leased Premises, be levied, assessed or charged
in lieu thereof, in whole or in part, against Landlord's reversionary interest
in the same or against the rent or income arising from the use or occupancy of
the Leased Premises, then in such event, Landlord shall forthwith timely advise
Tenant of each such change, and Tenant shall pay
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every such Imposition so made, subject always to Tenant's right to contest such
change as permitted hereafter. All such Impositions for any fractional
year within the term of this Lease shall be prorated between Landlord and Tenant
on a pro rata basis, with Tenant paying only such portions thereof which are
properly allocable to the term of this Lease.
Tenant shall have the right, in its or Landlord's name, to
contest in good faith the validity of any Imposition, or the method of
assessment thereof, which Tenant is required to bear, pay and discharge
hereunder, and for that purpose shall have the right to institute such
proceedings in name of Landlord as it may deem necessary, provided that
expenses incurred by reason thereof shall be paid by Tenant. Tenant further
agrees that it shall diligently prosecute such contest, at all times
effectually stay or prevent any official or judicial sale of the Leased
Premises, under execution or otherwise, and pay any final judgment enforcing
such contested Imposition and thereafter promptly procure record satisfaction
or release thereof. Tenant further agrees that if it becomes necessary to
institute an action in a court of competent jurisdiction in order to contest
such Imposition then, in that event, it shall give Landlord at least ten (10)
days' prior written notice of its intention to institute such action and at the
same time furnish Landlord a bond in such amount as Landlord may designate,
executed by a corporate surety licensed to do business in the state where the
Leased Premises are located and acceptable to Landlord, indemnifying and
protecting Landlord and any other person now or hereafter having any interest,
whether as security for indebtedness or otherwise, in the Leased Premises from
and against all liability, loss, damage, cost and expense of whatever kind or
nature growing out of or in any way connected with the fee, tax, assessment or
other charge complained of or the contest thereof.
Article 12
Insurance
Tenant agrees to secure, maintain and keep in force at all
times during the Lease Term, at Tenant's sole cost and expense, the following
policies of insurance:
(a) Direct Property Damage Insurance covering the
building and other improvements (including leasehold
improvements) on the Leased Premises to the extent of one
hundred percent (100%) of the full replacement cost thereof,
exclusive of the cost of excavations, foundations, and
footings and all improvements and fixtures required to be
insured by Tenant pursuant to Article 12(c) hereof, providing
protection against perils that are covered under standard
insurance industry practices within the classification of all
risk property damage insurance. Such insurance shall name as
an
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additional insured Landlord and any other parties in
interest as may be from time to time designated in writing by
notice from Landlord to Tenant. In addition, such insurance
shall be made payable to Tenant, Landlord and such additional
parties in interest from time to time designated by Landlord
to Tenant, as their interest may appear.
(b) Comprehensive General Liability Insurance
covering the Leased Premises and Tenant's use thereof against
claims for bodily injury or death, property damage or personal
injury, however caused, with a combined single limit of not
less than two million dollars ($2,000,000) for bodily injury
and property damage. Such insurance shall, in addition to
premises and operations liability, include contractual
liability insurance to cover all contractual liability assumed
by Tenant under or by virtue of this Lease (including, without
limitation, Article 15 hereof), broad form property damage,
loss of rental income, Product and Completed operations
liability. In addition, motor vehicle liability coverage with
not less than $1 million dollar policy limits shall be kept in
force by Tenant at all times during the term of this Lease.
All such insurance shall name as an additional insured
Landlord and any other parties in interest as may be from time
to time designated in writing by notice from Landlord to
Tenant. In addition, such insurance shall be made payable to
Tenant, Landlord and such additional parties in interest from
time to time designated by Landlord to Tenant, as their
interest may appear.
Tenant shall further maintain, at its sole cost
during the term of this Lease Excess or Umbrella Liability
insurance with minimum limits of $10 million; naming Landlord
as an additional insured.
(c) [RESERVED]
(d) Comprehensive Boiler and Machinery insurance
coverage, covering all boilers, pressure vessels, production
equipment, air-conditioning equipment and electrical equipment
which serve the Leased Premises, with per occurrence limits of
not less than two million dollars ($2,000,000).
(e) Workers' Compensation Insurance (including
occupational disease insurance) as may be from time to time
required by the laws of the state in which the Leased Premises
are located;
(f) Employers' Liability Insurance with a per
occurrence limit of not less than $500,000;
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All such policies of insurance shall be issued by insurance
companies licensed and admitted to do business in the State in which the Leased
Premises are located, which are reasonably acceptable to Landlord and having a
rating of A+ or better. In addition, all such policies of insurance shall
contain an endorsement providing that such insurance may not be materially
changed, amended or cancelled except after thirty (30) days' prior written
notice from the insurance company to Landlord, sent by registered mail or
nationally recognized overnight courier (e.g. Federal Express). The original
policy or policies shall be made available, from time to time, upon request of
Landlord to review and/or copy and Tenant shall deliver to Landlord together
reasonably satisfactory evidence of payment of the premium thereof, on or
before the commencement date of the Lease Term. Prior to expiration of each
policy term, Tenant shall deliver to Landlord written proof of renewal or
continuation of the policies and will deliver to Landlord certificates of
insurance within 20 days after renewal or issuance of the policies. If Tenant
at any time fails or refuses to procure and maintain the required amount of
insurance, then Landlord may, immediately and without notice to Tenant, obtain
same for and on behalf of Tenant and charge the cost thereof to Tenant, such
charge to be due and payable upon demand.
Except for the intentional acts of the Landlord, Tenant, and
all parties claiming under or through Tenant, hereby expressly releases and
discharges Landlord from any claim or liability, whether based on negligence or
any reason whatsoever, for any personal injury, property damage, or other loss
covered by Tenant's insurance. The aforesaid release shall apply only when
permitted by the applicable policy of insurance. All policies of Tenant shall
contain an endorsement containing an express waiver of any right of subrogation
by the insurance company against Landlord, provided that this waiver shall not
be applicable if it has the effect of invalidating any insurance coverage of
Landlord or Tenant, or if the applicable insurance policies do not contain a
clause to the effect that this waiver shall not affect the right of the insured
to recover under such policies.
Article 13
Escrow
Notwithstanding the provisions of this Lease, if Tenant, or
any successor or assignee then a tenant under this Lease as the Tenant, shall
fail at any time during the term of this Lease to maintain a net worth in
excess of one hundred million dollars (as determined in accordance with
generally accepted accounting principles), then Landlord may upon written
notice to Tenant require Tenant for the remainder of the Lease Term,
(notwithstanding a subsequent net worth in excess of one hundred million
dollars) to (i) deliver the security deposit required under Article 2; (ii)
carry a deductible not greater than $10,000 under the property damage insurance
described in Article 12(a); and (iii) pay to Landlord for each calendar year
during the Lease Term the
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amount of the Impositions imposed upon the Leased Premises and the amount of
premiums for all insurance policies required to be provided by Tenant
hereunder, in equal monthly installments on the first day of each month during
the Lease Term. Such monthly payments shall in the first instance be
reasonably estimated by Landlord based on the Impositions and premiums paid for
the prior year, with appropriate adjustments made at least annually thereafter.
No interest shall be paid by Landlord to Tenant on such monthly payments, but
they will be kept by Landlord in a separate escrow account, the funds thereof
shall be employed by Landlord to pay Impositions and premiums as they mature.
If at any time the funds held by Landlord shall be insufficient to pay any and
all Impositions and premiums as the same shall mature, Tenant shall, within ten
(10) days after notice thereof from Landlord, deposit with Landlord an amount
sufficient to make up any deficiency therefor. Tenant represents that its
present net worth is in excess of one hundred million dollars.
Article 14
Indemnity
Tenant hereby agrees to defend, pay, indemnify and save free
and harmless Landlord, its officers, directors, agents and employees, from and
against any and all claims, demands, fines, suits, actions, proceedings,
orders, decrees and judgments of any kind or nature by or in favor of anyone
whomsoever and from and against any and all costs and expenses incurred by
Landlord, including attorneys' and other professional fees, resulting from or
in connection with any of the following unless the same are caused by
Landlord's intentional acts: (a) any accident, bodily injury, death, personal
injury of any kind, or property damage arising, directly or indirectly, out of
or from or on account of any occurrence in, upon, at or about the Leased
Premises and the adjoining parking areas, sidewalks, streets, vaults and
passageways; (b) any accident, bodily injury, death, personal injury or
property damage arising, directly or indirectly, in connection with Tenant's
operation and conduct of business in the Leased Premises; (c) any use,
occupancy, nonuse or condition of the Leased Premises; and (d) any failure on
the part of Tenant to perform or comply with any of the agreements, terms,
covenants and conditions of this Lease.
Except for the intentional acts of Landlord, Landlord shall
not be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other personal property of
Tenant, Tenant's employees, agents, invitees and customers, or any other
occupant of the Leased Premises; nor for any failure of a water supply, gas,
electric current or any other utility, nor for any damage occasioned by failure
to keep the building, property or Leased Premises in repair. Landlord shall
not be liable to Tenant for any damage to person or property done or occasioned
by or from electric current, plumbing, gas, water, steam or sewage, odors, or
the
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bursting, leaking, running or failure of operation of any radiator, tank, water
closet, washstand, waste pipe, air conditioning or any other apparatus in,
above, upon or about the building, property or Leased Premises, nor for damage
or injury to person or property occasioned by water, snow, or ice being upon
any roof, sidewalk or entrance way, or being upon or coming through such
entrance way or any skylight, trap door or any other opening in the building,
property or Leased Premises, nor for loss resulting from theft or mysterious
disappearance, action of the elements, or any interference with light or air,
nor for any damages arising from the omission, action or negligence of Tenant,
co-Tenants or other occupants of the building or of any owners or occupants of
adjacent or contiguous property or acts of negligence by Landlord.
In case any action, suit or proceeding is brought against
Landlord by reason of any such occurrence as described in this Article 14,
Tenant or Tenant's insurer, upon Landlord's request, will at no expense to
Landlord resist and defend such action, suit or proceeding or cause the same to
be resisted and defended by counsel designated by Tenant and approved by
Landlord. The obligations of Tenant under this Article shall survive any
termination of this Lease.
Article 15
Damage or Destruction
In the event of any damage or loss to the Leased Premises,
Tenant shall give immediate written notice thereof to Landlord. If the
building on the Leased Premises shall at any time be damaged or destroyed by
fire or other cause whatsoever, Tenant shall promptly repair or rebuild same at
Tenant's expense, so as to make the building at least equal in value to the
building existing immediately prior to such occurrence and as nearly similar to
it in character as shall be practicable and reasonable; and Tenant shall do so,
even though the proceeds of any insurance policies shall be insufficient to
reimburse Tenant therefor.
There shall be no abatement of rent pending any repairs or
rebuilding, nor shall Tenant's obligations hereunder be terminated,
notwithstanding any destruction or damage to the Leased Premises.
Before beginning such repairs or rebuilding, or letting any
contracts in connection therewith, Tenant shall submit for Landlord's approval,
which approval shall not be unreasonably withheld or delayed, complete and
detailed plans and specifications thereof and a listing of all contractors and
subcontractors intended to perform any part of the work. Promptly after
receiving Landlord's approval, Tenant shall begin such repairs or rebuilding
and shall prosecute the same to completion with due diligence. All work shall
be done in a good and workmanlike manner employing appropriate new materials in
accordance with the plans and specifications approved by Landlord, and in
compliance with all
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applicable governmental and insurance requirements. Landlord, its employees,
agents and authorized architects and engineers shall have the right, at any
time during the performance of the work, to inspect the building and the
contracts, plans, specifications, drawings and all other records of Tenant, its
architect, contractors and subcontractors, relating to such repairs or
rebuilding. If Landlord or its authorized representative shall determine that
the work is not being done in accordance with the plans and specifications
approved by Landlord, then upon notice to Tenant specifying any deficiency,
Tenant shall take all steps necessary to promptly correct any such deficiency.
The reasonable charges of any architect or engineer of Landlord employed to
pass upon any plans and specifications and to supervise and approve any
construction shall be paid by Tenant as a cost of the repair or rebuilding.
Notwithstanding the foregoing in this Article 15, in the event
of a casualty for which the amount of damages to the improvements of the Leased
Premises exceeds an amount equal to eighty percent (80%) of the assessed fair
market value of such improvements on the Leased Premises (as determined by the
Real Estate Tax Assessor's office of the county in which the Leased Premises is
located), immediately prior to such casualty; then Landlord may elect within
sixty (60) days of such casualty upon written notice to Tenant to either (i)
require Tenant to rebuild as set forth above in Article 15; or (ii) terminate
the Lease and retain the insurance proceeds; whereupon neither party shall have
any further liability or obligation to the other, except as otherwise provided
elsewhere in this Lease.
Article 16
Condemnation
If the whole of the Leased Premises shall be acquired or taken
by eminent domain for any public or quasi-public use or purpose, or by private
purchase in lieu thereof, then this Lease and the Lease Term hereof shall
automatically cease and terminate as of the date of title vesting in such
proceedings. If only a part of the Leased Premises shall be so acquired or
taken and the remainder is untenantable for the purpose for which Tenant has
been using the Leased Premises then either party shall have the option to
terminate this Lease upon ninety (90) days prior written notice to the other.
If only a part of the Leased Premises shall be so acquired or taken and the
remainder is tenantable for the purpose for which Tenant has been using the
Leased Premises, then this Lease and all of the terms and provisions hereof
shall continue in full force and effect, except that the net annual rental
shall be reduced in the same proportion that the floor area of the building
forming a part of the Leased Premises taken bears to the original floor area of
such building demised hereunder, and Landlord shall, upon receipt of the award
in condemnation, make all necessary repairs or alterations to the building so
as to constitute the remaining premises a complete architectural unit;
provided,
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however, that Landlord, in any event, shall not be required to spend for such
repair and alteration work an amount in excess of the respective amounts
received by Landlord (free and clear of all claims of mortgagees and ground or
underlying lessors and Landlord's costs and professional fees from the action)
as damages for the taking of such part of the Leased Premises. The taking or
condemnation of any parking areas or other open space of the Leased Premises or
any sale, grant, dedication or taking of peripheral or perimeter parts or
portions of the Leased Premises for road widening or road improvement purposes
or for the installation of utilities shall not affect this Lease and Tenant
shall not, in any such event, be entitled to compensation, diminution or
abatement of any rent or other charges.
All damages or compensation awarded or paid for any taking or
condemnation, whether for the whole or a part of the Leased Premises or any
part of the land, buildings and improvements constituting the Leased Premises,
shall belong to and be the property of Landlord without any participation by
Tenant, whether such damages or compensation shall be awarded or paid for
diminution in value of the fee or any interest of Landlord in any ground or
underlying lease covering the Leased Premises or in the leasehold estate
created hereby. Tenant hereby expressly waives and relinquishes all claims to
such award or compensation, or any part thereof, and of the right to
participate in any such condemnation proceedings against the owners of any
interest in the Leased Premises; provided, however, that nothing herein
contained shall be construed to preclude Tenant from prosecuting any claim
directly against the condemning authority, but not against Landlord, for the
value of or damages to and/or the cost of removal of Tenant's property upon the
expiration of the Lease Term, as may be recoverable by Tenant in Tenant's own
right so long as no such claim shall diminish or otherwise affect Landlord's
award. Provided, however, that if as a result of such taking Tenant is
required to replace the parking area or provide new access, in order to use the
Premises in substantially the same manner as before the taking, the cost
incurred by Tenant for such replacement shall be prorated against the rent
becoming due over the remainder of the Lease Term. Tenant shall provide
Landlord with written documentation of such costs reasonably acceptable to
Landlord prior to any such adjustment of rent. Landlord may also elect to
provide an adjacent replacement area, in lieu of the above remedy for Tenant.
Article 17
Mortgaging; Assignment; Subletting
Neither Tenant nor its legal representatives or successors in
interest, by operation of law or otherwise, shall assign, mortgage or otherwise
transfer or encumber this Lease or any interest therein, or sublet or otherwise
permit the Leased Premises or any part thereof to be used or occupied by others
except (i) with the prior written consent of Landlord, which shall
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not be unreasonably withheld, or (ii) to another entity controlled by Tenant.
Any consent by Landlord to any act of mortgaging, assignment or subletting
shall apply only to the specific action authorized. Such consent shall not be
construed as a waiver of the duty of Tenant, its representatives, successors or
assigns, to obtain Landlord's consent to any other or subsequent mortgaging,
assignment or subletting. Any attempted mortgaging, assignment or subletting
without Landlord's prior written consent shall be void and be deemed an Event
of Default hereunder. Any mortgaging, assignment or subletting as permitted by
(i) or (ii) above, will not release or discharge Tenant from any liability
whatsoever under this Lease, and Tenant will remain liable for the performance
and observance of each and every agreement, term, covenant and condition of
this Lease.
In the event that Tenant, upon Landlord's prior written
consent, shall sublet the Leased Premises for a rental in excess of the rent
provided for herein from Tenant to Landlord, then notwithstanding any other
provision contained in this Lease to the contrary, the rent provided for herein
shall automatically be increased during the term of such sublease to a sum
equal to the amount of rent payable under such sublease. In the event that
Tenant shall receive any valuable consideration for an assignment of the
Tenant's interest in this Lease, then, notwithstanding any other provision
contained in this Lease to the contrary, Tenant shall pay to Landlord as
additional rent hereunder the amount of consideration thereby received.
Landlord shall have the right to assign this lease at any
time, upon written notice to Tenant, whereupon Landlord shall be released from
all further or other obligations or liabilities subsequently arising from and
after the date of such assignment. Assignee will assume the Landlord's
obligations under the terms of the Lease. The Assignee of the Landlord shall
have a net worth equal to the then net worth of the Landlord as determined in
accordance with generally accepted accounting practices. Landlord shall
provide Tenant with written notice of any assignment of this Lease.
Article 18
Subordination and Attornment
The rights of Tenant under this Lease shall, at Landlord's
election, be subject and subordinate at all times to all ground leases and/or
underlying leases, if any, now or hereafter in force against the Leased
Premises or any part thereof, and to the lien of any mortgage or mortgages now
or hereafter in force against such leases and/or the Leased Premises, and to
all advances made or hereafter to be made upon the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
The term "mortgages" as used in this Lease shall be deemed to include trust
indentures and deeds of trust.
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The aforesaid provisions shall be self-operative upon notice of election by
Landlord to Tenant and no further instrument of subordination shall be
required. Tenant hereby irrevocably appoints Landlord attorney-in-fact for
Tenant with full power and authority to execute and deliver in the name of the
Tenant any such instrument or instruments.
Tenant agrees that in the event of a sale, transfer or
assignment of Landlord's interest in the Leased Premises, or in the event that
any proceedings are brought for the foreclosure of or exercise of any power of
sale under any mortgage affecting the Leased Premises, or if a deed in lieu
thereof be given, or in the event any ground or underlying lease is cancelled
or terminated, Tenant shall attorn to and recognize such transferee, purchaser,
mortgagee or other party in interest as Landlord under this Lease and to affirm
this Lease so long as such transferee agrees not to disturb Tenant's rights
under this Lease.
Article 19
Estoppel Certificates
Tenant agrees, at any time and from time to time, upon not
less than ten (10) days prior written notice from Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications), the dates to which the rent and other charges have been
paid in advance, if any, and such other matters pertaining to this Lease as may
be requested by Landlord. It is understood and agreed that Tenant's obligation
to furnish such estoppel certificate in a timely fashion is a material
inducement for Landlord's execution of this Lease. Tenant does hereby appoint
Landlord as its attorney-in-fact to execute any such estoppel certificate. It
is intended that any such statement delivered pursuant to this Article may be
relied upon by present or prospective mortgagees, purchasers, ground lessors or
any assignee of any of the foregoing in connection with Landlord's interest in
the Leased Premises.
Article 20
Quiet Enjoyment
Tenant upon paying the rents reserved and performing and
observing all other agreements, terms, covenants and conditions of this Lease
on Tenant's part to be performed and observed hereunder, shall peaceably and
quietly have, hold and enjoy the Leased Premises during the Lease Term,
subject, nevertheless to any ground leases, mortgages, agreements or
encumbrances to which this Lease is or may be subordinated.
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Article 21
Cure of Tenant's Default
If Tenant shall fail to make any payment or perform any act
required hereunder to be made or performed by Tenant hereunder, then Landlord
may, but shall be under no obligation to, after such notice to Tenant and
expiration of any applicable cure period as may be provided for under Article
22 of this Lease, make such payment or perform such act with the same effect as
if made or performed by Tenant. Entry by Landlord upon the Leased Premises for
such purpose shall not waive or release Tenant from any default or obligation
hereunder. Tenant shall reimburse Landlord for all sums so paid and all costs
incurred, including attorneys' fees, upon Landlord's demand therefor.
Article 22
Default
If any one or more of the following events (herein referred to as an "Event of
Default") shall occur:
(a) if default be made in the due and punctual
payment of any rent or other charges, or any part hereof,
payable to Landlord hereunder, when and as the same shall
become due, and such default shall continue for a period of
five (5) days;
(b) if this Lease be mortgaged, assigned or the
Leased Premises or any part thereof be sublet, either
voluntarily or by operation of law, without Landlord's
prior written consent as set forth in Article 17 hereof;
(c) [RESERVED]
(d) if Tenant shall fail to observe, perform or
comply with any of the terms, covenants and conditions in this
Lease other than those provided in subparagraphs (a), (b) and
(c) above, within thirty (30) days after notice from Landlord
specifying the nature of such default; provided, however, that
no Event of Default shall be deemed to occur so long as the
curing of such default reasonably may not be completed within
such thirty (30) day period and Tenant has commenced to cure
such default and thereafter with reasonable diligence pursues
its efforts to cure and does so cure within ninety (90) days;
(e) if Tenant shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or
shall file any petition or answer seeking any reorganization,
readjustment, liquidation, dissolution or similar relief under
any bankruptcy or
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insolvency statute or law of the United States or any State, or shall seek or
consent to or acquiesce in the appointment of any bankruptcy or insolvency
trustee, receiver or liquidator of Tenant or of all or any substantial part of
its properties or of the Leased Premises;
(f) if within sixty (60) days after the
commencement of any involuntary proceeding against Tenant
seeking any reorganization, readjustment, liquidation,
dissolution or similar relief under any bankruptcy or
insolvency statute or law, Tenant fails to secure a dismissal
and discharge thereof; or
(g) if there shall be an "Event of Default" (as
defined therein) under the Lease dated February 26, 1997,
between ASA Company and Michael Foods, Inc. (relating to
certain premises located in Pennsylvania) which Event of
Default under such other lease is not promptly cured within
the applicable cure period, if any.
then and in any such event Landlord, at its option, may at any time thereafter
(in addition to and/or as an alternative to all other legal remedies):
(a) immediately terminate this Lease and Tenant's
right to possession of the Leased Premises; or
(b) terminate only the Tenant's right to
possession of the Leased Premises, without terminating this
Lease or releasing Tenant in whole or in part from Tenant's
obligations hereunder for the full term hereof; or
(c) without terminating this Lease or Tenant's
right to possession of the Leased Premises, enter upon the
Leased Premises and do and perform whatever Tenant is
obligated to do under the terms of this Lease.
In the event Landlord exercises its rights under subparagraph
(a) or (b) immediately above, Tenant shall quit and peacefully surrender the
Leased Premises to Landlord, and Landlord, upon or at any such expiration or
termination, may without further notice, enter upon and reenter the Leased
Premises and possess and repossess itself thereof, as provided by law,
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold and enjoy the Leased Premises and the right
to receive all rental income of and from the same, and further, Landlord may
collect damages in accordance with the law.
If Tenant's right to possession of the Leased Premises shall
be terminated pursuant to this Article 22, by summary proceedings or otherwise,
Landlord may in its own name, as agent for Tenant if this Lease not be
terminated, or if this Lease be terminated, in its own behalf, enter into
possession of and relet
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the Leased Premises or any part thereof, or said premises with additional
premises, for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the Lease Term) and on
such conditions (which may include concessions, free rent and/or alterations of
the Leased Premises) as Landlord, in its uncontrolled discretion, may determine
and may collect and receive the rents therefor. Landlord shall in no way be
responsible or liable for any failure to relet the Leased Premises or any part
thereof, or of any failure to collect any rent due upon such reletting.
No such expiration or termination of this Lease, or
termination of Tenant's right of possession thereunder, shall relieve Tenant of
its liability and obligations under this Lease, unless otherwise agreed to in
writing by Landlord, whether or not the Leased Premises shall be relet. Upon
an event of default, Tenant shall pay Landlord the rent and all other charges
required to be paid hereunder by Tenant up to the time of such event.
Thereafter:
(a) Tenant, until the end of the Lease Term, or
what would have been such term in the absence of any such
event, shall be liable to Landlord as damages for Tenant's
default, the equivalent of the amount of the rent and other
charges which would be payable under this Lease by Tenant if
this Lease were still in effect, less the net proceeds of any
reletting effected pursuant to the provisions hereof, after
deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession
costs, brokerage and management commissions, operating
expenses, legal expenses, reasonable attorneys' fees, and
expenses of preparation of such reletting. Tenant shall pay
such damages (herein called "deficiency") to Landlord monthly
on the days on which the net rent would have been payable
under this Lease if this Lease were still in effect, and
Landlord shall be entitled to recover from Tenant each monthly
deficiency as the same shall arise.
(b) At any time after the expiration or
termination of this Lease, in lieu of collecting any further
monthly deficiencies as aforesaid, Landlord shall be entitled
to recover from Tenant, and Tenant shall pay to Landlord, on
demand, as liquidated damages and not as a penalty, an amount
equal to the difference between the total rental and other
benefits which would have accrued to Landlord under this Lease
from the date of termination to the date of the expiration of
the original term demised and the then fair and reasonable
rental value of the Leased Premises for the same period.
Tenant shall remain liable for any monthly deficiencies not
previously recovered by Landlord. In the computation of such
liquidated damages, the difference between any installment of
rent thereafter becoming due and the fair and reasonable
rental value of
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the Leased Premises for the period for which such installment was payable shall
be discounted to the date of termination at the rate of not more than five
percent (5%) per annum.
If the Leased Premises or any part thereof be relet by
Landlord for the unexpired term of this Lease, or any part thereof, before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall prima facie be
the fair and reasonable rental value for the part or the whole of the Leased
Premises so relet during the term of the reletting. Nothing herein contained
shall limit or prejudice the right of Landlord to prove for and obtain as
liquidated damages by reason of such termination, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved, whether or
not such amount be greater, equal to, or less than the amount of the difference
referred to above.
If this Lease be terminated by summary proceedings or
otherwise, or if Tenant's right to possession of the Leased Premises shall be
terminated, and whether or not the Leased Premises be relet, Landlord shall be
entitled to recover from Tenant, and Tenant shall pay to Landlord, in addition
to any damages becoming due under this Article 22, the following: an amount
equal to all expenses, if any, including reasonable attorneys' fees, incurred
by Landlord in recovering possession of the Leased Premises, (whether or not
litigation be commenced in aid thereof), and all costs and charges for the care
of said Leased Premises while vacant, which damages shall be due and payable by
Tenant to Landlord at such time or times as such expenses are incurred by
Landlord.
Tenant hereby expressly waives, so far as permitted by law,
the service of any notice of intention to reenter provided for in any statute
and except as is herein otherwise provided Tenant, for and on behalf of itself
and all persons claiming through or under Tenant (including any leasehold
mortgagee or other creditor), also waives any and all right of redemption or
reentry or repossession in case Tenant shall be dispossessed by a judgment or
by warrant of any court or judge or in case of reentry or repossession by
Landlord or in case of any expiration or termination of this Lease. The terms
"enter," "reenter," "entry" or "reentry" as used in this Lease are not
restricted to their technical legal meanings.
Tenant hereby waives all right to trial by jury in any action
or proceeding hereafter instituted by Landlord against Tenant with respect to
this Lease or the Leased Premises. Tenant agrees not to interpose any
counterclaim of any nature or description in any action or proceeding. The
foregoing, however, shall not be construed as a waiver of Tenant's right to
assert any claim in a separate action or proceeding instituted by Tenant.
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In the event of any breach or threatened breach by Tenant of
any of the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though reentry, summary proceedings, and other remedies
were not provided for in this Lease.
Article 23
No Waiver
No failure by Landlord to insist upon the strict performance
of any agreement, term, covenant or condition hereof or to exercise any right
or remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by a written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease, but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach thereof.
Article 24
Remedies Cumulative
Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise.
Article 25
Surrender of Premises; Holding Over
Upon the expiration or sooner termination of the Lease Term,
Tenant agrees to quit and surrender the Leased Premises, clean and in good
condition and repair, normal wear and tear and insured casualty excepted,
together with all keys and combinations to locks, safes and vaults and all
improvements, alterations, additions, fixtures, equipment and decorations at
any time made or installed in, upon or to the interior or exterior of the
Leased Premises (except movable furniture, furnishings, equipment and other
personal property of Tenant put in at Tenant's expense), all
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of which shall thereupon become the property of Landlord without any claim by
Tenant therefor, but the surrender of such property to Landlord shall not be
deemed to be a payment of rent or in lieu of any rent reserved hereunder.
Before surrendering the Leased Premises, Tenant shall remove all of Tenant's
said personal property and, at Landlord's option, Tenant shall also, at
Tenant's expense, remove any alterations, additions, fixtures or equipment that
contains or constitutes a "Hazardous Substance" (as defined in Article 5 such
that the disposal of the same to a sanitary landfill is not permitted or is
otherwise regulated under applicable law), at any time made or installed by
Tenant in, upon or to the Leased Premises, and Tenant further agrees to repair
any damage caused thereby. If Tenant shall fail to remove any of Tenant's said
personal property or other property required by Landlord to be removed, said
property shall, at the option of Landlord, either be deemed abandoned and may
be disposed of by Landlord at Tenant's expense, or Landlord shall have the
right to remove and store said property, at the expense of Tenant, without
further notice to or demand upon Tenant and hold Tenant responsible for any and
all charges and expenses incurred by Landlord therefor. If the Leased Premises
be not surrendered as and when aforesaid, Tenant shall indemnify Landlord
against all loss or liability resulting from the delay by Tenant in so
surrendering the same, including without limitation, any claims made by any
succeeding occupant founded on such delay. If Tenant shall remain in
possession of the Leased Premises, or any part thereof, for any period after
the termination of this Lease in any of the ways above-named, Tenant shall pay
one and one-half (1.5) times the rent as a month-to-month hold over tenant
until such holding over shall cease. Tenant's obligations under this Article
shall survive the expiration or sooner termination of the Lease Term.
Article 26
Relationship of Parties
Nothing contained in this Lease shall be deemed to constitute
or be construed or implied to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties
hereto, other than the relationship of Landlord and Tenant.
The term "Landlord" as used in this Lease means only the owner
of the current interest of Landlord in the Leased Premises or, as the case may
be, the successor thereto from time to time. In the event of any transfer at
any time of the interest of Landlord, the transferor shall be and is hereby
entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing from and after the date of such transfer, and it shall be
deemed and construed without further agreement between the parties or their
respective successors in interest or between the parties and the transferee
that the transferee of Landlord's interest has assumed and agreed to carry out
any and all covenants and obligations of Landlord thereafter accruing
hereunder.
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Article 27
Successors and Assigns; Provisions Binding
Except as otherwise expressly provided in this Lease, all
covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
Each provision of this Lease to be performed by Tenant shall
be construed to be both a covenant and a condition, and if there shall be more
than one Tenant, they shall all be bound, jointly and severally, by the
provisions of this Lease. The persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly incorporated and
duly qualified corporation and is authorized to do business in the State of its
incorporation and that the person or persons executing this Lease on behalf of
Tenant is an officer or are officers of such Tenant, and that he or they as
such officers are duly authorized to sign and execute this Lease.
Article 28
Notices
Every notice, demand, request or other communication which may
be or is required to be given under this Lease or by law shall be in writing
and shall be sent by United States Certified or Registered Mail, postage
prepaid, return receipt requested, or by nationally recognized overnight
courier (e.g. Federal Express) and shall be addressed: (a) if to Tenant, to
Michael Foods, Inc. 5353 Wayzata Blvd., Suite 324, Minneapolis, MN 55416,
Attention: Jeffrey M. Shapiro; and (b) if to Landlord, to Papetti Holding
Company, One Papetti Plaza, Elizabeth, New Jersey 07207, Attention: Arthur N.
Papetti, with a copy to Martin B. O'Connor, II, O'Connor, Morss & O'Connor,
Liberty Hall Center, 1085 Morris Avenue, Union, NJ 07083-7136, and the same
shall be deemed delivered one (1) business day after being sent via nationally
recognized overnight courier (e.g., Federal Express) or three (3) business days
after being mailed by U.S. Certified or Registered mail, return receipt
requested. Either party may designate, by similar written notice to the other
party, any other address for such purposes.
Article 29
Miscellaneous
Tenant agrees not to record this Lease or any memorandum
thereof without the prior written consent of Landlord.
Each party covenants, warrants and represents to the other
that there was no broker instrumental in consummating this Lease and that no
conversations or prior negotiations were had by such party with any broker
concerning the renting of the Leased
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Premises. Each party agrees to indemnify and hold the other harmless against
and from all liabilities, including attorneys' fees, arising from any claims
for brokerage commissions or finders' fees resulting from or arising out of any
conversations or negotiations had by such party with any broker.
Tenant agrees to annually make available for review by
Landlord and its lenders such financial information and statements as the same
may reasonably request, provided, Landlord and its lenders agree to keep such
information and statements confidential to the extent the same is not public
information.
Article 30
Entire Agreement; Construction
This Lease sets forth the entire agreement between the parties
respecting the Leased Premises. There are no understandings, agreements,
statements, promises, representations or warranties, express or implied, not
specified herein respecting the Leased Premises and all prior conversations and
writings by or between the parties or their representatives are merged herein
and extinguished. This Lease shall not be modified except by a writing
subscribed to by the party to be charged, nor may this Lease be cancelled by
Tenant or the Leased Premises surrendered except with the express written
authorization of Landlord.
This Lease shall be construed, as to both validity and
performance, and enforced in accordance with and shall be governed by the laws
of the jurisdiction in which the Leased Premises are located, without regard to
such jurisdiction's principles of conflicts of law. If any provision of this
Lease or the application thereof to any person or circumstance shall to any
extent be held void or invalid, then the remainder of this Lease or the
application of such provision to persons or circumstances other than those as
to which it is held void or invalid shall not be affected thereby, and each
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
The headings in this Lease are for purposes of reference only
and shall not limit or define the meaning hereof. This Lease may be executed
in any number of counterparts, each of which is an original, but all of which
shall constitute one instrument.
Article 31
Binding Arbitration
In the event that a dispute arises between Landlord and Tenant
such matter shall be submitted to binding arbitration as follows:
27
<PAGE> 31
(1) Any arbitration hereunder shall be held
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association except that:
(i) Landlord and Tenant shall each select one
arbitrator. The two appointed arbitrators shall jointly
choose a third arbitrator from a list provided by the
American Arbitration Association and the third
arbitrator shall be the sole arbitrator to hear the
dispute. If either party fails to appoint an arbitrator
within twenty (20) days after demand by the other party,
or the appointed arbitrators fail to agree to the third
arbitrator within twenty (20) days after a list of
potential arbitrators is provided by the American
Arbitration Association, the American Arbitration
Association shall select an arbitrator for the party
failing to make appointment or shall appoint the third
arbitrator, as the case may be.
(ii) The arbitration shall be held in the
City in which any facility leased hereunder is
located, or such other location as the parties shall
mutually agree.
(iii) The parties shall bear their own
expenses of the arbitration, including attorneys fees
and costs of expert witnesses.
(iv) The filing or other fees of the
American Arbitration Association shall be paid
one-half by the Landlord and one-half by the Tenant.
(v) The award of the arbitrators shall be
binding and shall be enforceable in any court of the
state in which the Premises are located.
(2) If the American Arbitration Association is
not then in existence or refuses to administer the arbitration, the arbitration
shall be administered by the most nearly comparable organization as shall be
agreed by the parties, or failing agreement, as shall be determined by the
Union County Superior Court of Elizabeth, New Jersey.
(3) Notwithstanding anything herein to the
contrary, either party shall have the right to seek injunctive relief to
maintain the status quo until a dispute between the parties can be arbitrated.
In the event that a dispute arises between Landlord and Tenant
involving an amount which is greater than the then current annual base rent
under this Lease, such matter shall be litigated by the parties.
28
<PAGE> 32
Article 32
Choice of Law; Jurisdiction.
This Lease shall be governed, construed, applied and enforced
in accordance with the laws of the state in which the Premises are located
(without regards to principles of conflicts of laws).
Landlord and Tenant each (i) irrevocably submits to personal
jurisdiction in the courts of the state in which the Premises are located and
the applicable United States District Court serving the county in which the
Premises are located, and appellate courts from any thereof, and (ii)
irrevocably waives any objection which it may have at any time to the laying on
venue of any suit, action or proceeding arising out of or relating to this
Lease brought in any such court, and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Landlord and Tenant each hereby agree that to the extent
permitted by local court rules, any summons, complaint and other process and
notice in connection with the commencement of or any other proceeding in any
such suit, action or proceeding may be served on it by using the notification
procedure set forth in this Lease.
LANDLORD AND TENANT EACH HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS LEASE OR ANY ACTS OR OMISSIONS OF LANDLORD, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 33
Joint Preparation
This Lease is to be deemed to have been prepared jointly by
the parties hereto, and any uncertainty or ambiguity existing herein, if any,
shall not be interpreted against any party, but shall be interpreted according
to the application of the rules of interpretation for arm's length agreements.
Article 34
Time Is of the Essence
Time is of the essence with respect to all matters provided in
this Lease.
29
<PAGE> 33
Article 35
Term Renewal
Tenant is granted the right to extend the term of this Lease
for two (2) period(s) of five (5) years each (the "Option Period(s)") on the
terms and conditions set forth herein; provided, however, that each said right
to extend for each such Option Period (the "Option(s)") may be exercised only
in the event Tenant is not in default at the time each said Option right is
exercised and provided, further, that the Option for the immediately preceding
Option Period, if any, has been exercised. The phrase "Lease Term" as used in
this Lease shall mean the term of this Lease as extended by Tenant pursuant to
this Article.
To exercise each Option, Tenant shall notify Landlord in
writing no later than one (1) year prior to the expiration of the initial Lease
Term or the Option Period then expiring, if any.
In the event Tenant properly exercises its Option as provided
herein: (1) all of the terms and conditions of this Lease shall apply during
the Option Period(s) (except the Option then exercised), including, but not
limited to, Tenant's obligation to pay all costs, charges and expenses provided
for in the Lease; (2) the Option exercised by Tenant in order to extend the
Term of the Lease shall terminate and be of no further force and effect and may
not be exercised again by Tenant; (3) no concession previously granted Tenant
by Landlord in the initial term shall be due or payable to Tenant during or
with respect to such Option Period; and (4) the monthly base rent payable under
Article 2 during the particular Option Period shall be determined as set forth
below. At Landlord's request, prior to the commencement of the particular
Option Period, Tenant shall execute, acknowledge, and deliver to Landlord an
amendment to lease evidencing Tenant's exercise of its Option and setting forth
the commencement and expiration dates of the Option Period and term of the
Lease and the monthly base rent payable during the Option Period.
The Annual Rent payable monthly under Article 2 during each
Option Period shall be such amount as may be agreed upon by the parties and
which is not less than 110%, nor more than 135%, of the Annual Rent for the
twelve (12) months immediately preceding the commencement of the applicable
Option Period (the "Option Period Rent").
If the parties are unable, within sixty (60) days of notice by
Tenant electing to extend the term of the Lease, to agree on the amount of the
Option Period Rent then each party shall within ten (10) days thereafter
designate and select an M.A.I. certified appraiser and submit to them what such
party believes the Option Period Rent should be. The two appraisers shall then
together within thirty (30) days determine and agree upon the Option Period
Rent by selecting either the Option Period Rent
30
<PAGE> 34
proposed by Landlord or that proposed by Tenant, with no other variation.
If the two appraisers are unable within said thirty (30) days
to agree on either Landlord's or Tenant's proposed Option Period Rent, then
they shall together designate a third M.A.I. appraiser, who alone shall select
either Landlord's or Tenant's proposed Option Period Rent as the Annual Rent,
which determination shall be binding and enforceable upon all parties.
Each party shall pay the cost of the appraisers selected by
such party and the costs of the third appraiser (if retained) shall be paid
equally by each party.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW
31
<PAGE> 35
TENANT:
MICHAEL FOODS, INC., a Delaware corporation
(Seal) By: /s/ Gregg A. Ostrander
-------------------------------------
Attest: Gregg A. Ostrander, President
-------------------------------------
Print Name Here
- -------------------------------
(Ass't) Secretary
LANDLORD:
PAPETTI HOLDING COMPANY, a New Jersey
General partnership
Witness: By: /s/ Anthony Papetti
--------------------------------------
Anthony Papetti, General Partner
- -------------------------------
- -------------------------------
[SIGNATURE PAGE TO LEASE AGREEMENT]
STATE OF )
----------------- )
OF )
- ----------- -----------
On this day of , 1997, before me personally
appeared , to me personally known, who, being
by me duly sworn, did say that he is the of MICHAEL FOODS,
INC., a Delaware corporation, and that said instrument was signed on behalf of
said corporation by authority of its Board of Directors; and said officer
acknowledged said instrument to be the free act and deed of said corporation.
<PAGE> 36
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the and State aforesaid, the day and year first
above written.
-------------------------------
Notary Public
(SEAL)
My Commission Expires:
STATE OF )
--------------- )
OF )
- ----------- ---------
On this day of , 1997, before me personally
appeared ANTHONY PAPETTI, to me personally known, who, being by me duly sworn,
did say that he is a partner of PAPETTI HOLDING COMPANY, a New Jersey general
partnership, and that said instrument was signed by him as partner on behalf
of said general partnership; and said ANTHONY PAPETTI acknowledged said
instrument to be the free act and deed of said general partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the and State aforesaid, the day and year first
above written.
-----------------------------------
Notary Public
(SEAL)
My Commission Expires:
<PAGE> 37
EXHIBIT A
DESCRIPTION OF PREMISES
Track I (19.20885 acres) and II (64.64 acres), Lykens, Township,
Dauphen County, Pennsylvania
(LEGAL TO FOLLOW)
<PAGE> 1
EXHIBIT 10.48
EXECUTION COPY
LEASE BY AND BETWEEN
PAPETTI HOLDING COMPANY
AS LANDLORD,
AND
MICHAEL FOODS, INC.,
AS TENANT
DATED FEBRUARY 26, 1997
<PAGE> 2
INDEX
Article Page
1 Leased Premises; Lease Term . . . . . . . . . . . . . . . . . . . . 1
2 Rent Payments; Net Lease . . . . . . . . . . . . . . . . . . . . . . 1
3 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . 2
4 No Representations . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Compliance with Laws; Insurance Regulations . . . . . . . . . . . . 3
6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Repair, Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 6
8 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Covenant Against Liens . . . . . . . . . . . . . . . . . . . . . . . 8
10 Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . 9
11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . 15
16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Mortgaging; Assignment; Subletting . . . . . . . . . . . . . . . . . 17
18 Subordination and Attornment . . . . . . . . . . . . . . . . . . . . 18
19 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . 19
20 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21 Cure of Tenant's Default . . . . . . . . . . . . . . . . . . . . . . 20
22 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 24
25 Surrender of Premises; Holding Over . . . . . . . . . . . . . . . . 24
i
<PAGE> 3
26 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . 25
27 Successors and Assigns; Provisions Binding . . . . . . . . . . . . 26
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
30 Entire Agreement; Construction . . . . . . . . . . . . . . . . . . . 27
31 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 28
32 Choice of Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . 29
33 Joint Preparation . . . . . . . . . . . . . . . . . . . . . . . . . 29
34 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . . 30
35 Term Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ii
<PAGE> 4
L E A S E
THIS LEASE made and entered into as of the 26th day of
February, 1997, between PAPETTI HOLDING COMPANY, a New Jersey general
partnership, having its principal office at One Papetti Plaza, Elizabeth, New
Jersey 07027 (hereinafter called "Landlord") and MICHAEL FOODS, INC., a
Delaware corporation, having its principal office at 5353 Wayzata Boulevard,
Suite 324, Minneapolis, Minnesota 55416 (hereinafter called "Tenant").
A. Landlord is the owner of certain land and
improvements more particularly described on Exhibit A attached hereto (the
"Real Estate").
B. Tenant desires to lease from Landlord, and Landlord
is willing to lease to Tenant the Real Estate and improvements thereon upon and
subject to the terms, provisions and conditions of this Lease.
NOW THEREFORE, Landlord and Tenant, for and in consideration
of the rents, agreements, terms, covenants and conditions hereinafter mentioned
and hereby agreed to be paid, kept and performed by Landlord and Tenant, their
legal representatives, successors and assigns, do hereby mutually agree as
follows:
Article 1
Leased Premises; Lease Term
Upon and subject to the agreements, terms, covenants and
conditions hereinafter set forth, Landlord hereby leases to Tenant, and Tenant
hereby rents and leases from Landlord, the Real Estate, together with any and
all buildings, fixtures, structures and other improvements located thereon
(collectively with the Real Estate, the "Leased Premises"), subject to existing
restrictions, covenants, easements, rights and encumbrances of record.
TO HAVE AND TO HOLD for a term commencing on the date hereof
and ending on midnight of the day preceding the tenth (10th) annual anniversary
of the "Rent Commencement Date" as hereinafter defined (the "Lease Term")
unless sooner terminated or extended as herein provided. The "Rent
Commencement Date" shall mean March 1, 1997.
Article 2
Rent Payments; Net Lease
Tenant, during the Lease Term, will pay to Landlord an annual
rental of Four Hundred Thirty-Two Thousand Dollars ($432,000.00) in equal
monthly installments of Thirty-Six Thousand Dollars ($36,000.00) in advance on
or before the first day of each calendar month. The rent for any partial month
at the commencement hereof shall be prorated and paid upon Tenant's execution
of this
1
<PAGE> 5
Lease. Landlord may assess a charge of five percent (5%) of the monthly rent
installment due for any monthly payment that is received more than five (5)
days after it is due.
Tenant will pay to Landlord the rent herein reserved, without
prior demand or notice and without any setoffs, abatements, or deductions
whatsoever, at the office of Landlord or at such other place as Landlord shall
designate in writing. All other sums that may become due or be payable to
Landlord hereunder shall be paid at the time and in the manner herein provided
at the office of Landlord. All of such other sums so to be paid may, at
Landlord's option, be deemed to be additional rent to be added to any fixed
rent then due or thereafter falling due, and in the event of non-payment,
Landlord shall have all the rights and remedies herein provided.
If Tenant fails the net worth requirement of Article 13, then
Tenant shall deliver to Landlord the sum equal to one month's base rent as
security payment for the performance by Tenant of every covenant and condition
of this Lease. If Tenant shall default with respect to any covenant or
condition of this Lease, including, but not limited to, the payment of rent,
Landlord may apply the whole or any part of such security payment to the
payment of any sum in default or any other sum which Landlord may be required
to spend by reason of Tenant's default, and Tenant shall thereafter upon demand
of Landlord fully restore the original amount of the security deposit. After
all of the Tenant's obligations under this Lease shall have been satisfied, the
security payment or any remaining balance thereof shall be returned to Tenant.
In the event of a bona fide sale of the property of which the Leased Premises
are a part, Landlord shall have the obligation to transfer such security to the
purchaser to be held by such purchaser under the terms of this Lease, and
Landlord shall be released from all obligation and liability for the return of
such security to Tenant provided such transferee assumes such obligation.
Tenant acknowledges that the rent and other payments to
Landlord hereunder are intended to be "net" to Landlord and that this Lease is
a so called "triple net" or "net net net" lease to Landlord.
Article 3
Use of Leased Premises
Tenant shall occupy the Leased Premises during the Lease Term
for the purposes set forth on Exhibit A hereto and for no other purpose or use
without Landlord's prior written consent. Tenant shall not use or occupy or
permit the Leased Premises or any part thereof to be used or occupied for any
other business, use or purpose without Landlord's prior written consent, which
shall not be unreasonably withheld. Tenant shall apply for, secure, maintain
and comply with all licenses, permits, or accreditations which may
2
<PAGE> 6
be required for the conduct by Tenant of the use of the Leased Premises, as
herein permitted.
Article 4
No Representations
Tenant is fully familiar with the physical condition of the
Leased Premises, and Tenant accepts and takes the Leased Premises in their "as
is" and "where is" condition. Landlord has made no representations whatsoever
in connection with the condition of the Leased Premises or any part thereof,
and Landlord shall not be liable for any latent or patent defects therein.
Article 5
Compliance with Laws; Insurance Regulations
Throughout the Lease Term, Tenant shall, at its sole cost and
expense, promptly observe and comply with all laws, ordinances, orders,
regulations, rules, standards and requirements of every government (whether
federal, state or local), municipality or other governmental authority,
including but not limited to CERCLA, RCRA, TOSCA, FIFRA, OSHA and SARA (as the
same are commonly referred to under the federal environmental laws), and the
Americans with Disabilities Act of 1990, as amended (the "ADA"), and including
any agency or department thereof, having jurisdiction over Tenant or the Leased
Premises (collectively, "Governmental Regulations"), and of the local fire
insurance rating organization, and of all insurance companies writing policies
covering the Leased Premises or any part thereof, relating to the Leased
Premises, or the facilities, fixtures or equipment therein, or the use and
occupation or franchises and privileges connected therewith; whether or not
such laws, ordinances, orders, regulations, rules or requirements shall
necessitate improvements, interference with the use and enjoyment of the Leased
Premises, replacements or repairs, extraordinary as well as ordinary, foreseen
or unforeseen, and whether the same now are in force or may, at any time in the
future, be enacted or directed; and Tenant shall pay all costs, expenses,
claims, fines, penalties and damages that may in any manner arise out of or be
imposed because of the failure of Tenant to comply with any of the foregoing.
Landlord, its agents and representatives, may at any time
during the term of the Lease enter upon the Leased Premises, or any part
thereof, for the purpose of determining and ascertaining the environmental
status of the same, including but not limited to the performing of
environmental audits or surveys of the condition of the Leased Premises; and
may further video tape, from time to time, the condition of the Leased
Premises, or any building or other improvements thereon, for the purpose of
better assuring and determining Tenant's fulfillment of its obligations
hereunder.
3
<PAGE> 7
Tenant shall be responsible for and shall bear all costs and
expenses associated with any and all alterations to the Leased Premises, which
may be required by the ADA for the accommodation of disabled individuals who
may be employed from time to time by Tenant, or any disabled customers,
clients, guests, or invitees or sublessees. Tenant shall indemnify and hold
Landlord harmless from and against any and all costs incurred arising from the
failure of the Leased Premises to conform with the ADA, including the cost of
making any alterations, renovations or accommodations required by the ADA, or
any government enforcement agency, or any court, any and all fines, civil
penalties, and damages awarded against Landlord resulting from a violation or
violations of the ADA, and all reasonable legal expenses and court costs
incurred in defending claims made under the ADA, including reasonable
attorneys' fees.
Tenant shall not (i) use, store, generate, treat, sell or
dispose in, on or about the Leased Premises, any "Hazardous Substances"
(hereinafter defined), or (ii) permit the use, storage, generation, treatment,
selling or disposal in, on or about the Leased Premises of any Hazardous
Substances, except Hazardous Substances in such amounts and of such types that
are commonly and customarily used in compliance with Governmental Regulations
in the operation, cleaning and maintenance of Tenant's business operated in the
ordinary course. "Hazardous Substances" or "Hazardous Substance" as used in
this Lease shall mean any substances, waste or substance now or hereafter
designated as, or containing components designated as, hazardous, dangerous,
toxic or harmful and/or subject to any Governmental Regulations, including,
without limitation, asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment which contains dielectric fluid or other fluids
containing levels of polychlorinated biphenyls in excess of fifty (50) parts
per million and petroleum products in any form. Tenant shall (i) promptly
comply with all Governmental Regulations now or hereafter pertaining to the
use, discharge, handling, transportation, disposal, treatment, generation,
storage, sale or presence on the Leased Premises of Hazardous Substances; and
(ii) allow Landlord or Landlord's agents or representatives to enter onto the
Leased Premises at all times to check Tenant's compliance with all applicable
Governmental Regulations regarding Hazardous Substances should Landlord have a
reasonable belief that Tenant is not in compliance with all applicable
Governmental Regulations regarding Hazardous Substances. If Tenant is found to
not be in compliance with all applicable Governmental Regulations regarding
Hazardous Substances, all reasonable costs incurred by Landlord and associated
with Landlord's inspection of the Leased Premises and Landlord's monitoring of
Tenant's compliance with this Article, including Landlord's reasonable
attorneys' fees and costs shall be deemed additional rent and shall be due and
payable to Landlord immediately upon demand by Landlord. Tenant shall
indemnify, defend and save Landlord, its officers, directors, shareholders,
managers, agents and employees harmless from and against any and all damages,
penalties, costs and other liabilities (including Landlord's attorneys' fees
and costs and the cost of any remedial
4
<PAGE> 8
or abatement activities), arising during the term of this Lease or anytime
thereafter, directly or indirectly, from the use, discharge, handling,
transportation, disposal, treatment, generation, storage, existence or sale of
Hazardous Substances, during the term of this Lease in, on or about the Leased
Premises except to the extent such use, discharge, handling, transportation,
disposal, treatment, generation, storage, existence or sale of Hazardous
Substances resulted solely from the actions of Landlord. Tenant's obligations
under this Article shall survive the termination of this Lease.
Tenant shall, at Tenant's sole expense, comply with all laws,
rules, regulations, requirements, standards and ordinances enacted or imposed
by any governmental unit having jurisdiction over Tenant, the Leased Premises,
signage at the Leased Premises or Tenant's business. Tenant shall not use or
occupy the Leased Premises nor permit its use or occupancy for any unlawful use
or purpose, nor for any purpose which may be hazardous on account of fire,
environmental concerns or otherwise, nor for any use or purpose which might
render Landlord's insurance on the Leased Premises void.
Tenant agrees that if its storage, accumulation,
transportation, treatment or disposal of such Hazardous Substances results in
(i) contamination of the soil or surface or groundwater or (ii) loss or damage
to any person(s) or property, Tenant shall (a) notify Landlord immediately of
any contamination, claim of contamination, loss or damage, (b) proceed with due
diligence to clean up any such contamination in full compliance with all
applicable federal, state and local statutes, regulations and standards, and
(c) indemnify, defend and hold Landlord harmless from and against any and all
claims, suits, causes of action, penalties, fines, costs and fees, including
attorney's fees, arising from or connected with any such contamination, claim
of contamination, loss or damage. The foregoing provision shall survive the
termination of the Lease.
The parties hereto shall use their best efforts to resolve any
disputes regarding the origin of any contamination or claim of contamination or
the responsibility as between Landlord and Tenant of clean up of any such
contamination or claim of contamination. Landlord and Tenant agree that if
they are unable to resolve such a dispute, then the provisions of Article 31
governing resolution of disputes shall apply. The parties agree that the
arbitrator shall be retained only to resolve the dispute and in no event will
be retained by either party to conduct any resulting cleanup or remediation of
any suspected release of hazardous waste.
5
<PAGE> 9
To the extent applicable or may become applicable based on
Tenant's use of the Leased Premises or the termination of the Lease, Tenant at
its cost and in a timely manner shall (i) comply with "The Industrial Site
Recovery Act", N.J. Stat. Ann. Sections 13:1K-6 to -14, and the regulations
promulgated thereunder or obtain an exemption from compliance (See N.J. Admin.
Code 7:26B-1.9(a)); (ii) comply with "The Spill Compensation and Control Act",
N.J. Stat. Ann. Sections 58.10-23.11 to .24, and the regulations promulgated
thereunder, "The Pollution Prevention Act", N.J. Stat. Ann. Sections 13.1D-35
et seq. and Sections 34:5A-1 et seq., and the regulations promulgated
thereunder, and Sections 58:10A-21 through 58:10A-37 of the New Jersey
Statutes, and the regulations promulgated thereunder. The enumeration of
specific state statutes and regulations above shall in no way limit the
obligation of Tenant to otherwise comply with all other state laws and
regulations applicable to it, and Tenant expressly covenants to so comply at
all times and in all material respects during the term of this Lease.
Article 6
Utilities
Tenant shall make application for and arrange for the
installation of all utility meters or other devices as it may deem necessary
for its purposes, and Tenant shall be solely responsible for and promptly pay,
as and when the same become due and payable, all charges for water, sewer,
sprinkler, electricity, gas, telephone or other communication, fire or burglar
alarm systems, and any other utility or service supplied, used or consumed in
connection with the Leased Premises. Tenant shall use any utilities supplied
to or serving the Leased Premises in accordance with the regulations of the
public utility company or the governmental agency supplying the same, and
Tenant shall not at any time overburden or exceed the capacity of the mains,
feeders, ducts, conduits or other facilities by which such utilities are
supplied to, distributed in or serve the Leased Premises. Landlord shall not
be liable in damages or otherwise for any interruption in the supply of any
utility or service to the Leased Premises, nor shall any such interruption
constitute any ground for constructive eviction or an abatement of any of the
rents reserved hereunder.
Article 7
Repair, Maintenance and Replacement
Tenant, at its sole cost and expense, shall take good care of
the Leased Premises and of all buildings, structures, improvements, fixtures
and equipment now or hereafter located thereon, interior and exterior, and keep
the same and all parts thereof, including without limiting the generality
thereof, the roof, roof membrane and subroofing, foundations, exterior walls,
parking areas, the grounds, landscaped areas, (grass cutting, lawn and
shrubbery maintenance, tree and plant watering and care),
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drainage ditches, and swales, gutters, downspouts, glass, structural and
interior and exterior portions of the buildings and the plumbing, sprinkler
system, heating, air conditioning, wiring and other systems therein and
facilities thereof and all sidewalks, parking areas, driveways, passageways and
alleys adjacent thereto and other appurtenances thereunto belonging, and all
fixtures, machinery and equipment which constitute any part of the Leased
Premises, together with any and all alterations, additions and improvements
therein and thereto, in at least as good order and condition as exists on the
date hereof, suffering no waste or injury; and shall, at Tenant's sole cost and
expense, perform all maintenance and promptly make all needed repairs and
replacements, extraordinary as well as ordinary, structural or otherwise,
foreseen or unforeseen, in and to any of the foregoing and the buildings,
structures or improvements now or hereafter located thereon, including streets,
sidewalks, curbs and gutters, vaults, water, sprinkler systems, sewer and gas
connections, plumbing, pipes and mains, and all other fixtures, machinery and
equipment (including the lighting, electrical, heating, ventilation and
air-conditioning systems) now or hereafter belonging to or connected with the
Leased Premises or used in their operation. All such maintenance, repairs and
replacements shall be of first-class quality sufficient for the proper
maintenance and operation of the Leased Premises. Tenant shall keep and
maintain the Leased Premises in a clean and safe condition, and Tenant shall
not permit the accumulation of waste or refuse matter, nor permit anything to
be done or allow any condition to exist which would invalidate or prevent the
procurement of any insurance policies which may at any time be required
pursuant to the provisions of this Lease. Tenant shall not obstruct or permit
the obstruction of any parking areas, streets or sidewalks located on or
adjoining the Leased Premises, and shall keep such parking areas, streets and
sidewalks free of snow and ice.
In addition, Tenant shall, during the term of this Lease,
perform the periodic preventive maintenance recommended by such systems'
manufacturers. Both maintenance and preventive maintenance shall be performed
by such contractors as are recommended by Landlord or such other entities as
are mutually agreed upon by the parties hereto. Tenant shall, on January 1 of
each year while Tenant is in occupancy of the Premises, provide Landlord with
evidence of an executed preventive maintenance contract for all mechanical
equipment (HVAC) provided. Tenant shall pay for the annual mechanical
equipment inspection fees, if any, imposed by any governmental authority.
Tenant agrees to keep the interior of the Leased Premises,
including all plate glass windows, doors, dock bumpers, levelers, and seals in
good repair as well as the floors and floor drains.
Landlord reserves the right to take video footage of the
condition of the Leased Premises as of the Commencement Date, a
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copy of which shall be provided to Tenant and shall be an exhibit hereto.
On the default of Tenant of its obligations to maintain and
repair the Leased Premises as set forth above for a period of fifteen (15) days
after written notice from Landlord demanding cure of same, Landlord may, but
shall not be required to, cause all required maintenance, repairs or
replacements to be made, for Tenant's account, and Tenant shall promptly pay
Landlord all costs incurred plus an administrative fee of fifteen percent (15%)
of such costs and said amount shall constitute and be collectible as additional
rent hereunder.
Article 8
Alterations
Tenant shall not make any exterior or structural alterations,
improvements, or additions to the Leased Premises in excess of $125,000 without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld. Such exterior or structural alterations, improvements,
or additions, if consented to by Landlord, shall be made under the supervision
of an architect or engineer reasonably satisfactory to Landlord and in
accordance with plans and specifications approved by Landlord. Tenant shall
not make any interior or nonstructural alterations, improvements, or additions
to the Leased Premises in excess of $125,000 without obtaining Landlord's prior
written consent which shall not be unreasonably withheld.
All alterations, improvements, and additions made to the
Leased Premises shall be effected with due diligence, in a good and workmanlike
manner employing appropriate new materials and in compliance with all
applicable governmental and insurance requirements and shall be promptly and
fully paid for by Tenant; and no alterations, improvements, or additions made
to the Leased Premises shall change the general character of the Leased
Premises, impair its usefulness, or reduce the fair market value thereof below
its value immediately before such alteration, improvement, or addition. Prior
to proceeding with any alteration, improvement or addition requiring Landlord's
consent hereunder, Tenant shall at Landlord's request furnish Landlord with
satisfactory evidence of worker's compensation insurance in statutory limits of
Tenant, or any contractor or subcontractor performing work for Tenant on the
Leased Premises, as well as satisfactory evidence of all insurance coverage
required to be maintained by Tenant under this Lease. In addition, Landlord
may require that before commencement or continuance of such alteration,
improvement or addition, Tenant furnish Landlord with such security or
performance bond as Landlord shall request in order to assure completion of
same and protect against any and all liens, chattel mortgages and security
interests arising in connection therewith.
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Article 9
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of
any mechanics', materialmen's or other liens against the Leased Premises by
reason of any work, labor, services or materials performed or supplied or
claimed to have been performed or supplied to Tenant, or anyone holding the
Leased Premises, or any part thereof, through or under Tenant. Tenant shall
pay and obtain a release of record of any such lien, by payment thereof or if
Tenant intends to contest the lien by filing a bond or other security or
collateral reasonably acceptable to Landlord, within thirty (30) days after the
date of filing thereof, failing which, and in addition to any other rights of
Landlord hereunder, Landlord shall have the right to vacate and release the
same and charge the cost thereof (including attorneys' fees) to Tenant, such
charge to be due and payable upon demand. Tenant shall defend, indemnify and
hold Landlord harmless from and against any and all liability, loss, damage,
cost and expense (including court costs and attorneys' fees) arising out of or
in connection with any such lien or the enforcement or removal thereof.
Article 10
Landlord's Right of Entry
Landlord and Landlord's employees, agents and contractors, and
their respective employees and agents, shall be permitted during the Lease Term
to inspect the Leased Premises, after first giving Tenant such notice as is
reasonable under the circumstances, (except in the case of an emergency when
prior notice shall not be required), during reasonable business hours (except
in the case of an emergency) for the purposes of (a) ascertaining the condition
of the Leased Premises; (b) making semi-annual mutual inspections; (c)
inspecting any replacements or repairs or the performing any other act as may
be required of Landlord or Tenant under the terms of this Lease; and (d)
showing the Leased Premises to prospective tenants, purchasers or mortgagees.
Article 11
Taxes
Tenant shall, (subject to Tenant's right to contest as set
forth hereafter), in all instances, pay and discharge at its sole expense, all
duties, taxes, assessments, impositions, or charges of any kind, license and
permit fees, and other governmental levies and charges of every kind and nature
whatsoever, general and special, extraordinary as well as ordinary, whether
foreseen or unforeseen, which shall during the Lease Term be laid, levied,
assessed, imposed, become due and payable, or
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liens upon, or arise in connection with the ownership, use, occupancy or
possession of the Leased Premises, or any part thereof, or any appurtenances
thereto, or the streets, sidewalks, vaults, curbs and gutters adjoining the
Leased Premises, or the leasehold estate hereby created, by virtue of any
present or future law, ordinance, order, regulation, rule or requirement of any
government (whether federal, state or local), municipality or other
governmental authority, including any agency or department thereof. In
addition, Tenant shall pay and discharge any and all taxes and other charges
levied, assessed or imposed upon the fixtures, furnishings, equipment and all
other personal property of Tenant in, upon or about the Leased Premises, and
any license or excise covering business conducted in the Leased Premises. The
duties, taxes, assessments, impositions, charges, fees and payments
above-described are sometimes referred to herein collectively as "Impositions".
Nothing contained herein shall require Tenant to pay any inheritance, estate,
succession, transfer, gift, franchise, corporation, income or profit tax or
capital levy that is or may be imposed upon Landlord, unless such described tax
shall be levied upon the rent herein reserved, or otherwise imposed on
Landlord, in replacement of or substitution for any Impositions as are
presently levied, assessed or imposed.
All Impositions shall be paid by Tenant to the governmental
authorities charged with the collection thereof on or before the last day upon
which the same may be paid without interest or penalty for the late payment
thereof and Tenant shall forward a copy of the paid tax bill to Landlord within
thirty (30) days of such payment to the applicable governmental authority. In
the case of Impositions which may be payable in installments, installments
shall be payable within the longest period provided by law, be prorated with
Tenant charged during the term hereof, and Tenant shall only be obligated to
pay such installments as the same fall due during the Lease Term.
Any real estate taxes or water and sewer rents imposed for the
applicable fiscal tax period in which the Lease Term begins or ends shall be
prorated and adjusted between Landlord and Tenant.
Landlord shall forthwith forward to Tenant all applicable tax
bills as received by Landlord or cause the same to be directly sent to Tenant
and Tenant shall provide to Landlord within sixty days (60) after the due date
for payment of such Imposition, reasonable evidence that such Imposition has
been timely paid. If the present method of assessing, levying or charging
general public revenue or taxes against or upon the Leased Premises shall be
changed during the term of this Lease so that such taxes, assessments or
charges, instead of being assessed or levied directly against the land or
improvements constituting the Leased Premises, be levied, assessed or charged
in lieu thereof, in whole or in part, against Landlord's reversionary interest
in the same or against the rent or income arising from the use or occupancy of
the Leased Premises, then in such event, Landlord shall forthwith timely advise
Tenant of each such change, and Tenant shall pay
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every such Imposition so made, subject always to Tenant's right to contest such
change as permitted hereafter. All such Impositions for any fractional year
within the term of this Lease shall be prorated between Landlord and Tenant on
a pro rata basis, with Tenant paying only such portions thereof which are
properly allocable to the term of this Lease.
Tenant shall have the right, in its or Landlord's name, to
contest in good faith the validity of any Imposition, or the method of
assessment thereof, which Tenant is required to bear, pay and discharge
hereunder, and for that purpose shall have the right to institute such
proceedings in name of Landlord as it may deem necessary, provided that
expenses incurred by reason thereof shall be paid by Tenant. Tenant further
agrees that it shall diligently prosecute such contest, at all times
effectually stay or prevent any official or judicial sale of the Leased
Premises, under execution or otherwise, and pay any final judgment enforcing
such contested Imposition and thereafter promptly procure record satisfaction
or release thereof. Tenant further agrees that if it becomes necessary to
institute an action in a court of competent jurisdiction in order to contest
such Imposition then, in that event, it shall give Landlord at least ten (10)
days' prior written notice of its intention to institute such action and at the
same time furnish Landlord a bond in such amount as Landlord may designate,
executed by a corporate surety licensed to do business in the state where the
Leased Premises are located and acceptable to Landlord, indemnifying and
protecting Landlord and any other person now or hereafter having any interest,
whether as security for indebtedness or otherwise, in the Leased Premises from
and against all liability, loss, damage, cost and expense of whatever kind or
nature growing out of or in any way connected with the fee, tax, assessment or
other charge complained of or the contest thereof.
Article 12
Insurance
Tenant agrees to secure, maintain and keep in force at all
times during the Lease Term, at Tenant's sole cost and expense, the following
policies of insurance:
(a) Direct Property Damage Insurance covering the
building and other improvements (including leasehold
improvements) on the Leased Premises to the extent of one
hundred percent (100%) of the full replacement cost thereof,
exclusive of the cost of excavations, foundations, and
footings and all improvements and fixtures required to be
insured by Tenant pursuant to Article 12(c) hereof, providing
protection against perils that are covered under standard
insurance industry practices within the classification of all
risk property damage insurance. Such insurance shall name as
an
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additional insured Landlord and any other parties in interest
as may be from time to time designated in writing by notice
from Landlord to Tenant. In addition, such insurance shall be
made payable to Tenant, Landlord and such additional parties
in interest from time to time designated by Landlord to
Tenant, as their interest may appear.
(b) Comprehensive General Liability Insurance
covering the Leased Premises and Tenant's use thereof against
claims for bodily injury or death, property damage or personal
injury, however caused, with a combined single limit of not
less than two million dollars ($2,000,000) for bodily injury
and property damage. Such insurance shall, in addition to
premises and operations liability, include contractual
liability insurance to cover all contractual liability assumed
by Tenant under or by virtue of this Lease (including, without
limitation, Article 15 hereof), broad form property damage,
loss of rental income, Product and Completed operations
liability. In addition, motor vehicle liability coverage with
not less than $1 million dollar policy limits shall be kept in
force by Tenant at all times during the term of this Lease.
All such insurance shall name as an additional insured
Landlord and any other parties in interest as may be from time
to time designated in writing by notice from Landlord to
Tenant. In addition, such insurance shall be made payable to
Tenant, Landlord and such additional parties in interest from
time to time designated by Landlord to Tenant, as their
interest may appear.
Tenant shall further maintain, at its sole cost
during the term of this Lease Excess or Umbrella Liability
insurance with minimum limits of $10 million; naming Landlord
as an additional insured.
(c) [RESERVED]
(d) Comprehensive Boiler and Machinery insurance
coverage, covering all boilers, pressure vessels, production
equipment, air-conditioning equipment and electrical equipment
which serve the Leased Premises, with per occurrence limits of
not less than two million dollars ($2,000,000).
(e) Workers' Compensation Insurance (including
occupational disease insurance) as may be from time to time
required by the laws of the state in which the Leased Premises
are located;
(f) Employers' Liability Insurance with a per
occurrence limit of not less than $500,000;
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All such policies of insurance shall be issued by insurance
companies licensed and admitted to do business in the State in which the Leased
Premises are located, which are reasonably acceptable to Landlord and having a
rating of A+ or better. In addition, all such policies of insurance shall
contain an endorsement providing that such insurance may not be materially
changed, amended or cancelled except after thirty (30) days' prior written
notice from the insurance company to Landlord, sent by registered mail or
nationally recognized overnight courier (e.g. Federal Express). The original
policy or policies shall be made available, from time to time, upon request of
Landlord to review and/or copy and Tenant shall deliver to Landlord together
reasonably satisfactory evidence of payment of the premium thereof, on or
before the commencement date of the Lease Term. Prior to expiration of each
policy term, Tenant shall deliver to Landlord written proof of renewal or
continuation of the policies and will deliver to Landlord certificates of
insurance within 20 days after renewal or issuance of the policies. If Tenant
at any time fails or refuses to procure and maintain the required amount of
insurance, then Landlord may, immediately and without notice to Tenant, obtain
same for and on behalf of Tenant and charge the cost thereof to Tenant, such
charge to be due and payable upon demand.
Except for the intentional acts of the Landlord, Tenant, and
all parties claiming under or through Tenant, hereby expressly releases and
discharges Landlord from any claim or liability, whether based on negligence or
any reason whatsoever, for any personal injury, property damage, or other loss
covered by Tenant's insurance. The aforesaid release shall apply only when
permitted by the applicable policy of insurance. All policies of Tenant shall
contain an endorsement containing an express waiver of any right of subrogation
by the insurance company against Landlord, provided that this waiver shall not
be applicable if it has the effect of invalidating any insurance coverage of
Landlord or Tenant, or if the applicable insurance policies do not contain a
clause to the effect that this waiver shall not affect the right of the insured
to recover under such policies.
Article 13
Escrow
Notwithstanding the provisions of this Lease, if Tenant, or
any successor or assignee then a tenant under this Lease as the Tenant, shall
fail at any time during the term of this Lease to maintain a net worth in
excess of one hundred million dollars (as determined in accordance with
generally accepted accounting principles), then Landlord may upon written
notice to Tenant require Tenant for the remainder of the Lease Term,
(notwithstanding a subsequent net worth in excess of one hundred million
dollars) to (i) deliver the security deposit required under Article 2; (ii)
carry a deductible not greater than $10,000 under the property damage insurance
described in Article 12(a); and (iii) pay to Landlord for each calendar year
during the Lease Term the
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amount of the Impositions imposed upon the Leased Premises and the amount of
premiums for all insurance policies required to be provided by Tenant
hereunder, in equal monthly installments on the first day of each month during
the Lease Term. Such monthly payments shall in the first instance be
reasonably estimated by Landlord based on the Impositions and premiums paid for
the prior year, with appropriate adjustments made at least annually thereafter.
No interest shall be paid by Landlord to Tenant on such monthly payments, but
they will be kept by Landlord in a separate escrow account, the funds thereof
shall be employed by Landlord to pay Impositions and premiums as they mature.
If at any time the funds held by Landlord shall be insufficient to pay any and
all Impositions and premiums as the same shall mature, Tenant shall, within ten
(10) days after notice thereof from Landlord, deposit with Landlord an amount
sufficient to make up any deficiency therefor. Tenant represents that its
present net worth is in excess of one hundred million dollars.
Article 14
Indemnity
Tenant hereby agrees to defend, pay, indemnify and save free
and harmless Landlord, its officers, directors, agents and employees, from and
against any and all claims, demands, fines, suits, actions, proceedings,
orders, decrees and judgments of any kind or nature by or in favor of anyone
whomsoever and from and against any and all costs and expenses incurred by
Landlord, including attorneys' and other professional fees, resulting from or
in connection with any of the following unless the same are caused by
Landlord's intentional acts: (a) any accident, bodily injury, death, personal
injury of any kind, or property damage arising, directly or indirectly, out of
or from or on account of any occurrence in, upon, at or about the Leased
Premises and the adjoining parking areas, sidewalks, streets, vaults and
passageways; (b) any accident, bodily injury, death, personal injury or
property damage arising, directly or indirectly, in connection with Tenant's
operation and conduct of business in the Leased Premises; (c) any use,
occupancy, nonuse or condition of the Leased Premises; and (d) any failure on
the part of Tenant to perform or comply with any of the agreements, terms,
covenants and conditions of this Lease.
Except for the intentional acts of Landlord, Landlord shall
not be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other personal property of
Tenant, Tenant's employees, agents, invitees and customers, or any other
occupant of the Leased Premises; nor for any failure of a water supply, gas,
electric current or any other utility, nor for any damage occasioned by failure
to keep the building, property or Leased Premises in repair. Landlord shall
not be liable to Tenant for any damage to person or property done or occasioned
by or from electric current, plumbing, gas, water, steam or sewage, odors, or
the
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bursting, leaking, running or failure of operation of any radiator, tank, water
closet, washstand, waste pipe, air conditioning or any other apparatus in,
above, upon or about the building, property or Leased Premises, nor for damage
or injury to person or property occasioned by water, snow, or ice being upon
any roof, sidewalk or entrance way, or being upon or coming through such
entrance way or any skylight, trap door or any other opening in the building,
property or Leased Premises, nor for loss resulting from theft or mysterious
disappearance, action of the elements, or any interference with light or air,
nor for any damages arising from the omission, action or negligence of Tenant,
co-Tenants or other occupants of the building or of any owners or occupants of
adjacent or contiguous property or acts of negligence by Landlord.
In case any action, suit or proceeding is brought against
Landlord by reason of any such occurrence as described in this Article 14,
Tenant or Tenant's insurer, upon Landlord's request, will at no expense to
Landlord resist and defend such action, suit or proceeding or cause the same to
be resisted and defended by counsel designated by Tenant and approved by
Landlord. The obligations of Tenant under this Article shall survive any
termination of this Lease.
Article 15
Damage or Destruction
In the event of any damage or loss to the Leased Premises,
Tenant shall give immediate written notice thereof to Landlord. If the
building on the Leased Premises shall at any time be damaged or destroyed by
fire or other cause whatsoever, Tenant shall promptly repair or rebuild same at
Tenant's expense, so as to make the building at least equal in value to the
building existing immediately prior to such occurrence and as nearly similar to
it in character as shall be practicable and reasonable; and Tenant shall do so,
even though the proceeds of any insurance policies shall be insufficient to
reimburse Tenant therefor.
There shall be no abatement of rent pending any repairs or
rebuilding, nor shall Tenant's obligations hereunder be terminated,
notwithstanding any destruction or damage to the Leased Premises.
Before beginning such repairs or rebuilding, or letting any
contracts in connection therewith, Tenant shall submit for Landlord's approval,
which approval shall not be unreasonably withheld or delayed, complete and
detailed plans and specifications thereof and a listing of all contractors and
subcontractors intended to perform any part of the work. Promptly after
receiving Landlord's approval, Tenant shall begin such repairs or rebuilding
and shall prosecute the same to completion with due diligence. All work shall
be done in a good and workmanlike manner employing appropriate new materials in
accordance with the plans and specifications approved by Landlord, and in
compliance with all
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applicable governmental and insurance requirements. Landlord, its employees,
agents and authorized architects and engineers shall have the right, at any
time during the performance of the work, to inspect the building and the
contracts, plans, specifications, drawings and all other records of Tenant, its
architect, contractors and subcontractors, relating to such repairs or
rebuilding. If Landlord or its authorized representative shall determine that
the work is not being done in accordance with the plans and specifications
approved by Landlord, then upon notice to Tenant specifying any deficiency,
Tenant shall take all steps necessary to promptly correct any such deficiency.
The reasonable charges of any architect or engineer of Landlord employed to
pass upon any plans and specifications and to supervise and approve any
construction shall be paid by Tenant as a cost of the repair or rebuilding.
Notwithstanding the foregoing in this Article 15, in the event
of a casualty for which the amount of damages to the improvements of the Leased
Premises exceeds an amount equal to eighty percent (80%) of the assessed fair
market value of such improvements on the Leased Premises (as determined by the
Real Estate Tax Assessor's office of the county in which the Leased Premises is
located), immediately prior to such casualty; then Landlord may elect within
sixty (60) days of such casualty upon written notice to Tenant to either (i)
require Tenant to rebuild as set forth above in Article 15; or (ii) terminate
the Lease and retain the insurance proceeds; whereupon neither party shall have
any further liability or obligation to the other, except as otherwise provided
elsewhere in this Lease.
Article 16
Condemnation
If the whole of the Leased Premises shall be acquired or taken
by eminent domain for any public or quasi-public use or purpose, or by private
purchase in lieu thereof, then this Lease and the Lease Term hereof shall
automatically cease and terminate as of the date of title vesting in such
proceedings. If only a part of the Leased Premises shall be so acquired or
taken and the remainder is untenantable for the purpose for which Tenant has
been using the Leased Premises then either party shall have the option to
terminate this Lease upon ninety (90) days prior written notice to the other.
If only a part of the Leased Premises shall be so acquired or taken and the
remainder is tenantable for the purpose for which Tenant has been using the
Leased Premises, then this Lease and all of the terms and provisions hereof
shall continue in full force and effect, except that the net annual rental
shall be reduced in the same proportion that the floor area of the building
forming a part of the Leased Premises taken bears to the original floor area of
such building demised hereunder, and Landlord shall, upon receipt of the award
in condemnation, make all necessary repairs or alterations to the building so
as to constitute the remaining premises a complete architectural unit;
provided,
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however, that Landlord, in any event, shall not be required to spend for such
repair and alteration work an amount in excess of the respective amounts
received by Landlord (free and clear of all claims of mortgagees and ground or
underlying lessors and Landlord's costs and professional fees from the action)
as damages for the taking of such part of the Leased Premises. The taking or
condemnation of any parking areas or other open space of the Leased Premises or
any sale, grant, dedication or taking of peripheral or perimeter parts or
portions of the Leased Premises for road widening or road improvement purposes
or for the installation of utilities shall not affect this Lease and Tenant
shall not, in any such event, be entitled to compensation, diminution or
abatement of any rent or other charges.
All damages or compensation awarded or paid for any taking or
condemnation, whether for the whole or a part of the Leased Premises or any
part of the land, buildings and improvements constituting the Leased Premises,
shall belong to and be the property of Landlord without any participation by
Tenant, whether such damages or compensation shall be awarded or paid for
diminution in value of the fee or any interest of Landlord in any ground or
underlying lease covering the Leased Premises or in the leasehold estate
created hereby. Tenant hereby expressly waives and relinquishes all claims to
such award or compensation, or any part thereof, and of the right to
participate in any such condemnation proceedings against the owners of any
interest in the Leased Premises; provided, however, that nothing herein
contained shall be construed to preclude Tenant from prosecuting any claim
directly against the condemning authority, but not against Landlord, for the
value of or damages to and/or the cost of removal of Tenant's property upon the
expiration of the Lease Term, as may be recoverable by Tenant in Tenant's own
right so long as no such claim shall diminish or otherwise affect Landlord's
award. Provided, however, that if as a result of such taking Tenant is
required to replace the parking area or provide new access, in order to use the
Premises in substantially the same manner as before the taking, the cost
incurred by Tenant for such replacement shall be prorated against the rent
becoming due over the remainder of the Lease Term. Tenant shall provide
Landlord with written documentation of such costs reasonably acceptable to
Landlord prior to any such adjustment of rent. Landlord may also elect to
provide an adjacent replacement area, in lieu of the above remedy for Tenant.
Article 17
Mortgaging; Assignment; Subletting
Neither Tenant nor its legal representatives or successors in
interest, by operation of law or otherwise, shall assign, mortgage or otherwise
transfer or encumber this Lease or any interest therein, or sublet or otherwise
permit the Leased Premises or any part thereof to be used or occupied by others
except (i) with the prior written consent of Landlord, which shall
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not be unreasonably withheld, or (ii) to another entity controlled by Tenant.
Any consent by Landlord to any act of mortgaging, assignment or subletting
shall apply only to the specific action authorized. Such consent shall not be
construed as a waiver of the duty of Tenant, its representatives, successors or
assigns, to obtain Landlord's consent to any other or subsequent mortgaging,
assignment or subletting. Any attempted mortgaging, assignment or subletting
without Landlord's prior written consent shall be void and be deemed an Event
of Default hereunder. Any mortgaging, assignment or subletting as permitted by
(i) or (ii) above, will not release or discharge Tenant from any liability
whatsoever under this Lease, and Tenant will remain liable for the performance
and observance of each and every agreement, term, covenant and condition of
this Lease.
In the event that Tenant, upon Landlord's prior written
consent, shall sublet the Leased Premises for a rental in excess of the rent
provided for herein from Tenant to Landlord, then notwithstanding any other
provision contained in this Lease to the contrary, the rent provided for herein
shall automatically be increased during the term of such sublease to a sum
equal to the amount of rent payable under such sublease. In the event that
Tenant shall receive any valuable consideration for an assignment of the
Tenant's interest in this Lease, then, notwithstanding any other provision
contained in this Lease to the contrary, Tenant shall pay to Landlord as
additional rent hereunder the amount of consideration thereby received.
Landlord shall have the right to assign this lease at any
time, upon written notice to Tenant, whereupon Landlord shall be released from
all further or other obligations or liabilities subsequently arising from and
after the date of such assignment. Assignee will assume the Landlord's
obligations under the terms of the Lease. The Assignee of the Landlord shall
have a net worth equal to the then net worth of the Landlord as determined in
accordance with generally accepted accounting practices. Landlord shall
provide Tenant with written notice of any assignment of this Lease.
Article 18
Subordination and Attornment
The rights of Tenant under this Lease shall, at Landlord's
election, be subject and subordinate at all times to all ground leases and/or
underlying leases, if any, now or hereafter in force against the Leased
Premises or any part thereof, and to the lien of any mortgage or mortgages now
or hereafter in force against such leases and/or the Leased Premises, and to
all advances made or hereafter to be made upon the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
The term "mortgages" as used in this Lease shall be deemed to include trust
indentures and deeds of trust.
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The aforesaid provisions shall be self-operative upon notice of election by
Landlord to Tenant and no further instrument of subordination shall be
required. Tenant hereby irrevocably appoints Landlord attorney-in-fact for
Tenant with full power and authority to execute and deliver in the name of the
Tenant any such instrument or instruments.
Tenant agrees that in the event of a sale, transfer or
assignment of Landlord's interest in the Leased Premises, or in the event that
any proceedings are brought for the foreclosure of or exercise of any power of
sale under any mortgage affecting the Leased Premises, or if a deed in lieu
thereof be given, or in the event any ground or underlying lease is cancelled
or terminated, Tenant shall attorn to and recognize such transferee, purchaser,
mortgagee or other party in interest as Landlord under this Lease and to affirm
this Lease so long as such transferee agrees not to disturb Tenant's rights
under this Lease.
Article 19
Estoppel Certificates
Tenant agrees, at any time and from time to time, upon not
less than ten (10) days prior written notice from Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications), the dates to which the rent and other charges have been
paid in advance, if any, and such other matters pertaining to this Lease as may
be requested by Landlord. It is understood and agreed that Tenant's obligation
to furnish such estoppel certificate in a timely fashion is a material
inducement for Landlord's execution of this Lease. Tenant does hereby appoint
Landlord as its attorney-in-fact to execute any such estoppel certificate. It
is intended that any such statement delivered pursuant to this Article may be
relied upon by present or prospective mortgagees, purchasers, ground lessors or
any assignee of any of the foregoing in connection with Landlord's interest in
the Leased Premises.
Article 20
Quiet Enjoyment
Tenant upon paying the rents reserved and performing and
observing all other agreements, terms, covenants and conditions of this Lease
on Tenant's part to be performed and observed hereunder, shall peaceably and
quietly have, hold and enjoy the Leased Premises during the Lease Term,
subject, nevertheless to any ground leases, mortgages, agreements or
encumbrances to which this Lease is or may be subordinated.
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Article 21
Cure of Tenant's Default
If Tenant shall fail to make any payment or perform any act
required hereunder to be made or performed by Tenant hereunder, then Landlord
may, but shall be under no obligation to, after such notice to Tenant and
expiration of any applicable cure period as may be provided for under Article
22 of this Lease, make such payment or perform such act with the same effect as
if made or performed by Tenant. Entry by Landlord upon the Leased Premises for
such purpose shall not waive or release Tenant from any default or obligation
hereunder. Tenant shall reimburse Landlord for all sums so paid and all costs
incurred, including attorneys' fees, upon Landlord's demand therefor.
Article 22
Default
If any one or more of the following events (herein referred
to as an "Event of Default") shall occur:
(a) if default be made in the due and punctual
payment of any rent or other charges, or any part hereof,
payable to Landlord hereunder, when and as the same shall
become due, and such default shall continue for a period of
five (5) days;
(b) if this Lease be mortgaged, assigned or the
Leased Premises or any part thereof be sublet, either
voluntarily or by operation of law, without Landlord's prior
written consent as set forth in Article 17 hereof;
(c) [RESERVED]
(d) if Tenant shall fail to observe, perform or
comply with any of the terms, covenants and conditions in this
Lease other than those provided in subparagraphs (a), (b) and
(c) above, within thirty (30) days after notice from Landlord
specifying the nature of such default; provided, however, that
no Event of Default shall be deemed to occur so long as the
curing of such default reasonably may not be completed within
such thirty (30) day period and Tenant has commenced to cure
such default and thereafter with reasonable diligence pursues
its efforts to cure and does so cure within ninety (90) days;
(e) if Tenant shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or
shall file any petition or answer seeking any reorganization,
readjustment, liquidation, dissolution or similar relief under
any bankruptcy or
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insolvency statute or law of the United States or any State,
or shall seek or consent to or acquiesce in the appointment of
any bankruptcy or insolvency trustee, receiver or liquidator
of Tenant or of all or any substantial part of its properties
or of the Leased Premises;
(f) if within sixty (60) days after the
commencement of any involuntary proceeding against Tenant
seeking any reorganization, readjustment, liquidation,
dissolution or similar relief under any bankruptcy or
insolvency statute or law, Tenant fails to secure a dismissal
and discharge thereof; or
(g) if there shall be an "Event of Default" (as
defined therein) under the Lease dated February 26, 1997,
between A & A Urban Renewal and Michael Foods, Inc. and the
Lease dated February 26, 1997, between Jersey Pride Foods
Urban Renewal and Michael Foods, Inc. (relating to certain
premises located in New Jersey) which Event of Default under
such other lease is not promptly cured within the applicable
cure period, if any.
then and in any such event Landlord, at its option, may at any time thereafter
(in addition to and/or as an alternative to all other legal remedies):
(a) immediately terminate this Lease and Tenant's
right to possession of the Leased Premises; or
(b) terminate only the Tenant's right to
possession of the Leased Premises, without terminating this
Lease or releasing Tenant in whole or in part from Tenant's
obligations hereunder for the full term hereof; or
(c) without terminating this Lease or Tenant's
right to possession of the Leased Premises, enter upon the
Leased Premises and do and perform whatever Tenant is
obligated to do under the terms of this Lease.
In the event Landlord exercises its rights under subparagraph
(a) or (b) immediately above, Tenant shall quit and peacefully surrender the
Leased Premises to Landlord, and Landlord, upon or at any such expiration or
termination, may without further notice, enter upon and reenter the Leased
Premises and possess and repossess itself thereof, as provided by law,
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold and enjoy the Leased Premises and the right
to receive all rental income of and from the same, and further, Landlord may
collect damages in accordance with the law.
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If Tenant's right to possession of the Leased Premises shall
be terminated pursuant to this Article 22, by summary proceedings or otherwise,
Landlord may in its own name, as agent for Tenant if this Lease not be
terminated, or if this Lease be terminated, in its own behalf, enter into
possession of and relet the Leased Premises or any part thereof, or said
premises with additional premises, for such term or terms (which may be greater
or less than the period which would otherwise have constituted the balance of
the Lease Term) and on such conditions (which may include concessions, free
rent and/or alterations of the Leased Premises) as Landlord, in its
uncontrolled discretion, may determine and may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Leased Premises or any part thereof, or of any failure to collect any
rent due upon such reletting.
No such expiration or termination of this Lease, or
termination of Tenant's right of possession thereunder, shall relieve Tenant of
its liability and obligations under this Lease, unless otherwise agreed to in
writing by Landlord, whether or not the Leased Premises shall be relet. Upon
an event of default, Tenant shall pay Landlord the rent and all other charges
required to be paid hereunder by Tenant up to the time of such event.
Thereafter:
(a) Tenant, until the end of the Lease Term, or
what would have been such term in the absence of any such
event, shall be liable to Landlord as damages for Tenant's
default, the equivalent of the amount of the rent and other
charges which would be payable under this Lease by Tenant if
this Lease were still in effect, less the net proceeds of any
reletting effected pursuant to the provisions hereof, after
deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession
costs, brokerage and management commissions, operating
expenses, legal expenses, reasonable attorneys' fees, and
expenses of preparation of such reletting. Tenant shall pay
such damages (herein called "deficiency") to Landlord monthly
on the days on which the net rent would have been payable
under this Lease if this Lease were still in effect, and
Landlord shall be entitled to recover from Tenant each monthly
deficiency as the same shall arise.
(b) At any time after the expiration or
termination of this Lease, in lieu of collecting any further
monthly deficiencies as aforesaid, Landlord shall be entitled
to recover from Tenant, and Tenant shall pay to Landlord, on
demand, as liquidated damages and not as a penalty, an amount
equal to the difference between the total rental and other
benefits which would have accrued to Landlord under this Lease
from the date of termination to the date of the expiration of
the original term demised and the then fair and reasonable
rental value of the Leased
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Premises for the same period. Tenant shall remain
liable for any monthly deficiencies not previously recovered
by Landlord. In the computation of such liquidated damages,
the difference between any installment of rent thereafter
becoming due and the fair and reasonable rental value of the
Leased Premises for the period for which such installment was
payable shall be discounted to the date of termination at the
rate of not more than five percent (5%) per annum.
If the Leased Premises or any part thereof be relet by
Landlord for the unexpired term of this Lease, or any part thereof, before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall prima facie be
the fair and reasonable rental value for the part or the whole of the Leased
Premises so relet during the term of the reletting. Nothing herein contained
shall limit or prejudice the right of Landlord to prove for and obtain as
liquidated damages by reason of such termination, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved, whether or
not such amount be greater, equal to, or less than the amount of the difference
referred to above.
If this Lease be terminated by summary proceedings or
otherwise, or if Tenant's right to possession of the Leased Premises shall be
terminated, and whether or not the Leased Premises be relet, Landlord shall be
entitled to recover from Tenant, and Tenant shall pay to Landlord, in addition
to any damages becoming due under this Article 22, the following: an amount
equal to all expenses, if any, including reasonable attorneys' fees, incurred
by Landlord in recovering possession of the Leased Premises, (whether or not
litigation be commenced in aid thereof), and all costs and charges for the care
of said Leased Premises while vacant, which damages shall be due and payable by
Tenant to Landlord at such time or times as such expenses are incurred by
Landlord.
Tenant hereby expressly waives, so far as permitted by law,
the service of any notice of intention to reenter provided for in any statute
and except as is herein otherwise provided Tenant, for and on behalf of itself
and all persons claiming through or under Tenant (including any leasehold
mortgagee or other creditor), also waives any and all right of redemption or
reentry or repossession in case Tenant shall be dispossessed by a judgment or
by warrant of any court or judge or in case of reentry or repossession by
Landlord or in case of any expiration or termination of this Lease. The terms
"enter," "reenter," "entry" or "reentry" as used in this Lease are not
restricted to their technical legal meanings.
Tenant hereby waives all right to trial by jury in any action
or proceeding hereafter instituted by Landlord against Tenant with respect to
this Lease or the Leased Premises. Tenant
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agrees not to interpose any counterclaim of any nature or description in any
action or proceeding. The foregoing, however, shall not be construed as a
waiver of Tenant's right to assert any claim in a separate action or proceeding
instituted by Tenant.
In the event of any breach or threatened breach by Tenant of
any of the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though reentry, summary proceedings, and other remedies
were not provided for in this Lease.
Article 23
No Waiver
No failure by Landlord to insist upon the strict performance
of any agreement, term, covenant or condition hereof or to exercise any right
or remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by a written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease, but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach thereof.
Article 24
Remedies Cumulative
Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise.
Article 25
Surrender of Premises; Holding Over
Upon the expiration or sooner termination of the Lease Term,
Tenant agrees to quit and surrender the Leased Premises, clean and in good
condition and repair, normal wear and tear and insured casualty excepted,
together with all keys and combinations
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to locks, safes and vaults and all improvements, alterations, additions,
fixtures, equipment and decorations at any time made or installed in, upon or
to the interior or exterior of the Leased Premises (except movable furniture,
furnishings, equipment and other personal property of Tenant put in at Tenant's
expense), all of which shall thereupon become the property of Landlord without
any claim by Tenant therefor, but the surrender of such property to Landlord
shall not be deemed to be a payment of rent or in lieu of any rent reserved
hereunder. Before surrendering the Leased Premises, Tenant shall remove all of
Tenant's said personal property and, at Landlord's option, Tenant shall also,
at Tenant's expense, remove any alterations, additions, fixtures or equipment
that contains or constitutes a "Hazardous Substance" (as defined in Article 5
such that the disposal of the same to a sanitary landfill is not permitted or
is otherwise regulated under applicable law), at any time made or installed by
Tenant in, upon or to the Leased Premises, and Tenant further agrees to repair
any damage caused thereby. If Tenant shall fail to remove any of Tenant's said
personal property or other property required by Landlord to be removed, said
property shall, at the option of Landlord, either be deemed abandoned and may
be disposed of by Landlord at Tenant's expense, or Landlord shall have the
right to remove and store said property, at the expense of Tenant, without
further notice to or demand upon Tenant and hold Tenant responsible for any and
all charges and expenses incurred by Landlord therefor. If the Leased Premises
be not surrendered as and when aforesaid, Tenant shall indemnify Landlord
against all loss or liability resulting from the delay by Tenant in so
surrendering the same, including without limitation, any claims made by any
succeeding occupant founded on such delay. If Tenant shall remain in
possession of the Leased Premises, or any part thereof, for any period after
the termination of this Lease in any of the ways above-named, Tenant shall pay
one and one-half (1.5) times the rent as a month-to-month hold over tenant
until such holding over shall cease. Tenant's obligations under this Article
shall survive the expiration or sooner termination of the Lease Term.
Article 26
Relationship of Parties
Nothing contained in this Lease shall be deemed to constitute
or be construed or implied to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties
hereto, other than the relationship of Landlord and Tenant.
The term "Landlord" as used in this Lease means only the owner
of the current interest of Landlord in the Leased Premises or, as the case may
be, the successor thereto from time to time. In the event of any transfer at
any time of the interest of Landlord, the transferor shall be and is hereby
entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing from and after the date of such transfer, and it shall be
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deemed and construed without further agreement between the parties or their
respective successors in interest or between the parties and the transferee
that the transferee of Landlord's interest has assumed and agreed to carry out
any and all covenants and obligations of Landlord thereafter accruing
hereunder.
Article 27
Successors and Assigns; Provisions Binding
Except as otherwise expressly provided in this Lease, all
covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
Each provision of this Lease to be performed by Tenant shall
be construed to be both a covenant and a condition, and if there shall be more
than one Tenant, they shall all be bound, jointly and severally, by the
provisions of this Lease. The persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly incorporated and
duly qualified corporation and is authorized to do business in the State of its
incorporation and that the person or persons executing this Lease on behalf of
Tenant is an officer or are officers of such Tenant, and that he or they as
such officers are duly authorized to sign and execute this Lease.
Article 28
Notices
Every notice, demand, request or other communication which may
be or is required to be given under this Lease or by law shall be in writing
and shall be sent by United States Certified or Registered Mail, postage
prepaid, return receipt requested, or by nationally recognized overnight
courier (e.g. Federal Express) and shall be addressed: (a) if to Tenant, to
Michael Foods, Inc. 5353 Wayzata Blvd., Suite 324, Minneapolis, MN 55416,
Attention: Jeffrey M. Shapiro; and (b) if to Landlord, to Papetti Holding
Company, One Papetti Plaza, Elizabeth, New Jersey 07207, Attention: Arthur N.
Papetti, with a copy to Martin B. O'Connor, II, O'Connor, Morss & O'Connor,
Liberty Hall Center, 1085 Morris Avenue, Union, NJ 07083-7136, and the same
shall be deemed delivered one (1) business day after being sent via nationally
recognized overnight courier (e.g., Federal Express) or three (3) business days
after being mailed by U.S. Certified or Registered mail, return receipt
requested. Either party may designate, by similar written notice to the other
party, any other address for such purposes.
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Article 29
Miscellaneous
Tenant agrees not to record this Lease or any memorandum
thereof without the prior written consent of Landlord.
Each party covenants, warrants and represents to the other
that there was no broker instrumental in consummating this Lease and that no
conversations or prior negotiations were had by such party with any broker
concerning the renting of the Leased Premises. Each party agrees to indemnify
and hold the other harmless against and from all liabilities, including
attorneys' fees, arising from any claims for brokerage commissions or finders'
fees resulting from or arising out of any conversations or negotiations had by
such party with any broker.
Tenant agrees to annually make available for review by
Landlord and its lenders such financial information and statements as the same
may reasonably request, provided, Landlord and its lenders agree to keep such
information and statements confidential to the extent the same is not public
information.
Article 30
Entire Agreement; Construction
This Lease sets forth the entire agreement between the parties
respecting the Leased Premises. There are no understandings, agreements,
statements, promises, representations or warranties, express or implied, not
specified herein respecting the Leased Premises and all prior conversations and
writings by or between the parties or their representatives are merged herein
and extinguished. This Lease shall not be modified except by a writing
subscribed to by the party to be charged, nor may this Lease be cancelled by
Tenant or the Leased Premises surrendered except with the express written
authorization of Landlord.
This Lease shall be construed, as to both validity and
performance, and enforced in accordance with and shall be governed by the laws
of the jurisdiction in which the Leased Premises are located, without regard to
such jurisdiction's principles of conflicts of law. If any provision of this
Lease or the application thereof to any person or circumstance shall to any
extent be held void or invalid, then the remainder of this Lease or the
application of such provision to persons or circumstances other than those as
to which it is held void or invalid shall not be affected thereby, and each
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
The headings in this Lease are for purposes of reference only
and shall not limit or define the meaning hereof. This Lease
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may be executed in any number of counterparts, each of which is an original,
but all of which shall constitute one instrument.
Article 31
Binding Arbitration
In the event that a dispute arises between Landlord and Tenant
such matter shall be submitted to binding arbitration as follows:
(1) Any arbitration hereunder shall be held
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association except that:
(i) Landlord and Tenant shall each
select one arbitrator. The two appointed arbitrators
shall jointly choose a third arbitrator from a list
provided by the American Arbitration Association and
the third arbitrator shall be the sole arbitrator to
hear the dispute. If either party fails to appoint
an arbitrator within twenty (20) days after demand by
the other party, or the appointed arbitrators fail to
agree to the third arbitrator within twenty (20) days
after a list of potential arbitrators is provided by
the American Arbitration Association, the American
Arbitration Association shall select an arbitrator
for the party failing to make appointment or shall
appoint the third arbitrator, as the case may be.
(ii) The arbitration shall be held in the
City in which any facility leased hereunder is
located, or such other location as the parties shall
mutually agree.
(iii) The parties shall bear their own
expenses of the arbitration, including attorneys fees
and costs of expert witnesses.
(iv) The filing or other fees of the
American Arbitration Association shall be paid
one-half by the Landlord and one-half by the Tenant.
(v) The award of the arbitrators shall be
binding and shall be enforceable in any court of the
state in which the Premises are located.
(2) If the American Arbitration Association is
not then in existence or refuses to administer the arbitration, the arbitration
shall be administered by the most nearly comparable organization as shall be
agreed by the parties, or failing agreement, as shall be determined by the
Union County Superior Court of Elizabeth, New Jersey.
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(3) Notwithstanding anything herein to the
contrary, either party shall have the right to seek injunctive relief to
maintain the status quo until a dispute between the parties can be arbitrated.
In the event that a dispute arises between Landlord and Tenant
involving an amount which is greater than the then current annual base rent
under this Lease, such matter shall be litigated by the parties.
Article 32
Choice of Law; Jurisdiction.
This Lease shall be governed, construed, applied and enforced
in accordance with the laws of the state in which the Premises are located
(without regards to principles of conflicts of laws).
Landlord and Tenant each (i) irrevocably submits to personal
jurisdiction in the courts of the state in which the Premises are located and
the applicable United States District Court serving the county in which the
Premises are located, and appellate courts from any thereof, and (ii)
irrevocably waives any objection which it may have at any time to the laying on
venue of any suit, action or proceeding arising out of or relating to this
Lease brought in any such court, and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Landlord and Tenant each hereby agree that to the extent
permitted by local court rules, any summons, complaint and other process and
notice in connection with the commencement of or any other proceeding in any
such suit, action or proceeding may be served on it by using the notification
procedure set forth in this Lease.
LANDLORD AND TENANT EACH HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS LEASE OR ANY ACTS OR OMISSIONS OF LANDLORD, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 33
Joint Preparation
This Lease is to be deemed to have been prepared jointly by
the parties hereto, and any uncertainty or ambiguity existing herein, if any,
shall not be interpreted against any party, but shall be interpreted according
to the application of the rules of interpretation for arm's length agreements.
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Article 34
Time Is of the Essence
Time is of the essence with respect to all matters provided in
this Lease.
Article 35
Term Renewal
Tenant is granted the right to extend the term of this Lease
for two (2) period(s) of five (5) years each (the "Option Period(s)") on the
terms and conditions set forth herein; provided, however, that each said right
to extend for each such Option Period (the "Option(s)") may be exercised only
in the event Tenant is not in default at the time each said Option right is
exercised and provided, further, that the Option for the immediately preceding
Option Period, if any, has been exercised. The phrase "Lease Term" as used in
this Lease shall mean the term of this Lease as extended by Tenant pursuant to
this Article.
To exercise each Option, Tenant shall notify Landlord in
writing no later than one (1) year prior to the expiration of the initial Lease
Term or the Option Period then expiring, if any.
In the event Tenant properly exercises its Option as provided
herein: (1) all of the terms and conditions of this Lease shall apply during
the Option Period(s) (except the Option then exercised), including, but not
limited to, Tenant's obligation to pay all costs, charges and expenses provided
for in the Lease; (2) the Option exercised by Tenant in order to extend the
Term of the Lease shall terminate and be of no further force and effect and may
not be exercised again by Tenant; (3) no concession previously granted Tenant
by Landlord in the initial term shall be due or payable to Tenant during or
with respect to such Option Period; and (4) the monthly base rent payable under
Article 2 during the particular Option Period shall be determined as set forth
below. At Landlord's request, prior to the commencement of the particular
Option Period, Tenant shall execute, acknowledge, and deliver to Landlord an
amendment to lease evidencing Tenant's exercise of its Option and setting forth
the commencement and expiration dates of the Option Period and term of the
Lease and the monthly base rent payable during the Option Period.
The Annual Rent payable monthly under Article 2 during each
Option Period shall be such amount as may be agreed upon by the parties and
which is not less than 110%, nor more than 135%, of the Annual Rent for the
twelve (12) months immediately preceding the commencement of the applicable
Option Period (the "Option Period Rent").
If the parties are unable, within sixty (60) days of notice by
Tenant electing to extend the term of the Lease, to agree
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on the amount of the Option Period Rent then each party shall within ten (10)
days thereafter designate and select an M.A.I. certified appraiser and submit
to them what such party believes the Option Period Rent should be. The two
appraisers shall then together within thirty (30) days determine and agree upon
the Option Period Rent by selecting either the Option Period Rent proposed by
Landlord or that proposed by Tenant, with no other variation.
If the two appraisers are unable within said thirty (30) days
to agree on either Landlord's or Tenant's proposed Option Period Rent, then
they shall together designate a third M.A.I. appraiser, who alone shall select
either Landlord's or Tenant's proposed Option Period Rent as the Annual Rent,
which determination shall be binding and enforceable upon all parties.
Each party shall pay the cost of the appraisers selected by
such party and the costs of the third appraiser (if retained) shall be paid
equally by each party.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW
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TENANT:
MICHAEL FOODS, INC., a Delaware corporation
(Seal) By: /s/ Gregg A. Ostrander
-------------------------------------
Attest: Gregg A. Ostrander, President
-------------------------------------
Print Name Here
- -------------------------------
(Ass't) Secretary
LANDLORD:
PAPETTI HOLDING COMPANY, a New Jersey
General partnership
Witness: By: /s/ Anthony Papetti
--------------------------------------
Anthony Papetti, General Partner
- -------------------------------
- -------------------------------
[SIGNATURE PAGE TO LEASE AGREEMENT]
STATE OF )
----------------- )
OF )
- ----------- -----------
On this day of , 1997, before me personally
appeared , to me personally known, who, being
by me duly sworn, did say that he is the of MICHAEL FOODS,
INC., a Delaware corporation, and that said instrument was signed on behalf of
said corporation by authority of its Board of Directors; and said officer
acknowledged said instrument to be the free act and deed of said corporation.
<PAGE> 36
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the and State aforesaid, the day and year first
above written.
----------------------------
Notary Public
(SEAL)
My Commission Expires:
STATE OF )
----------------- )
OF )
- ----------- -----------
On this day of , 1997, before me personally
appeared ANTHONY PAPETTI, to me personally known, who, being by me duly sworn,
did say that he is a partner of PAPETTI HOLDING COMPANY, a New Jersey general
partnership, and that said instrument was signed by him as partner on behalf
of said general partnership; and said ANTHONY PAPETTI acknowledged said
instrument to be the free act and deed of said general partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the and State aforesaid, the day and year first
above written.
-----------------------------------
Notary Public
(SEAL)
My Commission Expires:
<PAGE> 37
EXHIBIT A
DESCRIPTION OF PREMISES
847-855 North Avenue, Elizabeth, New Jersey (Buildings Two and Three - 60,000
sq. ft.); 900 North Avenue, Elizabeth, New Jersey (Building five - 5,625 sq.
ft.)
(LEGAL TO FOLLOW)
<PAGE> 1
EXHIBIT 10.49
EXECUTION COPY
LEASE BY AND BETWEEN
PAPETTI HOLDING COMPANY
JACK BERNSTEIN, SHERWOOD WEISER AND
ESTATE OF DAVID LEVINSON
AS LANDLORD,
AND
MICHAEL FOODS, INC.,
AS TENANT
DATED FEBRUARY 26, 1997
<PAGE> 2
INDEX
Article Page
1 Leased Premises; Lease Term . . . . . . . . . . . . . . . . . . . . . 1
2 Rent Payments; Net Lease . . . . . . . . . . . . . . . . . . . . . . 1
3 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . 2
4 No Representations . . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Compliance with Laws; Insurance Regulations . . . . . . . . . . . . . 3
6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Repair, Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . 6
8 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Covenant Against Liens . . . . . . . . . . . . . . . . . . . . . . . 8
10 Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . . 9
11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . 15
16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Mortgaging; Assignment; Subletting . . . . . . . . . . . . . . . . . 17
18 Subordination and Attornment . . . . . . . . . . . . . . . . . . . . 18
19 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . 19
20 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21 Cure of Tenant's Default . . . . . . . . . . . . . . . . . . . . . . 20
22 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 24
25 Surrender of Premises; Holding Over . . . . . . . . . . . . . . . . . 24
i
<PAGE> 3
26 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . 25
27 Successors and Assigns; Provisions Binding . . . . . . . . . . . . . 26
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
30 Entire Agreement; Construction . . . . . . . . . . . . . . . . . . . 27
31 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 28
32 Choice of Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . . 29
33 Joint Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . 29
34 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . . 29
35 Term Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ii
<PAGE> 4
L E A S E
THIS LEASE made and entered into as of the 26th day of February,
1997, between PAPETTI HOLDING COMPANY, a New Jersey general partnership, JACK
BERNSTEIN, SHERWOOD WEISER AND ESTATE OF DAVID LEVINSON, having its principal
office at One Papetti Plaza, Elizabeth, New Jersey 07027 (hereinafter called
"Landlord") and MICHAEL FOODS, INC., a Delaware corporation, having its
principal office at 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota
55416 (hereinafter called "Tenant").
A. Landlord is the owner of certain land and
improvements more particularly described on Exhibit A attached hereto (the
"Real Estate").
B. Tenant desires to lease from Landlord, and Landlord
is willing to lease to Tenant the Real Estate and improvements thereon upon and
subject to the terms, provisions and conditions of this Lease.
NOW THEREFORE, Landlord and Tenant, for and in consideration
of the rents, agreements, terms, covenants and conditions hereinafter mentioned
and hereby agreed to be paid, kept and performed by Landlord and Tenant, their
legal representatives, successors and assigns, do hereby mutually agree as
follows:
Article 1
Leased Premises; Lease Term
Upon and subject to the agreements, terms, covenants and
conditions hereinafter set forth, Landlord hereby leases to Tenant, and Tenant
hereby rents and leases from Landlord, the Real Estate, together with any and
all buildings, fixtures, structures and other improvements located thereon
(collectively with the Real Estate, the "Leased Premises"), subject to existing
restrictions, covenants, easements, rights and encumbrances of record.
TO HAVE AND TO HOLD for a term commencing on the date hereof
and ending on midnight of the day preceding the tenth (10th) annual anniversary
of the "Rent Commencement Date" as hereinafter defined (the "Lease Term")
unless sooner terminated or extended as herein provided. The "Rent
Commencement Date" shall mean March 1, 1997.
Article 2
Rent Payments; Net Lease
Tenant, during the Lease Term, will pay to Landlord an annual
rental of Two Hundred Forty-Nine Thousand Three Hundred Forty- Eight Dollars
($249,348.00) in equal monthly installments of Twenty Thousand Seven Hundred
Seventy-Nine Dollars ($20,779.00) in advance on or before the first day of each
calendar month. The
1
<PAGE> 5
rent for any partial month at the commencement hereof shall be prorated and
paid upon Tenant's execution of this Lease. Landlord may assess a charge of
five percent (5%) of the monthly rent installment due for any monthly payment
that is received more than five (5) days after it is due.
Tenant will pay to Landlord the rent herein reserved, without
prior demand or notice and without any setoffs, abatements, or deductions
whatsoever, at the office of Landlord or at such other place as Landlord shall
designate in writing. All other sums that may become due or be payable to
Landlord hereunder shall be paid at the time and in the manner herein provided
at the office of Landlord. All of such other sums so to be paid may, at
Landlord's option, be deemed to be additional rent to be added to any fixed
rent then due or thereafter falling due, and in the event of non-payment,
Landlord shall have all the rights and remedies herein provided.
If Tenant fails the net worth requirement of Article 13, then
Tenant shall deliver to Landlord the sum equal to one month's base rent as
security payment for the performance by Tenant of every covenant and condition
of this Lease. If Tenant shall default with respect to any covenant or
condition of this Lease, including, but not limited to, the payment of rent,
Landlord may apply the whole or any part of such security payment to the
payment of any sum in default or any other sum which Landlord may be required
to spend by reason of Tenant's default, and Tenant shall thereafter upon demand
of Landlord fully restore the original amount of the security deposit. After
all of the Tenant's obligations under this Lease shall have been satisfied, the
security payment or any remaining balance thereof shall be returned to Tenant.
In the event of a bona fide sale of the property of which the Leased Premises
are a part, Landlord shall have the obligation to transfer such security to the
purchaser to be held by such purchaser under the terms of this Lease, and
Landlord shall be released from all obligation and liability for the return of
such security to Tenant provided such transferee assumes such obligation.
Tenant acknowledges that the rent and other payments to
Landlord hereunder are intended to be "net" to Landlord and that this Lease is
a so called "triple net" or "net net net" lease to Landlord.
Article 3
Use of Leased Premises
Tenant shall occupy the Leased Premises during the Lease Term
for the purposes set forth on Exhibit A hereto and for no other purpose or use
without Landlord's prior written consent. Tenant shall not use or occupy or
permit the Leased Premises or any part thereof to be used or occupied for any
other business, use or purpose without Landlord's prior written consent, which
shall not
2
<PAGE> 6
be unreasonably withheld. Tenant shall apply for, secure, maintain and comply
with all licenses, permits, or accreditations which may be required for the
conduct by Tenant of the use of the Leased Premises, as herein permitted.
Article 4
No Representations
Tenant is fully familiar with the physical condition of the
Leased Premises, and Tenant accepts and takes the Leased Premises in their "as
is" and "where is" condition. Landlord has made no representations whatsoever
in connection with the condition of the Leased Premises or any part thereof,
and Landlord shall not be liable for any latent or patent defects therein.
Article 5
Compliance with Laws; Insurance Regulations
Throughout the Lease Term, Tenant shall, at its sole cost and
expense, promptly observe and comply with all laws, ordinances, orders,
regulations, rules, standards and requirements of every government (whether
federal, state or local), municipality or other governmental authority,
including but not limited to CERCLA, RCRA, TOSCA, FIFRA, OSHA and SARA (as the
same are commonly referred to under the federal environmental laws), and the
Americans with Disabilities Act of 1990, as amended (the "ADA"), and including
any agency or department thereof, having jurisdiction over Tenant or the Leased
Premises (collectively, "Governmental Regulations"), and of the local fire
insurance rating organization, and of all insurance companies writing policies
covering the Leased Premises or any part thereof, relating to the Leased
Premises, or the facilities, fixtures or equipment therein, or the use and
occupation or franchises and privileges connected therewith; whether or not
such laws, ordinances, orders, regulations, rules or requirements shall
necessitate improvements, interference with the use and enjoyment of the Leased
Premises, replacements or repairs, extraordinary as well as ordinary, foreseen
or unforeseen, and whether the same now are in force or may, at any time in the
future, be enacted or directed; and Tenant shall pay all costs, expenses,
claims, fines, penalties and damages that may in any manner arise out of or be
imposed because of the failure of Tenant to comply with any of the foregoing.
Landlord, its agents and representatives, may at any time
during the term of the Lease enter upon the Leased Premises, or any part
thereof, for the purpose of determining and ascertaining the environmental
status of the same, including but not limited to the performing of
environmental audits or surveys of the condition of the Leased Premises; and
may further video tape, from time to time, the condition of the Leased
Premises, or any building or other improvements thereon, for the purpose of
better assuring and determining Tenant's fulfillment of its obligations
hereunder.
3
<PAGE> 7
Tenant shall be responsible for and shall bear all costs and
expenses associated with any and all alterations to the Leased Premises, which
may be required by the ADA for the accommodation of disabled individuals who
may be employed from time to time by Tenant, or any disabled customers,
clients, guests, or invitees or sublessees. Tenant shall indemnify and hold
Landlord harmless from and against any and all costs incurred arising from the
failure of the Leased Premises to conform with the ADA, including the cost of
making any alterations, renovations or accommodations required by the ADA, or
any government enforcement agency, or any court, any and all fines, civil
penalties, and damages awarded against Landlord resulting from a violation or
violations of the ADA, and all reasonable legal expenses and court costs
incurred in defending claims made under the ADA, including reasonable
attorneys' fees.
Tenant shall not (i) use, store, generate, treat, sell or
dispose in, on or about the Leased Premises, any "Hazardous Substances"
(hereinafter defined), or (ii) permit the use, storage, generation, treatment,
selling or disposal in, on or about the Leased Premises of any Hazardous
Substances, except Hazardous Substances in such amounts and of such types that
are commonly and customarily used in compliance with Governmental Regulations
in the operation, cleaning and maintenance of Tenant's business operated in the
ordinary course. "Hazardous Substances" or "Hazardous Substance" as used in
this Lease shall mean any substances, waste or substance now or hereafter
designated as, or containing components designated as, hazardous, dangerous,
toxic or harmful and/or subject to any Governmental Regulations, including,
without limitation, asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment which contains dielectric fluid or other fluids
containing levels of polychlorinated biphenyls in excess of fifty (50) parts
per million and petroleum products in any form. Tenant shall (i) promptly
comply with all Governmental Regulations now or hereafter pertaining to the
use, discharge, handling, transportation, disposal, treatment, generation,
storage, sale or presence on the Leased Premises of Hazardous Substances; and
(ii) allow Landlord or Landlord's agents or representatives to enter onto the
Leased Premises at all times to check Tenant's compliance with all applicable
Governmental Regulations regarding Hazardous Substances should Landlord have a
reasonable belief that Tenant is not in compliance with all applicable
Governmental Regulations regarding Hazardous Substances. If Tenant is found to
not be in compliance with all applicable Governmental Regulations regarding
Hazardous Substances, all reasonable costs incurred by Landlord and associated
with Landlord's inspection of the Leased Premises and Landlord's monitoring of
Tenant's compliance with this Article, including Landlord's reasonable
attorneys' fees and costs shall be deemed additional rent and shall be due and
payable to Landlord immediately upon demand by Landlord. Tenant shall
indemnify, defend and save Landlord, its officers, directors, shareholders,
managers, agents and employees harmless from and against any and all damages,
penalties, costs and other liabilities (including Landlord's attorneys' fees
and costs and the cost of any remedial
4
<PAGE> 8
or abatement activities), arising during the term of this Lease or anytime
thereafter, directly or indirectly, from the use, discharge, handling,
transportation, disposal, treatment, generation, storage, existence or sale of
Hazardous Substances, during the term of this Lease in, on or about the Leased
Premises except to the extent such use, discharge, handling, transportation,
disposal, treatment, generation, storage, existence or sale of Hazardous
Substances resulted solely from the actions of Landlord. Tenant's obligations
under this Article shall survive the termination of this Lease.
Tenant shall, at Tenant's sole expense, comply with all laws,
rules, regulations, requirements, standards and ordinances enacted or imposed
by any governmental unit having jurisdiction over Tenant, the Leased Premises,
signage at the Leased Premises or Tenant's business. Tenant shall not use or
occupy the Leased Premises nor permit its use or occupancy for any unlawful use
or purpose, nor for any purpose which may be hazardous on account of fire,
environmental concerns or otherwise, nor for any use or purpose which might
render Landlord's insurance on the Leased Premises void.
Tenant agrees that if its storage, accumulation,
transportation, treatment or disposal of such Hazardous Substances results in
(i) contamination of the soil or surface or groundwater or (ii) loss or damage
to any person(s) or property, Tenant shall (a) notify Landlord immediately of
any contamination, claim of contamination, loss or damage, (b) proceed with due
diligence to clean up any such contamination in full compliance with all
applicable federal, state and local statutes, regulations and standards, and
(c) indemnify, defend and hold Landlord harmless from and against any and all
claims, suits, causes of action, penalties, fines, costs and fees, including
attorney's fees, arising from or connected with any such contamination, claim
of contamination, loss or damage. The foregoing provision shall survive the
termination of the Lease.
The parties hereto shall use their best efforts to resolve any
disputes regarding the origin of any contamination or claim of contamination or
the responsibility as between Landlord and Tenant of clean up of any such
contamination or claim of contamination. Landlord and Tenant agree that if
they are unable to resolve such a dispute, then the provisions of Article 31
governing resolution of disputes shall apply. The parties agree that the
arbitrator shall be retained only to resolve the dispute and in no event will
be retained by either party to conduct any resulting cleanup or remediation of
any suspected release of hazardous waste.
5
<PAGE> 9
To the extent applicable or may become applicable based on
Tenant's use of the Leased Premises or the termination of the Lease, Tenant at
its cost and in a timely manner shall (i) comply with "The Industrial Site
Recovery Act", N.J. Stat. Ann. Sections 13:1K-6 to -14, and the regulations
promulgated thereunder or obtain an exemption from compliance (See N.J. Admin.
Code 7:26B-1.9(a)); (ii) comply with "The Spill Compensation and Control Act",
N.J. Stat. Ann. Sections 58.10-23.11 to .24, and the regulations promulgated
thereunder, "The Pollution Prevention Act", N.J. Stat. Ann. Sections 13.1D-35
et seq. and Sections 34:5A-1 et seq., and the regulations promulgated
thereunder, and Sections 58:10A-21 through 58:10A-37 of the New Jersey
Statutes, and the regulations promulgated thereunder. The enumeration of
specific state statutes and regulations above shall in no way limit the
obligation of Tenant to otherwise comply with all other state laws and
regulations applicable to it, and Tenant expressly covenants to so comply at
all times and in all material respects during the term of this Lease.
Article 6
Utilities
Tenant shall make application for and arrange for the
installation of all utility meters or other devices as it may deem necessary
for its purposes, and Tenant shall be solely responsible for and promptly pay,
as and when the same become due and payable, all charges for water, sewer,
sprinkler, electricity, gas, telephone or other communication, fire or burglar
alarm systems, and any other utility or service supplied, used or consumed in
connection with the Leased Premises. Tenant shall use any utilities supplied
to or serving the Leased Premises in accordance with the regulations of the
public utility company or the governmental agency supplying the same, and
Tenant shall not at any time overburden or exceed the capacity of the mains,
feeders, ducts, conduits or other facilities by which such utilities are
supplied to, distributed in or serve the Leased Premises. Landlord shall not
be liable in damages or otherwise for any interruption in the supply of any
utility or service to the Leased Premises, nor shall any such interruption
constitute any ground for constructive eviction or an abatement of any of the
rents reserved hereunder.
Article 7
Repair, Maintenance and Replacement
Tenant, at its sole cost and expense, shall take good care of
the Leased Premises and of all buildings, structures, improvements, fixtures
and equipment now or hereafter located thereon, interior and exterior, and keep
the same and all parts thereof, including without limiting the generality
thereof, the roof, roof membrane and subroofing, foundations, exterior walls,
parking areas, the grounds, landscaped areas, (grass cutting, lawn and
shrubbery maintenance, tree and plant watering and care),
6
<PAGE> 10
drainage ditches, and swales, gutters, downspouts, glass, structural and
interior and exterior portions of the buildings and the plumbing, sprinkler
system, heating, air conditioning, wiring and other systems therein and
facilities thereof and all sidewalks, parking areas, driveways, passageways and
alleys adjacent thereto and other appurtenances thereunto belonging, and all
fixtures, machinery and equipment which constitute any part of the Leased
Premises, together with any and all alterations, additions and improvements
therein and thereto, in at least as good order and condition as exists on the
date hereof, suffering no waste or injury; and shall, at Tenant's sole cost and
expense, perform all maintenance and promptly make all needed repairs and
replacements, extraordinary as well as ordinary, structural or otherwise,
foreseen or unforeseen, in and to any of the foregoing and the buildings,
structures or improvements now or hereafter located thereon, including streets,
sidewalks, curbs and gutters, vaults, water, sprinkler systems, sewer and gas
connections, plumbing, pipes and mains, and all other fixtures, machinery and
equipment (including the lighting, electrical, heating, ventilation and
air-conditioning systems) now or hereafter belonging to or connected with the
Leased Premises or used in their operation. All such maintenance, repairs and
replacements shall be of first-class quality sufficient for the proper
maintenance and operation of the Leased Premises. Tenant shall keep and
maintain the Leased Premises in a clean and safe condition, and Tenant shall
not permit the accumulation of waste or refuse matter, nor permit anything to
be done or allow any condition to exist which would invalidate or prevent the
procurement of any insurance policies which may at any time be required
pursuant to the provisions of this Lease. Tenant shall not obstruct or permit
the obstruction of any parking areas, streets or sidewalks located on or
adjoining the Leased Premises, and shall keep such parking areas, streets and
sidewalks free of snow and ice.
In addition, Tenant shall, during the term of this Lease,
perform the periodic preventive maintenance recommended by such systems'
manufacturers. Both maintenance and preventive maintenance shall be performed
by such contractors as are recommended by Landlord or such other entities as
are mutually agreed upon by the parties hereto. Tenant shall, on January 1 of
each year while Tenant is in occupancy of the Premises, provide Landlord with
evidence of an executed preventive maintenance contract for all mechanical
equipment (HVAC) provided. Tenant shall pay for the annual mechanical
equipment inspection fees, if any, imposed by any governmental authority.
Tenant agrees to keep the interior of the Leased Premises,
including all plate glass windows, doors, dock bumpers, levelers, and seals in
good repair as well as the floors and floor drains.
Landlord reserves the right to take video footage of the
condition of the Leased Premises as of the Commencement Date, a
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<PAGE> 11
copy of which shall be provided to Tenant and shall be an exhibit hereto.
On the default of Tenant of its obligations to maintain and
repair the Leased Premises as set forth above for a period of fifteen (15) days
after written notice from Landlord demanding cure of same, Landlord may, but
shall not be required to, cause all required maintenance, repairs or
replacements to be made, for Tenant's account, and Tenant shall promptly pay
Landlord all costs incurred plus an administrative fee of fifteen percent (15%)
of such costs and said amount shall constitute and be collectible as additional
rent hereunder.
Article 8
Alterations
Tenant shall not make any exterior or structural alterations,
improvements, or additions to the Leased Premises in excess of $125,000 without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld. Such exterior or structural alterations, improvements,
or additions, if consented to by Landlord, shall be made under the supervision
of an architect or engineer reasonably satisfactory to Landlord and in
accordance with plans and specifications approved by Landlord. Tenant shall
not make any interior or nonstructural alterations, improvements, or additions
to the Leased Premises in excess of $125,000 without obtaining Landlord's prior
written consent which shall not be unreasonably withheld.
All alterations, improvements, and additions made to the
Leased Premises shall be effected with due diligence, in a good and workmanlike
manner employing appropriate new materials and in compliance with all
applicable governmental and insurance requirements and shall be promptly and
fully paid for by Tenant; and no alterations, improvements, or additions made
to the Leased Premises shall change the general character of the Leased
Premises, impair its usefulness, or reduce the fair market value thereof below
its value immediately before such alteration, improvement, or addition. Prior
to proceeding with any alteration, improvement or addition requiring Landlord's
consent hereunder, Tenant shall at Landlord's request furnish Landlord with
satisfactory evidence of worker's compensation insurance in statutory limits of
Tenant, or any contractor or subcontractor performing work for Tenant on the
Leased Premises, as well as satisfactory evidence of all insurance coverage
required to be maintained by Tenant under this Lease. In addition, Landlord
may require that before commencement or continuance of such alteration,
improvement or addition, Tenant furnish Landlord with such security or
performance bond as Landlord shall request in order to assure completion of
same and protect against any and all liens, chattel mortgages and security
interests arising in connection therewith.
8
<PAGE> 12
Article 9
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of
any mechanics', materialmen's or other liens against the Leased Premises by
reason of any work, labor, services or materials performed or supplied or
claimed to have been performed or supplied to Tenant, or anyone holding the
Leased Premises, or any part thereof, through or under Tenant. Tenant shall
pay and obtain a release of record of any such lien, by payment thereof or if
Tenant intends to contest the lien by filing a bond or other security or
collateral reasonably acceptable to Landlord, within thirty (30) days after the
date of filing thereof, failing which, and in addition to any other rights of
Landlord hereunder, Landlord shall have the right to vacate and release the
same and charge the cost thereof (including attorneys' fees) to Tenant, such
charge to be due and payable upon demand. Tenant shall defend, indemnify and
hold Landlord harmless from and against any and all liability, loss, damage,
cost and expense (including court costs and attorneys' fees) arising out of or
in connection with any such lien or the enforcement or removal thereof.
Article 10
Landlord's Right of Entry
Landlord and Landlord's employees, agents and contractors, and
their respective employees and agents, shall be permitted during the Lease Term
to inspect the Leased Premises, after first giving Tenant such notice as is
reasonable under the circumstances, (except in the case of an emergency when
prior notice shall not be required), during reasonable business hours (except
in the case of an emergency) for the purposes of (a) ascertaining the condition
of the Leased Premises; (b) making semi-annual mutual inspections; (c)
inspecting any replacements or repairs or the performing any other act as may
be required of Landlord or Tenant under the terms of this Lease; and (d)
showing the Leased Premises to prospective tenants, purchasers or mortgagees.
Article 11
Taxes
Tenant shall, (subject to Tenant's right to contest as set
forth hereafter), in all instances, pay and discharge at its sole expense, all
duties, taxes, assessments, impositions, or charges of any kind, license and
permit fees, and other governmental levies and charges of every kind and nature
whatsoever, general and special, extraordinary as well as ordinary, whether
foreseen or unforeseen, which shall during the Lease Term be laid, levied,
assessed, imposed, become due and payable, or
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<PAGE> 13
liens upon, or arise in connection with the ownership, use, occupancy or
possession of the Leased Premises, or any part thereof, or any appurtenances
thereto, or the streets, sidewalks, vaults, curbs and gutters adjoining the
Leased Premises, or the leasehold estate hereby created, by virtue of any
present or future law, ordinance, order, regulation, rule or requirement of any
government (whether federal, state or local), municipality or other
governmental authority, including any agency or department thereof. In
addition, Tenant shall pay and discharge any and all taxes and other charges
levied, assessed or imposed upon the fixtures, furnishings, equipment and all
other personal property of Tenant in, upon or about the Leased Premises, and
any license or excise covering business conducted in the Leased Premises. The
duties, taxes, assessments, impositions, charges, fees and payments
above-described are sometimes referred to herein collectively as "Impositions".
Nothing contained herein shall require Tenant to pay any inheritance, estate,
succession, transfer, gift, franchise, corporation, income or profit tax or
capital levy that is or may be imposed upon Landlord, unless such described tax
shall be levied upon the rent herein reserved, or otherwise imposed on
Landlord, in replacement of or substitution for any Impositions as are
presently levied, assessed or imposed.
All Impositions shall be paid by Tenant to the governmental
authorities charged with the collection thereof on or before the last day upon
which the same may be paid without interest or penalty for the late payment
thereof and Tenant shall forward a copy of the paid tax bill to Landlord within
thirty (30) days of such payment to the applicable governmental authority. In
the case of Impositions which may be payable in installments, installments
shall be payable within the longest period provided by law, be prorated with
Tenant charged during the term hereof, and Tenant shall only be obligated to
pay such installments as the same fall due during the Lease Term.
Any real estate taxes or water and sewer rents imposed for the
applicable fiscal tax period in which the Lease Term begins or ends shall be
prorated and adjusted between Landlord and Tenant.
Landlord shall forthwith forward to Tenant all applicable tax
bills as received by Landlord or cause the same to be directly sent to Tenant
and Tenant shall provide to Landlord within sixty days (60) after the due date
for payment of such Imposition, reasonable evidence that such Imposition has
been timely paid. If the present method of assessing, levying or charging
general public revenue or taxes against or upon the Leased Premises shall be
changed during the term of this Lease so that such taxes, assessments or
charges, instead of being assessed or levied directly against the land or
improvements constituting the Leased Premises, be levied, assessed or charged
in lieu thereof, in whole or in part, against Landlord's reversionary interest
in the same or against the rent or income arising from the use or occupancy of
the Leased Premises, then in such event, Landlord shall forthwith timely advise
Tenant of each such change, and Tenant shall pay
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every such Imposition so made, subject always to Tenant's right to contest such
change as permitted hereafter. All such Impositions for any fractional year
within the term of this Lease shall be prorated between Landlord and Tenant on
a pro rata basis, with Tenant paying only such portions thereof which are
properly allocable to the term of this Lease.
Tenant shall have the right, in its or Landlord's name, to
contest in good faith the validity of any Imposition, or the method of
assessment thereof, which Tenant is required to bear, pay and discharge
hereunder, and for that purpose shall have the right to institute such
proceedings in name of Landlord as it may deem necessary, provided that
expenses incurred by reason thereof shall be paid by Tenant. Tenant further
agrees that it shall diligently prosecute such contest, at all times
effectually stay or prevent any official or judicial sale of the Leased
Premises, under execution or otherwise, and pay any final judgment enforcing
such contested Imposition and thereafter promptly procure record satisfaction
or release thereof. Tenant further agrees that if it becomes necessary to
institute an action in a court of competent jurisdiction in order to contest
such Imposition then, in that event, it shall give Landlord at least ten (10)
days' prior written notice of its intention to institute such action and at the
same time furnish Landlord a bond in such amount as Landlord may designate,
executed by a corporate surety licensed to do business in the state where the
Leased Premises are located and acceptable to Landlord, indemnifying and
protecting Landlord and any other person now or hereafter having any interest,
whether as security for indebtedness or otherwise, in the Leased Premises from
and against all liability, loss, damage, cost and expense of whatever kind or
nature growing out of or in any way connected with the fee, tax, assessment or
other charge complained of or the contest thereof.
Article 12
Insurance
Tenant agrees to secure, maintain and keep in force at all
times during the Lease Term, at Tenant's sole cost and expense, the following
policies of insurance:
(a) Direct Property Damage Insurance covering the
building and other improvements (including leasehold
improvements) on the Leased Premises to the extent of one
hundred percent (100%) of the full replacement cost thereof,
exclusive of the cost of excavations, foundations, and
footings and all improvements and fixtures required to be
insured by Tenant pursuant to Article 12(c) hereof, providing
protection against perils that are covered under standard
insurance industry practices within the classification of all
risk property damage insurance. Such insurance shall name as
an
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additional insured Landlord and any other parties in interest
as may be from time to time designated in writing by notice
from Landlord to Tenant. In addition, such insurance shall be
made payable to Tenant, Landlord and such additional parties
in interest from time to time designated by Landlord to
Tenant, as their interest may appear.
(b) Comprehensive General Liability Insurance
covering the Leased Premises and Tenant's use thereof against
claims for bodily injury or death, property damage or personal
injury, however caused, with a combined single limit of not
less than two million dollars ($2,000,000) for bodily injury
and property damage. Such insurance shall, in addition to
premises and operations liability, include contractual
liability insurance to cover all contractual liability assumed
by Tenant under or by virtue of this Lease (including, without
limitation, Article 15 hereof), broad form property damage,
loss of rental income, Product and Completed operations
liability. In addition, motor vehicle liability coverage with
not less than $1 million dollar policy limits shall be kept in
force by Tenant at all times during the term of this Lease.
All such insurance shall name as an additional insured
Landlord and any other parties in interest as may be from time
to time designated in writing by notice from Landlord to
Tenant. In addition, such insurance shall be made payable to
Tenant, Landlord and such additional parties in interest from
time to time designated by Landlord to Tenant, as their
interest may appear.
Tenant shall further maintain, at its sole cost
during the term of this Lease Excess or Umbrella Liability
insurance with minimum limits of $10 million; naming Landlord
as an additional insured.
(c) [RESERVED]
(d) Comprehensive Boiler and Machinery insurance
coverage, covering all boilers, pressure vessels, production
equipment, air-conditioning equipment and electrical equipment
which serve the Leased Premises, with per occurrence limits of
not less than two million dollars ($2,000,000).
(e) Workers' Compensation Insurance (including
occupational disease insurance) as may be from time to time
required by the laws of the state in which the Leased Premises
are located;
(f) Employers' Liability Insurance with a per
occurrence limit of not less than $500,000;
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All such policies of insurance shall be issued by insurance
companies licensed and admitted to do business in the State in which the Leased
Premises are located, which are reasonably acceptable to Landlord and having a
rating of A+ or better. In addition, all such policies of insurance shall
contain an endorsement providing that such insurance may not be materially
changed, amended or cancelled except after thirty (30) days' prior written
notice from the insurance company to Landlord, sent by registered mail or
nationally recognized overnight courier (e.g. Federal Express). The original
policy or policies shall be made available, from time to time, upon request of
Landlord to review and/or copy and Tenant shall deliver to Landlord together
reasonably satisfactory evidence of payment of the premium thereof, on or
before the commencement date of the Lease Term. Prior to expiration of each
policy term, Tenant shall deliver to Landlord written proof of renewal or
continuation of the policies and will deliver to Landlord certificates of
insurance within 20 days after renewal or issuance of the policies. If Tenant
at any time fails or refuses to procure and maintain the required amount of
insurance, then Landlord may, immediately and without notice to Tenant, obtain
same for and on behalf of Tenant and charge the cost thereof to Tenant, such
charge to be due and payable upon demand.
Except for the intentional acts of the Landlord, Tenant, and
all parties claiming under or through Tenant, hereby expressly releases and
discharges Landlord from any claim or liability, whether based on negligence or
any reason whatsoever, for any personal injury, property damage, or other loss
covered by Tenant's insurance. The aforesaid release shall apply only when
permitted by the applicable policy of insurance. All policies of Tenant shall
contain an endorsement containing an express waiver of any right of subrogation
by the insurance company against Landlord, provided that this waiver shall not
be applicable if it has the effect of invalidating any insurance coverage of
Landlord or Tenant, or if the applicable insurance policies do not contain a
clause to the effect that this waiver shall not affect the right of the insured
to recover under such policies.
Article 13
Escrow
Notwithstanding the provisions of this Lease, if Tenant, or
any successor or assignee then a tenant under this Lease as the Tenant, shall
fail at any time during the term of this Lease to maintain a net worth in
excess of one hundred million dollars (as determined in accordance with
generally accepted accounting principles), then Landlord may upon written
notice to Tenant require Tenant for the remainder of the Lease Term,
(notwithstanding a subsequent net worth in excess of one hundred million
dollars) to (i) deliver the security deposit required under Article 2; (ii)
carry a deductible not greater than $10,000 under the property damage insurance
described in Article 12(a); and (iii) pay to Landlord for each calendar year
during the Lease Term the
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amount of the Impositions imposed upon the Leased Premises and the amount of
premiums for all insurance policies required to be provided by Tenant
hereunder, in equal monthly installments on the first day of each month during
the Lease Term. Such monthly payments shall in the first instance be
reasonably estimated by Landlord based on the Impositions and premiums paid for
the prior year, with appropriate adjustments made at least annually thereafter.
No interest shall be paid by Landlord to Tenant on such monthly payments, but
they will be kept by Landlord in a separate escrow account, the funds thereof
shall be employed by Landlord to pay Impositions and premiums as they mature.
If at any time the funds held by Landlord shall be insufficient to pay any and
all Impositions and premiums as the same shall mature, Tenant shall, within ten
(10) days after notice thereof from Landlord, deposit with Landlord an amount
sufficient to make up any deficiency therefor. Tenant represents that its
present net worth is in excess of one hundred million dollars.
Article 14
Indemnity
Tenant hereby agrees to defend, pay, indemnify and save free
and harmless Landlord, its officers, directors, agents and employees, from and
against any and all claims, demands, fines, suits, actions, proceedings,
orders, decrees and judgments of any kind or nature by or in favor of anyone
whomsoever and from and against any and all costs and expenses incurred by
Landlord, including attorneys' and other professional fees, resulting from or
in connection with any of the following unless the same are caused by
Landlord's intentional acts: (a) any accident, bodily injury, death, personal
injury of any kind, or property damage arising, directly or indirectly, out of
or from or on account of any occurrence in, upon, at or about the Leased
Premises and the adjoining parking areas, sidewalks, streets, vaults and
passageways; (b) any accident, bodily injury, death, personal injury or
property damage arising, directly or indirectly, in connection with Tenant's
operation and conduct of business in the Leased Premises; (c) any use,
occupancy, nonuse or condition of the Leased Premises; and (d) any failure on
the part of Tenant to perform or comply with any of the agreements, terms,
covenants and conditions of this Lease.
Except for the intentional acts of Landlord, Landlord shall
not be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other personal property of
Tenant, Tenant's employees, agents, invitees and customers, or any other
occupant of the Leased Premises; nor for any failure of a water supply, gas,
electric current or any other utility, nor for any damage occasioned by failure
to keep the building, property or Leased Premises in repair. Landlord shall
not be liable to Tenant for any damage to person or property done or occasioned
by or from electric current, plumbing, gas, water, steam or sewage, odors, or
the
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bursting, leaking, running or failure of operation of any radiator, tank, water
closet, washstand, waste pipe, air conditioning or any other apparatus in,
above, upon or about the building, property or Leased Premises, nor for damage
or injury to person or property occasioned by water, snow, or ice being upon
any roof, sidewalk or entrance way, or being upon or coming through such
entrance way or any skylight, trap door or any other opening in the building,
property or Leased Premises, nor for loss resulting from theft or mysterious
disappearance, action of the elements, or any interference with light or air,
nor for any damages arising from the omission, action or negligence of Tenant,
co-Tenants or other occupants of the building or of any owners or occupants of
adjacent or contiguous property or acts of negligence by Landlord.
In case any action, suit or proceeding is brought against
Landlord by reason of any such occurrence as described in this Article 14,
Tenant or Tenant's insurer, upon Landlord's request, will at no expense to
Landlord resist and defend such action, suit or proceeding or cause the same to
be resisted and defended by counsel designated by Tenant and approved by
Landlord. The obligations of Tenant under this Article shall survive any
termination of this Lease.
Article 15
Damage or Destruction
In the event of any damage or loss to the Leased Premises,
Tenant shall give immediate written notice thereof to Landlord. If the
building on the Leased Premises shall at any time be damaged or destroyed by
fire or other cause whatsoever, Tenant shall promptly repair or rebuild same at
Tenant's expense, so as to make the building at least equal in value to the
building existing immediately prior to such occurrence and as nearly similar to
it in character as shall be practicable and reasonable; and Tenant shall do so,
even though the proceeds of any insurance policies shall be insufficient to
reimburse Tenant therefor.
There shall be no abatement of rent pending any repairs or
rebuilding, nor shall Tenant's obligations hereunder be terminated,
notwithstanding any destruction or damage to the Leased Premises.
Before beginning such repairs or rebuilding, or letting any
contracts in connection therewith, Tenant shall submit for Landlord's approval,
which approval shall not be unreasonably withheld or delayed, complete and
detailed plans and specifications thereof and a listing of all contractors and
subcontractors intended to perform any part of the work. Promptly after
receiving Landlord's approval, Tenant shall begin such repairs or rebuilding
and shall prosecute the same to completion with due diligence. All work shall
be done in a good and workmanlike manner employing appropriate new materials in
accordance with the plans and specifications approved by Landlord, and in
compliance with all
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applicable governmental and insurance requirements. Landlord, its employees,
agents and authorized architects and engineers shall have the right, at any
time during the performance of the work, to inspect the building and the
contracts, plans, specifications, drawings and all other records of Tenant, its
architect, contractors and subcontractors, relating to such repairs or
rebuilding. If Landlord or its authorized representative shall determine that
the work is not being done in accordance with the plans and specifications
approved by Landlord, then upon notice to Tenant specifying any deficiency,
Tenant shall take all steps necessary to promptly correct any such deficiency.
The reasonable charges of any architect or engineer of Landlord employed to
pass upon any plans and specifications and to supervise and approve any
construction shall be paid by Tenant as a cost of the repair or rebuilding.
Notwithstanding the foregoing in this Article 15, in the event
of a casualty for which the amount of damages to the improvements of the Leased
Premises exceeds an amount equal to eighty percent (80%) of the assessed fair
market value of such improvements on the Leased Premises (as determined by the
Real Estate Tax Assessor's office of the county in which the Leased Premises is
located), immediately prior to such casualty; then Landlord may elect within
sixty (60) days of such casualty upon written notice to Tenant to either (i)
require Tenant to rebuild as set forth above in Article 15; or (ii) terminate
the Lease and retain the insurance proceeds; whereupon neither party shall have
any further liability or obligation to the other, except as otherwise provided
elsewhere in this Lease.
Article 16
Condemnation
If the whole of the Leased Premises shall be acquired or taken
by eminent domain for any public or quasi-public use or purpose, or by private
purchase in lieu thereof, then this Lease and the Lease Term hereof shall
automatically cease and terminate as of the date of title vesting in such
proceedings. If only a part of the Leased Premises shall be so acquired or
taken and the remainder is untenantable for the purpose for which Tenant has
been using the Leased Premises then either party shall have the option to
terminate this Lease upon ninety (90) days prior written notice to the other.
If only a part of the Leased Premises shall be so acquired or taken and the
remainder is tenantable for the purpose for which Tenant has been using the
Leased Premises, then this Lease and all of the terms and provisions hereof
shall continue in full force and effect, except that the net annual rental
shall be reduced in the same proportion that the floor area of the building
forming a part of the Leased Premises taken bears to the original floor area of
such building demised hereunder, and Landlord shall, upon receipt of the award
in condemnation, make all necessary repairs or alterations to the building so
as to constitute the remaining premises a complete architectural unit;
provided,
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however, that Landlord, in any event, shall not be required to spend for such
repair and alteration work an amount in excess of the respective amounts
received by Landlord (free and clear of all claims of mortgagees and ground or
underlying lessors and Landlord's costs and professional fees from the action)
as damages for the taking of such part of the Leased Premises. The taking or
condemnation of any parking areas or other open space of the Leased Premises or
any sale, grant, dedication or taking of peripheral or perimeter parts or
portions of the Leased Premises for road widening or road improvement purposes
or for the installation of utilities shall not affect this Lease and Tenant
shall not, in any such event, be entitled to compensation, diminution or
abatement of any rent or other charges.
All damages or compensation awarded or paid for any taking or
condemnation, whether for the whole or a part of the Leased Premises or any
part of the land, buildings and improvements constituting the Leased Premises,
shall belong to and be the property of Landlord without any participation by
Tenant, whether such damages or compensation shall be awarded or paid for
diminution in value of the fee or any interest of Landlord in any ground or
underlying lease covering the Leased Premises or in the leasehold estate
created hereby. Tenant hereby expressly waives and relinquishes all claims to
such award or compensation, or any part thereof, and of the right to
participate in any such condemnation proceedings against the owners of any
interest in the Leased Premises; provided, however, that nothing herein
contained shall be construed to preclude Tenant from prosecuting any claim
directly against the condemning authority, but not against Landlord, for the
value of or damages to and/or the cost of removal of Tenant's property upon the
expiration of the Lease Term, as may be recoverable by Tenant in Tenant's own
right so long as no such claim shall diminish or otherwise affect Landlord's
award. Provided, however, that if as a result of such taking Tenant is
required to replace the parking area or provide new access, in order to use the
Premises in substantially the same manner as before the taking, the cost
incurred by Tenant for such replacement shall be prorated against the rent
becoming due over the remainder of the Lease Term. Tenant shall provide
Landlord with written documentation of such costs reasonably acceptable to
Landlord prior to any such adjustment of rent. Landlord may also elect to
provide an adjacent replacement area, in lieu of the above remedy for Tenant.
Article 17
Mortgaging; Assignment; Subletting
Neither Tenant nor its legal representatives or successors in
interest, by operation of law or otherwise, shall assign, mortgage or otherwise
transfer or encumber this Lease or any interest therein, or sublet or otherwise
permit the Leased Premises or any part thereof to be used or occupied by others
except (i) with the prior written consent of Landlord, which shall
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not be unreasonably withheld, or (ii) to another entity controlled by Tenant.
Any consent by Landlord to any act of mortgaging, assignment or subletting
shall apply only to the specific action authorized. Such consent shall not be
construed as a waiver of the duty of Tenant, its representatives, successors or
assigns, to obtain Landlord's consent to any other or subsequent mortgaging,
assignment or subletting. Any attempted mortgaging, assignment or subletting
without Landlord's prior written consent shall be void and be deemed an Event
of Default hereunder. Any mortgaging, assignment or subletting as permitted by
(i) or (ii) above, will not release or discharge Tenant from any liability
whatsoever under this Lease, and Tenant will remain liable for the performance
and observance of each and every agreement, term, covenant and condition of
this Lease.
In the event that Tenant, upon Landlord's prior written
consent, shall sublet the Leased Premises for a rental in excess of the rent
provided for herein from Tenant to Landlord, then notwithstanding any other
provision contained in this Lease to the contrary, the rent provided for herein
shall automatically be increased during the term of such sublease to a sum
equal to the amount of rent payable under such sublease. In the event that
Tenant shall receive any valuable consideration for an assignment of the
Tenant's interest in this Lease, then, notwithstanding any other provision
contained in this Lease to the contrary, Tenant shall pay to Landlord as
additional rent hereunder the amount of consideration thereby received.
Landlord shall have the right to assign this lease at any
time, upon written notice to Tenant, whereupon Landlord shall be released from
all further or other obligations or liabilities subsequently arising from and
after the date of such assignment. Assignee will assume the Landlord's
obligations under the terms of the Lease. The Assignee of the Landlord shall
have a net worth equal to the then net worth of the Landlord as determined in
accordance with generally accepted accounting practices. Landlord shall
provide Tenant with written notice of any assignment of this Lease.
Article 18
Subordination and Attornment
The rights of Tenant under this Lease shall, at Landlord's
election, be subject and subordinate at all times to all ground leases and/or
underlying leases, if any, now or hereafter in force against the Leased
Premises or any part thereof, and to the lien of any mortgage or mortgages now
or hereafter in force against such leases and/or the Leased Premises, and to
all advances made or hereafter to be made upon the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
The term "mortgages" as used in this Lease shall be deemed to include trust
indentures and deeds of trust.
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The aforesaid provisions shall be self-operative upon notice of election by
Landlord to Tenant and no further instrument of subordination shall be
required. Tenant hereby irrevocably appoints Landlord attorney-in-fact for
Tenant with full power and authority to execute and deliver in the name of the
Tenant any such instrument or instruments.
Tenant agrees that in the event of a sale, transfer or
assignment of Landlord's interest in the Leased Premises, or in the event that
any proceedings are brought for the foreclosure of or exercise of any power of
sale under any mortgage affecting the Leased Premises, or if a deed in lieu
thereof be given, or in the event any ground or underlying lease is cancelled
or terminated, Tenant shall attorn to and recognize such transferee, purchaser,
mortgagee or other party in interest as Landlord under this Lease and to affirm
this Lease so long as such transferee agrees not to disturb Tenant's rights
under this Lease.
Article 19
Estoppel Certificates
Tenant agrees, at any time and from time to time, upon not
less than ten (10) days prior written notice from Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications), the dates to which the rent and other charges have been
paid in advance, if any, and such other matters pertaining to this Lease as may
be requested by Landlord. It is understood and agreed that Tenant's obligation
to furnish such estoppel certificate in a timely fashion is a material
inducement for Landlord's execution of this Lease. Tenant does hereby appoint
Landlord as its attorney-in-fact to execute any such estoppel certificate. It
is intended that any such statement delivered pursuant to this Article may be
relied upon by present or prospective mortgagees, purchasers, 2 ground lessors
or any assignee of any of the foregoing in connection with Landlord's interest
in the Leased Premises.
Article 20
Quiet Enjoyment
Tenant upon paying the rents reserved and performing and
observing all other agreements, terms, covenants and conditions of this Lease
on Tenant's part to be performed and observed hereunder, shall peaceably and
quietly have, hold and enjoy the Leased Premises during the Lease Term,
subject, nevertheless to any ground leases, mortgages, agreements or
encumbrances to which this Lease is or may be subordinated.
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Article 21
Cure of Tenant's Default
If Tenant shall fail to make any payment or perform any act
required hereunder to be made or performed by Tenant hereunder, then Landlord
may, but shall be under no obligation to, after such notice to Tenant and
expiration of any applicable cure period as may be provided for under Article
22 of this Lease, make such payment or perform such act with the same effect as
if made or performed by Tenant. Entry by Landlord upon the Leased Premises for
such purpose shall not waive or release Tenant from any default or obligation
hereunder. Tenant shall reimburse Landlord for all sums so paid and all costs
incurred, including attorneys' fees, upon Landlord's demand therefor.
Article 22
Default
If any one or more of the following events (herein referred to
as an "Event of Default") shall occur:
(a) if default be made in the due and punctual
payment of any rent or other charges, or any part hereof,
payable to Landlord hereunder, when and as the same shall
become due, and such default shall continue for a period of
five (5) days;
(b) if this Lease be mortgaged, assigned or the
Leased Premises or any part thereof be sublet, either
voluntarily or by operation of law, without Landlord's prior
written consent as set forth in Article 17 hereof;
(c) [RESERVED]
(d) if Tenant shall fail to observe, perform or
comply with any of the terms, covenants and conditions in this
Lease other than those provided in subparagraphs (a), (b) and
(c) above, within thirty (30) days after notice from Landlord
specifying the nature of such default; provided, however, that
no Event of Default shall be deemed to occur so long as the
curing of such default reasonably may not be completed within
such thirty (30) day period and Tenant has commenced to cure
such default and thereafter with reasonable diligence pursues
its efforts to cure and does so cure within ninety (90) days;
(e) if Tenant shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or
shall file any petition or answer seeking any reorganization,
readjustment, liquidation, dissolution or similar relief under
any bankruptcy or
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insolvency statute or law of the United States or any State,
or shall seek or consent to or acquiesce in the appointment of
any bankruptcy or insolvency trustee, receiver or liquidator
of Tenant or of all or any substantial part of its
properties or of the Leased Premises; or
(f) if within sixty (60) days after the
commencement of any involuntary proceeding against Tenant
seeking any reorganization, readjustment, liquidation,
dissolution or similar relief under any bankruptcy or
insolvency statute or law, Tenant fails to secure a dismissal
and discharge thereof;
then and in any such event Landlord, at its option, may at any time thereafter
(in addition to and/or as an alternative to all other legal remedies):
(a) immediately terminate this Lease and Tenant's
right to possession of the Leased Premises; or
(b) terminate only the Tenant's right to
possession of the Leased Premises, without terminating this
Lease or releasing Tenant in whole or in part from Tenant's
obligations hereunder for the full term hereof; or
(c) without terminating this Lease or Tenant's
right to possession of the Leased Premises, enter upon the
Leased Premises and do and perform whatever Tenant is
obligated to do under the terms of this Lease.
In the event Landlord exercises its rights under subparagraph
(a) or (b) immediately above, Tenant shall quit and peacefully surrender the
Leased Premises to Landlord, and Landlord, upon or at any such expiration or
termination, may without further notice, enter upon and reenter the Leased
Premises and possess and repossess itself thereof, as provided by law,
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold and enjoy the Leased Premises and the right
to receive all rental income of and from the same, and further, Landlord may
collect damages in accordance with the law.
If Tenant's right to possession of the Leased Premises shall
be terminated pursuant to this Article 22, by summary proceedings or otherwise,
Landlord may in its own name, as agent for Tenant if this Lease not be
terminated, or if this Lease be terminated, in its own behalf, enter into
possession of and relet the Leased Premises or any part thereof, or said
premises with additional premises, for such term or terms (which may be greater
or less than the period which would otherwise have constituted the balance of
the Lease Term) and on such conditions (which may include concessions, free
rent and/or alterations of the Leased Premises) as Landlord, in its
uncontrolled discretion, may determine and may collect and receive the rents
therefor. Landlord
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shall in no way be responsible or liable for any failure to relet the Leased
Premises or any part thereof, or of any failure to collect any rent due upon
such reletting.
No such expiration or termination of this Lease, or
termination of Tenant's right of possession thereunder, shall relieve Tenant of
its liability and obligations under this Lease, unless otherwise agreed to in
writing by Landlord, whether or not the Leased Premises shall be relet. Upon
an event of default, Tenant shall pay Landlord the rent and all other charges
required to be paid hereunder by Tenant up to the time of such event.
Thereafter:
(a) Tenant, until the end of the Lease Term, or
what would have been such term in the absence of any such
event, shall be liable to Landlord as damages for Tenant's
default, the equivalent of the amount of the rent and other
charges which would be payable under this Lease by Tenant if
this Lease were still in effect, less the net proceeds of any
reletting effected pursuant to the provisions hereof, after
deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession
costs, brokerage and management commissions, operating
expenses, legal expenses, reasonable attorneys' fees, and
expenses of preparation of such reletting. Tenant shall pay
such damages (herein called "deficiency") to Landlord monthly
on the days on which the net rent would have been payable
under this Lease if this Lease were still in effect, and
Landlord shall be entitled to recover from Tenant each monthly
deficiency as the same shall arise.
(b) At any time after the expiration or
termination of this Lease, in lieu of collecting any further
monthly deficiencies as aforesaid, Landlord shall be entitled
to recover from Tenant, and Tenant shall pay to Landlord, on
demand, as liquidated damages and not as a penalty, an amount
equal to the difference between the total rental and other
benefits which would have accrued to Landlord under this Lease
from the date of termination to the date of the expiration of
the original term demised and the then fair and reasonable
rental value of the Leased Premises for the same period.
Tenant shall remain liable for any monthly deficiencies not
previously recovered by Landlord. In the computation of such
liquidated damages, the difference between any installment of
rent thereafter becoming due and the fair and reasonable
rental value of the Leased Premises for the period for which
such installment was payable shall be discounted to the date
of termination at the rate of not more than five percent (5%)
per annum.
If the Leased Premises or any part thereof be relet by
Landlord for the unexpired term of this Lease, or any part thereof,
22
<PAGE> 26
before presentation of proof of such liquidated damages to any court,
commission or tribunal, the amount of rent reserved upon such reletting shall
prima facie be the fair and reasonable rental value for the part or the whole
of the Leased Premises so relet during the term of the reletting. Nothing
herein contained shall limit or prejudice the right of Landlord to prove for
and obtain as liquidated damages by reason of such termination, an amount
equal to the maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the
amount of the difference referred to above.
If this Lease be terminated by summary proceedings or
otherwise, or if Tenant's right to possession of the Leased Premises shall be
terminated, and whether or not the Leased Premises be relet, Landlord shall be
entitled to recover from Tenant, and Tenant shall pay to Landlord, in addition
to any damages becoming due under this Article 22, the following: an amount
equal to all expenses, if any, including reasonable attorneys' fees, incurred
by Landlord in recovering possession of the Leased Premises, (whether or not
litigation be commenced in aid thereof), and all costs and charges for the care
of said Leased Premises while vacant, which damages shall be due and payable by
Tenant to Landlord at such time or times as such expenses are incurred by
Landlord.
Tenant hereby expressly waives, so far as permitted by law,
the service of any notice of intention to reenter provided for in any statute
and except as is herein otherwise provided Tenant, for and on behalf of itself
and all persons claiming through or under Tenant (including any leasehold
mortgagee or other creditor), also waives any and all right of redemption or
reentry or repossession in case Tenant shall be dispossessed by a judgment or
by warrant of any court or judge or in case of reentry or repossession by
Landlord or in case of any expiration or termination of this Lease. The terms
"enter," "reenter," "entry" or "reentry" as used in this Lease are not
restricted to their technical legal meanings.
Tenant hereby waives all right to trial by jury in any action
or proceeding hereafter instituted by Landlord against Tenant with respect to
this Lease or the Leased Premises. Tenant agrees not to interpose any
counterclaim of any nature or description in any action or proceeding. The
foregoing, however, shall not be construed as a waiver of Tenant's right to
assert any claim in a separate action or proceeding instituted by Tenant.
In the event of any breach or threatened breach by Tenant of
any of the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though reentry, summary proceedings, and other remedies
were not provided for in this Lease.
23
<PAGE> 27
Article 23
No Waiver
No failure by Landlord to insist upon the strict performance
of any agreement, term, covenant or condition hereof or to exercise any right
or remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of such agreement, term, covenant or condition.
No agreement, term, covenant or condition hereof to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by a written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease, but each and every agreement, term, covenant
and condition hereof shall continue in full force and effect with respect to
any other then existing or subsequent breach thereof.
Article 24
Remedies Cumulative
Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise.
Article 25
Surrender of Premises; Holding Over
Upon the expiration or sooner termination of the Lease Term,
Tenant agrees to quit and surrender the Leased Premises, clean and in good
condition and repair, normal wear and tear and insured casualty excepted,
together with all keys and combinations to locks, safes and vaults and all
improvements, alterations, additions, fixtures, equipment and decorations at
any time made or installed in, upon or to the interior or exterior of the
Leased Premises (except movable furniture, furnishings, equipment and other
personal property of Tenant put in at Tenant's expense), all of which shall
thereupon become the property of Landlord without any claim by Tenant therefor,
but the surrender of such property to Landlord shall not be deemed to be a
payment of rent or in lieu of any rent reserved hereunder. Before surrendering
the Leased Premises, Tenant shall remove all of Tenant's said personal property
and, at Landlord's option, Tenant shall also, at Tenant's expense, remove any
alterations, additions, fixtures or equipment that contains or constitutes a
"Hazardous Substance" (as defined in
24
<PAGE> 28
Article 5 such that the disposal of the same to a sanitary landfill is not
permitted or is otherwise regulated under applicable law), at any time made or
installed by Tenant in, upon or to the Leased Premises, and Tenant further
agrees to repair any damage caused thereby. If Tenant shall fail to remove any
of Tenant's said personal property or other property required by Landlord to be
removed, said property shall, at the option of Landlord, either be deemed
abandoned and may be disposed of by Landlord at Tenant's expense, or Landlord
shall have the right to remove and store said property, at the expense of
Tenant, without further notice to or demand upon Tenant and hold Tenant
responsible for any and all charges and expenses incurred by Landlord therefor.
If the Leased Premises be not surrendered as and when aforesaid, Tenant shall
indemnify Landlord against all loss or liability resulting from the delay by
Tenant in so surrendering the same, including without limitation, any claims
made by any succeeding occupant founded on such delay. If Tenant shall remain
in possession of the Leased Premises, or any part thereof, for any period after
the termination of this Lease in any of the ways above-named, Tenant shall pay
one and one-half (1.5) times the rent as a month-to-month hold over tenant
until such holding over shall cease. Tenant's obligations under this Article
shall survive the expiration or sooner termination of the Lease Term.
Article 26
Relationship of Parties
Nothing contained in this Lease shall be deemed to constitute
or be construed or implied to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties
hereto, other than the relationship of Landlord and Tenant.
The term "Landlord" as used in this Lease means only the owner
of the current interest of Landlord in the Leased Premises or, as the case may
be, the successor thereto from time to time. In the event of any transfer at
any time of the interest of Landlord, the transferor shall be and is hereby
entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing from and after the date of such transfer, and it shall be
deemed and construed without further agreement between the parties or their
respective successors in interest or between the parties and the transferee
that the transferee of Landlord's interest has assumed and agreed to carry out
any and all covenants and obligations of Landlord thereafter accruing
hereunder.
Article 27
Successors and Assigns; Provisions Binding
Except as otherwise expressly provided in this Lease, all
covenants, conditions and provisions of this Lease shall be binding
25
<PAGE> 29
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
Each provision of this Lease to be performed by Tenant shall
be construed to be both a covenant and a condition, and if there shall be more
than one Tenant, they shall all be bound, jointly and severally, by the
provisions of this Lease. The persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly incorporated and
duly qualified corporation and is authorized to do business in the State of its
incorporation and that the person or persons executing this Lease on behalf of
Tenant is an officer or are officers of such Tenant, and that he or they as
such officers are duly authorized to sign and execute this Lease.
Article 28
Notices
Every notice, demand, request or other communication which may
be or is required to be given under this Lease or by law shall be in writing
and shall be sent by United States Certified or Registered Mail, postage
prepaid, return receipt requested, or by nationally recognized overnight
courier (e.g. Federal Express) and shall be addressed: (a) if to Tenant, to
Michael Foods, Inc. 5353 Wayzata Blvd., Suite 324, Minneapolis, MN 55416,
Attention: Jeffrey M. Shapiro; and (b) if to Landlord, to Papetti Holding
Company, Jack Bernstein, Sherwood Weiser and Estate of David Levinson, One
Papetti Plaza, Elizabeth, New Jersey 07027, Attention: Arthur N. Papetti, with
a copy to Martin B. O'Connor, II, O'Connor, Morss & O'Connor, Liberty Hall
Center, 1085 Morris Avenue, Union, NJ 07083-7136, and the same shall be deemed
delivered one (1) business day after being sent via nationally recognized
overnight courier (e.g., Federal Express) or three (3) business days after
being mailed by U.S. Certified or Registered mail, return receipt requested.
Either party may designate, by similar written notice to the other party, any
other address for such purposes.
Article 29
Miscellaneous
Tenant agrees not to record this Lease or any memorandum
thereof without the prior written consent of Landlord.
Each party covenants, warrants and represents to the other
that there was no broker instrumental in consummating this Lease and that no
conversations or prior negotiations were had by such party with any broker
concerning the renting of the Leased Premises. Each party agrees to indemnify
and hold the other harmless against and from all liabilities, including
attorneys' fees, arising from any claims for brokerage commissions or finders'
26
<PAGE> 30
fees resulting from or arising out of any conversations or negotiations had by
such party with any broker.
Tenant agrees to annually make available for review by
Landlord and its lenders such financial information and statements as the same
may reasonably request, provided, Landlord and its lenders agree to keep such
information and statements confidential to the extent the same is not public
information.
Article 30
Entire Agreement; Construction
This Lease sets forth the entire agreement between the parties
respecting the Leased Premises. There are no understandings, agreements,
statements, promises, representations or warranties, express or implied, not
specified herein respecting the Leased Premises and all prior conversations and
writings by or between the parties or their representatives are merged herein
and extinguished. This Lease shall not be modified except by a writing
subscribed to by the party to be charged, nor may this Lease be cancelled by
Tenant or the Leased Premises surrendered except with the express written
authorization of Landlord.
This Lease shall be construed, as to both validity and
performance, and enforced in accordance with and shall be governed by the laws
of the jurisdiction in which the Leased Premises are located, without regard to
such jurisdiction's principles of conflicts of law. If any provision of this
Lease or the application thereof to any person or circumstance shall to any
extent be held void or invalid, then the remainder of this Lease or the
application of such provision to persons or circumstances other than those as
to which it is held void or invalid shall not be affected thereby, and each
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
The headings in this Lease are for purposes of reference only
and shall not limit or define the meaning hereof. This Lease may be executed
in any number of counterparts, each of which is an original, but all of which
shall constitute one instrument.
Article 31
Binding Arbitration
In the event that a dispute arises between Landlord and Tenant
such matter shall be submitted to binding arbitration as follows:
(1) Any arbitration hereunder shall be held
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association except that:
27
<PAGE> 31
(i) Landlord and Tenant shall each select
one arbitrator. The two appointed arbitrators shall
jointly choose a third arbitrator from a list provided
by the American Arbitration Association and the third
arbitrator shall be the sole arbitrator to hear the
dispute. If either party fails to appoint an
arbitrator within twenty (20) days after demand by the
other party, or the appointed arbitrators fail to
agree to the third arbitrator within twenty (20) days
after a list of potential arbitrators is provided by
the American Arbitration Association, the American
Arbitration Association shall select an arbitrator for
the party failing to make appointment or shall appoint
the third arbitrator, as the case may be.
(ii) The arbitration shall be held in the
City in which any facility leased hereunder is
located, or such other location as the parties shall
mutually agree.
(iii) The parties shall bear their own
expenses of the arbitration, including attorneys fees
and costs of expert witnesses.
(iv) The filing or other fees of the
American Arbitration Association shall be paid
one-half by the Landlord and one-half by the Tenant.
(v) The award of the arbitrators shall be
binding and shall be enforceable in any court of the
state in which the Premises are located.
(2) If the American Arbitration Association is
not then in existence or refuses to administer the arbitration, the arbitration
shall be administered by the most nearly comparable organization as shall be
agreed by the parties, or failing agreement, as shall be determined by the
Union County Superior Court of Elizabeth, New Jersey.
(3) Notwithstanding anything herein to the
contrary, either party shall have the right to seek injunctive relief to
maintain the status quo until a dispute between the parties can be arbitrated.
In the event that a dispute arises between Landlord and Tenant
involving an amount which is greater than the then current annual base rent
under this Lease, such matter shall be litigated by the parties.
28
<PAGE> 32
Article 32
Choice of Law; Jurisdiction.
This Lease shall be governed, construed, applied and enforced
in accordance with the laws of the state in which the Premises are located
(without regards to principles of conflicts of laws).
Landlord and Tenant each (i) irrevocably submits to personal
jurisdiction in the courts of the state in which the Premises are located and
the applicable United States District Court serving the county in which the
Premises are located, and appellate courts from any thereof, and (ii)
irrevocably waives any objection which it may have at any time to the laying on
venue of any suit, action or proceeding arising out of or relating to this
Lease brought in any such court, and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Landlord and Tenant each hereby agree that to the extent
permitted by local court rules, any summons, complaint and other process and
notice in connection with the commencement of or any other proceeding in any
such suit, action or proceeding may be served on it by using the notification
procedure set forth in this Lease.
LANDLORD AND TENANT EACH HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS LEASE OR ANY ACTS OR OMISSIONS OF LANDLORD, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 33
Joint Preparation
This Lease is to be deemed to have been prepared jointly by
the parties hereto, and any uncertainty or ambiguity existing herein, if any,
shall not be interpreted against any party, but shall be interpreted according
to the application of the rules of interpretation for arm's length agreements.
Article 34
Time Is of the Essence
Time is of the essence with respect to all matters provided in
this Lease.
29
<PAGE> 33
Article 35
Term Renewal
Tenant is granted the right to extend the term of this Lease
for two (2) period(s) of five (5) years each (the "Option Period(s)") on the
terms and conditions set forth herein; provided, however, that each said right
to extend for each such Option Period (the "Option(s)") may be exercised only
in the event Tenant is not in default at the time each said Option right is
exercised and provided, further, that the Option for the immediately preceding
Option Period, if any, has been exercised. The phrase "Lease Term" as used in
this Lease shall mean the term of this Lease as extended by Tenant pursuant to
this Article.
To exercise each Option, Tenant shall notify Landlord in
writing no later than one (1) year prior to the expiration of the initial Lease
Term or the Option Period then expiring, if any.
In the event Tenant properly exercises its Option as provided
herein: (1) all of the terms and conditions of this Lease shall apply during
the Option Period(s) (except the Option then exercised), including, but not
limited to, Tenant's obligation to pay all costs, charges and expenses provided
for in the Lease; (2) the Option exercised by Tenant in order to extend the
Term of the Lease shall terminate and be of no further force and effect and may
not be exercised again by Tenant; (3) no concession previously granted Tenant
by Landlord in the initial term shall be due or payable to Tenant during or
with respect to such Option Period; and (4) the monthly base rent payable under
Article 2 during the particular Option Period shall be determined as set forth
below. At Landlord's request, prior to the commencement of the particular
Option Period, Tenant shall execute, acknowledge, and deliver to Landlord an
amendment to lease evidencing Tenant's exercise of its Option and setting forth
the commencement and expiration dates of the Option Period and term of the
Lease and the monthly base rent payable during the Option Period.
The Annual Rent payable monthly under Article 2 during each
Option Period shall be such amount as may be agreed upon by the parties and
which is not less than 110%, nor more than 135%, of the Annual Rent for the
twelve (12) months immediately preceding the commencement of the applicable
Option Period (the "Option Period Rent").
If the parties are unable, within sixty (60) days of notice by
Tenant electing to extend the term of the Lease, to agree the amount of the
Option Period Rent then each party shall within ten (10) days thereafter
designate and select an M.A.I. certified appraiser and submit to them what such
party believes the Option Period Rent should be. The two appraisers shall then
together within thirty (30) days determine and agree upon the Option Period
Rent by selecting either the Option Period Rent proposed by Landlord or that
proposed by Tenant, with no other variation.
30
<PAGE> 34
If the two appraisers are unable within said thirty (30) days
to agree on either Landlord's or Tenant's proposed Option Period Rent, then
they shall together designate a third M.A.I. appraiser, who alone shall select
either Landlord's or Tenant's proposed Option Period Rent as the Annual Rent,
which determination shall be binding and enforceable upon all parties.
Each party shall pay the cost of the appraisers selected by
such party and the costs of the third appraiser (if retained) shall be paid
equally by each party.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW
31
<PAGE> 35
TENANT:
MICHAEL FOODS, INC., a Delaware corporation
(Seal) By: Gregg A. Ostrander
-------------------------------------
Attest: Gregg A. Ostrander
-------------------------------------
Print Name Here
_______________________________
(Ass't) Secretary
LANDLORD:
ASA COMPANY, a New Jersey general partnership
Witness: By: Anthony Papetti
--------------------------------------
Anthony Papetti, General Partner
- -------------------------------
- -------------------------------
STATE OF )
----------------------
)
OF
- ----------- --------------- )
On this _____ day of _______________, 1997, before me personally
appeared ________________________________ , to me personally known, who, being
by me duly sworn, did say that he is the ____________________ of MICHAEL FOODS,
INC., a Delaware corporation, and that said instrument was signed on behalf of
said corporation by authority of its Board of Directors; and said officer
acknowledged said instrument to be the free act and deed of said corporation.
<PAGE> 36
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the and State aforesaid, the day and year first
above written.
---------------------------------
Notary Public
(SEAL)
My Commission Expires:
STATE OF )
----------------- )
OF )
- ----------- -----------
On this day of , 1997, before me personally
appeared ANTHONY PAPETTI, to me personally known, who, being by me duly sworn,
did say that said instrument was signed by him with due authority on behalf of
PAPETTI HOLDING COMPANY and JACK BERNSTEIN, representing Jack Bernstein,
Sherwood Weiser and David Levinson, (collectively "Landlord") and that said
instrument as signed by him as partner on behalf of said Landlord; and said
ANTHONY PAPETTI acknowledged said instrument to be the free act and deed of
said Landlord.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the and State aforesaid, the day and year first
above written.
-----------------------------------
Notary Public
(SEAL)
My Commission Expires:
<PAGE> 37
EXHIBIT A
DESCRIPTION OF PREMISES
877-879 E. North Avenue, Elizabeth, New Jersey (Building Four - 53,000 sq. ft. -
5.6 acres); 877-879 North Avenue, Elizabeth, New Jersey (Dry Storage Area -
Building Seven - 4,700 sq. ft.); 877-879 North Avenue, Elizabeth, New Jersey
(Processing Areas - Building Four - 6,557 sq. ft.); 877-879 North Avenue,
Elizabeth, New Jersey (Pallet room - 592 sq. ft.)
(LEGAL TO FOLLOW)
<PAGE> 1
EXHIBIT 10.50
EXECUTION COPY
LEASE BY AND BETWEEN
A & A URBAN RENEWAL
AS LANDLORD,
AND
MICHAEL FOODS, INC.,
AS TENANT
DATED FEBRUARY 26, 1997
<PAGE> 2
INDEX
Article Page
1 Leased Premises; Lease Term . . . . . . . . . . . . . . . . . . . . 1
2 Rent Payments; Net Lease . . . . . . . . . . . . . . . . . . . . . 1
3 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . 2
4 No Representations . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Compliance with Laws; Insurance Regulations . . . . . . . . . . . . 3
6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Repair, Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 6
8 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9 Covenant Against Liens . . . . . . . . . . . . . . . . . . . . . . 8
10 Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . 9
11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . 15
16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 Mortgaging; Assignment; Subletting . . . . . . . . . . . . . . . . 17
18 Subordination and Attornment . . . . . . . . . . . . . . . . . . . 18
19 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . 19
20 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21 Cure of Tenant's Default . . . . . . . . . . . . . . . . . . . . . 20
22 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 24
25 Surrender of Premises; Holding Over . . . . . . . . . . . . . . . . 24
i
<PAGE> 3
26 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . 25
27 Successors and Assigns; Provisions Binding . . . . . . . . . . . . 26
28 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
30 Entire Agreement; Construction . . . . . . . . . . . . . . . . . . 27
31 Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 28
32 Choice of Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . 29
33 Joint Preparation . . . . . . . . . . . . . . . . . . . . . . . . . 29
34 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . 30
35 Term Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ii
<PAGE> 4
L E A S E
THIS LEASE made and entered into as of the 26th day of February, 1997,
between A & A URBAN RENEWAL, a New Jersey general partnership, having its
principal office at One Papetti Plaza, Elizabeth, New Jersey 07027 (hereinafter
called "Landlord") and MICHAEL FOODS, INC., a Delaware corporation, having its
principal office at 5353 Wayzata Boulevard, Suite 324, Minneapolis, Minnesota
55416 (hereinafter called "Tenant").
A. Landlord is the owner of certain land and improvements more
particularly described on Exhibit A attached hereto (the "Real Estate").
B. Tenant desires to lease from Landlord, and Landlord is willing
to lease to Tenant the Real Estate and improvements thereon upon and subject to
the terms, provisions and conditions of this Lease.
NOW THEREFORE, Landlord and Tenant, for and in consideration of the
rents, agreements, terms, covenants and conditions hereinafter mentioned and
hereby agreed to be paid, kept and performed by Landlord and Tenant, their
legal representatives, successors and assigns, do hereby mutually agree as
follows:
Article 1
Leased Premises; Lease Term
Upon and subject to the agreements, terms, covenants and conditions
hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby
rents and leases from Landlord, the Real Estate, together with any and all
buildings, fixtures, structures and other improvements located thereon
(collectively with the Real Estate, the "Leased Premises"), subject to existing
restrictions, covenants, easements, rights and encumbrances of record.
TO HAVE AND TO HOLD for a term commencing on the date hereof and
ending on midnight of the day preceding the tenth (10th) annual anniversary of
the "Rent Commencement Date" as hereinafter defined (the "Lease Term") unless
sooner terminated or extended as herein provided. The "Rent Commencement Date"
shall mean March 1, 1997.
Article 2
Rent Payments; Net Lease
Tenant, during the Lease Term, will pay to Landlord an annual rental
of Four Hundred Eighty Thousand Dollars ($480,000.00) in equal monthly
installments of Forty Thousand Dollars ($40,000.00) in advance on or before the
first day of each calendar month. The rent for any partial month at the
commencement hereof shall be prorated and paid upon Tenant's execution of this
Lease.
1
<PAGE> 5
Landlord may assess a charge of five percent (5%) of the monthly rent
installment due for any monthly payment that is received more than five (5)
days after it is due.
Tenant will pay to Landlord the rent herein reserved, without prior
demand or notice and without any setoffs, abatements, or deductions whatsoever,
at the office of Landlord or at such other place as Landlord shall designate in
writing. All other sums that may become due or be payable to Landlord
hereunder shall be paid at the time and in the manner herein provided at the
office of Landlord. All of such other sums so to be paid may, at Landlord's
option, be deemed to be additional rent to be added to any fixed rent then due
or thereafter falling due, and in the event of non-payment, Landlord shall have
all the rights and remedies herein provided.
If Tenant fails the net worth requirement of Article 13, then Tenant
shall deliver to Landlord the sum equal to one month's base rent as security
payment for the performance by Tenant of every covenant and condition of this
Lease. If Tenant shall default with respect to any covenant or condition of
this Lease, including, but not limited to, the payment of rent, Landlord may
apply the whole or any part of such security payment to the payment of any sum
in default or any other sum which Landlord may be required to spend by reason
of Tenant's default, and Tenant shall thereafter upon demand of Landlord fully
restore the original amount of the security deposit. After all of the Tenant's
obligations under this Lease shall have been satisfied, the security payment or
any remaining balance thereof shall be returned to Tenant. In the event of a
bona fide sale of the property of which the Leased Premises are a part,
Landlord shall have the obligation to transfer such security to the purchaser
to be held by such purchaser under the terms of this Lease, and Landlord shall
be released from all obligation and liability for the return of such security
to Tenant provided such transferee assumes such obligation.
Tenant acknowledges that the rent and other payments to Landlord
hereunder are intended to be "net" to Landlord and that this Lease is a so
called "triple net" or "net net net" lease to Landlord.
Article 3
Use of Leased Premises
Tenant shall occupy the Leased Premises during the Lease Term for the
purposes set forth on Exhibit A hereto and for no other purpose or use without
Landlord's prior written consent. Tenant shall not use or occupy or permit the
Leased Premises or any part thereof to be used or occupied for any other
business, use or purpose without Landlord's prior written consent, which shall
not be unreasonably withheld. Tenant shall apply for, secure, maintain and
comply with all licenses, permits, or accreditations which may
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be required for the conduct by Tenant of the use of the Leased Premises, as
herein permitted.
Article 4
No Representations
Tenant is fully familiar with the physical condition of the Leased
Premises, and Tenant accepts and takes the Leased Premises in their "as is" and
"where is" condition. Landlord has made no representations whatsoever in
connection with the condition of the Leased Premises or any part thereof, and
Landlord shall not be liable for any latent or patent defects therein.
Article 5
Compliance with Laws; Insurance Regulations
Throughout the Lease Term, Tenant shall, at its sole cost and expense,
promptly observe and comply with all laws, ordinances, orders, regulations,
rules, standards and requirements of every government (whether federal, state
or local), municipality or other governmental authority, including but not
limited to CERCLA, RCRA, TOSCA, FIFRA, OSHA and SARA (as the same are commonly
referred to under the federal environmental laws), and the Americans with
Disabilities Act of 1990, as amended (the "ADA"), and including any agency or
department thereof, having jurisdiction over Tenant or the Leased Premises
(collectively, "Governmental Regulations"), and of the local fire insurance
rating organization, and of all insurance companies writing policies covering
the Leased Premises or any part thereof, relating to the Leased Premises, or
the facilities, fixtures or equipment therein, or the use and occupation or
franchises and privileges connected therewith; whether or not such laws,
ordinances, orders, regulations, rules or requirements shall necessitate
improvements, interference with the use and enjoyment of the Leased Premises,
replacements or repairs, extraordinary as well as ordinary, foreseen or
unforeseen, and whether the same now are in force or may, at any time in the
future, be enacted or directed; and Tenant shall pay all costs, expenses,
claims, fines, penalties and damages that may in any manner arise out of or be
imposed because of the failure of Tenant to comply with any of the foregoing.
Landlord, its agents and representatives, may at any time during the
term of the Lease enter upon the Leased Premises, or any part thereof, for the
purpose of determining and ascertaining the environmental status of the same,
including but not limited to the performing of environmental audits or surveys
of the condition of the Leased Premises; and may further video tape, from time
to time, the condition of the Leased Premises, or any building or other
improvements thereon, for the purpose of better assuring and determining
Tenant's fulfillment of its obligations hereunder.
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Tenant shall be responsible for and shall bear all costs and expenses
associated with any and all alterations to the Leased Premises, which may be
required by the ADA for the accommodation of disabled individuals who may be
employed from time to time by Tenant, or any disabled customers, clients,
guests, or invitees or sublessees. Tenant shall indemnify and hold Landlord
harmless from and against any and all costs incurred arising from the failure
of the Leased Premises to conform with the ADA, including the cost of making
any alterations, renovations or accommodations required by the ADA, or any
government enforcement agency, or any court, any and all fines, civil
penalties, and damages awarded against Landlord resulting from a violation or
violations of the ADA, and all reasonable legal expenses and court costs
incurred in defending claims made under the ADA, including reasonable
attorneys' fees.
Tenant shall not (i) use, store, generate, treat, sell or dispose in,
on or about the Leased Premises, any "Hazardous Substances" (hereinafter
defined), or (ii) permit the use, storage, generation, treatment, selling or
disposal in, on or about the Leased Premises of any Hazardous Substances,
except Hazardous Substances in such amounts and of such types that are commonly
and customarily used in compliance with Governmental Regulations in the
operation, cleaning and maintenance of Tenant's business operated in the
ordinary course. "Hazardous Substances" or "Hazardous Substance" as used in
this Lease shall mean any substances, waste or substance now or hereafter
designated as, or containing components designated as, hazardous, dangerous,
toxic or harmful and/or subject to any Governmental Regulations, including,
without limitation, asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment which contains dielectric fluid or other fluids
containing levels of polychlorinated biphenyls in excess of fifty (50) parts
per million and petroleum products in any form. Tenant shall (i) promptly
comply with all Governmental Regulations now or hereafter pertaining to the
use, discharge, handling, transportation, disposal, treatment, generation,
storage, sale or presence on the Leased Premises of Hazardous Substances; and
(ii) allow Landlord or Landlord's agents or representatives to enter onto the
Leased Premises at all times to check Tenant's compliance with all applicable
Governmental Regulations regarding Hazardous Substances should Landlord have a
reasonable belief that Tenant is not in compliance with all applicable
Governmental Regulations regarding Hazardous Substances. If Tenant is found to
not be in compliance with all applicable Governmental Regulations regarding
Hazardous Substances, all reasonable costs incurred by Landlord and associated
with Landlord's inspection of the Leased Premises and Landlord's monitoring of
Tenant's compliance with this Article, including Landlord's reasonable
attorneys' fees and costs shall be deemed additional rent and shall be due and
payable to Landlord immediately upon demand by Landlord. Tenant shall
indemnify, defend and save Landlord, its officers, directors, shareholders,
managers, agents and employees harmless from and against any and all damages,
penalties, costs and other liabilities (including Landlord's attorneys' fees
and costs and the cost of any remedial
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or abatement activities), arising during the term of this Lease or anytime
thereafter, directly or indirectly, from the use, discharge, handling,
transportation, disposal, treatment, generation, storage, existence or sale of
Hazardous Substances, during the term of this Lease in, on or about the Leased
Premises except to the extent such use, discharge, handling, transportation,
disposal, treatment, generation, storage, existence or sale of Hazardous
Substances resulted solely from the actions of Landlord. Tenant's obligations
under this Article shall survive the termination of this Lease.
Tenant shall, at Tenant's sole expense, comply with all laws, rules,
regulations, requirements, standards and ordinances enacted or imposed by any
governmental unit having jurisdiction over Tenant, the Leased Premises, signage
at the Leased Premises or Tenant's business. Tenant shall not use or occupy
the Leased Premises nor permit its use or occupancy for any unlawful use or
purpose, nor for any purpose which may be hazardous on account of fire,
environmental concerns or otherwise, nor for any use or purpose which might
render Landlord's insurance on the Leased Premises void.
Tenant agrees that if its storage, accumulation, transportation,
treatment or disposal of such Hazardous Substances results in (i) contamination
of the soil or surface or groundwater or (ii) loss or damage to any person(s)
or property, Tenant shall (a) notify Landlord immediately of any contamination,
claim of contamination, loss or damage, (b) proceed with due diligence to clean
up any such contamination in full compliance with all applicable federal, state
and local statutes, regulations and standards, and (c) indemnify, defend and
hold Landlord harmless from and against any and all claims, suits, causes of
action, penalties, fines, costs and fees, including attorney's fees, arising
from or connected with any such contamination, claim of contamination, loss or
damage. The foregoing provision shall survive the termination of the Lease.
The parties hereto shall use their best efforts to resolve any
disputes regarding the origin of any contamination or claim of contamination or
the responsibility as between Landlord and Tenant of clean up of any such
contamination or claim of contamination. Landlord and Tenant agree that if
they are unable to resolve such a dispute, then the provisions of Article 31
governing resolution of disputes shall apply. The parties agree that the
arbitrator shall be retained only to resolve the dispute and in no event will
be retained by either party to conduct any resulting cleanup or remediation of
any suspected release of hazardous waste.
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To the extent applicable or may become applicable based on Tenant's
use of the Leased Premises or the termination of the Lease, Tenant at its cost
and in a timely manner shall (i) comply with "The Industrial Site Recovery
Act", N.J. Stat. Ann. Sections 13:1K-6 to -14, and the regulations promulgated
thereunder or obtain an exemption from compliance (See N.J. Admin. Code
7:26B-1.9(a)); (ii) comply with "The Spill Compensation and Control Act", N.J.
Stat. Ann. Sections 58.10-23.11 to .24, and the regulations promulgated
thereunder, "The Pollution Prevention Act", N.J. Stat. Ann. Sections 13.1D-35
et seq. and Sections 34:5A-1 et seq., and the regulations promulgated
thereunder, and Sections 58:10A-21 through 58:10A-37 of the New Jersey
Statutes, and the regulations promulgated thereunder. The enumeration of
specific state statutes and regulations above shall in no way limit the
obligation of Tenant to otherwise comply with all other state laws and
regulations applicable to it, and Tenant expressly covenants to so comply at
all times and in all material respects during the term of this Lease.
Article 6
Utilities
Tenant shall make application for and arrange for the installation of
all utility meters or other devices as it may deem necessary for its purposes,
and Tenant shall be solely responsible for and promptly pay, as and when the
same become due and payable, all charges for water, sewer, sprinkler,
electricity, gas, telephone or other communication, fire or burglar alarm
systems, and any other utility or service supplied, used or consumed in
connection with the Leased Premises. Tenant shall use any utilities supplied
to or serving the Leased Premises in accordance with the regulations of the
public utility company or the governmental agency supplying the same, and
Tenant shall not at any time overburden or exceed the capacity of the mains,
feeders, ducts, conduits or other facilities by which such utilities are
supplied to, distributed in or serve the Leased Premises. Landlord shall not
be liable in damages or otherwise for any interruption in the supply of any
utility or service to the Leased Premises, nor shall any such interruption
constitute any ground for constructive eviction or an abatement of any of the
rents reserved hereunder.
Article 7
Repair, Maintenance and Replacement
Tenant, at its sole cost and expense, shall take good care of the
Leased Premises and of all buildings, structures, improvements, fixtures and
equipment now or hereafter located thereon, interior and exterior, and keep the
same and all parts thereof, including without limiting the generality thereof,
the roof, roof membrane and subroofing, foundations, exterior walls, parking
areas, the grounds, landscaped areas, (grass cutting, lawn and shrubbery
maintenance, tree and plant watering and care),
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drainage ditches, and swales, gutters, downspouts, glass, structural and
interior and exterior portions of the buildings and the plumbing, sprinkler
system, heating, air conditioning, wiring and other systems therein and
facilities thereof and all sidewalks, parking areas, driveways, passageways and
alleys adjacent thereto and other appurtenances thereunto belonging, and all
fixtures, machinery and equipment which constitute any part of the Leased
Premises, together with any and all alterations, additions and improvements
therein and thereto, in at least as good order and condition as exists on the
date hereof, suffering no waste or injury; and shall, at Tenant's sole cost and
expense, perform all maintenance and promptly make all needed repairs and
replacements, extraordinary as well as ordinary, structural or otherwise,
foreseen or unforeseen, in and to any of the foregoing and the buildings,
structures or improvements now or hereafter located thereon, including streets,
sidewalks, curbs and gutters, vaults, water, sprinkler systems, sewer and gas
connections, plumbing, pipes and mains, and all other fixtures, machinery and
equipment (including the lighting, electrical, heating, ventilation and
air-conditioning systems) now or hereafter belonging to or connected with the
Leased Premises or used in their operation. All such maintenance, repairs and
replacements shall be of first-class quality sufficient for the proper
maintenance and operation of the Leased Premises. Tenant shall keep and
maintain the Leased Premises in a clean and safe condition, and Tenant shall
not permit the accumulation of waste or refuse matter, nor permit anything to
be done or allow any condition to exist which would invalidate or prevent the
procurement of any insurance policies which may at any time be required
pursuant to the provisions of this Lease. Tenant shall not obstruct or permit
the obstruction of any parking areas, streets or sidewalks located on or
adjoining the Leased Premises, and shall keep such parking areas, streets and
sidewalks free of snow and ice.
In addition, Tenant shall, during the term of this Lease, perform the
periodic preventive maintenance recommended by such systems' manufacturers.
Both maintenance and preventive maintenance shall be performed by such
contractors as are recommended by Landlord or such other entities as are
mutually agreed upon by the parties hereto. Tenant shall, on January 1 of each
year while Tenant is in occupancy of the Premises, provide Landlord with
evidence of an executed preventive maintenance contract for all mechanical
equipment (HVAC) provided. Tenant shall pay for the annual mechanical
equipment inspection fees, if any, imposed by any governmental authority.
Tenant agrees to keep the interior of the Leased Premises, including
all plate glass windows, doors, dock bumpers, levelers, and seals in good
repair as well as the floors and floor drains.
Landlord reserves the right to take video footage of the condition of
the Leased Premises as of the Commencement Date, a
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copy of which shall be provided to Tenant and shall be an exhibit hereto.
On the default of Tenant of its obligations to maintain and repair the
Leased Premises as set forth above for a period of fifteen (15) days after
written notice from Landlord demanding cure of same, Landlord may, but shall
not be required to, cause all required maintenance, repairs or replacements to
be made, for Tenant's account, and Tenant shall promptly pay Landlord all costs
incurred plus an administrative fee of fifteen percent (15%) of such costs and
said amount shall constitute and be collectible as additional rent hereunder.
Article 8
Alterations
Tenant shall not make any exterior or structural alterations,
improvements, or additions to the Leased Premises in excess of $125,000 without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld. Such exterior or structural alterations, improvements,
or additions, if consented to by Landlord, shall be made under the supervision
of an architect or engineer reasonably satisfactory to Landlord and in
accordance with plans and specifications approved by Landlord. Tenant shall
not make any interior or nonstructural alterations, improvements, or additions
to the Leased Premises in excess of $125,000 without obtaining Landlord's prior
written consent which shall not be unreasonably withheld.
All alterations, improvements, and additions made to the Leased
Premises shall be effected with due diligence, in a good and workmanlike manner
employing appropriate new materials and in compliance with all applicable
governmental and insurance requirements and shall be promptly and fully paid
for by Tenant; and no alterations, improvements, or additions made to the
Leased Premises shall change the general character of the Leased Premises,
impair its usefulness, or reduce the fair market value thereof below its value
immediately before such alteration, improvement, or addition. Prior to
proceeding with any alteration, improvement or addition requiring Landlord's
consent hereunder, Tenant shall at Landlord's request furnish Landlord with
satisfactory evidence of worker's compensation insurance in statutory limits of
Tenant, or any contractor or subcontractor performing work for Tenant on the
Leased Premises, as well as satisfactory evidence of all insurance coverage
required to be maintained by Tenant under this Lease. In addition, Landlord
may require that before commencement or continuance of such alteration,
improvement or addition, Tenant furnish Landlord with such security or
performance bond as Landlord shall request in order to assure completion of
same and protect against any and all liens, chattel mortgages and security
interests arising in connection therewith.
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Article 9
Covenant Against Liens
Tenant shall do all things necessary to prevent the filing of any
mechanics', materialmen's or other liens against the Leased Premises by reason
of any work, labor, services or materials performed or supplied or claimed to
have been performed or supplied to Tenant, or anyone holding the Leased
Premises, or any part thereof, through or under Tenant. Tenant shall pay and
obtain a release of record of any such lien, by payment thereof or if Tenant
intends to contest the lien by filing a bond or other security or collateral
reasonably acceptable to Landlord, within thirty (30) days after the date of
filing thereof, failing which, and in addition to any other rights of Landlord
hereunder, Landlord shall have the right to vacate and release the same and
charge the cost thereof (including attorneys' fees) to Tenant, such charge to
be due and payable upon demand. Tenant shall defend, indemnify and hold
Landlord harmless from and against any and all liability, loss, damage, cost
and expense (including court costs and attorneys' fees) arising out of or in
connection with any such lien or the enforcement or removal thereof.
Article 10
Landlord's Right of Entry
Landlord and Landlord's employees, agents and contractors, and their
respective employees and agents, shall be permitted during the Lease Term to
inspect the Leased Premises, after first giving Tenant such notice as is
reasonable under the circumstances, (except in the case of an emergency when
prior notice shall not be required), during reasonable business hours (except
in the case of an emergency) for the purposes of (a) ascertaining the condition
of the Leased Premises; (b) making semi-annual mutual inspections; (c)
inspecting any replacements or repairs or the performing any other act as may
be required of Landlord or Tenant under the terms of this Lease; and (d)
showing the Leased Premises to prospective tenants, purchasers or mortgagees.
Article 11
Taxes
Tenant shall, (subject to Tenant's right to contest as set forth
hereafter), in all instances, pay and discharge at its sole expense, all
duties, taxes, assessments, impositions, or charges of any kind, license and
permit fees, and other governmental levies and charges of every kind and nature
whatsoever, general and special, extraordinary as well as ordinary, whether
foreseen or unforeseen, which shall during the Lease Term be laid, levied,
assessed, imposed, become due and payable, or
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liens upon, or arise in connection with the ownership, use, occupancy or
possession of the Leased Premises, or any part thereof, or any appurtenances
thereto, or the streets, sidewalks, vaults, curbs and gutters adjoining the
Leased Premises, or the leasehold estate hereby created, by virtue of any
present or future law, ordinance, order, regulation, rule or requirement of any
government (whether federal, state or local), municipality or other
governmental authority, including any agency or department thereof. In
addition, Tenant shall pay and discharge any and all taxes and other charges
levied, assessed or imposed upon the fixtures, furnishings, equipment and all
other personal property of Tenant in, upon or about the Leased Premises, and
any license or excise covering business conducted in the Leased Premises. The
duties, taxes, assessments, impositions, charges, fees and payments
above-described are sometimes referred to herein collectively as "Impositions".
Nothing contained herein shall require Tenant to pay any inheritance, estate,
succession, transfer, gift, franchise, corporation, income or profit tax or
capital levy that is or may be imposed upon Landlord, unless such described tax
shall be levied upon the rent herein reserved, or otherwise imposed on
Landlord, in replacement of or substitution for any Impositions as are
presently levied, assessed or imposed.
All Impositions shall be paid by Tenant to the governmental
authorities charged with the collection thereof on or before the last day upon
which the same may be paid without interest or penalty for the late payment
thereof and Tenant shall forward a copy of the paid tax bill to Landlord within
thirty (30) days of such payment to the applicable governmental authority. In
the case of Impositions which may be payable in installments, installments
shall be payable within the longest period provided by law, be prorated with
Tenant charged during the term hereof, and Tenant shall only be obligated to
pay such installments as the same fall due during the Lease Term.
Any real estate taxes or water and sewer rents imposed for the
applicable fiscal tax period in which the Lease Term begins or ends shall be
prorated and adjusted between Landlord and Tenant.
Landlord shall forthwith forward to Tenant all applicable tax bills as
received by Landlord or cause the same to be directly sent to Tenant and Tenant
shall provide to Landlord within sixty days (60) after the due date for payment
of such Imposition, reasonable evidence that such Imposition has been timely
paid. If the present method of assessing, levying or charging general public
revenue or taxes against or upon the Leased Premises shall be changed during
the term of this Lease so that such taxes, assessments or charges, instead of
being assessed or levied directly against the land or improvements constituting
the Leased Premises, be levied, assessed or charged in lieu thereof, in whole
or in part, against Landlord's reversionary interest in the same or against the
rent or income arising from the use or occupancy of the Leased Premises, then
in such event, Landlord shall forthwith timely advise Tenant of each such
change, and Tenant shall pay
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every such Imposition so made, subject always to Tenant's right to contest such
change as permitted hereafter. All such Impositions for any fractional year
within the term of this Lease shall be prorated between Landlord and Tenant on
a pro rata basis, with Tenant paying only such portions thereof which are
properly allocable to the term of this Lease.
Tenant shall have the right, in its or Landlord's name, to contest in
good faith the validity of any Imposition, or the method of assessment thereof,
which Tenant is required to bear, pay and discharge hereunder, and for that
purpose shall have the right to institute such proceedings in name of Landlord
as it may deem necessary, provided that expenses incurred by reason thereof
shall be paid by Tenant. Tenant further agrees that it shall diligently
prosecute such contest, at all times effectually stay or prevent any official
or judicial sale of the Leased Premises, under execution or otherwise, and pay
any final judgment enforcing such contested Imposition and thereafter promptly
procure record satisfaction or release thereof. Tenant further agrees that if
it becomes necessary to institute an action in a court of competent
jurisdiction in order to contest such Imposition then, in that event, it shall
give Landlord at least ten (10) days' prior written notice of its intention to
institute such action and at the same time furnish Landlord a bond in such
amount as Landlord may designate, executed by a corporate surety licensed to do
business in the state where the Leased Premises are located and acceptable to
Landlord, indemnifying and protecting Landlord and any other person now or
hereafter having any interest, whether as security for indebtedness or
otherwise, in the Leased Premises from and against all liability, loss, damage,
cost and expense of whatever kind or nature growing out of or in any way
connected with the fee, tax, assessment or other charge complained of or the
contest thereof.
Article 12
Insurance
Tenant agrees to secure, maintain and keep in force at all times
during the Lease Term, at Tenant's sole cost and expense, the following
policies of insurance:
(a) Direct Property Damage Insurance covering the
building and other improvements (including leasehold improvements) on
the Leased Premises to the extent of one hundred percent (100%) of the
full replacement cost thereof, exclusive of the cost of excavations,
foundations, and footings and all improvements and fixtures required
to be insured by Tenant pursuant to Article 12(c) hereof, providing
protection against perils that are covered under standard insurance
industry practices within the classification of all risk property
damage insurance. Such insurance shall name as an
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additional insured Landlord and any other parties in interest as may
be from time to time designated in writing by notice from Landlord to
Tenant. In addition, such insurance shall be made payable to Tenant,
Landlord and such additional parties in interest from time to time
designated by Landlord to Tenant, as their interest may appear.
(b) Comprehensive General Liability Insurance covering
the Leased Premises and Tenant's use thereof against claims for bodily
injury or death, property damage or personal injury, however caused,
with a combined single limit of not less than two million dollars
($2,000,000) for bodily injury and property damage. Such insurance
shall, in addition to premises and operations liability, include
contractual liability insurance to cover all contractual liability
assumed by Tenant under or by virtue of this Lease (including, without
limitation, Article 15 hereof), broad form property damage, loss of
rental income, Product and Completed operations liability. In
addition, motor vehicle liability coverage with not less than $1
million dollar policy limits shall be kept in force by Tenant at all
times during the term of this Lease. All such insurance shall name as
an additional insured Landlord and any other parties in interest as
may be from time to time designated in writing by notice from Landlord
to Tenant. In addition, such insurance shall be made payable to
Tenant, Landlord and such additional parties in interest from time to
time designated by Landlord to Tenant, as their interest may appear.
Tenant shall further maintain, at its sole cost during the
term of this Lease Excess or Umbrella Liability insurance with minimum
limits of $10 million; naming Landlord as an additional insured.
(c) [RESERVED]
(d) Comprehensive Boiler and Machinery insurance
coverage, covering all boilers, pressure vessels, production
equipment, air-conditioning equipment and electrical equipment which
serve the Leased Premises, with per occurrence limits of not less than
Two Million Dollars $2,000,000.
(e) Workers' Compensation Insurance (including
occupational disease insurance) as may be from time to time required
by the laws of the state in which the Leased Premises are located;
(f) Employers' Liability Insurance with a per occurrence
limit of not less than $500,000;
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All such policies of insurance shall be issued by insurance companies
licensed and admitted to do business in the State in which the Leased Premises
are located, which are reasonably acceptable to Landlord and having a rating of
A+ or better. In addition, all such policies of insurance shall contain an
endorsement providing that such insurance may not be materially changed,
amended or cancelled except after thirty (30) days' prior written notice from
the insurance company to Landlord, sent by registered mail or nationally
recognized overnight courier (e.g. Federal Express). The original policy or
policies shall be made available, from time to time, upon request of Landlord
to review and/or copy and Tenant shall deliver to Landlord together reasonably
satisfactory evidence of payment of the premium thereof, on or before the
commencement date of the Lease Term. Prior to expiration of each policy term,
Tenant shall deliver to Landlord written proof of renewal or continuation of
the policies and will deliver to Landlord certificates of insurance within 20
days after renewal or issuance of the policies. If Tenant at any time fails or
refuses to procure and maintain the required amount of insurance, then Landlord
may, immediately and without notice to Tenant, obtain same for and on behalf of
Tenant and charge the cost thereof to Tenant, such charge to be due and payable
upon demand.
Except for the intentional acts of the Landlord, Tenant, and all
parties claiming under or through Tenant, hereby expressly releases and
discharges Landlord from any claim or liability, whether based on negligence or
any reason whatsoever, for any personal injury, property damage, or other loss
covered by Tenant's insurance. The aforesaid release shall apply only when
permitted by the applicable policy of insurance. All policies of Tenant shall
contain an endorsement containing an express waiver of any right of subrogation
by the insurance company against Landlord, provided that this waiver shall not
be applicable if it has the effect of invalidating any insurance coverage of
Landlord or Tenant, or if the applicable insurance policies do not contain a
clause to the effect that this waiver shall not affect the right of the insured
to recover under such policies.
Article 13
Escrow
Notwithstanding the provisions of this Lease, if Tenant, or any
successor or assignee then a tenant under this Lease as the Tenant, shall fail
at any time during the term of this Lease to maintain a net worth in excess of
one hundred million dollars (as determined in accordance with generally
accepted accounting principles), then Landlord may upon written notice to
Tenant require Tenant for the remainder of the Lease Term, (notwithstanding a
subsequent net worth in excess of one hundred million dollars) to (i) deliver
the security deposit required under Article 2; (ii) carry a deductible not
greater than $10,000 under the property damage insurance described in Article
12(a); and (iii) pay to Landlord for each calendar year during the Lease Term
the
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amount of the Impositions imposed upon the Leased Premises and the amount of
premiums for all insurance policies required to be provided by Tenant
hereunder, in equal monthly installments on the first day of each month during
the Lease Term. Such monthly payments shall in the first instance be
reasonably estimated by Landlord based on the Impositions and premiums paid for
the prior year, with appropriate adjustments made at least annually thereafter.
No interest shall be paid by Landlord to Tenant on such monthly payments, but
they will be kept by Landlord in a separate escrow account, the funds thereof
shall be employed by Landlord to pay Impositions and premiums as they mature.
If at any time the funds held by Landlord shall be insufficient to pay any and
all Impositions and premiums as the same shall mature, Tenant shall, within ten
(10) days after notice thereof from Landlord, deposit with Landlord an amount
sufficient to make up any deficiency therefor. Tenant represents that its
present net worth is in excess of one hundred million dollars.
Article 14
Indemnity
Tenant hereby agrees to defend, pay, indemnify and save free and
harmless Landlord, its officers, directors, agents and employees, from and
against any and all claims, demands, fines, suits, actions, proceedings,
orders, decrees and judgments of any kind or nature by or in favor of anyone
whomsoever and from and against any and all costs and expenses incurred by
Landlord, including attorneys' and other professional fees, resulting from or
in connection with any of the following unless the same are caused by
Landlord's intentional acts: (a) any accident, bodily injury, death, personal
injury of any kind, or property damage arising, directly or indirectly, out of
or from or on account of any occurrence in, upon, at or about the Leased
Premises and the adjoining parking areas, sidewalks, streets, vaults and
passageways; (b) any accident, bodily injury, death, personal injury or
property damage arising, directly or indirectly, in connection with Tenant's
operation and conduct of business in the Leased Premises; (c) any use,
occupancy, nonuse or condition of the Leased Premises; and (d) any failure on
the part of Tenant to perform or comply with any of the agreements, terms,
covenants and conditions of this Lease.
Except for the intentional acts of Landlord, Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other personal property of Tenant,
Tenant's employees, agents, invitees and customers, or any other occupant of
the Leased Premises; nor for any failure of a water supply, gas, electric
current or any other utility, nor for any damage occasioned by failure to keep
the building, property or Leased Premises in repair. Landlord shall not be
liable to Tenant for any damage to person or property done or occasioned by or
from electric current, plumbing, gas, water, steam or sewage, odors, or the
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bursting, leaking, running or failure of operation of any radiator, tank, water
closet, washstand, waste pipe, air conditioning or any other apparatus in,
above, upon or about the building, property or Leased Premises, nor for damage
or injury to person or property occasioned by water, snow, or ice being upon
any roof, sidewalk or entrance way, or being upon or coming through such
entrance way or any skylight, trap door or any other opening in the building,
property or Leased Premises, nor for loss resulting from theft or mysterious
disappearance, action of the elements, or any interference with light or air,
nor for any damages arising from the omission, action or negligence of Tenant,
co-Tenants or other occupants of the building or of any owners or occupants of
adjacent or contiguous property or acts of negligence by Landlord.
In case any action, suit or proceeding is brought against Landlord by
reason of any such occurrence as described in this Article 14, Tenant or
Tenant's insurer, upon Landlord's request, will at no expense to Landlord
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by Tenant and approved by Landlord.
The obligations of Tenant under this Article shall survive any termination of
this Lease.
Article 15
Damage or Destruction
In the event of any damage or loss to the Leased Premises, Tenant
shall give immediate written notice thereof to Landlord. If the building on
the Leased Premises shall at any time be damaged or destroyed by fire or other
cause whatsoever, Tenant shall promptly repair or rebuild same at Tenant's
expense, so as to make the building at least equal in value to the building
existing immediately prior to such occurrence and as nearly similar to it in
character as shall be practicable and reasonable; and Tenant shall do so, even
though the proceeds of any insurance policies shall be insufficient to
reimburse Tenant therefor.
There shall be no abatement of rent pending any repairs or rebuilding,
nor shall Tenant's obligations hereunder be terminated, notwithstanding any
destruction or damage to the Leased Premises.
Before beginning such repairs or rebuilding, or letting any contracts
in connection therewith, Tenant shall submit for Landlord's approval, which
approval shall not be unreasonably withheld or delayed, complete and detailed
plans and specifications thereof and a listing of all contractors and
subcontractors intended to perform any part of the work. Promptly after
receiving Landlord's approval, Tenant shall begin such repairs or rebuilding
and shall prosecute the same to completion with due diligence. All work shall
be done in a good and workmanlike manner employing appropriate new materials in
accordance with the plans and specifications approved by Landlord, and in
compliance with all
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applicable governmental and insurance requirements. Landlord, its employees,
agents and authorized architects and engineers shall have the right, at any
time during the performance of the work, to inspect the building and the
contracts, plans, specifications, drawings and all other records of Tenant, its
architect, contractors and subcontractors, relating to such repairs or
rebuilding. If Landlord or its authorized representative shall determine that
the work is not being done in accordance with the plans and specifications
approved by Landlord, then upon notice to Tenant specifying any deficiency,
Tenant shall take all steps necessary to promptly correct any such deficiency.
The reasonable charges of any architect or engineer of Landlord employed to
pass upon any plans and specifications and to supervise and approve any
construction shall be paid by Tenant as a cost of the repair or rebuilding.
Notwithstanding the foregoing in this Article 15, in the event of a
casualty for which the amount of damages to the improvements of the Leased
Premises exceeds an amount equal to eighty percent (80%) of the assessed fair
market value of such improvements on the Leased Premises (as determined by the
Real Estate Tax Assessor's office of the county in which the Leased Premises is
located), immediately prior to such casualty; then Landlord may elect within
sixty (60) days of such casualty upon written notice to Tenant to either (i)
require Tenant to rebuild as set forth above in Article 15; or (ii) terminate
the Lease and retain the insurance proceeds; whereupon neither party shall have
any further liability or obligation to the other, except as otherwise provided
elsewhere in this Lease.
Article 16
Condemnation
If the whole of the Leased Premises shall be acquired or taken by
eminent domain for any public or quasi-public use or purpose, or by private
purchase in lieu thereof, then this Lease and the Lease Term hereof shall
automatically cease and terminate as of the date of title vesting in such
proceedings. If only a part of the Leased Premises shall be so acquired or
taken and the remainder is untenantable for the purpose for which Tenant has
been using the Leased Premises then either party shall have the option to
terminate this Lease upon ninety (90) days prior written notice to the other.
If only a part of the Leased Premises shall be so acquired or taken and the
remainder is tenantable for the purpose for which Tenant has been using the
Leased Premises, then this Lease and all of the terms and provisions hereof
shall continue in full force and effect, except that the net annual rental
shall be reduced in the same proportion that the floor area of the building
forming a part of the Leased Premises taken bears to the original floor area of
such building demised hereunder, and Landlord shall, upon receipt of the award
in condemnation, make all necessary repairs or alterations to the building so
as to constitute the remaining premises a complete architectural unit;
provided,
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however, that Landlord, in any event, shall not be required to spend for such
repair and alteration work an amount in excess of the respective amounts
received by Landlord (free and clear of all claims of mortgagees and ground or
underlying lessors and Landlord's costs and professional fees from the action)
as damages for the taking of such part of the Leased Premises. The taking or
condemnation of any parking areas or other open space of the Leased Premises or
any sale, grant, dedication or taking of peripheral or perimeter parts or
portions of the Leased Premises for road widening or road improvement purposes
or for the installation of utilities shall not affect this Lease and Tenant
shall not, in any such event, be entitled to compensation, diminution or
abatement of any rent or other charges.
All damages or compensation awarded or paid for any taking or
condemnation, whether for the whole or a part of the Leased Premises or any
part of the land, buildings and improvements constituting the Leased Premises,
shall belong to and be the property of Landlord without any participation by
Tenant, whether such damages or compensation shall be awarded or paid for
diminution in value of the fee or any interest of Landlord in any ground or
underlying lease covering the Leased Premises or in the leasehold estate
created hereby. Tenant hereby expressly waives and relinquishes all claims to
such award or compensation, or any part thereof, and of the right to
participate in any such condemnation proceedings against the owners of any
interest in the Leased Premises; provided, however, that nothing herein
contained shall be construed to preclude Tenant from prosecuting any claim
directly against the condemning authority, but not against Landlord, for the
value of or damages to and/or the cost of removal of Tenant's property upon the
expiration of the Lease Term, as may be recoverable by Tenant in Tenant's own
right so long as no such claim shall diminish or otherwise affect Landlord's
award. Provided, however, that if as a result of such taking Tenant is
required to replace the parking area or provide new access, in order to use the
Premises in substantially the same manner as before the taking, the cost
incurred by Tenant for such replacement shall be prorated against the rent
becoming due over the remainder of the Lease Term. Tenant shall provide
Landlord with written documentation of such costs reasonably acceptable to
Landlord prior to any such adjustment of rent. Landlord may also elect to
provide an adjacent replacement area, in lieu of the above remedy for Tenant.
Article 17
Mortgaging; Assignment; Subletting
Neither Tenant nor its legal representatives or successors in
interest, by operation of law or otherwise, shall assign, mortgage or otherwise
transfer or encumber this Lease or any interest therein, or sublet or otherwise
permit the Leased Premises or any part thereof to be used or occupied by others
except (i) with the prior written consent of Landlord, which shall
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not be unreasonably withheld, or (ii) to another entity controlled by Tenant.
Any consent by Landlord to any act of mortgaging, assignment or subletting
shall apply only to the specific action authorized. Such consent shall not be
construed as a waiver of the duty of Tenant, its representatives, successors or
assigns, to obtain Landlord's consent to any other or subsequent mortgaging,
assignment or subletting. Any attempted mortgaging, assignment or subletting
without Landlord's prior written consent shall be void and be deemed an Event
of Default hereunder. Any mortgaging, assignment or subletting as permitted by
(i) or (ii) above, will not release or discharge Tenant from any liability
whatsoever under this Lease, and Tenant will remain liable for the performance
and observance of each and every agreement, term, covenant and condition of
this Lease.
In the event that Tenant, upon Landlord's prior written consent, shall
sublet the Leased Premises for a rental in excess of the rent provided for
herein from Tenant to Landlord, then notwithstanding any other provision
contained in this Lease to the contrary, the rent provided for herein shall
automatically be increased during the term of such sublease to a sum equal to
the amount of rent payable under such sublease. In the event that Tenant shall
receive any valuable consideration for an assignment of the Tenant's interest
in this Lease, then, notwithstanding any other provision contained in this
Lease to the contrary, Tenant shall pay to Landlord as additional rent
hereunder the amount of consideration thereby received.
Landlord shall have the right to assign this lease at any time, upon
written notice to Tenant, whereupon Landlord shall be released from all further
or other obligations or liabilities subsequently arising from and after the
date of such assignment. Assignee will assume the Landlord's obligations under
the terms of the Lease. The Assignee of the Landlord shall have a net worth
equal to the then net worth of the Landlord as determined in accordance with
generally accepted accounting practices. Landlord shall provide Tenant with
written notice of any assignment of this Lease.
Article 18
Subordination and Attornment
The rights of Tenant under this Lease shall, at Landlord's election,
be subject and subordinate at all times to all ground leases and/or underlying
leases, if any, now or hereafter in force against the Leased Premises or any
part thereof, and to the lien of any mortgage or mortgages now or hereafter in
force against such leases and/or the Leased Premises, and to all advances made
or hereafter to be made upon the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. The term
"mortgages" as used in this Lease shall be deemed to include trust indentures
and deeds of trust.
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The aforesaid provisions shall be self-operative upon notice of election by
Landlord to Tenant and no further instrument of subordination shall be
required. Tenant hereby irrevocably appoints Landlord attorney-in-fact for
Tenant with full power and authority to execute and deliver in the name of the
Tenant any such instrument or instruments.
Tenant agrees that in the event of a sale, transfer or assignment of
Landlord's interest in the Leased Premises, or in the event that any
proceedings are brought for the foreclosure of or exercise of any power of sale
under any mortgage affecting the Leased Premises, or if a deed in lieu thereof
be given, or in the event any ground or underlying lease is cancelled or
terminated, Tenant shall attorn to and recognize such transferee, purchaser,
mortgagee or other party in interest as Landlord under this Lease and to affirm
this Lease so long as such transferee agrees not to disturb Tenant's rights
under this Lease.
Article 19
Estoppel Certificates
Tenant agrees, at any time and from time to time, upon not less than
ten (10) days prior written notice from Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and stating the
modifications), the dates to which the rent and other charges have been paid in
advance, if any, and such other matters pertaining to this Lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificate in a timely fashion is a material inducement
for Landlord's execution of this Lease. Tenant does hereby appoint Landlord as
its attorney-in-fact to execute any such estoppel certificate. It is intended
that any such statement delivered pursuant to this Article may be relied upon
by present or prospective mortgagees, purchasers, ground lessors or any
assignee of any of the foregoing in connection with Landlord's interest in the
Leased Premises.
Article 20
Quiet Enjoyment
Tenant upon paying the rents reserved and performing and observing all
other agreements, terms, covenants and conditions of this Lease on Tenant's
part to be performed and observed hereunder, shall peaceably and quietly have,
hold and enjoy the Leased Premises during the Lease Term, subject, nevertheless
to any ground leases, mortgages, agreements or encumbrances to which this Lease
is or may be subordinated.
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Article 21
Cure of Tenant's Default
If Tenant shall fail to make any payment or perform any act required
hereunder to be made or performed by Tenant hereunder, then Landlord may, but
shall be under no obligation to, after such notice to Tenant and expiration of
any applicable cure period as may be provided for under Article 22 of this
Lease, make such payment or perform such act with the same effect as if made or
performed by Tenant. Entry by Landlord upon the Leased Premises for such
purpose shall not waive or release Tenant from any default or obligation
hereunder. Tenant shall reimburse Landlord for all sums so paid and all costs
incurred, including attorneys' fees, upon Landlord's demand therefor.
Article 22
Default
If any one or more of the following events (herein referred to as an
"Event of Default") shall occur:
(a) if default be made in the due and punctual payment of
any rent or other charges, or any part hereof, payable to Landlord
hereunder, when and as the same shall become due, and such default
shall continue for a period of five (5) days;
(b) if this Lease be mortgaged, assigned or the Leased
Premises or any part thereof be sublet, either voluntarily or by
operation of law, without Landlord's prior written consent as set
forth in Article 17 hereof;
(c) [RESERVED]
(d) if Tenant shall fail to observe, perform or comply
with any of the terms, covenants and conditions in this Lease other
than those provided in subparagraphs (a), (b) and (c) above, within
thirty (30) days after notice from Landlord specifying the nature of
such default; provided, however, that no Event of Default shall be
deemed to occur so long as the curing of such default reasonably may
not be completed within such thirty (30) day period and Tenant has
commenced to cure such default and thereafter with reasonable
diligence pursues its efforts to cure and does so cure within ninety
(90) days;
(e) if Tenant shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall
file any petition or answer seeking any reorganization, readjustment,
liquidation, dissolution or similar relief under any bankruptcy or
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insolvency statute or law of the United States or any State, or shall
seek or consent to or acquiesce in the appointment of any bankruptcy
or insolvency trustee, receiver or liquidator of Tenant or of all or
any substantial part of its properties or of the Leased Premises;
(f) if within sixty (60) days after the commencement of
any involuntary proceeding against Tenant seeking any reorganization,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy or insolvency statute or law, Tenant fails to secure a
dismissal and discharge thereof; or
(g) if there shall be an "Event of Default" (as defined
therein) under the Lease dated February 26, 1997 between Jersey Pride
Foods Urban Renewal and Michael Foods, Inc., and the Lease dated
February 26, 1997, between Papetti Holding Company and Michael Foods,
Inc. (relating to certain premises in New Jersey) which Event of
Default under such other lease is not promptly cured within the
applicable cure period, if any.
then and in any such event Landlord, at its option, may at any time thereafter
(in addition to and/or as an alternative to all other legal remedies):
(a) immediately terminate this Lease and Tenant's right
to possession of the Leased Premises; or
(b) terminate only the Tenant's right to possession of
the Leased Premises, without terminating this Lease or releasing
Tenant in whole or in part from Tenant's obligations hereunder for the
full term hereof; or
(c) without terminating this Lease or Tenant's right to
possession of the Leased Premises, enter upon the Leased Premises and
do and perform whatever Tenant is obligated to do under the terms of
this Lease.
In the event Landlord exercises its rights under subparagraph (a) or
(b) immediately above, Tenant shall quit and peacefully surrender the Leased
Premises to Landlord, and Landlord, upon or at any such expiration or
termination, may without further notice, enter upon and reenter the Leased
Premises and possess and repossess itself thereof, as provided by law,
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold and enjoy the Leased Premises and the right
to receive all rental income of and from the same, and further, Landlord may
collect damages in accordance with the law.
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If Tenant's right to possession of the Leased Premises shall be
terminated pursuant to this Article 22, by summary proceedings or otherwise,
Landlord may in its own name, as agent for Tenant if this Lease not be
terminated, or if this Lease be terminated, in its own behalf, enter into
possession of and relet the Leased Premises or any part thereof, or said
premises with additional premises, for such term or terms (which may be greater
or less than the period which would otherwise have constituted the balance of
the Lease Term) and on such conditions (which may include concessions, free
rent and/or alterations of the Leased Premises) as Landlord, in its
uncontrolled discretion, may determine and may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Leased Premises or any part thereof, or of any failure to collect any
rent due upon such reletting.
No such expiration or termination of this Lease, or termination of
Tenant's right of possession thereunder, shall relieve Tenant of its liability
and obligations under this Lease, unless otherwise agreed to in writing by
Landlord, whether or not the Leased Premises shall be relet. Upon an event of
default, Tenant shall pay Landlord the rent and all other charges required to
be paid hereunder by Tenant up to the time of such event. Thereafter:
(a) Tenant, until the end of the Lease Term, or what
would have been such term in the absence of any such event, shall be
liable to Landlord as damages for Tenant's default, the equivalent of
the amount of the rent and other charges which would be payable under
this Lease by Tenant if this Lease were still in effect, less the net
proceeds of any reletting effected pursuant to the provisions hereof,
after deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession costs,
brokerage and management commissions, operating expenses, legal
expenses, reasonable attorneys' fees, and expenses of preparation of
such reletting. Tenant shall pay such damages (herein called
"deficiency") to Landlord monthly on the days on which the net rent
would have been payable under this Lease if this Lease were still in
effect, and Landlord shall be entitled to recover from Tenant each
monthly deficiency as the same shall arise.
(b) At any time after the expiration or termination of
this Lease, in lieu of collecting any further monthly deficiencies as
aforesaid, Landlord shall be entitled to recover from Tenant, and
Tenant shall pay to Landlord, on demand, as liquidated damages and not
as a penalty, an amount equal to the difference between the total
rental and other benefits which would have accrued to Landlord under
this Lease from the date of termination to the date of the expiration
of the original term demised and the then fair and reasonable rental
value of the Leased
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Premises for the same period. Tenant shall remain liable for any
monthly deficiencies not previously recovered by Landlord. In the
computation of such liquidated damages, the difference between any
installment of rent thereafter becoming due and the fair and
reasonable rental value of the Leased Premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of not more than five percent (5%) per annum.
If the Leased Premises or any part thereof be relet by Landlord for
the unexpired term of this Lease, or any part thereof, before presentation of
proof of such liquidated damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall prima facie be the fair and
reasonable rental value for the part or the whole of the Leased Premises so
relet during the term of the reletting. Nothing herein contained shall limit
or prejudice the right of Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
If this Lease be terminated by summary proceedings or otherwise, or if
Tenant's right to possession of the Leased Premises shall be terminated, and
whether or not the Leased Premises be relet, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord, in addition to any
damages becoming due under this Article 22, the following: an amount equal to
all expenses, if any, including reasonable attorneys' fees, incurred by
Landlord in recovering possession of the Leased Premises, (whether or not
litigation be commenced in aid thereof), and all costs and charges for the care
of said Leased Premises while vacant, which damages shall be due and payable by
Tenant to Landlord at such time or times as such expenses are incurred by
Landlord.
Tenant hereby expressly waives, so far as permitted by law, the
service of any notice of intention to reenter provided for in any statute and
except as is herein otherwise provided Tenant, for and on behalf of itself and
all persons claiming through or under Tenant (including any leasehold mortgagee
or other creditor), also waives any and all right of redemption or reentry or
repossession in case Tenant shall be dispossessed by a judgment or by warrant
of any court or judge or in case of reentry or repossession by Landlord or in
case of any expiration or termination of this Lease. The terms "enter,"
"reenter," "entry" or "reentry" as used in this Lease are not restricted to
their technical legal meanings.
Tenant hereby waives all right to trial by jury in any action or
proceeding hereafter instituted by Landlord against Tenant with respect to this
Lease or the Leased Premises. Tenant
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agrees not to interpose any counterclaim of any nature or description in any
action or proceeding. The foregoing, however, shall not be construed as a
waiver of Tenant's right to assert any claim in a separate action or proceeding
instituted by Tenant.
In the event of any breach or threatened breach by Tenant of any of
the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though reentry, summary proceedings, and other remedies
were not provided for in this Lease.
Article 23
No Waiver
No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of such agreement, term, covenant or condition. No
agreement, term, covenant or condition hereof to be performed or complied with
by Tenant, and no breach thereof, shall be waived, altered or modified except
by a written instrument executed by Landlord. No waiver of any breach shall
affect or alter this Lease, but each and every agreement, term, covenant and
condition hereof shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
Article 24
Remedies Cumulative
Each right and remedy provided for in this Lease shall be cumulative
and shall be in addition to every other right or remedy provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by Landlord of any or all other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise.
Article 25
Surrender of Premises; Holding Over
Upon the expiration or sooner termination of the Lease Term, Tenant
agrees to quit and surrender the Leased Premises, clean and in good condition
and repair, normal wear and tear and insured casualty excepted, together with
all keys and combinations
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to locks, safes and vaults and all improvements, alterations, additions,
fixtures, equipment and decorations at any time made or installed in, upon or
to the interior or exterior of the Leased Premises (except movable furniture,
furnishings, equipment and other personal property of Tenant put in at Tenant's
expense), all of which shall thereupon become the property of Landlord without
any claim by Tenant therefor, but the surrender of such property to Landlord
shall not be deemed to be a payment of rent or in lieu of any rent reserved
hereunder. Before surrendering the Leased Premises, Tenant shall remove all of
Tenant's said personal property and, at Landlord's option, Tenant shall also,
at Tenant's expense, remove any alterations, additions, fixtures or equipment
that contains or constitutes a "Hazardous Substance" (as defined in Article 5
such that the disposal of the same to a sanitary landfill is not permitted or
is otherwise regulated under applicable law), at any time made or installed by
Tenant in, upon or to the Leased Premises, and Tenant further agrees to repair
any damage caused thereby. If Tenant shall fail to remove any of Tenant's said
personal property or other property required by Landlord to be removed, said
property shall, at the option of Landlord, either be deemed abandoned and may
be disposed of by Landlord at Tenant's expense, or Landlord shall have the
right to remove and store said property, at the expense of Tenant, without
further notice to or demand upon Tenant and hold Tenant responsible for any and
all charges and expenses incurred by Landlord therefor. If the Leased Premises
be not surrendered as and when aforesaid, Tenant shall indemnify Landlord
against all loss or liability resulting from the delay by Tenant in so
surrendering the same, including without limitation, any claims made by any
succeeding occupant founded on such delay. If Tenant shall remain in
possession of the Leased Premises, or any part thereof, for any period after
the termination of this Lease in any of the ways above-named, Tenant shall pay
one and one-half (1.5) times the rent as a month-to-month hold over tenant
until such holding over shall cease. Tenant's obligations under this Article
shall survive the expiration or sooner termination of the Lease Term.
Article 26
Relationship of Parties
Nothing contained in this Lease shall be deemed to constitute or be
construed or implied to create the relationship of principal and agent,
partnership, joint venture or any other relationship between the parties
hereto, other than the relationship of Landlord and Tenant.
The term "Landlord" as used in this Lease means only the owner of the
current interest of Landlord in the Leased Premises or, as the case may be, the
successor thereto from time to time. In the event of any transfer at any time
of the interest of Landlord, the transferor shall be and is hereby entirely
freed and relieved of all covenants and obligations of Landlord hereunder
accruing from and after the date of such transfer, and it shall be
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deemed and construed without further agreement between the parties or their
respective successors in interest or between the parties and the transferee
that the transferee of Landlord's interest has assumed and agreed to carry out
any and all covenants and obligations of Landlord thereafter accruing
hereunder.
Article 27
Successors and Assigns; Provisions Binding
Except as otherwise expressly provided in this Lease, all covenants,
conditions and provisions of this Lease shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
Each provision of this Lease to be performed by Tenant shall be
construed to be both a covenant and a condition, and if there shall be more
than one Tenant, they shall all be bound, jointly and severally, by the
provisions of this Lease. The persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly incorporated and
duly qualified corporation and is authorized to do business in the State of its
incorporation and that the person or persons executing this Lease on behalf of
Tenant is an officer or are officers of such Tenant, and that he or they as
such officers are duly authorized to sign and execute this Lease.
Article 28
Notices
Every notice, demand, request or other communication which may be or
is required to be given under this Lease or by law shall be in writing and
shall be sent by United States Certified or Registered Mail, postage prepaid,
return receipt requested, or by nationally recognized overnight courier (e.g.
Federal Express) and shall be addressed: (a) if to Tenant, to Michael Foods,
Inc. 5353 Wayzata Blvd., Suite 324, Minneapolis, MN 55416, Attention: Jeffrey
M. Shapiro; and (b) if to Landlord, to A & A Urban Renewal, 100 Trumbull
Street, Elizabeth, New Jersey, Attention: Arthur N. Papetti, with a copy to
Martin B. O'Connor, II, O'Connor, Morss & O'Connor, Liberty Hall Center, 1085
Morris Avenue, Union, NJ 07083-7136, and the same shall be deemed delivered
one (1) business day after being sent via nationally recognized overnight
courier (e.g., Federal Express) or three (3) business days after being mailed
by U.S. Certified or Registered mail, return receipt requested. Either party
may designate, by similar written notice to the other party, any other address
for such purposes.
26
<PAGE> 30
Article 29
Miscellaneous
Tenant agrees not to record this Lease or any memorandum thereof
without the prior written consent of Landlord.
Each party covenants, warrants and represents to the other that there
was no broker instrumental in consummating this Lease and that no conversations
or prior negotiations were had by such party with any broker concerning the
renting of the Leased Premises. Each party agrees to indemnify and hold the
other harmless against and from all liabilities, including attorneys' fees,
arising from any claims for brokerage commissions or finders' fees resulting
from or arising out of any conversations or negotiations had by such party with
any broker.
Tenant agrees to annually make available for review by Landlord and
its lenders such financial information and statements as the same may
reasonably request, provided, Landlord and its lenders agree to keep such
information and statements confidential to the extent the same is not public
information.
Article 30
Entire Agreement; Construction
This Lease sets forth the entire agreement between the parties
respecting the Leased Premises. There are no understandings, agreements,
statements, promises, representations or warranties, express or implied, not
specified herein respecting the Leased Premises and all prior conversations and
writings by or between the parties or their representatives are merged herein
and extinguished. This Lease shall not be modified except by a writing
subscribed to by the party to be charged, nor may this Lease be cancelled by
Tenant or the Leased Premises surrendered except with the express written
authorization of Landlord.
This Lease shall be construed, as to both validity and performance,
and enforced in accordance with and shall be governed by the laws of the
jurisdiction in which the Leased Premises are located, without regard to such
jurisdiction's principles of conflicts of law. If any provision of this Lease
or the application thereof to any person or circumstance shall to any extent be
held void or invalid, then the remainder of this Lease or the application of
such provision to persons or circumstances other than those as to which it is
held void or invalid shall not be affected thereby, and each provision of this
Lease shall be valid and enforced to the fullest extent permitted by law.
The headings in this Lease are for purposes of reference only and
shall not limit or define the meaning hereof. This Lease
27
<PAGE> 31
may be executed in any number of counterparts, each of which is an original,
but all of which shall constitute one instrument.
Article 31
Binding Arbitration
In the event that a dispute arises between Landlord and Tenant such
matter shall be submitted to binding arbitration as follows:
(1) Any arbitration hereunder shall be held pursuant to
the Commercial Arbitration Rules of the American Arbitration Association except
that:
(i) Landlord and Tenant shall each select one
arbitrator. The two appointed arbitrators shall jointly
choose a third arbitrator from a list provided by the American
Arbitration Association and the third arbitrator shall be the
sole arbitrator to hear the dispute. If either party fails to
appoint an arbitrator within twenty (20) days after demand by
the other party, or the appointed arbitrators fail to agree to
the third arbitrator within twenty (20) days after a list of
potential arbitrators is provided by the American Arbitration
Association, the American Arbitration Association shall select
an arbitrator for the party failing to make appointment or
shall appoint the third arbitrator, as the case may be.
(ii) The arbitration shall be held in the City in
which any facility leased hereunder is located, or such other
location as the parties shall mutually agree.
(iii) The parties shall bear their own expenses of
the arbitration, including attorneys fees and costs of expert
witnesses.
(iv) The filing or other fees of the American
Arbitration Association shall be paid one-half by the Landlord
and one-half by the Tenant.
(v) The award of the arbitrators shall be binding
and shall be enforceable in any court of the state in which
the Premises are located.
(2) If the American Arbitration Association is not then
in existence or refuses to administer the arbitration, the arbitration shall be
administered by the most nearly comparable organization as shall be agreed by
the parties, or failing agreement, as shall be determined by the Union County
Superior Court of Elizabeth, New Jersey.
28
<PAGE> 32
(3) Notwithstanding anything herein to the contrary,
either party shall have the right to seek injunctive relief to maintain the
status quo until a dispute between the parties can be arbitrated.
In the event that a dispute arises between Landlord and Tenant
involving an amount which is greater than the then current annual base rent
under this Lease, such matter shall be litigated by the parties.
Article 32
Choice of Law; Jurisdiction.
This Lease shall be governed, construed, applied and enforced in
accordance with the laws of the state in which the Premises are located
(without regards to principles of conflicts of laws).
Landlord and Tenant each (i) irrevocably submits to personal
jurisdiction in the courts of the state in which the Premises are located and
the applicable United States District Court serving the county in which the
Premises are located, and appellate courts from any thereof, and (ii)
irrevocably waives any objection which it may have at any time to the laying on
venue of any suit, action or proceeding arising out of or relating to this
Lease brought in any such court, and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Landlord and Tenant each hereby agree that to the extent permitted by
local court rules, any summons, complaint and other process and notice in
connection with the commencement of or any other proceeding in any such suit,
action or proceeding may be served on it by using the notification procedure
set forth in this Lease.
LANDLORD AND TENANT EACH HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS LEASE OR ANY ACTS OR OMISSIONS OF LANDLORD, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 33
Joint Preparation
This Lease is to be deemed to have been prepared jointly by the
parties hereto, and any uncertainty or ambiguity existing herein, if any, shall
not be interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's length agreements.
29
<PAGE> 33
Article 34
Time Is of the Essence
Time is of the essence with respect to all matters provided in this
Lease.
Article 35
Term Renewal
Tenant is granted the right to extend the term of this Lease for two
(2) period(s) of five (5) years each (the "Option Period(s)") on the terms and
conditions set forth herein; provided, however, that each said right to extend
for each such Option Period (the "Option(s)") may be exercised only in the
event Tenant is not in default at the time each said Option right is exercised
and provided, further, that the Option for the immediately preceding Option
Period, if any, has been exercised. The phrase "Lease Term" as used in this
Lease shall mean the term of this Lease as extended by Tenant pursuant to this
Article.
To exercise each Option, Tenant shall notify Landlord in writing no
later than one (1) year prior to the expiration of the initial Lease Term or
the Option Period then expiring, if any.
In the event Tenant properly exercises its Option as provided herein:
(1) all of the terms and conditions of this Lease shall apply during the Option
Period(s) (except the Option then exercised), including, but not limited to,
Tenant's obligation to pay all costs, charges and expenses provided for in the
Lease; (2) the Option exercised by Tenant in order to extend the Term of the
Lease shall terminate and be of no further force and effect and may not be
exercised again by Tenant; (3) no concession previously granted Tenant by
Landlord in the initial term shall be due or payable to Tenant during or with
respect to such Option Period; and (4) the monthly base rent payable under
Article 2 during the particular Option Period shall be determined as set forth
below. At Landlord's request, prior to the commencement of the particular
Option Period, Tenant shall execute, acknowledge, and deliver to Landlord an
amendment to lease evidencing Tenant's exercise of its Option and setting forth
the commencement and expiration dates of the Option Period and term of the
Lease and the monthly base rent payable during the Option Period.
The Annual Rent payable monthly under Article 2 during each Option
Period shall be such amount as may be agreed upon by the parties and which is
not less than 110%, nor more than 135%, of the Annual Rent for the twelve (12)
months immediately preceding the commencement of the applicable Option Period
(the "Option Period Rent").
If the parties are unable, within sixty (60) days of notice by Tenant
electing to extend the term of the Lease, to agree
30
<PAGE> 34
on the amount of the Option Period Rent then each party shall within ten (10)
days thereafter designate and select an M.A.I. certified appraiser and submit
to them what such party believes the Option Period Rent should be. The two
appraisers shall then together within thirty (30) days determine and agree upon
the Option Period Rent by selecting either the Option Period Rent proposed by
Landlord or that proposed by Tenant, with no other variation.
If the two appraisers are unable within said thirty (30) days to agree
on either Landlord's or Tenant's proposed Option Period Rent, then they shall
together designate a third M.A.I. appraiser, who alone shall select either
Landlord's or Tenant's proposed Option Period Rent as the Annual Rent, which
determination shall be binding and enforceable upon all parties.
Each party shall pay the cost of the appraisers selected by such party
and the costs of the third appraiser (if retained) shall be paid equally by
each party.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW
31
<PAGE> 35
TENANT:
MICHAEL FOODS, INC., a Delaware
corporation
(SEAL)
By: /s/ Gregg A. Ostrander
---------------------------------------
Attest: Gregg A. Ostrander, President
---------------------------------------
Print Name Here
- ---------------------------------
(Ass't) Secretary
LANDLORD:
A & A URBAN RENEWAL, a New Jersey
general partnership
WITNESS: By: /s/ Anthony Papetti
---------------------------------------
Anthony Papetti, General Partner
- ---------------------------------
- ---------------------------------
[SIGNATURE PAGE TO LEASE AGREEMENT]
STATE OF )
-------------- )
COUNTY OF )
-------------
On this day of , 1997, before me
personally appeared , to me
personally known, who, being by me duly sworn, did say that he/she is the
of MICHAEL FOODS, INC., a Delaware
corporation, and that said instrument was signed on behalf of said corporation
by authority of its Board of Directors; and said officer acknowledged said
instrument to be the free act and deed of said corporation.
<PAGE> 36
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed
my official seal in the and State aforesaid, the day and year first
above written.
---------------------------------------
Notary Public
(SEAL)
My Commission Expires:
STATE OF )
-------------- )
OF )
- ------ -------------
On this day of , 1997, before me
personally appeared ANTHONY PAPETTI, to me personally known, who, being by me
duly sworn, did say that he is a general partner of A & A URBAN RENEWAL, a New
Jersey general partnership, and that said instrument was signed by him as a
general partner on behalf of said general partnership; and said ANTHONY PAPETTI
acknowledged said instrument to be the free act and deed of said general
partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed
my official seal in the and State aforesaid, the day and year first
above written.
---------------------------------------
Notary Public
(SEAL)
My Commission Expires:
<PAGE> 37
EXHIBIT A
Description of Leased Premises
100 Trumbull Street, Elizabeth New Jersey
(LEGAL TO FOLLOW)
<PAGE> 1
EXHIBIT 20.1
NEWS
[MICHAEL FOODS INC. LETTERHEAD]
Contact: MARK D. WITMER
Director of Corporate Communications
(612) 546-1500
For Immediate Release
MICHAEL FOODS COMPLETES ACQUISITION OF PAPETTI'S HYGRADE EGG PRODUCTS
Minneapolis, February 26 -- Michael Foods, Inc. (Nasdaq\NMS:MIKL) announced
today that it has completed the previously announced acquisition of
Papetti's Hygrade Egg Products, Inc. and its affiliates ("Papetti's"). The
consideration included cash and stock in the amount of approximately $82.8
million, including approximately 3.2 million shares of Michael Foods common
stock. Additionally, Michael Foods assumed approximately $23.4 million of
Papetti's debt. The acquisition will be accounted for as a purchase.
Papetti's, based in Elizabeth, New Jersey, is the world's largest further
processed egg products producer with annual sales in excess $300 million.
Commenting on the acquisition, Gregg A. Ostrander, President and CEO of
Michael Foods, said, "We are excited about building the world's most
dynamic egg products company together with the Papetti family and the
Papetti's employees. The depth and breadth of our combined product
development, processing, sales and customer service capabilities will be
unparalleled in the egg products industry. We will now aggressively pursue
the operating synergies we see before us as we coordinate the operations of
our Papetti's and M.G. Waldbaum egg products subsidiaries."
Michael Foods, Inc. is a diversified food processor and distributor with
particular interests in egg products, refrigerated grocery products, frozen
and refrigerated potato products and specialty dairy products. Principal
subsidiaries include Papetti's Hygrade Egg Products, Inc., M.G. Waldbaum
Company, Crystal Farms Refrigerated Distribution Company, Northern Star Co.
and Kohler Mix Specialties, Inc.
# # #
2-26-97
<PAGE> 2
EXHIBIT 20.1
NEWS
[MICHAEL FOODS INC. LETTERHEAD]
Contact: MARK D. WITMER
Director of Corporate Communications
(612) 546-1500
For Immediate Release
MICHAEL FOODS COMPLETES DEBT FINANCING
Minneapolis, February 26 -- Michael Foods, Inc. (Nasdaq\NMS:MIKL) announced
today that it has completed a $125 million private placement of senior
notes. The notes were placed with various insurance company investors,
mature in February, 2009 and were priced to yield 7.58%. Proceeds will be
used in finance the acquisition of Papetti's Hygrade Egg Products, Inc., to
refinance debt assumed in both that transaction and in a pending merger
with North Star Universal, Inc., and for general corporate purposes.
Prudential Securities acted as placement agent in the transaction.
Michael Foods, Inc. is diversified food processor and distributor with
particular interests in egg products, refrigerated grocery products, frozen
and refrigerated potato products and specialty dairy products. Principal
subsidiaries include Papetti's Hygrade Egg Products, Inc., M.G. Waldbaum
Company, Crystal Farms Refrigerated Distribution Company, Northern Star Co.
and Kohler Mix Specialties, Inc.
# # #
2-26-97
<PAGE> 1
EXHIBIT 20.2
NEWS
[MICHAEL FOODS INC. LETTERHEAD]
Contact: MARK D. WITMER
Director of Corporate Communications
(612) 546-1500
For Immediate Release
MICHAEL FOODS COMPLETES BANK FINANCING
MINNEAPOLIS, February 28 -- Michael Foods, Inc. (Nasdaq\NMS:MIKL) announced
today that it has closed on a new Revolving Loan Agreement with its
principal banks. The credit facility is in the amount of $80 million,
matures in February, 2002 and allows the Company to borrow at the banks'
reference rate or at eurodollar rates, at it's option Bank of America
National Trust and Savings Association is the agent for the facility.
Michael Foods, Inc. is a diversified food processor and distributor with
particular interests in egg products, refrigerated grocery products,
frozen and refrigerated potato products and specialty dairy products.
Principal subsidiaries include Papetti's Hygrade Egg Products, Inc., M.G.
Waldbaum Company, Crystal Farms Refrigerated Distribution Company,
Northern Star Co. and Kohler Mix Specialties, Inc.
# # #
2-28-97
<PAGE> 1
EXHIBIT 20.3
Contact: Peter E. Flynn, Executive Vice President, North Star Universal, Inc.
(612) 941-3200
Contact: Mark D. Witmer, Assistant Treasurer, Michael Foods, Inc.
(612) 546-1500
FOR IMMEDIATE RELEASE
MICHAEL FOODS AND NORTH STAR COMPLETE MERGER
MINNEAPOLIS, February 28 -- Michael Foods, Inc. ("MFI")
(Nasdaq\NMS:MIKL) and North Star Universal, Inc. ("NSU") (Nasdaq\NMS:NSRU)
jointly announced today that they have completed the previously announced
Agreement and Plan of Reorganization between MFI, NSU and NSU Merger Co. (the
"Merger"). As a result of the Merger, NSU has been renamed Michael Foods, Inc.
and will be comprised of the businesses and management existing in MFI prior to
the Merger. New Michael Foods' common stock will trade under the Nasdaq symbol
of MIKLD beginning on March 3, 1997 for approximately 30 days, at which point
the symbol will revert to MIKL.
NSU delivered $21,250,000 of net indebtedness in the Merger, resulting in a
7.25% discount to be applied to the Average Price of Michael Common Stock
previously set at $12.85 per share. This resulted in 1,782,961 MFI shares
being effectively retired out of the 7,354,950 MFI shares held by NSU.
The balance of the MFI shares held by NSU were divided by the NSU shares
outstanding, resulting in a Reverse Stock Split Ratio of .562. Therefore, NSU
shareholders will receive .562 shares of New Michael Common Stock for each
share of NSU common stock held. Additionally, NSU shareholders will receive one
share of ENStar Inc. common stock for every three shares of NSU common stock
held.
First National Bank of Boston\Boston EquiServe is Exchange Agent for the Merger
and the Reverse Stock Split and Norwest Stock Transfer will handle the ENStar
Inc. stock distribution as Transfer Agent for ENStar Inc. The Exchange Agent
for the Merger will send a transmittal letter to MFI and NSU stockholders,
which will instruct stockholders with respect to the stock certificate exchange
process.
Michael Foods, Inc. is a diversified food processor and distributor with
particular interests in egg products, refrigerated grocery products, frozen and
refrigerated potato products and specialty dairy products. Principal
subsidiaries include Papetti's Hygrade Egg Products, Inc., M.G. Waldbaum
Company, Crystal Farms Refrigerated Distribution Company, Northern Star Co. and
Kohler Mix Specialties, Inc.
(more)
ENStar's (Nasdaq:ENSR) direct and indirect wholly-owned subsidiaries include
Americable, Inc. and Transition Networks, Inc. Americable is a provider of
connectivity and networking products and services. Transition Networks
designs, manufactures and markets connectivity devices used in local area
network ("LAN") applications. ENStar also owns a 23% interest in CorVel
Corporation.
# # #
2-28-97
<PAGE> 1
EXHIBIT 99.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------------
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: 0-15568
---------------------------------------------------------
MICHAEL FOODS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1579532
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 324, Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, MN 55416
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(612) 546-1500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ]Yes [ ]No
The number of shares outstanding of the registrant's Common Stock, $.01
par value, as of November 1, 1996 was 19,395,731 shares.
1
<PAGE> 2
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
==============================================================================================================
September 30, December 31,
ASSETS 1996 1995
- ------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,966,000 $ 1,921,000
Accounts receivable, less allowances 50,472,000 40,583,000
Inventories 57,875,000 58,845,000
Prepaid expenses and other 3,059,000 1,622,000
------------ ------------
Total current assets 114,372,000 102,971,000
PROPERTY PLANT AND EQUIPMENT-AT COST
Land 4,140,000 4,117,000
Buildings and improvements 98,198,000 95,109,000
Machinery and equipment 219,884,000 203,557,000
------------ ------------
322,222,000 302,783,000
Less accumulated depreciation 135,639,000 118,642,000
------------ ------------
186,583,000 184,141,000
OTHER ASSETS
Goodwill, net 56,550,000 57,829,000
Net assets held for sale 3,050,000 4,431,000
Other 9,514,000 9,855,000
------------ ------------
69,114,000 72,115,000
------------ ------------
$370,069,000 $359,227,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Notes payable $ 38,700,000 $ --
Current maturities of long-term debt 12,709,000 11,731,000
Accounts payable 37,674,000 27,362,000
Accrued compensation 4,389,000 6,543,000
Accrued insurance 6,907,000 6,945,000
Other accrued expenses 11,713,000 8,295,000
------------ ------------
Total current liabilities 112,092,000 60,876,000
LONG-TERM DEBT, less current maturities 42,910,000 89,690,000
DEFERRED INCOME TAXES 29,758,000 28,566,000
CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 3,000,000 shares authorized,
none issued -- --
Common stock, $.01 par value, 25,000,000 shares authorized,
shares issued 19,395,731 at September 30, 1996 and 19,332,001 at
December 31, 1995 194,000 193,000
Additional paid-in capital 112,613,000 112,374,000
Retained earnings 72,502,000 67,528,000
------------ ------------
185,309,000 180,095,000
------------ ------------
$370,069,000 $359,227,000
============ ============
==============================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net sales $159,928,000 $136,257,000
Cost of sales 144,828,000 116,243,000
------------ ------------
Gross profit 15,100,000 20,014,000
Selling, general and administrative expenses 11,155,000 11,367,000
------------ ------------
Operating profit 3,945,000 8,647,000
Other (income) expense
Interest expense 1,976,000 1,841,000
Interest capitalized (234,000) (61,000)
------------ ------------
1,742,000 1,780,000
Interest income (12,000) (12,000)
------------ ------------
1,730,000 1,768,000
------------ ------------
Earnings before income taxes 2,215,000 6,879,000
Income tax expense 890,000 2,650,000
------------ ------------
NET EARNINGS $ 1,325,000 $ 4,229,000
============ ============
NET EARNINGS PER SHARE $ .07 $ .22
============ ============
DIVIDENDS PER SHARE $ .05 $ .05
============ ============
Weighted average shares outstanding 19,396,000 19,332,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Nine Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $455,478,000 $393,821,000
Cost of sales 403,267,000 333,913,000
------------ ------------
Gross profit 52,211,000 59,908,000
Selling, general and administrative expenses 33,597,000 34,292,000
------------ ------------
Operating profit 18,614,000 25,616,000
Other (income) expense
Interest expense 6,010,000 6,076,000
Interest capitalized (496,000) (113,000)
------------ ------------
5,514,000 5,963,000
Interest income (40,000) (91,000)
------------ ------------
5,474,000 5,872,000
------------ ------------
Earnings before income taxes 13,140,000 19,744,000
Income tax expense 5,260,000 7,600,000
------------ ------------
NET EARNINGS $ 7,880,000 $ 12,144,000
============ ============
NET EARNINGS PER SHARE $ .41 $ .63
============ ============
DIVIDENDS PER SHARE $ .15 $ .15
============ ============
Weighted average shares outstanding 19,379,000 19,326,000
============ ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE> 5
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 30,965,000 $ 40,927,000
Cash flows from investing activities:
Capital expenditures (20,594,000) (17,275,000)
Net assets held for sale 800,000 453,000
Other assets 168,000 (2,321,000)
------------- --------------
Net cash used in investing activities (19,626,000) (19,143,000)
Cash flows from financing activities:
Purchase of shares (500,000) --
Proceeds from issuance of common stock 213,000 --
Payments on notes payable and long-term debt (99,916,000) (69,743,000)
Proceeds from notes payable and long-term debt 92,814,000 51,503,000
Cash dividends (2,905,000) (2,898,000)
------------- --------------
Net cash used in financing activities (10,294,000) (21,138,000)
------------- --------------
Net increase in cash and cash equivalents 1,045,000 646,000
Cash and cash equivalents at beginning of year 1,921,000 1,641,000
------------- --------------
Cash and cash equivalents at end of period $ 2,966,000 $ 2,287,000
============= ==============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE> 6
MICHAEL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with Regulation S-X pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to make the information presented not
misleading.
The Company utilizes a fiscal year consisting of either 52 or 53 weeks, ending
on the Saturday nearest to December 31 each year. The quarters ended September
30, 1996 and September 30, 1995 each include thirteen weeks of operations. For
clarity of presentation, the Company has described all periods presented as if
the quarter ended on September 30.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of September
30, 1996, the results of operations for the three and nine month periods ended
September 30, 1996 and 1995, and cash flows for the nine month periods ended
September 30, 1996 and 1995. The results of operations for the nine months
ended September 30, 1996 are not necessarily indicative of the results for the
full year.
NOTE B - INVENTORIES
Inventories other than raw potatoes and potato products are stated at the lower
of cost (determined on a first-in, first-out basis) or market. Raw potatoes
and potato products are stated at the lower of average cost for the year in
which produced or market. The cost of purchasing and raising flocks to laying
maturity is capitalized to inventory, then amortized, assuming no salvage
value, over the estimated productive life of each flock. Inventories consist
of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Work in process and finished goods $21,873,000 $19,848,000
Raw materials and supplies 13,690,000 16,597,000
Flocks 22,312,000 22,400,000
----------- -----------
$57,875,000 $58,845,000
=========== ===========
</TABLE>
NOTE C - LONG-TERM DEBT
The Company has an unsecured revolving line of credit with its principal banks
with interest payable at the banks' reference rates, or alternative variable
rates, at the Company's option. The revolving line of credit was increased
from $55,000,000 to $65,000,000 subsequent to the end of the third quarter. At
September 30, 1996, the Company had $2,700,000 outstanding at the reference
rate of 8.25% and $36,000,000 outstanding at an average variable rate of 5.9%.
This revolving line of credit, which matures on March 31, 1997, contains
certain restrictive covenants similar to the covenants contained in the
Company's senior promissory notes. At September 30, 1996, $16,300,000 of the
then available $55,000,000 revolving line of credit was unused.
6
<PAGE> 7
MICHAEL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(Unaudited)
NOTE D - CONTINGENCIES
Use of Estimates
In preparation of the Company's consolidated financial statements, management
is required to make estimates and assumptions that affect reported amounts of
assets and liabilities and related revenues and expenses. Actual results could
differ from the estimates used by management.
Patent Litigation
The Company had prepaid royalty payments of approximately $8,000,000 at
September 30, 1996 and $8,300,000 as of December 31, 1995 included in other
assets related to an exclusive license agreement for the production and sale of
extended shelf-life liquid egg products. These amounts have arisen as a result
of the Company making payments to prosecute and defend the patents related to
the exclusive license agreement. The Company has the right to offset up to 50%
of otherwise payable royalties for the legal costs which it has incurred to
defend patents underlying the exclusive license agreement. The Company has
been informed by the U.S. Patent and Trademark Office that a patent examiner
has rejected the claims under the four process patents, which are the subject
of the license agreement. Management and the licensor intend to appeal the
decision of the examiner and believe the validity of the patents will
ultimately be upheld. Counsel to the Company and the licensor estimates a full
appeal process could take two years. During the appeal process, the patents
remain valid and in full force and effect. Based upon current and expected
product volume levels, the Company expects to fully recover the remaining
prepaid royalties over the useful life of the exclusive license agreement.
However, there can be no assurance that the Company will be able to fully
recover its prepaid royalty payments. If the patents are ultimately denied
after all appeals have been concluded, the Company would continue to produce
and market the products currently subject to the license agreement without
incurring royalty cost.
Product Litigation
In the fall of 1994, a customer of the Company recalled product which was
potentially contaminated and is settling claims with consumers who became ill
after eating the product before the recall. The customer has filed a suit,
whereby the Company is a co-defendant with other companies alleged to have
supplied contaminated product to the customer's plant. The customer is seeking
damages for losses incurred, as well as alleged loss of past and future
profits. Management and its counsel believe the Company has substantial
defenses to the allegations and believe it is unlikely the Company will incur a
loss from this claim materially in excess of its insurance coverage.
Other Litigation
The Company is also engaged in routine litigation incidental to its business,
which management believes will not have a material effect upon its results of
operations, liquidity or consolidated financial position.
7
<PAGE> 8
MICHAEL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(Unaudited)
NOTE E - SIGNIFICANT ACQUISITION
In June, 1996, the Company entered into an agreement to purchase Papetti's
Hygrade Egg Products, Inc. and its affiliates ("Papetti's") in a cash and stock
transaction, along with other consideration, valued in total at approximately
$91 million. Additionally, the Company is to assume approximately $28 million
in debt issued by Papetti's. Papetti's is a producer of further processed egg
products with annual sales in excess of $275 million and total assets of
approximately $100 million. The cash portion of the purchase price is
approximately $48 million and the Common Stock portion is payable with 3.4
million shares. This acquisition transaction will also resolve the patent
litigation presently pending between the parties (see Note D). Pending
satisfactory completion of the due diligence review process and securing of
financing to fund the proposed transaction, it is expected that the acquisition
will close late in the fourth quarter of 1996 or the first quarter of 1997.
NOTE F - REORGANIZATION AGREEMENT
In December, 1995, the Company entered into a Reorganization Agreement with
North Star Universal, Inc. ("North Star") and NSU Merger Co. The
Reorganization Agreement was amended in September, 1996. North Star holds
approximately 38% of the Company's Common Stock. The effect of the
transactions set forth in the Reorganization Agreement is to distribute these
shares to North Star's shareholders after a certain portion of the holdings are
effectively retired to the Company's treasury in consideration for the Company
assuming North Star's net indebtedness, which is estimated to be approximately
$27 million. Following the reorganization, North Star will be renamed Michael
Foods, Inc. and will be comprised of the present operations and management of
the Company. It is expected that the transactions will close in the first
quarter of 1997.
8
