SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(D) of the Securities Exchange Act of 1934:
Date of Report (Date of earliest event reported):
OCTOBER 23, 2000
CAGLE'S, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 1-7138 58-0625713
(State of Incorporation) (Commission File Number) (IRS Employer ID No.)
2000 Hills Avenue, N.W., Atlanta, Ga. 30318
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 355-2820
</page>
Item 2. Acquisition or Disposition of Assets
On October 23, 2000, Cagle's, Inc. (the "Company") entered into a "First
Amendment of Credit Agreement" (the"Agreement") with Harris Trust and Savings
Bank, as agent for itself and for SunTrust Bank, Regions Bank of Gainesville,
SouthTrust Bank, and U. S. Bancorp AG Credit, Inc. Pursuant to the Agreement,
the Company's revolving line of credit has been temporarily increased from
$40,000,000 to $60,000,000 and is guaranteed by the Company's wholly owned
subsidiary Cagle's Farms, Inc. Both the Company and Cagle's Farms, Inc. have
pledged substantial assets as collateral pursuant to the Agreement, including
the Company's real estate, buildings and improvements, machinery, equipment and
fixtures at Perry, Georgia, Macon, Georgia, Pine Mountain, Georgia, Forsyth,
Georgia, Rockmart, Georgia, Dalton, Georgia, and Collinsville, Alabama; and the
Company's and Cagle's Farms, Inc.'s equipment, accounts, notes, contract
rights, instruments, documents, chattel paper, general intangibles, farm
products, inventory, and deposit accounts, and proceeds thereof.
Exhibit: First Amendment to Credit Agreement
</page>
CAGLE'S, INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
The Banks from time to time parties
to the Credit Agreement referred to below
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of November
1, 1999, as amended (the "Credit Agreement") among the undersigned, Cagle's,
Inc., a Georgia corporation (the "Company"), Cagle's Farms, Inc., a Georgia
corporation, as guarantor (the "Guarantor"), you (the "Banks") and Harris Trust
and Savings Bank, as agent for the Banks (the "Agent"). All defined terms used
herein shall have the same meaning as in the Credit Agreement unless otherwise
defined herein.
The Company, the Agent and the Banks now wish to increase the amount of the
Revolving Credit made available to the Company under the Credit Agreement and
amend certain provisions of the Credit Agreement in the manner set forth in
this Amendment.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in Section 2
hereof, the following provisions of the Credit Agreement shall be amended as
follows:
1.1. Section 1.1(c) of the Credit Agreement shall be amended to read as
follows.
"(c) The Revolving Credit shall consist of a base revolving credit (the
"Base Credit") in an aggregate principal amount at any one time outstanding of
up to $40,000,000, which shall be available at all times during the term of this
Agreement and an excess revolving credit (the "Excess Credit") in an aggregate
principal amount at any one time outstanding of up to $20,000,000, which shall
be available only during the period from the first date on which the First
Amendment to this Agreement becomes effective through March 31, 2001.
The respective maximum aggregate principal amounts of the Base Credit at any
One time outstanding and the percentage of the Base Credit available at any
time which each Bank by its acceptance hereof severally agrees to make
available to the Company and each Bank's percentage thereof (its "Commitment
Percentage") are as follows (collectively, the "Base Revolving Credit
Commitments" and individually, a "Base Revolving Credit Commitment"):
Harris Trust and Savings Bank $10,909,090.91 27.27272727%
SunTrust Bank 9,578,713.97 23.94678493%
Regions Bank of Gainsville 8,514,412.42 21.28603105%
SouthTrust Bank 5,676,274.94 14.19068735%
U.S. Bancorp Ag Credit, Inc. 5,321,507.76 13.30376940%
Total $40,000,000.00 100.0%
</page>
The respective maximum aggregate principal amounts of the Excess Credit at any
one time outstanding and the percentage of the Excess Credit available at any
time which each Bank by its acceptance hereof severally agrees to make
available to the Company are as follows (collectively, the "Excess Revolving
Credit Commitments" and individually, an "Excess Revolving Credit Commitment"):
Harris Trust and Savings Bank $5,454,545.45 27.27272727%
SunTrust Bank $4,789,356.99 23.94678493%
Regions Bank of Gainsville $4,257,206.21 21.28603105%
SouthTrust Bank $2,838,137.47 14.19068735%
U.S. Bancorp Ag Credit, Inc. $2,660,753.88 13.30376940%
Total $20,000,000.00 100.0%
Each Bank's Base Revolving Credit Commitment and Excess Revolving Credit
Commitment during any period are hereinafter referred to collectively as the
"Revolving Credit Commitment" for such Bank during such period and the Base
Revolving Credit Commitments and Excess Revolving Credit Commitments for all
Banks during any period are hereinafter collectively referred to as the
"Revolving Credit Commitments" during such period. All Revolving Credit Loans
shall be made first under the Base Credit until the Base Credit is fully
utilized and then under the Excess Credit (if available)."
1.2. The Credit Agreement shall be amended by adding the following
provisions thereto as sections 1.10 and 1.11:
"Section 1.10. Collateral. The Obligations shall be secured by (a)
valid, perfected and enforceable mortgage liens and security interests on all
right, title and interest of the Company and each Guarantor (as applicable) in
the real estate, buildings and improvements, machinery, equipment and fixtures
that comprise the Perry, Georgia processing plant, the Macon, Georgia
processing plant, the Pine Mountain, Georgia processing plant, the Forsyth,
Georgia feed mill and hatchery, the Rockmart, Georgia feed mill, the Dalton,
Georgia feed mill and hatchery and the Collinsville, Alabama processing plant,
and all proceeds thereof, and (b) valid, perfected (subject to the proviso
appearing at the end of this sentence) and enforceable security interests on
all right, title and interest of the Company and each Guarantor in all
equipment, accounts and accounts receivable, notes and notes receivable,
contract rights, instruments, documents, chattel paper, general intangibles
(including, without limitation, patents, trademarks, tradenames, copyrights,
and other intellectual property rights), farm products, inventory, and
deposit accounts, whether now owned or hereafter acquired or arising, and
all proceeds thereof; provided, however, that: (i) the security interests
of the Agent on Property subject to a true lease, Capital Lease or
conditional sale agreement or subject to a purchase money lien, in each
instance to the extent permitted hereby, shall be subject to the rights of
the lessor or lender thereunder and if such Lien is prohibited by the terms
of such true lease, Capital Lease, conditional sale agreement or purchase
money documents, such security interest will not attach to such Property,
and (ii) until a Potential Default or Event of Default has occurred and is
continuing and thereafter until otherwise required by the Agent, security
interests on notes and notes receivable need not be perfected if and so long
as the total value of such property at any one time not so perfected shall
not exceed $250,000 in the aggregate, (iii) the security interest of the
Agent on
</page>
vehicles subject to a certificate of title law need not be perfected except as
required by the Security Documents, and (iv) the Company and the Guarantors need
not comply with the Federal Assignment of Claims Act except as required by the
Security Documents. The Company and the Guarantors acknowledge and agree that
the liens and security interests on the Collateral shall be valid and perfected
first priority liens and security interests subject, however, to the (A) proviso
appearing in the immediately preceding sentence pursuant to one or more Security
Documents in form and substance satisfactory to the Agent, (B) compliance with
the Federal Assignment of Claims Act, where applicable, (C) the statutory trust
created pursuant to the Packers and Stockyards Act, (D) compliance with
applicable certificate of title laws, and (E) liens and security interests
permitted by Section 7.13 hereof.
Section 1.11. Further Assurances. The Company and each Guarantor
agrees that it shall from time to time at the request of the Agent execute and
deliver such documents and do such acts and things as the Agent may reasonably
request in order to provide for or perfect or protect such liens and security
interests on the Collateral."
1.3. The first sentence of Section 1.3(a) of the Credit Agreement shall
be amended by adding the following proviso immediately before the period
appearing at the end thereof:
"; provided, however, that Revolving Credit Obligations outstanding
under the Excess Credit shall only be Domestic Rate Portions."
1.4. Section 2.4 of the Credit Agreement shall be amended by adding the
following provisions thereto as Section 2.4(d):
"(d) Concurrently with the Company's or any Guarantor's receipt of any
proceeds from the issuance and sale of Additional Senior Notes (i) the Company
shall prepay the Revolving Credit Obligations constituting Excess Credit in an
amount equal to the lesser of (x) 100% of the gross cash proceeds from such
issuance and sale (net of costs and expenses directly incurred by the Company
or such Guarantor in connection therewith) and (y) the aggregate amount of the
Excess Credit then outstanding and (ii) the Excess Revolving Credit Commitments
shall permanently reduce by the amount so prepaid, such reduction in the Excess
Revolving Credit Commitments to be made ratably in accordance with the Banks'
respective Commitment Percentages. Such prepayment of the Excess Credit shall
be effected by applying the amount so paid to the Revolving Credit Obligations
constituting Excess Credit as follows: first to the Revolving Credit Loans then
outstanding until fully paid, then to the Reimbursement Obligations until fully
paid and with the balance (if any L/Cs are then outstanding) held as cash
collateral in the L/Cs in a manner consistent with Section 2.4(a) hereof."
1.5. The first paragraph of Section 3 of the Credit Agreement shall be
amended by adding the following sentence to the end thereof:
"All prepayments of Revolving Credit Obligations shall be applied first
to Revolving Credit Obligations outstanding under the Excess Credit until all
such Revolving Credit Obligations have been fully paid and then to Revolving
Credit Obligations outstanding under the Base Credit."
1.6. Section 3 of the Credit Agreement shall be amended by adding the
following provisions thereto immediately after the first paragraph thereof:
</page>
"Anything contained herein to the contrary notwithstanding all payments
and collections received in respect of the Obligations and all proceeds of the
Collateral received, in each instance, by the Agent or any of the Banks after
the occurrence and during the continuance of an Event of Default shall be
remitted to the Agent and distributed as follows:
(a) first to the payment of any outstanding costs and expenses
incurred by the Agent or any security trustee in monitoring, verifying,
protecting, preserving or enforcing the liens on the Collateral or in
protecting, preserving or enforcing rights under this Agreement, the Security
Documents or the Notes and in any event including all costs and expenses of a
character which the Company has agreed to pay under Section 12.9 hereof (such
funds to be retained by the Agent for its own account unless it has previously
been reimbursed for such costs and expenses by the Banks, in which event such
amounts shall be remitted to the Banks to reimburse them for payments
theretofore made to the Agent);
(b) second to the payment of any outstanding interest or other fees
or amounts due under the Notes, the Security Documents, the L/C Agreements or
this Agreement other than for principal, ratably as among the Banks in accord
with the amount of such interest and other fees or amounts owing each;
(c) third, to the payment of the principal of the Notes and the
Reimbursement Obligations ratably as among the Notes and Reimbursement
Obligations;
(d) fourth, to the payment of the Hedging Liabilities owed to the
Banks and their Affiliates ratably as among such Hedging Liabilities;
(e) fifth, to the Banks ratably in accord with the amounts of any
other indebtedness, obligations or liabilities of the Company owing to each of
them and secured by the Security Documents unless and until all such
indebtedness, obligations and liabilities have been fully paid and satisfied;
and
(f) sixth, to the Company or whoever may be lawfully entitled
thereto."
1.7. Section 4.1 of the Credit Agreement shall be amended by adding the
following definitions thereto:
""Additional Senior Notes" shall mean senior notes of the Company in an
aggregate principal amount not less than $20,000,000 nor more than $30,000,000
and maturing no earlier than September 30, 2006.
" Adjusted EBITDA" shall mean, for any period, the EBITDA for such
period minus 60% of the Company's income from unconsolidated Affiliates for the
same period.
"Borrowing Base Certificate" shall mean the certificate in the form of
Exhibit G hereto which is required to be delivered to the Banks in accordance
with Section 7.4(f) hereof.
</page>
"Collateral" shall mean the collateral security provided from time to
time to the Agent for the benefit of the Banks pursuant to the Security
Documents.
"EBITDA" shall mean with reference to any period, Net Income for such
period plus all amounts deducted in arriving at such Net Income amount in
respect of (i) Interest Expense for such period, plus (ii) federal, state and
local income taxes for such period, plus (iii) all amounts properly charged for
depreciation of fixed assets and amortization of intangible assets during such
period.
"Eligible Equipment" shall mean any machinery and equipment (but
excluding fixtures) of the Company or any Guarantor, which the Required Banks
in their sole discretion deem to be acceptable for inclusion in the Borrowing
Base and which complies with each of the following requirements:
(a) It is owned by the Company or a Guarantor;
(b) It has been identified to the Agent in the manner prescribed by the
Agent;
(c) It is not subject to any lien, security interest, mortgage or other
encumbrance of any nature whatsoever, except the Agent's security interest;
(d) It does not constitute a fixture under applicable law;
(e) It is not subject to any certificate of title law;
(f) It is located at a location disclosed to and approved by the Agent,
and if requested by the Agent, any Person (other than the Company or a
Guarantor) owning or controlling such location shall have waived all right,
title and interest in and to such machinery and equipment in a manner
satisfactory to the Agent;
(g) It is insured against such risks and hazards and in such amounts as
the Agent may specify by insurers acceptable to the Agent;
(h) the Agent shall have received an appraisal thereof performed by an
appraiser satisfactory to the Agent and otherwise acceptable in form and
substance to the Agent; and
(i) It is subject to a perfected first priority security interest in
favor of the Agent.
"Eligible Fixed Assets" shall mean the Eligible Equipment and the
Mortgaged Premises located in Pine Mountain, Georgia.
"Eligible Inventory" shall mean any Inventory of the Company or any
Guarantor, which the Required Banks in their sole discretion deem to be
acceptable for inclusion in the Borrowing Base and which complies with each
of the following requirements:
</page>
(a) it consists solely of feed grains, feed, ingredients, live broiler
chickens, dressed broiler chickens, commercial eggs, prepared food products,
breeder hens, breeder pullets, hatching eggs, commercial hens, commercial
pullets, packaging materials, vaccines, general supplies, maintenance supplies
and finished goods Inventory;
(b) it is in first class condition, not obsolete, and is readily usable
or salable by the Company or a Guarantor in the ordinary course of its business;
(c) it substantially conforms to the advertised or represented
specifications and other quality standards of the Company or the relevant
Guarantor, and has not been determined by the Banks to be unacceptable due to
age, type, category, quality and/or quantity;
(d) all warranties as set forth in this Agreement and the Security
Documents are true and correct with respect thereto;
(e) it has been identified to the Banks in the manner prescribed
pursuant to the Security Agreement;
(f) it is located at a location within the United States disclosed to
and approved by the Banks and, if requested by the Agent, any Person (other
than the Company or a Guarantor) owning or controlling such location shall
have waived all right, title and interest in and to such Inventory in a
manner satisfactory to the Banks;
(g) it is not subject to any other lien, security interest or
counterclaim; and
(h) It is subject to a perfected first priority security interest in
favor of the Agent.
"Eligible Receivables" shall mean any Receivable of the Company or any
Guarantor, which the Required Banks in their sole discretion deem to be
acceptable for inclusion in the Borrowing Base and which complies with each of
the following requirements:
(a) It arises out of a bona fide sale of Inventory which has been
delivered to, or has been shipped to, or for services actually rendered to the
Account Debtor on said Receivable in the ordinary course of business on
ordinary trade terms;
(b) It has been identified to the Agent in the manner required by the
Agent;
(c) It is evidenced by an invoice dated not later than 3 days after the
date of shipment to the Account Debtor thereunder;
(d) It has not remained unpaid in whole or in part more than 90 days
from and after its invoice date;
(e) It is net of any credit or allowance given by the Company or the
applicable Guarantor to such Account Debtor;
</page>
(f) It is not owing by an Account Debtor who (i) has become insolvent,
(ii) is the subject of any bankruptcy, arrangement, reorganization proceedings
or other proceedings for relief of debtors or (iii) has admitted its inability
to pay its debt generally or has stopped paying its debts generally;
(g) It is not owing by an Account Debtor obligated on Receivables more
than 25% of the aggregate unpaid balance of which have been past due longer
than the period specified in clause (d);
(h) If the Account Debtor is also a supplier to or creditor of the
Company or any Guarantor and the aggregate amount of all such Receivables
exceeds $1,000,000, then either (i) that Account Debtor shall have entered into
an agreement with or for the benefit of the Banks with respect to the waiver of
rights of setoff which is acceptable to the Banks or (ii) the amount of such
Receivable is net of any amount owed to such Account Debtor;
(i) The Account Debtor is not principally located outside the
continental United States, unless such Receivable is secured by an irrevocable
letter of credit issued or confirmed by a commercial bank located in the United
States and which is acceptable to the Required Banks and which, if requested by
the Agent, has been assigned to the Agent for the benefit of the Banks;
(j) It is not owing by the United States of America or any department,
agency or instrumentality thereof unless the Agent shall have received evidence
satisfactory to the Agent of compliance with the Assignment of Claims Act or
have waived such requirement in writing;
(k) Such Receivable, when added to the unpaid amount of other Eligible
Receivables of the same Account Debtor, does not exceed any credit limit
imposed by the Required Banks on such Account Debtor;
(l) Such Receivable is not subject to any dispute, counterclaim or
defense asserted by the Account Debtor thereunder;
(m) It is not owing by a Subsidiary, officer, director or employee of
the Company or any Guarantor;
(n) It does not arise from a cash or C.O.D. sale, a sale on approval,
sale or return, or from a consignment;
(o) It is free and clear of any security interest, lien or other
encumbrance of any nature whatsoever;
(p) It is payable in United States Dollars; and
(q) It is subject to a perfected first priority security interest in
favor of the Agent.
</page>
"Grower Payables" shall mean all amounts owed from time to time by the
Company to any Person (including without limitation producers, suppliers,
sellers and their agents of agricultural products) on account of the purchase
price of agricultural products or services (including poultry and livestock) if
the Agent determines that such Person is entitled to the benefits of any
grower's lien, statutory trust or similar security arrangements to secure the
payment of any amounts owed to such Person.
"Hedging Liabilities" shall mean indebtedness, obligations and
liabilities of the Company and any of its Subsidiaries attributable to (a) any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, cap, collar or floor or other interest rate hedge
arrangement, to which the Company or any of its Subsidiaries is a party or a
beneficiary, (b) any foreign exchange contract, currency option, currency swap,
cap, collar or floor or other similar agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in currency
values or (c) any commodity option, commodity forward contract, commodity swap,
cap, collar or floor or similar agreement or arrangement designed to protect
the Company or any of its Subsidiaries against fluctuations in commodity prices.
"Mortgages" shall mean the mortgages, deeds of trust and any and all
other instruments, documents and agreements which may at any time grant or
create a lien in favor of the Agent for the benefit of the Banks, or any of
them, on the Mortgaged Premises.
"Mortgaged Premises" shall mean so much of the Collateral as consists
of real property and all buildings and improvements thereon.
"Security Documents" shall mean any and all security agreements,
collateral assignments, deeds of trust, deeds to secure debt, mortgages and
other security documents from the Company and the Guarantors to the Agent for
the benefit of the Banks, as the same may be supplemented, amended, modified,
restated or replaced from time to time."
1.8. The definitions of the terms "Applicable Margin", "Borrowing Base",
"Commitment Fee Rate", "Interest Coverage Ratio" and "Loan Documents" contained
in Section 4.1 of the Credit Agreement shall be amended to read as follows:
"Applicable Margin" shall mean, (a) with respect to each type of
Portion (except Portions of Revolving Credit Loans made under the Excess Credit)
described in each column below, the rate of interest per annum shown in Rows A,
B, C and D below for the range of Leverage Ratio specified for each Row:
IF LEVERAGE REVOLVING CREDIT REVOLVING CREDIT TERM LOAN TERM LOAN
RATIO IS: EURODOLLAR MARGIN DOMESTIC RATE EURODOLLAR DOMESTIC
MARGIN MARGIN RATE MARGIN
----------- ----------------- ---------------- ---------- -----------
A <30% 1.25% 0% 1.50% 0%
B >=30%<40% 1.75% 0% 2.00% 0.25%
C >=40%<50% 2.25% 0.50% 2.50% 0.75%
D >=50%<60% 2.50% 0.75% 2.75% 1.00%
E >=60% 2.75% 1.00% 3.00% 1.25%
</page>
, and (b) with respect to Domestic Rate Portions of Revolving Credit Loans made
under the Excess Credit, (i) three-quarters of one percent (0.75%) through
December 31, 2000 and (ii) during each month thereafter until all Revolving
Credit Loans made under the Excess Credit have been fully paid, a rate per annum
determined by adding one-half of one percent (0.5%) to the Applicable Margin in
effect during the immediately preceding month.
Not later than 5 Business Days after receipt by the Agent of the
financial statements called for by Section 7.4 hereof for last month of the
applicable fiscal quarter of the Company, the Agent shall determine the Leverage
Ratio for the applicable period and shall promptly notify the Company and the
Banks of such determination and of any change in the Applicable Margins
described in (a) above resulting therefrom. Any such change in the Applicable
Margins shall be effective as of the date the Agent so notifies the Company and
the Banks with respect to all Portions outstanding on such date, and such new
Applicable Margins shall continue in effect until the effective date of the next
quarterly redetermination in accordance with this Section. Each determination
of the Leverage Ratio and Applicable Margins by the Agent in accordance with
this Section shall be conclusive and binding on the Company and the Banks absent
manifest error. From the date hereof until the Applicable Margins are first
adjusted pursuant hereto, the Applicable Margins shall be those set forth in Row
D above.
"Borrowing Base", as determined on the basis of the information
contained in the most recent Compliance Certificate, shall mean an amount equal
to:
(a) 85% of the amount of the Company's and each Guarantor's Eligible
Receivables, plus
(b) 65% of the Value of the Company's and each Guarantor's Eligible
Inventory, plus
(c) 70% (but 35% at all times after the earlier of March 31, 2001 or the
termination in full of the Excess Revolving Credit Commitments) of the appraised
value, as shown on the appraisals thereof dated August 31, 2000, prepared by
Payne Valuation Consulting, of the Company's and each Guarantor's Eligible Fixed
Assets, minus
(d) the aggregate outstanding amount of all Grower Payables;
provided that the Borrowing Base shall be computed only as against and on so
much of the Collateral as is included on the Borrowing Base Certificates to be
furnished from time to time by the Company pursuant to Section 7.4(f) hereof
and, if required by the Agent or the Required Banks pursuant to any of the terms
hereof or any Security Document, as verified by such other evidence required to
be furnished to the Agent or the Banks pursuant hereto or pursuant to any such
Security Document.
"Commitment Fee Rate" shall mean a rate per annum equal to 1/4 of 1%
(0.25%) at all times during which the Company's Leverage Ratio is less than 0.50
to 1, and 1/2 of 1% (0.5%) at any time when the Company's Leverage Ratio is
</page>
equal to or greater than 0.50 to 1. The Commitment Fee Rate shall be adjusted
in the manner and at the same time as the Applicable Margins are adjusted
pursuant hereto. From the date of this agreement until the Commitment Fee Rate
is first adjusted pursuant hereto, the Commitment Fee Rate shall be 1/4 of 1%.
"Interest Coverage Ratio" shall mean, as of any time the same is to be
determined, the ratio of Adjusted EBITDA for the most recent fiscal quarter
preceding the date of calculation to Interest Expense for the same period.
"Loan Documents" shall mean this Agreement and any and all exhibits hereto, the
Revolving Notes, the Term Notes, the Security Documents and the L/C Agreements
and the related L/Cs."
1.9. Section 7.4 of the Credit Agreement shall be amended by replacing the
period appearing at the end of subsection (e) thereof with "; and" and by adding
the following provision thereto as subsection (f):
"(f) no later than 30 days after the end of each month a Borrowing Base
Certificate signed by the chief financial officer of the Company showing the
calculation of the Borrowing Base as of the last day of the immediately
preceding month."
1.10. Section 7.5 of the Credit Agreement shall be amended by inserting
the following sentence immediately at the end thereof:
"Without in any way limiting the generality of the foregoing, the
Company shall pay to the Agent charges for audits of the Collateral performed by
the Agent or its agents or representatives in such amounts as the Agent may from
time to time request (the Agent acknowledging and agreeing that such charges
shall be computed in the same manner as it at the time customarily uses for the
assessment of charges for similar collateral audits); provided, however, that in
the absence of any Potential Default or Event of Default, the Company shall not
be required to pay the Agent for more than one (1) such audit per calendar
year."
1.11. Section 7.8 of the Credit Agreement shall be amended to read as
follows:
"Section 7.8. Leverage Ratio. The Company will not permit its Leverage
Ratio at any time to exceed:
(a) 0.65 to 1 during the Company's fiscal years ending on the Saturday
closest to March 31, 2001 and March 31, 2002;
(b) 0.55 to 1 during the Company's fiscal year ending on the Saturday
closest to March 31, 2003; and
(c) 0.45 to 1 during each fiscal year of the Company thereafter."
1.12. Section 7.9(a) of the Credit Agreement shall be amended by deleting
the amount of "$60,000,000" appearing therein and inserting the amount of
"$66,000,000" in its stead.
</page>
1.13. Sections 7.11 and 7.12 of the Credit Agreement shall be amended to
read as follows:
"Section 7.11. Interest Coverage Ratio. The Company will maintain an
Interest Coverage Ratio of not less than (a) 0.85 to 1 as of the last day of
each fiscal quarter of the Company ending between October 6, 2000 and the end of
the Company's fiscal year ending on the Saturday closest to March 31, 2001, and
(b) 2.5 to 1 as of the last day of each fiscal quarter of the Company ending
thereafter.
Section 7.12. Capital Expenditures. The Company will not, and will not
permit any Subsidiary to, make or commit to make any capital expenditures (as
defined and classified in accordance with generally accepted accounting
principles consistently applied); provided, however, that if no Event of Default
or Potential Default shall exist before and after giving effect thereto, the
Company and its Subsidiaries may make capital expenditures in an aggregate
amount in each fiscal year of the Company not to exceed:
(a) during the Company's fiscal year ending on the Saturday closest to
March 31, 2001, $50,000,000;
(b) during each of the Company's fiscal years thereafter, an amount
equal to the greater of $8,000,000 or an amount equal to the sum of (i) 50% of
the Company's Net Income for such fiscal year plus (ii) its depreciation charges
for such fiscal year."
1.14. Section 7.13 of the Credit Agreement shall be amended by replacing
the period appearing at the end of subsection (f) thereof with a semi-colon and
by adding the following provisions thereto as subsections (g), (h) and (i):
"(g) liens, pledges, mortgages, security interests and other
encumbrances in favor of the Agent;
(h) liens, pledges, mortgages, security interests and other encumbrances
on the Company's processing plant and related fixtures and equipment in
Collinsville, Alabama securing the Additional Senior Notes; and
(i) the statutory trust created by the Packers and Stockyards Act,
provided that the obligations secured thereby are not more than 15 days past
due."
1.15. Section 7.14 of the Credit Agreement shall be amended by replacing
the period appearing at the end of subsection (e) thereof with a semi-colon and
by adding the following provisions thereto as subsections (f) and (g) thereof:
"(f) the Company's indebtedness evidenced by the Additional Senior Notes
provided the terms and conditions governing such indebtedness are not as a whole
more burdensome on the Company and its Subsidiaries than the terms and
conditions of this Agreement in any material respect; and
(g) Hedging Liabilities."
</page>
1.16. Section 7.23 of the Credit Agreement shall be amended to read as
follows:
"Section 7.23. New Subsidiaries. The Company will not, directly or
indirectly, create or acquire any Subsidiary (except Cagle Transport, LLC, a
Georgia limited liability company) unless, as a condition to creating or
acquiring any Subsidiary, the Company shall (i) cause such Subsidiary to execute
an Additional Guarantor Supplement to this Agreement in the form of Exhibit D
hereto and such instruments and documents as the Agent may require such
Subsidiary to grant to the Agent for the benefit of the Banks a perfected first
priority security interest in its Collateral, (ii) deliver documentation similar
to that described in Sections 6.2(d), (g) and (h) and Section 6.4 relating to
the authorization for, execution and delivery of, and validity of such
Subsidiary's obligations hereunder, in form and substance satisfactory to the
Required Banks and (iii) deliver an updated Schedule 5.2 to reflect the new
Subsidiary."
1.17. Section 7.27 of the Credit Agreement shall be amended to read as
follows:
"Section 7.27. Operating Leases. The Company will not, and will not
permit any Subsidiary to, enter into any Operating Lease if the aggregate gross
value of the Property leased under all such Operating Leases would exceed
$15,000,000 during the Company's fiscal year ending on the Saturday closest to
March 31, 2001, and $5,000,000 during any fiscal year of the Company
thereafter."
1.18. Section 8.1(b) of the Credit Agreement shall be amended to read as
follows:
"(b) Default in the observance or performance of any covenant set forth
in Sections 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15,
7.16, 7.17, 7.19, 7.24 and 7.25, inclusive, hereof or of any provision of any
Loan Document requiring the maintenance of insurance on the Collateral subject
thereto or dealing with the use or remittance of proceeds of Collateral;".
1.19. Section 8.1 of the Credit Agreement shall be amended by replacing
the period appearing at the end of subsection (j) thereof with "; and" and by
adding the following provision thereto as subsection (k):
"(k) the Company shall fail to have, on or before March 31, 2001, an
executed commitment to purchase Additional Senior Notes secured by the
Collinsville, Alabama processing plant and related fixtures and equipment
containing customary terms and conditions for such commitments from one or more
institutional investors or lenders."
1.20. Clause (a) appearing in the first sentence of Section 12.1 of the
Credit Agreement shall be amended by adding the following clause immediately
before the semicolon at the end of clause (a)(viii):
</page>
", or (ix) release all or any substantial part (in value) of the
Collateral unless such release is permitted or required by this Agreement or the
other Loan Documents;".
1.21. The Credit Agreement shall be amended by adding thereto as Exhibit G
the form of Exhibit G attached to this Amendment.
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all of the
following conditions precedent:
2.1. The Company and each of the Banks shall have executed this Amendment
(such execution may be in several counterparts and the several parties hereto
may execute on separate counterparts).
2.2. Each Guarantor shall have executed the Acknowledgment attached
hereto.
2.3. the Company and each Guarantor shall have delivered to the Agent for
the benefit of the Banks in sufficient counterparts for distribution to the
Banks duly executed originals of the following:
(a) the Security Documents (except the Mortgages on the real estate
other than the Pine Mountain, Georgia processing plant) in form and substance
satisfactory to the Banks;
(b) appropriate forms of financing statements to perfect the security
interests of the Agent provided for by the Security Documents;
(c) good standing certificates for the Company and each Guarantor issued
by its state of organization, issued not more than 30 days before the date of
this Amendment;
(d) copies, certified as true, correct and complete by the Secretary or
Assistant Secretary of the Company and each Guarantor of resolutions regarding
the transactions contemplated by this Amendment, duly adopted by the Board of
Directors of the Company and each Guarantor and satisfactory in form and
substance to all of the Banks;
(e) an incumbency and signature certificate for the Company and each
Guarantor satisfactory in form and substance to all of the Banks;
(f) with respect to the Mortgages, a commitment or commitments from
Chicago Title Insurance Company (the "Title Company") stating that it is
prepared to issue its standard form of ALTA mortgagee's title policy or policies
in the amount equal to 105% of the appraised fair market value of the Mortgaged
Premises with a Comprehensive Number 1 endorsement, a revolving credit
endorsement, a letter of credit endorsement, and such other endorsements as the
Agent reasonably requests, such policy showing title to the Mortgaged Premises
in the Company or a Guarantor and insuring such Mortgages as a first lien
without encroachments or prior rights of others on the Mortgaged Premises,
subject only to current general taxes and assessments not yet delinquent;
</page>
(g) such additional documents, opinions or comments as may be required
by the Title Company in order to provide the insurance to be afforded to the
Agent pursuant to Section 2.3(f);
(h) complete and current plats of survey of the Mortgaged Premises
certified to the Agent and the Title Company prepared by an independent
registered land surveyor in accordance with standards acceptable to Agent and
satisfactory to the Banks and showing thereon the location of the perimeter of
the Mortgaged Premises by courses and distances, the lines of the streets
abutting the Mortgaged Premises and the width thereof, all buildings and
improvements located thereon and the relation of all buildings and improvements
by distance to the perimeter of the Mortgaged Premises, and the established
building lines and the street lines, all encroachments and the extent thereof in
feet and inches upon the Mortgaged Premises and indicating that all buildings
and improvements are within the lot and building lines of the Mortgaged Premises
and a surveyor's certification that the Mortgaged Premises is not in a flood
plain or designated as flood prone by the U.S. Corps of Engineers or
alternatively evidence that appropriate flood insurance has been obtained;
(i) a Phase I environmental assessment of the Mortgaged Premises
prepared by environmental consultants selected by the Company and acceptable to
the Agent showing no condition that is not acceptable to the Banks;
(j) an appraisal of the Mortgaged Premises that complies with all
regulatory requirements applicable to the Banks, including without limitation
FIRREA;
(k) flood insurance with respect to the Mortgaged Premises located in a
flood plain; and
(l) The Agent shall have received evidence of insurance required by
Section 7.3 hereof; and
(m) The Agent shall have received evidence satisfactory to it that its
security interests in the Collateral are prior to all liens, security interests
and encumbrances thereon.
2.4. Each of the representations and warranties set forth in Section 5 of
the Credit Agreement shall be true and correct on, and made as of, the date of
this Amendment.
2.5. The Company shall be in full compliance with all of the terms and
conditions of the Loan Documents and no Event of Default or Potential Default
shall have occurred and be continuing thereunder or shall result after giving
effect to this Amendment.
2.6. The Company shall have executed and delivered to each Bank a
Revolving Credit Note payable to the order of such Bank in the face principal
amount of such Bank's Revolving Credit Commitment after giving effect to this
Amendment, each such note to be substantially in the form of Exhibit A to the
Credit Agreement. From and after the date on which the other conditions
</page>
precedent to the effectiveness hereof are satisfied, each such Revolving Note
shall evidence all of the Company's indebtedness to the holder thereof under the
Credit Agreement, as amended hereby, and all references in the Credit Agreement
to the Revolving Notes or any Revolving Note shall include the notes delivered
pursuant hereto.
2.7. All legal matters incident to the execution and delivery hereof and
of the instruments and documents contemplated hereby shall be satisfactory to
the Banks and their respective counsel; and the Banks shall have received the
favorable written opinion of counsel for the Company and each Guarantor in the
form attached hereto as Exhibit A.
2.8. The Agent shall have received (a) for the ratable account of the
Banks a non-refundable fee in an amount equal to (i) 0.30% of the sum of the
Base Revolving Credit Commitments and the aggregate outstanding principal amount
of the Term Loans, plus (ii) 0.50% of the Excess Revolving Credit Commitments,
and (b)such other fees for its own account as it may have agreed upon with the
Company.
3. ELIMINATION OF EXCESS REVOLVING CREDIT.
Notwithstanding anything contained in any Loan Document to the contrary, if the
Company does not within forty-five (45) days from the date of this Amendment,
deliver to the Agent the Mortgages (and the related items described in Sections
2.3(f), (g), (h), (i), (j) and (k) above) for all of the real estate except for
the Pine Mountain, Georgia processing plant and the Agent and Required Lenders
do not waive such delivery, then the Excess Revolving Credit Commitments of all
the Banks shall automatically (without notice) and immediately terminate in full
and any and all Excess Credit shall be immediately due and payable.
4. REPRESENTATIONS AND WARRANTIES.
4.1. Except as disclosed in writing to each of the Banks prior to the date
hereof, each of the representations and warranties set forth in Section 5 of the
Credit Agreement are true and correct.
4.2. The Company is in full compliance with all of the terms and
conditions of the Credit Agreement and no Event of Default or Potential Default
has occurred and is continuing thereunder or shall result after giving effect to
this Amendment.
5. MISCELLANEOUS.
5.1. Reference to this specific Amendment need not be made in any note,
document, letter, certificate, the Credit Agreement itself, the Notes or any
communication issued or made pursuant to or with respect to the Credit
Agreement, any reference to the Credit Agreement being sufficient to refer to
the Credit Agreement as amended hereby.
</page>
5.2. This Amendment may be executed in any number of counterparts, and by
the different parties on different counterparts, all of which taken together
shall constitute one and the same agreement. Any of the parties hereto may
execute this agreement by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This agreement
shall be governed by the internal laws of the State of Illinois.
Upon acceptance hereof by the Agent and the Banks in the manner hereinafter set
forth, this Amendment shall be a contract between us for the purposes
hereinabove set forth.
Dated as of October 23, 2000.
CAGLE'S, INC.
By Kenneth R. Barkley
Its Senior Vice President Finance/Treasurer/CFO
Accepted and Agreed to as of the day and year last above written.
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By
Its Vice President
SUNTRUST BANK
By
Its
REGIONS BANK OF GAINSVILLE
By
Its
SOUTHTRUST BANK
By
Its
U.S. BANCORP AG CREDIT, INC.
By
Its
</page>
ACKNOWLEDGMENT
The undersigned, Cagle's Farms, Inc. ("CFI") has heretofore hereby agrees that
notwithstanding the execution and delivery of the above and foregoing Amendment,
its obligations under the Credit Agreement shall be and remain in full force and
effect and that all of the Company's indebtedness, obligations and liabilities
to the Agent and the Banks under the Credit Agreement as amended hereby shall
constitute indebtedness guaranteed by CFI under the Credit Agreement. CFI
further agrees that the consent or acknowledgment of CFI to any further
amendment to the Credit Agreement shall not be required as a result of this
acknowledgment having been obtained.
Dated as of October 23, 2000
CAGLE'S FARMS, INC.
By
Its
</page>
EXHIBIT A
(TO BE RETYPED ON LETTERHEAD OF COUNSEL
AND DATED AS OF DATE OF CLOSING)
OCTOBER 23, 2000
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
The Banks from time to time parties
to the Credit Agreement described below
Ladies and Gentlemen:
We have served as counsel to Cagle's, Inc., a Georgia corporation (the
"Borrower"), Cagle's Farms, Inc., a Georgia corporation (the "Guarantor"; the
Borrower and the Guarantors are hereinafter referred to collectively as the
"Companies" and individually as a "Company"), in connection with the amendment
of the Credit Agreement dated as of November 1, 1999 (the "Credit Agreement")
among the Borrower, the Guarantor and you pursuant to the First Amendment to
Credit Agreement dated as of OCTOBER 23, 2000 (the "Amendment"). As such
counsel, we have supervised the taking of the corporate proceedings necessary to
authorize the execution and delivery of, and have examined executed originals
of, the Amendment and the other instruments and documents listed on Exhibit A
attached to this letter (collectively the "Loan Documents"). As counsel to the
Companies, we are familiar with the articles of incorporation, charter, by-laws
and any other agreements under which any of the Companies is organized. We have
also examined such other instruments and records and inquired into such other
factual matters and matters of law as we deem necessary or pertinent to the
formulation of the opinions hereinafter expressed.
Based upon the foregoing and upon our examination of the articles of
incorporation, charter and by-laws of each of the Companies, we are of the
opinion that:
1. Each Company is a corporation duly organized and validly existing and
in good standing under the laws of the state of its incorporation with full and
adequate corporate power and authority to carry on its respective business as
now conducted and each Company is duly licensed or qualified and in good
standing in each jurisdiction wherein the conduct of its respective business or
the assets and properties owned or leased by it require such licensing or
qualification.
2. The Borrower has full right, power and authority to borrow from you, to
execute and deliver the Loan Documents executed by it and to observe and perform
all the matters and things therein provided for. The execution and delivery of
the Loan Documents executed by the Borrower does not, nor will the observance or
performance of any of the matters or things therein provided for, contravene any
provision of law or of the articles of incorporation, charter or by-laws of the
</page>
Borrower (there being no other agreements under which the Borrower is organized)
or of any covenant, indenture or agreement binding upon or affecting the
Borrower or any of its properties or assets.
3. The Guarantor has full right, power and authority to guarantee the
obligations of the Borrower and to observe and perform all of the matters and
things provided for in the Credit Agreement as amended by the Amendment. The
execution and delivery of the Acknowledgement in the form contained in the
Amendment executed by the Guarantor does not, nor will the observance or
performance of any of the matters or things provided for in the Acknowledgement,
contravene any provision of law or of the articles or certificates of
incorporation, charter or by-laws of the Guarantor (there being no other
agreements under which the Guarantor organized) or of any agreement binding upon
or affecting the Guarantor or any of its properties or assets.
4. The Loan Documents executed by the Companies have been duly authorized
by all necessary corporate action (no stockholder approval being required), have
been executed and delivered by the proper officers of the Companies and
constitute valid and binding agreements of the Companies enforceable against
them in accordance with their respective terms, subject to bankruptcy,
insolvency and other laws affecting creditor's rights generally and to
principles of equity.
5. No order, authorization, consent, license or exemption of, or filing or
registration with, any court or governmental department, agency, instrumentality
or regulatory body, whether local, state or federal, is or will be required in
connection with the lawful execution and delivery of the Loan Documents or the
observance and performance by any of the Companies of any of the terms thereof.
6. There is no action, suit, proceeding or investigation at law or in
equity before or by any court or public body pending or threatened against or
affecting any of the Companies or any of their respective assets and properties
which, if adversely determined, could result in any material adverse change in
the properties, business, operations or financial condition of the Companies.
7. The Security Agreement creates in favor of the Agent a security
interest in the collateral described therein to which Article 9 of the
______________ UCC is applicable (the "Article 9 Collateral").
8. The Agent upon the filing of the financing statements with the
appropriate jurisdiction will have a perfected security interest in that portion
of the Article 9 Collateral in which a security interest is perfected by filing
a financing statement under the ____________ UCC.
Respectfully submitted,
</page>
EXHIBIT G
CAGLE'S, INC.
BORROWING BASE CERTIFICATE
as of _____________________
($000's omitted)
This Borrowing Base Certificate is furnished to Harris Trust and Savings Bank,
as agent (the "Agent"), pursuant to that certain Credit Agreement dated as of
November 1, 1999, as amended, by and among Cagle, Inc. (the "Company"), the
Guarantors named therein, Harris Trust and Savings Bank and the other Banks
party thereto (the "Agreement"). Unless otherwise defined herein, the terms
used in this Borrowing Base Certificate have the meanings ascribed thereto in
the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected Chief Financial Officer of the Company.
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, the attached computation of the
Borrowing Base as defined in Section 4.1 of the Agreement.
3. No change of name, corporate identity or address of the chief executive
office of the Company has occurred.
4. I have reviewed the terms of the Agreement and, pursuant to such
review, I have no knowledge of the existence of any condition or event which
would constitute a Potential Default or Event of Default, except as set forth
below (detailing the nature of the condition or event, the period during which
it has existed and the action which the Company has taken, is taking or proposes
to take with respect to each such condition or event):
NONE
5. The information above and any attached exhibits do not contain any
untrue statement of material fact or omit a material fact, either individually
or in aggregate, that would make the information or any attached exhibits
misleading.
CAGLE'S, INC.
By
Its
CAGLE'S, INC.
BORROWING BASE CALCULATIONS
In Thousands USD
GROSS LESS NET ADVANCE COLLATERAL
ASSET VALUE INELIGIBLES VALUE RATE VALUE
...................... ------- ----------- ----- ------- ----------
Receivables........... $______ $__________ $____ 85% $_________
Inventory............. $______ $__________ $____ 85% $_________
Total-Working Capital........................................$_________
Pine Mountain
Processing Plant.. $__________ 70% $_________
Total Borrowing Base
Collateral........................................$_________
Less Grower Payables ........................................$_________
Net Borrowing Base
Collateral........................................$_________
Proposed Revolving
Credit Commitment........................................$_________
Excess Collateral............................................$_________
</page>
SIGNATURES:
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Cagle's, Inc.
(Registrants)
/S/ Kenneth R. Barkley
Date: November 01, 2000 Kenneth R. Barkley
Senior Vice President Finance/Treasurer/CFO
</page>