<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 28, 1996
[ ] 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: 1-9050
Hudson Foods, Inc.
(Exact name of registrant as specified in its charter)
Delaware 71-0427616
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1225 Hudson Road
Rogers, Arkansas 72756
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 636-1100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
Class A Common Stock, $.01 par value New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [ ]
On December 2, 1996, there were outstanding 20,540,493 shares of the
registrant's Class A common stock, $.01 par value, and 9,602,522 shares of the
registrant's Class B common stock, $.01 par value. The Class B common stock is
not registered or publicly traded, and its transferability is restricted.
<PAGE>
The aggregate market value of the 19,644,372 shares of Class A common stock held
by non-affiliates of the registrant as of December 2, 1996 was $363,420,882. The
aggregate market value of the 2,522 shares of Class B common stock held by
non-affiliates of the registrant on December 2, 1996 was $46,657, assuming that
each share of Class B common stock has a market value equal to a share of Class
A common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Hudson Foods, Inc. Annual Report for fiscal year ended September 28, 1996
(certain portions incorporated by reference into part II)
Proxy Statement for Annual Meeting of Stockholders, February 14, 1997 and
Adjournments (certain portions incorporated by reference into Part III)
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Hudson Foods, Inc. ("Hudson" or the "Company") was organized as a privately held
company in 1972 by James T. Hudson to purchase a broiler processing plant in
Noel, Missouri and other related assets from the Ralston Purina Company. In
February 1986, the Company completed an initial public stock offering of 2
million shares of its Class A common stock. The Company issued an additional 2.5
million shares of Class A common stock in November 1994.
The Company's poultry operations have grown since 1972 through expansions of
existing plants and a series of acquisitions including an integrated turkey
operation in 1979 and a major poultry company in 1986 which doubled Hudson's
size. In 1994, the Company began construction of a fully integrated broiler
complex near Henderson, Kentucky, which began processing in July 1996. Between
1987 and 1990 the Company broadened its product lines to include luncheon meat
with the acquisition of three luncheon meat processing plants and the related
brand names. In 1990, the Company added another product line, frozen portioned
entrees, through the acquisition of Pierre Frozen Foods, Inc. and expanded those
operations in 1992 with the purchase of an additional processing plant in
Caryville, Tennessee. Most recently, the Company began producing beef products
when its newly constructed beef processing plant in Columbus, Nebraska began
production in February 1995.
The Company sold its Topeka and Wichita, Kansas luncheon meat plants and related
brand names during fiscal 1996.The two plants produced ham, bacon and a variety
of luncheon meats. The Company continues to produce luncheon meat products at
its plant in Albert Lea, Minnesota.
NARRATIVE DESCRIPTION OF BUSINESS
General
The Company was established as a regional fully integrated poultry producer
selling commodity-type products in the United States. As a fully integrated
producer, the Company controls the breeding, hatching, growing, processing,
packaging, marketing and distribution of its product lines.
<PAGE>
The Company has changed dramatically since 1972 and is now a fully integrated
producer of further-processed poultry and a processor of other meat products.
The Company's products are produced at plants in several U.S. locations and sold
domestically and internationally. According to industry statistics, the Company
was the fifth largest poultry company, ranked by annual sales dollars, out of 57
companies that were surveyed./1/
- ---------------
/1/ Information contained in the October/November 1996 issue of "Poultry
Marketing and Technology."
The Company has achieved sales growth through acquisitions, expansions, product
line diversification, new product development and the development of an
international customer base. The Company has also tried to stabilize its profit
margins by shifting production to further-processed products and increasing
sales to targeted large customers under supply and pricing arrangements.
Consistent with that strategy, Hudson entered into a five-year, cost-plus
agreement with Boston Chicken, Inc., a franchiser and operator of Boston Market
foodservice stores specializing in complete meals featuring rotisserie roasted
chicken. The original agreement, dated October 12, 1994, provided for two Hudson
processing plants (one in Dexter, Missouri and one being built near Henderson,
Kentucky) to be cost-plus facilities for Boston Chicken. Subsequent to the
original agreement, Boston Market significantly expanded the protein options on
its menu. As a result, Hudson and Boston Chicken entered into an amended
purchase and supply agreement dated April 1, 1996. That amended agreement allows
Hudson to expand the products which it supplies to Boston Market. In addition to
chicken, the Company may also supply turkey, meat loaf and ham, all with
guaranteed minimum quantities. Hudson is currently the major supplier for Boston
Market's turkey requirements, with meat loaf and ham shipments to start soon.
Due to Boston Market's need for other proteins beyond chicken and strong demand
from other Hudson customers for additional chill-pack and individually frozen
chicken products, it was agreed that the Henderson, Kentucky facility would be
dedicated to the production of those products. The Henderson facility began
production in July 1996 and was processing approximately 300,000 birds per week
at the end of fiscal 1996. The parties agreed that the facility would be
producing 1.3 million birds per week by July 1997 and will increase production
consistent with commercially reasonable business practices. Under the agreement,
the Company may be reimbursed for certain expenses of the Henderson facility.
The Dexter, Missouri facility remains in place as a facility producing chicken
products for Boston Chicken.
Also, the Company entered into a supply agreement dated April 26, 1994 with
Restaurant Services, Inc., as purchasing agent for the Burger King system. The
Burger King system has committed to purchase, for a multi-year period,
approximately one-third of the capacity of the Company's beef plant and has an
option to buy more. Sales to the Burger King system are made based on a formula
price plus raw material costs. In addition, the Company is a minority
co-investor with Burger King Corporation and SBS Processing, Inc. in a similar
beef processing plant in Petersburg, Virginia.
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Products, Marketing and Customers
The following table sets forth, for the periods indicated, the net sales for
each of the Company's major product lines and the respective percentage of total
sales.
<TABLE>
<CAPTION>
Fiscal Year Ended
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September 28, 1996 September 30, 1995 October 1, 1994
Percentage Percentage Percentage
Net Sales of Total Sales Net Sales of Total Sales Net Sales of Total Sales
--------------- ---------------- --- --------------- --------------- --- --------------- ---------------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Chicken ................. $ 788.9 57.2% $ 648.3 54.0% $ 533.4 51.2%
Turkey .................. 182.6 13.2 145.1 12.1 113.2 10.9
Portioned entrees........ 175.4 12.7 171.4 14.3 175.5 16.9
Beef .................... 90.3 6.6 37.3 3.1 -- --
Luncheon meats .......... 94.2 6.8 159.0 13.2 164.7 15.8
Other /1/................ 47.1 3.5 39.4 3.3 54.0 5.2
--------- ------ -------- ------ -------- ------
Totals......... $1,378.5 100.0% $1,200.5 100.0% $1,040.8 100.0%
========= ====== ======== ====== ======== ======
- ---------------
/1/ Primarily includes sales of liquid and dried egg products, live birds, feed,
transportation and miscellaneous product sales .
</TABLE>
<PAGE>
The following table sets forth for the periods indicated the net sales to each
of the Company's customer groups and the respective percentage of total sales.
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------------------------------
September 28, 1996 September 30, 1995 October 1, 1994
Percentage Percentage Percentage
Net Sales of Total Sales Net Sales of Total Sales Net Sales of Total Sales
------------- --------------- --- -------------- ----------------- -- --------------- -----------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Foodservice..................... $ 350.3 25.4% $ 324.5 27.0% $ 313.0 30.1%
Club stores..................... 250.2 18.2 184.4 15.4 161.6 15.5
Retail.......................... 487.1 35.3 506.2 42.2 440.6 42.3
International................... 241.1 17.5 139.2 11.6 60.7 5.8
Other........................... 49.8 3.6 46.2 3.8 64.9 6.3
-------- ------ -------- ------ -------- ------
Totals................ $1,378.5 100.0% $1,200.5 100.0% $1,040.8 100.0%
======== ====== ======== ====== ======== ======
</TABLE>
The Company's products are sold domestically in three primary markets:
foodservice, club store and retail. The foodservice market is comprised
primarily of full service and fast food restaurants, prepared food companies,
various institutional customers such as schools, colleges and health care
facilities, vending machine operators, convenience stores and delicatessens. The
retail market includes grocery store chains, independent grocery stores and
grocery wholesalers.
The Company sells its products nationwide through independent brokers and sales
personnel of the Company under a variety of brand names, product lines and
private labels. The products are distributed from the Company's plants, storage
and distribution facilities and independent storage facilities to the final
customer or distributors via Company- owned trucks or contract carriers.
<PAGE>
The Company's products are sold internationally to wholesalers under the
Hudson(R), Delightful Farms(R) and Pierre(TM) brand names and also private
labels.
The primary raw materials used by the Company in its operations include raw
meat, feed ingredients, cooking ingredients and packaging supplies. The Company
grows substantially all the live chickens and turkeys used by its processing
plants but also buys live birds and processed poultry from outside sources. All
beef and pork raw materials are purchased from outside sources. The Company
believes that its sources of supply for these materials are adequate for its
present needs and does not anticipate any difficulty in acquiring these
materials in the future.
Chicken. The Company offers a wide variety of further-processed chicken products
including: cooked and uncooked individually frozen boneless and bone-in chicken
pieces; marinated whole chicken; breaded and fried chicken breast patties,
tenderloins and nuggets; buffalo-style wings and barbecued chicken. These
products are sold to retail, foodservice, club store, international and other
customers under the Hudson(R) and Delightful Farms(R) brand names. In addition
to further-processed products, the Company sells chill-packed and ice-packed
chicken parts and whole birds. The chill-packed products are sold to retail and
foodservice outlets under the Hudson(R) brand name and private labels. The
ice-packed products are sold in bulk to retail and foodservice outlets.
Turkey. The Company offers a full line of further-processed turkey products
which includes smoked turkey, turkey sausage, turkey pastrami, turkey salami,
turkey bologna and turkey ham sold under the Hudson(R) brand name. The Company
also sells a premium, fully cooked turkey breast produced in a variety of
flavors and sold under the Gourmet Recipe(R) line. Another major turkey product
is raw marinated breasts sold under the Carving Station(TM) line. During fiscal
1996, the Company marketed some individually packaged whole turkeys under the
Hudson(R) brand name and private labels, but has since begun to process and sell
all its turkey as further-processed products. The Company's turkey products are
sold primarily to retail, foodservice and international customers.
Portioned Entrees. The Company offers a full line of portion-controlled products
including: flame-broiled chicken, beef, turkey and pork patties; wrapped
microwaveable sandwiches; sausage patties and links; country-fried steak;
chicken nuggets; unbreaded char-broiled chicken; beef and pork fingers; pizza;
potato skin kits; chicken fajita kits and flavored chicken wings. The Company's
portioned entree products are primarily sold to domestic retail, foodservice and
club store customers, but some portioned entree products are also sold to
international wholesalers. Foodservice customers buying portioned entree
products primarily include restaurants, cafeterias, schools, colleges,
health-care facilities, vending machine operators and sandwich makers that
service convenience stores. The Company is one of the nation's largest
processors of United States Department of Agriculture ("USDA") commodity beef
and pork into further-processed products for school lunch programs. The
portioned entree products are primarily marketed under the Pierre(TM) and
Hudson(R) brand names and also under the Classic Seasons(R), Rib-B-Q(R), and
Fast Choice(TM) product lines.
<PAGE>
Beef. The Company primarily sells hamburger patties to a large foodservice
customer. In addition, the Company sells patties and chub packages to other
foodservice, club store, retail and international customers.
Luncheon Meats. The Company's luncheon meat products include sandwich meats,
wieners, sausage, turkey hams, and miscellaneous chicken and turkey products.
The Company's luncheon meat products are primarily sold to retail, club store,
foodservice and international customers under the Schweigert(R) and Hudson(R)
brand names as well as various private labels.
International Sales
The Company's products are sold internationally through sales offices located in
Rogers, Arkansas; Miami, Florida; Gdynia, Poland and Moscow, Russia.
International sales accounted for 17.5% of the Company's total sales during
fiscal 1996. The Company's products are sold primarily to wholesalers in Russia,
Eastern Europe, Asia and Latin America. The majority of these sales are chicken
leg quarters in Russia and Poland, but the Company also sells other items such
as hot dogs and turkey products. The loss of sales to Russia could have a
material adverse effect on the Company.
Major Customers
The Company's sales to Wal-Mart Stores, Inc. ("Wal-Mart") in fiscal 1996
constituted approximately 18.7% of total sales. No other customer accounted for
more than 10% of the Company's sales in fiscal 1996. Sales to the Company's next
largest customers, the Burger King system, a Russian wholesaler and Boston
Chicken were approximately 5.7%, 5.6% and 4.4%, respectively, of total sales in
1996. The loss of any of these customers could have a material adverse effect on
the Company.
Competition
The primary competitive factors in the poultry industry include price, product
quality, product development, brand identification and customer service.
Hudson's poultry products compete primarily with other integrated poultry
companies. Although poultry is relatively inexpensive in comparison with other
meats, the Company also competes indirectly with the producers of other meats
and fish. Changes in the relative prices of these foods may affect consumer
buying patterns.
The Company's portioned entree, luncheon meat and beef product lines compete
with regional and national meat processing companies, some of which are
divisions of fully integrated companies. Price, product quality, product
development, brand identification and customer service are important factors in
the business.
Regulation
<PAGE>
The poultry industry is subject to significant government regulation,
particularly in the health and environmental areas by the United States
Department of Agriculture ("USDA"), the Food and Drug Administration ("FDA") and
the Environmental Protection Agency. The Company anticipates increased
regulation by the USDA concerning food safety as well as by the FDA regarding
the use of medication in feed. The Company's food processing facilities are
subject to on-site examination, inspection and regulation by the USDA. The FDA
inspects the production of the Company's feed mills. Compliance with applicable
regulations has not had a material adverse effect upon the Company's earnings or
competitive position in the past and is not anticipated to have a material
adverse effect in the future. Management believes that the Company is in
substantial compliance with all applicable laws and regulations relating to the
operation of its facilities.
The Company takes all reasonable precautions to ensure that its flocks are
healthy and that its processing plants and other facilities operate in a
sanitary and environmentally sound manner. However, events beyond the control of
the Company, such as an outbreak of poultry disease in its flocks or the
adoption by the government of more stringent environmental regulations, could
adversely affect its operations.
Employees and Labor Relations
As of September 28, 1996, the Company employed 11,470 persons. Generally, the
Company believes that relations with its employees are good.
ITEM 2. PROPERTY
General
The Company believes that its facilities are generally in good condition and
suitable for their current purposes. The Company regularly engages in
construction and other capital improvement projects intended to expand and
improve the efficiency of its processing and support facilities.
The Company's chicken facilities were approximately 93% utilized in fiscal 1996.
The Company's portioned entree, luncheon meat and turkey facilities were
generally 85% to 100% utilized in fiscal 1996. The Company's beef facility was
approximately 48% utilized in fiscal 1996.
The Company's Hope, Arkansas, Springfield, Missouri and Cincinnati, Ohio
facilities are subject to mortgages or deeds of trust.
Plants and Facilities
<PAGE>
Chicken. The Company's chicken operations include breeding, hatching, rearing,
ingredient procurement, feed formulation and milling, veterinary and other
technical services, processing and related transportation and delivery services.
The Company both owns farms and contracts with independent growers to maintain
the Company's flocks of breeder chickens which lay eggs. The Company transfers
the eggs to its hatcheries. The newly hatched broiler chicks are then delivered
to independent contract growers or Company-owned farms where they are raised
until they reach processing weight, usually within seven weeks. During the
growout period, the Company provides growers with feed and other items, as well
as supervisory and technical assistance. The broilers are then transported by
Company trucks to its processing plants. The Company operates seven chicken
processing plants devoted to various phases of slaughtering, dressing, cutting,
deboning, further-processing and packaging. These processing plants are located
in Hope, Arkansas; Berlin, Maryland; Noel, Missouri; Albertville, Alabama;
Dexter, Missouri; Corydon, Indiana and Henderson, Kentucky. The Company operates
seven feed mills, nine broiler hatcheries and five protein facilities.
The Company's current processing capacity is approximately 5.6 million chickens
per week. During fiscal 1996, the Company processed a weekly average of 5.2
million chickens per week, yielding approximately 990.0 million pounds. The
Company has plans to expand the production capacity of its Corydon, Indiana
facility to 650,000 chickens per week and increase production at its Henderson,
Kentucky facility to 1.3 million birds per week, which will increase capacity to
approximately 7 million chickens per week.
The Company began processing chickens at its newly constructed Henderson,
Kentucky complex in July 1996. The complex includes a feed mill, hatchery,
processing plant and protein plant. At the end of fiscal 1996, the Company was
processing approximately 300,000 chickens per week at the Kentucky processing
plant and is scheduled to reach 1.3 million chickens per week by July 1997. The
Company's goal is to increase production at the Henderson plant to 2 million
chickens per week.
Turkey. The Company is a fully integrated turkey processor. The Company's turkey
operations include similar processes as discussed above for chicken. The Company
operates two turkey processing facilities in Springfield, Missouri. One is a
basic processing plant and the other is a further-processing plant. These
facilities have an annual production capacity of 183.0 million pounds. During
fiscal 1996, the Company produced approximately 176.1 million pounds of turkey
products. In addition, the Company operates one feed mill and two hatcheries.
Portioned Entrees. The Company produces its portioned entree products at plants
in Cincinnati, Ohio and Caryville, Tennessee which have an annual production
capacity of approximately 100.0 million pounds. During fiscal 1996, the Company
produced approximately 86.6 million pounds of portioned entree products.
Beef. The Company completed the construction of a beef processing plant in
Columbus, Nebraska in February 1995. The annual production capacity is
approximately 190.0 million pounds. During fiscal 1996, the Company produced
approximately 92.0 million pounds of beef products. The plant was originally
designed to process hamburger patties primarily for the Burger King system.
However, the plant was subsequently expanded to allow for additional capacity to
serve other customers.
<PAGE>
Luncheon Meat. The Company's luncheon meat plant is located in Albert Lea,
Minnesota. The plant's annual production capacity is approximately 61.0 million
pounds. During fiscal 1996, the Company produced approximately 60.2 million
pounds of luncheon meat products.
Other. The Company has a feed mill and an egg breaking plant in Social Circle,
Georgia that produces liquid and dried egg products.
ITEM 3. LEGAL PROCEEDINGS
On March 16, 1993, the United States of America, by the Attorney General of the
United States acting at the request of the Environmental Protection Agency,
filed a civil complaint against the Company in the United States District Court
for the South District of Indiana, New Albany Division, as civil action No. NA
93-19-C, alleging violations of the Federal Water Pollution Control Act (the
"Act"). Subsequently, this action was moved to the Indianapolis Division and
assigned Cause No. IP93-0692-C. The United States sought, among other things, a
permanent injunction preventing the Company from discharging wastewater in
violation of the Act from one of its processing facilities, an order requiring
the Company to undertake and expeditiously complete an upgrade of its wastewater
treatment system and a civil penalty of up to $25,000 per day for each violation
of the Act. The Company has reached an agreement in principle with the United
States Department of Justice to settle the litigation without admission of any
violation. On October 16, 1996, a consent decree was entered in which the
Company agreed to pay a civil penalty in the amount of $506,000 and the Company
shall receive a credit in the amount of $5,000 for an administrative penalty it
paid to the State of Indiana in 1992. The Company will pay the balance of
$501,000 in three equal principal amounts of $167,000 plus interest at an annual
rate of 5.53% over a two-year period. The Company also has agreed to implement
various supplemental environmental projects over a two-year period totaling at
least $300,000 in after-tax value.
The Company believes that its operations are in substantial compliance with
applicable environmental laws and regulations. However in the past, the Company
has paid monetary sanctions for violations of its wastewater discharge permits.
There can be no assurance that the Company will not experience future regulatory
proceedings and lawsuits relating to the environmental impact of its operations.
The Company cannot predict what effect, if any, such future proceedings or
lawsuits may have on its operations.
The Company is, at any time, involved in ordinary routine litigation incidental
to its business. Such litigation is not considered material to the Company's
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
COMMON STOCK
The Company's certificate of incorporation permits the issuance of up to
40,000,000 shares each of Class A common stock, $.01 par value, and Class B
common stock, $.01 par value. On December 2, 1996, there were 21,417,689 shares
of Class A common stock issued (including 877,196 shares held in treasury) and
9,602,522 shares of Class B common stock issued and outstanding. The Transfer
Agent and Registrar for both classes of common stock is ChaseMellon Shareholder
Services of Los Angeles, California.
The Class A common stock has one vote per share, while the Class B common stock
has ten votes per share in all matters submitted to a vote of the Company's
stockholders. Except as required by law or the certificate of incorporation,
holders of Class A or Class B common stock shall vote together as a single
class. Holders of Class A and Class B common stock are entitled to receive such
dividends and other distributions as may be determined by the Board of Directors
out of any funds of the Company legally available therefor. However, no dividend
may be declared and paid on the Class B common stock unless a dividend is also
declared and paid on the Class A common stock. In such an event, the dividend
per share of Class B common stock may not exceed 90% of the dividend per share
of Class A common stock. Certain members of the Hudson family own substantially
all of the Class B common stock which concentrates voting control over the
Company with James T. Hudson and the Hudson family. The Class B common stock
voting power is sufficient to, among other things, approve or prevent
extraordinary corporate transactions, such as mergers, consolidations or sales
of substantially all of the Company's assets and to elect or remove the members
of the Board of Directors.
Transfer of the Class B common stock may only be made to a "permitted
transferee" as defined in the Company's certificate of incorporation, but shares
of Class B common stock may be converted by the holder into an equal number of
shares of Class A common stock at any time. The Company may not issue additional
shares of Class B common stock without the approval of a majority of the votes
of the outstanding shares of Class A common stock and Class B common stock, each
voting separately as a class, except in connection with stock splits and stock
dividends. The Board of Directors and the holders of a majority of the
outstanding shares of Class B common stock may approve the conversion of all of
the Class B common stock into shares of Class A common stock.
In the event of a liquidation of the Company, all assets available for
distribution after payment of all prior claims would be divided among and paid
ratably to the holders of Class A common stock and Class B common stock.
Subject to any conversion rights of the holders of Class B common stock, holders
of Class A and Class B common stock have no preemptive rights to subscribe for
or receive any part of the authorized stock of the Company, additional or
increased issues of stock of any class or any obligations convertible into any
class or classes of stock. Further, no stockholder has the right to cumulate
votes in the election of directors.
<PAGE>
On December 2, 1996, the 20,540,493 shares of Class A common stock then
outstanding were held by approximately 1,261 holders of record (excluding
persons holding shares in nominee names).
<PAGE>
The Company's Class A common stock is currently traded on the New York Stock
Exchange ("NYSE") under the symbol "HFI." The following table sets forth the
quarterly high and low sales prices for the Class A common stock as reported on
the NYSE.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal 1995
First Quarter......................................... 17 7/8 13 7/8
Second Quarter........................................ 20 16 3/4
Third Quarter......................................... 19 1/4 12 3/4
Fourth Quarter........................................ 15 1/2 13 1/4
Fiscal 1996
First Quarter......................................... 17 1/2 13 5/8
Second Quarter......................................... 18 1/8 12 3/4
Third Quarter.......................................... 15 1/8 11 1/2
Fourth Quarter......................................... 14 1/2 12 1/8
Fiscal 1997
First Quarter (through December 2, 1996)............... 18 1/2 13 1/2
</TABLE>
The Class B common stock is not traded on the NYSE or any other exchange, and
the Company is not aware of any public market for such shares. On December 2,
1996, 9,602,522 shares of Class B common stock were outstanding and were held by
approximately 19 holders of record. James T. Hudson beneficially owns 99.9
percent of the outstanding Class B common stock.
<PAGE>
DIVIDEND POLICY
The Company's Board of Directors has declared cash dividends every fiscal
quarter since the Company's initial public offering in February 1986. Since
April 1987, the Board has declared quarterly dividends of $.02 per share of
Class A common stock and $.0167 per share of Class B common stock. The Company's
certificate of incorporation restricts the per share dividends declared and paid
on Class B common stock to not more than 90 percent of the per share dividends
declared and paid on Class A common stock.
Payment of future dividends will depend upon the Company's financial condition,
results of operations and other factors deemed relevant by the Board of
Directors. Additionally, the Company has entered into certain loan agreements
that restrict its ability to pay dividends. The Company's primary credit
facility restricts dividend payments to a maximum of $2.8 million in any fiscal
year.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the section captioned "Eleven-Year Financial
Summary," pages 30 and 31 of the Hudson Foods, Inc. 1996 Annual Report (the
"1996 Annual Report").
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference from the sections captioned "Discussion of
Operations," "Discussion of the Balance Sheet" and "Discussion of Cash Flows,"
pages 16, 17, 19 and 21 of the 1996 Annual Report.
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following: competitive pressures, grain prices, the loss of a major
customer, inflation, trade restrictions, the loss of sales to Russia, interest
rate fluctuations and other capital market conditions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from the sections captioned "Consolidated Statement of
Operations," "Consolidated Balance Sheet," "Consolidated Statement of Cash
Flows," "Notes to Consolidated Financial Statements," "Report of Independent
Accountants" and "Quarterly Financial Data (Unaudited)," pages 16, 18, 20,
22-27, 29 and 32 of the 1996 Annual Report.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the sections captioned "Election of Directors,"
"Executive Officers" and "Section 16 Requirements" contained in the Company's
Proxy Statement for Annual Meeting of Stockholders, February 14, 1997 and
Adjournments (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the section captioned "Executive Compensation"
contained in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the section captioned "Principal Stockholders"
contained in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the sections captioned "Executive
Compensation--Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions" contained in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report.
1. Financial statements
The following consolidated financial statements of Hudson Foods,
Inc. and Subsidiaries have been incorporated by reference from the 1996
Annual Report into Part II, Item 8 of this Report.
Description
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Accountants
<PAGE>
2. Financial statement schedules
Schedule No. Description Page
II Valuation and Qualifying Accounts 13
N/A Report of Independent Accountants 14
3. Exhibits required by Item 601 of Regulation S-K
Exhibit No Description
3a Restated certificate of incorporation of Hudson Foods,
Inc./1/
3b Restated by-laws of Hudson Foods, Inc., as amended to
date/2/
4a Restated certificate of incorporation of Hudson Foods,
Inc., Section 4/1/
9 Form of revocable proxy held by James T. Hudson/1/
10a Amended and Restated 1985 Stock Option Plan/3/
10b Form of Hudson Foods Stock Option Agreement/4/
10c Form of Hudson Farms Turkey Growing Contract/4/
10d Form of Hudson Farms Broiler Growing Contract/4/
10e Revolving Credit Agreement by and among Hudson Foods,
Inc., Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland," New York Branch, Bank of
America National Trust and Savings Association,
NationsBank of Texas, National Association, Caisse
Nationale De Credit Agricole, "Credit Agricole,"
Harris Trust and Savings Bank, SunTrust Bank, Atlanta,
Boatmen's First National Bank of Kansas City and
Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A.,
"Rabobank Nederland," New York Branch, as Agent and
NationsBank of Texas, N.A., as documentation agent,
dated as of April 30, 1996
<PAGE>
Exhibit No Description
10f Hudson Foods, Inc. Note Purchase Agreement dated as of
May 18, 1994, $50,000,000 Fixed Rate Senior Notes,
Guaranteed by Hudson Farms, Inc./5/
10g Purchase and Supply Agreement (Amended and Restated),
dated April 1, 1996 between Hudson Foods, Inc. and
Boston Chicken, Inc./6/
10h Supplier Agreement, dated April 26, 1994, between
Hudson Foods, Inc. and Restaurant Services, Inc., as
purchasing agent for the Burger King System/7/
10i Hudson Foods, Inc. Note Purchase Agreement dated
December 28, 1995, $55,000,000, 6.69% Senior Notes
due December 28, 2005
10j Hudson Foods, Inc. Note Purchase Agreement dated March
22, 1996, $50,000,000, 6.63% Senior Notes Due March
22, 2006
10k Hudson Foods, Inc. 1996 Stock Option Plan
11 Computation of Earnings Per Share
13 Annual Report to Shareholders
21 Subsidiaries of Hudson Foods, Inc.
23 Consent of Independent Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K during the fourth quarter
of fiscal 1996.
<PAGE>
/1/ Incorporated by reference from Hudson Foods, Inc. Form S-4 Registration
Statement No. 33-15274, as amended, filed with the Securities and Exchange
Commission on June 23, 1987.
/2/ Incorporated by reference from Hudson Foods, Inc., Form S-3 Registration
Statement No. 33-56019, as amended, filed with the Securities and Exchange
Commission on October 13, 1994.
/3/ Incorporated by reference from Hudson Foods, Inc. Form S-8 Registration
Statement No. 33-27738, as amended, filed with the Securities and Exchange
Commission on March 23, 1989.
/4/ Incorporated by reference from Hudson Foods, Inc. Form S-1 Registration
Statement No. 33-2505, as amended, filed with the Securities and Exchange
Commission on December 31, 1985.
/5/ Incorporated by reference from Hudson Foods, Inc. Quarterly Report on Form
10-Q for the quarterly period ended July 2, 1994, filed with the Securities and
Exchange Commission on August 1, 1994.
/6/ Incorporated by reference from Hudson Foods, Inc., Form 10-Q for the
quarterly period ended March 30, 1996, filed with the Securities and Exchange
Commission on June 25, 1996.
/7/ Incorporated by reference from Hudson Foods, Inc., Form 8-K Current Report
dated October 13, 1994, filed with the Securities and Exchange Commission on
October 13, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HUDSON FOODS, INC.
December 18, 1996 By /s/ James T. Hudson
-----------------------
James T. Hudson
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
December 18, 1996 By /s/ James T. Hudson
-----------------------
James T. Hudson
Chairman of the Board,
Chief Executive Officer
and Director
December 18, 1996 By /s/ Michael T. Hudson
-------------------------
Michael T. Hudson
President, Chief Operating
Officer and Director
December 18, 1996 By /s/ Charles B. Jurgensmeyer
------------------------------
Charles B. Jurgensmeyer
Chief Financial Officer,
Executive Vice President and
Director
December 18, 1996 By /s/ James R. Hudson
-----------------------
James R. Hudson
Vice President-Director of
Transportation and Director
December 18, 1996 By /s/ Jane M. Helmich
-----------------------
Jane M. Helmich
Director
December 18, 1996 By
-----------------------
Elmer W. Shannon
Director
<PAGE>
December 18, 1996 By
-----------------------
Jerry L. Hitt
Director
December 18, 1996 By
-----------------------
Kenneth N. May
Director
<PAGE>
HUDSON FOODS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years in the Period Ended September 28, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
Balance at Charged to Charged to Balance at
beginning costs and other end of
Description of period expenses accounts Write Offs period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended September 28, 1996 $1,775 $563 $24/1/ $(499) $1,863
====================================================================================
Year ended September 30, 1995 $1,463 $707 $16/1/ $(411) $1,775
====================================================================================
Year ended October 1, 1994 $1,208 $627 $15/1/ $(387) $1,463
====================================================================================
/1/ Collections of previously charged off amounts.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Hudson Foods, Inc.
Our report on the consolidated financial statements of Hudson Foods, Inc. has
been incorporated by reference in this Form 10-K from page 29 of the 1996 Annual
Report to Stockholders of Hudson Foods, Inc. In connection with our audits of
such financial statements, we have also audited the related financial statement
schedule on page 13 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
October 29, 1996
<PAGE>
REVOLVING CREDIT AGREEMENT
by and among
HUDSON FOODS, INC.,
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
NATIONSBANK OF TEXAS, N.A.,
CAISSE NATIONALE DE CREDIT AGRICOLE,
HARRIS TRUST AND SAVINGS BANK,
SUNTRUST BANK, ATLANTA,
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH, as Agent
and
NATIONSBANK OF TEXAS, N.A., as Documentation Agent
dated as of
April 30, 1996
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I - COMMITTED ADVANCES, BID RATE ADVANCES
AND CERTAIN FEES....................................1
1.01 The Facilities....................................................1
1.02 Agency Fee........................................................2
1.03 Facility Fee......................................................2
ARTICLE II - TERMS OF THE ADVANCES...............................2
2.01 The Advances......................................................2
2.02 Making the Committed Advances.....................................2
2.03 Bid Rate Credits..................................................3
ARTICLE III- REPAYMENT AND PREPAYMENT OF THE ADVANCES............3
3.01 Repayment, Optional Prepayment and Application of
Credit Payments...................................................4
3.02 Interest..........................................................6
3.03 Increased Costs.... ..............................................8
3.04 Changes in Law Rendering Certain LIBOR Rate Advances
Unlawful..........................................................8
3.05 Payments and Computations.........................................9
3.06 Payment on Non-Business Days......................................9
3.07 Pro Rata Committed Advances.......................................9
3.08 Maximum Amount Limitation.........................................9
3.09 Notation on Schedule.............................................10
ARTICLE IV - CONDITIONS PRECEDENT...............................10
4.01 Conditions Precedent to Initial Advances.........................10
4.02 Conditions Precedent to All Advances.............................11
4.03 Failure to Provide Certificate...................................12
ARTICLE V - REPRESENTATIONS AND WARRANTIES.....................12
5.01 Representations and Warranties of the Borrower...................12
ARTICLE VI - COVENANTS OF THE BORROWER..........................15
6.01 Affirmative Covenants............................................15
6.02 Negative Covenants...............................................19
<PAGE>
ARTICLE VII- EVENTS OF DEFAULT..................................22
7.01 Events of Default................................................22
ARTICLE VIII- DEFINITIONS........................................24
<PAGE>
8.01 Certain Defined Terms............................................24
8.02 Construction.....................................................32
8.03 Currency.........................................................32
ARTICLE IX - THE AGENT..........................................33
9.01 Authorization and Action.........................................33
9.02 Duties and Obligations...........................................33
9.03 Agent and Affiliates.............................................33
9.04 Bank Credit Decision.............................................34
9.05 Indemnification..................................................34
9.06 Resignation of Agent.............................................34
9.07 Exchange of Information..........................................35
9.08 Benefit of the Banks Only........................................35
ARTICLE X - MISCELLANEOUS......................................35
10.01 Amendments, Etc..................................................35
10.02 Notices, Etc.....................................................35
10.03 No Waiver; Remedies..............................................36
10.04 Accounting Terms.................................................36
10.05 Costs, Expenses and Taxes........................................36
10.06 Right of Set-off.................................................37
10 07 Indemnification..................................................37
10.08 Severability of Provisions.......................................38
10.09 Binding Effect; Successors and Assigns; Participations...........38
10.10 Consent to Jurisdiction..........................................39
10.11 Governing Law....................................................39
10.12 Banks' Obligations Several, Not Joint............................39
10.13 Execution in Counterparts........................................39
10.14 Waiver of Jury Trial.............................................39
10.15 No Oral Agreements...............................................40
10.16 No Effect on Certain Other Rights and Obligations................40
10.17 Amendment and Restatement........................................40
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 6.02(a) Description of Certain Liens, Lease Obligations, Etc.
Schedule 6.02(d) Description of Liabilities
Schedule 8.01 Subordinated Debt
Exhibit A Form of Promissory Note
Exhibit B Form of Guaranty
Exhibit C Form of Legal Opinion
Exhibit D Form of Notice of Committed Borrowing
Exhibit E Form of Request for Bids
Exhibit F Form of Outstandings Report
<PAGE>
REVOLVING CREDIT AGREEMENT
Dated as of April 30, 1996
HUDSON FOODS, INC., a Delaware corporation (the "Borrower"),
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW
YORK BRANCH ("Rabobank") and the other commercial, banking and financial
institutions whose signatures appear on the signature pages hereof or which
hereafter become parties hereto pursuant to Section 10.09 (Rabobank and such
other additional commercial, banking or financial institutions are sometimes
referred to hereinafter collectively as the "Banks" and individually as a
"Bank"), Rabobank, as agent for the Banks hereunder (in such agency capacity,
the "Agent"), and NationsBank of Texas, N.A., as documentation agent, agree as
follows:
ARTICLE I
COMMITTED ADVANCES, BID RATE ADVANCES
AND CERTAIN FEES
SECTION 1.01. The Facilities. (a) Each Bank agrees, severally and not
jointly, on the terms and conditions hereinafter set forth, to extend credit to
the Borrower during the period from the date hereof to the Termination Date
(this and certain other capitalized terms are defined in Section 8.01) by making
advances (the "Committed Advances") to the Borrower on a revolving basis from
time to time; provided that at no time shall any Bank be obligated to make a
Committed Advance in any amount which would exceed the lesser of (i) such Bank's
Available Commitment at such time, or (ii) such Bank's Available Commitment
Share of the Committed Borrowing pertaining to such Committed Advance. Within
the foregoing limit, and subject to the terms and conditions hereunder set
forth, the Borrower may borrow pursuant to this Section 1.01(a), prepay pursuant
to Section 3.01(b), and reborrow in accordance with this Section 1.01(a).
(b) Each Bank may, severally and not jointly, on the terms and
conditions hereinafter set forth, extend credit to the Borrower during the
period from the date hereof to the Termination Date by making advances (the "Bid
Rate Advances") to the Borrower or otherwise extending Bid Rate Credit to the
Borrower from time to time; provided (i) that at no time shall any Bank make a
Bid Rate Advance or otherwise extend any Bid Rate Credit in any amount which
would exceed the amount of such Bank's Available Commitment at such time and
(ii) at no time shall (A) the sum of (I) the outstanding Bid Rate Advances and
(II) the outstanding Bid Rate Credits (other than Bid Rate Credits consisting of
Bid Rate Advances) exceed (B) fifty percent (50%) of the Total Commitment.
(c) The Borrower shall have the right, upon at least five (5) Business
Days' notice to a Bank, to terminate in whole or reduce in part such Bank's
Available Commitment (which shall include the termination in whole or the
reduction in part of the obligation of such Bank to make Advances to the
Borrower in the amount specified in Section 1.01(a) in the event of such
termination or reduction), provided, however, that each partial reduction shall
be in the amount of $5,000,000 or an integral multiple thereof.
<PAGE>
(d) So long as no Event of Default shall have occurred and be
continuing at such time, the Borrower may request, at least sixty (60) days
prior to each anniversary of the date hereof, Agent and the Banks to extend the
Termination Date to the third anniversary date next following the date of such
determination. Such request shall be in writing to Agent and each Bank. Within
the thirty (30) day period immediately following its receipt of such request,
each Bank shall notify the Borrower in writing whether it elects to so extend
the Termination Date. Any failure by a Bank to so notify the Borrower shall be
deemed a decision by such Bank to not extend the Termination Date. No Bank shall
be obligated to extend the Termination Date, and if less than all of the Banks
elect to extend the Termination Date pursuant to this Section 1.01(d), the
Termination Date shall not be extended.
SECTION 1.02. Agency Fee. The Borrower agrees to pay to the Agent,
for its account, an annual agency fee (the "Agency Fee") in an amount determined
jointly by the Borrower and the Agent from time to time and set forth in a
separate letter agreement between the Borrower and Agent (the "Agency Fee
Letter").
SECTION 1.03. Facility Fee. The Borrower agrees to pay to each Bank a
facility fee on the amount of such Bank's Commitment (as such Commitment may be
reduced from time to time pursuant to Section 1.01(c)) from the date hereof
until the Termination Date at a rate of one-quarter of one percent (0.25%) per
annum, payable in arrears on the last day of each calendar quarter during the
term of such Bank's Commitment, commencing on the last day of the calendar
quarter first occurring after the date hereof, and on the Termination Date (the
"Facility Fee").
ARTICLE II
TERMS OF THE ADVANCES
SECTION 2.01 The Advances. Each Advance shall be in an amount of
$500,000 or a greater amount which is an integral multiple of $50,000.
SECTION 2.02. Making the Committed Advances. (a) Each Committed
Advance shall be made, to the extent that a Bank is so obligated under Section
1.01, on notice from the Borrower in writing in the form of Exhibit D hereto (a
"Notice of Committed Borrowing") to the Agent delivered before 11:00 A.M. (New
York City time) on, (i) in the case of a LIBOR Rate Advance, a Business Day
which is at least two (2) Business Days prior to the first day of the Interest
Period for such Committed Borrowing and (ii) in the case of a Base Rate Advance,
on the first day of the Interest Period for such Committed Borrowing, containing
the representations and other information contemplated in Exhibit D hereto and
accompanied by a duly executed Outstandings Report dated as of the first day of
the Interest Period for such Committed Borrowing. The Agent shall in turn
promptly notify each Bank by telephone (confirmed immediately by telex, cable or
facsimile), telex, cable or facsimile of the aggregate amount of, and the
initial Interest Period for, such Borrowing and such Bank's ratable portion of
such Borrowing. Each Bank shall, not later than 1:00 P.M. (New York City time)
on the date of such Borrowing specified in the notice received from the Agent
pursuant to the preceding sentence, deposit such Bank's ratable portion of such
Borrowing in same day funds to the Agent's Depository Account and include in a
communication accompanying such deposit a reference that such funds pertain to a
Committed Borrowing by the Borrower under this Agreement. Not later than 3:00
<PAGE>
P.M. (New York City time) on the later of the date of such Borrowing specified
in such notice or the first Business Day thereafter upon which the applicable
conditions set forth in Article IV have been fulfilled, Agent will make such
Advance available, to the extent that Agent is so obligated under Section 1.01,
to the Borrower in same day funds at Agent's address referred to in Section
10.02.
(b) Each Notice of Committed Borrowing shall be irrevocable and
binding on the Borrower and, in respect of the Committed Borrowing specified in
such Notice of Committed Borrowing, the Borrower shall indemnify each Bank
against any loss or expense incurred by such Bank as a result of any failure to
fulfill on or before the date specified for such Borrowing the applicable
conditions set forth in Article IV, including, without limitation, any loss
(including loss of Anticipated Profits) or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Bank to
fund the Advance to be made by such Bank as part of such Committed Borrowing
when such Advance, as a result of such failure, is not made on such date.
Provided that notice shall have been given to Borrower of the reasons therefor,
determinations by a Bank for purposes of this Section 2.02(b) shall be
conclusive, provided that such determinations are made reasonably and in good
faith.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Committed Borrowing that such Bank will not make available to
the Agent such Bank's ratable portion of such Borrowing, the Agent may assume
that such Bank has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent such Bank shall not have so
made such ratable portion available to the Agent, Rabobank may, in its sole
discretion, make such ratable portion so available, in which case such portion
shall constitute an additional Committed Advance made by Rabobank in connection
with such Committed Borrowing, and Rabobank's Commitment in connection with such
Committed Borrowing shall be deemed increased to the extent required in order
for Rabobank to make such portion so available.
(d) The failure of a Bank to make the Committed Advance to be made by
it as part of any Borrowing shall not relieve any other Bank of its obligation,
if any, hereunder to make its Committed Advance on the date of such Committed
Borrowing, but no Bank shall be responsible for the failure of any other Bank to
make the Committed Advance to be made by such other Bank on the date of any
Borrowing.
SECTION 2.03. Bid Rate Credits. From time to time, Borrower may
request of any one or more of the Banks, and any one or more such Banks may in
their sole and absolute discretion agree, to extend credit to the Borrower in
the form of Advances, Acceptances, Letters of Credit or otherwise to the
Borrower in such amount, at such pricing and on such other terms and conditions
as are agreed to by the Borrower and such Bank from time to time and are not
inconsistent with the terms and provisions of this Agreement (each, a "Bid Rate
Credit" and collectively, the "Bid Rate Credits"). Such requests shall be made
telephonically to such Banks as Borrower may select in its sole discretion and
confirmed promptly in writing by delivery of completed Requests for Bids in the
form of Exhibit E hereto. Each Request For Bids shall be for an amount not less
<PAGE>
than $500,000 (or, if greater, an integral multiple of $500,000). No Bank shall
be obligated to make any Bid Rate Credit at any time unless such Bank in its
sole and absolute discretion then chooses to do so. Any and all Bid Rate Credits
made by any Bank(s) pursuant to this Section 2.03 shall be entitled to all of
the rights, protections, and benefits of this Agreement and each of the other
Loan Documents.
ARTICLE III
REPAYMENT AND PREPAYMENT OF THE ADVANCES
SECTION 3.01. Repayment, Optional Prepayment and Application of
Certain Payments. (a) The Borrower shall repay the aggregate unpaid principal
amount of all Committed Advances of each Bank in accordance with the terms of
the promissory notes of the Borrower, in substantially the form of Exhibit A
hereto (the "Notes"), evidencing the indebtedness resulting from such Advances
and delivered to the Bank pursuant to Article IV or Section 10.08. All payments
of principal of, or interest, premium or other amounts on, the Committed
Advances shall be made by the Borrower to the Agent in immediately available
funds for the account of the holders of the relevant Notes. All payments of
principal of, or interest, premium or other amounts on, the Bid Rate Credits
shall be made by the Borrower to the respective Bank or Banks which extended
such Bid Rate Credits in accordance with the terms and conditions agreed upon
between the Borrower and respective Bank or Banks with respect thereto. All
payments of the Facility Fee shall be made by the Borrower to the Banks by a
check payable to the order of each such Bank which is duly honored upon the
presentment thereof, or in immediately available funds, in each case, pro rata
according to their respective Commitments. All payments of the fees described in
the Agency Fee Letter shall be made by the Borrower to the Agent by check for
the account of Rabobank as Agent. Payments shall be made to the Agent and/or
Banks at their respective addresses specified in Section 10.02 (or at such other
addresses as they may have specified for such purposes in written notices to the
Borrower) not later than 1:00 p.m. (New York City time) on the due date (or such
time as is agreed upon by the Borrower and the Agent and/or Banks, as the case
may be, on the date due. The Agent shall promptly remit to each Bank in
immediately available funds such Bank's share of all such payments received by
the Agent for the account of such Bank. All payments by the Borrower of
principal, interest, fees, indemnities and other amounts payable to any
recipient hereunder shall be made without setoff or counterclaim and free and
clear of, and without withholding or deduction for or on account of, any present
or future taxes now or hereafter imposed on such recipient or its income,
property, assets or franchise.
(b) The Borrower may, upon at least one (1) Business Day's notice to
the Agent and the Banks, and if such notice is given the Borrower shall, prepay
the outstanding amount of any Advances in whole or in part (pro rata among the
Banks after and during the continuance of an Event of Default), with accrued
interest to the date of such prepayment on the amount prepaid and any and all
amounts payable in respect thereof hereunder; provided, however, that any
prepayment of any Advance shall be made on, and only on, the last day of an
Interest Period for such Advance and, in the event that any Bank receives
payment of the principal of any Advance other than on the last day of the
Interest Period relating to such Advance (whether due to prepayments made by the
Borrower, or due to acceleration of the Bank Obligations, or due to any other
reason), the Borrower shall pay to such Bank on demand any amounts required to
<PAGE>
compensate the Bank for any additional losses, costs or expenses which it may
incur as a result of such payment. Provided that notice shall have been given to
Borrower of the reasons therefor, determinations of such losses, costs or
expenses by a Bank for purposes of this Section 3.01(b) shall be conclusive,
provided that such determinations are made reasonably and in good faith. All
payments of principal made pursuant to this Section 3.01(b) shall be applied to
the outstanding balance in inverse order of maturity.
(c) Prior to the occurrence and continuation of an Event of Default,
each payment of principal shall be applied to such of the maturing Committed
Advances or Bid Rate Credits as the Borrower shall direct; provided, that (i)
any Advances of the Borrower maturing the same day shall be paid pro rata among
such Advances and (ii) any payments in respect of a Committed Advance shall be
paid to the Agent for the account of the holders of the Notes, which payments
shall be remitted to such holders. Concurrently with each remittance to any Bank
of its share of any such payment in respect of a Committed Advance, the Agent
shall advise each Bank as to the application of such payment. Following the
occurrence and during the continuation of an Event of Default, the Agent and the
Banks shall apply all collections and recoveries of the Advances and the other
Bank Obligations hereunder to payment of outstanding Bank Obligations on a pro
rata basis to each Bank based on the respective amount of such Bank Obligations
owed to each Bank (whether or not mature and currently payable). Without
limiting the foregoing, in the case of payments of principal made following the
occurrence and during the continuation of an Event of Default while there are
Bank Obligations consisting of Letter of Credit Liabilities and Acceptances then
outstanding, each Bank primarily or contingently liable with respect thereto
may, at its option, require the Borrower to deposit with such Bank funds equal
to the amount of payment of principal that such Bank would have received with
respect thereto had the undrawn face amount thereof been an outstanding Advance
(and if the Borrower fails to promptly make such deposit, such Bank may advance
such amount as a Committed Advance). Any such deposit or advance described in
the immediately preceding sentence shall be held by such Bank as a reserve to
fund future payments by such Bank on such Letter of Credit Liabilities and
Acceptances, at such time as all of such Bank Obligations have been drawn upon
or expired any remaining amounts in such reserve shall be applied to the other
remaining Bank Obligations. The Agent shall endeavor to promptly notify the
Borrower and each Bank of the occurrence of an Event of Default; provided,
however, that a failure by the Agent to give such a notice shall not impair the
rights of the Agent or any Bank with respect to any such Event of Default or
result in any liability to the Agent. The Banks and Agent agree that if any
distribution shall be made by the Agent contrary to this Section 3.01(c)
(whether because the Agent shall not, at the time of distribution, have been
aware of the occurrence of any Event of Default or otherwise), the Banks shall
cooperate with the Agent to redistribute payments, collections or recoveries in
accordance with this Section 3.01(c).
SECTION 3.02. Interest. (a) The Borrower shall pay interest on the
unpaid principal amount of each Advance from the date of such Advance until such
principal is paid in full at the Applicable Rate (as hereinafter defined) as set
forth below.
<PAGE>
(b) The period between the date of each Advance and the date of
payment in full of such Advance shall be divided into successive periods, each
such period being an "Interest Period" for such Advance. Notwithstanding the
duration of the applicable Interest Period, interest on the unpaid amount of
each Advance shall be due and payable in accordance with Section 3.02(c) below
and the other applicable provisions of this Agreement. The initial Interest
Period for each Advance shall begin on the date of such Advance and end on the
last day of such period as selected by the Borrower, and thereafter, each
subsequent Interest Period for such Advance shall begin on the last day of the
immediately preceding Interest Period for such Advance and end on the last day
of such period as selected by the Borrower in accordance with the terms hereof.
The duration of each such Interest Period for each Advance shall be the period
commencing on (and including) the date upon which such Advance is made and (x)
in regards to LIBOR Rate Advances and those Base Rate Advances made for periods
of one month or greater, ending on (but excluding) the day numerically
corresponding to such date one month or three months thereafter, in each case as
selected by the Borrower in the relevant Notice of Committed Borrowing, (y) in
regards to Base Rate Advances made for periods of less than one month, ending on
the date on which the principal amount of such Base Rate Advance becomes due and
payable and (z) in regards to Bid Rate Credits, ending on such date as is agreed
to between the Borrower and each Bank which makes such Bid Credit available to
the Borrower; provided, however, that:
(i) the duration of any Interest Period for any Advance that commences
before the Termination Date and otherwise ends after the Termination Date shall
end on the Termination Date;
(ii) the duration of Interest Periods shall be the same for all
Committed Advances comprising a Committed Borrowing;
(iii) any Interest Period which would otherwise end on a day which is
not a Business Day shall continue to and end on the next succeeding Business
Day, unless the result would be that such Interest Period would be extended to
the next succeeding calendar month in which case such Interest Period shall end
on the next preceding Business Day;
(iv) if there exists no numerically corresponding day in such month,
such Interest Period shall end on the last Business Day of such month; and
(v) if the Borrower fails to select the duration of any Interest
Period for an Advance, the duration of such Interest Period shall be one month
or such other duration as shall be required in order to comply with the
provisions hereof.
(c) The Borrower shall pay interest on the unpaid principal amount of
each Advance from the date of such Advance until such principal amount is due,
payable on (x) in the case of Advances during any Interest Period with respect
to which interest is payable hereunder at the Base Rate (other than those made
for periods of less than one month), the last day of each calendar month and on
the Termination Date, and (y) in all other cases, on the last day of each
Interest Period for such Advance, at an interest rate per annum equal at all
times during such Interest Period for such Advance to the Applicable Rate (as
defined below); provided, however, that for any Advance having an Interest
Period of three months, interest thereon shall be due and payable monthly in
<PAGE>
arrears, commencing on the day one month after the first day of such Interest
Period, and on the last day of such Interest Period. The term "Applicable Rate",
as used herein, shall mean an interest rate per annum equal at all times during
the Interest Period then applicable to such Advance to whichever of the
following rates is selected by the Borrower:
(i) in the case of Committed Advances, either (A) in the case of Base
Rate Advances, the Base Rate, as the same shall from time to time change as and
when the Base Rate changes; or (B) in the case of LIBOR Rate Advances, (I) if
the Borrower's Adjusted Leverage Ratio as of the last day of the most recently
preceding fiscal quarter for which Borrower has delivered financial statments
described in Section 6.01(e)(iv) is less than 0.35 to 1, a rate equal to
one-quarter of one percent (0.25%) in excess of the LIBOR Rate in effect on the
first day of such Interest Period, (II) if the Borrower's Adjusted Leverage
Ratio as of the last day of the most recently preceding fiscal quarter for which
Borrower has delivered financial statments described in Section 6.01(e)(iv) is
0.35 to 1 or greater but less than 0.45 to 1, a rate equal to two-fifths of one
percent (0.40%) in excess of the LIBOR Rate in effect on the first day of such
Interest Period or (III) if the Borrower's Adjusted Leverage Ratio as of the
last day of the most recently preceding fiscal quarter for which Borrower has
delivered financial statments described in Section 6.01(e)(iv) is 0.45 to 1 or
greater, a rate equal to one-half of one percent (0.50%) in excess of the LIBOR
Rate in effect on the first day of such Interest Period; or
(ii) in the case of Bid Rate Advances, the Bid Rate in effect on the
first day of such Interest Period of such Bank as is making such Bid Rate
Advance; provided, however, that if any Bank is unable to acquire the funds upon
which the interest rate described in clause (i)(B) or (ii) immediately above is
based for such Interest Period or the Borrower fails to select an interest rate
in accordance with the terms hereof, then the Applicable Rate for such Interest
Period will be the Base Rate; provided, further, that in no event shall the
Applicable Rate exceed the maximum nonusurious interest rate, if any, that at
any time, or from time to time, may be contracted for, taken, reserved, charged,
or received under applicable state or federal laws (the "Maximum Rate"). The
term "Adjusted Leverage Ratio," as used herein, means the quotient (expressed as
a ratio) of (I) the sum of (A) indebtedness with maturities greater than one
year (including all current portions thereof), plus (B) subordinated debt,
divided by (II) the sum of (A) indebtedness with maturities greater than one
year (including all current portions thereof), plus (B) subordinated debt, plus
(C) book equity, plus (D) long-term deferred taxes attributable to Borrower's
prior use of cash accounting, plus (E) deferred taxes attributable to Borrower's
use of the "farm price" method of accounting for deferred taxes. For purposes of
calculating the Adjusted Leverage Ratio in connection with this Section 3.02(c),
all Advances shall be considered indebtedness with a maturity greater than one
year.
(d) All past due principal and, to the extent permitted by applicable
law, interest, fees and other amounts owing hereunder upon the Advances, shall
bear interest, from the date such amount becomes due to the date such amount is
paid in full, at the Default Rate (as defined below) and shall be due and
payable upon demand. The term "Default Rate", as used herein, means the lesser
of (i) the Maximum Rate, or (ii) the rate per annum which shall from day-to-day
be equal to two percent (2%) in excess of the Base Rate.
<PAGE>
SECTION 3.03. Increased Costs. (a) If either (i) the introduction of
or any change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation of any law or
regulation or (ii) the compliance by any Bank with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law), shall result in any increase in the cost to any Bank of making,
funding or maintaining any Advance, then the Borrower shall from time to time,
upon demand by such Bank, pay to such Bank additional amounts sufficient to
indemnify such Bank against such increased cost. A certificate as to the amount
of such increased cost, submitted to the Borrower by such Bank, shall, in the
absence of manifest error, be conclusive and binding for all purposes, provided
that the determination of such increased costs shall have been made in good
faith.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) compliance by any Bank with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by any Bank and any Bank
determines that the amount of such capital is increased by or based upon the
existence of such Bank's commitment to lend hereunder and other commitments of
this type, then, upon demand by such Bank, the Borrower shall immediately pay to
such Bank, from time to time as specified by such Bank, additional amounts
sufficient to compensate such Bank in the light of such circumstances, to the
extent that any Bank reasonably determines such increase in capital to be
allocable to the existence of such Bank's commitment to lend hereunder. A
certificate as to such amounts, submitted to the Borrower by such Bank, shall,
in the absence of manifest error, be conclusive and binding for all purposes,
provided that the determination of such amounts shall have been made in good
faith.
SECTION 3.04 Changes in Law Rendering Certain LIBOR Rate Advances
Unlawful. In the event that any change in any applicable law (including the
adoption of any new applicable law) or any change in the interpretation of any
applicable law by any judicial, governmental or other regulatory body charged
with the interpretation, implementation or administration thereof, should make
it (or in the good-faith judgment of an affected Bank should raise a substantial
question as to whether it is) unlawful for such affected Bank to make, maintain
or fund LIBOR Rate Advances of a certain type, then (a) such affected Bank shall
promptly notify each of the other parties hereto, (b) the obligation of all
Banks to make LIBOR Rate Advances of such type shall, upon the effectiveness of
such event, be suspended for the duration of such unlawfulness, and (c) if the
affected Bank so requests, the Borrower shall, on such date as may be required
by the relevant applicable law, repay, prepay or convert to Base Rate Advances
all then outstanding LIBOR Rate Advances of such type made to the Borrower by
such affected Bank together with accrued interest thereon and all amounts then
due, if any, hereunder, other than amounts that would otherwise be payable under
Section 10.05(b).
SECTION 3.05. Payments and Computations. The Borrower shall make each
payment hereunder and under the Notes not later than 2:00 P.M. (New York City
time) on the day when due in lawful money of the United States of America to
each Bank and/or the Agent, as the case may be at its address referred to in
Section 10.02 in same day funds. The Borrower hereby authorizes each Bank, if
<PAGE>
and to the extent payment of any amount is not made when due under any Loan
Document, to charge from time to time against any account of the Borrower with
such Bank any amount so due. All computations of interest accrued at the
Applicable Rate (but not the Base Rate or Maximum Rate) hereunder and under the
Notes and commitment fee hereunder shall be made by each Bank on the basis of a
year of 360 days for the actual number of days (including the first day but
excluding the last day) elapsed, and all computations of interest accrued at the
Base Rate or Maximum Rate shall be based upon a year with 365 or 366 days, as
appropriate).
SECTION 3.06. Payment on Non-Business Days. Whenever any payment to
be made hereunder or under the Notes shall be stated to be due, on a day which
is not a Business Day, such payment may be made on the next succeeding Business
Day (subject to Section 3.02(b)(iii) hereof), and such extension of time shall
in such case be included in the computation of payment of interest, commitment
fee or other fee, as the case may be.
SECTION 3.07. Pro Rata Committed Advances. The Borrower and the Banks
acknowledge and agree that all Committed Advances made on or after the date
hereof, and all increases and decreases thereof, are to be made and incurred pro
rata by the Banks in accordance with such Bank's Available Commitment Share or
in such other manner as the Banks among themselves may agree from time to time,
except as otherwise required by Section 2.02(c) or Section 3.01(c); and each
Bank's actual outstanding Committed Advances shall be adjusted from time to time
by each Bank purchasing or selling at par from or to the other Banks, as the
case may be, a portion of these Committed Advances simultaneously with each such
increase or decrease, such that each Bank's position in each shall equal such
Bank's Available Commitment Share at all times.
SECTION 3.08. Maximum Amount Limitation. Anything in this Agreement
or the other Loan Documents to the contrary notwithstanding, neither Borrower
nor any other Person liable for the Bank Obligations shall ever be required to
pay unearned interest on any Note or any of the Bank Obligations, or ever be
required to pay interest on any Note or any of the Obligations at a rate in
excess of the Maximum Rate, if any. If the effective rate of interest which
would otherwise be payable under this Agreement, any Note or any of the other
Loan Documents would exceed the Maximum Rate, if any, then the rate of interest
which would otherwise be contracted for, charged, or received under this
agreement, any Note or any of the other Loan Documents shall be reduced to the
Maximum Rate, if any, provided, however, that if at any time thereafter such
effective rate of interest shall be less than the Maximum Rate, if any, the rate
of interest contracted for, charged, or received under this Agreement, any Note
or any of the other Loan Documents shall be the Maximum Rate until each Bank
shall have received the interest or discount it otherwise would have received
but for such limitation to the Maximum Rate. If any unearned interest or
discount or property that is deemed to constitute interest (including, without
limitation, to the extent that any of the fees payable by Borrower, or any other
Person liable for the Bank Obligations to any Bank under this Agreement, any
Note, or any of the other Loan Documents are deemed to constitute interest) is
contracted for, charged, or received in excess of the Maximum Rate, if any, then
such interest in excess of the Maximum Rate shall be deemed a mistake and
canceled, shall not be collected or collectible, and if paid nonetheless, shall,
at the option of the holder of such Note, be either refunded to Borrower or
other Person, or credited on the principal of such Note. It is further agreed
<PAGE>
that, without limitation of the foregoing and to the extent permitted by
applicable law, all calculations of the rate of interest or discount contracted
for, charged or received by any Bank under its Note, or under any of the Loan
Documents, that are made for the purpose of determining whether such rate
exceeds the Maximum Rate applicable to such Bank, if any, shall be made, to the
extent permitted by applicable laws (now or hereafter enacted), by amortizing,
prorating and spreading during the period of the full terms of the Advances
evidenced by the Note, and any renewals thereof all interest at any time
contracted for, charged or received by such Bank in connection therewith. This
Section 3.08 shall control every other provision of all agreements among the
parties to this Agreement pertaining to the transactions contemplated by or
contained in the Loan Documents, and the terms of this Section 3.08 shall be
deemed to be incorporated in every Loan Document and communication related
thereto.
SECTION 3.09. Notation on Schedule. Each Bank shall, and is hereby
authorized by Borrower to place appropriate notations on the schedule to each
Bank's Note evidencing the date, amount, interest date and maturity of each
Advance and the amount of each payment of principal; provided, however, that the
failure of a Bank to make such notation shall not limit or otherwise affect the
obligations of Borrower under the Notes or this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to Initial Advances. The
effectiveness of this Agreement and the obligation of each of the Banks to make
its initial Advance is subject to the condition precedent that the Agent shall
have received at least two (2) Business Days before the day of such Advance the
following, each dated the day of such Advance, in form and substance
satisfactory to the Agent and the Banks:
(a) This Agreement and the Notes,
(b) Certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements which
name the Borrower (under its present name and any previous name) as debtor and
which are filed in the office of the Arkansas Secretary of State, together with
copies of such financing statements,
(c) Copies, certified by the Secretary, Assistant Secretary, or Chief
Financial Officer of each Loan Party of the resolutions of the Board of
Directors of such Loan Party approving each Loan Document to which it is a
party, and of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to such Loan Document, including,
without limitation, certificates of good standing and certified copies of each
Loan Party's Certificate of Incorporation and Bylaws,
(d) A certificate of the Secretary, Assistant Secretary or Chief
Financial Officer of Borrower, dated as of the date of the initial Advance,
certifying (i) that no Event of Default exists on the date of, or will exist as
a result of, the initial Advance; (ii) that the representations and warranties
in Section 5.01 are true and correct as of and immediately after the initial
Advance; (iii) that the Borrower has performed and complied with all agreements
<PAGE>
and conditions required to be performed or complied with it prior to or on the
date of the initial Advance; and (iv) the names and true signatures of the
officers of Borrower authorized to sign each Loan Document to which it is a
party and the other documents to be delivered by it hereunder,
(e) A favorable opinion of Messrs. Wright, Lindsey & Jennings, counsel
for the Loan Parties, in substantially the form of Exhibit C and as to such
other matters as the Banks may reasonably request, and
(f) The Agency Fee Letter, duly executed and delivered by the Borrower
to the Agent.
SECTION 4.02. Conditions Precedent to All Advances. The obligation of
the Banks to make each Advance (including the initial Advance) shall be subject
to the further conditions precedent that on the date of such Advance:
(a) the following statements shall be true (and the receipt by the
Borrower of the proceeds of such Advance shall be deemed to constitute a
representation and warranty by the Borrower that such statements are true on
such date):
<PAGE>
(i) The representations and warranties contained in Section 5.01 of
this Agreement and in Section 5 of the Guaranty (if any subsidiary of Borrower
has executed a Guaranty pursuant to Section 6.02(m)) are correct on and as of
the date of such Advance as though made on and as of such date,
(ii) No event has occurred and is continuing, or would result from
such Advance, which constitutes an Event of Default (as defined in Section 7.01
hereof) or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(iii) Borrower on such date is in compliance with the compliance
criteria set forth in each of the financial covenants contained in subparagraphs
(f), (g), (h) and (i) of Section 6.01 as if the Borrower's compliance therewith
was to be measured as of such date and for such periods ended on such date
(rather than on the measured dates specified therein).
(b) the Banks shall have received such other approvals, opinions or
documents, including guarantees executed by any or all of Borrower's Affiliates,
as the Banks may reasonably request.
SECTION 4.03. Failure to Provide Certificate. Notwithstanding the
conditions precedent in Sections 4.01 and 4.02 requiring the delivery of the
certificates set forth therein, any request by Borrower for an Advance or Letter
of Credit will be deemed to be a representation by Borrower, as to the facts set
forth in each of said Sections whether or not the certificate required therein
is delivered.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
<PAGE>
(a) The Borrower. The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Agreement. The Borrower has no subsidiaries
which are not a Guarantor, except (i) Ohse Transportation, Inc., a Kansas
corporation, (ii) Hudson Foods Poland s.p. zo.o., a Polish limited liability
company, (iii) Hudson Development Corporation, an Arkansas corporation and (iv)
Hudson Foods Foreign Sales, Inc., a United States Virgin Islands corporation.
(b) The Loan Documents. The execution, delivery and performance by the
Borrower of each Loan Document to which it is or will be a party are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) the Borrower's charter or by-laws or
(ii) any law or any contractual restriction binding on or affecting the
Borrower, and do not result in or require the creation of any lien, security
interest or other charge or encumbrance (other than pursuant hereto) upon or
with respect to any of its properties.
(c) Governmental Approvals. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Borrower of any Loan Document to which it is or will be a party.
(d) Enforceability. This Agreement is, and each other Loan Document to
which the Borrower will be a party when delivered hereunder will be, legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms.
(e) Financial Condition and Operations. The balance sheets of the
Borrower and its subsidiaries as at December 30, 1995, and the related
statements of income and cash flows of the Borrower and its subsidiaries for the
fiscal period then ended, copies of which have been furnished to the Bank,
fairly present the financial condition of the Borrower and its subsidiaries as
at such date and the results of the operations of the Borrower and its
subsidiaries for the period ended on such date, all in accordance with generally
accepted accounting principles consistently applied, and since December 30,
1995, there has been no material adverse change in such condition or operations.
(f) Litigation. There is no pending or threatened action or proceeding
affecting the Borrower or any of its subsidiaries before any court, governmental
agency or arbitrator, which may materially adversely affect the financial
condition or operations of the Borrower or any subsidiary.
(g) Use of Proceeds of Advances, Etc. (i) No proceeds of any Committed
Advance or Bid Rate Credit will be used to acquire any security in any
transaction which is subject to Sections 13 and 14 of the Securities Exchange
Act of 1934; (ii) the Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System); and (iii) no proceeds of any Committed Advance or Bid Rate Credit will
be used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock; following application of
the proceeds of each Committed Advance or Bid Rate Credit, not more than
twenty-five percent (25%)of the value of the assets (either of the Borrower only
or of the Borrower and its subsidiaries on a consolidated basis) subject to the
<PAGE>
provisions of Section 6.02(a) will be margin stock (within the meaning of
Regulation U).
(h) ERISA. (i) All members of any Controlled Group have complied with
all applicable minimum funding requirements and all other applicable and
material requirements of ERISA and the Code applicable to each Plan, and there
are no existing conditions that would give rise to material liability
thereunder, (ii) with respect to each Plan, all members of any Controlled Group
have made all material contributions or payments to or under each Plan required
by law, by the terms of such Plan or the terms of any contract or agreement,
(iii) no Termination Event has occurred nor is reasonably expected to occur with
respect to any Plan, and there are no unfunded benefit liabilities, as defined
in Section 4001(a)(18) of ERISA, with respect to any Plan which pose a risk of
causing a lien to be created on the assets of the Borrower or any of its
subsidiaries or which will result in the occurrence of a Reportable Event, (iv)
no material liability to the PBGC has been, or is expected to be, incurred by
any member of any Controlled Group, (v) no member of any Controlled Group has
been required to contribute to a Multiemployer Plan or has incurred or
reasonably expects to incur any withdrawal liability under ERISA to any
Multiemployer Plan, and (vi) no prohibited transaction under ERISA or the Code
has occurred with respect to any Plan which could reasonably be expected to have
a material adverse effect on the condition, financial or otherwise, of any Plan.
(i) Solvency. The Borrower and each of its subsidiaries is and, after
giving effect to the initial Advance, will be solvent, that the execution,
delivery and performance of any of the Loan Documents to which the Borrower or
any of its subsidiaries is a party does not and will not render such Person
insolvent, that any property remaining with such Person after execution,
delivery and performance of the Loan Documents to which it is a party is not an
unreasonably small capital for the conduct of its business and that each
execution, delivery and performance is not intended to and will not hinder,
delay or defraud any Person to which the Borrower or any of its subsidiaries
was, is or may be liable.
(j) Taxes. The Borrower and each subsidiary has filed all federal,
state and other income tax returns which are required to be filed and has paid
all taxes as shown on said returns, and all taxes due or payable without returns
and all assessments received to the extent that such taxes or assessments have
become due. All tax liabilities of the Borrower and each subsidiary are
adequately provided for on the books of the Borrower and each subsidiary
(including interest and penalties pertaining thereto to the extent that the same
are estimable). No income tax liability of a material nature has been asserted
by taxing authorities for taxes in excess of those already paid, and federal,
state and other income tax returns of Borrower and each subsidiary have been
examined and reported on by the taxing authorities or closed by applicable laws
and satisfied for all years prior to and including the 1989 tax year.
(k) Environmental Matters. Except as disclosed in the Borrower's Form
10-K Annual Report for its fiscal year ended September 30, 1995 and except with
respect to matters the effect of which would not be material and adverse to the
properties, business, prospects, profits or condition (financial or otherwise)
of the Borrower or any of its subsidiaries: (i) neither the Borrower nor any of
its subsidiaries has generated, transported or disposed of any Hazardous
Substance; (ii) neither the Borrower nor any of its subsidiaries is currently
<PAGE>
generating, transporting or disposing of any Hazardous Substance; (iii) neither
the Borrower nor any of its subsidiaries has knowledge, based upon diligent
inquiry, that (A) any of its fixed assets (whether owned, leased or otherwise
directly or indirectly controlled) has been used for the disposal of or has been
contaminated by any Hazardous Substance, or (B) any of its business operations
have contaminated lands or waters of others with any Hazardous Substance; (iv)
neither the Borrower nor any of its subsidiaries, nor any of their respective
assets, are subject to any liability under Environmental Law nor, to the best of
the Borrower's and each subsidiary's knowledge following diligent inquiry any
threatened liability under any Environmental Law; (v) neither the Borrower nor
any of its subsidiaries has received any notice of or otherwise learned of any
governmental investigation evaluating whether any remedial action is necessary
to respond to a release or a threatened release of any Hazardous Substance for
which either the Borrower or any of its subsidiaries is or may be liable; (vi)
to the best of the Borrower's and each subsidiary's knowledge, following
diligent inquiry, neither the Borrower nor any of its subsidiaries is in
violation of any Environmental Law; and (vii) neither the Borrower nor any of
its subsidiaries has failed to obtain any permits or licenses required by any
Environmental Law.
ARTICLE VI
COVENANTS OF THE BORROWER
SECTION 6.01. Affirmative Covenants. So long as any amount payable
hereunder or under the Notes shall remain unpaid or any Bank shall have any
commitment hereunder, the Borrower will, unless Agent, after obtaining the
approval of the Majority Banks, shall otherwise consent in writing:
(a) Payment of Taxes and Claims. Cause to be paid and discharged all
lawful taxes, assessments or governmental charges imposed upon the income,
profits or property of the Borrower and its subsidiaries before the same shall
be in default, and all lawful claims for labor, rentals, materials and supplies
which, if unpaid, might become a lien upon Borrower's or its subsidiaries'
property or any part thereof; provided, however, that the Borrower and its
subsidiaries shall not be required to cause to be paid or discharged any such
tax, assessment, governmental charge or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings, and adequate book
reserves shall be established with respect thereto, and the Borrower shall, and
shall cause each subsidiary to, pay such tax, charge or claim before any
property subject thereto shall be sold to satisfy a lien.
(b) Compliance with Applicable Laws. Comply, and cause each of its
subsidiaries to comply, with the requirements of all applicable laws and orders,
except where contested in good faith and by proper proceedings, and obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its business and those of
its subsidiaries.
(c) Preservation of Property. Keep, and cause each of its subsidiaries
to keep, its properties which are useful in their respective businesses, whether
owned in fee or otherwise, or leased, in good operating condition, ordinary wear
and tear excepted, and comply with, and cause each subsidiary to comply with,
all leases to which it or any subsidiary is a party or under which it or any
subsidiary occupies property so as to prevent any loss or forfeiture thereunder.
<PAGE>
(d) Visitation Rights. At any reasonable time and from time to time,
permit the Agent or any Bank, or any agents or representatives thereof, to
examine and make copies of and abstracts from the records and books of account
of and visit the properties of, and, upon and during the continuance of an Event
of Default, to do so at the expense of Borrower and any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Borrower and any of its
subsidiaries with any of their respective officers or directors.
(e) Reporting Requirements. Furnish to the Agent and each Bank: (i) as
soon as available and in any event within thirty (30) days after the end of each
month, unaudited consolidated balance sheets and unaudited consolidated
statements of income of the Borrower and its subsidiaries as of the end of such
month certified by the Chief Financial Officer, Secretary or Treasurer of the
Borrower; (ii) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, a copy of the audited
consolidated financial statements for such year for the Borrower and its
subsidiaries, certified in a manner acceptable to the Agent by Coopers & Lybrand
or other independent public accountants acceptable to the Agent; (iii) promptly
after the filing or receiving thereof, copies of all reports and notices which
the Borrower or Guarantor files under ERISA with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation or the U.S. Department of Labor, or
which the Borrower or Guarantor receives therefrom; (iv) as soon as available
and in any event within forty-five (45) days after the end of each fiscal
quarter, unaudited consolidated financial statements for such quarter for the
Borrower and its subsidiaries, certified by the Chief Financial Officer,
Secretary or Treasurer of the Borrower, and a compliance certificate in form and
substance satisfactory to Agent, showing the calculation of each financial
covenant as of such quarter-end, executed by the Chief Financial Officer,
Secretary or Treasurer of Borrower; (v) promptly, upon the occurrence of an
Event of Default or an event that but for the passage of time or the giving of
notice or both would constitute an Event of Default, notice of such Event of
Default or event; (vi) weekly Outstandings Reports in the form of Exhibit F
hereto setting forth the amounts and types of Advances made and Bid Rate Credits
extended by each Bank; (vii) promptly after the filing or receiving thereof,
copies of all reports and notices which the Borrower or Guarantor files with the
Securities and Exchange Commission or similar state regulatory body, or which
the Borrower or Guarantor receives therefrom; and (viii) such other information
respecting the condition or operations, financial or otherwise, of the Borrower
or the Guarantor as the Agent or any Bank may from time to time reasonably
request.
(f) Working Capital. Maintain as of the last day of each fiscal
quarter (i) a ratio of current assets to current liabilities (exclusive of
current deferred taxes) of not less than 1.5 to 1.0, and (ii) an excess of
current assets over current liabilities (exclusive of current deferred taxes) of
not less than $60,000,000; and the calculation thereof shall be on a basis which
in all respects is consistent with the provisions of Section 10.04.
(g) Net Worth. Maintain as of the last day of each fiscal quarter a
Tangible Net Worth (as hereinafter defined) of not less than the sum of (i)
$232,148,622, plus (ii) the amount of all proceeds of any issuance of capital
stock of Borrower, plus (iii) the amount of any Subordinated Debt which is
converted into capital stock of Borrower, plus (iv) in the case of each fiscal
quarter ending on or after October 1, 1995, the Applicable Net Income Carryover
<PAGE>
(as hereinafter defined). "Tangible Net Worth" means the excess of total assets
over total liabilities, total assets and total liabilities each to be determined
in accordance with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements referred to in
Section 6.01(e), excluding, however, from the determination of total assets (i)
goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other similar intangibles, (ii) treasury stock, (iii)
securities which are not readily marketable, (iv) cash held in a sinking or
other analogous fund established for the purpose of redemption, retirement or
prepayment of capital stock, (v) any write-up in the book value of any asset
resulting from a revaluation thereof subsequent to the date hereof, and (vi) any
items not included in clauses (i) through (v) above which are treated as
intangibles in conformity with generally accepted accounting principles.
"Applicable Net Income Carryover" at any time that any determination thereof is
to be made means an amount equal to sixty percent (60%) of the Borrower's net
income for each and every fiscal year ending on or after October 1, 1995 which
has ended on or before the date such determination of Applicable Net Income
Carryover is to be made; provided, however, that in the event that the
Borrower's net income for any fiscal year described above is less than zero, the
Borrower's net income for such fiscal year shall be deemed to be zero for
purposes of calculating Applicable Net Income Carryover.
(h) Maximum Leverage Ratio. Maintain as of the last day of each fiscal
quarter a Leverage Ratio of not more than 0.5 to 1.0. "Leverage Ratio," as used
herein, means, for any period of determination thereof, the quotient (expressed
as a ratio) of (I) the sum of (A) indebtedness with maturities greater than one
year (including all current portions thereof), plus (B) subordinated debt,
divided by (II) the sum of (A) indebtedness with maturities greater than one
year (including all current portions thereof), plus (B) subordinated debt, plus
(C) book equity, plus (D) long-term deferred taxes attributable to Borrower's
prior use of cash accounting, plus (E) deferred taxes attributable to Borrower's
use of the "farm price" method of accounting for deferred taxes. For purposes of
calculating the Leverage Ratio in connection with this Section 6.01(h), all
Advances shall be considered indebtedness with a maturity less than one year.
(i) Cash Flow Ratio. Maintain as of the last day of each fiscal
quarter a Cash Flow Coverage Ratio of not less than 1.3 to 1.0 on a rolling
eight fiscal quarter basis. "Cash Flow Coverage Ratio" means for any period of
determination thereof, the quotient (expressed as a ratio) of (I) the sum of (A)
earnings before taxes, plus (B) interest expense, plus (C) lease expenses, plus
(D) depreciation and amortization, divided by (II) the sum of (A) interest
expense, plus (B) lease expenses, plus (C) principal payments on long term debt
and capital leases other than Qualifying Balloon Payments (as hereinafter
defined), plus (D) dividends, purchases or other acquisitions by the Borrower or
any of its subsidiaries of any stock of the Borrower and distributions of assets
to the Borrower's stockholders as such. "Qualifying Balloon Payments" at any
time that any determination thereof is made means the Balloon Portion (as
hereinafter defined) of the final principal payment due on the final maturity
date of any long term debt or capital lease having a final maturity date during
such fiscal quarter; provided, however, that no such Balloon Portion shall
constitute a Qualifying Balloon Payment if (a) the Agent determines in good
faith that it is unlikely that the Borrower will be able to refinance the
Balloon Portion when due or within sixty (60) days thereafter with Qualifying
<PAGE>
Replacement Financing (as defined below) or (b) the Agent determines in good
faith that the Borrower is not diligently pursuing reasonable efforts to
accomplish a refinancing of the Balloon Portion when due or within sixty (60)
days thereafter with Qualifying Replacement Financing or (c) more than sixty
(60) days have elapsed since the Balloon Portion became due and the Borrower did
not prior to expiration of such period refinance the Balloon Portion with
Qualifying Replacement Financing. "Balloon Portion" at any time that any
determination thereof is to be made means the portion of a final principal
payment due on the final maturity date of any long term debt or capital lease
which exceeds the average scheduled pre-maturity annual principal amortization
under such long term debt or capital lease. "Qualified Replacement Financing"
means long term debt or capital lease financing of the Company that does not (or
would not if entered into) result in a Default or an Event of Default.
(j) Insurance. Maintain, and cause each subsidiary to maintain, in
force with financially sound and reputable insurers, policies with respect to
its property and business against such casualties and contingencies (including
public liability, larceny, embezzlement or other criminal misappropriation
insurance) and in such amounts as is customary in the case of corporations
engaged in the same or similar lines of business or comparable size and
financial strength.
(k) Environmental Notice and Inspection.
(i) Notify the Agent and the Banks in writing, promptly upon any
executive officer or the Borrower or any of its subsidiaries learning of any of
the following which is reasonably likely to result in liability in excess of Two
Million Dollars ($2,000,000): (A) any Environmental Claim which the Borrower or
any of its subsidiaries receives, including one to take or pay for any remedial,
removal, response, clean-up or other action with respect to any Hazardous
Substances located on any property, whether or not owned by Borrower or any of
its subsidiaries; (B) any notice of any alleged violation of or knowledge by the
Borrower or any of its subsidiaries of a condition which has a reasonable
potential of resulting in a claim for a violation of any Requirement of Law
involving environmental, health or safety matters; and (C) any commencement or
threatened commencement of any judicial or administrative proceeding or
investigation alleging a violation of any Requirement of Law involving
environmental, health or safety matters.
(ii) Permit and cause each of its subsidiaries to permit the Agent,
any Bank and any agent or representative thereof access in accordance with
Section 6.01(d), to inspect any documents, property or operations, and interview
any employees, representatives or agents, of the Borrower or any of its
subsidiaries pertaining to the areas of environmental compliance hazard or
liability.
(iii) Submit and cause each of its subsidiaries to submit, upon
written request of the Agent or any Bank, to the Agent or such Bank, at
reasonable intervals, a report providing an update of the status of any
environmental, health or safety compliance, hazard or liability issue identified
in any notice or report required pursuant to this Section 6.01(k) and any other
environmental, health or safety compliance obligation, remedial obligation or
liability, that might, individually or in the aggregate, result in liability in
excess of Two Million Dollars ($2,000,000).
<PAGE>
(l) Further Assurances. On request of any Bank or the Agent, promptly
correct any defect, error or omission which may be discovered in the contents of
any of the Loan Documents or in the execution or acknowledgment thereof, and
will execute, acknowledge and deliver such further instruments and do such
further acts as may be necessary or as may be requested by any Bank or the Agent
to carry out more effectively the purposes of this Agreement and the Loan
Documents.
SECTION 6.02. Negative Covenants. So long as any amount payable
hereunder or under the Notes shall remain unpaid or any Bank shall have any
Commitment hereunder, the Borrower will not, unless Agent, after obtaining the
approval of the Majority Banks, shall otherwise consent in writing:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
subsidiaries to create or suffer to exist, any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties, whether now owned or hereafter acquired,
or assign, or permit any of its subsidiaries to assign, any right to receive
income, in each case to secure any Indebtedness (as defined below) of any person
or entity, other than (i) those described on Schedule 6.02(a) hereto, and
renewals and extensions thereof on the same or substantially the same terms and
conditions (ii) purchase money liens or purchase money security interests upon
or in any fixed assets acquired or held by the Borrower or any subsidiary in the
ordinary course of business to secure the purchase price of such fixed assets or
to secure indebtedness incurred solely for the purpose of financing the
acquisition of such fixed assets, (iii) liens or security interests existing on
such fixed assets at the time of their acquisition, (iv) liens and security
interests on previously acquired fixed assets, the fair value of which assets
does not exceed by more than one hundred percent (100%) the amount of
indebtedness secured thereby, all as determined by the Agent in its sole, good
faith discretion or (v) obligations for capital and operating leases of real or
personal fixed assets acquired or held by the Borrower in the ordinary course of
business which are secured only by the fixed assets the subject of the lease,
provided, however, that the aggregate principal amount of the indebtedness
secured by the liens or security interests referred to in clauses (ii), (iii)
and (iv) above plus the aggregate amount of capitalized payment obligations
under the leases referred to in clause (v) above plus the amount of any increase
in the indebtedness referred to in clause (i) above shall not exceed $25,000,000
at any time outstanding.
(b) Dividends, Etc. Declare or pay any dividends, purchase or
otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such, or
permit any of its subsidiaries to purchase or otherwise acquire for value any
stock of the Borrower which in the aggregate exceeds $2,750,000 during any
fiscal year.
(c) Lease Obligations. Create or suffer to exist, or permit any of its
subsidiaries to create or suffer to exist, any obligations for the payment of
rent for any property under leases or agreements to lease, which do or would
constitute operating leases, which in the aggregate have annual rental payments
in excess of seven and one-half percent (7.5%) of Borrower's Net Tangible
Assets; provided, however, that leases for rolling stock shall be excluded from
the foregoing calculation. "Net Tangible Assets" means total assets less
<PAGE>
intangibles less current liabilities (exclusive of current deferred taxes).
(d) Indebtedness, etc. Create, incur, assume or suffer to exist any
indebtedness, liabilities or obligations, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, except: (i)
the liabilities of the Borrower permitted under Section 6.02(a); (ii)
liabilities of the Borrower to the Agent and the Banks hereunder or otherwise;
(iii) short-term indebtedness of the Borrower to parties other than the Agent
and Banks hereunder, provided that such indebtedness shall at no time exceed
$20,000,000.00 in the aggregate; (iv) other long-term indebtedness, and (v)
those liabilities listed on Schedule 6.02(d) hereto.
(e) Capital Expenditures, etc. Make any capital expenditures in any
one fiscal year in excess of twenty-five percent (25%) of the Borrower's
stockholders' equity at the end of the immediately preceding fiscal year (such
calculation also to include the gross purchase price of assets or stock, as the
case may be, acquired in connection with any merger, consolidation, asset
acquisition, stock purchase or similar transaction except for the portion of
such gross purchase price which was paid for by the Borrower solely with shares
of the Borrower's capital stock); provided, however, that the amount of capital
expenditures incurred in fiscal years 1996 and 1997 in connection with
Borrower's planned construction of a new processing facility in Kentucky shall
be excluded from the calculation of this covenant.
(f) Loans, Guarantees, etc. Make any loans or advances to or
investments in any person, or directly or indirectly guaranty or otherwise
assure a creditor against loss in respect of any indebtedness, obligations or
liabilities (contingent or otherwise) of any person unless any such amounts have
been included as indebtedness in making calculations with respect to each
representation, warranty and covenant herein.
(g) Payment of Subordinated Debt. Make any prepayments of principal on
any existing or future Subordinated Debt of the Borrower.
(h) Merger and Consolidation.
(i) Directly or indirectly, consolidate with or merge into any other
Person, or permit any other Person to consolidate with or merge into it, unless
(A) Borrower is the surviving legal entity, (B) immediately upon the
consummation of such consolidation or merger there shall be no Default or Event
of Default and (C) any additional documentation required by the Agent shall be
delivered to the Agent.
(ii) Allow any subsidiary, directly or indirectly, to consolidate with
or merge into any other subsidiary, unless (A) immediately upon the consummation
of such consolidation or merger, there shall be no Default or Event of Default
and (B) any additional documentation required by the Agent shall be delivered to
the Agent.
(i) Business. Engage, directly or through other Persons, in any
business other than the business now carried on, and other businesses directly
related thereto.
<PAGE>
(j) Transactions With Affiliates. Notwithstanding any other provision
of this Agreement, enter into any transaction with any Affiliate of the Borrower
(other than a merger permitted under Section 6.02(h) hereof) except in the
ordinary course of Borrower's business, and on fair and reasonable terms no less
favorable to Borrower than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate.
(k) Sale of Assets. Sell, lease, transfer, or otherwise dispose of
assets, except (i) in the ordinary course of business and for full and fair
consideration or (ii) assets which Borrower or its subsidiary determines in good
faith are obsolete.
(l) Use of Proceeds. Use the proceeds of any Advances or Letters of
Credit for any purpose other than the financing of the integrated broiler,
turkey and food processing and marketing operations of Borrower or for general
corporate purposes including acquisitions to the extent permitted under Section
6.02.
(m) Subsidiaries. Form or otherwise acquire any subsidiary corporation
(including subsidiary corporations of the Borrower), unless (i) the Borrower
gives each Bank and the Agent prior written notice thereof and (ii) such
subsidiary executes and delivers to each Bank and the Agent (A) its guaranty of
debt with respect to this Agreement in form substantially similar to the form of
guaranty attached hereto as Exhibit B (the "Guaranty") and (B) such other
documents and amendments to the Loan Documents as the Majority Banks shall
require.
(n) Accounting Methods. Change its methods of accounting, unless
required by GAAP.
(o) Fiscal Year End. Change its fiscal year.
(p) Compliance with ERISA. (i) Terminate any Plan so as to result in
any material (in the opinion of the Majority Banks) liability of the Borrower or
any of its subsidiaries to the PBGC, or (ii) permit to exist any occurrence of
any Reportable Event, or any other event or condition, which presents a material
(in the opinion of the Majority Banks) risk of such a termination by the PBGC of
any Plan.
(q) Restricted Investments. Make any investments (including loans or
other advances to or for the benefit of any subsidiary of the Borrower) except
(i) investments in readily marketable obligations of the United States of
America maturing within one year from date of purchase, (ii) investments in
prime (by recognized United States financial standards) commercial paper
maturing within one year from date of purchase, (iii) investment in fully
insured domestic certificates of deposit and certificates of deposit issued by
any Bank (provided such Bank's outstanding long-term debt securities are rated
at least A by Standard & Poor's Corporation or at least A-1 by Moody's Investors
Service, Inc.) maturing within one year, (iv) endorsements of negotiable
instruments for collection in the ordinary course of business, (v) investments
in other comparable prudent investments, including investments in or issued by
any Bank, reported to the Banks monthly in conjunction with the Borrower's
monthly reports required by Section 6.01(e) (together with a copy of the
Borrower's then-current investment policy) and (vi) investments in the
<PAGE>
Borrower's subsidiaries that have complied with the requirements of Section
6.02(m); provided, however, that this Section 6.02(q) shall not be deemed to
prohibit the Borrower from creating accounts receivable from any subsidiary of
the Borrower as a result of the sale of inventory in accordance with Section
6.02(j).
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any amount payable hereunder or
under the Notes when due; or
(b) Any representation or warranty made by the Borrower (or any of its
officers) or any Guarantor under or in connection with any Loan Document shall
prove to have been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe the covenants in
Sections 6.01(a), (e) or (j) hereof and any such failure shall remain unremedied
for 10 days after written notice thereof shall have been given to the Borrower
by the Agent or any Bank, or the Borrower shall otherwise have acquired
knowledge thereof; or
(d) The Borrower or any Guarantor shall fail to perform or observe any
other term, covenant or agreement contained in any Loan Document on their
respective parts to be performed or observed; or
(e) The Borrower or any of its subsidiaries shall fail to pay any
indebtedness (excluding indebtedness evidenced by the Notes) of the Borrower or
such subsidiary (as the case may be), or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such indebtedness; or
any other default under any agreement or instrument relating to any such
indebtedness, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness; or any such indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(f) The Borrower or any of its subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its property, and, in the
<PAGE>
case of any such proceeding instituted against it (but not instituted by it)
either such proceeding shall remain undismissed or unstayed for a period of 30
days or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against it or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur; or the Borrower or any of its
subsidiaries shall take any corporate action to authorize any of the actions set
forth above in this subsection (e); or
(g) Any judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower or any of its subsidiaries and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(h) Any provision of the Guaranty after delivery thereof shall for any
reason cease to be valid and binding on any Guarantor, or any Guarantor shall so
state in writing; or
(i) James T. Hudson and his immediate family cease to own of record at
least 51% of the aggregate outstanding voting power of Borrower; or
(j) (I) Any Termination Event with respect to a Plan shall have
occurred, and, thirty days after notice thereof shall have been given to
Borrower by the Agent or any Bank, (A) such Termination Event (if correctable)
shall not have been corrected and (B) the then present value of such Plan's
vested benefits exceeds the then current value of assets accumulated in such
Plan by more than the amount of $500,000 (or in the case of a Termination Event
involving the withdrawal of a "substantial employer" (as defined in Section
4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such
excess shall exceed such amount, or (II) the Borrower or any of its
subsidiaries, as an employer under a Multiemployer Plan, shall have made a
complete or partial withdrawal from such Multiemployer Plan and the plan sponsor
of such Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an annual amount exceeding
$100,000; then, and in any such event, the Agent, with the consent of the
Majority Banks (i) may, by notice to the Borrower, declare the obligation of the
Banks to make Committed Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) may, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower or any
subsidiary under the Federal Bankruptcy Code, (x) the obligation of the Banks to
make Committed Advances shall automatically be terminated and (y) the Notes, all
such interest and all such amounts shall automatically become due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
<PAGE>
ARTICLE VIII
DEFINITIONS
SECTION 8.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acceptance" means a draft drawn on a Bank by the Borrower and
accepted and discounted by such Bank pursuant to
Section 2.03.
"Adjusted Leverage Ratio" shall have the meaning specified in Section
3.02(c).
"Advances" and "Advance" respectively mean (a) all advances (including
Committed Advances and Bid Rate Advances) made by the Banks or any single Bank
(as the context requires) to the Borrower pursuant to Article I, and (b) a
single such advance made by any Bank.
"Affiliate" means (i) the Borrower or (ii) the Guarantor or (iii) any
corporation or entity of which either the Borrower or the Guarantor owns,
directly or indirectly through one or more intermediaries, 10% or more of the
outstanding capital stock of such corporation or entity.
"Agency Fee" shall have the meaning specified in Section 1.02.
"Agency Fee Letter" shall have the meaning specified in Section 1.02.
"Agent's Depository Account" means the Agent's Account No. 8026002533
maintained at The Bank of New York in New York City, ABA Reference No.
021000018, or such other account as shall be designated by the Agent in a
written notice to the Banks.
"Aggregate Outstanding Liabilities" means, as of any date, the sum of
the then outstanding Advances, Bid Rate Credits and Letter of Credit
Liabilities.
"Anticipated Profits" at any time that any determination thereof is to
be made means an amount equal to the excess, if any, of (i) the amount of
interest that the Agent or a Bank, as the case may be, determines in good faith
that it would have realized on any Advance which was made, or any Advance that
was requested by the Borrower to be made pursuant to a Notice of Committed
Borrowing as if such requested Advance had been made, and remained outstanding
for the duration of the Interest Period pertaining thereto, over (ii) the
Agent's or a Bank's, as the case may be, cost of obtaining the funds for any
such Advance made, or any such requested Advance, for the Interest Period
pertaining thereto.
"Applicable Net Income Carryover" shall have the meaning specified in
Section 6.01(g).
<PAGE>
"Applicable Rate" shall have the meaning specified in Section 3.02(c).
"Available Commitment" at the time any determination thereof is to be
made means, with respect to any Bank, an amount equal to the excess, if any, of
such (i) Bank's Commitment over (ii) the Aggregate Outstanding Liabilities then
owing to such Bank.
"Available Commitment Share" when used with reference to any Bank at
the time any determination thereof is to be made means a fraction, expressed as
a percentage, the numerator of which shall be the amount of such Bank's
Available Commitment then in effect and the denominator of which shall be the
amount of the Available Total Commitment then in effect.
"Available Total Commitment" at the time any determination thereof is
to be made means the aggregate sum of the Available Commitments of the Banks at
such times.
"Balloon Portion" shall have the meaning specified in Section 6.01(i).
"Bank Obligations" means all obligations of any Loan Party to the
Agent or the Banks, or any of them, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, joint or several, or now or
hereafter existing, or due or to become due, under or in connection with this
Agreement, the Notes or any other Loan Documents.
"Bank Supplement" shall have the meaning specified in Section 10.09.
"Base Rate" means the higher of (i) the fluctuating rate of interest
announced publicly by Rabobank in New York, New York, from time to time, as
Rabobank's base rate, or (ii) the fluctuating rate of interest per annum equal
to one-half of one percent (0.5%) in excess of the rate of interest per annum at
which Rabobank, as a federally licensed branch of a foreign bank, can acquire
overnight federal funds in the interbank overnight federal funds market in New
York City through brokers of recognized standing one Business Day prior to such
date in the amount of such Advance. Rabobank may make commercial loans or other
loans at rates of interest at, above, or below its base rate.
"Bid Rate" for any Interest Period for any Advance of any Bank means
an interest rate per annum at all times equal during such Interest Period to the
rate per annum which such Bank offers to the Borrower in writing from time to
time in response to a request from the Borrower or an interest rate quotation
regarding a specific proposed Bid Rate Advance for a specific amount to be made
on a specific date for a specific period.
"Bid Rate Advance" shall have the meaning specified in Section
1.01(b).
"Bid Rate Credits" shall have the meaning specified in Section 2.03.
"Borrowing Date" means the date on which a Borrowing is, or is to be,
consummated, as the context requires.
<PAGE>
"Business Day" means (a) in the case of a Business Day which relates
to fees, a day upon which the Agent is open at its address specified in or
pursuant to the provisions of Section 10.02 for the purpose of conducting
commercial banking business, (b) in the case of a Business Day which relates to
a LIBOR Rate Advance, a day on which the requirements of clause (a) of this
definition are met and, in addition, dealings are carried out in the interbank
eurodollar market and banks are open for business in New York, (c) in the case
of a Business Day which relates to a Letter of Credit, a day on which the
relevant issuer and the Agent are each open at their respective addresses
specified in or pursuant to Section 10.02 for purposes of conducting commercial
banking business, and (d) in the case of Bid Credits and Base Rate Advances, a
day on which the requirements of clause (a) of this definition are met and, in
addition, banks are open for business in New York.
"Cash Flow Coverage Ratio" shall have the meaning specified in Section
6.01(i).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" with respect to any Bank means the amount set forth
opposite such Bank's name on the signature page hereof (or on the signature page
of the then most recent Bank Supplement to which such Bank is a party, if any),
as amended from time to time, as such amount may be reduced from time to time
pursuant to Section 1.01(c).
"Committed Advances" shall have the meaning specified in Section
1.01(a).
"Committed Borrowing" means a borrowing consisting of simultaneous
Committed Advances from the Banks (or any of them) pursuant to Section 2.02.
"Controlled Group" means, as to any Person, all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) which are under common control with such Person and which,
together with such Person, are treated as a single employer under Section
4001(a)(14) of ERISA or Section 4.14(b), (c), (m), (n) or (o) of the Code.
"Default" means any of the events specified in Section 7.01, whether
or not there has been satisfied any requirement in connection with such event
for the giving of notice, or the lapse of time, or the happening of any further
condition, event or act.
"Default Rate" shall have the meaning specified in Section 3.02(d).
"Environmental Claim" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability for
violation of any Environmental Law or for release or injury to the environment
or threat to public health, personal injury (including sickness, disease or
death), property damage, natural resources, damage, or otherwise alleging
liability for damages, punitive damages, cleanup costs, removal costs, remedial
costs, response costs, restitution, civil or criminal penalties, injunctive
relief, or other type of relief, resulting from or based upon (a) the presence,
placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden, accidental or
<PAGE>
non-accidental placement, spill, leaks, discharges, emissions or releases) of
any Hazardous Substances at, in or from property, whether or not owned by the
Borrower or any of its subsidiaries, or (b) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
42 U.S.C. ss. 9601 et seq., (ii) the Resource Conservation and Recovery Act, as
amended from time to time, 42 U.S.C. ss. 6901 et seq., (iii) the Clean Air Act,
as amended from time to time, 42 U.S.C. ss. 7401 et seq., (iv) the Clean Water
Act of 1977, as amended from time to time, 33 U.S.C. ss. 1251 et seq., (v) the
Toxic Substances Control Act, as amended from time to time, 15 U.S.C. ss. 2601
et seq., (vi) the Hazardous Materials Transportation Act, as amended from time
to time, 49 U.S.C. ss. 1801 et seq., and (vii) all other federal, state and
local laws relating to air pollution, water pollution, noise control and/or the
handling, discharge, disposal or recovery of on-site or off-site Hazardous
Substances, as each of the foregoing may be amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Events of Default" shall have the meaning specified in Section 7.01.
"Facility Fee" shall have the meaning specified in Section 1.03.
"GAAP" means generally accepted accounting principles as in effect
from time to time as set forth in the opinions, statements and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants, the Financial Accounting Standards Board and such other Persons who
shall be approved by a significant segment of the accounting profession and
concurred in by the independent certified public accountants certifying any
audited financial statements of the Borrower.
"Guarantor" shall mean any entity which executes a Guaranty as
contemplated in Section 6.02(m).
"Guaranty" shall have the meaning specified in Section 6.02(m).
"Hazardous Substances" means one or more of the following substances:
(i) those substances included within the definitions of "hazardous
substances", hazardous materials", "toxic substances", or "solid waste" in any
Environmental Laws;
(ii) those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(iii) such other substances, materials and wastes which are or become
regulated under any Environmental Laws or regulation, or which are classified as
hazardous or toxic; and
(iv) any material, waste or substance which is asbestos, explosives or
radioactive.
<PAGE>
"Indebtedness" with respect to any Person means, without duplication,
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property acquired by, or services rendered to, such Person,
(b) all indebtedness of such Person created or arising under any conditional
sale or other title retention agreement with respect to any property acquired by
such Person, (c) the present value determined in accordance with GAAP of all
obligations of such Person under leases which shall have been or should be
recorded as capitalized leases in accordance with GAAP, (d) all indebtedness or
for the deferred purchase price of property or services secured by any lien upon
or in any property owned by such Person whether or not such Person has assumed
or become liable for the payment of such indebtedness, (e) indebtedness arising
under acceptance facilities, in connection with surety or other similar bonds,
and the undrawn maximum face amount of all outstanding letters of credit issued
for the account of such Person and, without duplication, the outstanding amount
of all drafts drawn thereunder, (f) obligations of such Person with respect to
interest rate protection agreements, (g) all liabilities in respect of unfunded
vested benefits under Plans and all asserted withdrawal liability of such Person
or a commonly controlled entity to a Multiemployer Plan, as such term is defined
under Section 3(37) of ERISA, and (h) all direct or indirect guarantees by such
Person of indebtedness described in this definition of any other Person;
provided, that, for purposes of this definition, Trade Debt shall not be
included.
"Interest Period" shall have the meaning specified in Section 3.02(b).
"Letter of Credit" means each letter of credit, as defined in the
Uniform Commercial Code, issued to, for the account of, or for the benefit of
the Borrower by a Bank or by another financial institution upon a Bank's
guaranty.
"Letter of Credit Liabilities" means, at any time, the sum of (a) the
aggregate maximum amount that thereafter could be drawn under all Letters of
Credit plus (b) all amounts drawn, but unreimbursed, under Letters of Credit.
"Leverage Ratio" shall have the meaning specified in Section 6.01(h).
"LIBOR Interest Period" means an Interest Period for a particular
LIBOR Rate Advance.
"LIBOR Office" with respect to any Bank means the office, branch or
affiliate of such bank designated as its address on the signature pages hereto
or such other office(s), branch(es) or affiliate(s) of such Bank (as designated
from time to time by notice from such Bank to the Borrower and the Agent) which
shall be making or maintaining the LIBOR Rate Advances of such Bank hereunder.
"LIBOR Rate Advance" means any Advance which bears interest as a rate
determined by reference to the LIBOR Rate.
"LIBOR Rate" for any LIBOR Interest Period for any Advance means an
interest rate per annum equal at all times during such Interest Period to the
quotient of (i) the rate per annum conclusively determined by Rabobank for such
LIBOR Interest Period at which deposits in U.S. dollars in immediately available
funds are offered, which appear on Telerate page 3750 as of 11:00 A.M. (London
time) on the LIBOR Business Day that is two (2) London banking days preceding
<PAGE>
the first day of such Interest Period, for delivery on the first day of such
LIBOR Interest Period in an amount equal to the principal amount of the Advance
outstanding on the first day of such LIBOR Interest Period for a period equal to
such LIBOR Interest Period divided by (ii) the remainder of one (1) minus the
applicable LIBOR Reserve Percentage.
"Loan Documents" and "Loan Document" means this Agreement, the Notes,
any Guaranty, the Agency Fee Letter, and all other documents, instruments, and
certificates delivered to the Agent and/or any Bank by any Loan Party under this
Agreement or in connection herewith, including, without limitation, all
documents, instruments and certificates delivered in connection with the
extension of Bid Rate Credits by any Bank hereunder and all letters of credit
and supporting documents described in Section 10.17 as being deemed to be Loan
Documents.
"Loan Parties" means, collectively, the Borrower and any Guarantor.
"LIBOR Reserve Percentage" means, with respect to each LIBOR Interest
Period, a percentage (expressed as a decimal) equal to the daily average during
such LIBOR Interest Period of the percentages in effect on each day of such
LIBOR Interest Period, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor thereto), for determining the maximum reserve
requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D
of the Board of Governors of the Federal Reserve System or any other then
applicable regulation of the Board of Governors which prescribes reserve
requirements applicable to "Eurocurrency Liabilities" as presently defined in
Regulation D.
"Majority Banks" at the time any determination thereof is to be made
and for any specific purpose means a Bank or Banks having a combined Pro Rata
Share aggregating sixty percent (60%) or more.
"Maximum Rate" shall have the meaning specified in Section 3.02(c).
"Multiemployer Plan" means, with respect to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its controlled group is making, or is
obligated to make contributions or has made, or been obligated to make,
contributions.
"Net Tangible Assets" shall have the meaning specified in Section
6.02(c).
"Net Worth" means the excess of total assets over total liabilities,
total assets and total liabilities each to be determined in accordance with
generally accepted accounting principles consistent with those applied in the
preparation of the financial statements referred to in Section 6.01(e).
"Notes" shall have the meaning specified in Section 3.01.
"Notice of Committed Borrowing" shall have the meaning specified in
Section 2.02.
<PAGE>
"Original Banks" means the commercial, banking and financial
institutions whose signatures appear on the signature pages of the Prior
Revolving Credit Agreement.
"Outstandings Report" means a duly executed and completed report of
the Borrower, substantially in the form of Exhibit F hereto.
"Person" shall mean any individual or entity.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Plan" means any plan subject to Title IV of ERISA and maintained for
employees of the Borrower or any of its subsidiaries, or of any member of a
Controlled Group, of which the Borrower or any of its subsidiaries is a part.
"Prior Revolving Credit Agreement" means that certain Revolving Credit
Agreement, dated as of April 26, 1994, by and among the Borrower, Rabobank and
the Original Banks, as amended by (i) that certain Amendment to Revolving Credit
Agreement dated as of April 17, 1995 and executed by and among the Borrower,
Rabobank and the Original Banks and (ii) those certain letter amendments to the
Revolving Credit Agreement dated as of October 18, 1995 and executed by and
between the Borrower and the Original Banks.
"Pro Rata Share" when used with reference to any Bank at the time any
determination thereof is to be made means a fraction, expressed as a percentage,
the numerator of which shall be the amount of such Bank's Commitment then in
effect and the denominator of which shall be the Total Commitment then in
effect; provided, that if the respective Commitments of the Banks, and the Total
Commitment, have then been terminated, the numerator of such fraction shall be
the principal amount of the Aggregate Outstanding Liabilities then owing to such
Bank and the denominator of such fraction shall be the principal amount of the
Aggregate Outstanding Liabilities then owing to all of the Banks.
"Qualifying Balloon Payments" shall have the meaning specified in
Section 6.01(i).
"Qualifying Replacement Financing" shall have the meaning specified in
Section 6.01(i).
"Reportable Event" means a reportable event as defined in Section
4043(b) of Title IV of ERISA.
"Request for Bids" shall mean a telephonic request for one or more Bid
Rate Credits which is confirmed in a writing substantially in the form of
Exhibit E.
"Requirement of Law" means, with respect to any Person, the charter
and by-laws or other organizational or governing documents of such Person, and
any law, rule or regulation (including Environmental Laws and ERISA) or order,
decree or other determination of an arbitrator or a court or other such
governmental authority applicable to or binding upon such Person or any property
or to which such Person or any of its property is subject.
<PAGE>
"Secured Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of September 23, 1992, by and among the Borrower, the
Guarantor, and the Banks, and Bank of America National Trust and Savings
Association, as collateral agent.
"Subordinated Debt" means, without duplication, all unsecured
Indebtedness of the Borrower which is made subordinate and junior in right of
payment to the Bank Obligations of the Borrower by the inclusion in the
instrument evidencing or creating such Indebtedness or the indenture or other
instrument under which such Indebtedness is issued of subordination provisions
no more favorable to the Persons extending or purchasing such Indebtedness than
the terms of subordination found in the documents evidencing the Subordinated
Debt outstanding as of the date hereof set forth on Schedule 8.01 hereof.
"Tangible Net Worth" shall have the meaning specified in Section
6.01(g).
"Termination Date" means the earlier of June 30, 1999 (or anniversary
thereof as may be determined in accordance with Section 1.01(d) hereof) or the
date of termination in whole or in part of the Commitment pursuant to Section
1.01(c) or Section 7.01.
"Termination Event" means (a) a Reportable Event described in Section
4043 of ERISA and the regulations issued thereunder (other than a Reportable
Event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of Borrower or any Subsidiary from a Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to
terminate a Plan or the treatment of Plan amendment as termination under Section
4041 of ERISA, or (d) the institution of proceedings to terminate a Plan by the
PBGC, or (e) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"Total Commitment" at the time any determination thereof is to be made
means the sum of the then existing Commitments of the Banks.
"Trade Debt" means trade accounts payable incurred in the ordinary
course of business with an original maturity of not greater than 180 days (and
which are not overdue for more than 30 days).
SECTION 8.02. Construction. Wherever herein the singular number is
used, the same shall include the plural where appropriate, and words of any
gender shall include each other gender where appropriate. The headings, captions
or arrangements used in any of the Loan Documents are, unless specified
otherwise, for convenience only and shall not be deemed to limit, amplify or
modify the terms of the Loan Documents, nor affect the meaning thereof.
SECTION 8.03. Currency. All Advances and Bid Rate Credits shall be
denominated in United States Dollars.
<PAGE>
ARTICLE IX
THE AGENT
SECTION 9.01. Authorization and Action. Each Bank hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. As to
any matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Banks; provided,
however, that the Agent shall not be required to take any action which exposes
the Agent to personal liability or which is contrary to this Agreement or
applicable law.
SECTION 9.02. Duties and Obligations. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent (i) may treat the payee
of any Note as the holder thereof unless and until the Agent receives written
notice of the assignment thereof signed by such payee and the Agent receives the
written agreement of the assignee that such assignee is bound hereby as it would
have been if it had been an original Bank party hereto, in each case in form
satisfactory to the Agent, (ii) may consult with legal counsel (including
counsel for the Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, and (iii) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, cable, telex or facsimile)
believed by it to be genuine and signed or sent by the proper party or parties
or by acting upon any representation or warranty of the Borrower made or deemed
to be made hereunder. Further, the Agent (A) makes no warranty or representation
to any Bank or shall not be responsible to any Bank for the accuracy or
completeness of any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement, (B) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement on the part of the Borrower
or to inspect the property (including the books and records) of the Borrower,
and (C) shall not be responsible to any Bank for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto.
SECTION 9.03. Agent and Affiliates. With respect to its Commitment,
the Advances made by it and the Note issued to it, the Agent shall have the same
rights and powers under this Agreement as the other Banks and may exercise the
same as though it were not the Agent; and the term "Bank" or "Banks" shall,
unless otherwise expressly indicated, include the Agent in its capacity as Bank.
Rabobank and its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
the Borrower, all as if Rabobank were not the Agent hereunder and without any
duty to account therefor to the Banks.
<PAGE>
SECTION 9.04. Bank Credit Decision. It is understood and agreed by
each Bank that it has itself been, and will continue to be, solely responsible
for making its own independent appraisal of and investigations into the
financial condition, creditworthiness, condition, affairs, status and nature of
the Borrower. Accordingly, each Bank confirms to the Agent that such Bank has
not relied, and will not hereafter rely, on the Agent (i) to check or inquire on
its behalf into the adequacy, accuracy or completeness of any information
provided by the Borrower under or in connection with this Agreement or the
transactions herein contemplated (whether or not such information has been or is
hereafter distributed to such Bank by the Agent), or (ii) to assess or keep
under review on its behalf the financial condition, creditworthiness, condition,
affairs, status or nature of the Borrower. Each Bank acknowledges that a copy of
this Agreement and a copy of the Exhibits and Schedules hereto have been made
available to it and to its individual legal counsel for review and such Bank
acknowledges that it is satisfied with the form and substance of this Agreement
and the Exhibits and Schedules hereto.
SECTION 9.05. Indemnification. The Banks agree to indemnify the Agent
(to the extent not reimbursed by the Borrower), ratably according to their
respective Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgment, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by the Agent under this
Agreement, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limiting the generality of the foregoing, each Bank
agrees to reimburse the Agent promptly upon demand for its ratable share of any
reasonable out-of-pocket expenses (including reasonable counsel fees) incurred
by the Agent in connection with the preservation of any rights of the Agent or
the Banks under, or the enforcement of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Borrower.
SECTION 9.06. Resignation of Agent. The Agent may resign at any time
by giving written notice thereof to the Banks and the Borrower. If no successor
Agent shall have been appointed by the Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be either a Bank or a bank organized under the laws
of the United States or of any state thereof, or any affiliate of such bank, and
having a combined capital and surplus of at least $50,000,000, provided,
however, that the appointment of any successor Agent shall require the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, and that if the Borrower shall not have consented to the appointment
of any of the Banks, then any Bank may be appointed as a successor Agent in
accordance with the terms of this Section 9.06 without the consent of the
Borrower. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Agent's resignation hereunder as Agent, the
provision of this Article IX shall inure to its benefit as to any actions taken
<PAGE>
or omitted to be taken by it while it was Agent under this Agreement.
SECTION 9.07. Exchange of Information. Each Bank and the Agent shall
freely exchange with the other(s) of them any information relating to the
condition, financial or otherwise, of any Loan Party, and the Borrower hereby
consents any and all prior, present or future such exchanges.
SECTION 9.08. Benefit of the Banks Only. The terms and provisions of
this Article IX are for the sole and exclusive benefit of the Agent and the
Banks, and not for the benefit of the Borrower, the Guarantors or any other Loan
Party.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver of any
provision of any Loan Document, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the 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 any modification of, or waiver of compliance with
any of the provisions of, this Section 10.01, the Guaranty, the definition of
Majority Bank or any terms affecting the maturity of or any other dates for
payment or the amounts of any Commitments, the Advances, or interest on the
Advances shall require the written agreement of the Borrower, the Agent and each
of the Banks.
SECTION 10.02. Notices, Etc. All notices and other communications
provided for under any Loan Document shall be in writing (including telegraphic,
telex or cable communication) and mailed, telegraphed, telexed, cabled or
delivered, if to the Borrower, at its address at 1225 Hudson Road, Rogers, AR
72756, Attention: Charles B. Jurgensmeyer and Tommy D. Reynolds; and if to the
Agent, at its address at 245 Park Avenue, New York, New York 10167, Attention:
Corporate Services Department, and at its address at 13355 Noel Road, Suite
1000, Dallas, Texas 75240, Attention: Douglas L. Pogge; and if to a Bank, at its
address or addresses, as the case may be, set forth on the signature page of
this Agreement or the then most recent Bank Supplement to which such Bank is a
party; or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and
communications shall, when mailed, telegraphed, telexed or cabled, be effective
when deposited in the mails, delivered to the telegraph company, confirmed by
telex answerback or delivered to the cable company, respectively, except that
notices to the Agent or any Bank pursuant to the provisions of Article II shall
not be effective until received by the Agent or such Bank, as the case may be.
Notwithstanding the other provisions of this Section 10.02, the Agent may accept
oral borrowing notices pursuant to Article II hereof, provided that the Agent
shall incur no liability to the Borrower in acting on any such communication
that the Agent believes in good faith to have been given by a person authorized
to give such notice on behalf of the Borrower. Any confirmation sent by the
Agent or any Bank to the Borrower of any borrowing under this Agreement shall,
in the absence of manifest error, be conclusive and binding for all purposes.
SECTION 10.03. No Waiver; Remedies. No failure on the part of the
Agent or any Bank to exercise, and no delay in exercising, any right under any
<PAGE>
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
SECTION 10.04. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistently applied, except as otherwise stated herein.
The Borrower agrees to furnish to the Agent and each Bank concurrently with each
delivery of the items referred to in Section 6.01(e)(i) and Section 6.01(e)(ii),
a calculation of the Borrower's compliance or noncompliance with the covenants
contained in Sections 6.01(f), (g), (h) and (i) and a calculation and
reconciliation of the adjustments contemplated in this Section 10.04, each in
form and detail satisfactory to the Agent, and certified by such person and in
such manner as is prescribed in Sections 6.01(f) (g), (h) and (i), as the case
may be, as to the other items referred to therein.
SECTION 10.05. Costs, Expenses and Taxes. (a) The Borrower agrees to
pay on demand all costs and expenses in connection with the preparation,
execution, delivery, filing, recording and administration of the Loan Documents
and the other documents to be delivered under the Loan Documents, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent and each Bank (who may be in-house counsel for the Agent or such
Bank), and local counsel who may be retained by said counsel, with respect
thereto and with respect to advising the Agent and such Bank as to its rights
and responsibilities under the Loan Documents and all costs and expenses
(including reasonable counsel fees and expenses) in connection with the
enforcement of the Loan Documents and the other documents to be delivered under
the Loan Documents. In addition, the Borrower agrees to pay on demand the
expenses described in Section 6.01(d), subject to the limitations on amount
specified therein. In addition, the Borrower shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of the Loan Documents and the other
documents to be delivered under the Loan Documents, and agrees to hold the Agent
and the Banks harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes and fees.
(b) If, due to payments made by the Borrower pursuant to Section 3.01
or due to acceleration of the maturity of the Advances pursuant to Section 7.01
or due to any other reason, the Agent or any Bank receives payments of principal
of any Advance other than on the last day of an Interest Period relating to such
Advance, the Borrower shall pay to the Agent or the Bank on demand any amounts
required to compensate the Agent or such Bank, as the case may be, for any
additional losses, costs or expenses which it may incur as a result of such
payment, including, without limitation, any loss (including loss of Anticipated
Profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by the Agent or such Bank, as the case may
be, to fund or maintain such Advance.
SECTION 10.06. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Agent and each Bank are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply, on a pro rata basis according to each Bank's Pro Rata
<PAGE>
Share, any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Agent
and/or such Bank to or for the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or hereafter existing under any
Loan Document, irrespective of whether or not such Bank shall have made any
demand under such Loan Document and although deposits, indebtedness or such
obligations may be unmatured or contingent; provided, however, that each Bank
and the Agent may first set off and apply such funds to obligations other than
Bank Obligations. The Agent and each Bank, as the case may be, agrees promptly
to notify the Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Agent and the Banks may have.
<PAGE>
SECTION 10.07 Indemnification. Borrower agrees to, and does indemnify
and hold harmless the Agent and each Bank and their respective officers,
directors, agents, employees, attorneys and shareholders against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims (whether made or threatened), costs, expenses and disbursements of any
kind or nature whatsoever (including without limitation, the reasonable fees and
expenses of counsel (including the allocated cost of staff counsel)) which may
be imposed on or incurred by the Agent or any Bank or their respective officers,
directors, agents, employees, attorneys and shareholders in any way relating to,
or arising out of, (a) any of the Loan Documents, (b) the breach of any
representation or warranty as set forth herein regarding Environmental Laws, (c)
the failure of the Borrower or any of its subsidiaries to perform any obligation
required herein or in any of the Loan Documents to be performed pursuant to
Environmental Laws, or (d) any other act, omission, event or other transaction
contemplated in any of the Loan Documents, to the extent that any of the same
result, directly or indirectly, from any claims (whether made or threatened) or
actions, suits or proceedings (whether made or threatened) by or on behalf of
any Person other than a Bank. Without limiting the generality of the foregoing,
such indemnity shall extend to any and all costs and expenses whatsoever
incurred by the Agent and each Bank and their respective officers, directors,
agents, employees, attorneys and shareholders (including, without limitation,
the reasonable fees and expenses of counsel (including the allocated cost of
staff counsel)), in connection with investigating, preparing for or defending
against or providing evidence, producing documents or taking any action with
respect to any such action, claim (whether made or threatened and whether or not
the Agent, any Bank or other indemnified person is a party to such action or
claim), suit, liability, damage or loss, whether or not resulting in any
liability. The Agent and each Bank may select its own legal counsel in
connection with any matters indemnified against hereunder. The obligation of
Borrower under this Section 10.07 shall survive execution, delivery,
consummation and any termination of this Agreement. Borrower's obligations under
this Section 10.07 are and shall remain absolute and unconditional, enforceable
against each of them whether or not any Advance is ever made, any Letter of
Credit is ever issued, any Acceptance is ever created or any other obligation
ever arises or any conditions of lending are ever met and without regard to any
act, omission, breach, knowledge or event by, attributable to, or in any manner
involving the Agent or any Bank or their respective officers, directors, agents,
employees, attorneys and shareholders. Payment by Borrower in respect of a claim
made by the Agent or any Bank or their respective officers, directors, agents,
<PAGE>
employees, attorneys and shareholders pursuant to this Section 10.07 shall be
made within thirty days after demand therefor. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the foregoing amounts which is permissible under applicable law.
SECTION 10.08. Severability of Provisions. Any provision of this
Agreement or of any other Loan Document 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 thereof or affecting the validity or unenforceability of
such provision in any other jurisdiction.
SECTION 10.09. Binding Effect; Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Agent and the Banks and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Agent and each
Bank. Each Bank shall have the right at any time, to assign, negotiate,
hypothecate, or grant participations in this Agreement or in any of its
commitments, Advances, Notes and rights under this Agreement and any of the
other Loan Documents, and in the event of the exercise of such right shall
promptly notify the Agent and the other Banks thereof; provided, however, that
no assignment shall be made to a third party without the prior consent of the
Borrower, which consent shall not be unreasonably withheld. Each Bank assigning
or transferring any of its commitments, Advances, Notes, rights and security
under this Agreement or any of the other Loan Documents shall, promptly upon
request by the Agent, execute and deliver such documents and instruments
reasonably requested by the Agent (collectively, a "Bank Supplement") to
evidence such assignment or transfer and to substitute the assignee or
transferee as a Bank on all of the Loan Documents. The Borrower hereby
acknowledges and agrees that any assignment or transfer described in this
Section 10.09 will give rise to a direct obligation of the Borrower to the
buyer, assignee or transferee, as the case may be, but not a participant, and
such person (other than a participant) shall be considered a Bank and rely on,
and possess all rights under, all opinions, certificates or other instruments
delivered under or in connection with this Agreement or any other Loan Document.
The Borrower shall accord full recognition to any such assignment or transfer,
and all rights and remedies of such Bank in connection with the interest so
assigned shall be as fully enforceable by such assignee as they were by the
assignor Bank thereof before such assignment. In connection with any proposed
assignment, negotiation, hypothecation or granting of a participation, the Agent
and any such Bank or Banks, as the case may be, may disclose to the proposed
assignee or participant any information that the Borrower is required to deliver
to the Agent and/or the Banks pursuant to this Agreement or the other Loan
Documents, and the Borrower hereby agrees to cooperate fully with the Agent and
the Banks, as the case may be, in providing any such information to any proposed
assignee or participant. If requested by the Agent, any assignor or transferor
Bank, or any assignee or transferee, Borrower shall execute and deliver (a) to
such assignor or transferor Bank a promissory note or substitute promissory
note, as the case may be, in substantially the form of Exhibit A, payable to the
order of such assignor or transferor Bank in the principal amount of the
retained Commitment, if any, of such assignee or transferor Bank in respect of
such assignment or transfer and (b) to such assignee or transferee a promissory
<PAGE>
note, in substantially the form of Exhibit A, payable to the order of the
assignee or transferee in the principal amount of the assigned or transferred
Commitment of such assignee or transferee in respect of such assignment or
transfer.
SECTION 10.10. Consent to Jurisdiction. (a) The Borrower hereby
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in New York City in any action or proceeding arising out of or relating
to this Agreement or any of the other Loan Documents to which the Borrower is a
party, and the Borrower hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such New York State
court or in such Federal court. The Borrower 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. The Borrower irrevocably consents
to the service of copies of the summons and complaint and any other process
which may be served in any such action or proceeding by the mailing of copies of
such process to the Borrower at its address specified in Section 10.02. The
Borrower agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
<PAGE>
(b) Nothing in this Section 10.10 shall affect the right of the Bank
to serve legal process in any other manner permitted by law or affect the right
of the Bank to bring any action or proceeding against the Borrower or its
property in the courts of other jurisdictions.
SECTION 10.11. Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 10.12. Banks' Obligations Several, Not Joint. The obligations
of the Banks under this Agreement and the other Loan Documents are several, and
are not joint. No Bank or the Agent shall be responsible or liable in any way
for the failure or refusal of any other Bank to make any Advance to be made by
any other Bank, or for any other obligations of any other Bank.
SECTION 10.13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same agreement.
SECTION 10.14. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN
DOCUMENT TO WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED
THEREUNDER.
SECTION 10.15. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE
AGREEMENTS, DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
SECTION 10.16. No Effect on Certain Other Rights and Obligations.
Notwithstanding anything to the contrary contained in this Agreement or any
other Loan Document, nothing contained in this Agreement or any other Loan
Document is intended to affect, nor shall it affect, in any way any rights or
obligations of any Person arising under or in connection with (a) that certain
Note Purchase Agreement dated as of August 27, 1992 by and among the Borrower,
Pierre Frozen Foods, Inc., Rabobank, Metropolitan Life Insurance Company and
John Hancock Mutual Life Insurance Company (as amended, the "Pierre Foods
Facility Note Purchase Agreement") or any of the Transaction Documents (as
defined in the Pierre Foods Facility Note Purchase Agreement) or (b) that
certain Term Loan Agreement dated as of July 18, 1985, by and among the Borrower
and Rabobank (as amended, the "Springfield Facility Loan Agreement"), or any of
the Loan Documents (as defined in the Springfield Facility Loan Agreement).
SECTION 10.17. Amendment and Restatement. Upon the execution and
delivery of this Agreement and the other Loan Documents, this Agreement shall
immediately thereupon constitute an amendment, restatement, renewal and
extension (but not a novation, extinguishment or satisfaction) of the Prior
Revolving Credit Agreement and the other Loan Documents (as defined therein),
except that letters of credit issued by any one or more of the Original Banks
under the Prior Revolving Credit Agreement which remained outstanding as of
April 30, 1996 (which, together with all supporting documents delivered by the
Borrower or the Guarantor in connection therewith, shall thereafter be deemed to
be Loan Documents under this Agreement) shall not be terminated or affected
thereby, and any indemnification or other provisions of the Prior Revolving
Credit Agreement or any other Loan Documents executed in connection therewith
which were expressly intended to survive the termination of the Prior Revolving
Credit Agreement, shall not be terminated or otherwise affected thereby. With
respect to matters relating to the period prior to the date hereof, all of the
provisions of the Prior Revolving Credit Agreement are hereby ratified and
confirmed and shall remain in force and effect.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
HUDSON FOODS, INC.
By:
Name:
Title:
Commitment: $40,000,000.00 COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"Rabobank Nederland", New York Branch
Address: 245 Park Avenue
New York, New York 10167
By:
Authorized Officer
By:
Authorized Officer
Commitment: $40,000,000.00 NATIONSBANK OF TEXAS, N.A.
Address: 901 Main Street, 67th Floor
Dallas, Texas 75202
By:
Name:
Title:
Commitment: $30,000,000.00 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Address: 333 Clay Street, Suite 4550
Houston, Texas 77002
By:
Name:
Title:
Commitment: $30,000,000.00 CAISSE NATIONALE DE CREDIT
AGRICOLE
Address: 55 East Monroe Street, Suite 4700
Chicago, Illinois 60614
By:
Name:
Title:
<PAGE>
Commitment: $30,000,000.00 HARRIS TRUST AND SAVINGS BANK
Address: 111 West Monroe
Chicago, Illinois 60690-0755
By:
Name:
Title:
Commitment: $15,000,000.00 SUNTRUST BANK, ATLANTA
Address: 25 Park Place, 25th Floor
Atlanta, Georgia 30303
By:
Name:
Title:
By:
Name:
Title:
Commitment: $15,000,000.00 BOATMEN'S FIRST NATIONAL BANK
OF KANSAS CITY
Address: 10th & Baltimore
Kansas City, Missouri 64183
By:
Name:
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"Rabobank Nederland", New York Branch,
as Agent for the Banks
Address: 245 Park Avenue
New York, New York 10167
By:
Authorized Officer
By:
Authorized Officer
NATIONSBANK OF TEXAS, N.A.,
as documentation agent
Address: 901 Main Street, 67th Floor
Dallas, Texas 75202
By:
Name:
Title:
<PAGE>
SCHEDULE 6.02(a)
Description of Certain Liens, Lease Obligations, Etc.
[See attachment.]
<PAGE>
SCHEDULE 6.02(d)
Description of Liabilities
[See attachment.]
<PAGE>
A-2
SCHEDULE 8.01
Subordinated Debt
[See attachment.]
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$____________ Dated: April 30, 1996
FOR VALUE RECEIVED, the undersigned, HUDSON FOODS, INC. (the
"Borrower"), a Delaware corporation, HEREBY PROMISES TO PAY to the order of
___________________ (the "Bank") on the Termination Date (as defined in the
Credit Agreement referred to below) the principal sum of _____________________
Dollars ($_________) or, if less, the aggregate unpaid principal amount of all
Advances (as defined below) made by the Bank to the Borrower outstanding on the
Termination Date.
The Borrower promises to pay interest on the unpaid principal amount
of each Advance from the date of such Advance until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Bank at ____________________ or at such other location
as may specified by the Bank or to the Agent (as defined in the Credit
Agreement) as may be required under the Credit Agreement, in same day funds. All
Advances made by the Bank to the Borrower and all payments made on account of
principal hereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed on the grid attached hereto which is part of this Promissory
Note.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Revolving Credit Agreement dated as of April
30, 1996 (the "Credit Agreement") among the Borrower and the Bank, and other
commercial, banking and financial institutions party thereto and the Guaranty
referred to therein. The Credit Agreement, among other things, (i) provides for
the making of advances (the "Advances") by the Bank to the Borrower from time to
time in an aggregate amount not to exceed at any time outstanding the amount
first above mentioned and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
HUDSON FOODS, INC.
By:
Name:
Title:
<PAGE>
B-1
<TABLE>
<CAPTION>
ADVANCES, BID RATE CREDITS AND PRINCIPAL PAYMENTS
@@
- -----------------------------------------------------------------------------------------------------------------------------------
Type of
Advance or Bid
Amount of Rate Credit and
Advance or Bid Applicable Amount of Unpaid
Rate Credit Made Interest Rate Interest Period Principal Repaid Principal Balance Notation Made By
Date
@@
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
The aggregate unpaid principal amount shown on this grid 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 or Bid Rate Credit on this
schedule shall not, however, limit or otherwise affect the Borrower's
obligations under the Credit Agreement or under this Note to repay the principal
amount of the Advances and Bid Rate Credits together with all interest accruing
thereon, nor shall such failure affect the Borrower's or any other Loan Party's
obligations under any other Loan Document.
<PAGE>
C-6
EXHIBIT B
GUARANTY
GUARANTY, dated ___________, 19__ made by __________________, a
[corporation] organized and existing under the laws of ________ (the
"Guarantor"), in favor of COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"Rabobank Nederland", New York Branch, individually and as Agent for itself and
the Banks (as such term is defined in the "Credit Agreement" defined below (the
"Agent").
PRELIMINARY STATEMENT. The Agent and one or more of the Banks have
entered into a Revolving Credit Agreement dated as of April 30, 1996 (said
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Credit Agreement," the terms defined therein and not otherwise
defined herein being used herein as therein defined) with Hudson Foods, Inc., a
corporation organized and existing under the laws of Delaware (the "Borrower").
It is a condition precedent to the making of Advances and extension of Bid Rate
Credits by the Agent and/or the Banks under the Credit Agreement that the
Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce Agent and/or the Banks to make Advances under the Credit Agreement, the
Guarantor hereby agrees as follows:
SECTION 1. Guaranty. The Guarantor hereby unconditionally guarantees
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Borrower now or hereafter existing under
the Credit Agreement, the Notes and the other Loan Documents to which the
Borrower is a party and any other agreement or instrument relating thereto,
whether for Committed Advances, Bid Rate Advances, Bid Rate Credits, principal,
interest, fees, expenses or otherwise (such obligations being the
"Obligations"), and agrees to pay any and all expenses (including counsel fees
and expenses) incurred by the Agent and/or the Banks in enforcing any rights
under this Guaranty.
SECTION 2. Guaranty Absolute. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement, the Notes and the other Loan Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Agent and/or the Banks with respect thereto.
The liability of the Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability of the Credit Agreement,
the Notes, any other Loan Document or any other agreement or instrument relating
thereto;
<PAGE>
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to departure from the Credit Agreement, the Notes or any other
Loan Document and any other agreement or instrument relating thereto;
(iii) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Obligations; or
(iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor. This Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Obligations is rescinded or must otherwise be
returned by the Banks upon the insolvency, bankruptcy or reorganization of the
Borrower or otherwise, all as though such payment had not been made.
SECTION 3. Waiver. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obligations
and this Guaranty and any requirement that the Agent or any of the Banks
protect, secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Borrower or
any other person or entity or any collateral.
SECTION 4. No Right of Subrogation, Etc. Notwithstanding anything to
the contrary contained herein, the Guarantor shall not have any right, claim or
action, now or hereafter, against the Borrower arising out of or in connection
with this Guaranty or any other document evidencing the Obligations, including,
without limitation, any right or claim of subrogation, contribution,
reimbursement, exoneration, or indemnity, all such rights and claims being
hereby expressly and absolutely waived. If any amount shall be paid to the
Guarantor on account of Guarantor having made a payment under this Guaranty at
any time when any Obligations shall not have been finally and indefeasibly paid
in full, such amount shall be held in trust for the benefit of the Agent and the
Banks and shall forthwith be paid to the Agent to be credited and applied upon
the Obligations, whether matured or unmatured, in accordance with the terms of
the Credit Agreement.
SECTION 5. Representations and Warranties. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Guaranty.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty are within its corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the Guarantor's charter or
by-laws or (ii) any law or any contractual restriction binding on or affecting
the Guarantor.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Guarantor of this Guaranty.
<PAGE>
(d) This Guaranty is a legal, valid and binding obligation of the
Guarantor enforceable against it in accordance with its terms.
(e) The balance sheet for the Borrower and its subsidiaries (including
the Guarantor) as at _______________, 19__, and the related statement of income
of the Borrower and its subsidiaries (including the Guarantor) for the fiscal
period then ended, copies of which have been furnished to the Bank, fairly
present the financial condition of the Borrower and its subsidiaries (including
the Guarantor) as at such date and the results of the operations of the Borrower
and its subsidiaries (including the Guarantor) for the period ended on such
date, all in accordance with generally accepted accounting principles
consistently applied, and since ______________, 19__, there has been no material
adverse change in such condition or operations.
(f) There is no pending or threatened action or proceeding affecting
the Guarantor before any court, arbitrator or governmental agency, which may
materially adversely affect the financial condition or operations of the
Guarantor or which purports to affect the legality, validity or enforceability
of this Guaranty.
SECTION 6. Covenants. The Guarantor covenants and agrees that, so long
as any part of the Obligations shall remain unpaid or unperformed or the Agent
or any of the Banks shall have any Commitment, the Guarantor will, unless the
Agent shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to the Bank:
(i) as soon as available and in any event within thirty (30) days
after the end of each month of each fiscal year of the Borrower, the balance
sheet of the Borrower and its subsidiaries (including the Guarantor) as of the
end of such month and the statement of income of the Borrower and its
subsidiaries (including the Guarantor) for the period commencing at the end of
the previous fiscal year and ending with the end of such month, certified by the
Chief Financial Officer, Secretary or Treasurer of the Guarantor;
(ii) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, a copy of the financial
statements for the Borrower and its subsidiaries (including the Guarantor) for
such year certified in a manner acceptable to the Agent by Coopers & Lybrand or
other independent public accountants acceptable to the Agent; and
(iii) such other information respecting the condition or operations,
financial or otherwise, of the Guarantor or any of its subsidiaries as the Agent
may from time to time reasonably request.
SECTION 7. Amendments, Etc. No amendment or waiver of any provision
of this Guaranty nor consent to any departure by the Guarantor therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
<PAGE>
SECTION 8. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex or cable communication) and mailed, telegraphed, telexed,
cabled or delivered, if to the Guarantor, at its address at
_______________________________, Attention: __________________, if to the Agent,
at its address specified in the Credit Agreement, or as to each party at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and other communications shall, when mailed,
telegraphed, telexed or cabled, be effective when deposited in the mails,
delivered to the telegraph company, confirmed by telex answerback or delivered
to the cable company, respectively.
SECTION 9. No Waiver; Remedies. No failure on the part of the Agent
or any of the Banks to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 10. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Agent and each of the Banks are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Agent or such Bank to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not the Agent
or such Bank shall have made any demand under this Guaranty and although such
deposits, indebtedness or obligations may be unmatured or contingent. The Agent
or such Bank, as the case may be, severally (but not jointly) agrees to notify
the Guarantor promptly after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agent and each of the Banks under this Section 10
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Agent and each of the Banks may have.
SECTION 11. Continuing Guaranty; Transfer of Note. This Guaranty is a
continuing guaranty and shall (i) remain in full force and effect until the
later of payment in full of the Obligations and all other amounts payable under
this Guaranty or the Termination Date, (ii) be binding upon the Guarantor, its
successors and assigns and (iii) inure to the benefit of and be enforceable by
the Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), the Agent and each of the Banks may
assign or otherwise transfer the Notes to any other person or entity, and such
other person or entity shall thereupon become vested with all the rights in
respect thereof granted to the Agent or such Bank, as the case may be, herein or
otherwise.
SECTION 12. Consent to Jurisdiction. (a) The Guarantor hereby
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in New York City in any action or proceeding arising out of or relating
to this Guaranty, and the Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State court or in such Federal court. The Guarantor hereby irrevocably
<PAGE>
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. The
Guarantor irrevocably consents to the service of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding by the mailing of copies of such process to the Guarantor to its
address specified in Section 8. The Guarantor agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 12 shall affect the right of the Bank to
serve legal process in any other manner permitted by law or affect the right of
the Agent to bring any action or proceeding against the Guarantor or its
property in the courts of any other jurisdictions.
SECTION 13. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS GUARANTY.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[GUARANTOR]
By:
Name:
Title:
<PAGE>
D-2
EXHIBIT C
[Date of Initial Advance]
[To the Agent and the Banks]
Re: Hudson Foods, Inc.
Gentlemen:
We have acted as counsel to Hudson Foods, Inc. (the "Borrower") in
connection with the Revolving Credit Agreement dated as of April 30, 1996 (the
"Credit Agreement") among the Borrower, Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch,
individually and as Agent, and the other commercial, banking and financial
institutions party thereto (collectively, the "Banks" and individually, a
"Bank"). This opinion is delivered to you pursuant to Section 4.01(f) of the
Credit Agreement. Capitalized terms not otherwise defined herein are used herein
as defined in the Loan Documents (as such term is defined in the Credit
Agreement).
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined such corporate documents and records of the Loan
Parties, certificates of public officials and other documents and (iii) received
such information from officers and representatives of the Loan Parties, as we
have deemed necessary or appropriate for the purposes of this opinion. We have
examined, among other documents, the following documents:
(a) the Credit Agreement; and
(b) the Notes; and
In our examination of the documents referred to above, we have
assumed the due authorization, execution and delivery of the Credit Agreement by
the Bank, the authenticity of all documents submitted to us as original
documents, and the conformity to original documents of all documents submitted
to us as copies thereof. In our examination of the certificates referred to in
clause (ii) above, we have assumed that all financing statements in which the
Borrower is named as debtor, have been properly filed and indexed in the
appropriate filing offices in the State, that such certificates are accurate and
complete, and that the Bank has no knowledge of the contents of any other
financing statement.
Based upon and subject to the foregoing and the further
qualifications set forth below, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware.
<PAGE>
2. The execution, delivery and performance by the Loan Parties of the
Loan Documents to which they are parties are within the Loan Parties' respective
powers, have been duly authorized by all necessary corporate action, and do not
contravene (i) the Loan Parties' respective charters or by-laws or (ii) any law,
rule or regulation applicable to the Loan Parties (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System) or (iii) any contractual or legal restriction binding on or affecting
the Loan Parties. The Loan Documents have been duly executed and delivered on
behalf of the Loan Parties.
3. No authorization, order, license, franchise, consent or approval or
other action by, and no notice to or registration or filing with, any
governmental authority or regulatory body is required for (i) the due execution,
delivery, recordation, filing or performance by the Loan Parties of any Loan
Document to which they are a party, or (ii) the exercise by the Bank of its
rights under any Loan Document.
4. In any action or proceeding arising out of or relating to any Loan
Document in any court in the State of Arkansas, such court would recognize and
give effect to the provisions of such Loan Document wherein the parties thereto
agree that such Loan Document shall be governed by, and construed in accordance
with, the law of the State of New York. If the law of the State of Arkansas were
applied to determine the contractual rights and liabilities created by such Loan
Document, such Loan Document would be the legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
subject, however, to (a) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (b) the effect of general principles of equity (regardless whether such
enforceability is considered in a proceeding in equity or at law).
5. There is no pending or, to the best of our knowledge after due
inquiry, threatened action or proceeding against either Loan Party before any
court, governmental agency or arbitrator which is likely to have a materially
adverse effect upon the financial condition or operations of either Loan Party.
Very truly yours,
<PAGE>
E-2
EXHIBIT D
NOTICE OF COMMITTED BORROWING
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
245 Park Avenue
New York, New York 10167
Attention: Corporate Services Department
Re: Revolving Credit Agreement, dated as of April 30, 1996, as amended or
modified and in effect from time to time, the "Credit Agreement", among HUDSON
FOODS, INC. (the "Borrower"), the various financial institutions party thereto
and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland",
New York Branch, individually and as Agent, terms not otherwise expressly
defined herein shall have the same meanings set forth in the Credit Agreement.
Gentlemen/Ladies:
A. Loans and Letter of Credit. The Borrower hereby requests that on
__________, 199__, Committed Advances be made to the Borrower in the aggregate
principal amount of $__________ and be comprised of
[ ] Base Rate Loans in the aggregate principal amount of $__________
and/or
[ ] LIBOR Rate Loans in the aggregate principal amount of $__________
with Interest Period(s) of
[ ] 1 month in the amount of $__________,
[ ] 3 months in the amount of $__________,
B. Representations and Warranties. The Borrower hereby expressly
confirms that the representations and warranties contained in Section 5.01 of
the Credit Agreement [and Section 5 of the Guaranty, if applicable] are correct
on and as of the date specified in Section A above as though made on and as of
such date.
C. Outstandings Report. Attached hereto as Exhibit A is an
Outstandings Report dated the date hereof, which Outstandings Report is
complete, true and accurate in all respects.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed and delivered by its duly authorized officer this _____ day of
_________________, 19___.
HUDSON FOODS, INC.
By:
Name:
Title:
<PAGE>
F-1
EXHIBIT E
REQUEST FOR BIDS
====================================================
Attention:__________________________________________
Facsimile:
Telephone:
___________This instrument constitutes a Request for Bids under, and as defined
by, the Revolving Credit Agreement dated as of April 30, 1996 (as amended or
modified and in effect from time to time, the "Credit Agreement") among the
undersigned HUDSON FOODS, INC. (the "Borrower"), the various financial
institutions party thereto, and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "Rabobank Nederland, New York Branch, individually and as Agent. Terms not
otherwise expressly defined herein shall have the meanings set forth in the
Credit Agreement.
___________The Borrower hereby requests Bid Rate Credit(s), subject to the terms
of the Credit Agreement, as follows:
(a)________Bid Rate Credit Borrowing Date: ______________, 19___.
(b)________Aggregate principal amount of Bid Rate Credits requested:
$__________.
(c)________Number of Bid Rate Credits requested and principal amounts
thereof: _________ Bid Rate Credits in the amounts of $_________, $__________
and $__________, respectively.
(d)________Interest Period(s) and its/their maturity date(s):
@@
Principal Amount Maturity Date Interest Period
$ days
$ days
$ days
@@
(e)________Applicable Rate: __________
(f)________Deposit to Account #____________ at _________________________.
<PAGE>
___________A. Representations and Warranties.
___________ (i) The Borrower hereby expressly confirms that the representations
and warranties contained in Section 5.01 of the Credit Agreement [and Section 5
of the Guaranty, if applicable] are correct on and as of the date specified in
Section (a) above as though made on and as of such date.
___________ (ii) The Borrower hereby expressly represents and warrants that
after giving effect to the Bid Rate Credit(s) requested herein (a) the sum of
(I) the outstanding Bid Rate Advances and (II) the outstanding Bid Rate Credits
(other than Bid Rate Credits consisting of Bid Rate Advances) does not exceed
(b) fifty percent (50%) of the Total Commitment.
___________B. Outstandings Report. Attached hereto as Exhibit A is an
Outstandings Report dated the date hereof, which Outstandings Report is
complete, true and accurate in all respects.
___________The Borrower agrees that if prior to the time a Bid Rate Credit is
made in relation hereto, any matter certified to, confirmed, represented or
warranted herein by it will not be true and correct at such time as if then
made, it will immediately so notify the Agent.
___________IN WITNESS WHEREOF, the Borrower has caused this Request for Bids to
be executed and delivered by its duly authorized officer this _______ day of
_______________, 19____.
HUDSON FOODS, INC.
By:
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT F
- -------------------------------------------------------------------------------------------------------
OUTSTANDINGS REPORT
Bid Advances with the Bank
Committed Advances Bid Advances and LCs Group - Outside the
Outstanding Outstanding RLOC
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rabobank Nederland
- -------------------------------------------------------------------------------------------------------
Bank of America
- -------------------------------------------------------------------------------------------------------
NationsBank
- -------------------------------------------------------------------------------------------------------
Credit Agricole
- -------------------------------------------------------------------------------------------------------
Harris Trust and Savings Bank
- -------------------------------------------------------------------------------------------------------
SunTrust Bank, Atlanta
- -------------------------------------------------------------------------------------------------------
Boatmen's First National
- -------------------------------------------------------------------------------------------------------
Other Banks Outside the Bank Group
Not to Exceed $20,000,000
</TABLE>
<PAGE>
HUDSON FOODS, INC.
Note Purchase Agreement
DATED AS OF DECEMBER 28, 1995
$55,000,000 6.69% SENIOR NOTES DUE DECEMBER 28, 2005
<PAGE>
TABLE OF CONTENTS
(Not a Part of the Agreement)
PAGE
1.PURCHASE AND SALE OF NOTES............................................... 1
1.1 Issuance of Notes.............................................. 1
1.2 The Closing.................................................... 1
1.3 Purchase for Investment; ERISA................................. 2
1.4 Failure to Tender, Failure of Conditions....................... 3
1.5 Expenses....................................................... 3
2.WARRANTIES AND REPRESENTATIONS........................................... 4
2.1 Nature of Business............................................. 4
2.2 Financial Statements; Indebtedness; Material Adverse Change.... 4
2.3 Subsidiaries and Affiliates.................................... 5
2.4 Title to Properties; Leases; Patents, Trademarks, etc.......... 5
2.5 Taxes.......................................................... 6
2.6 Pending Litigation............................................. 7
2.7 Full Disclosure................................................ 7
2.8 Corporate Organization and Authority........................... 7
2.9 Charter Instruments, Other Agreements, etc..................... 8
2.10 Restrictions on Company and Subsidiaries....................... 8
2.11 Compliance with Law............................................ 8
2.12 ERISA.......................................................... 9
2.13 Certain Laws................................................... 10
2.14 Transactions are Legal and Authorized; Obligations are
Enforceable.................................................... 11
2.15 Governmental Consent; Certain Laws............................. 11
2.16 Private Offering of Notes...................................... 12
2.17 No Defaults; Transactions Prior to Closing Date, etc........... 12
2.18 Use of Proceeds of Notes....................................... 12
2.19 Solvency....................................................... 13
3.CLOSING CONDITIONS....................................................... 13
3.1 Opinions of Counsel............................................ 13
3.2 Warranties and Representations True............................ 13
3.3 Officers' Certificates......................................... 13
3.4 Good Standing Certificate...................................... 14
3.5 Legality....................................................... 14
3.6 Private Placement Number....................................... 14
3.7 Expenses....................................................... 14
3.8 Compliance with this Agreement................................. 14
3.9 Other Purchasers............................................... 14
3.10 Proceedings Satisfactory....................................... 14
4.PAYMENTS................................................................. 15
4.1 Mandatory Interest and Principal Prepayments................... 15
4.2 Optional Prepayments........................................... 15
4.3 Offer to Prepay upon Change in Control......................... 16
4.4 Pro Rata Payments.............................................. 18
4.5 Notation of Notes on Prepayment................................ 18
4.6 No Other Optional Prepayments; No Acquisition of Notes......... 18
<PAGE>
5.REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............................ 19
5.1 Registration of Notes.......................................... 19
5.2 Exchange of Notes.............................................. 19
5.3 Replacement of Notes........................................... 20
5.4 Issuance Taxes................................................. 20
6.COVENANTS................................................................ 20
6.1 Payment of Taxes and Claims.................................... 20
6.2 Maintenance of Properties; Corporate Existence; etc............ 21
6.3 Payment of Notes and Maintenance of Office..................... 22
6.4 Liens.......................................................... 22
6.5 Merger, Consolidation, Transfers of Property, etc.............. 25
6.6 Tangible Net Worth............................................. 26
6.7 Working Capital; Current Ratio................................. 27
6.8 Limitations on Indebtedness.................................... 27
6.9 Current Debt................................................... 30
6.10 Cash Flow Coverage Ratio....................................... 30
6.11 Dividends and Prepayments on Subordinated Debt................. 31
6.12 Capital Expenditures........................................... 32
6.13 Operating Lease Rentals........................................ 32
6.14 Nature of Business............................................. 33
6.15 Transactions with Affiliates................................... 33
6.16 Guaranties of Subsidiaries..................................... 33
6.17 Restricted Investments......................................... 34
6.18 ERISA.......................................................... 34
6.19 Private Offering............................................... 35
6.20 Certain Accounting Matters..................................... 36
7.INFORMATION AS TO COMPANY................................................ 36
7.1 Financial and Business Information............................. 36
7.2 Officer's Certificates......................................... 39
7.3 Accountants' Certificates...................................... 40
7.4 Inspection..................................................... 40
8.EVENTS OF DEFAULT........................................................ 40
8.1 Nature of Events............................................... 40
8.2 Default Remedies............................................... 43
8.3 Annulment of Acceleration of Notes............................. 44
9.INTERPRETATION OF THIS AGREEMENT......................................... 45
9.1 Terms Defined.................................................. 45
9.2 GAAP........................................................... 56
9.3 Directly or Indirectly......................................... 56
9.4 Section Headings and Table of Contents and Construction........ 56
9.5 Governing Law.................................................. 57
10.MISCELLANEOUS........................................................... 57
10.1 Communications................................................ 57
10.2 Reproduction of Documents..................................... 58
10.3 Survival...................................................... 58
10.4 Successors and Assigns........................................ 58
10.5 Amendment and Waiver.......................................... 59
10.6 Expenses...................................................... 60
10.7 Payments on Notes............................................. 60
10.8 Jurisdiction; Service of Process.............................. 61
10.9 Entire Agreement.............................................. 62
10.10 Duplicate Originals, Execution in Counterpart................. 62
<PAGE>
TABLE OF CONTENTS (Cont.)
iii
Annex 1 -- Information as to Purchasers
Annex 2 -- Payment Instructions at Closing
Annex 3 -- Information as to Company and Subsidiaries
Annex 4 -- Information as to Business Covenants
Exhibit A -- Form of 6.69% Senior Note Due December 28, 2005
Exhibit B1 -- Form of Company Counsel's Closing Opinion
Exhibit B2 -- Form of Special Counsel's Closing Opinion
Exhibit C -- Form of Company Officer's Certificate
Exhibit D -- Form of Company Secretary's Certificate
Exhibit E -- Form of Subsidiary Guaranty
<PAGE>
HUDSON FOODS, INC.
1225 Hudson Road
Rogers, Arkansas 72756
NOTE PURCHASE AGREEMENT
$55,000,000 6.69% SENIOR NOTES DUE DECEMBER 28, 2005
Dated as of December 28, 1995
Employers Life Insurance Company of Wausau
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Ladies and Gentlemen:
HUDSON FOODS, INC. (together with its successors and assigns permitted
pursuant to this Agreement, the "Company"), a Delaware corporation, hereby
agrees with you as follows:
1. PURCHASE AND SALE OF NOTES
1.1 Issuance of Notes.
The Company will authorize the issuance of Fifty-Five Million Dollars
($55,000,000) in aggregate principal amount of its six and sixty-nine
one-hundredths percent (6.69%) Senior Notes due December 28, 2005 (all such
notes, whether initially issued, or issued in exchange or substitution for, any
such note, in each case in accordance with the Note Purchase Agreements,
collectively, the "Notes"). The Notes shall be in the form of Exhibit A, and
shall have the terms as herein and therein provided.
1.2 The Closing.
(a) Purchase and Sale of Notes. The Company hereby agrees to sell to you
and you hereby agree to purchase from the Company, in accordance with the
provisions hereof, the aggregate principal amount of Notes set forth below
your name on Annex 1 at one hundred percent (100%) of the principal amount
thereof.
(b) The Closing. The closing (the "Closing") of the Company's sale of
Notes will be held on December 28, 1995 (the "Closing Date") at 9:00 a.m.,
local time, at the office of Metropolitan Life Insurance Company, One
Madison Avenue, New York, New York. At the Closing, the Company will deliver
to you one or more Notes (as set forth below your name on Annex 1), in the
denominations indicated on Annex 1, in the aggregate principal amount of
your purchase, dated the Closing Date and payable to you or payable as
indicated on Annex 1, against payment by federal funds wire transfer in
immediately available funds of the purchase price thereof, as directed by
the Company on Annex 2, which shall be an account at a bank located in the
United States of America.
<PAGE>
(c) Other Purchasers. Contemporaneously with the execution and delivery
hereof, the Company is entering into separate note purchase agreements
identical (except for the name and signature of the purchaser) hereto (such
separate note purchase agreements, together with this Agreement,
collectively and as amended from time to time, the "Note Purchase
Agreements") with each other purchaser (each, an "Other Purchaser" and
collectively, the "Other Purchasers;" you and the Other Purchasers referred
to as the "Purchasers") listed on Annex 1, providing for the sale to each
Other Purchaser of Notes in the aggregate principal amount set forth below
its name on Annex 1. The sales of the Notes to you and to each Other
Purchaser are to be separate sales.
1.3 Purchase for Investment; ERISA.
(a) Purchase for Investment. You represent to the Company that you are
purchasing the Notes, in the aggregate amounts provided herein, for your own
account for investment and with no present intention of distributing the
Notes or any part thereof, but without prejudice to your right at all times
to:
(i) sell or otherwise dispose of all or any part of the Notes under a
registration statement filed under the Securities Act, or in a transaction
exempt from the registration requirements of the Securities Act; and
(ii) have control over the disposition of all of your respective assets
to the fullest extent required by any applicable insurance law.
It is understood that, in making the representations set out in Section 2.14(a)
and Section 2.15(a) of this Agreement, the Company is relying, to the extent
applicable, upon your representations in the immediately preceding sentence.
(b) ERISA. Each of you represent and warrant that, with respect to each
source of funds to be used by you to purchase the Notes on the Closing Date
(respectively, the "Source"), at least one (1) of the following statements
is accurate:
(i) the Source is assets of an insurance company general account and not
assets of an insurance company separate account (within the meaning of
Section 3(17) of ERISA), and that all requirements for an exemption under
Department of Labor Prohibited Transaction Exemption 95-60 (60 F.R. 35925,
July 12, 1995) have been satisfied; provided that in making such
representation you are relying on the Company's representations set forth in
Section 2.12(c), or;
(ii) the Source is a "governmental plan" as defined in Title I, Section
3(32) of ERISA;
(iii) the Source is either (A) an insurance company pooled separate
account, and the purchase is exempt in accordance with Department of Labor
Prohibited Transaction Exemption 90-1 (issued January 29, 1990), or (B) a
bank collective investment fund, in which case the purchase is exempt in
accordance with Department of Labor Prohibited Transaction Exemption 91-38
(issued July 12, 1991);
<PAGE>
(iv) the Source is an "investment fund" managed by a qualified
professional asset manager" or "QPAM" (as such terms are defined in Part V
of Department of Labor Prohibited Transaction Exemption 84-14 (issued March
13, 1984)) which QPAM has been identified in writing, and the purchase is
exempt under Department of Labor Prohibited Transaction Exemption 84-14
provided that no other party to the transactions described in this Agreement
and no "affiliate" of such other party (as defined in Section V(c) of
Department of Labor Prohibited Transaction Exemption 84-14) has at the time
of the Closing Date, and has not exercised at any time during the
immediately preceding year, the authority to appoint or terminate said QPAM
as manager of the assets of any "plan" identified in writing pursuant to
this clause (iv) or to negotiate the terms of said QPAM's management
agreement on behalf of such identified "plans;" or
(v) the Source is one or more "plans," or a separate account or trust
fund comprised of one or more "plans," each of which has been identified to
the Company in writing pursuant to this clause (v).
As used in this Section 1.3(b), "plan" or "plans" shall have the meaning set
forth in Title I, section 3(3) of ERISA.
1.4 Failure to Tender, Failure of Conditions.
If at the Closing the Company fails to tender to you the Notes to be purchased
by you at the Closing, or if the conditions specified in Section 3 hereof have
not been fulfilled, you may thereupon elect to be relieved of all further
obligations hereunder. Nothing in this Section 1.4 shall operate to relieve the
Company from any of its obligations hereunder or to waive your respective rights
against the Company.
1.5 Expenses.
(a) Generally. Whether or not the Notes are sold, the Company will
promptly (and in any event within thirty (30) days of receiving any
statement or invoice therefor) pay all fees, expenses and costs relating
hereto, including, but not limited to:
(i) the reasonable cost of reproducing this Agreement, the Notes
and the other documents delivered in connection with the Closing;
(ii) the reasonable fees and disbursements of your special counsel
incurred in connection herewith;
(iii) the reasonable cost of delivering to your home office or
custodian bank, insured to your satisfaction, the Notes purchased by you;
(iv) the reasonable fees, expenses and costs incurred in complying
with each of the conditions to closing set forth in Section 3 hereof; and
(v) the cost of obtaining a private placement number for the
Notes.
(b) Counsel. Without limiting the generality of the foregoing, it is
agreed and understood that the Company will pay, at the Closing, the
<PAGE>
statement for reasonable fees and disbursements of your special counsel
presented at the Closing and the Company will also pay, upon receipt of any
statement therefor, each additional statement for reasonable fees and
disbursements of your special counsel rendered after the Closing in
connection with the issuance of the Notes or the matters referred to in
Section 1.5(a) hereof.
(c) Survival. The obligations of the Company under this Section 1.5,
Section 5.4, Section 8.2(e) and Section 10.6 of this Agreement shall survive
the payment of the Notes and the termination hereof.
2. WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase the Notes, the
Company warrants and represents, as of the Closing Date, as follows:
2.1 Nature of Business.
The Most Recent 10-K (a copy of which previously has been delivered to you),
correctly describes the general nature of the business and principal Properties
of the Company and the Subsidiaries as of the Closing Date.
2.2 Financial Statements; Indebtedness; Material Adverse Change.
(a) Financial Statements. The Company has provided you and each Other
Purchaser with its financial statements described in Part 2.2(a) of Annex 3
hereto. Such financial statements have been prepared in accordance with GAAP
consistently applied, and present fairly, in all material respects, the
financial position of the Company and its consolidated subsidiaries as of
such dates and the results of their operations and cash flows for such
periods. All such financial statements include the accounts of all
subsidiaries of the Company for the respective periods during which a
subsidiary relationship has existed.
(b) Indebtedness. Part 2.2(b) of Annex 3 hereto lists all Indebtedness
of the Company and the Subsidiaries as of the Closing Date, and provides the
following information with respect to each item of such Indebtedness:
(i) the holder thereof,
(ii) the outstanding amount,
(iii) the portion which is classified as current under GAAP, and
(iv) the collateral securing such Indebtedness, if any.
(c) Material Adverse Change. Since September 30, 1995, there has been no
change in the business, prospects, profits, Properties or condition
(financial or otherwise) of the Company or any of the Subsidiaries, except
changes in the ordinary course of business that, in the aggregate for all
such changes, could not reasonably be expected to have a Material Adverse
Effect.
<PAGE>
(d) Other Financial Information. All statements or summaries of
historical and pro forma financial condition and performance of the Company
and the Subsidiaries contained in the Most Recent 10K or described in Part
2.2(a) of Annex 3 have been in all material respects prepared in accordance
with GAAP, unless otherwise expressly noted therein. All assumptions and
estimates upon which any statements of pro forma financial condition or
performance have been based are reasonable in light of the circumstances
existing at the time such assumptions and estimates were made, based on the
best information available to management of the Company and the Subsidiaries
at the time of the preparation thereof. As of the Closing Date, and in light
of the circumstances existing on such date, such assumptions continue to be
reasonable, based on the best information available to the management of the
Company and the Subsidiaries.
2.3 Subsidiaries and Affiliates.
Part 2.3 of Annex 3 hereto sets forth:
(a) the name of each of the Subsidiaries, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Company
and each other Subsidiary, and
(b) a description of the Affiliates (other than individuals) and the
nature of their affiliation.
Each of the Company and the Subsidiaries has good and marketable title to all of
the shares it purports to own of the stock of each Subsidiary, free and clear in
each case of any Lien. All such shares have been duly issued and are fully paid
and nonassessable.
2.4 Title to Properties; Leases; Patents, Trademarks, etc.
(a) Each of the Company and the Subsidiaries has good and marketable
title to all of the real Property, and good title to all of the other
Property, reflected in the most recent balance sheet referred to in Section
2.2(a) hereof (except as sold or otherwise disposed of in the ordinary
course of business), except where the failure to have such good and
marketable title (i) is immaterial to such financial statements, and (ii)
could not reasonably be expected to have a Material Adverse Effect. All such
Property is free from Liens not permitted by Section 6.4 hereof.
(b) Each of the Company and the Subsidiaries has complied with all
material obligations under all leases to which it is a party, except where
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect. All such leases are in full force and effect and each of the
Company and the Subsidiaries enjoys peaceful and undisturbed possession
under all such leases.
(c) Each of the Company and the Subsidiaries owns, possesses or has the
right to use all of the patents, trademarks, service marks, trade names,
copyrights and licenses, and rights with respect thereto, necessary for the
present and currently planned future conduct of its business, without any
known conflict with the rights of others, except for such failures to own,
possess, or have the right to use, that, in the aggregate for all such
<PAGE>
failures, could not reasonably be expected to have a Material Adverse
Effect.
2.5 Taxes.
(a) Returns Filed; Taxes Paid.
(i) All tax returns required to be filed by the Company and each
Subsidiary and any other Person with which the Company or any Subsidiary
files or has filed a consolidated return in any jurisdiction have been filed
on a timely basis, and all taxes, assessments, fees and other governmental
charges upon the Company, such Subsidiary and any such Person, and upon any
of their respective Properties, income or franchises, that are due and
payable have been paid, except for such tax returns and such tax payments
which are being contested in good faith and which could not, in the
aggregate for all such tax returns and payments, reasonably be expected to
have a Material Adverse Effect.
(ii) All liabilities of each of the Company, the Subsidiaries and
the other Persons referred to in the preceding clause (i) with respect to
federal income taxes have been finally determined except for the fiscal
years set forth in Part 2.5(a) of Annex 3 hereto, the only years not closed
by the completion of an audit or the expiration of the statute of
limitations.
(b) Book Provisions Adequate.
(i) The amount of the liability for taxes reflected in each of the
balance sheets referred to in Section 2.2(a) hereof is in each case an
adequate provision for taxes as of the dates of such balance sheets
(including, without limitation, any payment due pursuant to any tax sharing
agreement) as are or may become payable by any one or more of the Company
and the other Persons consolidated with the Company in such financial
statements in respect of all tax periods ending on or prior to such dates.
(ii) The Company does not know of any proposed additional tax
assessment against it or any such Person that is not reflected in full in
the most recent balance sheet referred to in Section 2.2(a) hereof.
2.6 Pending Litigation.
(a) There are no proceedings, actions or investigations pending or, to
the knowledge of the Company, threatened against or affecting the Company or
any Subsidiary in any court or before any Governmental Authority or
arbitration board or tribunal that, in the aggregate for all such
proceedings, actions and investigations, could reasonably be expected to
have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default with respect to
any judgment, order, writ, injunction or decree of any court, Governmental
Authority, arbitration board or tribunal that, in the aggregate for all such
defaults, could reasonably be expected to have a Material Adverse Effect.
2.7 Full Disclosure.
<PAGE>
The financial statements referred to in Section 2.2(a) hereof do not, nor does
this Agreement, the Most Recent 10-K or any statement furnished by or on behalf
of the Company to you in connection with the negotiation or any closing of any
sale of the Notes, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein and herein not
misleading. There is no fact that the Company has not disclosed to you in
writing that has had or, so far as the Company can now reasonably foresee, could
reasonably be expected to have a Material Adverse Effect.
2.8 Corporate Organization and Authority.
Each of the Company and the Subsidiaries:
(a) is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all legal and corporate power and authority to own and operate
its Properties and to carry on its business as now conducted and as
presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises and other
governmental authorizations necessary to own and operate its Properties and
to carry on its business as now conducted and as presently proposed to be
conducted, except where the failure to have such licenses, certificates,
permits, franchises and other governmental authorizations, in the aggregate
for all such failures, could not reasonably be expected to have a Material
Adverse Effect; and
(d) has duly qualified or has been duly licensed, and is authorized to
do business and is in good standing, as a foreign corporation, in each state
(each of which states is listed in Part 2.8(d) of Annex 3 hereto) where the
failure to be so qualified or licensed and authorized and in good standing,
in the aggregate for all such failures, could reasonably be expected to have
a Material Adverse Effect.
2.9 Charter Instruments, Other Agreements, etc.
(a) Charter Instruments. Neither the Company nor any Subsidiary is in
violation in any respect of any term of any charter instrument or bylaw.
(b) Agreements Relating to Indebtedness. Neither the Company nor any
Subsidiary is in violation of any term in, and no default or event of
default exists under, any agreement or other instrument to which it is a
party or by which it or any of its Properties may be bound relating to, or
providing the terms of, any Indebtedness specified in Part 2.2(b) of Annex 3
hereto having a principal or stated amount equal to or in excess of Two
Hundred Fifty Thousand Dollars ($250,000).
<PAGE>
(c) Other Agreements. Neither the Company nor any Subsidiary is in
violation of any term in, and no default or event of default exists under,
any agreement or other instrument to which it is a party or by which it or
any of its Properties may be bound (other than the agreements and other
instruments specified in clause (b) of this Section 2.9), which, in the
aggregate for all such violations, could reasonably be expected to have a
Material Adverse Effect.
2.10 Restrictions on Company and Subsidiaries.
Neither the Company nor any Subsidiary:
(a) is a party to any contract or agreement, or subject to any charter
or other corporate restriction that, in the aggregate for all such
contracts, agreements, charters and corporate restrictions, could reasonably
be expected to have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts the right or
ability of such corporation to incur Indebtedness, other than this Agreement
and the agreements listed in Part 2.10(b) of Annex 3 hereto, none of which
restricts the issuance and sale of the Notes or the performance by the
Company of its obligations under this Agreement or under the Notes; or
(c) has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its Property, whether now
owned or hereafter acquired, to be subject to a Lien not permitted by
Section 6.4 hereof.
True, correct and complete copies of each of the agreements listed in Part
2.10(b) of Annex 3 hereto have been provided to you and your special counsel.
2.11 Compliance with Law.
Neither the Company nor any Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, which
violations, in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
2.12 ERISA.
(a) Prohibited Transactions. Neither the execution of this Agreement,
the purchase of the Notes by you nor the consummation of the transactions
contemplated by this Agreement will constitute a "prohibited transaction"
(as such term is defined in section 406(a) of ERISA) or result in a tax
under section 4975 of the IRC. The representation by the Company in the
preceding sentence is made in reliance upon your respective representations
in Section 1.3(b) hereof as to the source of funds to be used by you to
purchase the Notes.
(b) Pension Plans.
<PAGE>
(i) Compliance with ERISA. The Company and the ERISA Affiliates are
in compliance with ERISA, except for such failures to comply that, in the
aggregate for all such failures, could not reasonably be expected to have a
Material Adverse Effect.
(ii) Funding Status; Relationship of Vested Benefits to Pension Plan
Assets.
(A) No "accumulated funding deficiency" (as defined in section
302 of ERISA and section 412 of the IRC), whether or not waived, exists with
respect to any Pension Plan.
(B) The present value of all benefits, determined as of the
most recent valuation date for such benefits as provided in Section 6.18
hereof, vested under each Pension Plan does not exceed the value of the
assets of such Pension Plan allocable to such vested benefits, determined as
of such date as provided in Section 6.18 hereof.
(iii) PBGC. No liability to the PBGC has been or is expected to be
incurred by the Company or any ERISA Affiliate with respect to any Pension
Plan that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect. No circumstance exists that constitutes
grounds under section 4042 of ERISA entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, any Pension
Plan or trust created thereunder, nor has the PBGC instituted any such
proceeding.
(iv) Multiemployer Plans. Neither the Company nor any ERISA
Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan.
There have been no "reportable events" (as such term is defined in section
4043 of ERISA) with respect to any Multiemployer Plan that could result in
the termination of such Multiemployer Plan and give rise to a liability of
the Company or any ERISA Affiliate in respect thereof.
(c) Disclosure. Part 2.12(c) of Annex 3 sets forth all ERISA Affiliates
and all "employee benefit plans" with respect to which the Company or any
"affiliate" of the Company is a "party-in-interest" or in respect of which
the Notes could constitute an "employer security" ("employee benefit plan"
and "party-in-interest" having the meanings specified in section 3 of ERISA
and "affiliate" and "employer security" having the meanings specified in
section 407(d) of ERISA).
2.13 Certain Laws.
(a) Environmental Protection Laws.
(i) Compliance. Each of the Company and the Subsidiaries is in
compliance with all Environmental Protection Laws in effect in each
jurisdiction where it is presently doing business and in which the failure
so to comply, in the aggregate for all such failures, could reasonably be
expected to have a Material Adverse Effect.
<PAGE>
(ii) Liability. Neither the Company nor any Subsidiary is subject to
any liability under any Environmental Protection Law that, in the aggregate
for all such liabilities, could reasonably be expected to have a Material
Adverse Effect.
(iii) Notices. Neither the Company nor any Subsidiary has received
any:
(A) notice from any Governmental Authority by which any of
its present or previously-owned or leased Properties has been identified in
any manner by any Governmental Authority as a hazardous substance disposal
or removal site, "Super Fund" clean-up site or candidate for removal or
closure pursuant to any Environmental Protection Law;
(B) notice of any Lien arising under or in connection with
any Environmental Protection Law that has attached to any revenues of, or
to, any of its owned or leased Properties; or
(C) communication, written or oral, from any Governmental
Authority concerning any action or omission by the Company or such
Subsidiary in connection with its ownership or leasing of any Property
resulting in the release of any Hazardous Substance or resulting in any
violation of any Environmental Protection Law;
where the effect of which, in the aggregate for all such notices and
communications, could reasonably be expected to have a Material Adverse Effect.
(b) Health Laws.
(i) Compliance. Each of the Company and the Subsidiaries is in
compliance with all Health Laws in effect in each jurisdiction where it is
presently doing business and in which the failure so to comply, in the
aggregate for all such failures, could reasonably be expected to have a
Material Adverse Effect.
(ii) Liability. Neither the Company nor any Subsidiary is subject to
any liability under any Health Law that, in the aggregate for all such
liabilities, could reasonably be expected to have a Material Adverse Effect.
(iii) Notices. Neither the Company nor any Subsidiary has received
any notice from any Governmental Authority concerning any actual or alleged
violation of any Health Law where the effect of which, in the aggregate for
all such notices and communications, could reasonably be expected to have a
Material Adverse Effect.
2.14 Transactions are Legal and Authorized; Obligations are Enforceable.
(a) Transactions are Legal and Authorized. Each of the issuance, sale
and delivery of the Notes by the Company, the execution and delivery of this
Agreement by the Company, and compliance by the Company with all of the
provisions of this Agreement and of the Notes:
(i) is within the corporate powers of the Company; and
<PAGE>
(ii) is legal and does not conflict with, result in any breach of
any of the provisions of, constitute a default under, or result in the
creation of any Lien upon any Property of the Company or any Subsidiary
under the provisions of, any agreement, charter instrument, bylaw or other
instrument to which any such Person is a party or by which any such Person
or any of such Person's respective Properties may be bound.
(b) Obligations are Enforceable. Each of this Agreement and the Notes
have been duly authorized by all necessary action on the part of the
Company, have been duly executed and delivered by authorized officers of the
Company and constitute legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms except that the
enforceability of this Agreement and of the Notes may be:
(i) limited by applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium or other similar laws affecting the enforceability of
creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
2.15 Governmental Consent; Certain Laws.
(a) Governmental Consent. Neither the nature of the Company or any
Subsidiary, or of any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor
any circumstance in connection with the offer, issuance, sale or delivery of
the Notes and the execution and delivery of this Agreement, is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority on the part of the Company or
any Subsidiary as a condition to the execution and delivery of this
Agreement or the offer, issuance, sale or delivery of the Notes.
(b) Certain Laws. Neither the Company nor any Subsidiary is subject to
regulation under, or otherwise required to comply with any filing,
registration or notice provisions of, (i) the Investment Company Act of
1940, as amended, (ii) the Public Utility Holding Company Act of 1935, as
amended, (iii) the Transportation Acts (49 U.S.C.), as amended, or (iv) the
Federal Power Act, as amended, except that Ohse is subject to regulation
under the Transportation Acts (49 U.S.C.), as amended.
2.16 Private Offering of Notes.
Neither the Company nor any Subsidiary has offered any of the Notes or any
similar Security of the Company for sale to, or solicited offers to buy any
thereof from, or otherwise approached or negotiated with respect thereto with,
any prospective purchaser other than you and four (4) other Institutional
Investors, each of whom was offered all or a portion of the Notes at private
sale for investment.
2.17 No Defaults; Transactions Prior to Closing Date, etc.
(a) No event has occurred and no condition exists that, upon the
execution and delivery of this Agreement or the issuance of the Notes, would
constitute a Default or an Event of Default.
<PAGE>
(b) Except as disclosed in Part 2.17(b) of Annex 3 hereto, neither the
Company nor any Subsidiary entered into any transaction during the period
beginning on September 30, 1995 and ending on the Closing Date that would
have been prohibited by Section 6.5, Section 6.11, Section 6.12 or Section
6.15 hereof had such Sections applied during such period.
2.18 Use of Proceeds of Notes.
(a) Use of Proceeds. The Company will generally apply the proceeds from
the sale of the Notes to finance Capital Expenditures of the Company.
(b) Margin Securities. None of the transactions contemplated herein and
in the Notes (including, without limitation, the use of the proceeds from
the sale of the Notes) violates, will violate or will result in a violation
of section 7 of the Exchange Act or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The
obligations of the Company under this Agreement and the Notes are not and
will not be directly or indirectly secured (within the meaning of such
Regulation G) by any Margin Security, and no Notes are being sold on the
basis of any such collateral.
(c) Absence of Foreign or Enemy Status. Neither the sale of the Notes
nor the use of proceeds from the sale thereof will result in a violation of
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended), or any ruling issued
thereunder or any enabling legislation or Presidential Executive Order in
connection therewith.
2.19 Solvency.
The fair value of the business and assets of the Company is in excess of the
amount that will be required to pay its liabilities (including, without
limitation, contingent, subordinated, unmatured and unliquidated liabilities on
existing debts, as such liabilities may become absolute and matured), in each
case both prior to and after giving effect to the transactions contemplated by
this Agreement and the Notes. After giving effect to the transactions
contemplated by this Agreement and the Notes, the Company will not be engaged in
any business or transaction, or about to engage in any business or transaction,
for which it has unreasonably small capital, and the Company has or had no
intent to hinder, delay or defraud any entity to which it is, or will become, on
or after the Closing Date, indebted or to incur debts that would be beyond its
ability to pay as such debts mature.
3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Notes at the Closing are subject to
the following conditions precedent:
3.1 Opinions of Counsel.
You shall have received from
(a) Wright, Lindsey & Jennings, counsel for the Company, and
<PAGE>
(b) Hebb & Gitlin, a Professional Corporation, your special counsel,
closing opinions, each dated the Closing Date, substantially in the respective
forms set forth in Exhibit B1 and Exhibit B2 hereto and as to such other matters
as you may reasonably request. This Section 3.1 shall constitute direction by
the Company to such counsel named in the foregoing clause (a) to deliver such
closing opinion to you.
3.2 Warranties and Representations True.
The warranties and representations contained in Section 2 hereof shall be true
on the Closing Date with the same effect as though made on and as of that date.
3.3 Officers' Certificates.
You shall have received:
(a) a certificate dated the Closing Date and signed by a Senior Officer
of the Company, substantially in the form of Exhibit C hereto; and
(b) a certificate dated the Closing Date and signed by the Secretary or
an Assistant Secretary of the Company, substantially in the form of Exhibit
D hereto.
3.4 Good Standing Certificate.
You shall have received a certificate, dated on or immediately prior to the
Closing Date, from the Secretary of State (or other appropriate official) of
Delaware, certifying as to the due incorporation and good standing of the
Company.
3.5 Legality.
The Notes to be acquired by you shall, on the Closing Date, qualify as a legal
investment for you under applicable insurance law (without regard to any
"basket" or "leeway" provisions), and such acquisition shall not subject you to
any penalty or other onerous condition contained in or pursuant to any such law
or regulation, and you shall have received such evidence as you may reasonably
request to establish compliance with this condition.
3.6 Private Placement Number.
The Company shall have obtained or caused to be obtained a private placement
number for the Notes from the CUSIP Service Bureau of Standard & Poor's (a
division of McGraw-Hill, Inc.) and you shall have been informed of such private
placement number.
3.7 Expenses.
All fees and disbursements required to be paid pursuant to Section 1.5(b) hereof
shall have been paid in full.
3.8 Compliance with this Agreement.
<PAGE>
Each of the Company and the Subsidiaries shall have performed and complied with
all agreements and conditions contained herein that are required to be performed
or complied with by the Company and the Subsidiaries on or prior to the Closing
Date, and such performance and compliance shall remain in effect on the Closing
Date.
3.9 Other Purchasers
None of the Other Purchasers shall have failed to execute and deliver a Note
Purchase Agreement or to accept delivery of or make payment for the Notes to be
purchased by it on the Closing Date.
3.10 Proceedings Satisfactory.
All proceedings taken in connection with the issuance and sale of the Notes and
all documents and papers relating thereto shall be satisfactory to you and your
special counsel. You and your special counsel shall have received, in a timely
manner, copies of such documents and papers as you or they may request in
connection therewith or in connection with your special counsel's closing
opinion, all in form and substance satisfactory to you and your special counsel.
4. PAYMENTS
4.1 Mandatory Interest and Principal Prepayments.
(a) Interest. Interest on the Notes shall be computed and paid in the
manner and on the dates provided in the Notes.
(b) Principal. The Company shall pay, and there shall become due and
payable, Seven Million Eight Hundred Fifty-Seven Thousand One Hundred
Forty-Two and 86/100 Dollars ($7,857,142.86) in principal amount of the
Notes on December 28 in each year beginning on December 28, 1999, and ending
on December 28, 2004, inclusive (each, a "Required Principal Prepayment").
Each Required Principal Prepayment shall be at one hundred percent (100%) of
the principal amount paid, together with interest accrued thereon to the
date of payment. The entire principal of the Notes remaining outstanding on
December 28, 2005, together with interest accrued thereon, shall become due
and payable on December 28, 2005.
4.2 Optional Prepayments.
(a) Optional Prepayments. The Company may, at any time and from time to
time, prepay the principal amount of the Notes in part, in integral
multiples of One Million Dollars ($1,000,000), or in whole, in each case
together with:
(i) an amount equal to the Make-Whole Amount on such date in respect
of the principal amount of the Notes being so prepaid; and
(ii) interest on such principal amount then being prepaid accrued to
the prepayment date.
<PAGE>
(b) Notice of Optional Prepayment. The Company will give notice of any
optional prepayment of the Notes to each holder of Notes not less than
thirty (30) days or more than sixty (60) days before the date fixed for
prepayment, specifying:
(i) such date;
(ii) that such prepayment is to be made pursuant to Section 4.2 of
this Agreement;
(iii) the principal amount of each Note to be prepaid on such date;
(iv) the interest to be paid on each such Note, accrued to the date
fixed for payment; and
(v) the calculation of an estimated Make-Whole Amount, if any
(calculated as if the date of such notice was the date of prepayment), due
in connection with such prepayment, accompanied by a copy of any applicable
documentation used in connection with determining the Make-Whole Discount
Rate in respect of such prepayment.
Notice of prepayment having been so given, the aggregate principal amount of the
Notes to be prepaid specified in such notice, together with the Make-Whole
Amount as of the specified prepayment date with respect thereto, if any, and
accrued interest thereon shall become due and payable on the specified
prepayment date. Two (2) Business Days prior to the making of such prepayment,
the Company shall deliver to each holder of Notes by facsimile transmission a
certificate of a Senior Financial Officer specifying the details of the
calculation of such Make-Whole Amount as of the specified prepayment date,
accompanied by a copy of any applicable documentation used in connection with
determining the Make-Whole Discount Rate in respect of such prepayment.
(c) Application of Prepayments. Upon any partial prepayment of the Notes
pursuant to this Section 4.2, the principal amount of Notes so prepaid shall
be applied to the Required Principal Prepayments with respect to such Notes,
and to the payment at maturity of such Notes, as provided in Section 4.1
hereof, in the inverse order of the due date of such payments.
4.3 Offer to Prepay upon Change in Control.
(a) Notice and Offer. In the event of either
(i) a Change in Control, or
(ii) the obtaining of knowledge of a Control Event by any officer of
the Company or any Subsidiary (including, without limitation, via the
receipt of notice of a Control Event from any holder of Notes), the Company
will, within three (3) Business Days of the occurrence of either of such
events, give written notice of such Change in Control or Control Event to
each holder of Notes by certified mail (with a copy thereof sent via an
overnight courier of national reputation) and, simultaneously with the
sending of such written notice, give telephonic advice of such Change in
Control or Control Event to an investment officer or other similar
representative or agent of each such holder specified on Annex 1 hereto at
<PAGE>
the telephone number specified thereon, or to such other Person at such
other telephone number as any holder of a Note may specify to the Company in
writing.
In the event of a Change in Control, such written notice shall contain, and such
written notice shall constitute, an irrevocable offer to prepay all, but not
less than all, the Notes held by such holder on a date specified in such notice
(the "Control Prepayment Date") that is not less than thirty (30) days and not
more than sixty (60) days after the date of such notice. If the Control
Prepayment Date shall not be specified in such notice, the Control Prepayment
Date shall be the thirtieth (30th) day after the date of posting of such notice.
If the Company shall not have received a written response to such notice from
each holder of Notes within ten (10) days after the date of posting of such
notice to such holder of Notes, then the Company shall immediately send a second
written notice via an overnight courier of national reputation to each such
holder of Notes who shall have not previously responded to the Company, which
notice shall also specify the Control Prepayment Date.
(b) Acceptance and Payment. To accept or reject such offered prepayment,
a holder of Notes shall cause a notice of such acceptance or rejection to be
delivered to the Company on or prior to the fifteenth (15th) day after the
date of receipt by such holder of the latest written offer of such
prepayment (the "Offer Determination Date"). If so accepted, such offered
prepayment shall be due and payable on the Control Prepayment Date. Such
offered prepayment shall be made at one hundred percent (100%) of the
principal amount of such Notes, together with any Make-Whole Amount as of
the Control Prepayment Date with respect thereto and interest on the Notes
then being prepaid accrued to the Control Prepayment Date. If a holder of
Notes shall not have responded to such offered prepayment on or prior to the
Offer Determination Date, such holder shall be deemed to have accepted such
offered prepayment.
(c) Officer's Certificate. Each offer to prepay the Notes pursuant to
this Section 4.3 shall be accompanied by a certificate, executed by a Senior
Officer of the Company and dated the date of such offer, specifying:
(i) the Control Prepayment Date;
(ii) that such offer is made pursuant to Section 4.3 of this
Agreement;
(iii) the principal amount of each Note offered to be prepaid;
(iv) the interest that would be due on each such Note offered to be
prepaid, accrued to the date fixed for payment;
(v) the calculation of an estimated Make-Whole Amount, if any
(calculated as if the date of such notice was the date of prepayment), that
would be due in connection with such offered prepayment, accompanied by a
copy of any applicable documentation used in connection with determining the
Make-Whole Discount Rate in respect of such prepayment; and
(vi) in reasonable detail, the nature and date or proposed date of
the Change in Control.
<PAGE>
Each such notice shall also contain a legend specifying that such holder shall
be deemed to have accepted such offered prepayment if such holder shall not have
responded to such offer on or prior to the fifteenth (15th) day following such
holder's receipt of such notice.
(d) Effect of Prepayment. Each partial prepayment of the principal of
the Notes made pursuant to this Section 4.3 shall be applied against and
reduce each of the then remaining Required Principal Prepayments of the
Notes and the payment of principal due at maturity by a percentage equal to
the aggregate principal amount of the Notes so prepaid divided by the
aggregate principal amount of the Notes outstanding immediately prior to
such prepayment.
(e) Notice Concerning Status of Holders of Notes. Promptly after each
Control Prepayment Date and the making of all prepayments contemplated on
such Control Prepayment Date under this Section 4.3 (and, in any event,
within thirty (30) days thereafter), the Company shall deliver to each
remaining holder of Notes a certificate signed by a Senior Officer of the
Company containing a list of the then current holders of Notes (together
with their addresses) and setting forth as to each such holder the
outstanding principal amount of Notes held by each such holder at such time.
4.4 Pro Rata Payments.
(a) Required Principal Prepayments. If at the time any Required
Principal Prepayment or the payment of principal due at maturity with
respect to the Notes is required to be made pursuant to Section 4.1 hereof,
there is more than one Note outstanding, the aggregate principal amount of
each such Required Principal Prepayment or such payment due at maturity (as
the case may be) shall be allocated among the Notes at the time outstanding
in proportion, as nearly as practicable, to the respective unpaid principal
amounts of the Notes then outstanding, with adjustments, to the extent
practicable, to equalize for any prior prepayments not in such proportion.
(b) Optional Prepayments. If at the time any prepayment under Section
4.2 hereof is due and there is more than one Note outstanding, the aggregate
principal amount of each such prepayment of the Notes shall be allocated
among the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts of the Notes then
outstanding.
4.5 Notation of Notes on Prepayment.
Upon any partial prepayment of a Note, such Note may, at the option of the
holder thereof, be (but shall not be required to be):
(a) surrendered to the Company pursuant to Section 5.2 hereof in
exchange for a new Note in a principal amount equal to the principal amount
remaining unpaid on the surrendered Note;
(b) made available to the Company for notation thereon of the portion of
the principal so prepaid; or
<PAGE>
(c) marked by such holder with a notation thereon of the portion of the
principal so prepaid.
In case the entire principal amount of any Note has been paid, such Note shall
be surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
4.6 No Other Optional Prepayments; No Acquisition of Notes.
Except for prepayments made in accordance with this Section 4, the Company may
not make any prepayment of principal in respect of the Notes. The Company will
not, and will not permit any Subsidiary or any Affiliate to, directly or
indirectly, acquire or make any offer to acquire any Notes.
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
5.1 Registration of Notes.
The Company will cause to be kept at its office maintained pursuant to Section
6.3 hereof a register for the registration and transfer of Notes. The name and
address of each holder of one or more Notes, the outstanding principal amount of
each such Note, each transfer thereof and the name and address of each
transferee of one or more Notes shall be registered in such register. The Person
in whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof and the Company shall not be
affected by any notice or knowledge to the contrary.
5.2 Exchange of Notes.
(a) Upon surrender of any Note at the office of the Company maintained
pursuant to Section 6.3 hereof duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note
or such holder's attorney duly authorized in writing, the Company will
execute and deliver, at the Company's expense (except as provided below),
new Notes in exchange therefor, in denominations of at least One Hundred
Thousand Dollars ($100,000) (except as may be necessary to reflect any
principal amount not evenly divisible by One Hundred Thousand Dollars
($100,000)), in an aggregate principal amount equal to the unpaid principal
amount of the surrendered Note. Each such new Note shall be payable to such
Person as such holder may request and shall be substantially in the form of
Exhibit A hereto. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes.
(b) The Company will pay the cost of delivering to or from such holder's
home office or custodian bank from or to the Company, insured to the
reasonable satisfaction of such holder, the surrendered Note and any Note
issued in substitution or replacement for the surrendered Note.
<PAGE>
(c) Each holder of Notes agrees that, in the event it shall sell or
transfer any Note without surrendering such Note to the Company as set forth
in Section 5.2(a) hereof, it shall:
(i) prior to the delivery of such Note, make a notation thereon of
all principal, if any, paid on such Note and shall also indicate thereon the
date to which interest shall have been paid on such Note; and
(ii) promptly notify the Company of the name and address of the
transferee of any such Note so transferred and the effective date of such
transfer.
5.3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any Note (which
evidence shall be, in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership (or of ownership by such Institutional
Investor's nominee) and of such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company (provided that if the holder of such Note is an
Institutional Investor or a nominee of such Institutional Investor, such
Institutional Investor's own unsecured agreement of indemnity shall be
deemed to be satisfactory for such purpose), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense will execute and deliver, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall
have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest
shall have been paid thereon.
5.4 Issuance Taxes.
The Company will pay all taxes (if any) due in connection with and as the result
of the initial issuance and sale of the Notes and in connection with any
modification of this Agreement or the Notes and shall save each holder of Notes
harmless without limitation as to time against any and all liabilities with
respect to all such taxes. The obligations of the Company under this Section 5.4
shall survive the payment or prepayment of the Notes and the termination of this
Agreement.
6. COVENANTS
The Company covenants that on and after the Closing Date and so long as any of
the Notes shall be outstanding:
6.1 Payment of Taxes and Claims.
The Company will, and will cause each Subsidiary to, pay before they become
delinquent:
<PAGE>
(a) all taxes, assessments and governmental charges or levies imposed
upon it or its Property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, landlords and other like Persons that, if unpaid,
might result in the creation of a Lien upon its Property; provided, that
items of the foregoing description need not be paid
(i) while being actively contested in good faith and by appropriate
proceedings as long as adequate book reserves have been established and
maintained and exist with respect thereto, and
(ii) so long as the title of the Company or the other Subsidiary, as
the case may be, to, and its right to use, such Property, is not materially
adversely affected thereby.
In the case of any such item being contested as described in the immediately
preceding sentence (other than the item described in Part 6.1 of Annex 4 hereto)
involving in excess of Two Million Dollars ($2,000,000), the appropriateness of
the proceedings will be supported by an opinion of the independent counsel
responsible for such proceedings and the adequacy of such reserves will be
supported by an opinion of the independent accountants of the Company or such
Subsidiary (which opinions will be delivered to the Purchasers and the other
holders of Notes as provided in Section 7.1(c) hereof), provided that, if the
aggregate amount of all such items shall at any time exceed Three Million
Dollars ($3,000,000), regardless of the amount of any individual item, the
adequacy of the reserves for all such items will be supported by opinions of the
independent accountants of the Company or such Subsidiary (which opinions will
be delivered to the Purchasers and the other holders of the Notes as provided in
Section 7.1(c) hereof).
6.2 Maintenance of Properties; Corporate Existence; etc.
The Company will, and will cause each Subsidiary to:
(a) Property -- maintain its Property in good condition and working
order, ordinary wear and tear excepted, and make all necessary renewals,
replacements, additions, betterments and improvements thereto;
(b) Insurance -- maintain, with financially sound and reputable insurers
accorded a rating by A.M. Best Company of "A" or better and a size rating of
"XII" or better (or a comparable rating by any comparable successor rating
agency), insurance with respect to its Property and business against such
casualties and contingencies, of such types (including, without limitation,
insurance with respect to losses arising out of Property loss or damage,
public liability, business interruption, larceny, workers' compensation,
embezzlement or other criminal misappropriation) and in such amounts as is
customary in accordance with sound business practices in the case of
corporations of established reputations engaged in the same or a similar
business and similarly situated;
<PAGE>
(c) Financial Records -- keep accurate and complete books of records and
accounts in which accurate and complete entries shall be made of all its
business transactions and that will permit the provision of accurate and
complete financial statements in accordance with GAAP;
(d) Corporate Existence and Rights --
(i) do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights (charter and
statutory) and franchises, except where the failure to do so, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect, and
(ii) maintain each Subsidiary as a Subsidiary and each Wholly-Owned
Subsidiary as a Wholly-Owned Subsidiary,
in each case except as permitted by Section 6.5 hereof; and
(e) Compliance with Law -- not be in violation of any law, ordinance or
governmental rule or regulation to which it is subject (including, without
limitation, any Environmental Protection Law or any Health Law) and not fail
to obtain any license, certificate, permit, franchise or other governmental
authorization necessary to the ownership of its Properties or to the conduct
of its business if such violations or failures to obtain, in the aggregate,
could reasonably be expected to have (i) a Material Adverse Effect or (ii) a
material adverse effect on the ability of the Company or any Subsidiary to
conduct in the future the business it conducts at the time of such violation
or failure to obtain.
6.3 Payment of Notes and Maintenance of Office.
The Company will punctually pay, or cause to be paid, the principal of and
interest (and Make-Whole Amount, if any) on the Notes, as and when the same
shall become due according to the terms of this Agreement and of the Notes. The
Company will maintain an office at the address of the Company set forth in
Section 10.1 hereof where notices, presentations and demands in respect of this
Agreement or of the Notes may be made upon the Company. Such office will be
maintained at such address until such time as the Company shall notify the
Purchasers and the other holders of the Notes of any change of location of such
office, which will in any event be located within the United States of America.
6.4 Liens.
(a) Negative Pledge. The Company will not, and will not permit any
Subsidiary to, cause or permit to exist, or agree or consent to cause or
permit to exist in the future (upon the happening of a contingency or
otherwise), any of its Property, whether now owned or hereafter acquired, to
be subject to any Lien except:
(i) Taxes, etc. -- Liens securing Property taxes, assessments or
governmental charges or levies or the claims or demands of materialmen,
mechanics, carriers, warehousemen, vendors, landlords and other like
Persons, so long as
<PAGE>
(A) the payment thereof is being actively contested in good
faith and by appropriate proceedings and adequate book reserves have been
established and maintained and exist with respect thereto, and
(B) the title of the Company or the Subsidiary, as the case may
be, to, and its right to use, such Property, is not materially adversely
affected thereby;
(ii) Judicial Liens -- Liens
(A) arising from judicial attachments and judgments,
(B) securing appeal bonds or supersedeas bonds, and
(C) arising in connection with court proceedings (including,
without limitation, surety bonds and letters of credit or any other
instrument serving a similar purpose),
provided that (1) the execution or other enforcement of such Liens is
effectively stayed, (2) the claims secured thereby are being actively contested
in good faith and by appropriate proceedings, (3) adequate book reserves shall
have been established and maintained and shall exist with respect thereto and
(4) the aggregate amount so secured shall not at any time exceed Two Million
Dollars ($2,000,000);
(iii) Ordinary Course Business Liens -- Liens incurred or deposits
made in the ordinary course of business
(A) in connection with workers' compensation, unemployment
insurance, social security and other like laws, and
(B) to secure the performance of letters of credit, bids,
tenders, sales contracts, leases, statutory obligations, surety and
performance bonds (of a type other than set forth in Section 6.4(a)(ii)
hereof) and other similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment of the deferred
purchase price of Property;
provided, however, that all such Liens do not, in the aggregate, materially
detract from the value of such Property or materially interfere with the use of
such Property in the ordinary conduct of the business of the Company and the
Subsidiaries, taken as a whole;
(iv) Certain Encumbrances -- Liens in the nature of reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other similar title exceptions or encumbrances
affecting real Property, provided that such exceptions and encumbrances do
not in the aggregate materially detract from the value of such Properties or
materially interfere with the use of such Property in the ordinary conduct
of the business of the Company and the Subsidiaries, taken as a whole;
(v) Intergroup Liens -- Liens on Property of a Subsidiary, provided
that such Liens secure only obligations owing to the Company;
<PAGE>
(vi) Closing Date Liens --
(A) Liens in existence on the Closing Date securing
Indebtedness, provided that such Liens and such Indebtedness are described
in Part 6.4(a)(vi) of Annex 4 hereto; and
(B) Liens securing renewals, extensions (as to time) and
refinancings of Indebtedness secured by the Liens described in Part
6.4(a)(vi) of Annex 4 hereto, provided that
(1) the amount of Indebtedness secured by each such Lien
is not increased in excess of the amount of such Indebtedness outstanding on
the date of such renewal, extension or refinancing, unless the aggregate
amount of Indebtedness in excess of such outstanding Indebtedness is
permitted to be outstanding under the terms and provisions of Section 6.8(b)
hereof,
(2) none of such Liens is extended to encumber or
otherwise relate to or cover any additional Property of the Company or any
Subsidiary, and
(3) immediately prior to, and immediately after the
consummation of such renewal, extension or refinancing, and after giving
effect thereto, no Default or Event of Default exists or would exist; and
(vii) Secured Indebtedness -- other Liens on Property of the Company
or the Subsidiaries as specified in Section 6.8(b) hereof securing
Indebtedness permitted pursuant to Section 6.8(b) hereof.
(b) Equal and Ratable Lien; Equitable Lien. In case any Property shall
be subjected to a Lien in violation of this Section 6.4, the Company will
forthwith make or cause to be made, to the fullest extent permitted by
applicable law, provision whereby the Notes will be secured equally and
ratably with all other obligations secured thereby pursuant to such
agreements and instruments as shall be approved by the Required Holders, and
the Company will cause to be delivered to each holder of a Note an opinion
of independent counsel to the effect that such agreements and instruments
are enforceable in accordance with their terms. Regardless of whether the
Company complies with the provisions of the immediately preceding sentence,
in case any Property shall be subjected to a Lien in violation of this
Section 6.4, the Notes shall have the benefit, to the fullest extent that,
and with such priority as, the holders of Notes may be entitled thereto
under applicable law, of an equitable Lien on such Property securing the
Notes. A violation of this Section 6.4 will constitute an Event of Default,
whether or not any such provision is made or action is taken pursuant to
this Section 6.4(b).
(c) Financing Statements. The Company will not, and will not permit any
Subsidiary to, sign or file a financing statement under the Uniform
Commercial Code of any jurisdiction that names the Company or such
Subsidiary as debtor, or sign any security agreement authorizing any secured
party thereunder to file any such financing statement, except, in any such
case, a financing statement filed or to be filed to perfect or protect a
security interest that the Company or such Subsidiary is entitled to create,
<PAGE>
assume or incur, or permit to exist, under the foregoing provisions of this
Section 6.4 or to evidence for informational purposes a lessor's interest in
Property leased to the Company or any such Subsidiary.
6.5 Merger, Consolidation, Transfers of Property, etc.
(a) Merger and Consolidation. The Company will not, and will not permit
any Subsidiary to, merge with or into or consolidate with any other Person
or permit any other Person to merge or consolidate with or into it (except
that a Subsidiary may merge into or consolidate with the Company or a
Wholly-Owned Subsidiary), provided that the foregoing restriction does not
apply to the merger or consolidation of the Company with another corporation
if:
(i) the Company is the corporation that results from such merger or
consolidation (the "Surviving Corporation");
(ii) the due and punctual payment of the principal of and Make-Whole
Amount, if any, and interest on all of the Notes, according to their tenor,
and the due and punctual performance and observance of all the covenants in
the Notes and this Agreement to be performed or observed by the Company are
expressly assumed by the Surviving Corporation pursuant to such agreements
and instruments as shall be approved by the Required Holders, and the
Company causes to be delivered to each holder of Notes an opinion of
independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms (subject to customary
qualifications); and
(iii) immediately prior to, and immediately after the consummation
of the transaction, and after giving effect thereto, no Default or Event of
Default exists or would exist.
(b) Acquisition of Stock, etc. The Company will not, and will not permit
any Subsidiary to, acquire any stock of any corporation if upon completion
of such acquisition such corporation would be a Subsidiary, or acquire all
of the Property of, or such of the Property as would permit the transferee
to continue any one or more integral business operations of, any Person
unless, immediately prior to, and immediately after the consummation of such
acquisition, and after giving effect thereto, no Default or Event of Default
exists or would exist.
(c) Transfers of Property. The Company will not, and will not permit any
Subsidiary to, sell, lease as lessor, transfer or otherwise dispose of any
Property (collectively, "Transfers"), except Transfers of inventory and
Transfers of other Property for Fair Market Value, in each case in the
ordinary course of business of the Company or any such Subsidiary.
6.6 Tangible Net Worth.
The Company will maintain, as of the last day of each fiscal quarter, a Tangible
Net Worth of not less than the sum of
(a) One Hundred Twenty-Nine Million Dollars ($129,000,000), plus
<PAGE>
(b) the amount of all proceeds of any issuance of capital stock of the
Company after May 18, 1994, plus
(c) the amount of any Subordinated Debt which is converted into capital
stock of the Company after May 18, 1994, plus
(d) in the case of each fiscal quarter ending on or after October 1,
1994, the Applicable Net Income Carryover.
As used herein,
Tangible Net Worth -- means the excess of total assets over total
liabilities, as each of total assets and total liabilities would be shown on
a consolidated balance sheet for the Company and the Subsidiaries prepared
in accordance with GAAP consistent with GAAP applied in the preparation of
the financial statements referred to in Section 7.1(a) and Section 7.1(b)
hereof, excluding, however, Intangible Assets from such determination of
total assets.
Intangible Assets -- means (i) goodwill, organizational expenses,
research and development expenses, trademarks, trade names, copyrights,
patents, patent applications, licenses and rights in any thereof, and other
similar intangibles, (ii) treasury stock, (iii) Securities which are not
readily marketable, (iv) cash held in a sinking or other analogous fund
established for the purpose of redemption, retirement or prepayment of
capital stock, (v) any write-up in the book value of any asset resulting
from a revaluation thereof subsequent to May 18, 1994, and (vi) any items
not included in clauses (i) through (v) above, inclusive, which are treated
as intangibles in conformity with GAAP.
Applicable Net Income Carryover -- at any time that any
determination thereof is to be made means an amount equal to the sum of (i)
sixty percent (60%) of the net income of the Company and the Subsidiaries,
determined on a consolidated basis for such Persons in accordance with GAAP,
for the fiscal year of the Company ending on October 1, 1994, plus (ii)
sixty percent (60%) of the net income of the Company and the Subsidiaries,
determined on a consolidated basis for such Persons in accordance with GAAP,
for each and every fiscal year of the Company ending after October 1, 1994
which has ended on or before the date such determination of Applicable Net
Income Carryover is to be made; provided, however, that, in the event that
such net income for any fiscal year described above is less than zero (0),
the net income of the Company and the Subsidiaries for such fiscal year
shall be deemed to be zero (0) for purposes of calculating Applicable Net
Income Carryover.
6.7 Working Capital; Current Ratio.
The Company will maintain as of the last day of each fiscal quarter:
(a) a ratio of current assets to current liabilities (exclusive of
current deferred taxes), in each case as would be shown on a consolidated
balance sheet for the Company and the Subsidiaries at such time prepared in
accordance with GAAP, of not less than 1.5 to 1.0, and
<PAGE>
(b) an excess of current assets over current liabilities (exclusive of
current deferred taxes), in each case as would be shown on a consolidated
balance sheet for the Company and the Subsidiaries at such time prepared in
accordance with GAAP, of not less than Sixty Million Dollars ($60,000,000).
6.8 Limitations on Indebtedness.
(a) Leverage Ratio. The Company will maintain, as of the last day of
each fiscal quarter, a Leverage Ratio of not more than 0.5 to 1.0.
As used herein:
Leverage Ratio -- means for any date of determination thereof, the
quotient (expressed as a ratio) of (x) Indebtedness with maturities of
greater than one (1) year (including, without limitation, all current
portions thereof and all Subordinated Debt) of the Company and the
Subsidiaries as would appear on a consolidated balance sheet prepared in
accordance with GAAP for such Persons at such time, divided by (y) the sum
of (i) Indebtedness with maturities of greater than one (1) year (including,
without limitation, all current portions thereof and all Subordinated Debt)
of the Company and the Subsidiaries as would appear on a consolidated
balance sheet prepared in accordance with GAAP for such Persons at such
time, plus (ii) stockholders' equity of the Company and the Subsidiaries
(excluding, in any event, any minority interests) as would appear on a
consolidated balance sheet prepared in accordance with GAAP for such Persons
at such time, plus (iii) long-term deferred taxes, attributable to the
Company's prior use of cash accounting, of the Company and the Subsidiaries
as would appear on a consolidated balance sheet prepared in accordance with
GAAP for such Persons at such time, plus (iv) deferred taxes, attributable
to the Company's use of the "farm price method" of accounting for deferred
taxes, of the Company and the Subsidiaries as would appear on a consolidated
balance sheet prepared in accordance with GAAP for such Persons at such
time.
(b) Limitation on Secured Indebtedness. The Company will not, and will
not permit any Subsidiary to, create, incur, assume or suffer to exist any
Indebtedness or other liabilities or obligations, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, or joint or
several, which are secured by, or have the benefit of, any Lien except
Indebtedness secured by or having the benefit of, or in respect of:
(i) Liens outstanding on the Closing Date described in Part
6.4(a)(vi) of Annex 4 hereto;
(ii) purchase money Liens or purchase money security interests upon
or in any fixed assets acquired or held by the Company or any Subsidiary in
the ordinary course of business to secure the purchase price of such fixed
assets or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such fixed assets;
(iii) Liens or security interests existing on fixed assets at the
time of their acquisition;
<PAGE>
(iv) Liens and security interests on previously acquired fixed
assets, the Fair Market Value of which assets does not exceed by more than
one hundred percent (100%) the amount of Indebtedness secured thereby, all
as determined by the Required Holders, in their sole, good faith discretion;
or
(v) Liens in respect of obligations for Capital Leases of real or
personal fixed assets acquired or held by the Company in the ordinary course
of business which are secured only by the fixed assets that are the subject
of such Capital Lease,
provided, however, that (x) the aggregate amount of any Indebtedness incurred in
connection with renewals, extensions (as to time) and refinancings of
Indebtedness described in Part 6.4(a)(vi) of Annex 4 hereto in excess of the
amount of such Indebtedness outstanding immediately prior to each such renewal,
extension or refinancing, plus (y) the aggregate principal amount of the
Indebtedness secured by the Liens or security interests referred to in clause
(ii), clause (iii) and clause (iv) of this Section 6.8(b), plus (z) the
aggregate amount of capitalized payment obligations under the Capital Leases
specified in clause (v) of this Section 6.8(b) shall not at any time exceed
Twenty-Five Million Dollars ($25,000,000).
(c) Limitation on Subsidiary Indebtedness. The Company shall not at any
time permit Total Subsidiary Indebtedness to exceed ten percent (10%) of
Consolidated Indebtedness at such time.
As used herein:
Total Subsidiary Indebtedness -- means, at any time (without
duplication),
(a) the aggregate Indebtedness of all Subsidiaries outstanding
at such time, plus
(b) the aggregate amount of claims in respect of the
redemption of, and accumulated unpaid dividends on, all preferred
stock (and other equity Securities and all other Securities
convertible into, exchangeable for, or representing the right to
purchase, preferred stock) of all Subsidiaries outstanding at such
time (whether or not any right of redemption or conversion is
exercisable by the holder thereof at such time),
determined, in each case, on a combined basis for such Persons, but
excluding from such calculation (i) any such Indebtedness of any
Subsidiary in respect of any Guaranty of the Notes provided pursuant to,
and in accordance with the provisions of, Section 6.16 hereof, (ii) any
such Indebtedness of any Subsidiary in respect of any Guaranty of any of
the obligations of the Company under (A) the Bank Credit Agreement and
(B) any other primary Indebtedness of the Company, so long as, in each
such case, such Subsidiary has entered into a Guaranty of the
obligations of the Company under the Notes and this Agreement, (iii) any
<PAGE>
such Indebtedness of any Subsidiary existing on the Closing Date which
is described in Part 6.8(c) of Annex 4 hereto, and (iv) all such
preferred stock and other equity Securities which are legally and
beneficially owned by the Company.
Consolidated Indebtedness -- means, at any time, the aggregate amount of
Indebtedness of the Company and the Subsidiaries, determined on a
consolidated basis for such Persons at such time in accordance with
GAAP.
(d) Limitation on Indebtedness. The Company will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any
Indebtedness or other liabilities or obligations, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, or joint or
several, except:
(i) liabilities of the Company in respect of the Notes, the Note
Purchase Agreements and the Bank Credit Agreement, and liabilities of
any Subsidiary in respect of any Guaranty of the obligations of the
Company under the Notes, the Note Purchase Agreements or the Bank Credit
Agreement;
(ii) long-term Indebtedness, provided the Company complies with
the provisions of Section 6.8(a) hereof;
(iii) Indebtedness secured by Liens permitted to be outstanding
pursuant to Section 6.8(b) hereof;
(iv) unsecured short-term Indebtedness of the Company incurred for
the purpose of funding the working capital requirements of the Company
and the Subsidiaries, provided the Company complies with the provisions
of Section 6.9 hereof;
(v) Indebtedness of Subsidiaries, provided the Company complies
with the provisions of Section 6.8(c) hereof; and
(vi) those liabilities listed in Part 6.8(d) of Annex 4 hereto.
(e) Loans, Guaranties, etc. The Company will not, and will not permit
any Subsidiary to, make any loans or advances to or investments in any
Person, or directly or indirectly enter into any Guaranty or otherwise
assure a creditor against loss in respect of any Indebtedness or other
obligations or liabilities (contingent or otherwise) of any Person unless
any such amounts have been included as Indebtedness in making calculations
with respect to each representation, warranty and covenant set forth in this
Agreement.
6.9 Current Debt.
The Company will not, and will not permit any Subsidiary to, have any Current
Debt outstanding on any day unless, within the period of three hundred
sixty-five (365) days immediately preceding such day, there shall have been at
least one (1) period of not less than forty-five (45) consecutive days during
which on each day of such period the aggregate Current Debt of all such Persons
<PAGE>
did not exceed the amount of additional Funded Debt in favor of a Person other
than a Subsidiary that the Company would have been permitted to have outstanding
(but did not have outstanding) if the Company were required to maintain a
Leverage Ratio of not more than 0.5 to 1.0 on such day.
6.10 Cash Flow Coverage Ratio.
The Company will maintain, as of the last day of each fiscal quarter, a Cash
Flow Coverage Ratio of not less than 1.3 to 1.0 for the period of eight (8)
consecutive fiscal quarters then most recently ended.
As used herein:
Cash Flow Coverage Ratio -- means for any period of determination
thereof, the quotient (expressed as a ratio) of (x) the sum of (i)
Consolidated Net Income, plus (ii) income taxes of the Company and the
Subsidiaries, plus (iii) Consolidated Interest Expense, plus (iv)
Consolidated Lease Expense, plus (iv) depreciation and amortization of the
Company and the Subsidiaries, divided by (y) the sum of (i) Consolidated
Interest Expense, plus (ii) Consolidated Lease Expense, plus (iii) all
scheduled and optional principal payments on long-term Indebtedness
(including, without limitation, imputed principal on Capital Leases), other
than, in each such case, the principal amount of any such Indebtedness which
shall be paid during such period from the proceeds of Indebtedness incurred
in connection with any refinancing thereof prior to, or at the time of, the
maturity thereof, plus (iv) the sum of (a) dividends on the capital stock of
the Company or a Subsidiary (other than dividends paid to the Company or a
Subsidiary), (b) purchases or other acquisitions by the Company or any
Subsidiary of any capital stock of the Company, and (c) distributions of
assets to the Company's stockholders as such.
Consolidated Net Income -- means, for any period, net income (or loss)
from continuing operations (after income taxes) of the Company and the
Subsidiaries, excluding, in any event, net income (or loss) in respect of
extraordinary items, net income (or loss) from discontinued operations and
the cumulative effects of changes in accounting principles, all as
determined on a consolidated basis for such Persons in accordance with GAAP.
Consolidated Interest Expense -- means, for any period, the aggregate
amount of interest accrued or capitalized on, or with respect to,
Indebtedness (including, without limitation, amortization of debt discount,
imputed interest on Capital Leases and interest on the Notes), but without
giving effect to any deduction for any interest income, of the Company and
the Subsidiaries determined on a consolidated basis for such Persons for
such period in accordance with GAAP.
Consolidated Lease Expense -- means, for any period, the aggregate
amount of rentals payable in respect of Operating Leases for such period by
any one or more of the Company and the Subsidiaries, determined on a
consolidated basis for such Persons for such period in accordance with GAAP.
Operating Lease -- means, with respect to any Person, any lease other
than a Capital Lease.
<PAGE>
6.11 Dividends and Prepayments on Subordinated Debt.
(a) Limit on Dividends and Other Distributions. The Company will not
declare or pay any dividends (whether in cash or other Property), purchase,
redeem, retire or otherwise acquire for value any of its capital stock (or
any warrants, rights or options to acquire any shares of such capital stock)
now or hereafter outstanding, or make any other distribution of Property to
its stockholders, or permit any of its Subsidiaries to purchase or otherwise
acquire for value any capital stock of the Company if:
(i) after giving effect to such dividend, distribution or other
payment, the aggregate amount of all such dividends, distributions and
other payments exceeds Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000) during any fiscal year, or
(ii) at the time of the declaration of such dividend, distribution
or other payment, and immediately before, and after giving effect to the
payment thereof, an Event of Default exists or would exist.
(b) No Subordinated Debt Prepayments. The Company will not at any time,
and will not at any time permit any Subsidiary to, make any prepayments,
directly or indirectly, of principal on, or redeem, repurchase or retire,
any existing or future Subordinated Debt of the Company or any Subsidiary.
6.12 Capital Expenditures.
The Company will not, and will not permit any Subsidiary to, make any Capital
Expenditures, if:
(a) the aggregate amount of Capital Expenditures of the Company and the
Subsidiaries, determined on a consolidated basis for such Persons in
accordance with GAAP, in any one (1) fiscal year would be in excess of
twenty-five percent (25%) of stockholder's equity of the Company and the
Subsidiaries as would appear on a consolidated balance sheet prepared in
accordance with GAAP for such Persons as at the end of the fiscal year then
most recently ended; provided, however, that
(i) the amount of Capital Expenditures incurred in fiscal year 1996
and fiscal year 1997 of the Company in connection with the Company's
planned construction of a new processing facility in the state of
Kentucky, and
(ii) the portion of any purchase price in respect of any Capital
Expenditure which was paid for by the Company solely with shares of the
Company's capital stock, shall be excluded from the application of this
covenant; or
(b) at the time of such Capital Expenditure, and immediately before and
after giving effect thereto, a Default or an Event of Default exists or
would exist.
As used herein:
<PAGE>
Capital Expenditure -- means, with respect to any Person, any payments
in respect of the acquisition or construction cost of Property (including,
without limitation, (i) the purchase price of tangible assets acquired by
such Person and (ii) the gross purchase price of assets or stock, as the
case may be, acquired by such Person in connection with any merger,
consolidation, asset acquisition, stock purchase or similar transaction
entered into by such Person) or other expenditures in respect of Property,
in each case that is, or is part of a group of related items of Property
substantially all of which are, required to be classified as long-term
assets on a balance sheet of such Person prepared in accordance with GAAP.
6.13 Operating Lease Rentals.
The Company will not create or suffer to exist, or permit any of the
Subsidiaries to create or suffer to exist, any obligations for the payment of
rent for any Property under leases or agreements to lease, which do or would
constitute Operating Leases, which in the aggregate have annual rental payments
for any fiscal year in excess of seven and one-half percent (7.5%) of Net
Tangible Assets determined at the end of such fiscal year; provided, however,
that leases for rolling stock shall be excluded from the foregoing calculation.
As used herein:
Net Tangible Assets -- means total assets minus Intangible Assets minus
current liabilities (exclusive of current deferred taxes) of the Company and
the Subsidiaries, in each case as would appear on a consolidated balance
sheet for such Persons prepared in accordance with GAAP.
6.14 Nature of Business.
The Company will not, and will not permit any Subsidiary to, engage in any
business if, as a result thereof, the principal businesses of the Company and
the Subsidiaries, taken as a whole, would not be substantially the same as the
businesses described in the Most Recent 10-K.
6.15 Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to, enter into any
transaction, including, without limitation, the purchase, sale or exchange of
Property or the rendering of any service, with any Affiliate, 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 an Affiliate.
6.16 Guaranties of Subsidiaries.
(a) New Subsidiaries. The Company shall cause each Subsidiary not
existing as of the Closing Date to execute and deliver to the holders of the
Notes a Subsidiary Guaranty, in substantially the form of Exhibit E hereto,
within ten (10) Business Days of the creation or acquisition of any such
Subsidiary.
<PAGE>
(b) Certain Existing Subsidiaries. If Ohse, Hudson Poland, Hudson
Development or Hudson Foreign Sales shall at any time own or hold, directly
or indirectly, assets having a book value equal to or in excess of five
percent (5%) of the total assets of the Company and the Subsidiaries at such
time, as would be shown on a consolidated balance sheet for such Persons
prepared in accordance with GAAP, then the Company shall cause such Person
to execute and deliver to the holders of the Notes a Subsidiary Guaranty, in
substantially the form of Exhibit E hereto, within ten (10) Business Days of
such time.
(c) Delivery of Documents. The delivery of any agreements pursuant to
Section 6.16(a) or Section 6.16(b) hereof shall be accompanied by such other
documents as any Purchaser or other holder of Notes may reasonably request,
including, without limitation, charter documents, bylaws, and appropriate
resolutions of the Board of Directors of any such Subsidiary providing a
Subsidiary Guaranty.
(d) Guaranties of Bank Credit Agreement Obligations. Notwithstanding the
other terms and provisions of this Section 6.16, the Company will not at any
time permit any Subsidiary or Affiliate to provide to the Banks any Guaranty
of the Company's obligations under the Bank Credit Agreement unless such
Subsidiary or such Affiliate shall, at the same time, deliver a Subsidiary
Guaranty and other documents to the holders of the Notes as specified in
Section 6.16(c) hereof.
6.17 Restricted Investments.
The Company will not at any time, and will not at any time permit any Subsidiary
to, make any investments (including, without limitation, loans or other advances
to or for the benefit of any Subsidiary) except:
(a) investments in readily marketable obligations of the United States
of America maturing within one (1) year from date of purchase,
(b) investments in prime (by recognized United States financial
standards) commercial paper maturing within one (1) year from date of
purchase,
(c) investments in fully insured domestic certificates of deposit and
certificates of deposit issued by any Bank (provided such Bank's outstanding
long-term debt securities are rated at least "A" by Standard & Poor's (a
division of McGraw-Hill, Inc.) or at least "A-1" by Moody's Investors
Service, Inc.) maturing within one (1) year from the date of creation
thereof,
(d) endorsements of negotiable instruments for collection in the
ordinary course of business,
(e) investments in Subsidiaries that have complied with the requirements
of Section 6.16 hereof, and
(f) other investments so long as the aggregate book value of all such
investments does not at any time exceed ten percent (10%) of Tangible Net
Worth at such time;
<PAGE>
provided, however, that this Section 6.17 shall not be deemed to prohibit the
Company from creating accounts receivable owing from any Subsidiary as a result
of the sale of inventory in accordance with Section 6.15 hereof.
6.18 ERISA.
(a) Compliance. The Company will, and will cause each ERISA Affiliate
to, at all times with respect to each Pension Plan, make timely payment of
contributions required to meet the minimum funding standard set forth in
ERISA or the IRC with respect thereto, and to comply with all other
applicable provisions of ERISA.
(b) Relationship of Vested Benefits to Pension Plan Assets. The Company
will not at any time permit the present value of all employee benefits
vested under each Pension Plan to exceed the assets of such Pension Plan
allocable to such vested benefits at such time, in each case determined
pursuant to Section 6.18(c) hereof.
(c) Valuations. All assumptions and methods used to determine the
actuarial valuation of vested employee benefits under Pension Plans and the
present value of assets of Pension Plans will be reasonable in the good
faith judgment of the Company and will comply with all requirements of law.
(d) Prohibited Actions. The Company will not, and will not permit any
ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such term is defined
in section 406 of ERISA or section 4975 of the IRC) that would result in
the imposition of a material tax or penalty;
(ii) incur with respect to any Pension Plan any "accumulated funding
deficiency" (as such term is defined in section 302 of ERISA), whether
or not waived;
(iii) terminate any Pension Plan in a manner that could result in
(A) the imposition of a Lien on the Property of the Company or
any Subsidiary pursuant to section 4068 of ERISA, or
(B) the creation of any liability under section 4062 of ERISA;
(iv) fail to make any payment required by section 515 of ERISA; or
(v) at any time be an "employer" (as such term is defined in
section 3(5) of ERISA) required to contribute to any Multiemployer Plan
if, at such time, it could reasonably be expected that the Company or
any Subsidiary will incur withdrawal liability in respect of such
Multiemployer Plan and such liability, if incurred, together with the
aggregate amount of all other withdrawal liability as to which there is
a reasonable expectation of incurrence by the Company or any Subsidiary
under any one or more Multiemployer Plans, could reasonably be expected
to have a Material Adverse Effect.
6.19 Private Offering.
<PAGE>
The Company will not, and will not permit any Person acting on its behalf to,
offer the Notes or any part thereof or any similar Securities for issuance or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.
6.20 Certain Accounting Matters.
The Company will not, at any time,
(a) change its methods of accounting, unless required in accordance with
GAAP, or
(b) change its fiscal year.
7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information.
The Company will deliver to each Purchaser and to each other holder of Notes:
(a) Quarterly Statements -- as soon as practicable after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), and in any event
within forty-five (45) days thereafter, duplicate copies of
(i) a consolidated balance sheet of the Company and the Subsidiaries
as at the end of such quarter, and
(ii) consolidated statements of operations and cash flows of the
Company and the Subsidiaries for such quarter and (in the case of the
second and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally and
certified as complete and correct, subject to changes resulting from year-end
adjustments, by a Senior Financial Officer, and accompanied by the certificate
required by Section 7.2 hereof;
(b) Annual Statements -- as soon as practicable after the end of each
fiscal year of the Company, and in any event within ninety (90) days
thereafter, duplicate copies of
(i) consolidated balance sheets of the Company and the Subsidiaries
as at the end of such year, and
(ii) consolidated statements of operations and cash flows of the
Company and the Subsidiaries for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP and
accompanied by
<PAGE>
(A) an opinion of independent certified public accountants of
recognized national standing, which opinion shall, without
qualification (including, without limitation, qualifications related
to the scope of the audit or the ability of the Company or a
Subsidiary to continue as a going concern), state that such
financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their
results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances,
(B) a certification by a Senior Financial Officer that such
consolidated financial statements are complete and correct, and
(C) the certificates required by Section 7.2 and Section 7.3
hereof;
(c) Opinions of Independent Accountants and Counsel -- as soon as
practicable after the end of each fiscal year of the Company, and in any
event within ninety (90) days thereafter, duplicate copies of all opinions
of independent accountants and counsel required pursuant to Section 6.1
hereof;
(d) Audit Reports -- promptly upon receipt thereof, a copy of each other
report submitted to the Company or any Subsidiary by independent accountants
in connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary;
(e) SEC and Other Reports -- within fifteen (15) days of their becoming
available, one copy, without duplication, of (i) each financial statement,
report, notice or proxy statement sent by the Company or any Subsidiary to
public securities holders generally, and (ii) each regular or periodic
report (including, without limitation, each Annual Report on Form 10-K, each
Quarterly Report on Form 10-Q and each Current Report on Form 8-K), each
registration statement (other than registration statements on Form S-8)
which shall have become effective (without exhibits except as expressly
requested by a holder of Notes), and each final prospectus, and all
amendments to any of the foregoing, filed by the Company or any Subsidiary
with, or received by, such Person in connection therewith from, the
Securities and Exchange Commission or any successor agency;
(f) ERISA --
(i) immediately upon becoming aware of the occurrence of any
(A) "reportable event" (as such term is defined in section 4043
of ERISA), or
(B) "prohibited transaction" (as such term is defined in section
406 of ERISA or section 4975 of the IRC),
<PAGE>
in connection with any Pension Plan or any trust created thereunder, a written
notice specifying the nature thereof, what action the Company is taking or
proposes to take with respect thereto and, when known, any action taken by the
IRS, the Department of Labor or the PBGC with respect thereto; and
(ii) prompt written notice of and, where applicable, a description
of
(A) any notice from the PBGC in respect of the commencement of
any proceedings pursuant to section 4042 of ERISA to terminate any
Pension Plan or for the appointment of a trustee to administer any
Pension Plan,
(B) any distress termination notice delivered to the PBGC under
section 4041 of ERISA in respect of any Pension Plan, and any
determination of the PBGC in respect thereof,
(C) the placement of any Multiemployer Plan in reorganization
status under Title IV of ERISA,
(D) any Multiemployer Plan becoming "insolvent" (as such term is
defined in section 4245 of ERISA) under Title IV of ERISA,
(E) the whole or partial withdrawal of the Company or any ERISA
Affiliate from any Multiemployer Plan and the withdrawal liability
incurred in connection therewith, and
(F) any material increase in contingent liabilities of the
Company or any Subsidiary in respect of any post-retirement employee
welfare benefits.
(g) Actions, Proceedings -- promptly after the commencement thereof,
written notice of any action or proceeding relating to the Company or any
Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, is reasonably
likely to have a Material Adverse Effect;
(h) Certain Matters -- prompt written notice of and a description of any
event or circumstance that, had such event or circumstance occurred or
existed immediately prior to the Closing Date, would have been required to
be disclosed as an exception to any statement set forth in Section 2.13(a)
or Section 2.13(b) hereof;
(i) Notice of Default or Event of Default -- immediately upon becoming
aware of the existence of any condition or event that constitutes a Default
or an Event of Default, a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to take
with respect thereto;
(j) Notice of Claimed Default -- immediately upon becoming aware that
the holder of any Note, or of any Indebtedness or other Security of the
Company or any Subsidiary, shall have given notice or taken any other action
with respect to a claimed Default, Event of Default, default or event of
<PAGE>
default, a written notice specifying the notice given or action taken by
such holder and the nature of the claimed Default, Event of Default, default
or event of default and what action the Company is taking or proposes to
take with respect thereto;
(k) Information Furnished to Other Creditors -- promptly after any
request therefor, copies of any statement, report or certificate furnished
to any holder of Indebtedness of the Company or any Subsidiary;
(l) Rule 144A -- promptly after any request therefor, information
requested to comply with 17 C.F.R. ss.230.144A, as amended from time to
time; and
(m) Requested Information -- promptly after any request therefor, such
other data and information as from time to time may be reasonably requested
by any holder of Notes, including, without limitation, data, information,
agreements, instruments or documents relating to the business or financial
operations or performance of the Company or any Subsidiary and any financial
statements prepared by the Company (in addition to the financial statements
specified in clause (a) and clause (b) of this Section 7.1), in each case
which may be reasonably requested by any holder of Notes.
7.2 Officer's Certificates.
Each set of financial statements delivered to each holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of
a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 6.4 through Section 6.13,
inclusive, and Section 6.17 hereof, during the period covered by the income
statement then being furnished (including with respect to each such Section,
where applicable, the calculations of the maximum or minimum amount, ratio
or percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amounts, ratio or percentage then in
existence);
(b) Event of Default -- a statement that the signers have reviewed the
relevant terms hereof and have made, or caused to be made, under their
supervision, a review of the transactions and conditions of the Company and
the Subsidiaries from the beginning of the accounting period covered by the
income statement being delivered therewith to the date of the certificate
and that such review shall not have disclosed the existence during such
period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Company shall
have taken or proposes to take with respect thereto; and
(c) Investments -- a description of all investments of the Company and
the Subsidiaries made pursuant to Section 6.17(f) hereof during such
accounting period (which description shall specify the type of investment,
the cost thereof and the book value thereof), and, if any such investments
are made, a description of the Company's then-current investment policy.
<PAGE>
7.3 Accountants' Certificates.
Each set of annual financial statements delivered pursuant to Section 7.1(b)
hereof shall be accompanied by a certificate of the accountants who certify such
financial statements, stating that
(a) they have reviewed this Agreement and stating further, whether, in
making their audit, such accountants have become aware of any condition or
event that then constitutes a Default or an Event of Default and, if such
accountants are aware that any such condition or event then exists,
specifying the nature and period of existence thereof, and
(b) they have reviewed the annual certificate of a Senior Financial
Officer of the Company provided pursuant to clause (a) of Section 7.2 hereof
and that they confirm the calculations contained therein.
7.4 Inspection.
The Company will permit, upon prior notice to the Company, the representatives
of each holder of Notes (at the expense of the Company at any time when a
Default or an Event of Default has occurred and is in existence, and otherwise
at the expense of such holder) to visit and inspect any of the Properties of the
Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants (and by this provision
the Company authorizes such accountants to discuss the finances and affairs of
the Company and the Subsidiaries), all at such reasonable times and as often as
may be reasonably requested.
8. EVENTS OF DEFAULT
8.1 Nature of Events.
An "Event of Default" shall exist if any of the following occurs and is
continuing:
(a) Principal or Make-Whole Amount Payments -- the Company shall fail to
make any payment of principal or Make-Whole Amount on any Note on or before
the date such payment is due;
(b) Interest Payments -- the Company shall fail to make any payment of
interest on any Note on or before the date such payment is due;
(c) Certain Defaults -- the Company or any Subsidiary shall fail to
perform or observe any covenant contained in Section 6.1 hereof, in Section
6.2(b) hereof, in Section 7.1(a) through Section 7.1(h) hereof, inclusive,
or in Section 7.1(k) through Section 7.1(m) hereof, inclusive, and such
failure continues for more than ten (10) days after the earlier of (i)
receipt by the Company of written notice thereof from any Purchaser or any
other holder of Notes, or (ii) such time as such failure shall otherwise
first become known to any officer of the Company;
<PAGE>
(d) Other Defaults -- the Company or any Subsidiary shall fail to
perform, observe or comply with any other term, covenant or agreement
contained in this Agreement, in the Notes or in any other document or
instrument delivered in connection herewith required to be performed by the
Company or such Subsidiary pursuant to the terms of this Agreement, of the
Notes or of such other document or instrument;
(e) Warranties or Representations -- any warranty, representation or
other statement by or on behalf of the Company (or any of its officers)
contained herein or in any certificate or instrument furnished in compliance
with or in reference hereto shall have been false or misleading in any
material respect when made;
(f) Default on Indebtedness or Security --
(i) the Company or any Subsidiary shall fail to make any payment on
any Indebtedness or any Security when due;
(ii) any event shall occur or any condition shall exist in respect
of any Indebtedness or any Security of the Company or any Subsidiary, or
under any agreement securing or relating to any such Indebtedness or
Security, that immediately or with any one or more of the passage of
time or the giving of notice:
(A) causes (or permits any holder thereof or a trustee therefor to
cause) such Indebtedness or Security, or a portion thereof, to
become due prior to its stated maturity or prior to its regularly
scheduled date or dates of payment; or
(B) permits any one or more of the holders thereof or a trustee
therefor to require the Company or any Subsidiary to repurchase such
Indebtedness or Security from such holder and any such holder or
trustee exercises (or attempts to exercise) such right; or
(iii) any "Event of Default" shall have occurred or shall exist
under, and as defined in, the Bank Credit Agreement, as amended and as
in effect at such time;
(g) Involuntary Bankruptcy Proceedings --
(i) a receiver, liquidator, custodian or trustee of the Company or
any Subsidiary, or of all or any part of the Property of any such
Person, shall be appointed by court order and such order shall remain in
effect for more than thirty (30) days, or an order for relief shall be
entered with respect to the Company or any Subsidiary, or the Company or
any Subsidiary shall be adjudicated a bankrupt or insolvent;
(ii) any of the Property of the Company or any Subsidiary shall be
sequestered by court order and such order shall remain in effect for
more than thirty (30) days; or
(iii) a petition shall be filed against the Company or any
Subsidiary under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
<PAGE>
jurisdiction, whether now or hereafter in effect, and shall not be
dismissed within thirty (30) days after such filing;
(h) Voluntary Petitions -- the Company or any Subsidiary shall file a
petition in voluntary bankruptcy or seeking relief under any provision of
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or shall consent to, or take any corporate action to
authorize, the filing of any petition against, or with respect to, any such
Person, under any such law;
(i) Assignments for Benefit of Creditors, etc. -- the Company or any
Subsidiary shall make an assignment for the benefit of its creditors, or
admit in writing its inability, or fail, to pay its debts generally as they
become due, or shall consent to the appointment of a receiver, liquidator or
trustee of the Company or any Subsidiary or of all or any part of the
Property of any such Person;
(j) Undischarged Final Judgments -- a final, nonappealable judgment or
final, nonappealable judgments for the payment of money aggregating in
excess of Two Million Dollars ($2,000,000) is or are outstanding against any
one or more of the Company or any Subsidiary and any one of such judgments
shall have been outstanding for more than ten (10) days from the date of its
entry and shall not have been discharged in full or stayed; or
(k) Subsidiary Guaranty --
(i) any Subsidiary Guaranty shall cease to be in full force and
effect or shall be declared by a court or Governmental Authority of
competent jurisdiction to be void, voidable or unenforceable against the
Subsidiary which is a guarantor thereunder;
(ii) the validity or enforceability of any Subsidiary Guaranty
against the Subsidiary which is a guarantor thereunder shall be
contested by such Subsidiary, or any subsidiary or affiliate thereof; or
(iii) any Subsidiary, or any subsidiary or affiliate thereof, shall
deny that such Subsidiary has any further liability or obligation under
the Subsidiary Guaranty to which such Subsidiary is a party.
If any action, condition, event or other matter would, at any time, constitute
an Event of Default under any provision of this Section 8.1, then an Event of
Default shall exist, regardless of whether the same or a similar action,
condition, event or other matter is addressed in a different provision of this
Section 8.1 and would not constitute an Event of Default at such time under such
different provision.
8.2 Default Remedies.
(a) Acceleration on Event of Default.
(i) If an Event of Default in respect of the Company specified in
clause (g), clause (h) or clause (i) of Section 8.1 hereof shall exist,
all of the Notes at the time outstanding shall automatically become
<PAGE>
immediately due and payable together with interest accrued thereon and
the Make-Whole Amount (if any) in respect thereof, in each case without
presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, and the Company shall forthwith pay to the
holder or holders of all the Notes then outstanding the entire principal
of and interest accrued on the Notes and, to the extent permitted by
law, the Make-Whole Amount at such time with respect to such principal
amount of the Notes, and all other amounts owing under the Note Purchase
Agreements.
(ii) If an Event of Default other than those in respect of the
Company specified in clause (g), clause (h) or clause (i) of Section 8.1
hereof shall exist, the Required Holders may exercise any right, power
or remedy permitted to such holder or holders by law and shall have, in
particular, without limiting the generality of the foregoing, the right
to declare the entire principal of, and all interest accrued on and
Make-Whole Amount (if any) in respect of, all the Notes then outstanding
to be, and such Notes shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived, and the Company shall
forthwith pay to the holder or holders of all the Notes then outstanding
the entire principal of and interest accrued on such Notes and, to the
extent permitted by law, the Make-Whole Amount at such time with respect
to such principal amount of the Notes, and all other amounts owing under
the Note Purchase Agreements.
(b) Acceleration on Payment Default. During the existence of an Event of
Default described in Section 8.1(a) or Section 8.1(b) hereof, and
irrespective of whether the Notes then outstanding shall have been declared
to be due and payable pursuant to Section 8.2(a)(ii) hereof, any holder of
Notes that shall have not consented to any waiver with respect to such Event
of Default may, at such holder's option, by notice in writing to the
Company, declare the Notes then held by such holder to be, and such Notes
shall thereupon become, forthwith due and payable together with all interest
accrued thereon, and Make-Whole Amount (if any) in respect thereof, without
any presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and the Company shall forthwith pay to such
holder the entire principal of and interest accrued on such Notes and, to
the extent permitted by law, the Make-Whole Amount at such time with respect
to such principal amount of such Notes and all other amounts owing under the
Note Purchase Agreements to such holder.
(c) Valuable Rights. The Company acknowledges, and the parties hereto
agree, that the right of each holder to maintain its investment in the Notes
free from repayment by the Company (except as herein specifically provided
for) is a valuable right and that the provision for payment of a Make-Whole
Amount by the Company, in the event that the Notes are prepaid or are
accelerated as a result of an Event of Default under certain circumstances,
is intended to provide compensation for the deprivation of such right under
such circumstances.
(d) Other Remedies; Remedies Cumulative; Nonwaiver. During the existence
of an Event of Default and irrespective of whether the Notes then
outstanding shall have been declared to be due and payable pursuant to
<PAGE>
Section 8.2(a)(ii) hereof and irrespective of whether any Purchaser or any
other holder of Notes then outstanding shall otherwise have pursued or be
pursuing any other rights or remedies, any Purchaser and any other holder of
Notes may proceed to protect and enforce its rights hereunder and under such
Notes by exercising such remedies as are available to such holder in respect
thereof under applicable law, either by suit in equity or by action at law,
or both, whether for specific performance of any agreement contained herein
or in aid of the exercise of any power granted herein, provided that the
maturity of such holder's Notes may be accelerated only in accordance with
Section 8.2(a) and Section 8.2(b) hereof. All rights and remedies of each
Purchaser and each other holder of Notes are cumulative to, and not
exclusive of, any rights or remedies any such Purchaser or such other holder
of Notes would otherwise have. No course of dealing on the part of any
Purchaser or any other holder of Notes nor any delay or failure on the part
of any Purchaser or any other holder of Notes to exercise any right shall
operate as a waiver of such right or otherwise prejudice such Purchaser's or
such other holder's rights, powers and remedies.
(e) Expenses. If the Company shall fail to pay when due any principal
of, or Make-Whole Amount or interest on, any Note, or shall fail to comply
with any other provision hereof, the Company shall pay to each Purchaser and
to each other holder of Notes, to the extent permitted by law, such further
amounts as shall be sufficient to cover the costs and expenses (including,
but not limited to, reasonable attorneys' fees) incurred by such Purchaser
or such other holder in collecting any sums due on such Notes or in
otherwise assessing, analyzing or enforcing any rights or remedies that are
or may be available to it.
8.3 Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 8.2(a)(ii) hereof, then and in
every such case, the Required Holders may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of any
moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all the Notes and all other sums
payable hereunder and under the Notes (except any principal of, or interest
or Make-Whole Amount on, the Notes that shall have become due and payable by
reason of such declaration under Section 8.2(a)(ii) hereof) shall have been
duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to Section 10.5 hereof or otherwise made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
9. INTERPRETATION OF THIS AGREEMENT
9.1 Terms Defined.
<PAGE>
As used herein, the following terms have the respective meanings set forth below
or set forth in the Section of this Agreement following such term:
Acceptable Control Persons -- means any members of the immediate family of, or
the respective heirs, executors or trustees holding for the sole benefit of such
heirs or members of the immediate family of, James T. Hudson.
Affiliate -- means, at any time, a Person (other than a Subsidiary)
(a) that directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, the Company,
(b) that beneficially owns or holds five percent (5%) or more of any
class of the Voting Stock of the Company,
(c) five percent (5%) or more of the Voting Stock (or in the case of a
Person that is not a corporation, five percent (5%) or more of the equity
interest) of which is beneficially owned or held by the Company or a
Subsidiary,
(d) that is an officer or director (or a member of the immediate family
of an officer or director) of the Company or any Subsidiary, or
(e) that is an Acceptable Control Person, a natural Person in any manner
related by birth or marriage to any Acceptable Control Person or a Person
owned or Controlled by any such Person,
at such time.
As used in this definition:
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.
Agreement, this -- means this Note Purchase Agreement, as it may be
amended and restated from time to time.
Applicable Net Income Carryover -- Section 6.6.
Bank Credit Agreement -- means the Revolving Credit Agreement, dated as
of April 26, 1994, by and among the Company, the Banks and Rabobank, as
agent, as the same shall have been amended, modified or restated from time
to time, and any substitute or replacement credit facility in respect
thereof.
Banks -- means each of Rabobank, Bank of America National Trust and
Savings Association, NationsBank of Texas, National Association, Caisse
Nationale de Credit Agricole, and Harris Trust and Savings Bank.
<PAGE>
Board of Directors -- means the board of directors of the Company or a
Subsidiary, as applicable, or any committee thereof that, in the instance,
shall have the lawful power to exercise the power and authority of such
board of directors.
Business Day -- means, at any time, a day other than a Saturday, a
Sunday or a day on which the bank designated by the holder of a Note to
receive (for such holder's account) payments on such Note is required by law
(other than a general banking moratorium or holiday for a period exceeding
four (4) consecutive days) to be closed.
Capital Expenditure -- Section 6.12.
Capital Lease -- means, at any time, a lease with respect to which the
lessee is required to recognize the acquisition of an asset and the
incurrence of a liability at such time in accordance with GAAP.
Cash Flow Coverage Ratio -- Section 6.10.
Change in Control -- means, at any time:
(a) the failure of Acceptable Control Persons to beneficially own,
in the aggregate, at least fifty-one percent (51%) (by number of votes)
of the aggregate voting power in respect of the Voting Stock of the
Company outstanding at such time; or
(b) the failure of Acceptable Control Persons to have the power to
elect or cause the election of at least fifty-one percent (51%) of the
members of the Board of Directors of the Company at such time.
Closing -- Section 1.2(b).
Closing Date -- Section 1.2(b).
Company -- has the meaning assigned to such term in the introductory
sentence hereof.
Consolidated Indebtedness -- Section 6.8(c).
Consolidated Interest Expense -- Section 6.10.
Consolidated Lease Expense -- Section 6.10.
Consolidated Net Income -- Section 6.10.
Control Event -- means:
(a) the execution by the Company, any Subsidiary, any Affiliate or
any Acceptable Control Person of any letter of intent or similar
agreement with respect to any proposed transaction or event or series of
transactions or events that, individually or in the aggregate, could
reasonably be expected to result in a Change in Control; or
<PAGE>
(b) the execution of any written agreement that, when fully
performed by the parties thereto, would result in a Change in Control.
Control Prepayment Date -- Section 4.3(a).
Current Debt -- means, with respect to any Person, (without duplication)
(a) the portion of the amount of liabilities for borrowed money of
such Person pursuant to a credit facility, under which such Person
borrows (and re-borrows) money on a short-term basis for working capital
purposes in the ordinary course of such Person's business, that is at
such time classified in good faith by such Person as a current
liability, and
(b) all other liabilities for borrowed money, Capital Leases and all
liabilities secured by any Lien existing on Property owned by such
Person whether or not such liabilities have been assumed, which, in each
case are payable on demand or within one (1) year, except:
(i) any such liabilities which are renewable or extendable at
the option of such Person to a date more than one (1) year, and
(ii) any such liabilities which, although payable within one (1)
year, constitute payments required to be made on account of
principal of Indebtedness initially expressed to mature more than
one (1) year from origination.
Default -- means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.
Dollars or $ -- means United States of America dollars.
Environmental Protection Law -- means any federal, state, county,
regional or local law, statute or regulation (including, without limitation,
CERCLA, RCRA and SARA) enacted in connection with or relating to the
protection or regulation of the environment, including, without limitation,
those laws, statutes and regulations regulating the disposal, removal,
production, storing, refining, handling, transferring, processing or
transporting of Hazardous Substances, and any regulations issued or
promulgated in connection with such statutes by any Governmental Authority,
and any orders, decrees or judgments issued by any court of competent
jurisdiction in connection with any of the foregoing.
As used in this definition:
CERCLA -- means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time
(by SARA or otherwise), and all rules and regulations promulgated in
connection therewith.
RCRA -- means the Resource Conservation and Recovery Act of 1976, as
amended from time to time, and all rules and regulations promulgated in
connection therewith.
<PAGE>
SARA -- means the Superfund Amendments and Reauthorization Act of
1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate -- means any corporation or trade or business that:
(a) is a member of the same "controlled group of corporations"
(within the meaning of section 414(b) of the IRC) as the Company; or
(b) is under "common control" (within the meaning of section
414(c) of the IRC) with the Company.
Event of Default -- Section 8.1.
Exchange Act -- means the Securities Exchange Act of 1934, as amended
from time to time.
Fair Market Value -- means, at any time, with respect to any Property,
the sale value of such Property that would be realized in an arm's-length
sale at such time between an informed and willing buyer and an informed and
willing seller under no compulsion to buy or sell, respectively.
Funded Debt -- means, at any time, in respect of any Person,
Indebtedness of such Person with maturities of greater than one (1) year
(including, without limitation, all current portions thereof) as would
appear on a balance sheet of such Person prepared in accordance with GAAP at
such time.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board
and in such statements, opinions and pronouncements of such other entities
with respect to financial accounting of for-profit entities as shall be
accepted by a substantial segment of the accounting profession in the United
States of America.
Governmental Authority -- means:
(a) the government of
(i) the United States of America and any state or other
political subdivision thereof, or
(ii) any other jurisdiction (A) in which the Company or any
Subsidiary conducts all or any part of its business or (B) that
asserts jurisdiction over the conduct of the affairs or Properties
of the Company or any Subsidiary; and
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
<PAGE>
Guaranty -- means, with respect to any Person (for the purposes of this
definition, the "Guarantor"), any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection) of the Guarantor guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person (the "Primary
Obligor") in any manner, whether directly or indirectly, including, without
limitation, obligations incurred through an agreement, contingent or
otherwise, by the Guarantor:
(a) to purchase such indebtedness or obligation or any Property
constituting security therefor;
(b) to advance or supply funds
(i) for the purpose of payment of such indebtedness, dividend or
other obligation, or
(ii) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary Obligor
or otherwise to advance or make available funds for the purchase or
payment of such indebtedness, dividend or other obligation;
(c) to lease Property or to purchase Securities or other Property or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the Primary Obligor to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or obligation
of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty in connection with any
computation of indebtedness or other liability, it shall be assumed that the
indebtedness or other liabilities that are the subject of such Guaranty are
direct obligations of the issuer of such Guaranty.
Hazardous Substances -- means any and all pollutants, contaminants,
toxic or hazardous wastes and any other substances that might pose a hazard
to health or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage,
seepage or filtration of which is or shall be, in each of the foregoing
cases, restricted, prohibited or penalized by any applicable law.
Health Laws -- means any federal, state, county, regional or local law,
statute or regulation enacted in connection with, or relating to, the
processing, production, use, marketing or sale of meat, poultry, feed and
other food products (and any similar businesses of the Company and the
Subsidiaries), including, without limitation, all regulations issued or
promulgated in connection with such laws and statutes by any Governmental
Authority (including, without limitation, the United States Department of
Agriculture and the United States Food and Drug Administration), and any
orders, decrees or judgments issued by any court of competent jurisdiction
in connection with any of the foregoing.
<PAGE>
Hudson Development -- means Hudson Development Corporation, an Arkansas
corporation.
Hudson Foreign Sales -- means Hudson Foods Foreign Sales, Inc., a
corporation organized under the laws of the United States Virgin Islands.
Hudson Poland -- means Hudson Foods Poland s.p. zo.o, a limited
liability company organized under the laws of Poland.
Indebtedness -- means, at any time, with respect to any Person, without
duplication:
(a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of Property acquired by, or services rendered
to, such Person,
(b) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to any
Property acquired by such Person,
(c) the present value, determined in accordance with GAAP, of all
obligations of such Person under leases which shall have been or should
be recorded as Capital Leases in accordance with GAAP,
(d) all indebtedness or other payment obligations for the deferred
purchase price of property or services secured by any Lien upon or in
any Property owned by such Person whether or not such Person has assumed
or become liable for the payment of such indebtedness,
(e) indebtedness arising under acceptance facilities, in connection
with surety or other similar bonds, and the undrawn maximum face amount
of all outstanding letters of credit issued for the account of such
Person and, without duplication, the outstanding amount of all drafts
drawn thereunder,
(f) Swaps of such Person,
(g) all liabilities of such Person in respect of unfunded vested
benefits under Pension Plans and all asserted withdrawal liabilities of
such Person or a commonly controlled entity to a Multiemployer Plan, and
(h) all direct or indirect Guaranties by such Person of indebtedness
described in this definition of any other Person;
provided, that, for purposes of this definition, Trade Debt and Operating Leases
shall not be included.
As used in this definition:
Swaps -- means, with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar
obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency. For purposes of
this Agreement, the amount of the obligation under any Swap shall be
<PAGE>
the amount determined in respect thereof as of the end of the then
most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each
such case, the amount of such obligation shall be the net amount so
determined.
Trade Debt -- means trade accounts payable incurred in the
ordinary course of business with an original maturity or due date of
not greater than one hundred eighty (180) days from the creation
thereof (and which are not overdue for more than thirty (30) days).
Institutional Investor -- means the Purchasers, any affiliate of any of
the Purchasers and any holder or beneficial owner of Notes that is an
"accredited investor" as defined in section 2(15) of the Securities Act.
Intangible Assets -- Section 6.6.
IRC -- means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.
IRS -- means the Internal Revenue Service and any successor agency.
Leverage Ratio -- Section 6.8(a).
Lien -- means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including, but
not limited to, the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale, sale with recourse or a trust
receipt, or a lease, consignment or bailment for security purposes. The term
"Lien" includes, without limitation, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
real Property and includes, without limitation, with respect to stock,
stockholder agreements, voting trust agreements, buy-back agreements and all
similar arrangements. For the purposes hereof, the Company and each
Subsidiary shall be deemed to be the owner of any Property that it shall
have acquired or holds subject to a conditional sale agreement, Capital
Lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes, and such
retention or vesting is deemed a Lien. The term "Lien" does not include
negative pledge clauses in agreements relating to the borrowing of money.
Make-Whole Amount -- means, with respect to any date (a "Prepayment
Date") and any principal amount ("Prepaid Principal") of Notes required for
any reason to be paid prior to the regularly scheduled maturity thereof on
such Prepayment Date, the greater of
(a) Zero Dollars ($0), and
<PAGE>
(b) (i) the sum of the present values of the then remaining
scheduled payments of principal and interest (minus, in the case of the
first of such interest payments, and prior to determining the present
value thereof, the amount of interest accrued on such Prepaid Principal
since the scheduled interest payment date immediately preceding such
Prepayment Date) that would be payable in respect of such Prepaid
Principal but for such prepayment, minus
(ii) such Prepaid Principal.
In determining such present values, a discount rate equal to the Make-Whole
Discount Rate with respect to such Prepayment Date and Prepaid Principal divided
by twelve (12), and a discount period of one (1) month of thirty (30) days,
shall be used.
Make-Whole Discount Rate -- means, with respect to any Prepayment Date
and Prepaid Principal, a rate equal to the sum of fifty one-hundredths
percent (.50%) plus the Treasury Rate determined as of such Prepayment Date.
As used in this definition:
Treasury Rate -- means, with respect to the calculation of a
Make-Whole Amount in respect of any prepayment or acceleration of any
Notes,
(a) the yield reported on the day on which such calculation is
being made, as the yield, based on the "bid" price, on the display
designated as "Page 678" on the Telerate Service (or such other
display as may replace Page 678 on the Telerate Service) providing
the most current yields for actively traded United States Treasury
securities with maturities corresponding to the remaining Weighted
Average Life to Maturity of the Prepaid Principal (such Weighted
Average Life to Maturity being determined as of the date of such
calculation and rounded to the nearest month), or
(b) if and only if the source of data described in clause (a)
ceases to exist or fails to report such yield, a reasonably
comparable electronic service as may be designated by the Required
Holders, or
(c) if and only if the source of data specified in clause (a) of
this definition ceases to exist or fails to report such yield and
the Required Holders shall fail to agree upon a comparable
electronic service pursuant to clause (b) of this definition, such
yield reported under the heading "This Week" and under the caption
"Treasury Constant Maturities" of the maturity corresponding to the
remaining Weighted Average Life to Maturity of the Prepaid Principal
(such Weighted Average Life to Maturity being determined as of the
date of such calculation and rounded to the nearest month) as most
recently published and made available to the public in the
statistical release designated "H.15(519)" or any successor
publication that is published weekly by the Federal Reserve System
and that establishes yields on actively traded United States
Treasury securities or, if no such successor publication is
<PAGE>
available, then any other source of current information in respect
of interest rates on the securities of the United States of America
that is generally available and, in the judgment of the Required
Holders, provides information reasonably comparable to the H.15(519)
statistical release.
If no maturity exactly corresponds to such rounded Weighted
Average Life to Maturity, yields for the two (2) most closely
corresponding published maturities next above and below the rounded
Weighted Average Life to Maturity of the Prepaid Principal shall be
calculated pursuant to the immediately preceding sentence and the
Treasury Rate shall be interpolated from such yields on a
straight-line basis, rounding with respect to each such relevant
period to the nearest month.
Margin Security -- means "margin stock" within the meaning of
Regulations G, T and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II, as amended from time to time.
Material Adverse Effect -- means a material adverse effect on
(a) the business, prospects, profits, Properties or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a
whole,
(b) the ability of the Company to perform its obligations set forth
in this Agreement and in the Notes, or
(c) the validity or enforceability of any of the terms or provisions
of this Agreement or the Notes.
Most Recent 10-K -- means the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1995, as filed with the Securities and
Exchange Commission.
Multiemployer Plan -- means any "multiemployer plan" (as defined in
section 3(37) of ERISA) in respect of which the Company or any ERISA
Affiliate is an "employer" (as such term is defined in section 3 of ERISA).
Net Tangible Assets -- Section 6.13.
Note Purchase Agreements -- Section 1.2(c).
Notes -- Section 1.1.
Offer Determination Date -- Section 4.3(b).
Ohse -- means Ohse Transportation, Inc., a Kansas corporation.
Operating Lease -- Section 6.10.
Other Purchaser -- Section 1.2(c).
<PAGE>
PBGC -- means the Pension Benefit Guaranty Corporation and any successor
corporation or governmental agency.
Pension Plan -- means, at any time, any "employee pension benefit plan"
(as such term is defined in section 3 of ERISA) maintained at such time by
the Company or any ERISA Affiliate for employees of the Company or such
ERISA Affiliate, excluding any Multiemployer Plan.
Person -- means an individual, sole proprietorship, partnership,
corporation, trust, limited liability company, joint venture, unincorporated
organization, or a government or agency or political subdivision thereof.
Prepaid Principal -- has the meaning assigned to such term in the
definition of "Make-Whole Amount" set forth in this Section 9.1.
Prepayment Date -- has the meaning assigned to such term in the
definition of "Make-Whole Amount" set forth in this Section 9.1.
Property -- means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Purchasers -- Section 1.2(c).
Rabobank -- means Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank Nederland"), New York Branch.
Required Holders -- means, at any time, the holders of more than
sixty-six and two-thirds percent (66-2/3%) in principal amount of the Notes
at the time outstanding (exclusive of Notes then owned by any one or more of
the Company, any Subsidiary and any Affiliate).
Required Principal Prepayment -- Section 4.1(b).
Securities Act -- means the Securities Act of 1933, as amended from time
to time.
Security -- means "security" as defined in section 2(1) of the
Securities Act.
Senior Financial Officer -- means the chief financial officer, the
principal accounting officer, the treasurer or the comptroller of the
Company.
Senior Officer -- means the chief executive officer, the chief operating
officer, the president, the chief financial officer, the treasurer or the
secretary of the Company.
Source -- Section 1.3(b).
Subordinated Debt -- means, at any time, any unsecured Indebtedness of
the Company or a Subsidiary that is in any respect subordinate or junior in
right of payment or otherwise to the Indebtedness evidenced by the Notes or
to any other Indebtedness of the Company or any Subsidiary.
<PAGE>
Subsidiary -- means, at any time, any corporation of which the Company
owns, directly or indirectly, more than fifty percent (50%) (by number of
votes) of each class of the Voting Stock of such corporation at such time.
Subsidiary Guaranty -- means a Guaranty Agreement, substantially in the
form of Exhibit E hereto, executed by a Subsidiary in favor of the holders
of Notes pursuant to Section 6.16 hereof guarantying the Company's
obligations under the Note Purchase Agreements and the Notes.
Surviving Corporation -- Section 6.5(a).
Tangible Net Worth -- Section 6.6.
Total Subsidiary Indebtedness -- Section 6.8(c).
Transfers -- Section 6.5(c).
Voting Stock -- means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions).
Weighted Average Life to Maturity -- means, with respect to any
Prepayment Date and Prepaid Principal, the number of years obtained by
dividing (a) the Remaining Dollar-Years with respect to such Prepayment Date
and such Prepaid Principal by (b) such Prepaid Principal.
As used in this definition:
Remaining Dollar-Years -- means, with respect to any Prepayment Date
and Prepaid Principal, the result obtained by
(a) multiplying an amount equal to each then remaining required
payment of principal (including repayment at final maturity) of such
Indebtedness unpaid immediately prior to such date, by
(ii) the number of years (calculated to the nearest
one-twelfth (1/12)) that will elapse between such date and the
date each such required payment of principal is due, and
(b) calculating the sum of each of the products obtained in the
preceding clause (a).
Wholly-Owned Subsidiary -- means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity Securities (except directors'
qualifying shares) and voting Securities of which are owned by any one or
more of the Company and the other Wholly-Owned Subsidiaries at such time.
9.2 GAAP.
Unless otherwise provided herein, all financial statements delivered in
connection herewith will be prepared in accordance with GAAP as in effect on the
date of, or during the period covered by, such financial statement. Where the
character or amount of any asset or liability or item of income or expense, or
<PAGE>
any consolidation or other accounting computation is required to be made for any
purpose hereunder, it shall be done in accordance with GAAP as in effect on the
date of, or at the end of the period covered by, the financial statements from
which such asset, liability, item of income, or item of expense, is derived, or,
in the case of any such computation, as in effect on the date as of which such
computation is required to be determined, provided, that if any term defined
herein includes or excludes amounts, items or concepts that would not be
included in or excluded from such term if such term were defined with reference
solely to GAAP, such term will be deemed to include or exclude such amounts,
items or concepts as set forth herein. Whenever a calculation based on the
consolidated financial position or consolidated results of operations of a group
of Persons is required hereby, investments by members of the group in Persons
which are excluded hereby from such group shall be accounted for using the cost
method.
9.3 Directly or Indirectly.
Where any provision herein refers to action to be taken by any Person, or that
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any partnership in which such Person is a
general partner.
9.4 Section Headings and Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part of this
Agreement and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Agreement as
a whole and not to any particular Section or other subdivision.
(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of
each other covenant contained herein, and compliance with any one
covenant shall not (absent such an express contrary provision) be deemed
to excuse compliance with one or more other covenants.
9.5 Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, INTERNAL NEW YORK LAW.
10. MISCELLANEOUS
10.1 Communications.
(a) Method; Address. All communications hereunder or under the Notes
shall be in writing, shall be hand delivered, deposited into the United
States mail (registered or certified mail), postage prepaid, sent by
overnight courier or sent by facsimile transmission (confirmed by
delivery by overnight courier) and shall be addressed,
<PAGE>
(i) if to the Company,
Hudson Foods, Inc.
1225 Hudson Road
Rogers, Arkansas 72756
Attention: Charles B. Jurgensmeyer, Chief Financial Officer
and Executive Vice President, and Tommy D.
Reynolds, Secretary and Treasurer
Telephone: (501) 636-1100
Facsimile: (501) 631-5400,
or at such other address as the Company shall have furnished in
writing to each Purchaser and all other holders of the Notes at the time
outstanding, and
(ii) if to any of the holders of the Notes,
(A) if such holders are the Purchasers, at their respective
addresses set forth on Annex 1 hereto, and further including any parties
referred to on such Annex 1 that are required to receive notices in
addition to such holders of the Notes, and
(B) if such holders are not the Purchasers, at their respective
addresses set forth in the register for the registration and transfer of
Notes maintained pursuant to Section 5.1 hereof,
or to any such party at such other address as such party may designate by notice
duly given in accordance with this Section 10.1 to the Company (which other
address shall be entered in such register).
(b) When Given. Any communication properly addressed and sent in
accordance with Section 10.1(a) hereof shall be deemed to be received when
actually received at the address of the addressee.
10.2 Reproduction of Documents.
This Agreement and all documents relating hereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed,
(b) documents received by you at the Closing of your purchase of Notes
(except the Notes themselves), and
(c) financial statements, certificates and other information previously
or hereafter furnished to any Purchaser or any other holder of Notes,
may be reproduced by such Purchaser or such other holder of Notes by any
photographic, photostatic, microfilm, micro-card, miniature photographic,
digital or other similar process and each Purchaser or such other holder of
Notes may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by such
<PAGE>
Purchaser or such other holder of Notes in the regular course of business) and
that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence. Nothing in this Section 10.2 shall
prohibit the Company or any Purchaser or any other holder of Notes from
contesting the validity or the accuracy of any such reproduction.
10.3 Survival.
All warranties, representations, certifications and covenants made by the
Company herein or in any certificate or other instrument delivered by the
Company or on behalf of the Company hereunder shall be considered to have been
relied upon by you and shall survive the delivery to you of the Notes regardless
of any investigation made by you or on your behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company hereunder.
10.4 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto. The provisions hereof are intended to
be for the benefit of all holders, from time to time, of Notes, and shall be
enforceable by any such holder, whether or not an express assignment to such
holder of rights hereunder shall have been made by any Purchaser or any
Purchaser's successor or assign.
10.5 Amendment and Waiver.
(a) General Requirements. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Company and the Required Holders, provided that
(i) no such amendment or waiver shall, without the written consent
of the holders of all Notes (exclusive of Notes held by the Company, any
Subsidiary or any Affiliate) at the time outstanding,
(A) subject to Section 8 hereof, change the amount or time of
any prepayment or payment of principal or Make-Whole Amount or the
rate or time of payment of interest,
(B) amend Section 6.19 or Section 8 hereof,
(C) amend the definition of "Required Holders," or
(D) amend this Section 10.5; and
(ii) no amendment or waiver of any of the provisions of Section 1
through Section 4 hereof, inclusive, or any defined term used therein,
shall be effective as to any Purchaser or any other holder of Notes
unless agreed and consented to by such Purchaser or such other holder of
Notes in writing.
(b) Solicitation.
<PAGE>
(i) Solicitation. The Company shall not solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any
of the provisions hereof or the Notes unless each Purchaser and each
other holder of the Notes (irrespective of the amount of Notes then
owned by it) shall be provided by the Company with sufficient
information to enable it to make an informed decision with respect
thereto. Executed or true and correct copies of any waiver or consent
effected pursuant to the provisions of this Section 10.5 shall be
delivered by the Company to each Purchaser and each other holder of
outstanding Notes forthwith following the date on which the same shall
have been executed and delivered by all holders of outstanding Notes
required to consent or agree to such waiver or consent.
(ii) Payment. The Company shall not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
Purchaser or any other holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes of any waiver or
amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted,
ratably to all of the Purchasers and the other holders of all Notes then
outstanding.
(iii) Scope of Consent. Any consent made pursuant to this Section
10.5 by a holder of Notes that has transferred or has agreed to transfer
its Notes to the Company, any Subsidiary or any Affiliate and has
provided or has agreed to provide such written consent as a condition to
such transfer shall be void and of no force and effect except solely as
to such holder, and any amendments effected or waivers granted or to be
effected or granted that would not have been or would not be so effected
or granted but for such consent (and the consents of all other holders
of Notes that were acquired under the same or similar conditions) shall
be void and of no force and effect, retroactive to the date such
amendment or waiver initially took or takes effect, except solely as to
such holder.
(c) Binding Effect. Except as provided in Section 10.5(a) and Section
10.5(b)(iii) hereof, any amendment or waiver consented to as provided in
this Section 10.5 shall apply equally to all Purchasers and all other
holders of Notes and shall be binding upon them and upon each future holder
of any Note and upon the Company whether or not such Note shall have been
marked to indicate such amendment or waiver. No such amendment or waiver
shall extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right
consequent thereon.
10.6 Expenses.
The Company shall pay when billed
(a) all expenses incurred by any Purchaser and any other holder of Notes
in connection with the enforcement of any rights under this Agreement and
the Notes (including, without limitation, all fees and expenses of such
Purchaser's or such other holder's special counsel), and
<PAGE>
(b) all expenses relating to the consideration, negotiation, preparation
or execution of any amendments, waivers or consents pursuant to Section 10.5
and the other terms and provisions hereof, whether or not any such
amendments, waivers or consents are executed, including, without limitation
any amendments, waivers or consents resulting from any work-out,
restructuring or similar proceedings relating to the performance by the
Company of its obligations under this Agreement or the Notes.
10.7 Payments on Notes.
(a) Manner of Payment. The Company shall pay all amounts payable with
respect to each Note (without any presentment of such Notes and without any
notation of such payment being made thereon) by crediting, by federal funds
bank wire transfer, the account of the holder thereof in any bank in the
United States of America as may be designated in writing by such holder, or
in such other manner as may be reasonably directed or to such other address
in the United States of America as may be reasonably designated in writing
by such holder. Annex 1 hereto shall be deemed to constitute notice,
direction or designation (as appropriate) to the Company with respect to
payments as aforesaid. In the absence of such written direction, all amounts
payable with respect to each Note shall be paid by check mailed and
addressed to the registered holder of such Note at the address shown in the
register maintained by the Company pursuant to Section 5.1 hereof.
(b) Payments Due on Holidays. If any payment due on, or with respect to,
any Note shall fall due on a day other than a Business Day, then such
payment shall be made on the first Business Day following the day on which
such payment shall have so fallen due; provided that if all or any portion
of such payment shall consist of a payment of interest, for purposes of
calculating such interest, such payment shall be deemed to have been
originally due on such first following Business Day, such interest shall
accrue and be payable to (but not including) the actual date of payment, and
the amount of the next succeeding interest payment shall be adjusted
accordingly.
(c) Payments, When Received. Any payment to be made to the holders of
Notes hereunder or under the Notes shall be deemed to have been made on the
Business Day such payment actually becomes available to such holder at such
holder's bank prior to 11:00 a.m. (local time of such bank).
10.8 Jurisdiction; Service of Process
THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, OR ANY
ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH HEREUNDER OR UNDER THE NOTES, BROUGHT BY ANY PURCHASER OR ANY OTHER
REGISTERED HOLDER OF A NOTE AGAINST THE COMPANY OR ANY OF ITS PROPERTY, MAY BE
BROUGHT BY SUCH PERSON IN THE COURTS OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR ANY STATE COURT SITTING IN NEW YORK, NEW YORK,
AS SUCH PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE MAY IN ITS SOLE
DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE IN PERSONAM
JURISDICTION OF EACH SUCH COURT, AND AGREES THAT PROCESS SERVED EITHER
PERSONALLY OR BY REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY
<PAGE>
LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, AND THE COMPANY IRREVOCABLY
WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE,
ANY CLAIM THAT THE COMPANY IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY
SUCH COURT. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR
ANY COMMERCIAL DELIVERY SERVICE. IN ADDITION, THE COMPANY HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT THE COMPANY
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND/OR THE NOTES,
BROUGHT IN SUCH COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OF ANY PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE TO SERVE ANY SUCH
WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO
OBTAIN JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. THE COMPANY AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.
10.9 Entire Agreement.
This Agreement constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
10.10 Duplicate Originals, Execution in Counterpart.
Two (2) or more duplicate originals hereof may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed in one or more counterparts
and shall be effective when at least one counterpart shall have been executed by
each party hereto, and each set of counterparts that, collectively, show
execution by each party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank; next page is signature page.]
<PAGE>
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.
Very truly yours,
HUDSON FOODS, INC.
By
Name:
Title:
Accepted:
[PURCHASER]
By
Name:
Title:
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASERS
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER (Cont.)
NOTE PURCHASE AGREEMENT
Annex 1-1
<PAGE>
NOTE PURCHASE AGREEMENT
Annex 2-1
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING
<PAGE>
NOTE PURCHASE AGREEMENT
Annex 3-1
ANNEX 3
INFORMATION AS TO COMPANY AND SUBSIDIARIES
<PAGE>
ANNEX 2
INFORMATION AS TO COMPANY AND SUBSIDIARIES (Cont.)
NOTE PURCHASE AGREEMENT
Annex 3-1
<PAGE>
NOTE PURCHASE AGREEMENT
Annex 4-1
ANNEX 4
INFORMATION AS TO BUSINESS COVENANTS
<PAGE>
FORM OF NOTE
A-2
EXHIBIT A
FORM OF NOTE
HUDSON FOODS, INC.
6.69% SENIOR NOTE DUE DECEMBER 28, 2005
No. R-[_] PPN: 443782 A# 4
$[________] December 28, 1995
HUDSON FOODS, INC. (the "Company"), a Delaware corporation, for value received,
hereby promises to pay to [______] or registered assigns the principal sum of
[______] DOLLARS ($[______]) on December 28, 2005 and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) on the unpaid principal
balance hereof from the date of this Note at the rate of six and sixty-nine
one-hundreds percent (6.69%) per annum, payable monthly in arrears on the
twenty-eighth (28th) day of each calendar month in each year, commencing on the
later of January 28, 1996 or the first interest payment date following the date
of this Note, until the principal amount hereof shall become due and payable;
and to pay on demand interest on any overdue principal (including any overdue
partial payment of principal) and Make-Whole Amount, if any, and (to the extent
permitted by applicable law) on any overdue installment of interest (the due
date of such payments to be determined without giving effect to any grace
period), at a rate per annum equal to the lesser of (a) the highest rate allowed
by applicable law or (b) the greater of (i) eight and sixty-nine one-hundredths
percent (8.69%), or (ii) two percent (2%) per annum in excess of the prime rate
of interest of Morgan Guaranty Trust Company in New York City as publicly
announced and in effect on the first day of each calendar month, from month to
month.
Payments of principal, Make-Whole Amount, if any, and interest shall be made in
such coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts to the registered
holder hereof at the address shown in the register maintained by the Company for
such purpose, in the manner provided in the Note Purchase Agreement (defined
below).
This Note is one of an issue of Notes of the Company issued in an aggregate
principal amount limited to Fifty-Five Million Dollars ($55,000,000) pursuant to
the Company's separate Note Purchase Agreements (collectively, as amended from
time to time, the "Note Purchase Agreement"), each dated as of December 28,
1995, with the purchasers listed on Annex 1 thereto, is entitled to the benefits
thereof and subject to the terms thereof, and the terms of which are
incorporated herein by reference. Capitalized terms used herein and not defined
herein have the meanings specified in the Note Purchase Agreement.
As provided in the Note Purchase Agreement, (i) a portion of the principal of
this Note must be repaid (and will become due and payable) prior to the stated
<PAGE>
maturity hereof, (ii) all or a portion of the principal of this Note may be
repaid at the option of the Company (and will, on the exercise of such option,
become due and payable) prior to the stated maturity hereof and a Make-Whole
Amount may be due in connection therewith, and (iii) all of the principal of
this Note (together with any applicable Make-Whole Amount) may, under certain
circumstances, be declared due and payable in the manner and with the effect
provided in the Note Purchase Agreement.
This Note is a registered Note and is transferable only by surrender thereof at
the principal office of the Company as specified in the Note Purchase Agreement,
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of this Note or its attorney duly authorized in
writing.
THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.
HUDSON FOODS, INC.
By:
Name:
Title:
<PAGE>
FORM OF SUBSIDIARY GUARANTY
E-3
EXHIBIT E
FORM OF SUBSIDIARY GUARANTY
GUARANTY
THIS GUARANTY (as amended from time to time, this "Guaranty"), dated as of
[_______ __, ____], by [____________] (together with its successors and assigns,
the "Guarantor"), a[n] [__________] corporation, in favor of each of the holders
of Notes (as defined below).
W I T N E S S E T H:
WHEREAS, Hudson Foods, Inc., a Delaware corporation (together with its
successors, assigns and transferees, the "Company"), entered into those certain
separate Note Purchase Agreements (collectively, as amended, modified, waived or
restated from time to time, the "Note Purchase Agreement"), each dated as of
December 28, 1995, with, respectively, each of the purchasers listed on Annex 1
thereto (the "Purchasers"), which provide, among other things, for the issuance
and sale to the Purchasers of the Company's 6.69% Senior Notes due December 28,
2005 (which notes, together with any notes delivered in substitution or exchange
for any such notes, are herein referred to individually as a "Note," and
collectively, as the "Notes") in the aggregate principal amount of Fifty-Five
Million Dollars ($55,000,000); and
WHEREAS, the Purchasers, subject to the terms and conditions of the Note
Purchase Agreement, agreed to purchase the Notes from the Company on the
condition that, among other things, the Company shall, pursuant to Section 6.16
of the Note Purchase Agreement, cause the Guarantor to guaranty the payment and
performance of all obligations of the Company arising under, or in respect of,
the Notes, the Note Purchase Agreement, and all other documents executed in
connection therewith, and agree to be bound by the terms and provisions of the
Note Purchase Agreement, all as hereinafter provided; and
WHEREAS, the Guarantor is a [wholly-owned] subsidiary of the Company and has or
will derive direct and indirect economic, financial and other benefits from the
Indebtedness incurred under the Note Purchase Agreement and the Notes by the
Company, and under this Guaranty by the Guarantor, and the incurrence of such
Indebtedness is in the best interests of the Guarantor; and
WHEREAS, the Guarantor desires and is willing to execute this Guaranty in
accordance with the requirements of the Note Purchase Agreement, and all acts
and proceedings required by law and by the certificate of incorporation and
bylaws of the Guarantor necessary to constitute this Guaranty a valid and
binding agreement for the uses and purposes set forth herein in accordance with
its terms have been done and taken, and the execution and delivery hereof has
been in all respects duly authorized;
<PAGE>
NOW THEREFORE, in consideration of the premises and mutual agreements set forth
herein, and other good and valuable consideration to the Guarantor paid (the
receipt and sufficiency of which are hereby acknowledged), the Guarantor hereby
agrees as follows:
11. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS
11.1 Guarantied Obligations
The Guarantor hereby irrevocably, unconditionally and absolutely guarantees to
each holder of Notes, as and for the Guarantor's own debt, until final and
indefeasible payment has been made:
(a) the due and punctual payment by the Company of the principal of, and
interest, and the Make-Whole Amount (if any) on, the Notes at any time
outstanding and the due and punctual payment of all other amounts payable,
and all other indebtedness owing, by the Company to the holders of the Notes
under the Note Purchase Agreement and the Notes (all such obligations so
guarantied are herein collectively referred to as the "Guarantied
Obligations"), in each case when and as the same shall become due and
payable, whether at maturity, pursuant to mandatory or optional prepayment,
by acceleration or otherwise, all in accordance with the terms and
provisions thereof; it being the intent of the Guarantor that the guaranty
set forth herein (the "Unconditional Guaranty") shall be a guaranty of
payment and not a guaranty of collection; and
(b) the punctual and faithful performance, keeping, observance, and
fulfillment by the Company of all duties, agreements, covenants and
obligations of the Company contained in the Note Purchase Agreement and the
Notes.
11.2 Performance Under Note Purchase Agreement
In the event the Company fails to make, on or before the due date thereof, any
payment of the principal of, or interest or the Make-Whole Amount (if any) on,
the Notes or of any other amounts payable, or any other indebtedness owing, to
the holders of the Notes under the Note Purchase Agreement or any of the Notes
or if the Company shall fail to perform, keep, observe, or fulfill any other
obligation referred to in clause (a) or clause (b) of Section 1.1 hereof in the
manner provided in the Notes or in the Note Purchase Agreement after, in each
case, giving effect to any applicable grace periods or cure provisions or
waivers or amendments, the Guarantor shall cause forthwith to be paid the
moneys, or to be performed, kept, observed, or fulfilled each of such
obligations, in respect of which such failure has occurred in accordance with
the terms and provisions of the Note Purchase Agreement and the Notes. In
furtherance of the foregoing, if an Event of Default shall exist, all of the
Guarantied Obligations shall, in the manner and subject to the limitations
provided in the Note Purchase Agreement for the acceleration of the Notes
(including, without limitation, the provisions related to the annulment
thereof), forthwith become due and payable without notice, regardless of whether
the acceleration of the Notes shall be stayed, enjoined, delayed or otherwise
prevented.
11.3 Waivers
<PAGE>
To the fullest extent permitted by law, the Guarantor does hereby waive:
(a) notice of acceptance of this Guaranty;
(b) notice of any purchase of the Notes under the Note Purchase
Agreement, or the creation, existence or acquisition of any of the
Guarantied Obligations, subject to the Guarantor's right to make inquiry of
each holder of Notes to ascertain the amount of the Guarantied Obligations
at any reasonable time;
(c) notice of the amount of the Guarantied Obligations, subject to the
Guarantor's right to make inquiry of each holder of Notes to ascertain the
amount of the Guarantied Obligations at any reasonable time;
(d) notice of adverse change in the financial condition of the Company
or any other fact that might increase or expand the Guarantor's risk
hereunder;
(e) notice of presentment for payment, demand, protest, and notice
thereof as to the Notes or any other instrument;
(f) notice of any Default or Event of Default;
(g) all other notices and demands to which the Guarantor might otherwise
be entitled (except if such notice or demand is specifically otherwise
required to be given to the Guarantor pursuant to the terms of this
Guaranty);
(h) the right by statute or otherwise to require any holder of Notes to
institute suit against the Company or any other Person or to exhaust the
rights and remedies of such holder of Notes against the Company or any other
Person, the Guarantor being bound to the payment of each and all Guarantied
Obligations, whether now existing or hereafter accruing, as fully as if such
Guarantied Obligations were directly owing to the holders of Notes by the
Guarantor;
(i) any defense arising by reason of any disability or other defense
(other than the defense that the Guarantied Obligations shall have been
fully and finally performed and indefeasibly paid) of the Company or by
reason of the cessation from any cause whatsoever of the liability of the
Company in respect thereof, and any other defense that the Guarantor may
otherwise have against the Company or any holder of Notes; and
(j) any stay (except in connection with a pending appeal), valuation,
appraisal, redemption or extension law now or at any time hereafter in force
which, but for this waiver, might be applicable to any sale of Property of
the Guarantor made under any judgment, order or decree based on this
Guaranty, and the Guarantor covenants that it will not at any time insist
upon or plead, or in any manner claim or take the benefit or advantage of
such law.
11.4 Certain Waivers of Subrogation, Reimbursement and Indemnity.
The Guarantor hereby acknowledges and agrees that
<PAGE>
(a) the Guarantor shall not have any right of subrogation, contribution,
reimbursement, or indemnity whatsoever in respect of the Guarantied
Obligations, and no right of recourse to or with respect to any assets or
Property of the Company,
(b) it will not file any claims against the Company or the estate of the
Company in the course of any proceeding under any applicable bankruptcy or
insolvency law in respect of the rights referred to in this Section 1.4, and
(c) each holder of Notes may specifically enforce the provisions of this
Section 1.4.
Nothing shall discharge or satisfy the obligations of the Guarantor hereunder
except the full and final performance and indefeasible payment of the Guarantied
Obligations.
11.5 Releases
The Guarantor consents and agrees that, without notice to or by the Guarantor
and without impairing, releasing, abating, deferring, suspending, reducing,
terminating or otherwise affecting the obligations of the Guarantor hereunder,
each holder of Notes, in the manner provided herein, by action or inaction, may:
(a) compromise or settle, renew or extend the period of duration or the
time for the payment, or discharge the performance of, or may refuse to, or
otherwise not, enforce, or may, by action or inaction, release all or any
one or more parties to, any one or more of the Notes or the Note Purchase
Agreement;
(b) assign, sell or transfer, or otherwise dispose of, any one or more
of the Notes;
(c) grant waivers, extensions, consents and other indulgences to the
Company or any other Person in respect of any one or more of the Notes or
the Note Purchase Agreement;
(d) amend, modify or supplement in any manner and at any time (or from
time to time) any one or more of the Notes or the Note Purchase Agreement;
(e) release or substitute any one or more of the endorsers or guarantors
of the Guarantied Obligations whether parties hereto or not;
(f) sell, exchange, release or surrender any Property at any time
pledged or granted as security in respect of the Guarantied Obligations,
whether so pledged or granted by the Guarantor or another guarantor of the
Company's obligations under the Note Purchase Agreement and the Notes; and
(g) exchange, enforce, waive, or release, by action or inaction, any
security for the Guarantied Obligations or any other guaranty of any of the
Notes.
<PAGE>
11.6 Marshaling
The Guarantor consents and agrees that:
(a) no holder of Notes shall be under any obligation to marshal any
assets in favor of the Guarantor or against or in payment of any or all of
the Guarantied Obligations; and
(b) to the extent the Company or another Person makes a payment or
payments to any holder of Notes, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, or required, for any of the foregoing reasons or
for any other reason, to be repaid or paid over to a custodian, trustee,
receiver, or any other party under any bankruptcy law, common law, or
equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof intended to be satisfied thereby shall be revived
and continued in full force and effect as if said payment or payments had
not been made and the Guarantor shall be primarily liable for such
obligation.
11.7 Liability
The Guarantor agrees that its liability in respect of this Guaranty shall be
immediate and shall not be contingent upon the exercise or enforcement by any
holder of Notes of whatever remedies any such holder may have against the
Company or any other Person or the enforcement of any Lien or realization upon
any security any such holder may at any time possess.
11.8 Primary Obligation
The Unconditional Guaranty set forth herein is a primary and original obligation
of the Guarantor and is an absolute, unconditional, continuing and irrevocable
guaranty of payment and performance and shall remain in full force and effect
(except as set forth in Section 1.16 hereof) until the full, final and
indefeasible payment of the Guarantied Obligations without respect to future
changes in conditions, including, without limitation:
(a) any change of law or any invalidity or irregularity with respect to
the issuance or assumption of any obligations (including, without
limitation, the Notes) of or by any of the Company or the Guarantor, or with
respect to the execution and delivery of any agreement (including, without
limitation, the Notes, the Note Purchase Agreement and this Guaranty) of or
by any of the Company or the Guarantor;
(b) the genuineness, validity, regularity or enforceability of any of
the Guarantied Obligations;
(c) any default, failure or delay, willful or otherwise, in the
performance of any obligations by the Company;
(d) any event or condition described in Section 1.5 hereof;
<PAGE>
(e) the occurrence of any event or the existence of any condition
specified in Section 8.1(g), Section 8.1(h) or Section 8.1(i) of the Note
Purchase Agreement with respect to the Company or any Subsidiary;
(f) any change in the ownership of the Voting Stock or other equity
Securities of the Company or the Guarantor;
(g) the impossibility or illegality of performance on the part of the
Company under the Note Purchase Agreement, the Notes or this Guaranty;
(h) any change of circumstances of the Company, the Guarantor or any
other Person, whether or not foreseen or foreseeable, whether or not
imputable to the Company or the Guarantor, including, without limitation,
impossibility of performance through fire, explosion, accident, labor
disturbance, floods, droughts, embargoes, wars (whether or not declared),
civil commotions, acts of God or the public enemy, delays or failure of
suppliers or carriers, inability to obtain materials, economic or political
conditions, or any other causes affecting performance, or any other force
majeure, whether or not beyond the control of the Company or the Guarantor
and whether or not of the kind hereinbefore specified;
(i) any attachment, claim, demand, charge, lien, order, process,
encumbrance or any other happening or event or reason, similar or dissimilar
to the foregoing, or any withholding or diminution at the source, by reason
of any taxes, assessments, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and whether or not
valid, incurred by or against any Person, or any claims, demands, charges,
liens or encumbrances of any nature, foreseen or unforeseen, incurred by any
Person, or against any sums payable under the Note Purchase Agreement or the
Notes, so that such sums would be rendered inadequate or would be
unavailable to make the payment herein provided;
(j) any order, judgment, decree, ruling or regulation (whether or not
valid) of any court of any nation or of any political subdivision thereof or
any body, agency, department, official or administrative or regulatory
agency of any nation or any political subdivision thereof; or
(k) any other change or circumstance whatsoever.
11.9 Election to Perform Obligations
Any election by the Guarantor to pay or otherwise perform any of the obligations
of the Company under the Notes or the Note Purchase Agreement shall not release
the Company from such obligations or any of the Company's other obligations
under the Notes or the Note Purchase Agreement.
11.10 No Election
Each holder of Notes shall, individually or collectively, have the right to seek
recourse against the Guarantor to the fullest extent provided for herein for the
Guarantor's obligations under this Guaranty in respect of the Notes. No election
to proceed in one form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of such holder's right to proceed in any
other form of action or proceeding or against other parties unless such holder
<PAGE>
has expressly waived such right in writing. Specifically, but without limiting
the generality of the foregoing, no action or proceeding by any holder of Notes
against the Company or the Guarantor under any document or instrument evidencing
obligations of the Company or the Guarantor to such holder of Notes shall serve
to diminish the liability of the Guarantor under this Guaranty, except to the
extent that such holder of Notes finally and unconditionally shall have realized
payment by such action or proceeding, notwithstanding the effect of any such
action or proceeding upon the Guarantor's right of subrogation against the
Company.
11.11 Severability
Subject to Section 8 of the Note Purchase Agreement, each of the rights and
remedies granted under this Guaranty to each holder of Notes in respect of the
Notes held by such holder may be exercised by such holder without notice by such
holder to, or the consent of or any other action by, any other holder of Notes.
11.12 Other Enforcement Rights
Each holder of Notes may proceed, as provided in Section 1.11 hereof, to protect
and enforce this Guaranty by suit or suits or proceedings in equity, at law or
in bankruptcy, and whether for the specific performance of any covenant or
agreement contained herein or in execution or aid of any power herein granted;
or for the recovery of judgment for the obligations hereby guarantied or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law. Each holder of Notes shall have, to the fullest extent permitted
by law and this Guaranty, a right of set-off against any and all credits and any
and all other Property of the Guarantor, now or at any time whatsoever with, or
in the possession of, such holder of Notes, or anyone acting for such holder, to
ensure the full performance of any and all obligations of the Guarantor
hereunder.
11.13 Delay or Omission; No Waiver
No course of dealing on the part of any holder of Notes and no delay or failure
on the part of any such holder to exercise any right hereunder shall impair such
right or operate as a waiver of such right or otherwise prejudice such holder's
rights, powers and remedies hereunder. Every right and remedy given by this
Guaranty or by law to any holder of Notes may be exercised from time to time as
often as may be deemed expedient by such Person.
11.14 Restoration of Rights and Remedies
If any holder of Notes shall have instituted any proceeding to enforce any right
or remedy under this Guaranty, under the Note Purchase Agreement or under any
Note held by such holder of Notes, and such proceeding shall have been
dismissed, discontinued or abandoned for any reason, or shall have been
determined adversely to such holder, then and in every such case each such
holder, the Company and the Guarantor shall, except as may be limited or
affected by any determination (including, without limitation, any determination
in connection with any such dismissal) in such proceeding, be restored severally
and respectively to its respective former positions hereunder and thereunder,
and thereafter, subject as aforesaid, the rights and remedies of such holders of
Notes shall continue as though no such proceeding had been instituted.
<PAGE>
11.15 Cumulative Remedies
No remedy under this Guaranty, the Note Purchase Agreement or the Notes is
intended to be exclusive of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given pursuant to this
Guaranty, the Note Purchase Agreement or the Notes.
11.16 Survival
So long as the Guarantied Obligations shall not have been fully and finally
performed and indefeasibly paid, the obligations of the Guarantor under this
Guaranty shall survive the transfer and payment of any Note and the payment in
full of all the Notes.
11.17 No Setoff, Counterclaim or Other Deduction
Except as otherwise required by law, each payment by the Guarantor shall be made
without setoff, counterclaim or other deduction.
11.18 Notices in Respect of Payments.
If the Guarantor shall pay to any holder of a Note any amount in respect of the
Guarantied Obligations, the Guarantor, within five (5) Business Days after
making such payment, shall provide notice of such payment to each other holder
of a Note.
INTERPRETATION OF THIS GUARANTYIS GUARANTY
12.1 Terms Defined
As used in this Guaranty, the capitalized terms have the meaning specified in
the Note Purchase Agreement unless otherwise set forth in this Guaranty (such
definitions, unless otherwise expressly provided, to be equally applicable to
both the singular and plural forms of the terms defined).
12.2 Paragraph Headings and Construction
(a) Paragraph Headings, etc. The titles of the paragraphs appear as a
matter of convenience only, do not constitute a part hereof and shall not
affect the construction hereof. The words "herein," "hereof," "hereunder"
and "hereto" refer to this Guaranty as a whole and not to any particular
paragraph or other subdivision.
(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant shall
not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
WARRANTIES AND REPRESENTATIONS
The Guarantor represents and warrants to each holder of Notes, as of the date of
effectiveness hereof, as follows:
<PAGE>
13.1 Generally.
(a) The Guarantor is fully aware of the financial condition of the
Company. The Guarantor delivers this guaranty based solely upon its own
independent investigation and in no part upon any representation or
statement of any one or more of the holders of Notes with respect thereto.
The Guarantor is in a position to obtain, and hereby assumes full
responsibility for obtaining, any additional information concerning the
financial condition of the Company as the Guarantor may deem material to its
obligations hereunder, and the Guarantor is neither relying upon, nor
expecting, any holder of Notes to furnish it any information concerning the
financial condition of the Company.
(b) The Guarantor is a corporation duly organized and validly existing
and in good standing under the laws of if its jurisdiction of organization.
The Guarantor has the corporate power to own its properties and carry on its
business as it is now being conducted. The Guarantor has the valid authority
and the corporate power to enter into and perform, and has taken all
necessary action to authorize the entry into, and the performance and
delivery of, this Guaranty and the transactions contemplated hereby.
(c) This Guaranty has been duly authorized by all necessary action on
the part of the Guarantor, has been duly executed and delivered by a duly
authorized officer of the Guarantor, and constitutes a legal, valid and
binding obligation of the Guarantor.
(d) The entry into and performance of this Guaranty and the transactions
contemplated hereby do not and will not conflict with any applicable law or
regulation or official or judicial order, conflict with the certificate of
incorporation or bylaws of the Guarantor, conflict with any agreement or
document to which the Guarantor is a party or that is binding upon it or any
of its Properties, or result in the creation or imposition of any Lien on
any of its Properties pursuant to the provisions of any agreement or
document.
(e) Neither the legal nature of the Guarantor, nor any of its businesses
and Properties, nor any relationship between or among the Guarantor or any
other Person, nor any circumstance in connection with the execution or
delivery of this Guaranty, is such as to require any authorization, consent,
approval, license, registration, notarization, exemption or other action by
or notice to or filing with any court or administrative or governmental body
or agency having jurisdiction over the Guarantor or the Company or any of
their respective properties or businesses, in connection with the execution
and delivery of this Guaranty or the fulfillment of and compliance with the
terms and provisions hereof.
(f) The warranties and representations contained in Section 2 of the
Note Purchase Agreement are true in all material respects on the date hereof
with the same effect as though made on and as of the date hereof.
13.2 Nature of Business of Company and Subsidiaries.
The Company, the Guarantor and all of the other Subsidiaries are, and will be,
as to financing and capital raising activities, operated as part of one
<PAGE>
consolidated business entity and the Guarantor is directly or indirectly
dependent upon the Company and each other Subsidiary for and in connection with
its business activities and its financial resources.
13.3 Solvency.
The fair value of the business and assets of the Company and the Guarantor is in
excess of the amount that will be required to pay its respective liabilities
(including, without limitation, contingent, subordinated, unmatured and
unliquidated liabilities on existing debts, as such liabilities may become
absolute and matured), in each case both prior to and after giving effect to the
transactions contemplated by this Guaranty. After giving effect to the
transactions contemplated by this Guaranty, neither the Company nor the
Guarantor will be engaged in any business or transaction, or about to engage in
any business or transaction, for which it has unreasonably small capital, and
neither the Company nor the Guarantor has or had any intent to hinder, delay or
defraud any entity to which it is, or will become, on or after the date hereof,
indebted or to incur debts that would be beyond its ability to pay as such debts
mature.
GENERAL COVENANTSL COVENANTS
The Guarantor covenants and agrees that on and after the date hereof and so long
as any of the Guarantied Obligations shall be outstanding:
14.1 Undertakings in Note Purchase Agreement
The Guarantor will be bound by the terms and provisions of the Note Purchase
Agreement. Without limiting the generality of the foregoing, the Guarantor will
comply with each of the undertakings of the Company in the Note Purchase
Agreement in respect of which the Company undertakes to cause a Subsidiary
generally or the Guarantor specifically to comply with such undertakings, as if
such undertakings (as they apply to the Guarantor) were set forth at length
herein as the undertakings of the Guarantor.
14.2 Payment of Notes and Maintenance of Office
The Guarantor will punctually pay, or cause to be paid, all of the Guarantied
Obligations when due and all other payment obligations required of it hereunder
and will maintain an office at its address as set forth in paragraph 5.3 where
notices, presentations and demands in respect of this Guaranty may be made upon
it. Such office will be maintained at such address until such time as the
Guarantor shall notify the holders of Notes of any change of location of such
office.
14.3 Further Assurances
The Guarantor will cooperate with the holders of Notes and execute such further
instruments and documents as the Required Holders shall reasonably request to
carry out, to the reasonable satisfaction of the Required Holders, the
transactions contemplated by this Guaranty and the Note Purchase Agreement.
15. MISCELLANEOUS
<PAGE>
15.1 Successors and Assigns.
(a) Whenever the Guarantor or any of the parties to the Note Purchase
Agreement is referred to, such reference shall be deemed to include the
successors and assigns of such party, and all the covenants, promises and
agreements contained in this Guaranty by or on behalf of the Guarantor shall
bind the successors and assigns of the Guarantor and shall inure to the
benefit of each of the holders, from time to time, of the Notes, whether so
expressed or not and whether or not an assignment of the rights hereunder
shall have been delivered in connection with any assignment or other
transfer of Notes.
(b) The Guarantor agrees to take such action as may be reasonably
requested by any holder of Notes in connection with the purchase by such
holder or the transfer of the Notes of such holder in accordance with the
requirements of the Note Purchase Agreement in connection with providing an
executed copy of this Guaranty to the new holder or holders of such Notes,
provided that no additional obligations of the Guarantor shall thereby be
created (beyond what is provided by this Guaranty).
15.2 Partial Invalidity.
The unenforceability or invalidity of any provision or provisions hereof shall
not render any other provision or provisions contained herein unenforceable or
invalid.
15.3 Communications.
All communications to the holders of Notes or the Company hereunder shall be in
writing, shall be delivered in the manner, to the addresses, and with the
effect, as provided by the Note Purchase Agreement. Notices to the Guarantor
shall be addressed as indicated on Annex 1, or as the Guarantor shall from time
to time notify the holders of Notes in writing.
15.4 Governing Law.
THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, INTERNAL NEW YORK LAW.
15.5 Jurisdiction; Service of Process
THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, THE NOTES OR
THE NOTE PURCHASE AGREEMENT, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE
ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR UNDER THE NOTES OR
THE NOTE PURCHASE AGREEMENT, BROUGHT BY ANY HOLDER OF A NOTE AGAINST THE
GUARANTOR OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH HOLDER IN THE COURTS OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY
STATE COURT SITTING IN NEW YORK, NEW YORK, AS SUCH HOLDER OF A NOTE MAY IN ITS
SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS GUARANTY, THE
GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE IN
PERSONAM JURISDICTION OF EACH SUCH COURT, AND AGREES THAT PROCESS SERVED EITHER
PERSONALLY OR BY REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY
LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, AND THE GUARANTOR IRREVOCABLY
<PAGE>
WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE,
ANY CLAIM THAT THE GUARANTOR IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF
ANY SUCH COURT. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR
ANY COMMERCIAL DELIVERY SERVICE. IN ADDITION, THE GUARANTOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT THE GUARANTOR
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AND/OR THE NOTES AND/OR
THE NOTE PURCHASE AGREEMENT BROUGHT IN SUCH COURTS, AND HEREBY IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY
BE DEEMED TO LIMIT THE ABILITY OF ANY HOLDER OF A NOTE TO SERVE ANY SUCH WRITS,
PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE GUARANTOR IN SUCH OTHER JURISDICTION, AND IN SUCH MANNER,
AS MAY BE PERMITTED BY APPLICABLE LAW. THE GUARANTOR AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.
15.6 Effective Date.
This Guaranty shall be effective as of the date first written above.
<PAGE>
FORM OF SUBSIDIARY GUARANTY
E-17
FORM OF SUBSIDIARY GUARANTY
E-12
15.7 Benefits of Guaranty Restricted to Noteholders.
Nothing express or implied in this Guaranty is intended or shall be construed to
give to any Person other than the Guarantor and the holders of Notes any legal
or equitable right, remedy or claim under or in respect hereof or any covenant,
condition or provision therein or herein contained; and all such covenants,
conditions and provisions are and shall be held to be for the sole and exclusive
benefit of the Guarantor and the holders of Notes.
15.8 Survival of Representations and Warranties.
All representations and warranties contained herein or made in writing by the
Guarantor in connection herewith shall survive the execution and delivery
hereof.
15.9 Expenses.
(a) The Guarantor shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees) incurred by the holders of
Notes in connection with the consideration, negotiation, preparation or
execution of any amendments, waivers, consents, standstill agreements and
other similar agreements with respect hereto (whether or not any such
amendments, waivers, consents, standstill agreements or other similar
agreements are executed).
(b) At any time when the Company or the Guarantor and the holders of
Notes are conducting restructuring or workout negotiations in respect
hereof, or a Default or Event of Default exists, the Guarantor shall pay
when billed the reasonable costs and expenses (including reasonable
attorneys' fees and the reasonable fees of professional advisors) incurred
by the holders of Notes in connection with the assessment, analysis or
enforcement of any rights or remedies that are or may be available to the
holders of the Notes.
(c) If the Guarantor shall fail to pay when due any principal of, or
Make-Whole Amount or interest on, any Note, the Guarantor shall pay to each
holder of Notes, to the extent permitted by law, such amounts as shall be
sufficient to cover the costs and expenses, including but not limited to
reasonable attorneys' fees, incurred by such holder in collecting any sums
due on such Notes.
15.10 Amendment.
This Guaranty may be amended only in a writing executed by the Guarantor and the
Required Holders.
<PAGE>
15.11 Entire Agreement.
This Guaranty constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
15.12 Duplicate Originals.
Two or more duplicate counterpart originals hereof may be signed by the parties,
each of which shall be an original but all of which together shall constitute
one and the same instrument.
[Remainder of page intentionally blank. Next page is signature page.]
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed on its
behalf by a duly authorized officer of the Guarantor.
[GUARANTOR]
By
Name:
Title:
<PAGE>
E-18
Annex 1
Address of Guarantor:
[To be added at the time of execution and delivery of the Guaranty.]
<PAGE>
[Execution Copy]
=================================================================
HUDSON FOODS, INC.
$50,000,000
6.63% SENIOR NOTES DUE MARCH 22, 2006
---------------
NOTE AGREEMENT
---------------
Dated as of March 22, 1996
=================================================================
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
1. Authorization of Issues of Notes........................................-2-
2. Purchase and Sale of Notes..............................................-2-
3. Conditions of Closing...................................................-2-
3A. Certain Documents.............................................-2-
3B. Opinion of Purchasers' Special Counsel........................-2-
3C. Representations and Warranties; No Default....................-3-
3D. Good Standing Certificate.....................................-3-
3E. Legality......................................................-3-
3F. Private Placement Number......................................-3-
3G. Structuring Fee...............................................-3-
3H. Compliance with this Agreement................................-3-
3I. Proceedings...................................................-3-
4. Prepayments.............................................................-4-
4A. Required Prepayments..........................................-4-
4B. Optional Prepayment With Yield-Maintenance Amount.............-4-
4C. Notice of Optional Prepayment.................................-4-
4D. Partial Payments Pro Rata.....................................-4-
4E. Retirement of Notes...........................................-5-
5. Affirmative Covenants...................................................-5-
5A. Financial Statements..........................................-5-
5B. Officer's Certificates........................................-9-
5C. Accountants' Certificates.....................................-9-
5D. Inspection...................................................-10-
5E. Equal and Ratable Lien; Equitable Lien.......................-10-
5F. Payment of Taxes and Claims..................................-10-
5G. Maintenance of Properties; Corporate Existence; etc..........-11-
5H. Payment of Notes and Maintenance of Office...................-12-
5I. Guaranties of Subsidiaries...................................-12-
6. Negative Covenants.....................................................-13-
6A. Financial Covenants..........................................-13-
6A(1) Tangible Net Worth................................-13-
6A(2) Working Capital; Current Ratio....................-14-
6A(3) Leverage Ratio....................................-14-
6A(4) Cash Flow Coverage Ratio..........................-15-
6A(5) Current Debt......................................-16-
6B. Dividends and Prepayments on Subordinated Debt...............-16-
6C. Liens, Debt, and Other Restrictions..........................-17-
6C(1) Liens.............................................-17-
6C(2) Limitations on Indebtedness.......................-19-
6C(3) Restricted Investments............................-22-
6C(4) Merger, Consolidation, Transfers of Property, etc.-23-
6C(5) Operating Lease Rentals...........................-24-
6D. Transactions with Affiliates.................................-24-
6E. Capital Expenditures.........................................-24-
6F. Nature of Business...........................................-25-
<PAGE>
6G. ERISA........................................................-25-
6H. Private Offering.............................................-26-
6I. Certain Accounting Matters...................................-26-
7. Events of Default......................................................-26-
7A. Acceleration.................................................-26-
7B. Rescission of Acceleration...................................-30-
7C. Notice of Acceleration or Rescission.........................-30-
7D. Other Remedies...............................................-30-
8. Representations, Covenants and Warranties..............................-30-
8A. Corporate Organization and Authority.........................-31-
8B. Financial Statements; Indebtedness; Material Adverse Change..-31-
8C. Nature of Business...........................................-32-
8D. Subsidiaries and Affiliates..................................-32-
8E. Title to Properties; Leases; Patents, Trademarks, etc........-32-
8F. Taxes........................................................-33-
8G. Pending Litigation...........................................-34-
8H. Full Disclosure..............................................-34-
8I. Charter Instruments, Other Agreements, etc...................-34-
8J. Restrictions on Company and Subsidiaries.....................-35-
8K. Compliance with Law..........................................-35-
8L. ERISA........................................................-35-
8M. Certain Laws.................................................-37-
8N. Transactions are Legal and Authorized; Obligations
are Enforceable..............................................-38-
8O. Governmental Consent; Certain Laws...........................-39-
8P. Private Offering of Notes....................................-39-
8Q. No Defaults; Transactions Prior to Closing Date, etc.........-39-
8R. Use of Proceeds of Notes.....................................-39-
8S. Solvency.....................................................-40-
9. Representations of Each Purchaser......................................-40-
9A. Nature of Purchase...........................................-40-
9B. Source of Funds..............................................-40-
9C. Representations of Each Purchaser to Each Other Purchaser....-41-
10. Definitions...........................................................-41-
10A. Yield-Maintenance Terms.....................................-41-
10B. Other Terms.................................................-42-
10C. Accounting Principles, Terms and Determinations.............-52-
11. Miscellaneous.........................................................-53-
11A. Note Payments...............................................-53-
11B. Expenses....................................................-53-
11C. Consent to Amendments.......................................-54-
11D. Form, Registration, Transfer and Exchange of Notes;
Lost Notes..................................................-54-
11E. Persons Deemed Owners; Participations.......................-55-
11F. Survival of Representations and Warranties; Entire Agreement-55-
11G. Successors and Assigns......................................-55-
11H. Disclosure to Other Persons.................................-55-
11I. Notices.....................................................-56-
11J. Payments Due on Non-Business Days...........................-56-
<PAGE>
11K. Satisfaction Requirement....................................-56-
11L. Governing Law...............................................-56-
11M. Severability................................................-56-
11N. Descriptive Headings........................................-57-
11O. Maximum Interest Payable....................................-57-
11P. Jurisdiction; Service of Process............................-57-
11Q. Counterparts................................................-58-
11R. Severalty of Obligations....................................-58-
<PAGE>
ANNEX 1 -- PURCHASER SCHEDULE
ANNEX 2 -- PAYMENT INSTRUCTIONS
ANNEX 3 -- INFORMATION AS TO COMPANY AND SUBSIDIARIES
ANNEX 4 -- INFORMATION AS TO BUSINESS COVENANTS
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL EXHIBIT C -- FORM OF COMPANY
EXHIBIT C -- OFFICER'S CERTIFICATE EXHIBIT D -- FORM OF COMPANY SECRETARY'S
CERTIFICATE
EXHIBIT E -- FORM OF SUBSIDIARY GUARANTY
<PAGE>
HUDSON FOODS, INC.
1225 Hudson Road
Rogers, Arkansas 72756
As of March 22, 1996
To Each of the Purchasers Named in the
Purchaser Schedule Attached Hereto
$50,000,000 6.63% Senior Notes due March 22, 2006
Ladies and Gentlemen:
The undersigned, Hudson Foods, Inc., a Delaware corporation (the
"Company"), hereby agrees with the purchasers named in the Purchaser Schedule
attached hereto (the "Purchasers") as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUES OF NOTES.
1.Authorization of Issues of Notes. The Company will authorize the issue of its
senior promissory notes in the aggregate principal amount of $50,000,000, to be
dated the date of issue thereof, to mature March 22, 2006, to bear interest on
the unpaid balance thereof from the date thereof until the principal thereof
shall have become due and payable at the rate of 6.63% per annum and on overdue
payments at the rate specified therein, and to be substantially in the form of
Exhibit A attached hereto. The term "Notes" as used herein shall include each
such senior promissory note delivered pursuant to any provision of this
Agreement and each such senior promissory note delivered in substitution or
exchange for any other Note pursuant to any such provision. Capitalized terms
used herein have the meanings specified in paragraph 10.
PARAGRAPH 2. PURCHASE AND SALE OF NOTES.
2.Purchase and Sale of Notes. The Company hereby agrees to sell to each
Purchaser and, subject to the terms and conditions herein set forth, each
Purchaser agrees to purchase from the Company the aggregate principal amount of
Notes set forth opposite such Purchaser's name in the Purchaser Schedule
attached hereto at 100% of such aggregate principal amount. The Company will
deliver to each Purchaser, at the offices of Prudential Equity Investors Inc. at
717 5th Avenue, Suite 1100, New York City, New York, one or more Notes
registered in such Purchaser's name, evidencing the aggregate principal amount
of Notes to be purchased by such Purchaser and in the denomination or
denominations specified with respect to such Purchaser in the Purchaser Schedule
against payment of the purchase price thereof by transfer of immediately
available funds for credit to the account of Hudson Foods, Inc. as specified by
the Company in Annex 2 hereto on the date of closing, which shall be March 22,
1996 or any other date on or before March 25, 1996 upon which the Company and
the Purchasers may mutually agree (the "Closing" or the "Date of Closing").
<PAGE>
PARAGRAPH 3. CONDITIONS PRECEDENT.
3.Conditions of Closing. Each Purchaser's obligation to purchase and pay for the
Notes to be purchased by such Purchaser hereunder is subject to the
satisfaction, on or before the Date of Closing, of the following conditions:
3A.Certain Documents. Each Purchaser shall have received the following, each
dated the Date of Closing:
(i) The Notes to be purchased by such Purchaser.
(ii) A certificate signed by a Senior Officer of the Company,
substantially in the form of Exhibit C hereto.
(iii) A certificate signed by the Secretary or an Assistant
Secretary of the Company, substantially in the form of Exhibit D hereto.
(iv) A favorable opinion of Wright, Lindsey & Jennings,
special counsel to the Company, satisfactory to the Purchasers and substantially
in the form of Exhibit B attached hereto and as to such other matters as the
Purchasers may reasonably request.
(v) Certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, listing all effective financing statements
which name the Company or any Subsidiary (under its present name and any
previous name) as debtor and which are filed in Arkansas, Indiana, Alabama,
Maryland, Minnesota, Missouri, Ohio, Georgia, and Tennessee.
3B.Opinion of Purchasers' Special Counsel. Such Purchaser shall have received
from Thomas P. Donahue, counsel for the Purchasers in connection with this
transaction, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.
3C.Representations and Warranties; No Default. The representations and
warranties contained in paragraph 8 shall be true on and as of the Date of
Closing, except to the extent of changes caused by the transactions herein
contemplated; and there shall exist on the Date of Closing no Event of Default
or Default.
3D.Good Standing Certificate. A certificate, dated on or immediately prior to
the Date of Closing, from the Secretary of State (or other appropriate official)
of Delaware, certifying as to the due incorporation and good standing of the
Company.
3E.Legality. The Notes to be acquired by such Purchaser shall, on the Closing
Date, qualify as a legal investment for you under applicable insurance law
(without regard to any "basket" or "leeway" provisions), and such acquisition
shall not subject you to any penalty or other onerous condition contained in or
pursuant to any such law or regulation, and you shall have received such
evidence as you may reasonably request to establish compliance with this
condition.
<PAGE>
3F.Private Placement Number. The Company shall have obtained or caused to be
obtained a private placement number for the Notes from the CUSIP Service Bureau
of Standard & Poor's (a division of McGraw-Hill, Inc.) and you shall have been
informed of such private placement number.
3G.Structuring Fee. The Company shall have paid Prudential a $20,000 Structuring
Fee in cash.
3H.Compliance with this Agreement. Each of the Company and the Subsidiaries
shall have performed and complied with all agreements and conditions contained
herein that are required to be performed or complied with by the Company and the
Subsidiaries on or prior to the Date of Closing, and such performance and
compliance shall remain in effect on the Date of Closing.
3I.Proceedings. All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in substance and form to such Purchaser, and such
Purchaser shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.
PARAGRAPH 4. PREPAYMENTS.
4.Prepayments. The Notes shall be subject to prepayment only with respect to the
required prepayments specified in paragraph 4A and the optional prepayments
permitted by paragraph 4B.
4A.Required Prepayments. Until the Notes shall be paid in full, the Company
shall apply to the prepayment of the Notes, without premium, the sum of
$7,142,857.14 on March 22 in each of the years 2000 to 2005, inclusive, and such
principal amounts of the Notes, together with interest thereon to the prepayment
dates, shall become due on such prepayment dates. The remaining outstanding
principal amount of the Notes, together with interest accrued thereon, shall
become due on the maturity date of the Notes.
4B.Optional Prepayment With Yield-Maintenance Amount. The Notes shall be subject
to prepayment on any Business Day on or after 90 days from the date of issuance
thereof, in whole at any time or from time to time in part (in multiples of
$1,000,000), at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each Note. Any partial prepayment of the Notes
pursuant to this paragraph 4B shall be applied in satisfaction of required
payments of principal in inverse order of their scheduled due dates.
4C.Notice of Optional Prepayment. The Company shall give the holder of each Note
irrevocable written notice of any prepayment pursuant to paragraph 4B not less
than 10 Business Days prior to the prepayment date, specifying such prepayment
date and the principal amount of the Notes, and of the Notes held by such
holder, to be prepaid on such date and stating that such prepayment is to be
made pursuant to paragraph 4B. Notice of prepayment having been given as
aforesaid, the principal amount of the Notes specified in such notice, together
with interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, with respect thereto, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to paragraph 4B, give
<PAGE>
telephonic notice of the principal amount of the Notes to be prepaid and the
prepayment date to each holder which shall have designated a recipient of such
notices in the Purchaser Schedule attached hereto or by notice in writing to the
Company.
4D.Partial Payments Pro Rata. Upon any partial prepayment of the Notes pursuant
to paragraph 4A or 4B, the principal amount so prepaid shall be allocated to all
Notes at the time outstanding (including, for the purpose of this paragraph 4D
only, all Notes prepaid or otherwise retired or purchased or otherwise acquired
by the Company or any of its Subsidiaries or Affiliates other than by prepayment
pursuant to paragraph 4A or 4B) in proportion to the respective outstanding
principal amounts thereof.
4E.Retirement of Notes. The Company shall not, and shall not permit any of its
Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part
prior to their stated final maturity (other than by prepayment pursuant to
paragraph 4A or 4B or upon acceleration of such final maturity pursuant to
paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes
held by any holder.
PARAGRAPH 5. AFFIRMATIVE COVENANTS.
5.Affirmative Covenants. So long as any Note shall remain unpaid, the Company
covenants that
5A.Financial Statements. The Company will deliver to each holder:
(i) Quarterly Statements -- as soon as practicable after the
end of each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year), and in any
event within 45 days thereafter, duplicate copies of
(a) a consolidated balance sheet of the Company and
the Subsidiaries as at the end of such quarter, and
(b) consolidated statements of operations and cash
flows of the Company and the Subsidiaries for such quarter and (in the case of
the second and third quarters) for the portion of the fiscal year ending with
such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial statements
generally and certified as complete and correct, subject to changes resulting
from year-end adjustments, by a Senior Financial Officer, and accompanied by the
certificate required by Paragraph 5B hereof;
(ii) Annual Statements -- as soon as practicable after the end
of each fiscal year of the Company, and in any event within 90 days thereafter,
duplicate copies of
(a) consolidated balance sheets of the Company and
the Subsidiaries as at the end of such year, and
<PAGE>
(b) consolidated statements of operations and cash
flows of the Company and the Subsidiaries for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance with GAAP
and accompanied by
(I) an opinion of independent certified
public accountants of recognized national standing, which opinion shall, without
qualification (including, without limitation, qualifications related to the
scope of the audit or the ability of the Company or a Subsidiary to continue as
a going concern), state that such financial statements present fairly, in all
material respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such accountants in connection
with such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable basis for
such opinion in the circumstances,
(II) a certification by a Senior Financial
Officer that such consolidated financial statements are complete and correct,
and
(III) the certificates required by paragraph
5B and paragraph 5C hereof;
(iii) Opinions of Independent Accountants and Counsel -- as
soon as practicable after the end of each fiscal year of the Company, and in any
event within 90 days thereafter, duplicate copies of all opinions of independent
accountants and counsel required pursuant to paragraph 5F hereof;
(iv) Audit Reports -- promptly upon receipt thereof, a copy of
each other report submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by them
of the books of the Company or any Subsidiary;
(v) SEC and Other Reports -- within 15 days of their becoming
available, one copy, without duplication, of (a) each financial statement,
report, notice or proxy statement sent by the Company or any Subsidiary to
public securities holders generally, and (b) each regular or periodic report
(including, without limitation, each Annual Report on Form 10-K, each Quarterly
Report on Form 10-Q and each Current Report on Form 8-K), each registration
statement (other than registration statements on Form S-8) which shall have
become effective (without exhibits except as expressly requested by a holder of
Notes), and each final prospectus, and all amendments to any of the foregoing,
filed by the Company or any Subsidiary with, or received by, such Person in
connection therewith from, the Securities and Exchange Commission or any
successor agency;
(vi) ERISA --
(a) immediately upon becoming aware of the occurrence
of any
<PAGE>
(I) "reportable event" (as such term is
defined in section 4043 of ERISA), or
(II) "prohibited transaction" (as such term
is defined in section 406 of ERISA or section 4975 of the Code),
in connection with any Pension Plan or any trust created
thereunder, a written notice specifying the nature thereof, what action the
Company is taking or proposes to take with respect thereto and, when known, any
action taken by the IRS, the Department of Labor or the PBGC with respect
thereto; and
(b) prompt written notice of and, where applicable, a
description of
(I) any notice from the PBGC in respect of
the commencement of any proceedings pursuant to section 4042 of ERISA to
terminate any Pension Plan or for the appointment of a trustee to administer any
Pension Plan,
(II) any distress termination notice
delivered to the PBGC under section 4041 of ERISA in respect of any Pension
Plan, and any determination of the PBGC in respect thereof,
(III) the placement of any Multiemployer
Plan in reorganization status under Title IV of ERISA,
(IV) any Multiemployer Plan becoming
"insolvent" (as such term is defined in section 4245 of ERISA) under Title IV of
ERISA,
(V) the whole or partial withdrawal of the
Company or any ERISA Affiliate from any Multiemployer Plan and the withdrawal
liability incurred in connection therewith, and
(VI) any material increase in contingent
liabilities of the Company or any Subsidiary in respect of any post-retirement
employee welfare benefits.
(vii) Actions, Proceedings -- promptly after the commencement
thereof, written notice of any action or proceeding relating to the Company or
any Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, is reasonably likely to have a
Material Adverse Effect;
(viii) Certain Matters -- prompt written notice of and a
description of any event or circumstance that, had such event or circumstance
occurred or existed immediately prior to the Closing Date, would have been
required to be disclosed as an exception to any statement set forth in Section
2.13(a) or Section 2.13(b) hereof;
<PAGE>
(ix) Notice of Default or Event of Default -- immediately upon
becoming aware of the existence of any condition or event that constitutes a
Default or an Event of Default, a written notice specifying the nature and
period of existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(x) Notice of Claimed Default -- immediately upon becoming
aware that the holder of any Note, or of any Indebtedness or other Security of
the Company or any Subsidiary, shall have given notice or taken any other action
with respect to a claimed Default, Event of Default, default or event of
default, a written notice specifying the notice given or action taken by such
holder and the nature of the claimed Default, Event of Default, default or event
of default and what action the Company is taking or proposes to take with
respect thereto;
(xi) Information Furnished to Other Creditors -- promptly
after any request therefor, copies of any statement, report or certificate
furnished to any holder of Indebtedness of the Company or any Subsidiary;
(xii) Rule 144A -- promptly after any request therefor,
information requested to comply with 17 C.F.R. ss.230.144A, as amended from time
to time; and
(xiii) Requested Information -- promptly after any request
therefor, such other data and information as from time to time may be reasonably
requested by any holder of Notes, including, without limitation, data,
information, agreements, instruments or documents relating to the business or
financial operations or performance of the Company or any Subsidiary and any
financial statements prepared by the Company (in addition to the financial
statements specified in clause (i) and clause (ii) of this paragraph 5A), in
each case which may be reasonably requested by any holder of Notes.
5B.Officer's Certificates. Each set of financial statements delivered to each
holder of Notes pursuant to paragraph 5A(i) or paragraph 5A(ii) hereof shall be
accompanied by a certificate of a Senior Financial Officer setting forth:
(i) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of paragraphs 6A, 6B, 6C(1), 6C(2), 6C(3),
6C(4), 6C(5) and 6E hereof, during the period covered by the income statement
then being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such paragraphs,
and the calculation of the amounts, ratio or percentage then in existence);
(ii) Event of Default -- a statement that the signers have
reviewed the relevant terms hereof and have made, or caused to be made, under
their supervision, a review of the transactions and conditions of the Company
and the Subsidiaries from the beginning of the accounting period covered by the
income statement being delivered therewith to the date of the certificate and
that such review shall not have disclosed the existence during such period of
any condition or event that constitutes a Default or an Event of Default or, if
any such condition or event existed or exists, specifying the nature and period
of existence thereof and what action the Company shall have taken or proposes to
<PAGE>
take with respect thereto; and
(iii) Investments -- a description of all investments of the
Company and the Subsidiaries made pursuant to paragraph 6C(3)(vi) hereof during
such accounting period (which description shall specify the type of investment,
the cost thereof and the book value thereof), and, if any such investments are
made, a description of the Company's then-current investment policy.
5C.Accountants' Certificates. Each set of annual financial statements delivered
pursuant to paragraph 5A(ii) hereof shall be accompanied by a certificate of the
accountants who certify such financial statements, stating that
(i) they have reviewed this Agreement and stating further,
whether, in making their audit, such accountants have become aware of any
condition or event that then constitutes a Default or an Event of Default and,
if such accountants are aware that any such condition or event then exists,
specifying the nature and period of existence thereof, and
(ii) they have reviewed the annual certificate of a Senior
Financial Officer of the Company provided pursuant to clause (i) of paragraph 5B
hereof and that they confirm the calculations contained therein.
5D.Inspection. The Company will permit, upon prior notice to the Company, the
representatives of each holder of Notes (at the expense of the Company at any
time when a Default or an Event of Default has occurred and is in existence, and
otherwise at the expense of such holder) to visit and inspect any of the
Properties of the Company or any Subsidiary, to examine all their respective
books of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants (and by
this provision the Company authorizes such accountants to discuss the finances
and affairs of the Company and the Subsidiaries), all at such reasonable times
and as often as may be reasonably requested.
5E.Equal and Ratable Lien; Equitable Lien. In case any Property shall be
subjected to a Lien (other than Liens permitted by paragraph 6C(1)), the Company
will forthwith make or cause to be made provision whereby the Notes will be
secured equally and ratably with all other obligations secured thereby pursuant
to such agreements and instruments as shall be approved by the Required Holders,
and the Company will cause to be delivered to each holder of a Note an opinion
of independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms. Regardless of whether the Company
complies with the provisions of the immediately preceding sentence, in case any
Property shall be subjected to a Lien in violation of this paragraph 5E, the
Notes shall have the benefit and with such priority as, the holders of Notes may
be entitled thereto under applicable law, of an equitable Lien on such Property
securing the Notes. A violation of paragraph 6C(1) will constitute an Event of
Default, whether or not any such provision is made or action is taken pursuant
to this paragraph 5E.
5F.Payment of Taxes and Claims. The Company will, and will cause each Subsidiary
to, pay before they become delinquent:
<PAGE>
(i) all taxes, assessments and governmental charges or levies
imposed upon it or its Property; and
(ii) all claims or demands of materialmen, mechanics,
carriers, warehousemen, vendors, landlords and other like Persons that, if
unpaid, might result in the creation of a Lien upon its Property;
provided, that items of the foregoing description need not be paid
(a) while being actively contested in good faith and
by appropriate proceedings as long as adequate book reserves have been
established and maintained and exist with respect thereto, and
(b) so long as the title of the Company or the other
Subsidiary, as the case may be, to, and its right to use, such Property, is not
materially adversely affected thereby.
In the case of any such item being contested as described in the
immediately preceding sentence involving in excess of $2,000,000, the
appropriateness of the proceedings will be supported by an opinion of the
independent counsel responsible for such proceedings and the adequacy of such
reserves will be supported by an opinion of the independent accountants of the
Company or such Subsidiary (which opinions will be delivered to the Purchasers
and the other holders of Notes as provided in paragraph 5A(iii) hereof),
provided that, if the aggregate amount of all such items shall at any time
exceed $3,000,000, regardless of the amount of any individual item, the adequacy
of the reserves for all such items will be supported by opinions of the
independent accountants of the Company or such Subsidiary (which opinions will
be delivered to the Purchasers and the other holders of the Notes as provided in
paragraph 5A(iii) hereof).
5G.Maintenance of Properties; Corporate Existence; etc.nce; etc.
The Company will, and will cause each Subsidiary to:
(i) Property -- maintain its Property in good condition and
working order, ordinary wear and tear excepted, and make all necessary renewals,
replacements, additions, betterments and improvements thereto;
(ii) Insurance -- maintain, with financially sound and
reputable insurers accorded a rating by A.M. Best Company of "A" or better and a
size rating of "XII" or better (or a comparable rating by any comparable
successor rating agency), insurance with respect to its Property and business
against such casualties and contingencies, of such types (including, without
limitation, insurance with respect to losses arising out of Property loss or
damage, public liability, business interruption, larceny, workers' compensation,
embezzlement or other criminal misappropriation) and in such amounts as is
customary in accordance with sound business practices in the case of
corporations of established reputations engaged in the same or a similar
business and similarly situated;
<PAGE>
(iii) Financial Records -- keep accurate and complete books of
records and accounts in which accurate and complete entries shall be made of all
its business transactions and that will permit the provision of accurate and
complete financial statements in accordance with GAAP;
(iv) Corporate Existence and Rights --
(a) do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises, except where the failure to do so, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect, and
(b) maintain each Subsidiary as a Subsidiary and each
Wholly-Owned Subsidiary as a Wholly-Owned Subsidiary,
in each case except as permitted by paragraph 6C(4) hereof; and
(v) Compliance with Law -- not be in violation of any law,
ordinance or governmental rule or regulation to which it is subject (including,
without limitation, any Environmental Protection Law or any Health Law) and not
fail to obtain any license, certificate, permit, franchise or other governmental
authorization necessary to the ownership of its Properties or to the conduct of
its business if such violations or failures to obtain, in the aggregate, could
reasonably be expected to have (i) a Material Adverse Effect or (ii) a material
adverse effect on the ability of the Company or any Subsidiary to conduct in the
future the business it conducts at the time of such violation or failure to
obtain.
5H. Payment of Notes and Maintenance of Office. The Company will punctually pay,
or cause to be paid, the principal of and interest (and Yield-Maintenance
Amount, if any) on the Notes, as and when the same shall become due according to
the terms of this Agreement and of the Notes. The Company will maintain an
office at the address of the Company set forth in paragraph 11I hereof where
notices, presentations and demands in respect of this Agreement or of the Notes
may be made upon the Company. Such office will be maintained at such address
until such time as the Company shall notify the Purchasers and the other holders
of the Notes of any change of location of such office, which will in any event
be located within the United States of America.
5I.Guaranties of Subsidiaries.
(i) New Subsidiaries. The Company shall cause each Subsidiary
not existing as of the Date of Closing to execute and deliver to the holders of
the Notes a Subsidiary Guaranty, in substantially the form of Exhibit E hereto,
within 10 Business Days of the creation or acquisition of any such Subsidiary.
(ii) Certain Existing Subsidiaries. If Ohse, Hudson Poland,
Hudson Development or Hudson Foreign Sales shall at any time own or hold,
directly or indirectly, assets having a book value equal to or in excess of five
percent of the total assets of the Company and the Subsidiaries at such time, as
would be shown on a consolidated balance sheet for such Persons prepared in
accordance with GAAP, then the Company shall cause such Person to execute and
deliver to the holders of the Notes a Subsidiary Guaranty, in substantially the
<PAGE>
form of Exhibit E hereto, within 10 Business Days of such time.
(iii) Delivery of Documents. The delivery of any agreements
pursuant to paragraph 5I(i) or paragraph 5I(ii) hereof shall be accompanied by
such other documents as any Purchaser or other holder of Notes may reasonably
request, including, without limitation, charter documents, bylaws, and
appropriate resolutions of the Board of Directors of any such Subsidiary
providing a Subsidiary Guaranty.
(iv) Guaranties of Bank Credit Agreement Obligations.
Notwithstanding the other terms and provisions of this paragraph 5I, the Company
will not at any time permit any Subsidiary or Affiliate to provide to the Banks
any Guaranty of the Company's obligations under the Bank Credit Agreement unless
such Subsidiary or such Affiliate shall, at the same time, deliver a Subsidiary
Guaranty and other documents to the holders of the Notes as specified in
paragraph 5I(iii) hereof.
PARAGRAPH 6. NEGATIVE COVENANTS.
6.Negative Covenants. So long as any Note shall remain unpaid,
6A.Financial Covenants.
6A(1).Tangible Net Worth. The Company will not permit, as of the last day of
each fiscal quarter, Tangible Net Worth to be less than the sum of (i)
$129,000,000, plus (ii) the amount of all proceeds of any issuance of capital
stock of the Company after May 18, 1994, plus (iii) the amount of any
Subordinated Debt which is converted into capital stock of the Company after May
18, 1994, plus (iv) in the case of each fiscal quarter ending on or after
October 1, 1994, the Applicable Net Income Carryover. As used herein,
"Tangible Net Worth" -- means the excess of total assets over
total liabilities, as each of total assets and total liabilities would be shown
on a consolidated balance sheet for the Company and the Subsidiaries prepared in
accordance with GAAP consistent with GAAP applied in the preparation of the
financial statements referred to in paragraph 5A(i) and paragraph 5A(ii) hereof,
excluding, however, Intangible Assets from such determination of total assets.
"Intangible Assets" -- means (i) goodwill, organizational
expenses, research and development expenses, trademarks, trade names,
copyrights, patents, patent applications, licenses and rights in any thereof,
and other similar intangibles, (ii) treasury stock, (iii) Securities which are
not readily marketable, (iv) cash held in a sinking or other analogous fund
established for the purpose of redemption, retirement or prepayment of capital
stock, (v) any write-up in the book value of any asset resulting from a
revaluation thereof subsequent to May 18, 1994, and (vi) any items not included
in clauses (i) through (v) above, inclusive, which are treated as intangibles in
conformity with GAAP.
"Applicable Net Income Carryover" -- at any time that any
determination thereof is to be made means an amount equal to the sum of (i) 60%
of the net income of the Company and the Subsidiaries, determined on a
consolidated basis for such Persons in accordance with GAAP, for the fiscal year
of the Company ending on October 1, 1994, plus (ii) 60% of the net income of the
<PAGE>
Company and the Subsidiaries, determined on a consolidated basis for such
Persons in accordance with GAAP, for each and every fiscal year of the Company
ending after October 1, 1994 which has ended on or before the date such
determination of Applicable Net Income Carryover is to be made; provided,
however, that, in the event that such net income for any fiscal year described
above is less than zero, the net income of the Company and the Subsidiaries for
such fiscal year shall be deemed to be zero for purposes of calculating
Applicable Net Income Carryover.
6A(2).Working Capital; Current Ratio. The Company will not permit as of the last
day of each fiscal quarter:
(i) the ratio of current assets to current liabilities
(exclusive of current deferred taxes), in each case as would be shown on a
consolidated balance sheet for the Company and the Subsidiaries at such time
prepared in accordance with GAAP, to be less than 1.5 to 1.0, and
(ii) the excess of current assets over current liabilities
(exclusive of current deferred taxes), in each case as would be shown on a
consolidated balance sheet for the Company and the Subsidiaries at such time
prepared in accordance with GAAP, to be less than $60,000,000.
6A(3).Leverage Ratio. The Company will not permit, as of the last day of each
fiscal quarter, a Leverage Ratio to be more than 0.5 to 1.0. As used herein:
"Leverage Ratio" -- means for any date of determination
thereof, the quotient (expressed as a ratio) of (x) Indebtedness with maturities
of greater than one year (including, without limitation, all current portions
thereof and all Subordinated Debt) of the Company and the Subsidiaries as would
appear on a consolidated balance sheet prepared in accordance with GAAP for such
Persons at such time, divided by (y) the sum of (i) Indebtedness with maturities
of greater than one year (including, without limitation, all current portions
thereof and all Subordinated Debt) of the Company and the Subsidiaries as would
appear on a consolidated balance sheet prepared in accordance with GAAP for such
Persons at such time, plus (ii) stockholders' equity of the Company and the
Subsidiaries (excluding, in any event, any minority interests) as would appear
on a consolidated balance sheet prepared in accordance with GAAP for such
Persons at such time, plus (iii) long-term deferred taxes, attributable to the
Company's prior use of cash accounting, of the Company and the Subsidiaries as
would appear on a consolidated balance sheet prepared in accordance with GAAP
for such Persons at such time, plus (iv) deferred taxes, attributable to the
Company's use of the "farm price method" of accounting for deferred taxes, of
the Company and the Subsidiaries as would appear on a consolidated balance sheet
prepared in accordance with GAAP for such Persons at such time.
6A(4) Cash Flow Coverage Ratio. The Company will not permit, as of the last day
of each fiscal quarter, the Cash Flow Coverage Ratio to be less than 1.3 to 1.0
for the period of eight consecutive fiscal quarters then most recently ended. As
used herein:
"Cash Flow Coverage Ratio" means for any period of
determination thereof, the quotient (expressed as a ratio) of (x) the sum of (i)
Consolidated Net Income, plus (ii) income taxes of the Company and the
Subsidiaries, plus (iii) Consolidated Interest Expense, plus (iv) Consolidated
<PAGE>
Lease Expense, plus (iv) depreciation and amortization of the Company and the
Subsidiaries, divided by (y) the sum of (i) Consolidated Interest Expense, plus
(ii) Consolidated Lease Expense, plus (iii) all scheduled and optional principal
payments on long-term Indebtedness (including, without limitation, imputed
principal on Capital Leases), other than, in each such case, the principal
amount of any such Indebtedness which shall be paid during such period from the
proceeds of Indebtedness incurred in connection with any refinancing thereof
prior to, or at the time of, the maturity thereof, plus (iv) the sum of (a)
dividends on the capital stock of the Company or a Subsidiary (other than
dividends paid to the Company or a Subsidiary), (b) purchases or other
acquisitions by the Company or any Subsidiary of any capital stock of the
Company, and (c) distributions of assets to the Company's stockholders as such.
"Consolidated Net Income" means, for any period, net income
(or loss) from continuing operations (after income taxes) of the Company and the
Subsidiaries, excluding, in any event, net income (or loss) in respect of
extraordinary items, net income (or loss) from discontinued operations and the
cumulative effects of changes in accounting principles, all as determined on a
consolidated basis for such Persons in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest accrued or capitalized on, or with respect to,
Indebtedness (including, without limitation, amortization of debt discount,
imputed interest on Capital Leases and interest on the Notes), but without
giving effect to any deduction for any interest income, of the Company and the
Subsidiaries determined on a consolidated basis for such Persons for such period
in accordance with GAAP.
"Consolidated Lease Expense" means, for any period, the
aggregate amount of rentals payable in respect of Operating Leases for such
period by any one or more of the Company and the Subsidiaries, determined on a
consolidated basis for such Persons for such period in accordance with GAAP.
"Operating Lease" means, with respect to any Person, any lease
other than a Capital Lease.
6A(5) Current Debt. The Company will not, and will not permit any Subsidiary to,
have any Current Debt outstanding on any day unless, within the period of 365
days immediately preceding such day, there shall have been at least one period
of not less than 45 consecutive days during which on each day of such period the
aggregate Current Debt of all such Persons did not exceed the amount of
additional Funded Debt in favor of a Person other than a Subsidiary that the
Company would have been permitted to have outstanding (but did not have
outstanding) if the Company were required to maintain a Leverage Ratio of not
more than 0.5 to 1.0 on such day.
6B.Dividends and Prepayments on Subordinated Debt.
(i) Limit on Dividends and Other Distributions. The Company
will not declare or pay any dividends (whether in cash or other Property),
purchase, redeem, retire or otherwise acquire for value any of its capital stock
(or any warrants, rights or options to acquire any shares of such capital stock)
now or hereafter outstanding, or make any other distribution of Property to its
stockholders, or permit any of its Subsidiaries to purchase or otherwise acquire
<PAGE>
for value any capital stock of the Company if:
(a) after giving effect to such dividend,
distribution or other payment, the aggregate amount of all such dividends,
distributions and other payments exceeds $2,750,000 during any fiscal year, or
(b) at the time of the declaration of such dividend,
distribution or other payment, and immediately before, and after giving effect
to the payment thereof, an Event of Default exists or would exist.
(ii) No Subordinated Debt Prepayments. The Company will not at
any time, and will not at any time permit any Subsidiary to, make any
prepayments, directly or indirectly, of principal on, or redeem, repurchase or
retire, any existing or future Subordinated Debt of the Company or any
Subsidiary.
6C.Liens, Debt, and Other Restrictions.
6C(1) Liens.
(i) Negative Pledge. The Company will not, and will not permit
any Subsidiary to, cause or permit to exist, or agree or consent to cause or
permit to exist in the future (upon the happening of a contingency or
otherwise), any of its Property, whether now owned or hereafter acquired, to be
subject to any Lien except:
(a) Taxes, etc. -- Liens securing Property taxes,
assessments or governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, vendors, landlords and other
like Persons, so long as
(I) the payment thereof is being actively
contested in good faith and by appropriate proceedings and adequate book
reserves have been established and maintained and exist with respect thereto,
and
(II) the title of the Company or the
Subsidiary, as the case may be, to, and its right to use, such Property, is not
materially adversely affected thereby;
(b) Judicial Liens -- Liens
(I) arising from judicial attachments and
judgments,
(II) securing appeal bonds or supersedeas
bonds, and
(III) arising in connection with court
proceedings (including, without limitation, surety bonds and letters of credit
or any other instrument serving a similar purpose),
provided that (A) the execution or other enforcement of such
Liens is effectively stayed, (B) the claims secured thereby are being actively
<PAGE>
contested in good faith and by appropriate proceedings, (C) adequate book
reserves shall have been established and maintained and shall exist with respect
thereto and (D) the aggregate amount so secured shall not at any time exceed
$2,000,000;
(c) Ordinary Course Business Liens -- Liens incurred
or deposits made in the ordinary course of business
(I) in connection with workers'
compensation, unemployment insurance, social security and other like laws, and
(II) to secure the performance of letters of
credit, bids, tenders, sales contracts, leases, statutory obligations, surety
and performance bonds (of a type other than set forth in paragraph 6C(1)(i)(b)
hereof) and other similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment of the deferred
purchase price of Property;
provided, however, that all such Liens do not, in the
aggregate, materially detract from the value of such Property or materially
interfere with the use of such Property in the ordinary conduct of the business
of the Company and the Subsidiaries, taken as a whole;
(d) Certain Encumbrances -- Liens in the nature of
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other similar title exceptions or
encumbrances affecting real Property, provided that such exceptions and
encumbrances do not in the aggregate materially detract from the value of such
Properties or materially interfere with the use of such Property in the ordinary
conduct of the business of the Company and the Subsidiaries, taken as a whole;
(e) Intergroup Liens -- Liens on Property of a
Subsidiary, provided that such Liens secure only obligations owing to the
Company;
(f) Closing Date Liens --
(I) Liens in existence on the Date of
Closing securing Indebtedness, provided that such Liens and such Indebtedness
are described in Part 6C(1)(i)(f) of Annex 4 hereto; and
(II) Liens securing renewals, extensions (as
to time) and refinancings of Indebtedness secured by the Liens described in Part
6C(1)(i)(f) of Annex 4 hereto, provided that
(A) the amount of Indebtedness
secured by each such Lien is not increased in excess of the amount of such
Indebtedness outstanding on the date of such renewal, extension or refinancing,
unless the aggregate amount of Indebtedness in excess of such outstanding
Indebtedness is permitted to be outstanding under the terms and provisions of
paragraph 6C(2)(ii) hereof,
<PAGE>
(B) none of such Liens is extended
to encumber or otherwise relate to or cover any additional Property of the
Company or any Subsidiary, and
(C) immediately prior to, and
immediately after the consummation of such renewal, extension or refinancing,
and after giving effect thereto, no Default or Event of Default exists or would
exist; and
(g) Secured Indebtedness -- other Liens on Property
of the Company or the Subsidiaries as specified in paragraph 6C(2)(ii) hereof
securing Indebtedness permitted pursuant to paragraph 6C(2)(ii) hereof.
(ii) Financing Statements. The Company will not, and will not
permit any Subsidiary to, sign or file a financing statement under the Uniform
Commercial Code of any jurisdiction that names the Company or such Subsidiary as
debtor, or sign any security agreement authorizing any secured party thereunder
to file any such financing statement, except, in any such case, a financing
statement filed or to be filed to perfect or protect a security interest that
the Company or such Subsidiary is entitled to create, assume or incur, or permit
to exist, under the foregoing provisions of this paragraph 6C(1) or to evidence
for informational purposes a lessor's interest in Property leased to the Company
or any such Subsidiary.
6C(2) Limitations on Indebtedness.
(i) Limitation on Indebtedness. The Company will not, and will
not permit any Subsidiary to, create, incur, assume or suffer to exist any
Indebtedness or other liabilities or obligations, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, or joint or several, except:
(a) liabilities of the Company in respect of the
Notes, this Agreement and the Bank Credit Agreement, and liabilities of any
Subsidiary in respect of any Guaranty of the obligations of the Company under
the Notes, this Agreement or the Bank Credit Agreement;
(b) long-term Indebtedness, provided the Company
complies with the provisions of paragraph 6A(3) hereof;
(c) Indebtedness secured by Liens permitted to be
outstanding pursuant to paragraph 6C(2)(ii) hereof;
(d) unsecured short-term Indebtedness of the Company
incurred for the purpose of funding the working capital requirements of the
Company and the Subsidiaries, provided the Company complies with the provisions
of paragraph 6A(5) hereof;
(e) Indebtedness of Subsidiaries, provided the
Company complies with the provisions of Section 6C(2)(iii) hereof; and
(f) those liabilities listed in Part 6C(2)(i) of
Annex 4 hereto.
<PAGE>
(ii) Limitation on Secured Indebtedness. The Company will not,
and will not permit any Subsidiary to, create, incur, assume or suffer to exist
any Indebtedness or other liabilities or obligations, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, or joint or
several, which are secured by, or have the benefit of, any Lien except
Indebtedness secured by or having the benefit of, or in respect of:
(a) Liens outstanding on the Closing Date described
in Part 6C(1)(a)(vi) of Annex 4 hereto;
(b) purchase money Liens or purchase money security
interests upon or in any fixed assets acquired or held by the Company or any
Subsidiary in the ordinary course of business to secure the purchase price of
such fixed assets or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such fixed assets;
(c) Liens or security interests existing on fixed
assets at the time of their acquisition;
(d) Liens and security interests on previously
acquired fixed assets, the Fair Market Value of which assets does not exceed by
more than 100% the amount of Indebtedness secured thereby, all as determined by
the Required Holders, in their sole, good faith discretion; or
(e) Liens in respect of obligations for Capital
Leases of real or personal fixed assets acquired or held by the Company in the
ordinary course of business which are secured only by the fixed assets that are
the subject of such Capital Lease,
provided, however, that (I) the aggregate amount of any Indebtedness
incurred in connection with renewals, extensions (as to time) and refinancings
of Indebtedness described in Part 6C(1)(i)(f) of Annex 4 hereto in excess of the
amount of such Indebtedness outstanding immediately prior to each such renewal,
extension or refinancing, plus (II) the aggregate principal amount of the
Indebtedness secured by the Liens or security interests referred to in clause
(b), clause (c) and clause (d) of this paragraph 6C(2)(ii), plus (z) the
aggregate amount of capitalized payment obligations under the Capital Leases
specified in clause (e) of this paragraph 6C(2)(ii) shall not at any time exceed
$25,000,000.
(iii) Limitation on Subsidiary Indebtedness. The Company shall
not at any time permit Total Subsidiary Indebtedness to exceed 10% of
Consolidated Indebtedness at such time. As used herein:
"Total Subsidiary Indebtedness" -- means, at any time (without
duplication),
(a) the aggregate Indebtedness of all Subsidiaries
outstanding at such time, plus
(b) the aggregate amount of claims in respect of the
redemption of, and accumulated unpaid dividends on, all preferred stock (and
other equity Securities and all other Securities convertible into, exchangeable
<PAGE>
for, or representing the right to purchase, preferred stock) of all Subsidiaries
outstanding at such time (whether or not any right of redemption or conversion
is exercisable by the holder thereof at such time),
determined, in each case, on a combined basis for such
Persons, but excluding from such calculation (i) any such Indebtedness of any
Subsidiary in respect of any Guaranty of the Notes provided pursuant to, and in
accordance with the provisions of, paragraph 5I hereof, (ii) any such
Indebtedness of any Subsidiary in respect of any Guaranty of any of the
obligations of the Company under (A) the Bank Credit Agreement and (B) any other
primary Indebtedness of the Company, so long as, in each such case, such
Subsidiary has entered into a Guaranty of the obligations of the Company under
the Notes and this Agreement, (iii) any such Indebtedness of any Subsidiary
existing on the Date of Closing which is described in Part 6C(2)(iii) of Annex 4
hereto, and (iv) all such preferred stock and other equity Securities which are
legally and beneficially owned by the Company.
"Consolidated Indebtedness" -- means, at any time,
the aggregate amount of Indebtedness of the Company and the Subsidiaries,
determined on a consolidated basis for such Persons at such time in accordance
with GAAP.
(iv) Loans, Guaranties, etc. The Company will not, and will
not permit any Subsidiary to, make any loans or advances to or investments in
any Person, or directly or indirectly enter into any Guaranty or otherwise
assure a creditor against loss in respect of any Indebtedness or other
obligations or liabilities (contingent or otherwise) of any Person unless any
such amounts have been included as Indebtedness in making calculations with
respect to each representation, warranty and covenant set forth in this
Agreement.
6C(3) Restricted Investments. The Company will not at any time, and will not at
any time permit any Subsidiary to, make any investments (including, without
limitation, loans or other advances to or for the benefit of any Subsidiary)
except:
(i) investments in readily marketable obligations of the
United States of America maturing within one year from date of purchase,
(ii) investments in prime (by recognized United States
financial standards) commercial paper maturing within one year from date of
purchase,
(iii) investments in fully insured domestic certificates of
deposit and certificates of deposit issued by any Bank (provided such Bank's
outstanding long-term debt securities are rated at least "A" by Standard &
Poor's (a division of McGraw-Hill, Inc.) or at least "A-1" by Moody's Investors
Service, Inc.)maturing within one year from the date of creation thereof,
(iv) endorsements of negotiable instruments for collection in
the ordinary course of business,
(v) investments in Subsidiaries that have complied with the
requirements of paragraph 5I hereof, and
<PAGE>
(vi) other investments so long as the aggregate book value of
all such investments does not at any time exceed 10% of Tangible Net Worth at
such time;
provided, however, that this paragraph 6C(3) shall not be deemed to prohibit the
Company from creating accounts receivable owing from any Subsidiary as a result
of the sale of inventory in accordance with paragraph 6D hereof.
6C(4) Merger, Consolidation, Transfers of Property, etc.
(i) Merger and Consolidation. The Company will not, and will
not permit any Subsidiary to, merge with or into or consolidate with any other
Person or permit any other Person to merge or consolidate with or into it
(except that a Subsidiary may merge into or consolidate with the Company or a
Wholly-Owned Subsidiary), provided that the foregoing restriction does not apply
to the merger or consolidation of the Company with another corporation if:
(a) the Company is the corporation that results from
such merger or consolidation (the "Surviving Corporation");
(b) the due and punctual payment of the principal of
and Yield-Maintenance Amount, if any, and interest on all of the Notes,
according to their tenor, and the due and punctual performance and observance of
all the covenants in the Notes and this Agreement to be performed or observed by
the Company are expressly assumed by the Surviving Corporation pursuant to such
agreements and instruments as shall be approved by the Required Holders, and the
Company causes to be delivered to each holder of Notes an opinion of independent
counsel to the effect that such agreements and instruments are enforceable in
accordance with their terms (subject to customary qualifications); and
(c) immediately prior to, and immediately after the
consummation of the transaction, and after giving effect thereto, no Default or
Event of Default exists or would exist.
(ii) Acquisition of Stock, etc. The Company will not, and will
not permit any Subsidiary to, acquire any stock of any corporation if upon
completion of such acquisition such corporation would be a Subsidiary, or
acquire all of the Property of, or such of the Property as would permit the
transferee to continue any one or more integral business operations of, any
Person unless, immediately prior to, and immediately after the consummation of
such acquisition, and after giving effect thereto, no Default or Event of
Default exists or would exist.
(iii) Transfers of Property. The Company will not, and will
not permit any Subsidiary to, sell, lease as lessor, transfer or otherwise
dispose of any Property (collectively, "Transfers"), except Transfers of
inventory and Transfers of other Property for Fair Market Value, in each case in
the ordinary course of business of the Company or any such Subsidiary.
6C(5) Operating Lease Rentals. The Company will not create or suffer to exist,
or permit any of the Subsidiaries to create or suffer to exist, any obligations
for the payment of rent for any Property under leases or agreements to lease,
which do or would constitute Operating Leases, which in the aggregate have
annual rental payments for any fiscal year in excess of 7.5% of Net Tangible
<PAGE>
Assets determined at the end of such fiscal year; provided, however, that leases
for rolling stock shall be excluded from the foregoing calculation. As used
herein:
"Net Tangible Assets" -- means total assets minus Intangible
Assets minus current liabilities (exclusive of current deferred taxes) of the
Company and the Subsidiaries, in each case as would appear on a consolidated
balance sheet for such Persons prepared in accordance with GAAP.
6D Transactions with Affiliates. The Company will not, and will not permit any
Subsidiary to, enter into any transaction, including, without limitation, the
purchase, sale or exchange of Property or the rendering of any service, with any
Affiliate, 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 an Affiliate.
6E Capital Expenditures. The Company will not, and will not permit any
Subsidiary to, make any Capital Expenditures, if:
(i) the aggregate amount of Capital Expenditures of the
Company and the Subsidiaries, determined on a consolidated basis for such
Persons in accordance with GAAP, in any one fiscal year would be in excess of
25% of stockholder's equity of the Company and the Subsidiaries as would appear
on a consolidated balance sheet prepared in accordance with GAAP for such
Persons as at the end of the fiscal year then most recently ended; provided,
however, that
(a) the amount of Capital Expenditures incurred in
fiscal year 1996 and fiscal year 1997 of the Company in connection with the
Company's planned construction of a new processing facility in the state of
Kentucky, and
(b) the portion of any purchase price in respect of
any Capital Expenditure which was paid for by the Company solely with shares of
the Company's capital stock,
shall be excluded from the application of this covenant; or
(ii) at the time of such Capital Expenditure, and immediately
before and after giving effect thereto, a Default or an Event of Default exists
or would exist. As used herein:
"Capital Expenditure" -- means, with respect to any Person,
any payments in respect of the acquisition or construction cost of Property
(including, without limitation, (x) the purchase price of tangible assets
acquired by such Person and (y) the gross purchase price of assets or stock, as
the case may be, acquired by such Person in connection with any merger,
consolidation, asset acquisition, stock purchase or similar transaction entered
into by such Person) or other expenditures in respect of Property, in each case
that is, or is part of a group of related items of Property substantially all of
which are, required to be classified as long-term assets on a balance sheet of
such Person prepared in accordance with GAAP.
<PAGE>
6F Nature of Business. The Company will not, and will not permit any Subsidiary
to, engage in any business if, as a result thereof, the principal businesses of
the Company and the Subsidiaries, taken as a whole, would not be substantially
the same as the businesses described in the Most Recent 10-K.
6G ERISA.
(i) Compliance. The Company will, and will cause each ERISA
Affiliate to, at all times with respect to each Pension Plan, make timely
payment of contributions required to meet the minimum funding standard set forth
in ERISA or the Code with respect thereto, and to comply with all other
applicable provisions of ERISA.
(ii) Relationship of Vested Benefits to Pension Plan Assets.
The Company will not at any time permit the present value of all employee
benefits vested under each Pension Plan to exceed the assets of such Pension
Plan allocable to such vested benefits at such time, in each case determined
pursuant to paragraph 6G(iii) hereof.
(iii) Valuations. All assumptions and methods used to
determine the actuarial valuation of vested employee benefits under Pension
Plans and the present value of assets of Pension Plans will be reasonable in the
good faith judgment of the Company and will comply with all requirements of law.
(iv) Prohibited Actions. The Company will not, and will not
permit any ERISA Affiliate to:
(a) engage in any "prohibited transaction" (as such
term is defined in section 406 of ERISA or section 4975 of the Code) that would
result in the imposition of a material tax or penalty;
(b) incur with respect to any Pension Plan any
"accumulated funding deficiency" (as such term is defined in section 302 of
ERISA), whether or not waived;
(c) terminate any Pension Plan in a manner that could
result in
(I) the imposition of a Lien on the Property
of the Company or any Subsidiary pursuant to section 4068 of ERISA, or
(II) the creation of any liability under
section 4062 of ERISA;
(d) fail to make any payment required by section 515
of ERISA; or
(e) at any time be an "employer" (as such term is
defined in section 3(5) of ERISA) required to contribute to any Multiemployer
Plan if, at such time, it could reasonably be expected that the Company or any
Subsidiary will incur withdrawal liability in respect of such Multiemployer Plan
and such liability, if incurred, together with the aggregate amount of all other
withdrawal liability as to which there is a reasonable expectation of incurrence
by the Company or any Subsidiary under any one or more Multiemployer Plans,
<PAGE>
could reasonably be expected to have a Material Adverse Effect.
6H Private Offering. The Company will not, and will not permit any Person acting
on its behalf to, offer the Notes or any part thereof or any similar Securities
for issuance or sale to, or solicit any offer to acquire any of the same from,
any Person so as to bring the issuance and sale of the Notes within the
provisions of section 5 of the Securities Act.
6I Certain Accounting Matters. The Company will not, at any time, (a) change its
methods of accounting, unless required in accordance with GAAP, or (b) change
its fiscal year.
PARAGRAPH 7. EVENTS OF DEFAULT.
7 Events of Default.s of Default.
7A Acceleration. If any of the following events shall occur and be continuing
for any reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise):
(i) Principal or Yield-Maintenance Amount Payments -- the
Company shall fail to make any payment of principal or Yield-Maintenance Amount
on any Note on or before the date such payment is due;
(ii) Interest Payments -- the Company shall fail to make any
payment of interest on any Note on or before the date such payment is due;
(iii) Certain Defaults -- the Company or any Subsidiary shall
fail to perform or observe any covenant contained in paragraph 5F, 5G(ii), 5A(i)
through (viii), inclusive, or 5(A)(xi) through (xiii), inclusive, and such
failure continues for more than 10 days after the earlier of (i) receipt by the
Company of written notice thereof from any Purchaser or any other holder of
Notes, or (ii) such time as such failure shall otherwise first become known to
any officer of the Company;
(iv) Other Defaults -- the Company or any Subsidiary shall
fail to perform, observe or comply with any other term, covenant or agreement
contained in this Agreement, in the Notes or in any other document or instrument
delivered in connection herewith required to be performed by the Company or such
Subsidiary pursuant to the terms of this Agreement, of the Notes or of such
other document or instrument;
(v) Warranties or Representations -- any warranty,
representation or other statement by or on behalf of the Company (or any of its
officers) contained herein or in any certificate or instrument furnished in
compliance with or in reference hereto, or by any Subsidiary in any Subsidiary
Guaranty, shall have been false or misleading in any material respect when made;
(vi) Cross Default --
(a) the Company or any Subsidiary shall fail to make
any payment on any Indebtedness or any Security when due;
<PAGE>
(b) any event shall occur or any condition shall
exist in respect of any Indebtedness or any Security of the Company or any
Subsidiary, or under any agreement securing or relating to any such Indebtedness
or Security, that immediately or with any one or more of the passage of time or
the giving of notice:
(I) causes (or permits any holder thereof or
a trustee therefor to cause) such Indebtedness or Security, or a portion
thereof, to become due prior to its stated maturity or prior to its regularly
scheduled date or dates of payment; or
(II) permits any one or more of the holders
thereof or a trustee therefor to require the Company or any Subsidiary to
repurchase such Indebtedness or Security from such holder and any such holder or
trustee exercises (or attempts to exercise) such right; or
(c) any "Event of Default" shall have occurred or
shall exist under, and as defined in, the Bank Credit Agreement, as amended and
as in effect at such time;
(vii) Involuntary Bankruptcy Proceedings --
(a) a receiver, liquidator, custodian or trustee of
the Company or any Subsidiary, or of all or any part of the Property of any such
Person, shall be appointed by court order and such order shall remain in effect
for more than 30 days, or an order for relief shall be entered with respect to
the Company or any Subsidiary, or the Company or any Subsidiary shall be
adjudicated a bankrupt or insolvent;
(b) any of the Property of the Company or any
Subsidiary shall be sequestered by court order and such order shall remain in
effect for more than 30 days; or
(c) a petition shall be filed against the Company or
any Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and shall not be dismissed within 30 days
after such filing;
(viii) Voluntary Petitions -- the Company or any Subsidiary
shall file a petition in voluntary bankruptcy or seeking relief under any
provision of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, or shall consent to, or take any corporate
action to authorize, the filing of any petition against, or with respect to, any
such Person, under any such law;
(ix) Assignments for Benefit of Creditors, etc. -- the Company
or any Subsidiary shall make an assignment for the benefit of its creditors, or
admit in writing its inability, or fail, to pay its debts generally as they
become due, or shall consent to the appointment of a receiver, liquidator or
trustee of the Company or any Subsidiary or of all or any part of the Property
of any such Person;
<PAGE>
(x) Undischarged Final Judgments -- a final, nonappealable
judgment or final, nonappealable judgments for the payment of money aggregating
in excess of $2,000,000 is or are outstanding against any one or more of the
Company or any Subsidiary and any one of such judgments shall have been
outstanding for more than 10 days from the date of its entry and shall not have
been discharged in full or stayed; or
(xi) Subsidiary Guaranty --
(a) any Subsidiary Guaranty shall cease to be in full
force and effect or shall be declared by a court or Governmental Authority of
competent jurisdiction to be void, voidable or unenforceable against the
Subsidiary which is a guarantor thereunder;
(b) the validity or enforceability of any Subsidiary
Guaranty against the Subsidiary which is a guarantor thereunder shall be
contested by such Subsidiary, or any subsidiary or affiliate thereof; or
(c) any Subsidiary, or any subsidiary or affiliate
thereof, shall deny that such Subsidiary has any further liability or obligation
under the Subsidiary Guaranty to which such Subsidiary is a party;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind (including,
without limitation, notice of intent to accelerate), all of which are hereby
waived by the Company, (b) if such event is an Event of Default specified in
clause (vii), (viii) or (ix) of this paragraph 7A with respect to the Company,
all of the Notes at the time outstanding shall automatically become immediately
due and payable together with interest accrued thereon and together with the
Yield-Maintenance Amount, if any, with respect to each Note, without
presentment, demand, protest or notice of any kind (including, without
limitation, notice of intent to accelerate and notice of acceleration of
maturity), all of which are hereby waived by the Company, and (c) if such event
is not an Event of Default specified in clause (vii), (viii) or (ix) of this
paragraph 7A with respect to the Company, the Required Holder(s) may at its or
their option, by notice in writing to the Company, declare all of the Notes to
be, and all of the Notes shall thereupon be and become, immediately due and
payable together with interest accrued thereon and together with the
Yield-Maintenance Amount, if any, with respect to each Note, without
presentment, demand, protest or other notice of any kind (including, without
limitation, notice of intent to accelerate), all of which are hereby waived by
the Company.
The Company acknowledges, and the parties hereto agree, that each
holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and that
the provision for payment of the Yield-Maintenance Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
<PAGE>
7B.Rescission of Acceleration. At any time after any or all of the Notes shall
have been declared immediately due and payable pursuant to paragraph 7A, the
Required Holder(s) may, by notice in writing to the Company, rescind and annul
such declaration and its consequences if (i) the Company shall have paid all
overdue interest on the Notes, the principal of and Yield-Maintenance Amount, if
any, payable with respect to any Notes which have become due otherwise than by
reason of such declaration, and interest on such overdue interest and overdue
principal and Yield-Maintenance Amount at the rate specified in the Notes, (ii)
the Company shall not have paid any amounts which have become due solely by
reason of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to paragraph 11C, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this Agreement. No such rescission or annulment shall
extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.
7C.Notice of Acceleration or Rescission. Whenever any Note shall be declared
immediately due and payable pursuant to paragraph 7A or any such declaration
shall be rescinded and annulled pursuant to paragraph 7B, the Company shall
forthwith give written notice thereof to the holder of each Note at the time
outstanding.
7D.Other Remedies. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
PARAGRAPH 8. REPRESENTATIONS, COVENANTS AND WARRANTIES.
8. Representations, Covenants and Warranties. The Company represents, covenants
and warrants as follows:
8A. Corporate Organization and Authority. Each of the Company and the
Subsidiaries:
(i) is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation;
(ii) has all legal and corporate power and authority to own
and operate its Properties and to carry on its business as now conducted and as
presently proposed to be conducted;
(iii) has all licenses, certificates, permits, franchises and
other governmental authorizations necessary to own and operate its Properties
and to carry on its business as now conducted and as presently proposed to be
conducted, except where the failure to have such licenses, certificates,
<PAGE>
permits, franchises and other governmental authorizations, in the aggregate for
all such failures, could not reasonably be expected to have a Material Adverse
Effect; and
(iv) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign corporation, in
each state (each of which states is listed in Part 8A(iv) of Annex 3 hereto)
where the failure to be so qualified or licensed and authorized and in good
standing, in the aggregate for all such failures, could reasonably be expected
to have a Material Adverse Effect.
8B. Financial Statements; Indebtedness; Material Adverse Change.
(i) Financial Statements. The Company has provided each
Purchaser with its financial statements described in Part 8B(i) of Annex 3
hereto. Such financial statements have been prepared in accordance with GAAP
consistently applied, and present fairly, in all material respects, the
financial position of the Company and its consolidated subsidiaries as of such
dates and the results of their operations and cash flows for such periods. All
such financial statements include the accounts of all Subsidiaries of the
Company for the respective periods during which a Subsidiary relationship has
existed.
(ii) Indebtedness. Part 8B(ii) of Annex 3 hereto lists all
Indebtedness of the Company and the Subsidiaries as of the Closing Date, and
provides the following information with respect to each item of such
Indebtedness:
(a) the holder thereof,
(b) the outstanding amount,
(c) the portion which is classified as current under
GAAP, and
(d) the collateral securing such Indebtedness, if
any.
(iii) Material Adverse Change. Since September 30, 1995, there
has been no change in the business, prospects, profits, Properties or condition
(financial or otherwise) of the Company or any of the Subsidiaries, except
changes in the ordinary course of business that, in the aggregate for all such
changes, could not reasonably be expected to have a Material Adverse Effect.
(iv) Other Financial Information. All statements or summaries
of historical and pro forma financial condition and performance of the Company
and the Subsidiaries contained in the Most Recent 10K or described in Part 8B(i)
of Annex 3 have been in all material respects prepared in accordance with GAAP,
unless otherwise expressly noted therein. All assumptions and estimates upon
which any statements of pro forma financial condition or performance have been
based are reasonable in light of the circumstances existing at the time such
assumptions and estimates were made, based on the best information available to
management of the Company and the Subsidiaries at the time of the preparation
thereof. As of the Closing Date, and in light of the circumstances existing on
<PAGE>
such date, such assumptions continue to be reasonable, based on the best
information available to the management of the Company and the Subsidiaries.
8C. Nature of Business. The Most Recent 10-K (a copy of which previously has
been delivered to you), correctly describes the general nature of the business
and principal Properties of the Company and the Subsidiaries as of the Closing
Date.
8D. Subsidiaries and Affiliates. Part 8D of Annex 3 hereto sets forth (i) the
name of each of the Subsidiaries, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by the Company and each other Subsidiary,
and (ii) a description of the Affiliates (other than individuals) and the nature
of their affiliation.
Each of the Company and the Subsidiaries has good and marketable title
to all of the shares it purports to own of the stock of each Subsidiary, free
and clear in each case of any Lien. All such shares have been duly issued and
are fully paid and nonassessable.
8E. Title to Properties; Leases; Patents, Trademarks, etc.
(i) Each of the Company and the Subsidiaries has good and
marketable title to all of the real Property, and good title to all of the other
Property, reflected in the most recent balance sheet referred to in paragraph
8B(i) hereof (except as sold or otherwise disposed of in the ordinary course of
business), except where the failure to have such good and marketable title (a)
is immaterial to such financial statements, and (b) could not reasonably be
expected to have a Material Adverse Effect. All such Property is free from Liens
not permitted by paragraph 6C(i) hereof.
(ii) Each of the Company and the Subsidiaries has complied
with all material obligations under all leases to which it is a party, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. All such leases are in full force and effect and each
of the Company and the Subsidiaries enjoys peaceful and undisturbed possession
under all such leases.
(iii) Each of the Company and the Subsidiaries owns, possesses
or has the right to use all of the patents, trademarks, service marks, trade
names, copyrights and licenses, and rights with respect thereto, necessary for
the present and currently planned future conduct of its business, without any
known conflict with the rights of others, except for such failures to own,
possess, or have the right to use, that, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect.
8F. Taxes.
(i) Returns Filed; Taxes Paid.
(a) All tax returns required to be filed by the
Company and each Subsidiary and any other Person with which the Company or any
Subsidiary files or has filed a consolidated return in any jurisdiction have
been filed on a timely basis, and all taxes, assessments, fees and other
governmental charges upon the Company, such Subsidiary and any such Person, and
<PAGE>
upon any of their respective Properties, income or franchises, that are due and
payable have been paid, except for such tax returns and such tax payments which
are being contested in good faith and which could not, in the aggregate for all
such tax returns and payments, reasonably be expected to have a Material Adverse
Effect.
(b) All liabilities of each of the Company, the
Subsidiaries and the other Persons referred to in the preceding clause (i) with
respect to federal income taxes have been finally determined except for the
fiscal years set forth in 8F(i) of Annex 3 hereto, the only years not closed by
the completion of an audit or the expiration of the statute of limitations.
(ii) Book Provisions Adequate.
(a) The amount of the liability for taxes reflected
in each of the balance sheets referred to in paragraph 8B(i) hereof is in each
case an adequate provision for taxes as of the dates of such balance sheets
(including, without limitation, any payment due pursuant to any tax sharing
agreement) as are or may become payable by any one or more of the Company and
the other Persons consolidated with the Company in such financial statements in
respect of all tax periods ending on or prior to such dates.
(b) The Company does not know of any proposed
additional tax assessment against it or any such Person that is not reflected in
full in the most recent balance sheet referred to in paragraph 8B(i) hereof.
8G. Pending Litigation.
(i) There are no proceedings, actions or investigations
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary in any court or before any Governmental Authority or
arbitration board or tribunal that, in the aggregate for all such proceedings,
actions and investigations, could reasonably be expected to have a Material
Adverse Effect.
(ii) Neither the Company nor any Subsidiary is in default with
respect to any judgment, order, writ, injunction or decree of any court,
Governmental Authority, arbitration board or tribunal that, in the aggregate for
all such defaults, could reasonably be expected to have a Material Adverse
Effect.
8H. Full Disclosure. The financial statements referred to in paragraph 8B(i)
hereof do not, nor does this Agreement, the Most Recent 10-K or any statement
furnished by or on behalf of the Company to you in connection with the
negotiation or any closing of any sale of the Notes, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein and herein not misleading. There is no fact that
the Company has not disclosed to you in writing that has had or, so far as the
Company can now reasonably foresee, could reasonably be expected to have a
Material Adverse Effect.
8I. Charter Instruments, Other Agreements, etc.
<PAGE>
(i) Charter Instruments. Neither the Company nor any
Subsidiary is in violation in any respect of any term of any charter instrument
or bylaw.
(ii) Agreements Relating to Indebtedness. Neither the Company
nor any Subsidiary is in violation of any term in, and no default or event of
default exists under, any agreement or other instrument to which it is a party
or by which it or any of its Properties may be bound relating to, or providing
the terms of, any Indebtedness specified in Part 8B(ii) of Annex 3 hereto having
a principal or stated amount equal to or in excess of $250,000.
(iii) Other Agreements. Neither the Company nor any Subsidiary
is in violation of any term in, and no default or event of default exists under,
any agreement or other instrument to which it is a party or by which it or any
of its Properties may be bound (other than the agreements and other instruments
specified in clause (ii) of this paragraph 8I), which, in the aggregate for all
such violations, could reasonably be expected to have a Material Adverse Effect.
8J. Restrictions on Company and Subsidiaries. Neither the Company nor any
Subsidiary:
(i) is a party to any contract or agreement, or subject to any
charter or other corporate restriction that, in the aggregate for all such
contracts, agreements, charters and corporate restrictions, could reasonably be
expected to have a Material Adverse Effect;
(ii) is a party to any contract or agreement that restricts
the right or ability of such corporation to incur Indebtedness, other than this
Agreement and the agreements listed in Part 8J(ii) of Annex 3 hereto, none of
which restricts the issuance and sale of the Notes or the performance by the
Company of its obligations under this Agreement or under the Notes; or
(iii) has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its Property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
paragraph 6C(1) hereof.
True, correct and complete copies of each of the agreements listed in
Part 8J(ii) of Annex 3 hereto have been provided to you and your counsel.
8K. Compliance with Law. Neither the Company nor any Subsidiary is in violation
of any law, ordinance, governmental rule or regulation to which it is subject,
which violations, in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
8L. ERISA.
(i) Prohibited Transactions. Neither the execution of this
Agreement, the purchase of the Notes by you nor the consummation of the
transactions contemplated by this Agreement will constitute a "prohibited
transaction" (as such term is defined in section 406(a) of ERISA) or result in a
<PAGE>
tax under section 4975 of the Code. The representation by the Company in the
preceding sentence is made in reliance upon your respective representations in
paragraph 9B hereof as to the source of funds to be used by you to purchase the
Notes.
(ii) Pension Plans.
(a) Compliance with ERISA. The Company and the ERISA
Affiliates are in compliance with ERISA, except for such failures to comply
that, in the aggregate for all such failures, could not reasonably be expected
to have a Material Adverse Effect.
(b) Funding Status; Relationship of Vested Benefits
to Pension Plan Assets.
(I) No "accumulated funding deficiency" (as
defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Pension Plan.
(II) The present value of all benefits,
determined as of the most recent valuation date for such benefits as provided in
paragraph 6G hereof, vested under each Pension Plan does not exceed the value of
the assets of such Pension Plan allocable to such vested benefits, determined as
of such date as provided in paragraph 6G hereof.
(c) PBGC. No liability to the PBGC has been or is
expected to be incurred by the Company or any ERISA Affiliate with respect to
any Pension Plan that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. No circumstance exists that
constitutes grounds under section 4042 of ERISA entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, any Pension Plan
or trust created thereunder, nor has the PBGC instituted any such proceeding.
(d) Multiemployer Plans. Neither the Company nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan. There
have been no "reportable events" (as such term is defined in section 4043 of
ERISA) with respect to any Multiemployer Plan that could result in the
termination of such Multiemployer Plan and give rise to a liability of the
Company or any ERISA Affiliate in respect thereof.
(iii) Disclosure. Part 8L(iii) of Annex 3 sets forth all ERISA
Affiliates and all "employee benefit plans" with respect to which the Company or
any "affiliate" of the Company is a "party-in-interest" or in respect of which
the Notes could constitute an "employer security" ("employee benefit plan" and
"party-in-interest" having the meanings specified in section 3 of ERISA and
"affiliate" and "employer security" having the meanings specified in section
407(d) of ERISA).
8M. Certain Laws.
(i) Environmental Protection Laws.
<PAGE>
(a) Compliance. Each of the Company and the
Subsidiaries is in compliance with all Environmental Protection Laws in effect
in each jurisdiction where it is presently doing business and in which the
failure so to comply, in the aggregate for all such failures, could reasonably
be expected to have a Material Adverse Effect.
(b) Liability. Neither the Company nor any Subsidiary
is subject to any liability under any Environmental Protection Law that, in the
aggregate for all such liabilities, could reasonably be expected to have a
Material Adverse Effect.
(c) Notices. Neither the Company nor any Subsidiary
has received any:
(I) notice from any Governmental Authority
by which any of its present or previously-owned or leased Properties has been
identified in any manner by any Governmental Authority as a hazardous substance
disposal or removal site, "Super Fund" clean-up site or candidate for removal or
closure pursuant to any Environmental Protection Law;
(II) notice of any Lien arising under or in
connection with any Environmental Protection Law that has attached to any
revenues of, or to, any of its owned or leased Properties; or
(III) communication, written or oral, from
any Governmental Authority concerning any action or omission by the Company or
such Subsidiary in connection with its ownership or leasing of any Property
resulting in the release of any Hazardous Substance or resulting in any
violation of any Environmental Protection Law;
where the effect of which, in the aggregate for all such
notices and communications, could reasonably be expected to have a Material
Adverse Effect.
(ii) Health Laws.
(a) Compliance. Each of the Company and the
Subsidiaries is in compliance with all Health Laws in effect in each
jurisdiction where it is presently doing business and in which the failure so to
comply, in the aggregate for all such failures, could reasonably be expected to
have a Material Adverse Effect.
(b) Liability. Neither the Company nor any Subsidiary
is subject to any liability under any Health Law that, in the aggregate for all
such liabilities, could reasonably be expected to have a Material Adverse
Effect.
(c) Notices. Neither the Company nor any Subsidiary
has received any notice from any Governmental Authority concerning any actual or
alleged violation of any Health Law where the effect of which, in the aggregate
for all such notices and communications, could reasonably be expected to have a
Material Adverse Effect.
8N. Transactions are Legal and Authorized; Obligations are Enforceable.
<PAGE>
(i) Transactions are Legal and Authorized. Each of the
issuance, sale and delivery of the Notes by the Company, the execution and
delivery of this Agreement by the Company, and compliance by the Company with
all of the provisions of this Agreement and of the Notes:
(a) is within the corporate powers of the Company;
and
(b) is legal and does not conflict with, result in
any breach of any of the provisions of, constitute a default under, or result in
the creation of any Lien upon any Property of the Company or any Subsidiary
under the provisions of, any agreement, charter instrument, bylaw or other
instrument to which any such Person is a party or by which any such Person or
any of such Person's respective Properties may be bound.
(ii) Obligations are Enforceable. Each of this Agreement and
the Notes have been duly authorized by all necessary action on the part of the
Company, have been duly executed and delivered by authorized officers of the
Company and constitute legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms except that the
enforceability of this Agreement and of the Notes may be limited by applicable
bankruptcy, reorganization, arrangement, insolvency, moratorium or other similar
laws affecting the enforceability of creditors' rights generally.
8O. Governmental Consent; Certain Laws.
(i) Governmental Consent. Neither the nature of the Company or
any Subsidiary, or of any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offer, issuance, sale or delivery of the
Notes and the execution and delivery of this Agreement, is such as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any Governmental Authority on the part of the Company or any Subsidiary as
a condition to the execution and delivery of this Agreement or the offer,
issuance, sale or delivery of the Notes.
(ii) Certain Laws. Neither the Company nor any Subsidiary is
subject to regulation under, or otherwise required to comply with any filing,
registration or notice provisions of, (i) the Investment Company Act of 1940, as
amended, (ii) the Public Utility Holding Company Act of 1935, as amended, (iii)
the Transportation Acts (49 U.S.C.), as amended, or (iv) the Federal Power Act,
as amended, except that Ohse is subject to regulation under the Transportation
Acts (49 U.S.C.), as amended.
8P. Private Offering of Notes. Neither the Company nor any Subsidiary has
offered any of the Notes or any similar Security of the Company for sale to, or
solicited offers to buy any thereof from, or otherwise approached or negotiated
with respect thereto with, any prospective purchaser other than you.
8Q. No Defaults; Transactions Prior to Closing Date, etc.
(i) No event has occurred and no condition exists that, upon
the execution and delivery of this Agreement or the issuance of the Notes, would
constitute a Default or an Event of Default.
<PAGE>
(ii) Except as disclosed in Part 8Q(ii) of Annex 3 hereto,
neither the Company nor any Subsidiary entered into any transaction during the
period beginning on September 30, 1995 and ending on the Closing Date that would
have been prohibited by paragraphs 6B, 6C(4), 6D or 6E hereof had such
paragraphs applied during such period.
8R. Use of Proceeds of Notes.
(i) Use of Proceeds. The Company will generally apply the
proceeds from the sale of the Notes to finance Capital Expenditures of the
Company.
(ii) Margin Securities. None of the transactions contemplated
herein and in the Notes (including, without limitation, the use of the proceeds
from the sale of the Notes) violates, will violate or will result in a violation
of section 7 of the Exchange Act or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The obligations
of the Company under this Agreement and the Notes are not and will not be
directly or indirectly secured (within the meaning of such Regulation G) by any
Margin Security, and no Notes are being sold on the basis of any such
collateral.
(iii) Absence of Foreign or Enemy Status. Neither the sale of
the Notes nor the use of proceeds from the sale thereof will result in a
violation of any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), or any ruling
issued thereunder or any enabling legislation or Presidential Executive Order in
connection therewith.
8S. Solvency. The fair value of the business and assets of the Company is in
excess of the amount that will be required to pay its liabilities (including,
without limitation, contingent, subordinated, unmatured and unliquidated
liabilities on existing debts, as such liabilities may become absolute and
matured), in each case both prior to and after giving effect to the transactions
contemplated by this Agreement and the Notes. After giving effect to the
transactions contemplated by this Agreement and the Notes, the Company will not
be engaged in any business or transaction, or about to engage in any business or
transaction, for which it has unreasonably small capital, and the Company has or
had no intent to hinder, delay or defraud any entity to which it is, or will
become, on or after the Closing Date, indebted or to incur debts that would be
beyond its ability to pay as such debts mature.
PARAGRAPH 9. REPRESENTATIONS OF EACH PURCHASER.
9.Representations of Each Purchaser. Each Purchaser represents as follows:
9A.Nature of Purchase. Such Purchaser is not acquiring the Notes to be purchased
by it hereunder with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act, provided that the disposition
of such Purchaser's property shall at all times be and remain within its
control.
<PAGE>
9B.Source of Funds. The source of funds to be used by such Purchaser to purchase
the Notes constitutes assets allocated to: (i) the "insurance company general
account" of such Purchaser (as such term is defined under Section V of the
United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60) and, as of the date of the purchase of the Notes, such Purchaser
satisfies all of the applicable requirements for relief under Sections I and V
of PTCE 95-60 or (ii) as separate account maintained by such Purchaser in which
no employee benefit plan, other than employee benefit plans identified on a list
that has been furnished by such Purchaser to the Company, participates to the
extent of 10% or more.
9C.Representations of Each Purchaser to Each Other Purchaser. By its execution
of this Agreement, each Purchaser severally represents and acknowledges to each
other Purchaser that it has, independently and without reliance upon any other
Purchaser and based on the financial statements referred to in paragraph 8B(i)
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Purchaser
also severally represents and acknowledges to each other Purchaser that it will,
independently and without reliance upon any other Purchaser and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement. The provisions of this paragraph 9C are for the sole benefit of the
Purchasers and are not intended to benefit or to confer any right upon the
Company or any other Person.
PARAGRAPH 10. DEFINITIONS.
10. Definitions. For the purpose of this Agreement, the terms defined in the
introductory sentence and in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
10A. Yield-Maintenance Terms.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City are required or authorized to be
closed.
"Called Principal" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.
"Discounted Value" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called Principal
of any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the Business Day next
<PAGE>
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Settlement Date" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"Yield-Maintenance Amount" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in no
event be less than zero.
10B. Other Terms.
"Acceptable Control Persons" shall mean any members of the immediate family of,
or the respective heirs, executors or trustees holding for the sole benefit of
such heirs or members of the immediate family of, James T. Hudson.
"Affiliate" shall mean, at any time, a Person (other than a Subsidiary)
<PAGE>
(i) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
the Company,
(ii) that beneficially owns or holds 5% or more of any class
of the Voting Stock of the Company,
(iii) 5% or more of the Voting Stock (or in the case of a
Person that is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary,
(iv) that is an officer or director (or a member of the
immediate family of an officer or director) of the Company or any Subsidiary, or
(v) that is an Acceptable Control Person, a natural Person in
any manner related by birth or marriage to any Acceptable Control Person or a
Person owned or Controlled by any such Person,
at such time.
As used in this definition, "Control" shall mean 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.
"Applicable Net Income Carryover" shall have the meaning specified in
paragraph 6A(1).
"Bank Credit Agreement" shall mean the Revolving Credit Agreement,
dated as of April 26, 1994, by and among the Company, the Banks and Rabobank, as
agent, as the same shall have been amended, modified or restated from time to
time, and any substitute or replacement credit facility in respect thereof.
"Banks" shall mean each of Rabobank, Bank of America National Trust and
Savings Association, NationsBank of Texas, National Association, Caisse
Nationale de Credit Agricole, and Harris Trust and Savings Bank or any future
banks which become parties to the Bank Credit Agreement.
"Board of Directors" shall mean the board of directors of the Company
or a Subsidiary, as applicable, or any committee thereof that, in the instance,
shall have the lawful power to exercise the power and authority of such board of
directors.
"Capital Expenditure" shall have the meaning specified in paragraph 6E.
"Capital Lease" shall mean, at any time, a lease with respect to which
the lessee is required to recognize the acquisition of an asset and the
incurrence of a liability at such time in accordance with GAAP.
"Cash Flow Coverage Ratio" shall have the meaning specified in
paragraph 6A(4).
"Closing" or "Date of Closing" shall have the meaning specified in
paragraph 2.
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning specified in the introductory sentence
hereof.
"Consolidated Indebtedness" shall have the meaning specified in
paragraph 6C(2)(iii).
"Consolidated Interest Expense" shall have the meaning specified in
paragraph 6A(4).
"Consolidated Lease Expense" shall have the meaning specified in
paragraph 6A(4).
"Consolidated Net Income" shall have the meaning specified in paragraph
6A(4).
"Current Debt" shall mean, with respect to any Person, (without
duplication)
(i) the portion of the amount of liabilities for borrowed
money of such Person pursuant to a credit facility, under which such Person
borrows (and re-borrows) money on a short-term basis for working capital
purposes in the ordinary course of such Person's business, that is at such time
classified in good faith by such Person as a current liability, and
(ii) all other liabilities for borrowed money, Capital Leases
and all liabilities secured by any Lien existing on Property owned by such
Person whether or not such liabilities have been assumed, which, in each case
are payable on demand or within one year, except:
(a) any such liabilities which are renewable or
extendable at the option of such Person to a date more than one year, and
(b) any such liabilities which, although payable
within one year, constitute payments required to be made on account of principal
of Indebtedness initially expressed to mature more than one year from
origination.
"Environmental Protection Law" shall mean any federal, state, county,
regional or local law, statute or regulation (including, without limitation,
CERCLA, RCRA and SARA) enacted in connection with or relating to the protection
or regulation of the environment, including, without limitation, those laws,
statutes and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing or transporting of Hazardous
Substances, and any regulations issued or promulgated in connection with such
statutes by any Governmental Authority, and any orders, decrees or judgments
issued by any court of competent jurisdiction in connection with any of the
foregoing. As used in this definition:
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time (by SARA
or otherwise), and all rules and regulations promulgated in connection
therewith.
<PAGE>
"RCRA" shall mean the Resource Conservation and Recovery Act
of 1976, as amended from time to time, and all rules and regulations promulgated
in connection therewith.
"SARA" shall mean the Superfund Amendments and Reauthorization
Act of 1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"Event of Default" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "Default" shall mean any of such
events, whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, at any time, with respect to any
Property, the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller under no compulsion to buy or sell, respectively.
"GAAP" shall have the meaning specified in paragraph 10C.
"Governmental Authority" shall mean:
(i) the government of
(a) the United States of America and any state or
other political subdivision thereof, or
(b) any other jurisdiction (A) in which the Company
or any Subsidiary conducts all or any part of its business or (B) that asserts
jurisdiction over the conduct of the affairs or Properties of the Company or any
Subsidiary; and
(ii) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" shall mean, with respect to any Person (for the purposes of
this definition, the "Guarantor"), any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of the Guarantor guaranteeing or in effect guaranteeing any indebtedness,
dividend or other obligation of any other Person (the "Primary Obligor") in any
manner, whether directly or indirectly, including, without limitation,
<PAGE>
obligations incurred through an agreement, contingent or otherwise, by the
Guarantor:
(i) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(ii) to advance or supply funds
(a) for the purpose of payment of such indebtedness,
dividend or other obligation, or
(b) to maintain working capital or other balance
sheet condition or any income statement condition of the Primary Obligor or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness, dividend or other obligation;
(iii) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the Primary Obligor to make payment
of the indebtedness or obligation; or
(iv) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty in connection with any
computation of indebtedness or other liability, it shall be assumed that the
indebtedness or other liabilities that are the subject of such Guaranty are
direct obligations of the issuer of such Guaranty.
"Hazardous Substances" shall mean any and all pollutants, contaminants,
toxic or hazardous wastes and any other substances that might pose a hazard to
health or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage
or filtration of which is or shall be, in each of the foregoing cases,
restricted, prohibited or penalized by any applicable law.
"Health Laws" shall mean any federal, state, county, regional or local
law, statute or regulation enacted in connection with, or relating to, the
processing, production, use, marketing or sale of meat, poultry, feed and other
food products (and any similar businesses of the Company and the Subsidiaries),
including, without limitation, all regulations issued or promulgated in
connection with such laws and statutes by any Governmental Authority (including,
without limitation, the United States Department of Agriculture and the United
States Food and Drug Administration), and any orders, decrees or judgments
issued by any court of competent jurisdiction in connection with any of the
foregoing.
"Hudson Development" shall mean Hudson Development Corporation, an
Arkansas corporation.
"Hudson Foreign Sales" shall mean Hudson Foods Foreign Sales, Inc., a
corporation organized under the laws of the United States Virgin Islands.
<PAGE>
"Hudson Poland" shall mean Hudson Foods Poland s.p. zo.o, a limited
liability company organized under the laws of Poland.
"Indebtedness" shall mean, at any time, with respect to any Person,
without duplication:
(i) all indebtedness of such Person for borrowed money or for
the deferred purchase price of Property acquired by, or services rendered to,
such Person,
(ii) all indebtedness of such Person created or arising under
any conditional sale or other title retention agreement with respect to any
Property acquired by such Person,
(iii) the present value, determined in accordance with GAAP,
of all obligations of such Person under leases which shall have been or should
be recorded as Capital Leases in accordance with GAAP,
(iv) all indebtedness or other payment obligations for the
deferred purchase price of property or services secured by any Lien upon or in
any Property owned by such Person whether or not such Person has assumed or
become liable for the payment of such indebtedness,
(v) indebtedness arising under acceptance facilities, in
connection with surety or other similar bonds, and the undrawn maximum face
amount of all outstanding letters of credit issued for the account of such
Person and, without duplication, the outstanding amount of all drafts drawn
thereunder,
(vi) Swaps of such Person,
(vii) all liabilities of such Person in respect of unfunded
vested benefits under Pension Plans and all asserted withdrawal liabilities of
such Person or a commonly controlled entity to a Multiemployer Plan, and
(viii) all direct or indirect Guaranties by such Person of
indebtedness described in this definition of any other Person;
provided, that, for purposes of this definition, Trade Debt and Operating Leases
shall not be included. As used in this definition:
"Swaps" shall mean, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For purposes of this Agreement, the amount
of the obligation under any Swap shall be the amount determined in respect
thereof as of the end of the then most recently ended fiscal quarter of such
Person, based on the assumption that such Swap had terminated at the end of such
fiscal quarter, and in making such determination, if any agreement relating to
such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
<PAGE>
"Trade Debt" shall mean trade accounts payable incurred in the
ordinary course of business with an original maturity or due date of not greater
than 180 days from the creation thereof (and which are not overdue for more than
30 days).
"Institutional Investor" shall mean the Purchasers, any affiliate of
any of the Purchasers and any holder or beneficial owner of Notes that is an
"accredited investor" as defined in section 2(15) of the Securities Act.
"Intangible Assets" shall have the meaning specified in paragraph
6A(1).
"Leverage Ratio" shall have the meaning specified in paragraph 6A(3).
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including, but not
limited to, the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale, sale with recourse or a trust receipt, or a lease,
consignment or bailment for security purposes. The term "Lien" includes, without
limitation, reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting real Property and includes, without limitation, with
respect to stock, stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements. For the purposes hereof, the Company
and each Subsidiary shall be deemed to be the owner of any Property that it
shall have acquired or holds subject to a conditional sale agreement, Capital
Lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes, and such
retention or vesting is deemed a Lien. The term "Lien" does not include negative
pledge clauses in agreements relating to the borrowing of money.
"Margin Security" shall mean "margin stock" within the meaning of
Regulations G, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II, as amended from time to time.
"Material Adverse Effect" shall mean a material adverse effect on
(i) the business, prospects, profits, Properties or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
(ii) the ability of the Company to perform its obligations set
forth in this Agreement and in the Notes, or
(iii) the validity or enforceability of any of the terms or
provisions of this Agreement or the Notes.
"Most Recent 10-K" shall mean the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1995, as filed with the Securities and
Exchange Commission.
"Multiemployer Plan" shall mean any "multiemployer plan" (as defined in
section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate
is an "employer" (as such term is defined in section 3 of ERISA).
<PAGE>
"Net Tangible Assets" shall have the meaning specified in paragraph
6C(5).
"Notes" shall have the meaning specified in paragraph 1.
"Officer's Certificate" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"Ohse" shall mean Ohse Transportation, Inc., a Kansas corporation.
"Operating Lease" shall have the meaning specified in paragraph 6A(4).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor entity.
"Pension Plan" shall mean, at any time, any "employee pension benefit
plan" (as such term is defined in section 3 of ERISA) maintained at such time by
the Company or any ERISA Affiliate for employees of the Company or such ERISA
Affiliate, excluding any Multiemployer Plan.
"Person" shall mean an individual, sole proprietorship, partnership,
corporation, trust, limited liability company, joint venture, unincorporated
organization, or a government or agency or political subdivision thereof.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Purchasers" shall have the meaning specified in the introductory
sentence hereof.
"Rabobank" shall mean Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A. ("Rabobank Nederland"), New York Branch.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof.
"Required Holder(s)" shall mean the holder or holders of at least 66
2/3% of the aggregate principal amount of the Notes from time to time
outstanding.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security" shall mean "security" as defined in section 2(1) of the
Securities Act.
"Senior Financial Officer" shall mean the chief financial officer, the
principal accounting officer, the treasurer or the comptroller of the Company.
"Senior Officer" shall mean the chief executive officer, the chief
operating officer, the president, the chief financial officer, the treasurer or
the secretary of the Company.
<PAGE>
"Subordinated Debt" shall mean, at any time, any unsecured Indebtedness
of the Company or a Subsidiary that is in any respect subordinate or junior in
right of payment or otherwise to the Indebtedness evidenced by the Notes or to
any other Indebtedness of the Company or any Subsidiary.
"Subsidiary" shall mean, at any time, any corporation of which the
Company owns, directly or indirectly, more than 50% (by number of votes) of each
class of the Voting Stock of such corporation at such time.
"Subsidiary Guaranty" shall mean a Guaranty Agreement, substantially in
the form of Exhibit E hereto, executed by a Subsidiary in favor of the holders
of Notes pursuant to paragraph 5I hereof guarantying the Company's obligations
under this Agreement and the Notes.
"Surviving Corporation" shall have the meaning specified in paragraph
6C(4)(i).
"Tangible Net Worth" shall have the meaning specified in paragraph
6A(1).
"Total Subsidiary Indebtedness" shall have the meaning specified in
paragraph 6C(2)(iii).
"Transferee" shall mean any direct or indirect transferee of all or any
part of any Note purchased by any Purchaser under this Agreement.
"Transfers" shall have the meaning specified in paragraph 6C(4)(iii).
"Voting Stock" shall mean capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions).
"Wholly-Owned Subsidiary" shall mean, at any time, any Subsidiary 100%
of all of the equity Securities (except directors' qualifying shares) and voting
Securities of which are owned by any one or more of the Company and the other
Wholly-Owned Subsidiaries at such time.
10C.Accounting Principles, Terms and Determinations. All references in this
Agreement to "GAAP" shall be deemed to refer to generally accepted accounting
principles in effect in the United States at the time of application thereof.
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered pursuant to clause (ii)
of paragraph 5A or, if no such statements have been so delivered, the most
recent audited financial statements referred to in clause (i) of paragraph 8B.
<PAGE>
PARAGRAPH 11. MISCELLANEOUS.
11A.Note Payments. So long as any Purchaser shall hold any Note, the Company
will make payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note, which comply with the terms of this
Agreement, by wire transfer of immediately available funds for credit (not later
than 12:00 noon, New York City time, on the date due) to such Purchaser's
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as such Purchaser may
designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees that, before
disposing of any Note, such Purchaser will make a notation thereon (or on a
schedule attached thereto) of all principal payments previously made thereon and
of the date to which interest thereon has been paid. The Company agrees to
afford the benefits of this paragraph 11A to any Transferee which shall have
made the same agreement as each Purchaser has made in this paragraph 11A.
11B.Expenses. The Company agrees, whether or not the transactions contemplated
hereby shall be consummated, to pay, and save each Purchaser and any Transferee
harmless against liability for the payment of, all out-of-pocket expenses
arising in connection with such transactions, including (i) all document
production and duplication charges and the fees and expenses of any special
counsel engaged by such Purchaser or such Transferee in connection with this
Agreement, the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or proposed consent granted, and (ii)
the costs and expenses, including attorneys' fees, incurred by such Purchaser or
such Transferee in enforcing (or determining whether or how to enforce) any
rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the transactions contemplated hereby or by reason of such
Purchaser's or such Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case. The obligations
of the Company under this paragraph 11B shall survive the transfer of any Note
or portion thereof or interest therein by any Purchaser or any Transferee and
the payment of any Note.
11C.Consent to Amendments. This Agreement may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if the Company shall obtain the written consent to such
amendment, action or omission to act, of the Required Holder(s) except that,
without the written consent of the holder or holders of all Notes at the time
outstanding, no amendment to this Agreement shall change the maturity of any
Note, or change the principal of, or the rate or time of payment of interest on
or any Yield-Maintenance Amount payable with respect to any Note, or affect the
time, amount or allocation of any prepayments, or change the proportion of the
principal amount of the Notes required with respect to any consent, amendment,
waiver or declaration. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 11C,
whether or not such Note shall have been marked to indicate such consent, but
any Notes issued thereafter may bear a notation referring to any such consent.
No course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
<PAGE>
waiver of any rights of any holder of such Note. As used herein and in the
Notes, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
11D.Form, Registration, Transfer and Exchange of Notes; Lost Notes. The Notes
are issuable as registered notes without coupons in denominations of at least
$100,000, except as may be necessary to reflect any principal amount not evenly
divisible by $100,000. The Company shall keep at its principal office a register
in which the Company shall provide for the registration of Notes and of
transfers of Notes. Upon surrender for registration of transfer of any Note at
the principal office of the Company, the Company shall, at its expense, execute
and deliver one or more new Notes of like tenor and of a like aggregate
principal amount, registered in the name of such transferee or transferees. At
the option of the holder of any Note, such Note may be exchanged for other Notes
of like tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office of
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note or such
holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of any
Note of the loss, theft, destruction or mutilation of such Note and, in the case
of any such loss, theft or destruction, upon receipt of such holder's unsecured
indemnity agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
11E.Persons Deemed Owners; Participations. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any Person on
such terms and conditions as may be determined by such holder in its sole and
absolute discretion, provided that any such participation shall be in a
principal amount of at least $100,000.
11F.Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of any
Note or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any Transferee, regardless of any investigation made at any
time by or on behalf of any Purchaser or any Transferee. Subject to the
preceding sentence, this Agreement and the Notes embody the entire agreement and
understanding between the Purchasers and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
<PAGE>
11G.Successors and Assigns. All covenants and other agreements in this Agreement
contained by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including, without limitation, any Transferee) whether so expressed or not.
11H.Disclosure to Other Persons. The Company acknowledges that the holder of any
Note may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary in connection with or
pursuant to this Agreement to (i) such holder's directors, officers, employees,
agents and professional consultants, (ii) any other holder of any Note, (iii)
any Person to which such holder offers to sell such Note or any part thereof,
(iv) any Person to which such holder sells or offers to sell a participation in
all or any part of such Note, (v) any Person from which such holder offers to
purchase any security of the Company, (vi) any federal or state regulatory
authority having jurisdiction over such holder, (vii) the National Association
of Insurance Commissioners or any similar organization or (viii) any other
Person to which such delivery or disclosure may be necessary or appropriate (a)
in compliance with any law, rule, regulation or order applicable to such holder,
(b) in response to any subpoena or other legal process or informal investigative
demand or (c) in connection with any litigation to which such holder is a party.
11I.Notices. All notices or other communications provided for hereunder (except
for the telephonic notice required by paragraph 4D) shall be in writing and sent
by first class mail or nationwide overnight delivery service (with charges
prepaid) and (i) if to any Purchaser, addressed to such Purchaser at the address
specified for such communications in the Purchaser Schedule attached hereto, or
at such other address as such Purchaser shall have specified to the Company in
writing, (ii) if to any other holder of any Note, addressed to such other holder
at such address as such other holder shall have specified to the Company in
writing or, if any such other holder shall not have so specified an address to
the Company, then addressed to such other holder in care of the last holder of
such Note which shall have so specified an address to the Company, and (iii) if
to the Company, addressed to it at 1225 Hudson Road, Rogers, Arkansas 72756,
Attention: Charles B. Jurgensmeyer, Chief Financial Officer and Executive Vice
President, and Tommy D. Reynolds, Secretary and Treasurer, or at such other
address as the Company shall have specified to the holder of each Note in
writing; provided, however, that any such communication to the Company may also,
at the option of the holder of any Note, be delivered by any other means either
to the Company at its address specified above or to any officer of the Company.
11J.Payments Due on Non-Business Days. Anything in this Agreement or the Notes
to the contrary notwithstanding, any payment of principal of or interest on any
Note that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended to the next
succeeding Business Day by reason of the preceding sentence, the period of such
extension shall be included in the computation of the interest payable on such
Business Day.
11K.Satisfaction Requirement. If any agreement, certificate or other writing, or
any action taken or to be taken, is by the terms of this Agreement required to
be satisfactory to any Purchaser or to the Required Holder(s), the determination
<PAGE>
of such satisfaction shall be made by such Purchaser or the Required Holder(s),
as the case may be, in the sole and exclusive judgment (exercised in good faith)
of the Person or Persons making such determination.
11L.Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF NEW YORK. This Agreement may not be changed orally, but (subject to the
provisions of paragraph 11C) only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
11M.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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11N.Descriptive Headings. The descriptive headings of the several paragraphs of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
11O.Maximum Interest Payable. The Company, each Purchaser and any other holders
of the Notes specifically intend and agree to limit contractually the amount of
interest payable under this Agreement, the Notes and all other instruments and
agreements related hereto and thereto to the maximum amount of interest lawfully
permitted to be charged under applicable law. Therefore, none of the terms of
this Agreement, the Notes or any instrument pertaining to or relating to this
Agreement or the Notes shall ever be construed to create a contract to pay
interest at a rate in excess of the maximum rate permitted to be charged under
applicable law, and neither the Company, any guarantor nor any other party
liable or to become liable hereunder, under the Notes, any guaranty or under any
other instruments and agreements related hereto and thereto shall ever be liable
for interest in excess of the amount determined at such maximum rate, and the
provisions of this paragraph 11O shall control over all other provisions of this
Agreement, any Notes, any guaranty or any other instrument pertaining to or
relating to the transactions herein contemplated. If any amount of interest
taken or received by any Purchaser or any holder of a Note shall be in excess of
said maximum amount of interest which, under applicable law, could lawfully have
been collected by such Purchaser or such holder incident to such transactions,
then such excess shall be deemed to have been the result of a mathematical error
by all parties hereto and shall be refunded promptly by the Person receiving
such amount to the party paying such amount, or, at the option of the recipient,
credited ratably against the unpaid principal amount of the Note or Notes held
by such Purchaser or such holder, respectively. All amounts paid or agreed to be
paid in connection with such transactions which would under applicable law be
deemed "interest" shall, to the extent permitted by such applicable law, be
amortized, prorated, allocated and spread throughout the stated term of this
Agreement and the Notes. "Applicable law" as used in this paragraph means that
law in effect from time to time which permits the charging and collection of the
highest permissible lawful, nonusurious rate of interest on the transactions
<PAGE>
herein contemplated, and "maximum rate" as used in this paragraph means, with
respect to each of the Notes, the maximum lawful, nonusurious rates of interest
(if any) which under applicable law may be charged to the Company from time to
time with respect to such Notes.
11P. Jurisdiction; Service of Process.
THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
NOTES, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT
IN RESPECT OF ANY BREACH HEREUNDER OR UNDER THE NOTES, BROUGHT BY ANY PURCHASER
OR ANY OTHER REGISTERED HOLDER OF A NOTE AGAINST THE COMPANY OR ANY OF ITS
PROPERTY, MAY BE BROUGHT BY SUCH PERSON IN THE COURTS OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY STATE COURT SITTING
IN NEW YORK, NEW YORK, AS SUCH PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE
MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND AGREES THAT
PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL CONSTITUTE, TO THE
EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, AND THE
COMPANY IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, ANY CLAIM THAT THE COMPANY IS NOT SUBJECT TO THE IN
PERSONAM JURISDICTION OF ANY SUCH COURT. RECEIPT OF PROCESS SO SERVED SHALL BE
CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED
STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE. IN ADDITION, THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT THE COMPANY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
AND/OR THE NOTES, BROUGHT IN SUCH COURTS, AND HEREBY IRREVOCABLY WAIVES ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OF ANY PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE TO
SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE
LAW OR TO OBTAIN JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND
IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. THE COMPANY AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.
11Q.Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one instrument.
11R.Severalty of Obligations. The sales of Notes to the Purchasers are to be
several sales, and the obligations of the Purchasers under this Agreement are
several obligations. Except as provided in paragraph 3F, no failure by any
Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and no
Purchaser shall be responsible for the obligations of, or any action taken or
omitted by, any other Purchaser hereunder.
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement among the
Company and the Purchasers.
Very truly yours,
HUDSON FOODS, INC.
By________________________
Title:
The foregoing Agreement is hereby accepted as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By_________________________
Vice President
PRUCO LIFE INSURANCE COMPANY
By_________________________
Vice President
<PAGE>
P-3
ANNEX I
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Notes to be Note Denom-
Purchased ination(s)
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA $49,000,000 $49,000,000
(1) All payments on account of Notes held by such purchaser shall be made by
wire transfer of immediately available funds for credit to:
Account No. 050-54-526
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name of the Company, a reference to
"6.63% Senior Notes due March 22, 2006, Security No. !INV5360!", and the due
date and application (as among principal, interest and Yield-Maintenance Amount)
of the
payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attention: Investment Operations Group (Attention: Manager)
<PAGE>
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
1201 Elm Street
Suite 4900
Dallas, Texas 75270
Attention: Managing Director
(4) Recipient of telephonic prepayment notices:
Manager, Asset Management Unit
(201) 802-5260
(5) Tax Identification No.: 22-1211670
PRUCO LIFE INSURANCE COMPANY $1,000,000 $1,000,000
(1) All payments on account of Notes held by such purchaser shall be made by
wire transfer of immediately available funds for credit to:
Account No. 000-55-455
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name of the Company, a reference to
"6.63% Senior Notes due March 22, 2006, Security No. !INV5361!", and the due
date and application (as among principal, interest and Yield-Maintenance Amount)
of the
payment being made.
(2) Address for all notices relating to payments:
Pruco Life Insurance Company
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attention: Investment Administration Unit
<PAGE>
(3) Address for all other communications and notices:
Pruco Life Insurance Company
c/o Prudential Capital Group
1201 Elm Street
Suite 4900
Dallas, Texas 75270
Attention: Managing Director
(4) Recipient of telephonic prepayment notices:
Manager, Asset Management Unit
(201) 802-6429
(5) Tax Identification No.: 22-1944557
<PAGE>
A-4
EXHIBIT A
HUDSON FOODS, INC.
6.63% SENIOR NOTE DUE MARCH 22, 2006
No. _____ [Date]
$--------
FOR VALUE RECEIVED, the undersigned, HUDSON FOODS, INC. (the
"Company"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to ____________________________
___________________________, or registered assigns, the principal sum of
_________________________ DOLLARS on _____________, ____, with interest
(computed on the basis of a 360-day year--30-day month) (a) on the unpaid
balance thereof at the rate of 6.63% per annum from the date hereof, payable
monthly on the 22nd day of each month in each year, commencing with the 22nd day
of the calendar month next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Yield-Maintenance Amount (as defined in the Note
Agreement referred to below), payable monthly as aforesaid (or, at the option of
the registered holder hereof, on demand), at a rate per annum from time to time
equal to the lesser of (a) the maximum rate permitted by applicable law or (b)
the greater of (i) 8.63% or (ii) 2.0% over the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York from time to time in New
York City as its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of Morgan
Guaranty Trust Company of New York in New York City or at such other place as
the holder hereof shall designate to the Company in writing, in lawful money of
the United States of America.
This Note is one of a series of Senior Notes (the "Notes") issued
pursuant to a Note Agreement, dated as of March 22, 1996 (the "Agreement"),
among the Company and the original purchasers of the Notes named in the
Purchaser Schedule attached thereto and is entitled to the benefits thereof.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
<PAGE>
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
The Company agrees to make required prepayments of principal on the
dates and in the amounts specified in the Agreement. This Note is also subject
to optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.
If an Event of Default, as defined in the Agreement, shall occur and be
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Agreement.
The Company and any and all endorsers, guarantors and sureties
severally waive grace, demand, presentment for payment, notice of dishonor or
default, notice of intent to accelerate, notice of acceleration (to the extent
set forth in the Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Note be collected at law or
in equity, or in bankruptcy or other proceedings, or should this Note be placed
in the hands of attorneys for collection, the Company agrees to pay, in addition
to the principal, premium, if any, and interest due and payable hereon, all
costs of collecting or attempting to collect this Note, including reasonable
attorneys' fees and expenses (including those incurred in connection with any
appeal).
The Company, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note shall
ever be construed to create a contract to pay interest at a rate in excess of
the maximum rate permitted to be charged under applicable law, and neither the
Company nor any other party liable or to become liable hereunder shall ever be
liable for interest in excess of the amount determined at such maximum rate, and
the provisions of paragraph 11O of the Agreement shall control over any contrary
provision of this Note.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
HUDSON FOODS, INC.
By_________________________
Secretary/Treasurer
<PAGE>
B-1
EXHIBIT B
[FORM OF OPINION OF COMPANY'S COUNSEL]
<PAGE>
HUDSON FOODS, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the Hudson Foods,
Inc. 1996 Stock Option Plan (the "Plan"). The purpose of the Plan is to attract
and retain the best available personnel for positions of substantial
responsibility and to provide additional incentive to employees of Hudson Foods,
Inc. (the "Company") or any present or future Parent or Subsidiary of the
Company to promote the success of the business. It is intended that options
issued pursuant to this Plan shall primarily constitute incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended. Stock options not constituting incentive stock options may also be
issued.
2. Definitions. As used herein, the following definitions shall apply.
(a) "Company" shall mean Hudson Foods, Inc.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Common Stock" or "Stock" shall mean the Company's Class
A Common Stock.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with paragraph 4(a) of the Plan.
(f) "Continuous Employment" or "Continuous Status as an
Employee" shall mean the absence of any interruption or termination of
employment by the Company or any present or future Parent or Subsidiary
of the Company. Employment shall not be considered interrupted in the
case of sick leave, military leave or any other leave of absence
approved by the Company or in the case of transfers between payroll
locations of the Company or between the Company, its Parent, its
Subsidiaries or a successor.
(g) "Effective Date" shall mean the date specified in
paragraph 12 hereof.
(h) "Employee shall mean any person employed on a full-time
basis by the Company or any present or future Parent or Subsidiary of
the Company. For the purposes of granting Non-qualified Options
pursuant to the Plan, "Employee" shall also mean any member of the
Board of Directors of the Company or any present or future Parent or
Subsidiary of the Company.
(i) "Incentive Stock Option" shall mean an option granted
pursuant to Section 422 of the Code.
(j) "Non-qualified Option" shall mean an option not
constituting an Incentive Stock Option.
<PAGE>
(k) "Option" shall mean an option to purchase Common Stock
granted pursuant to this Plan.
(l) "Optioned Stock" shall mean stock subject to an Option
granted pursuant to this Plan.
(m) "Optionee" shall mean an Employee who receives an Option.
(n) "Parent" shall mean any present or future corporation
which would be a "parent corporation" as defined in Subsection 424(e)
of the Code.
(o) "Plan" shall mean the Hudson Foods, Inc. 1996 Stock
Option Plan.
(p) "Share" shall mean one share of the Common Stock.
(q) "Subsidiary" shall mean any present or future corporation
which would be a "subsidiary corporation" as defined in Subsection
424(f) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of paragraph 11 hereof, the aggregate number of shares of Common
Stock deliverable upon the exercise of Options pursuant to the Plan shall not
exceed one million two hundred thousand (1,200,000) Shares for Incentive Stock
Options or three hundred thousand (300,000) Shares for Non-qualified Options.
Such Shares may either be authorized but unissued or treasury Shares.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, be available for the
grant of other Options under the Plan.
4. Administration of the Plan.
(a) Composition of Option Committee. The Plan shall be
administered by an Option Committee (the "Committee") consisting of
three directors of the Company appointed by the Board. Employees who
are designated by the Committee as key management personnel shall be
eligible to receive Options under the Plan.
(b) Powers of the Option Committee. The Committee is
authorized (but only to the extent not contrary to the express
provisions of the Plan or to resolutions adopted by the Board) to
interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the form and content of
Options to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall
have and may exercise such other power and authority as may be
delegated to it by the Board from time to time. A majority of the
entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present
shall be deemed the action of the Committee.
<PAGE>
The President of the Company and such other officers as shall
be designated by the Committee are hereby authorized to execute
instruments evidencing Options on behalf of the Company and to cause
them to be delivered to the Optionees or other participants.
(c) Effect of Option Committee's Decision. All
decisions, determinations and interpretations of the Committee shall
be final and conclusive on all persons affected thereby.
5. Eligibility. Options may be granted to Employees who are key
management personnel, as determined by the Option Committee, of the Company or
any present or future Parent or Subsidiary. An Employee who has been granted an
Option may, if otherwise eligible, be granted an additional Option or Options.
In any calendar year, the aggregate fair market value of the Shares (as
determined at the time the Option is granted) for which Incentive Stock Options
are exercisable for the first time by any Employee cannot exceed the sum of
$100,000. Notwithstanding the prior provisions of this paragraph, the Committee
may grant Options in excess of the foregoing limitations, provided said Options
shall be clearly and specifically designated as not being Incentive Stock
Options, as defined in Section 422 of the Code.
Any Incentive Stock Option or Non-qualified Option which is cancelled
by consent of the parties shall not be considered outstanding and shall revert
to the status of authorized but unissued Options.
6. Term of Plan; Term of Options.
(a) The Plan shall continue in effect for a term of ten (10)
years from the date it is adopted, unless sooner terminated pursuant to
paragraph 15. No Option shall be granted under the Plan after ten (10)
years from the date it is adopted by the Board.
(b) The term of each Option granted under the Plan shall be
established by the Committee, but shall not exceed 10 years, provided
however that in the case of an Employee who owns stock representing
more than ten (10) percent of the total combined voting power of all
classes of the Company stock including the stock of the Company's
Parent and Subsidiary, the term of such Option shall not exceed five
years.
(c) Notwithstanding the provision of any Option which provides
for its exercise in installments as designated by the Option Committee,
all such Options shall become immediately exercisable in the event of
change in control or threatened change in control of the Company. The
term "control" shall refer to the acquisition of ten (10) percent or
more of the voting securities of the Company by any person or by
persons acting as a group within the meaning of Section 13(d) of the
Securities Exchange Act of 1934; provided, however, that for the
purposes of the Option Plan no change in control or threatened change
in control shall be deemed to have occurred if prior to the acquisition
of, or offer to acquire, 10 percent or more of the voting securities of
the Company, the full Board of Directors shall have adopted by not less
than a two-thirds vote a resolution specifically approving such
<PAGE>
acquisition or offer. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any
other form of entity not specifically listed herein.
7. Incentive Stock Option Price. The price per Share at which each
Incentive Stock Option granted under the Plan may be exercised shall not, as to
any particular Incentive Stock Option, be less than the fair market value of the
Stock at the time such Incentive Stock Option is granted. In the case of an
Employee who owns Stock representing more than ten (10) percent of the Company's
outstanding Common Stock at the time the Incentive Stock Option is granted, the
Incentive Stock Option price shall not be less than 110% of the fair market
value of the Stock at the time the Incentive Stock Option is granted. If the
Common Stock is traded otherwise than on a national securities exchange at the
time of the granting of an Incentive Stock Option, then the price per Share
shall be not less than the mean between the bid and asked price on the date the
Option is granted or, if there is no bid and asked price on said date, then on
the next prior business day on which there was a bid and asked price. If no such
bid and asked price is available, then the price per Share shall be determined
by the Committee. If the Common Stock is listed on a national securities
exchange at the time of granting an Incentive Stock Option, then the price per
Share shall be not less than the average of the highest and lowest selling price
on such exchange on the date such Incentive Stock Option is granted or if there
were no sales on said date, then the price shall be not less than the mean
between the bid and asked price on such date.
8. Exercise of Option.
(a) Procedure for Exercise. Any Option granted hereunder shall
be exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Option granted to an
Optionee. An Option may not be exercised for a fractional Share.
An Option granted pursuant to the Plan may be exercised,
subject to provisions relative to its termination and limitations on
its exercise, from time to time only by (a) written notice of intent to
exercise the Option with respect to a specified number of Shares, and
(b) payment to the Company (contemporaneously with delivery of each
such notice), in cash, of the amount of the Option price of the number
of Shares with respect to which the Option is then being exercised.
Each such notice and payment shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the Company
at the Company's executive offices, until the total number of Shares
then subject to the Option have been purchased.
(b) Exercise During Employment or Following Death. Unless
otherwise provided in the terms of an Option, an Option may be
exercised by an Optionee only while he is an Employee and has
maintained Continuous Status as an Employee since the date of the grant
of the Option, or within 3 months after termination of his status as an
Employee (but not later than the date on which the Option would
otherwise expire), except if his Continuous Employment is terminated by
reason of disability, within the meaning of Code Section 22(e)(3), or
death, then to the extent that the Optionee would have been entitled to
<PAGE>
exercise the Option immediately prior to his disability or death, such
Option may be exercised within twelve (12) months from the date of his
disability or death by the Optionee, the personal representatives of
his estate, or persons to whom his rights under such Option shall have
passed by will or by laws of descent and distribution.
The Committee's determination whether an Optionee's employment
has ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
9. Non-Transferability of Options. Options granted under the Plan may
not be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution. An Option
may be exercised, during the lifetime of the Optionee, only by the Optionee.
10. Effect of Change in Stock Subject to the Plan. In the event that
each of the outstanding shares of Common Stock (other than shares held by
dissenting shareholders) shall be changed into or exchanged for a different
number or kind of shares of stock of the Company or of another corporation
whether by reason of merger, consolidation, recapitalization, reclassification,
stock dividend, split-up, combination of shares, or otherwise), then there shall
be substituted for each share of Common Stock then under Option or available for
Option the number and kind of shares of stock into which each outstanding share
of Common Stock (other than shares held by dissenting shareholders) shall be so
changed or for which each such share shall be so exchanged, together with an
appropriate adjustment of the Option price.
In the event there shall be any other change, in the number of, or kind
of, issued shares of Common Stock, or of any stock or other securities into
which such Common Stock shall have been changed, or for which it shall have been
exchanged, then if the Committee shall, in its sole discretion, determine that
such change equitably requires an adjustment in the number, or kind, or Option
price of shares then subject to an Option or available for Option, such
adjustment shall be made by the Board and shall be effective and binding for all
purposes of the Plan.
11. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the determination shall be
given to each Employee to whom an Option is so granted within a reasonable time
after the date of such grant.
12. Effective Date. The Plan shall become effective April 1, 1996.
Options may be granted prior to ratification of the Plan by the stockholders if
the exercise of such Options is subject to such stockholder ratification. The
Plan shall continue in effect for a term of ten (10) years from the date it is
adopted by the Board, unless sooner terminated under paragraph 15 of the Plan.
13. Approval by Shareholders. The Plan shall be approved by
stockholders of the Company within twelve (12) months before or after the date
it becomes effective.
<PAGE>
14. Modification of Options. At any time and from time to time the
Board may authorize the Committee to direct execution of an instrument providing
for the modification of any outstanding Option, provided no such modification,
extension or renewal shall confer on the holder of said Option any right or
benefit which could not be conferred on him by the grant of a new Option at such
time, or impair the Option without the consent of the holder of the Option.
15. Amendment and Termination of the Plan. The Board may alter, suspend
or discontinue the Plan except that no action of the Board may increase (other
than as provided in paragraph 10) the maximum number of shares permitted to be
optioned or become available for the granting of Options under the Plan, or
reduce the minimum Option price, or extend the period within which Options may
be exercised, unless such action of the Board shall be subject to approval or
ratification by the shareholders of the Company.
No action of the Board may, without the consent of the holder of the
Option, impair any then outstanding Option.
16. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
Inability of the Company to obtain from any regulatory body or
authority deemed by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of any liability in
respect of the non-issuance or sale of such Shares.
As a condition to the exercise of an Option, the Company may require
the person exercising to make such representations and warranties as may be
necessary to assure the availability of an exemption from the registration
requirement of federal or state securities law.
17. Reservation of Shares. The Company, during the term of this Plan,
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
Date Adopted: April 1, 1996.
HUDSON FOODS, INC.
By:_______________________
President
ATTEST:
_______________________________
Secretary
EXHIBIT 11
HUDSON FOODS, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
(In thousands except per share data)
- ------------------------------------------------------------------------------------------------------------------------------
Threee Months Ended Twelve Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $8,808 $8,361 $22,998 $35,758
- ------------------------------------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE:
Weighted average number of common
shares outstanding 30,108 29,921 30,084 29,124
Common stock equivalents:
Dilutive options 305 352 317 370
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common
and common equivalent shares 30,413 30,273 30,401 29,494
- ------------------------------------------------------------------------------------------------------------------------------
Primary earnings per share $0.29 $0.28 $0.76 $1.21
- ------------------------------------------------------------------------------------------------------------------------------
FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of common
shares outstanding 30,108 29,921 30,084 29,124
Common stock equivalents:
Dilutive options 305 352 317 370
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common
and common equivalent shares 30,413 30,273 30,401 29,494
- ------------------------------------------------------------------------------------------------------------------------------
Fully diluted earnings per share $0.29 $0.28 $0.76 $1.21
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations
Hudson Foods, Inc. and Subsidiaries
For the Years Ended September 28, September 30, October 1,
(Dollars in thousands except per share data) 1996 1995 1994
<S> <C> <C> <C>
Sales $1,378,474 $1,200,512 $1,040,840
Cost of sales 1,211,556 1,023,959 885,248
---------- ---------- ----------
Gross profit 166,918 176,553 155,592
Selling 94,805 82,945 78,698
General and administrative 32,240 29,211 25,755
---------- ---------- ----------
Operating income 39,873 64,397 51,139
---------- ---------- ----------
Other expense (income):
Interest, net 5,789 1,845 6,152
Interest on tax settlement - 4,500 -
Other, net (4,246) (2,190) -
---------- ---------- -----------
Total other expense 1,543 4,155 6,152
---------- ---------- -----------
Income before income taxes 38,330 60,242 44,987
Income tax expense 15,332 24,484 17,995
---------- ---------- -----------
Net income $ 22,998 $ 35,758 $ 26,992
========== ========== ===========
Earnings per share:
Primary $.76 $1.21 $1.08
Fully diluted $.76 $1.21 $1.08
========== ========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
Discussion of Operations
1996 vs. 1995.
Sales from the Company's operations were $1.4 billion for fiscal 1996, an
increase of $178.0 million, or 14.8%, over fiscal 1995. International sales were
17.5% and 11.6% of fiscal 1996 and 1995 sales, respectively. The sales increase
primarily resulted from the following:
o Chicken sales increased 21.7% to $788.9 million in fiscal 1996 from
$648.3 million in fiscal 1995 primarily due to an 18.6% increase in volume and a
2.6% increase in selling prices. The volume increase was essentially due to
increased sales in international markets, especially Russia and Eastern Europe,
and increased domestic consumer demand for chicken products.
o Turkey sales increased 25.8% to $182.6 million in fiscal 1996 from
$145.1 million in fiscal 1995 mainly due to a 23.1% increase in volume and a
2.2% increase in selling prices. The Company has greatly expanded its sales of
turkey in international markets and also to foodservice customers.
o Portioned entree sales increased 2.3% to $175.4 million in fiscal
1996 from $171.4 million in fiscal 1995 mostly due to a 2.9% increase in volume
offset by a slight decrease in selling prices. The volume increase was primarily
due to increased sales to vending, convenience stores and club stores. Portioned
entrees have begun to see benefits from changes to its customer base and the
introduction of new product lines.
o Beef sales were $90.3 million in fiscal 1996 compared with $37.3
million in fiscal 1995. The Company's beef plant in Columbus, Nebraska began
production in February 1995. The Company produces beef patties primarily for a
large restaurant chain but also produces patties and chub packages for club
stores, retail outlets and international sales.
o Luncheon meat sales decreased 40.7% to $94.2 million in fiscal 1996
from $159.0 million in fiscal 1995 largely due to a 45.0% decrease in volume
offset by a 7.7% increase in selling prices. The volume decrease was due to the
December 29, 1995 sale of the Company's Topeka, Kansas luncheon meat plant and
its related brand names, and the closing and subsequent sale of its Wichita,
Kansas luncheon meat plant. The Company continues to produce luncheon meat
products at its plant in Albert Lea, Minnesota.
Cost of sales was $1.2 billion for fiscal 1996, an increase of $187.6 million,
or 18.3%, over fiscal 1995. As a percentage of sales, cost of sales increased to
87.9% in fiscal 1996 from 85.3% in fiscal 1995. This increase was primarily due
to increases in volume and higher feed and ingredient costs that resulted from
extremely high grain markets. Feed and ingredient costs increased to 26.6% of
sales in fiscal 1996 from 19.3% in fiscal 1995.
Gross profit was $166.9 million in fiscal 1996, a decrease of $9.6 million, or
5.5%, from fiscal 1995.
<PAGE>
Selling and general and administrative expenses were $127.0 million in fiscal
1996, an increase of $14.9 million, or 13.3%, over fiscal 1995. As a percentage
of sales, selling and general and administrative expenses decreased to 9.2% in
fiscal 1996 from 9.3% in fiscal 1995.
Operating income was $39.9 million in fiscal 1996, a decrease of $24.5 million,
or 38.1%, from fiscal 1995. The decrease was mainly due to higher feed and
ingredient costs described previously.
Interest expense increased as a result of $120 million and $75 million of
long-term borrowings made in fiscal 1996 and 1995, respectively.
Other income for fiscal 1996 was primarily composed of a gain of $7.5 million
resulting from insurance proceeds received in excess of the book value of assets
destroyed by fire. That gain was offset by a loss of $1.3 million resulting from
the sale of the Topeka and Wichita, Kansas luncheon meat assets and related
brand names.
<PAGE>
1995 vs. 1994.
Sales from the Company's operations were $1.2 billion for fiscal 1995, an
increase of $159.7 million, or 15.3%, over fiscal 1994. International sales were
11.6% and 5.8% of fiscal 1995 and 1994 sales, respectively. The sales increase
primarily resulted from the following:
o Chicken sales increased 21.5% to $648.3 million in fiscal 1995 from
$533.4 million in fiscal 1994 mostly due to a 25.2% increase in volume partially
offset by a 2.9% decrease in selling prices. The volume increase was essentially
due to increased sales in international markets, especially Russia, and
increased domestic consumer demand for chicken products.
o Turkey sales increased 28.2% to $145.1 million in fiscal 1995 from
$113.2 million in fiscal 1994 largely due to a 22.0% increase in volume and a
5.1% increase in selling prices.
o Portioned entree sales decreased 2.4% to $171.4 million in fiscal
1995 from $175.5 million in fiscal 1994 primarily due to a 3.8% decrease in
selling prices slightly offset by a 1.5% increase in volume. Portioned entrees
experienced some changes in its customer base and product lines that caused
overall selling prices to decline.
o Beef sales were $37.3 million in fiscal 1995. The Company's beef
plant in Columbus, Nebraska began production in February 1995.
o Luncheon meat sales decreased 3.5% to $159.0 million in fiscal 1995
from $164.7 million in fiscal 1994 mainly due to a 9.9% decrease in selling
prices offset by a 7.1% increase in volume.
Cost of sales was $1.0 billion for fiscal 1995, an increase of $138.7 million,
or 15.7%, over fiscal 1994. As a percentage of sales, cost of sales increased to
85.3% in fiscal 1995 from 85.1% in fiscal 1994. The increase primarily resulted
from higher processing costs due to increased sales of further-processed
products and decreases in selling prices discussed earlier. The increase was
offset somewhat by an 8.8% decrease in feed costs per ton.
<PAGE>
Gross profit was $176.6 million in fiscal 1995, an increase of $21.0 million, or
13.5%, over fiscal 1994.
Selling and general and administrative expenses were $112.2 million in fiscal
1995, an increase of $7.7 million, or 7.4%, over fiscal 1994. As a percentage of
sales, selling and general and administrative expenses decreased to 9.3% in
fiscal 1995 from 10.0% in fiscal 1994.
Operating income was $64.4 million in fiscal 1995, an increase of $13.3 million,
or 25.9%, over fiscal 1994. The increase was mostly due to the improvements in
the Company's operations described previously.
Interest expense decreased primarily due to the conversion and redemption of the
8% convertible subordinated debentures, increased capitalized interest on
construction in progress and increased interest income on the short-term
investment of excess cash.
During the second quarter of fiscal 1995, based on the Company's best estimate
of the final tax and interest due resulting from an Internal Revenue Service
examination settlement, the Company recorded $0.5 million of tax expense and
$4.5 million of interest expense.
Other income for fiscal 1995 was primarily composed of insurance proceeds
received in excess of the book value of assets destroyed by fire.
General. Historically, the Company's operating results have been heavily
influenced by two factors: the cost of feed grains and commodity-based finished
product prices. These two factors have fluctuated significantly and
independently. In recent years the Company has undertaken a business strategy to
increase the production and sale of further-processed products and increase
sales to large customers such as club store and foodservice chains. In 1996, one
such customer accounted for approximately 18.7% of total sales. This strategy
helps decrease the proportion of feed grain costs to total cost of sales, which
helps reduce the impact of commodity cost fluctuations. In addition, the sales
prices of further-processed products are less sensitive to commodity price
fluctuations. Even so, a material increase in feed costs or a material decrease
in finished product prices could have an adverse effect on the Company, but
management believes that the implementation of this strategy has reduced the
Company's vulnerability to such price fluctuations.
The Company believes that its operations are in substantial compliance with
applicable environmental laws and regulations.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
Hudson Foods, Inc. and Subsidiaries
September 28, September 30,
(Dollars in thousands) 1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,437 $ 2,159
Accounts receivable 110,655 82,853
Less allowance for doubtful accounts 1,863 1,775
---------- ---------
108,792 81,078
Inventories 226,872 177,055
Other 22,373 36,313
---------- ---------
Total current assets 364,474 296,605
Property, plant and equipment, net 367,600 275,624
Excess cost of investment over net assets acquired, net 14,119 14,682
Other assets 28,549 36,630
---------- ---------
Total assets $774,742 $623,541
========== =========
Liabilities and Stockholders' Equity Current liabilities:
Notes payable $ - $ 12,300
Current portion of long-term obligations 24,714 8,742
Accounts payable 69,552 47,676
Accrued liabilities 49,578 44,590
Deferred income taxes 6,741 2,839
---------- ---------
Total current liabilities 150,585 116,147
---------- ---------
Long-term obligations 224,951 129,973
---------- ---------
Deferred income taxes and deferred gain 73,286 73,072
---------- ---------
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock:
Class A, $.01 par value, issued 21,384,664 and 21,331,374 shares 214 213
Class B, $.01 par value, issued and outstanding 9,602,522
and 9,602,672 shares 96 96
Additional capital 159,314 158,842
Retained earnings 177,153 156,432
---------- ---------
336,777 315,583
Treasury stock, at cost (877,196 and 915,438 Class A shares) (10,857) (11,234)
---------- ---------
Total stockholders' equity 325,920 304,349
---------- ---------
Total liabilities and stockholders' equity $774,742 $623,541
========== =========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
Discussion of the Balance Sheet
Working capital at September 28, 1996 was $213.9 million compared with $180.5
million at September 30, 1995 and the current ratio was 2.42 to 1 and 2.55 to 1
at September 28, 1996 and September 30, 1995, respectively.
Accounts receivable and inventories increased mainly due to expanded sales in
both international and domestic markets. Other current assets decreased
primarily due to cash received on an insurance claim receivable for fire losses.
Accounts payable increased largely due to payables for the new Kentucky chicken
complex, increased outside product purchases for international sales and
increased feed and ingredient payables. Current deferred income taxes increased
primarily due to an increase in the book/tax difference in live farm inventories
resulting from increased flock numbers and higher feed costs. Other assets
decreased essentially due to the expenditure of funds received from a trustee
for a capital project of $16.9 million offset by costs for that project.
The Company's total capitalization, as represented by long-term obligations plus
stockholders' equity, was $550.9 million on September 28, 1996, compared with
$434.3 million on September 30, 1995. Long-term obligations represented 40.8%
and 29.9% of total capitalization on September 28, 1996 and September 30, 1995,
respectively.
The Company did not have any notes payable due under its unsecured credit
agreements at September 28, 1996 compared with $12.3 million on September 30,
1995. Total long-term obligations and current portion of long-term obligations
increased $111.0 million due to proceeds of $120.0 million received on new
unsecured loans offset by normal debt payments.
Common stock and additional capital increased due to the exercise of employee
stock options and treasury stock issued under the employee stock purchase plan.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Hudson Foods, Inc. and Subsidiaries
For the Years Ended September 28, September 30, October 1,
(Dollars in thousands) 1996 1995 1994
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 22,998 $ 35,758 $ 26,992
Non-cash items included in net income:
Depreciation 25,318 24,084 21,246
Amortization 1,385 1,053 1,033
Deferred income taxes 3,661 4,637 209
Other (892) (2,777) (2,777)
Changes in assets and liabilities:
Accounts receivable (33,811) (15,570) (8,056)
Inventories (54,946) (41,554) (19,004)
Accounts payable 21,876 6,488 9,633
Accrued liabilities 6,340 4,423 11,814
Other 18,138 (35,261) (4,798)
---------- ---------- ---------
Cash flows provided by (used for) operating activities 10,067 (18,719) 36,292
---------- ---------- ---------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (139,387) (73,314) (49,161)
Disposition of property, plant and equipment, net 758 3,828 4,271
Funds received from (held by) trustee for capital project 16,926 (16,926) -
Sale of business 28,885 - -
Other (9,613) (5,427) (4,407)
---------- ---------- ---------
Cash flows used for investing activities (102,431) (91,839) (49,297)
---------- ---------- ---------
Cash Flows from Financing Activities:
Additions (reductions) to notes payable (12,300) (4,500) 16,800
Additions to long-term obligations 120,000 75,000 -
Reductions of long-term obligations (9,050) (11,021) (5,635)
Sale of Class A common stock - 51,264 -
Dividends (2,277) (2,249) (1,796)
Exercise of stock options and other 269 2,324 1,644
---------- ---------- ---------
Cash flows provided by financing activities 96,642 110,818 11,013
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents 4,278 260 (1,992)
Cash and cash equivalents at beginning of period 2,159 1,899 3,891
---------- ---------- ---------
Cash and cash equivalents at end of period $ 6,437 $ 2,159 $ 1,899
========== ========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized $ 6,957 $ 7,111 $ 6,321
Income taxes $ 8,524 $ 32,210 $ 13,300
========== ========== =========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
Discussion of Cash Flows
The Company's cash flows provided by operations was $10.1 million for fiscal
1996 compared with cash flows used for operations of $18.7 million for fiscal
1995. The change was primarily due to a decrease in other current assets and an
increase in accounts payable.
Historically, the Company's operations have been financed through internally
generated funds, borrowings, lease arrangements and the issuance of common
stock. On April 30, 1996, the Company entered into a $200.0 million unsecured
credit agreement that expires June 30, 1999, but may be extended annually. At
September 28, 1996, the Company did not have any notes payable outstanding under
the agreement but had $12.9 million in outstanding letters of credit. The credit
agreement, among other things, limits the payment of dividends to approximately
$2.8 million in any fiscal year and limits annual capital expenditures and lease
obligations. It requires the maintenance of minimum levels of working capital
and tangible net worth, and requires that the current ratio, leverage ratio and
cash flow coverage ratio be maintained at certain levels. It also limits the
creation of new secured debt to $25.0 million and new unsecured short-term debt
with parties outside the credit agreement to $20.0 million. Additionally, an
event of default will occur if the aggregate outstanding voting power of James
T. Hudson and his immediate family is reduced below 51%.
Also, the Company has two separate unsecured short-term credit agreements with
financial institutions (outside the $200.0 million credit agreement) giving the
Company the right to borrow up to $15.0 million from one institution and $10.0
million from the other. At September 28, 1996, the Company did not have any
notes outstanding under these agreements.
On December 28, 1995 and March 22, 1996, the Company borrowed $55.0 million at
6.69% due December 28, 2005 and $50.0 million at 6.63% due March 22, 2006,
respectively, under unsecured term loan agreements from insurance companies.
Interest payments only will be due in the first four years. On January 31, 1996,
the Company borrowed $15.0 million under an unsecured term loan agreement from a
bank at 6.45% due January 31, 2006. Interest and principal payments are due each
month. A balloon payment of $6.8 million will be due on January 31, 2006.
Covenants under the loan agreements are substantially the same as those included
in the $200.0 million unsecured credit agreement.
For fiscal 1996 and 1995, the Company had capital expenditures of $139.4 million
and $73.3 million, respectively. Capital expenditures for fiscal 1996 included
the construction of a chicken complex near Henderson, Kentucky and the expansion
and/or upgrading of existing production facilities and related equipment. The
Kentucky chicken complex began production in July 1996 and was producing 300,000
birds per week at September 28, 1996. It is scheduled to be producing 1.3
million birds per week by July 1997.
The Company's capital budget for fiscal 1997 contemplates aggregate capital
expenditures of approximately $65 million for the completion of the chicken
complex near Henderson, Kentucky and the upgrading and/or expansion of current
production facilities and related equipment. The capital expenditures have been
and will continue to be financed by operations, borrowings, lease arrangements
and the issuance of common stock.
<PAGE>
On December 29, 1995, the Company sold its Topeka, Kansas luncheon meat plant
and its related brand names for $32.3 million. The initial sales price was
reduced by certain post-closing adjustments and the expenses of the sale
resulting in a final sales price of approximately $28.9 million. Additionally,
the Company closed its Wichita, Kansas luncheon meat processing facility on
January 13, 1996 and subsequently sold the plant on June 28, 1996. The sale of
the Topeka and Wichita assets resulted in a $1.3 million loss.
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations. The Company is a vertically integrated producer of chicken
and turkey products, including the breeding, hatching, growing, processing and
packaging of those product lines. Additionally, the Company processes and
markets beef and pork products. The Company's products are sold domestically in
three primary markets: foodservice, club stores and retail outlets. The
Company's products are also sold internationally to wholesalers primarily in
Russia, Eastern Europe, Asia and Latin America.
Principles of Consolidation. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
Estimates. Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets, liabilities, revenue and
expenses as reflected in the financial statements. Actual results could differ
from estimates.
Cash and Cash Equivalents. The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents. At
September 28, 1996 and September 30, 1995, cash and cash equivalents included
temporary cash investments in certificates of deposit, U.S. treasury bills and
U.S. government agency securities of $18,817,000 and $18,944,000, respectively.
Cash equivalents are stated at cost, which approximates market value, and have
been used to offset book overdrafts.
Concentrations. Financial instruments which subject the Company to
concentrations of credit risk consist primarily of trade receivables from large
domestic and foreign companies. The Company generally does not require
collateral from its customers. Such credit risk is considered by management to
be limited due to the Company's broad customer base. In fiscal years 1996, 1995
and 1994, one domestic customer accounted for approximately 18.7%, 14.7% and
17.7% of consolidated sales, respectively. At September 28, 1996, accounts
receivable from this customer were $20.8 million. The Company's foreign sales in
fiscal years 1996, 1995 and 1994 were 17.5%, 11.6% and 5.8% of total sales,
respectively. Fiscal 1996 sales included 5.6% to one foreign customer. At
September 28, 1996, accounts receivable from this foreign customer were $14.0
million.
Inventories. Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventory cost includes the cost of raw materials and all
applicable costs of processing.
<PAGE>
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
When assets are sold or retired, the costs of the assets and the related
accumulated depreciation are removed from the accounts and the resulting gains
or losses are recognized. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets. Interest costs of
approximately $8,066,000, $4,487,000 and $1,702,000 were capitalized during
1996, 1995 and 1994, respectively.
Earnings per Share. Earnings per share are based on the weighted average number
of shares outstanding. The primary earnings per share computation assumes that
outstanding dilutive stock options were exercised and the proceeds used to
purchase common shares. Earnings per share, assuming full dilution, gives effect
to the conversion of outstanding convertible debentures and the exercise of
dilutive stock options.
Excess Cost of Investment Over Net Assets Acquired. The excess cost of
investment over net assets acquired is being amortized over periods ranging from
33 to 40 years and is evaluated annually for impairment based on estimated
undiscounted cash flows of the acquired entities. Accumulated amortization was
$5,273,000 and $4,758,000 at September 28, 1996 and September 30, 1995,
respectively.
Income Taxes. The Company utilizes the asset and liability approach for
financial accounting and reporting for income taxes. Deferred income tax assets
and liabilities are recorded to reflect the expected tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end.
Advertising. Advertising costs are expensed in the period incurred. Such
expenses were $9,893,000, $7,399,000 and $7,841,000 for fiscal 1996, 1995 and
1994, respectively.
Fiscal Year. The Company utilizes a 52-53 week accounting period which ends on
the Saturday closest to September 30.
<PAGE>
2. Inventories
<TABLE>
<CAPTION>
Sept. 28, Sept. 30,
(Dollars in thousands) 1996 1995
<S> <C> <C>
Field inventory - broilers
and breeder stock $ 46,545 $ 33,493
Field inventory - turkeys
and breeder stock 14,705 11,610
Feed, eggs and other 32,273 30,441
Finished products 133,349 101,511
-------- --------
Total $226,872 $177,055
======== ========
</TABLE>
<PAGE>
3. Property, Plant and Equipment
<TABLE>
<CAPTION>
Sept. 28, Sept. 30,
(Dollars in thousands) 1996 1995
<S> <C> <C>
Land $ 13,402 $ 13,579
Buildings and improvements 204,248 190,945
Machinery and equipment 160,807 145,550
Construction in progress 139,888 63,129
-------- --------
518,345 413,203
Less accumulated depreciation 150,745 137,579
-------- --------
Total $367,600 $275,624
======== ========
</TABLE>
4. Financing Arrangements
The Company's line of credit agreement (the "Agreement"), which expires June 30,
1999, provides for aggregate borrowings or letters of credit up to $200 million.
At September 28, 1996, the Company had issued $12.9 million in letters of
credit. The Agreement, among other things, limits the payment of dividends to
approximately $2.8 million in any fiscal year and limits annual capital
expenditures and lease obligations. It requires the maintenance of minimum
levels of working capital and tangible net worth, and requires that the current
ratio, leverage ratio and cash flow coverage ratio be maintained at certain
levels. It also limits the creation of new secured debt to $25.0 million and new
unsecured short-term debt with parties outside the Agreement to $20.0 million.
At September 28, 1996, $187.1 million was unused under the Agreement.
In addition, the Company has two separate unsecured short-term credit agreements
with financial institutions giving the Company the right to borrow up to $15.0
million from one institution and $10.0 million from the other. At September 28,
1996, the Company did not have any notes outstanding under these agreements.
5. Accrued Liabilities
<TABLE>
<CAPTION>
Sept. 28, Sept. 30,
(Dollars in thousands) 1996 1995
<S> <C> <C>
Payroll and benefits $32,952 $28,223
Advertising 4,499 3,888
Income, property and other taxes 3,286 2,605
Interest 1,160 625
Other 7,681 9,249
------- -------
Total $49,578 $44,590
======= =======
</TABLE>
<PAGE>
6. Long-Term Obligations
<TABLE>
<CAPTION>
Sept. 28, Sept. 30,
(Dollars in thousands) 1996 1995
<S> <C> <C>
6.69% Notes to insurance
companies due Dec. 28, 2005 $ 55,000 $ -
6.63% Notes to an insurance
company due March 22, 2006 50,000 -
6.90% Notes to an insurance
company due June 1, 2005 45,463 49,124
Tax-exempt floating rate bonds
(3.95% at Sept. 28, 1996) due
March 1, 2015 25,000 25,000
9.99% Notes to an insurance
company due April 12, 1997 15,000 15,000
6.45% Note to a bank due
Jan. 31, 2006 14,647 -
8.99% Note to an insurance
company due March 15, 1998 13,632 14,504
7.62% Note to an insurance
company due Sept. 1, 2002 9,835 11,459
9.95% Note to a bank due
June 30, 1999 6,150 6,700
7.20%-7.64% Notes to a bank
due Sept. 1, 2002 6,084 7,084
8.14% Note to an insurance
company due March 15, 1998 4,480 4,740
7.68% Note to an insurance
company due Sept. 1, 2002 3,750 4,375
Other - 6%-7% Notes due
through 2002 624 729
-------- --------
Total 249,665 138,715
Less current portion of
long-term obligations 24,714 8,742
-------- --------
Long-term obligations $224,951 $129,973
======== ========
</TABLE>
Certain of the Company's loan agreements contain restrictive covenants which are
similar to those required under the $200 million line of credit.
The fair value of the Company's long-term obligations is based on discounted
future cash flows using current interest rates. The fair value of the Company's
long-term obligations at September 28, 1996 and September 30, 1995, including
current portion, is estimated to be approximately $247 million and $141 million,
respectively.
<PAGE>
At September 28, 1996, the aggregate amount of long-term obligations which will
become due during each of the next five fiscal years is as follows: $24,714,000
in 1997; $25,676,000 in 1998; $13,646,000 in 1999; $23,966,000 in 2000; and
$24,338,000 in 2001.
7. Income Taxes
Consolidated income tax expense for each of the three years in the period ended
September 28, 1996 consists of the following:
<TABLE>
<CAPTION>
For the Years Ended Sept. 28, Sept. 30, Oct. 1,
(Dollars in thousands) 1996 1995 1994
<S> <C> <C> <C>
Current provision:
Federal $ 9,993 $17,620 $16,067
State 1,678 2,227 1,719
Deferred provision:
Federal 3,333 4,250 306
State 328 387 (97)
------- ------- --------
Total income tax expense $15,332 $24,484 $17,995
======= ======= ========
</TABLE>
Reconciliations of the statutory federal income tax rate with the effective
income tax rate for each of the three years in the period ended September 28,
1996 are as follows:
<TABLE>
<CAPTION>
For the Years Ended Sept. 28, Sept. 30, Oct. 1,
1996 1995 1994
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit 4.0 3.1 2.7
Tax credits (0.6) (0.7) (0.7)
Other 1.6 3.2 3.0
----- ----- -----
Effective income tax rate 40.0% 40.6% 40.0%
===== ===== =====
</TABLE>
<PAGE>
An analysis of the Company's net current and long-term deferred tax liabilities
(assets) at September 28, 1996 and September 30, 1995 is as follows:
<TABLE>
<CAPTION>
Sept. 28, Sept. 30,
(Dollars in thousands) 1996 1995
<S> <C> <C>
Current:
Inventory $13,783 $ 9,568
Allowance for doubtful accounts (703) (682)
Accrued liabilities (6,839) (6,297)
Other 500 250
-------- --------
Total current deferred
income taxes $6,741 $2,839
======== ========
Long-term:
Property, plant and equipment $31,274 $27,963
Change from the cash basis
to the accrual basis of
accounting in 1988 for the
"Family Farm" subsidiaries 38,315 38,315
Other 3,263 2,617
-------- --------
Total long-term deferred
income taxes $72,852 $68,895
======== ========
</TABLE>
8. Employee Benefit and Compensation Plans
Stock Option Plan. The 1996 Stock Option Plan reserves 1,200,000 and 300,000
shares of the Company's Class A common stock for issuance as incentive stock
options and nonqualified stock options, respectively. The Company continues to
reserve 477,534 shares of Class A common stock for issuance against outstanding
options granted under the Second Amended and Restated 1985 Stock Option Plan
(the "1985 Stock Option Plan") which expired during fiscal year 1996.
The 1996 Stock Option Plan and the 1985 Stock Option Plan (collectively, the
"Option Plans") provide for the grant of options to key employees upon terms and
conditions determined by a committee of the Board of Directors. Options expire
no later than the tenth anniversary of the date of grant, and are exercisable at
a price which is at least 100% of the fair market value of such shares on the
date of grant (110% in the case of individuals holding at least 10% of the
Company's Class A common stock).
<PAGE>
A summary of stock option activity related to the Option Plans for each of the
three years in the period ended September 28, 1996 is as follows:
<TABLE>
<CAPTION>
Number of
Number Option price shares
of shares per share exercisable
<S> <C> <C> <C>
Outstanding at
10/2/93 1,361,373 $4.63-$8.21 854,091
=======
Granted - -
Exercised (322,394) $4.67-$8.21
Cancelled (6,525) $4.75-$7.00
----------
Outstanding at
10/1/94 1,032,454 $4.63-$7.13 723,464
=======
Granted - -
Exercised (484,980) $4.63-$6.67
Cancelled (10,200) $4.75-$5.04
----------
Outstanding at
9/30/95 537,274 $4.63-$7.13 344,284
=======
Granted 30,000 $14.13
Exercised (53,140) $4.63-$6.69
Cancelled (6,600) $5.04
----------
Outstanding at
9/28/96 507,534 $4.63-$14.13 396,339
========== =======
</TABLE>
Employee Stock Purchase Plan. The Company's 1990 Employee Stock Purchase Plan
(the "Purchase Plan") makes available to eligible employees a means of
purchasing up to 1,500,000 shares of the Company's common stock at current
market prices. Under the terms of the Purchase Plan, the Company contributes an
amount annually, in cash or Class A stock, equal to 15% of the undistributed
total of participants' contributions for the past ten years. All full-time
employees of the Company (except those owning 10% or more of the Company's Class
A stock) are eligible to participate in the Purchase Plan.
Retirement Plans. The Company provides a 401(k) Plan and an Executive Salary
Deferral Plan which include Company matching of 50% of contributions not
exceeding 4% of each participant's salary. The Company's contribution was
$1,483,000 in 1996; $1,393,000 in 1995; and $1,168,000 in 1994.
<PAGE>
9. Commitments and Contingencies
The Company leases transportation and delivery equipment, poultry farms,
processing equipment and distribution facilities under operating leases expiring
during the next six years. Management expects that in the normal course of
business the leases will be renewed or replaced by other leases.
In November and December 1992, under sale-leaseback agreements, the Company sold
certain equipment with a net book value of $4.5 million for $19.2 million cash.
Annual payments under the operating lease agreements are $3.5 million. The gain
of $14.7 million is being amortized over the terms of the leases. At September
28, 1996 and September 30, 1995, the unamortized portion of the deferred gain is
included in the balance sheet captions "accrued liabilities" ($2,005,000 and
$2,777,000, respectively) and "deferred income taxes and deferred gain"
($434,000 and $4,177,000, respectively).
Total rental expense (net of amortized gain) was $35,566,000 in 1996;
$28,378,000 in 1995; and $23,042,000 in 1994.
At September 28, 1996, future minimum rental payments required under leases that
have initial or remaining noncancellable terms in excess of one year are as
follows: $30,030,000 in 1997; $24,377,000 in 1998; $19,984,000 in 1999;
$14,933,000 in 2000; and $8,551,000 in 2001.
The Company maintains separate self-insurance programs for employee group
health, dental and disability benefits and for workers' compensation costs.
Self-insurance costs are accrued based upon the aggregate of the liability for
reported claims and an estimated liability for claims incurred but not yet
reported.
The Company is involved in litigation incidental to its business. Such
litigation is not considered by management to be significant.
10. Related Party Transactions
Lease payments for transportation equipment made to the Company's chairman
amounted to $3,112,000 in 1996; $1,708,000 in 1995; and $956,000 in 1994.
Certain officers and employees of the Company own turkey and broiler farms and
enter into grower contracts with the Company which provide for the payment of
grower fees. The Company's arrangements with these officers and employees are
similar to contracts with unrelated growers and, as such, do not include an
ongoing commitment by the Company. Grower fees paid to these officers and
employees amounted to $787,000 in 1996; $803,000 in 1995; and $689,000 in 1994.
At September 28, 1996 and September 30, 1995, other current assets include
$217,000 and $216,000, respectively, and other assets include $8,234,000 and
$6,084,000, respectively, of accounts and notes receivable from an officer and
director and entities controlled by this person.
<PAGE>
11. Impact of New Financial Accounting Pronouncement
Beginning in fiscal 1997, the Company will adopt Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The statement establishes
accounting standards for the impairment of long-lived assets such as buildings,
equipment and certain intangibles. The Company does not believe adoption of the
new standard will have a material impact on the financial statements.
<PAGE>
12. Stockholders' Equity
<TABLE>
<CAPTION>
(Dollars in thousands) Common stock
Class A Class B
--------------------------------------------------------------------------------------
Additional Retained Treasury
Shares Amount Shares Amount capital earnings stock
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 2, 1993 8,630,407 $ 86 8,502,052 $85 $ 87,638 $ 97,727 $(11,634)
Net income - - - - - 26,992 -
Stock exchange 170 - (170) - - - -
Exercise of stock options 214,928 2 - - 1,641 - -
Conversion of 8% debentures 388,388 4 - - 8,154 - -
Issuance of stock under the
Employee Stock Purchase Plan - - - - 72 - 218
Cash dividends:
Class A $.080 per share - - - - - (946) -
Class B $.067 per share - - - - - (850) -
--------------------------------------------------------------------------------------
Balance at October 1, 1994 9,233,893 92 8,501,882 85 97,505 122,923 (11,416)
Net income - - - - - 35,758 -
Stock exchange 2,101,102 21 (2,101,102) (21) - - -
Exercise of stock options 422,455 4 - - 2,333 - -
Conversion of 8% debentures 262,885 3 952 - 5,262 - -
Stock offering 2,500,000 25 - - 51,239 - -
3-for-2 stock split 6,653,539 66 3,200,940 32 (101) - -
Purchase of land 157,500 2 - - 2,371 - -
Issuance of stock under the
Employee Stock Purchase Plan - - - - 233 - 182
Cash dividends:
Class A $.080 per share - - - - - (1,611) -
Class B $.067 per share - - - - - (638) -
--------------------------------------------------------------------------------------
Balance at September 30, 1995 21,331,374 213 9,602,672 96 158,842 156,432 (11,234)
Net income - - - - - 22,998 -
Stock exchange 150 - (150) - - - -
Exercise of stock options 53,140 1 - - 269 - -
Issuance of stock under the
Employee Stock Purchase Plan - - - - 203 - 377
Cash dividends:
Class A $.080 per share - - - - - (1,639) -
Class B $.067 per share - - - - - (638) -
--------------------------------------------------------------------------------------
Balance at September 28, 1996 21,384,664 $214 9,602,522 $96 $159,314 $177,153 $(10,857)
======================================================================================
</TABLE>
<PAGE>
On February 6, 1987, the Company's Restated Certificate of Incorporation was
amended to create two classes of common stock. The amendment authorized the
issuance of up to 40,000,000 shares of Class A common stock, par value $.01 per
share, and 40,000,000 shares of Class B common stock, par value $.01 per share.
Upon adoption of the amendment, each outstanding share of common stock converted
automatically into a share of Class A common stock. During fiscal 1987, the
Company concluded a one-time-only exchange offer in which holders of Class A
common stock were given the opportunity to exchange their shares for an
equivalent number of shares of Class B common stock. The Class B common stock
has ten votes per share in most matters submitted to a vote of the Company's
stockholders, while the Class A common stock has one vote per share. As a result
of the exchange offer, voting control of the Company rests with the holders of
Class B common stock. In addition, the dividend per share of Class B common
stock may not exceed 90 percent of the dividend per share of Class A common
stock. The number of outstanding Class A shares at September 28, 1996 and
September 30, 1995 were 20,507,468 and 20,415,936, respectively.
<PAGE>
Management Responsibility for Financial Statements
The financial statements have been prepared by the management of Hudson Foods,
Inc. in conformity with generally accepted accounting principles. Management is
responsible for the fairness and reliability of the financial statements and
other financial data included in this report. In the preparation of the
financial statements, it is necessary to make informed estimates and judgments
based on currently available information of the effects of certain events and
transactions.
Hudson maintains accounting and other controls which management believes provide
reasonable assurance that financial records are reliable, assets are safeguarded
and transactions are properly recorded in accordance with management's
authorizations. However, limitations exist in any system of internal control
based upon the recognition that the cost of the system should not exceed
benefits derived.
Hudson's independent auditors, Coopers & Lybrand L.L.P., are engaged to audit
the financial statements of Hudson and to express an opinion thereon. Their
audit is conducted in accordance with generally accepted auditing standards to
enable them to report whether the financial statements present fairly, in all
material respects, the financial position and the results of operations and cash
flows of Hudson in conformity with generally accepted accounting principles.
James T. Hudson
Chairman and Chief Executive Officer
Charles B. Jurgensmeyer
Chief Financial Officer and Executive Vice President
October 29, 1996
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
Hudson Foods, Inc.
We have audited the accompanying consolidated balance sheet of Hudson Foods,
Inc. and subsidiaries as of September 28, 1996 and September 30, 1995, and the
related consolidated statements of operations and cash flows for each of the
three years in the period ended September 28, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
(included on pages 16, 18, 20 and 22 to 27) present fairly, in all material
respects, the consolidated financial position of Hudson Foods, Inc. and
subsidiaries as of September 28, 1996 and September 30, 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 28, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
October 29, 1996
<PAGE>
<TABLE>
<CAPTION>
Eleven-Year Financial Summary
(Dollars in thousands except per share data) 1996 1995 1994 1993
<S> <C> <C> <C> <C>
Operating data:
Sales $1,378,474 $1,200,512 $1,040,840 $920,545
Cost of sales 1,211,556 1,023,959 885,248 802,002
Gross profit 166,918 176,553 155,592 118,543
Selling 94,805 82,945 78,698 63,926
General and administrative 32,240 29,211 25,755 20,695
Operating income 39,873 64,397 51,139 33,922
Interest, net 5,789 1,845 6,152 7,975
Interest on tax settlement - 4,500 - -
Other, net (4,246) (2,190) - 530
Income (loss) before income taxes
and extraordinary item 38,330 60,242 44,987 25,417
Income tax expense (benefit) 15,332 24,484 17,995 9,512
Income before extraordinary item 22,998 35,758 26,992 15,905
Net income 22,998 35,758 26,992 15,905
Per share data:
Primary earnings per share
before extraordinary item $.76 $1.21 $1.08 $.67
Primary earnings per share .76 1.21 1.08 .67
Fully diluted earnings per share
before extraordinary item .76 1.21 1.08 .67
Fully diluted earnings per share .76 1.21 1.08 .67
Dividends declared per Class A common share .080 .080 .080 .080
Dividends declared per Class B common share .067 .067 .067 .067
Stockholders' equity per share 10.82 10.14 8.30 7.17
Financial data:
Working capital $213,889 $180,458 $100,096 $103,811
Capital expenditures 139,387 73,314 49,161 21,453
Property, plant and equipment, net 367,600 275,624 229,050 205,613
Total assets 774,742 623,541 473,180 416,503
Long-term obligations less current portion 224,951 129,973 75,169 88,985
Total debt 249,665 151,015 97,078 94,070
Stockholders' equity 325,920 304,349 209,189 173,902
Depreciation and amortization 26,703 25,137 22,279 22,943
Statistical data:
Sales growth 14.8% 15.3% 13.1% 13.8%
Return on sales (net margin) 1.7 3.0 2.6 1.7
Return on average stockholders' equity 7.3 13.9 14.1 10.3
Current ratio 2.42:1 2.55:1 1.87:1 2.28:1
Long-term obligations to total capitalization 40.8% 29.9% 26.4% 33.8%
Shares used in primary earnings
per share computation (000's) 30,401 29,494 24,948 23,627
Shares used in fully diluted earnings
per share computation (000's) 30,401 29,494 25,099 23,627
Shares outstanding at year-end (000's) 30,110 30,019 25,203 24,261
Stockholders of record 1,332 1,433 1,316 1,402
Number of employees 11,470 10,303 8,911 8,554
Class A common stock price (high-low) $18 1/8-11 1/2 $20-12 3/4 $16 3/4-7 1/8 $10 1/4-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
<C> <C> <C> <C> <C> <C> <C>
$809,243 $765,292 $666,697 $620,485 $549,032 $428,880 $223,963
733,028 690,316 606,220 547,929 521,745 384,045 184,915
76,215 74,976 60,477 72,556 27,287 44,835 39,048
49,907 37,135 27,270 13,400 12,989 7,253 4,401
18,533 16,645 16,377 15,735 10,155 8,879 6,915
7,775 21,196 16,830 43,421 4,143 28,703 27,732
8,476 9,073 7,571 9,462 10,843 8,734 2,349
- - - - - - -
(4,342) (1,406) (4,591) (2,606) (228) (2,382) (1,096)
3,641 13,529 13,850 36,565 (6,472) 22,351 26,479
1,471 4,987 5,138 13,798 (10,410) 9,432 13,001
2,170 8,542 8,712 22,767 3,938 12,919 13,478
2,170 8,542 8,712 22,767 14,793 12,919 13,478
$.10 $.39 $.40 $1.13 $.20 $.69 $.78
.10 .39 .40 1.13 .75 .69 .78
.10 .39 .40 1.04 .30 .67 .78
.10 .39 .40 1.04 .73 .67 .78
.080 .080 .080 .080 .080 .070 .05
.067 .067 .067 .067 .067 .033 -
6.42 6.39 5.85 5.51 4.21 3.74 2.71
$81,475 $88,564 $89,822 $86,813 $66,679 $41,072 $39,308
46,960 31,326 32,446 19,501 20,522 26,050 9,359
207,097 178,753 164,357 133,495 128,096 120,774 87,428
402,188 360,191 342,269 299,054 290,493 293,594 235,495
125,695 97,418 89,675 78,509 73,747 93,652 83,842
145,924 100,295 97,032 83,886 118,641 125,625 104,614
134,330 133,499 126,005 110,637 82,315 74,031 50,458
17,911 16,536 14,346 12,406 10,608 8,258 3,022
5.7% 14.8% 7.4% 13.0% 28.0% 91.5% 21.3%
0.3 1.1 1.3 3.7 2.7 3.0 6.0
1.6 6.6 7.4 23.6 18.9 20.8 43.1
2.00:1 2.35:1 2.48:1 2.60:1 1.91:1 1.37:1 1.45:1
48.3% 42.2% 41.6% 41.5% 47.3% 55.9% 62.4%
21,455 22,100 21,932 20,096 19,787 18,848 17,324
21,455 22,100 21,932 25,427 24,867 23,436 17,337
20,922 20,880 21,539 20,075 19,533 19,781 18,653
1,483 1,514 1,657 1,668 1,911 1,913 1,571
8,229 7,659 7,370 6,262 5,474 6,027 2,758
$6 1/2-4 5/8 $7 3/4-4 3/8 $9 5/8-4 3/8 $11 1/4-6 1/8 $8 3/4-3 1/4 $13 7/8-8 5/8 $14 1/8-7 1/8
</TABLE>
<PAGE>
Quarterly Financial Data (unaudited)
Hudson Foods, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands except per share data)
Quarter Ended 1996 December 30 March 30 June 29 September 28 Fiscal 1996
<S> <C> <C> <C> <C> <C>
Sales $340,674 $330,297 $337,234 $370,269 $1,378,474
Cost of sales 293,757 293,369 296,069 328,361 1,211,556
Gross profit 46,917 36,928 41,165 41,908 166,918
Selling 23,657 24,134 23,440 23,574 94,805
General and administrative 7,121 8,208 8,542 8,369 32,240
Operating income 16,139 4,586 9,183 9,965 39,873
Other expense (income), net 1,270 1,540 3,778 (5,045) 1,543
Income before income taxes 14,869 3,046 5,405 15,010 38,330
Income tax expense 5,870 1,164 2,096 6,202 15,332
Net income $8,999 $1,882 $3,309 $8,808 $22,998
Earnings per share:
Primary $.30 $.06 $.11 $.29 $.76
Fully diluted .30 .06 .11 .29 .76
Dividends:
Class A .0200 .0200 .0200 .0200 .080
Class B .0167 .0167 .0167 .0167 .067
Market price (high-low) $17 1/2-13 5/8 $18 1/8-2 3/4 $15 1/8-11 1/2 $14 1/2-12 1/8 $18 1/8-11 1/2
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended 1995 December 31 April 1 July 1 September 30 Fiscal 1995
<S> <C> <C> <C> <C> <C>
Sales $279,955 $271,814 $305,650 $343,093 $1,200,512
Cost of sales 238,202 227,520 261,825 296,412 1,023,959
Gross profit 41,753 44,294 43,825 46,681 176,553
Selling 19,048 19,150 21,393 23,354 82,945
General and administrative 7,252 7,402 6,818 7,739 29,211
Operating income 15,453 17,742 15,614 15,588 64,397
Other expense (income), net (932) 3,718 578 791 4,155
Income before income taxes 16,385 14,024 15,036 14,797 60,242
Income tax expense 6,550 5,856 5,642 6,436 24,484
Net income $9,835 $8,168 $9,394 $8,361 $35,758
Earnings per share:
Primary $.35 $.27 $.31 $.28 $1.21
Fully diluted .35 .27 .31 .28 1.21
Dividends:
Class A .0200 .0200 .0200 .0200 .080
Class B .0167 .0167 .0167 .0167 .067
Market price (high-low) $17 7/8-13 7/8 $20-16 3/4 $19 1/4-12 3/4 $15 1/2-13 1/4 $20-12 3/4
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF HUDSON FOODS, INC.
1. Hudson Development Company, Inc., an Arkansas corporation.
2. Hudson Foods Foreign Sales, Inc., incorporated under the laws of the U.S.
Virgin Islands.
3. Hudson Foods Poland, Sp. zo.o., a Polish limited liability company.
4. Hudson Midwest Foods, Inc., a Nebraska corporation.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Hudson Foods, Inc. on Form S-8 (File Nos. 33-36690 and 33-41839) of our reports
dated October 29, 1996, on our audits of the consolidated financial statements
and financial statement schedule of Hudson Foods, Inc. as of September 28, 1996,
and September 30, 1995, and for each of the three years in the period ended
September 28, 1996, which reports are incorporated by reference and included in
this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
December 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-28-1996
<EXCHANGE-RATE> 1
<CASH> 6,437
<SECURITIES> 0
<RECEIVABLES> 110,655
<ALLOWANCES> 1,863
<INVENTORY> 226,872
<CURRENT-ASSETS> 364,474
<PP&E> 518,345
<DEPRECIATION> 150,745
<TOTAL-ASSETS> 774,742
<CURRENT-LIABILITIES> 150,585
<BONDS> 0
0
0
<COMMON> 310
<OTHER-SE> 325,610
<TOTAL-LIABILITY-AND-EQUITY> 774,742
<SALES> 1,378,474
<TOTAL-REVENUES> 1,378,474
<CGS> 1,211,556
<TOTAL-COSTS> 1,338,601
<OTHER-EXPENSES> (4,246)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,789
<INCOME-PRETAX> 38,330
<INCOME-TAX> 15,332
<INCOME-CONTINUING> 22,998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,998
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
