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EXHIBIT 10(s)
Dated as of September 11, 1996
Thorn Apple Valley, Inc.
26999 Central Park Boulevard
Suite 300
Southfield, Michigan 48076-4178
Re: Senior Secured Seasonal Line of Credit
Gentlemen/Ladies:
Thorn Apple Valley, Inc. (hereinafter referred to as "Borrower"), the
undersigned Lenders (herein collectively called "Lenders" and individually
called "Lender") and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New
York Branch ("RBN") as Agent for the Lenders (the "Agent") hereby agree that
the Seasonal Line of Credit letter agreement dated March 11, 1996, as
heretofore amended (the "Existing Seasonal Line of Credit Agreement"), is
hereby amended and restated in its entirety as follows, effective as of the
Effective Date (such term and others being used herein as defined in Section 9
below):
1. COMMITMENTS, BORROWING PROCEDURES AND NOTES
1.1 Commitments. On the terms and subject to the conditions of
this Agreement (including Section 4), each Lender severally agrees to make
Loans pursuant to the Commitments described in this Section 1.1.
1.1.1 Commitment of Each Lender. From time to time on any Business
Day occurring prior to the Commitment Termination Date, each Lender will
make loans (relative to such Lender, its "Loans") to the Borrower equal to such
Lender's Percentage of the aggregate amount of the Borrowing requested by the
Borrower to be made on such day. The commitment of each Lender described in
this Section 1.1.1 is herein referred to as its "Commitment." On the terms and
subject to the conditions hereof, the Borrower may from time to time borrow,
prepay and reborrow Loans.
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1.1.2 Lenders Not Required To Make Loans. No Lender shall be required
to make any Loan (x) if, after giving effect thereto, the aggregate outstanding
principal amount of all Loans
(a) of all Lenders would exceed the lesser of (i) the
Available Borrowing Base and (ii) the Commitment Amount, or
(b) of such Lender would exceed such Lender's Percentage
of the lesser of (i) the Available Borrowing Base and (ii) the
Commitment Amount, or
(y) if, after giving effect thereto, any of the "Commitment Amount" as defined
in the Credit Agreement remains unused.
1.2 Reduction of Commitment Amount.
The Borrower may, from time to time on any Business Day occurring
after the time of the initial Borrowing hereunder, voluntarily reduce the
Commitment Amount; provided, however, that all such reductions shall require at
least five Business Days' prior notice to the Agent and be permanent, and any
partial reduction of the Commitment Amount shall be in a minimum amount of
$1,000,000 and in an integral multiple of $1,000,000.
1.3 Borrowing Procedure. By delivering a Borrowing Request to the
Agent on or before 12:00 Noon, New York City time, on a Business Day, the
Borrower may from time to time irrevocably request, on the day of the requested
Borrowing, that a Borrowing be made in a minimum amount of $500,000 and an
integral multiple of $100,000 or in the unused amount of the Commitments. The
Agent shall promptly advise each Lender of such Borrowing Request. On the
terms and subject to the conditions of this Agreement, each Borrowing shall be
comprised of Loans, and shall be made on the Business Day, specified in such
Borrowing Request. On or before 2:00 p.m., New York City time, each Lender
shall deposit with the Agent same-day funds in an amount equal to such Lender's
Percentage of the requested Borrowing. Such deposit will be made to an account
which the Agent shall specify from time to time by notice to the Lenders. To
the extent funds are received from the Lenders, the Agent shall make such funds
available to the Borrower by wire transfer to the accounts the Borrower shall
have specified in its Borrowing Request. No Lender's obligation to make any
Loan shall be affected by any other Lender's failure to make any Loan.
1.4 Notes. Each Lender's Loans under its Commitment shall be
evidenced by a Note payable to the order of such Lender in a maximum principal
amount equal to such Lender's Percentage of the original Commitment Amount.
The Borrower hereby irrevocably authorizes each Lender to make (or cause to be
made) appropriate notations on the grid attached to such Lender's Note (or on
any
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continuation of such grid), which notations, if made, shall evidence, inter
alia, the date of and the outstanding principal of the Loans evidenced thereby.
Such notations shall be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to make any such
notations shall not limit or otherwise affect any Obligations of the Borrower.
2. REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
2.1 Repayments and Prepayments. The Borrower shall repay in full
the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Loans; provided, however, that
(i) any such prepayment shall be made pro rata
among the Loans of all Lenders; and
(ii) all such voluntary partial prepayments shall be
in an aggregate minimum amount of $500,000 and an integral
multiple of $100,000;
(b) shall, if on any date the aggregate principal amount
of outstanding Loans exceeds the Available Borrowing Base, as
calculated in the then most recently delivered Borrowing Base
Certificate, make a mandatory prepayment of all Loans equal to such
excess;
(c) shall, on each date Excess Capital Infusion Proceeds
are received by the Borrower or any Subsidiary, make a mandatory
prepayment of the Loans in the amount as provided in the Intercreditor
Agreement; and
(d) shall, immediately upon any acceleration of the
Stated Maturity Date of any Loans pursuant to Section 7.2 or Section
7.3, repay all Loans, unless, pursuant to Section 7.3, only a portion
of all Loans is so accelerated.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 3.4. No mandatory
prepayment of principal under Section 2.1(c) or voluntary prepayment of
principal of any Loans shall cause a reduction in the Commitment Amount unless
so specified.
2.2 Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section
2.2.
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2.2.1 Rates. The Loans shall accrue interest at a rate per annum
equal to the Alternate Base Rate from time to time in effect plus 2.00%.
2.2.2 Post-Maturity Rates. After the date any principal amount of
any Loan is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to the rate which would otherwise be in
effect, plus a margin of 2%.
2.2.3 Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) if the Borrower reduces the Commitment to zero, on
the date of any payment or prepayment, in whole, of the principal
outstanding on such Loan pursuant to Section 2.1(a);
(c) on each Monthly Payment Date occurring after the
Effective Date; and
(d) on that portion of any Loans the Stated Maturity Date
of which is accelerated pursuant to Section 7.2 or Section 7.3,
immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Agreement Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
2.3 Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Lender, for the period (including any portion thereof when
its Commitment is suspended by reason of the Borrower's inability to satisfy
any condition of Section 4) commencing on the Effective Date and continuing
through such Lender's Commitment Termination Date, a commitment fee at the rate
of .25 of 1% per annum on such Lender's Percentage of the sum of the average
daily unused portion of the Commitment Amount. Such commitment fees shall be
payable by the Borrower in arrears on each Monthly Payment Date, commencing
with the first such day following the Effective Date and on such Lender's
Commitment Termination Date. All such fees shall be non-refundable.
2.4 Restructuring Fee. The Borrower agrees to pay to the Agent
for the account of each Lender on the Effective Date a
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restructuring fee equal to 2.00% per annum on the principal amount of such
Lender's Loans outstanding under the Existing Seasonal Line of Credit Agreement
computed for the period from and including August 1, 1996 to the Effective
Date. All such fees shall be non-refundable.
3. CERTAIN PROVISIONS
3.1 Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitment or the Loans made by such Lender is reduced to a
level below that which such Lender or such controlling Person could have
achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by such Lender to the Borrower, the Borrower
shall immediately pay directly to such Lender additional amounts sufficient to
compensate such Lender or such controlling Person for such reduction in rate of
return. A statement of such Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In determining such
amount, such Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
3.2 Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
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(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(c) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount
such Lender would have received had no such withholding or deduction
been required.
Moreover, if any Taxes are directly asserted against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder, the
Agent or such Lender may pay such Taxes and the Borrower will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such Person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had not such Taxes been
asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 3.2, a distribution hereunder by
the Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
Upon the request of the Borrower or the Agent, each Lender that is
organized under the laws of a jurisdiction other than the United States shall,
prior to the due date of any payments under the Notes, execute and deliver to
the Borrower and the Agent, on or about the first scheduled payment date in
each Fiscal Year, one or more (as the Borrower or the Agent may reasonably
request) United States Internal Revenue Service Forms 4224 or Forms 1001 or
such other forms or documents (or successor forms or documents), appropriately
completed, as may be applicable to establish the extent, if any, to which a
payment to such Lender is exempt from withholding or deduction of Taxes.
3.3 Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes or
any other Agreement Document shall be made by the Borrower to the Agent for the
pro rata account of the Lenders entitled to receive such payment. All such
payments required to be made to the Agent shall be made, without setoff,
deduction or counterclaim, not later than 11:00 a.m., New York City time, on
the date due, in same day or immediately available funds, to such account as
the Agent shall specify from time to
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time by notice to the Borrower. Funds received after that time shall be deemed
to have been received by the Agent on the next succeeding Business Day. The
Agent shall promptly remit in same day funds to each Lender its share, if any,
of such payments received by the Agent for the account of such Lender. All
interest and fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the
period for which such interest or fee is payable over a year comprised of 365
days or, if appropriate, 366 days. Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall be
included in computing interest and fees, if any, in connection with such
payment.
3.4 Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Section
3.1) in excess of its pro rata share of payments then or therewith obtained by
all Lenders, such Lender shall purchase from the other Lenders such
participations in Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase
price to the ratable extent of such recovery together with an amount equal to
such selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required
repayment to the purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 3.5) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of
such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, exercise
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its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.
3.5 Setoff. Each Lender shall, upon the occurrence of any Default
described in clauses (a) through (d) of Section 8.1.9 of the Credit Agreement
or any other Event of Default, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due), and (as
security for such Obligations) the Borrower hereby grants to each Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with such
Lender; provided, however, that any such appropriation and application shall be
subject to the provisions of Section 3.4 and the Intercreditor Agreement. Each
Lender agrees promptly to notify the Borrower and the Agent after any such
setoff and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable
law or otherwise) which such Lender may have.
3.6 Use of Proceeds. Proceeds of each Borrowing shall be used for
general corporate purposes and working capital purposes of the Borrower and its
Subsidiaries. Without limiting the foregoing, no proceeds of any Loan will be
used to acquire any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934 or any "margin stock," as
defined in F.R.S. Board Regulation U.
4. CONDITIONS TO RESTATEMENT AND BORROWING
4.1 Restatement. The effectiveness of the amendment and
restatement of the Existing Seasonal Line of Credit Agreement by this Agreement
shall be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Section 4.1.
4.1.1 Equity Infusion. The Borrower shall have received cash proceeds
of an additional $3,000,000 in capital contributions from one or more of its
shareholders upon terms and conditions satisfactory to the Lenders, and the
Agent shall have received evidence satisfactory to the Agent of such receipt.
4.1.2 Resolutions, etc. The Agent shall have received from the
Borrower and each Subsidiary a certificate, dated a date satisfactory to the
Agent, of its Secretary or Assistant Secretary as to
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(a) resolutions of its Board of Directors then in full
force and effect authorizing the execution, delivery and performance
of this Agreement, the Notes and each other Agreement Document to be
executed by it; and
(b) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement, the Notes
and each other Agreement Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary or Assistant Secretary of the
Borrower or such Subsidiary, as the case may be, canceling or amending such
prior certificate.
4.1.3 Delivery of Notes. The Agent shall have received, for the
account of each Lender, its Notes duly executed and delivered by the Borrower.
4.1.4 Opinions of Counsel. The Agent shall have received opinions,
dated the date of the initial Borrowing and addressed to the Agent and all
Lenders, from Honigman, Miller, Schwartz & Cohn, counsel to the Borrower,
substantially in the form of Exhibit C hereto.
4.1.5 Intercreditor Agreement; Other Financing Agreements. The
Intercreditor Agreement shall have been executed and delivered by the parties
thereto and the restatement effected by the Credit Agreement shall have become
effective in accordance with the terms thereof. The Borrower and its
Subsidiaries shall have executed and delivered to the Collateral Agent the
Security Documents and the Subsidiaries shall have executed and delivered to
the Collateral Agent the Subsidiaries Guaranty. The Financing Agreements
(other than this Agreement) shall have been amended and/or restated in form and
substance satisfactory to the Lenders and consistent with this Agreement.
4.1.6 Environmental Report. The Agent shall have received Phase I
environmental assessments with respect to the properties of the Borrower to be
mortgaged under the Security Documents which assessments shall be, in form and
substance, satisfactory to the Lenders.
4.1.7 Closing Fees, Expenses, etc. The Agent shall have received
for its own account, or for the account of each Lender, as the case may be, all
fees, costs and expenses due and payable pursuant to Sections 2.4 and 10.2, if
then invoiced.
4.2 All Borrowings. The obligation of each Lender to fund any
Loan on the occasion of any Borrowing shall be subject to the satisfaction of
each of the conditions precedent set forth in this Section 4.2.
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4.2.1 Compliance with Warranties, No Default, etc. Both before and
after giving effect to any Borrowing (but, if any Default of the nature
referred to in Section 8.1.5 of the Credit Agreement shall have occurred with
respect to any other Indebtedness, without giving effect to the application,
directly or indirectly, of the proceeds thereof) the following statements shall
be true and correct:
(a) the representations and warranties set forth in
Section 5 hereof and in Article VI of the Credit Agreement (excluding,
however, those contained in Section 6.7 of the Credit Agreement) shall
be true and correct with the same effect as if then made (unless
stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such
earlier date);
(b) except as disclosed by the Borrower to the Agent and
the Lenders pursuant to Section 6.7 of the Credit Agreement:
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be pending
or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries which might materially
adversely affect the Borrower's consolidated business,
operations, assets, revenues, properties or prospects or which
purports to affect the legality, validity or enforceability of
this Agreement, the Notes or any other Agreement Document; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 6.7
which might materially adversely affect the consolidated
businesses, operations, assets, revenues, properties or
prospects of the Borrower and its Subsidiaries;
(c) no Default shall have then occurred and be
continuing, and neither the Borrower nor any of its Subsidiaries are
in material violation of any law or governmental regulation or court
order or decree; and
(d) the aggregate outstanding principal amount of the Loans
shall not exceed the Available Borrowing Base, as calculated in the
then most recently delivered Borrowing Base Certificate pursuant to
the Credit Agreement, and the Borrower shall not be delinquent in the
delivery of any Borrowing Base Certificate pursuant to the Credit
Agreement.
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4.2.2 Borrowing Request. The Agent shall have received a Borrowing
Request for such Borrowing. Each of the delivery of a Borrowing Request and
the acceptance by the Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing (both immediately before and after giving effect to such
Borrowing and the application of the proceeds thereof) the statements made in
Section 4.2.1 are true and correct.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Representations and Warranties. In order to induce the
Lenders and the Agent to enter into this Agreement and to make Loans hereunder,
the Borrower represents and warrants unto the Agent and each Lender as set
forth in this Section 5 and as set forth in Article VI of the Credit Agreement.
5.2 Organization, etc. The Borrower is a corporation validly
organized and existing and in good standing under the laws of the State of its
incorporation, and it has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform
its obligations under this Agreement and each other Agreement Document to which
it is a party.
5.3 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement and each other
Agreement Document executed or to be executed by it are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(i) contravene its Organic Documents;
(ii) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting it except for such contraventions, which, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect; or
(iii) result in, or require the creation or imposition of,
any lien on any of its properties other than pursuant to the Security
Documents.
5.4 Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Borrower of this Agreement or any other
Agreement Document to which it is a party or for the Borrower's participation
in the consummation of the Restructuring (other than those required for
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the provision and perfection of Liens under the Security Documents and those
the failure to obtain or effect could not reasonably be expected to have a
Material Adverse Effect.
5.5 Validity, etc. This Agreement constitutes, and each other
Agreement Document executed by the Borrower will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with their respective
terms.
6. Covenants; Security. The Borrower agrees to perform and comply
with each and every covenant and undertaking set forth in Appendix A hereto.
The Borrower shall cause all Obligations hereunder to be secured by the
Security Documents in accordance with the terms thereof and of the
Intercreditor Agreement.
7. Events of Default.
7.1 Listing of Events of Default. Each of the following events or
occurrences described in this Section 7.1 shall constitute an "Event of
Default".
(i) the Borrower shall default in the payment or
prepayment when due of any principal of or interest on any Loan, or in
the payment when due of any commitment fee or of any other Obligation
and such default shall continue unremedied for two Business Days; or
(ii) any Event of Default (as defined in the Credit
Agreement) shall occur, regardless of whether such Credit Agreement is
in full force and effect; or
(iii) the Credit Agreement shall terminate; or
(iv) the Borrower shall default in the due performance and
observance of any of its obligations under Section 1.8 or Section 2 of
Appendix A; or
(v) the Borrower shall default in the due performance and
observance of any other agreement contained herein or in any other
Agreement Document executed by it and such default shall continue
unremedied for a period of 30 days after notice thereof shall have
been given to the Borrower by the Agent or any Lender.
7.2 Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 8.1.9 of the Credit Agreement) shall occur,
the Commitments (if not theretofore terminated) shall automatically terminate
and the outstanding principal amount of all outstanding Loans and all
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other Obligations shall automatically be and become immediately due and
payable, without notice or demand.
7.3 Action if Other Event of Default. If any Event of Default (other
than any Event of Default described in clauses (a) through (d) of Section 8.1.9
of the Credit Agreement) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable and/or Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which
shall be so declared due and payable shall be and become immediately due and
payable, without further notice, demand or presentment, and/or, as the case may
be, the Commitments shall terminate.
8. Agent.
8.1 Actions. Each Lender hereby appoints RBN as its Agent under and
for purposes of this Agreement, the Notes and each other Agreement Document.
Each Lender authorizes the Agent to act on behalf of such Lender under this
Agreement, the Notes and each other Agreement Document and, in the absence of
other written instructions from the Required Lenders received from time to time
by the Agent (with respect to which the Agent agrees that it will comply,
except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
the Agent, pro rata according to such Lender's Percentage, from and against any
and all liabilities, obligations, losses, damages, claims, costs or expenses of
any kind or nature whatsoever which may at any time be imposed on, incurred by,
or asserted against, the Agent in any way relating to or arising out of this
Agreement, the Notes and any other Agreement Document, including reasonable
attorneys' fees, and as to which the Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, claims, costs or
expenses which are determined by a court of competent jurisdiction in a final
proceeding to have resulted solely from the Agent's gross negligence or wilful
misconduct. The Agent shall not be required to take any action hereunder,
under the Notes or under any other Agreement Document, or to prosecute or
defend any suit in respect of this Agreement, the Notes or any other Agreement
Document, unless it is indemnified hereunder to its satisfaction. If any
indemnity in favor of the Agent shall be or become, in the Agent's
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determination, inadequate, the Agent may call for additional indemnification
from the Lenders and cease to do the acts indemnified against hereunder until
such additional indemnity is given.
8.2 Exculpation. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action
taken or omitted to be taken by it under this Agreement or any other Agreement
Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Agreement Document, nor to make any
inquiry respecting the performance by the Borrower of its obligations hereunder
or under any other Agreement Document. Any such inquiry which may be made by
the Agent shall not obligate it to make any further inquiry or to take any
action. The Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which the Agent believes to be genuine and to have been presented by a proper
Person.
8.3 Successor. The Agent may resign as such at any time upon at
least 30 days' prior notice to the Borrower and all Lenders. If the Agent at
any time shall resign, the Required Lenders may (with the written consent of
the Borrower which consent shall not be unreasonably withheld or delayed)
appoint another Lender as a successor Agent, which shall thereupon become the
Agent hereunder. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Agent's giving notice of resignation, then the retiring
Agent may (with the written consent of the Borrower which consent shall not be
unreasonably withheld or delayed), on behalf of the Lenders, appoint a
successor Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all 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 the Agent, the provisions of:
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(a) this Article VIII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was the Agent
under this Agreement; and
(b) Section 10.2 and Section 10.3 shall continue to inure
to its benefit.
8.4 Loans by RBN. RBN shall have the same rights and powers with
respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes
held by it or any of its Affiliates as any other Lender and may exercise the
same as if it were not the Agent. RBN and its Affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Borrower or any Subsidiary or Affiliate of the Borrower as if RBN were not the
Agent hereunder.
8.5 Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Agreement Documents (the terms and provisions of which being satisfactory to
such Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to extend its
Commitment. Each Lender also acknowledges that it will, independently of the
Agent and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other
Agreement Document.
8.6 Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrower pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by the Borrower). The Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Agent from the Borrower for distribution
to the Lenders by the Agent in accordance with the terms of this Agreement.
9. Definitions.
9.1 Definitions. The following definitions (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof and to all genders):
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"Agent" has the meaning set forth in the introductory paragraph
hereto.
"Agreement" means, on any date, this Line of Credit as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Agreement Document" means this Agreement, the Notes, the
Intercreditor Agreement, the Security Documents, the Subsidiaries Guaranty and
each other relevant agreement, document or instrument delivered in connection
with this Agreement, as each such agreement, document or instrument may be
amended, supplemented, restated or otherwise modified from time to time.
"Alternate Base Rate" means, on any date a fluctuating rate of
interest per annum equal to the higher of:
(i) the rate of interest announced by the Agent from time to
time in New York, New York as its base rate; or
(ii) one percent (1%) per annum above the fluctuating rate of
interest that is the rate determined by RBN to be the opening rate per
annum paid or payable by it on the day in question in New York, New
York for federal funds purchased overnight from other banking
institutions.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the RBN in connection with extensions of credit.
Changes in the rate of interest on the Loans will take effect simultaneously
with each change in the Alternate Base Rate. The Agent will give notice
promptly to the Borrower and the Lenders of changes in the Alternate Base Rate.
"Authorized Officer" means, relative to the Borrower, those of its
officers whose signatures and incumbency shall have been certified to the Agent
and the Lenders pursuant to Section 4.1.2.
"Available Borrowing Base" means, at any time, the excess (if any) of
the Borrowing Base, as calculated in the then most recently delivered Borrowing
Base Certificate, over the aggregate principal amount of all outstanding Other
Borrowing Base Debt (including, without limitation, the Effective Amount of all
L/C Obligations).
"Borrower" means Thorn Apple Valley, Inc.
"Borrowing" means the Loans made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with Section 1.1.
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"Borrowing Request" means an Borrowing Request and certificate signed
by an Authorized Officer of the Borrower substantially in the form of Exhibit
B, with appropriate insertions.
"Collateral Agent" is defined in the definition of "Intercreditor
Agreement" in this Section.
"Commitment" is defined in Section 1.1.1.
"Commitment Amount" means, on any date, $20,000,000 as such amount may
be reduced from time to time pursuant to Section 1.2.
"Commitment Termination Date" means January 31, 1997.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of September 11, 1996, among the Borrower, the Agent, the Lenders and
the other commercial lending institutions as or may become parties thereto, as
such agreement is amended, supplemented, restated or otherwise modified from
time to time.
"Default" means any Event of Default or any Unmatured Event of
Default.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 10.9.
"Event of Default" is defined in Section 7.1.
"Indemnified Parties" is defined in Section 10.3.
"Indemnified Liabilities" is defined in Section 10.3.
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of September _, 1996 among RBN as Collateral Agent (in such capacity, the
"Collateral Agent"), RBN as Agent, the Lenders and other lenders to the
Borrower, as such agreement is amended, supplemented, restated or otherwise
modified from time to time.
"Lender" has the meaning set forth in the introductory paragraph
hereto.
"Loans" is defined in Section 1.1.1.
"Note" means a promissory note of the Borrower payable to any Lender,
in the form of Exhibit A hereto (as such promissory note may be amended,
endorsed or otherwise modified from time to time), evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from outstanding Loans,
and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
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"Obligations" means all obligations (monetary or otherwise) of the
Borrower arising under or in connection with this Agreement, the Notes and each
other Agreement Document.
"Organic Document" means, relative to any Person, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Other Borrowing Base Debt" means any Indebtedness (including, without
limitation, the Effective Amount of all L/C Obligations) outstanding under the
Credit Agreement.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its signature hereto, as such Percentage may be adjusted from time to
time to reflect assignments made by such Lender of which the Agent has notice
and to which the Agent has consented.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"RBN" is defined in the introductory paragraph hereto.
"Required Lenders" means, at any time, Lenders holding at least
66-2/3% of the then aggregate outstanding principal amount of the Notes then
held by the Lenders, or, if no such principal amount is then outstanding,
Lenders having at least 66-2/3% of the Commitments.
"Security Documents" is defined in the Intercreditor Agreement.
"Stated Maturity Date" means January 31, 1997.
"Unmatured Event of Default" means any condition, occurrence or event
that after notice or lapse of time or both would constitute an Event of
Default.
9.2 Credit Agreement Definitions. Capitalized words used in this
Agreement which are not defined in Section 9.1 above shall have the meaning
ascribed to them in the Credit Agreement.
10. GENERAL.
10.1 Waivers, Amendments, etc. The provisions of this Agreement and
of each other Agreement Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and
consented to by the
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Borrower and the Required Lenders; provided, however, that no such amendment,
modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 10.1, change the definition of
"Required Lenders," increase the Commitment Amount or the Percentage
of any Lender, reduce any fees described in Section 2, or extend the
Commitment Termination Date shall be made without the consent of each
Lender and each holder of a Note;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment or prepayment of principal of or interest on any
Loan (or reduce the principal amount of or rate of interest on any
Loan) shall be made without the consent of the holder of that Note
evidencing such Loan; or
(d) affect adversely the interests, rights or obligations
of the Agent shall be made without consent of the Agent.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other
Agreement Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Agent, any Lender
or the holder of any Note under this Agreement or any other Agreement Document
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
10.2 Expenses. The Borrower agrees to pay on demand all expenses of
the Agent (including the fees and out-of-pocket expenses of counsel to the
Agent and of local counsel, if any, who may be retained by counsel to the
Agent) in connection with:
(a) asset or collateral inspection and auditing and financial
consultants,
(b) the negotiation, preparation, execution and delivery of
this Agreement and of each other Agreement Document, including
schedules and exhibits, and any
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amendments, waivers, consents, supplements or other modifications to
this Agreement or any other Agreement Document as may from time to
time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Agreement document.
The Borrower further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Agreement, the borrowings
hereunder, or the issuance of the Notes or any other Agreement Documents (but
not including, to the extent reimbursement is prohibited by applicable law, the
Oklahoma real estate mortgage tax). The Borrower also agrees to reimburse the
Agent and each Lender upon demand for all reasonable out-of-pocket expenses
(including Lenders' travel expenses, attorneys' fees and legal expenses)
incurred by the Agent or such Lender in connection with (x) the negotiation of
any restructuring (including the Restructuring) or "work-out," whether or not
consummated, of any Obligations and (y) the enforcement of any Obligations.
10.3 Responsibility and Indemnity. In consideration of the execution
and delivery of this Agreement by each Lender and the extension of the
Commitments, the Borrower hereby indemnifies, exonerates and holds the
Agent and each Lender and each of their respective officers, directors,
employees and agents (collectively, the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action, suits, losses,
costs, liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party or the action
for which indemnification hereunder is sought), including reasonable attorneys'
fees and disbursements (collectively, the "Indemnified Liabilities"), incurred
by the Indemnified Parties or any of them as a result of, or arising out of, or
relating to:
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement
and any other Agreement Document by any of the Indemnified Parties
(including any action by of on behalf of the Borrower as the result of
any determination by the Required Lenders pursuant to Section 4 not to
fund any Borrowing);
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(c) any investigation, litigation or proceeding related
to any acquisition or proposed acquisition by the Borrower or any of
its Subsidiaries of all or any portion of the Stock or assets of any
Person, whether or not the Agent or such Lender is party thereto;
(d) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter
relating to the protection of the environment or the Release by the
Borrower or any of its Subsidiaries of any Hazardous Materials; or
(e) the presence on or under, or escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
10.4 Survival. The obligations of the Borrower under Sections 3.1,
10.2 and 10.3, and the obligations of the Lenders under Section 8.1, shall in
each case survive any termination of this Agreement, the payment in full of all
Obligations and the termination of all Commitments.
10.5 Notices. All notices and other communications provided to any
party hereto under this Agreement or any other Agreement Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such
party at its address, or facsimile number set forth on Schedule 10.5 or at such
other address, Telex or facsimile number as may be designated by such party in
a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by pre-paid courier
service, shall be deemed given when received; any notice, if transmitted by
facsimile, shall be deemed given when transmitted.
10.6 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
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prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
10.7 Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES
AND EACH OTHER AGREEMENT DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This
Agreement, the Notes and the other Agreement Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
10.8 Assigns. This Agreement shall be binding upon and shall inure to
the benefit of, the respective successors and assigns of the parties hereto,
except that the Borrower may not assign its rights or obligations hereunder.
10.9 Execution in Counterparts, Effectiveness, etc.; Waiver. This
Agreement may be executed by the parties hereto in several counterparts,
each of which shall be executed by the Borrower and the Agent and be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and the
conditions set forth in Section 4.1 are met. As of the Effective Date, the
Agent and the Lenders hereby waive the Borrower's non-compliance with Section 6
of the Existing Seasonal Line of Credit Agreement and any and all Events of
Default and Unmatured Events of Default arising from the Borrower's
non-compliance with Section 6 of the Existing Seasonal Line of Credit Agreement
by the Borrower for the period ending on the Effective Date.
10.10 Waiver of Jury Trial. The Agent, each Lender and the Borrower
each waives any right to a trial by jury in any action for proceeding to
enforce or defend any rights under or relating to this Agreement, or any
amendment, instrument, document or agreement delivered or which may in the
future be delivered in connection herewith or arising from any banking
relationship existing in connection with this Agreement, and agrees that any
such action or proceeding shall be tried before a court and not before a jury.
If the foregoing is acceptable to the Borrower, please indicate
agreement therewith by having an authorized officer execute this Agreement
where indicated below.
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COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., NEW YORK
BRANCH as Agent
By
-----------------------------------
Title:
By
-----------------------------------
Title:
SENIOR SECURED SEASONAL
LINE OF CREDIT AGREEMENT
S-1
24
PERCENTAGE LENDERS
-----------------------------------------------------------------
25% COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., NEW YORK BRANCH
By
----------------------------------
Title:
By
----------------------------------
Title:
25% OLD KENT BANK
By
----------------------------------
Title:
25% NATIONAL CITY BANK
By
--------------------------
Title:
25% HARRIS TRUST AND SAVINGS BANK
By
--------------------------
Title:
____
100%
====
Agreed and Accepted:
THORN APPLE VALLEY, INC.
By
--------------------------
Title:
SENIOR SECURED SEASONAL
LINE OF CREDIT AGREEMENT
S-2
25
APPENDIX, SCHEDULE AND EXHIBITS
APPENDIX A Covenants Appendix
SCHEDULE 10.5 Notice Addresses
EXHIBIT A Note
EXHIBIT B Form of Borrowing Request
EXHIBIT C Form of Opinion of Messrs.
Honigman, Miller, Schwartz
& Cohn, counsel to the
Borrower (See Paragraph
4.1.4)
26
APPENDIX A
TEMPORARY COVENANTS(1)
SECTION 1. AFFIRMATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 1 and in Sections 6.3, 6.6(e), 6.6(f), 6.6(g),
6.6(h), 6.6(i), 6.8, 6.10, 6.11, and 6.12 of the Existing Note Agreement.
SECTION 1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower will furnish, or will cause to be furnished, to each Creditor Party
and the Agent copies of the following financial statements, reports, notices
and information:
(a) Weekly Reporting -- on the last Business Day of each
week,
(i) a Borrowing Base Certificate setting forth a
calculation of the Borrowing Base as of the last Business Day
of the preceding week; and
(ii) a Weekly P&L Statement in respect of the
preceding week;
(b) Fiscal Periodic Reporting --
(i) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year, consolidated balance sheets of
the Borrower and its Subsidiaries as of the end of such Fiscal
Period and consolidated statements of earnings and cash flow
of the Borrower and its Subsidiaries for such Fiscal Period
and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Period,
certified as true and correct by the chief financial
Authorized Officer of the Borrower (the parties hereto
acknowledge that such financial statements will not have been
audited, and that the annual audit of the Borrower may require
adjustments to the figures presented therein);
(ii) as soon as available and in any event within
26 days after the end of each Fiscal Period of each Fiscal
Year, a comparison of
(A) the actual consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and actual consolidated
statements of earnings and cash flow of the Borrower
and its Subsidiaries for such Fiscal Period and for
the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal
Period (the parties hereto acknowledge that such
financial statements will not have been audited, and
that the annual audit of the Borrower may require
adjustments to the figures presented therein), with
________________________
(1) Capitalized terms used in this Appendix A are defined
in Section 3 of this Appendix A.
Appendix A-1
27
(B) the budgeted consolidated balance
sheet of the Borrower and its Subsidiaries as of the
end of such Fiscal Period and the budgeted
consolidated statements of earnings and cash flow of
the Borrower and its Subsidiaries for such Fiscal
Period and for the period commencing at the end of
the previous Fiscal Year and ending with the end of
such Fiscal Period, in each case, contained in the
most recent Rolling Projection (defined below),
certified as true and correct by the chief financial
Authorized Officer of the Borrower;
(iii) as soon as available and in any event within
26 days after the end of each of the first twelve Fiscal
Periods of each Fiscal Year and within 90 days after the end
of the last Fiscal Period of each Fiscal Year, a certificate,
executed by the chief financial Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to
the Agent and each Creditor Party) compliance with the
financial covenants set forth in Section 2.4; and
(iv) as soon as available and in any event within
30 days after the end of each Fiscal Period of each Fiscal
Year, a management report describing in detail the Company's
results of operations during such Fiscal Period and
explaining, among other things, (x) any material variances
demonstrated by the comparison delivered in respect of such
Fiscal Period pursuant to clause (ii) above and (y) any
failure to comply with financial covenants identified in the
certificate delivered in respect of such Fiscal Period
pursuant to clause (iii) above;
(c) Quarterly Reporting -- as soon as available and in
any event within 45 days after the end of each of Fiscal Quarter of
each Fiscal Year, a projection (each, a "Rolling Projection"), for
each of the thirteen Fiscal Periods next succeeding the last day of
such Fiscal Quarter, of the consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of each such next succeeding Fiscal
Period and the budgeted consolidated statements of earnings and cash
flow of the Borrower and its Subsidiaries for each such next
succeeding Fiscal Period and for the period commencing at the end of
such Fiscal Quarter and ending with the end of each such next
succeeding Fiscal Period, certified as true and correct by the chief
financial Authorized Officer of the Borrower;
(d) Annual Reporting --
(i) as soon as available and in any event within
90 days after the end of each Fiscal Year of the Borrower, a
copy of the annual audit report (including, without
limitation, any accompanying or related auditor's letter and
the Borrower's responses thereto) for such Fiscal Year for the
Borrower and its Subsidiaries, including therein consolidated
balance sheets of the Borrower and its Subsidiaries as of the
end of such Fiscal Year and consolidated statements of
earnings and cash flow of the Borrower and its Subsidiaries
for such Fiscal Year, in each case certified (without any
Impermissible Qualification) in a manner acceptable to the
Agent and each of the Creditor Parties by Coopers & Lybrand or
other
Appendix A-2
28
independent public accountants acceptable to the Agent and
each of the Creditor Parties, together with a certificate from
such accountants to the effect that, in making the examination
necessary for the signing of such annual report by such
accountants, they have not become aware of any Default or
Event of Default that has occurred and is continuing, or, if
they have become aware of such Default or Event of Default,
describing such Default or Event of Default and the steps, if
any, being taken to cure it; provided, however, that in the
case of the Company's financial statements for the Fiscal Year
ended May 31, 1996, such audit opinion shall be delivered not
later than September 13, 1996;
(ii) together with the financial reports delivered
pursuant to paragraph (i) of this Section 1.1(d), a
certificate of the independent certified public accountants
(i) stating that in making the examination necessary for
expressing an opinion on such financial statements, nothing
came to their attention that caused them to believe that there
is in existence or has occurred any Default or Event of
Default under any of the Financing Agreements (as defined in
the Intercreditor Agreement) or, if such accountants shall
have obtained knowledge of any such Default or Event of
Default, describing the nature thereof and the length of time
it has existed and (ii) acknowledging that the Creditor
Parties may rely on their opinion on such financial
statements;
(e) Defaults -- as soon as possible and in any event
within three days after the occurrence of each Default, a statement of
the chief financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(f) Litigation -- as soon as possible and in any event
within three days after (x) the occurrence of any adverse development
with respect to any litigation, action, proceeding, or labor
controversy described in Section 6.7 of the Bank Credit Agreement or
(y) the commencement of any labor controversy, litigation, action,
proceeding of the type described in Section 6.7 of the Bank Credit
Agreement, notice thereof and copies of all documentation relating
thereto;
(g) Securities Reports, etc. -- promptly after the
sending or filing thereof, copies of all reports which the Borrower
sends to any of its securityholders, and all reports and registration
statements which the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities
exchange;
(h) Pension Plans -- immediately upon becoming aware of
the institution of any steps by the Borrower or any other Person to
terminate any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and copies of
all documentation relating thereto; and
Appendix A-3
29
(i) Other -- such other information respecting the
condition or operations, financial or otherwise, of the Borrower or
any of its Subsidiaries as any Creditor Party may from time to time
reasonably request.
SECTION 1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of
all taxes, assessments and governmental charges imposed upon it or
upon its Property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 1.3. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.
(a) The Borrower will maintain and preserve, and will
cause each Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and will use, and cause
each Subsidiary to use, its best efforts to maintain, preserve, renew
and extend all of its rights, powers, privileges and franchises
necessary to the proper conduct of its business.
(b) The Borrower will, and will cause each of its
Subsidiaries to, maintain, preserve, protect and keep its properties
in good repair, working order and condition, and make necessary and
proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly conducted at all times
unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically
desirable.
SECTION 1.4. INSURANCE. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
(including business interruption insurance) against such casualties and
contingencies and of such types and in such amounts and with only such
deductibles as is customary in the case of similar businesses and will, upon
request of the Agent or any Creditor Party, furnish to each Creditor Party at
reasonable intervals a certificate of an Authorized Officer of the Borrower
setting forth the nature and extent of all insurance maintained by the Borrower
and its Subsidiaries in accordance with this Section.
SECTION 1.5. BOOKS AND RECORDS. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Agent and each of
(i) the Noteholders as a group and (ii) the Lenders as a group, or any of their
respective representatives, at reasonable times and intervals, to visit all of
its offices, to discuss its financial matters with its officers and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with each Creditor Party
or its representatives whether or not any
Appendix A-4
30
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
records. The Borrower shall pay any fees of such independent public accountant
incurred in connection with the Agent's or any Creditor Party's exercise of its
rights pursuant to this Section.
SECTION 1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to:
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and each Creditor Party
and provide copies upon receipt of all written claims, complaints,
notices or inquiries from governmental authorities relating to the
condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Agent and each Creditor Party any
actions and proceedings relating to compliance with Environmental
Laws; and
(c) provide such information and certifications which the
Agent or any Creditor Party may reasonably request from time to time
to evidence compliance with this Section 1.6.
SECTION 1.7. EQUITY OR SUBORDINATED DEBT.
(a) The Borrower shall receive at least $15,000,000 in
proceeds of Subordinated Debt on or before April 30, 1997.
(b) In the event that the Borrower shall fail to receive
at least $15,000,000 in proceeds of equity or Subordinated Debt on or
before January 31, 1997, the Borrower shall retain a
nationally-recognized investment advisor, who shall be acceptable to
the Creditor Parties, to set up and implement a plan (a copy of which
shall be provided to each Creditor Party) to raise such proceeds on or
before April 30, 1997.
SECTION 1.8. COLLATERAL MATTERS. The Borrower shall, and shall
cause each Subsidiary to, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments, and do
such further acts, as the Collateral Agent may reasonably request from time to
time in order:
(a) to ensure that
(i) the obligations of the Borrower hereunder and
under the other Financing Agreements (as defined in the
Intercreditor Agreement) are secured by substantially all
assets of the Borrower, subject to the exceptions set forth in
Appendix A-5
31
Exhibit A-3 and guaranteed, pursuant to the Subsidiaries
Guaranty, by all Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary created or
acquired after the Effective Date), and
(ii) the obligations of each Subsidiary under the
Subsidiaries Guaranty are secured by substantially all of the
assets of such Subsidiary, and
(b) to perfect and maintain the validity, effectiveness
and priority of any of the Security Documents and the Liens intended
to be created thereby, subject to the exceptions set forth in Exhibit
A-3.
Without limiting the generality of the foregoing, the Borrower shall, and shall
cause each Subsidiary to, take the actions in respect of Collateral set forth
on Exhibit A-3 within the times set forth therein. Contemporaneously with the
execution and delivery of any document referred to above, the Borrower shall,
and shall cause each Subsidiary to, deliver all resolutions, opinions and
corporate documents as the Collateral Agent may reasonably request to confirm
the enforceability of such document and the perfection of the security interest
created thereby, if applicable.
SECTION 2. NEGATIVE COVENANTS. The Borrower agrees with the
Agent and each Creditor Party that the Borrower will perform the obligations
set forth in this Section 2.
SECTION 2.1. BUSINESS ACTIVITIES. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
the business of processing food and such activities as may be incidental or
related thereto.
SECTION 2.2. INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than, without
duplication, the following:
(a) Indebtedness in respect of the Creditor Obligations;
(b) Indebtedness existing as of the Effective Date which
is identified in Item 2.2(b) ("Ongoing Indebtedness") of the
Disclosure Schedule attached hereto;
(c) Indebtedness secured by Liens described in clause (h)
or (j) of Section 2.3;
(d) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and services,
but excluding Indebtedness incurred through the borrowing of money or
Guaranties);
(e) Hedging Obligations to a Lender;
(f) Subordinated Debt; or
(g) obligations in respect of Capital Leases in an
aggregate amount not to exceed $7,000,000 at any time.
Appendix A-6
32
SECTION 2.3. LIENS. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens for taxes, assessments or governmental charges
not then due and delinquent and for which a penalty has not attached
or the validity of which is being contested in good faith and by
proper proceedings and with respect to which adequate reserves are
maintained in accordance with GAAP;
(b) Liens arising in connection with court proceedings,
provided that the execution of such Liens is effectively stayed, such
Liens are being contested in good faith and adequate reserves are
maintained with respect thereto in accordance with GAAP;
(c) Liens arising in the ordinary course of business and
not incurred in connection with the borrowing of money, including
encumbrances in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real Property, landlord's and
lessor's liens in the ordinary course of business, which do not,
individually or in the aggregate, materially interfere with the
conduct of the business of the Borrower and its Subsidiaries taken as
a whole and do not materially affect the value of the Property subject
to such Liens;
(d) Construction or materialmen's or mechanic's Liens
securing obligations not overdue or, if overdue, being contested in
good faith and by proper proceedings and with respect to which
adequate reserves are maintained in accordance with GAAP;
(e) Liens in connection with workers' compensation,
social security taxes or similar charges arising in the ordinary
course of business and not incurred in connection with the borrowing
of money;
(f) Liens existing on the Effective Date set forth in
Item 2.3(f) of the Disclosure Schedule attached hereto;
(g) Intercompany Liens (for purposes of intercompany
Liens, a Subsidiary shall mean any corporation of which the Borrower
directly or indirectly owns at least 80% of the Voting Stock);
(h) The extension, renewal or replacement of any Lien
permitted by the foregoing paragraph (f) in respect of the same
Property theretofore subject thereto or the extension, renewal or
replacement (without increase of principal amount of the Indebtedness
originally incurred);
(i) Liens incurred in connection with obtaining or
performing government contracts in the ordinary course of business and
not incurred in connection with the borrowing of money;
(j) (i) Any Lien in Property or in rights relating thereto to
secure any rights granted with respect to such Property in connection
with the provision of all or a part of the purchase price or cost of
the construction of such Property created
Appendix A-7
33
contemporaneously with, or within 270 days after, such acquisition or
the completion of such construction (except Liens in connection with
the Ponca City Litigation shall not be permitted under this clause
(j)(i)), or (ii) any Lien in Property existing in such Property at the
time of acquisition thereof, whether or not the debt secured thereby
is assumed by the Borrower or such Subsidiary; provided, that the
Indebtedness secured by any such Lien referred to in clauses (i) and
(ii) above shall not exceed 100% of the fair market value on the
related Property at the time the Lien was originally created;
(k) the Shared Lien; and
(l) Liens created, in the ordinary course of the
Borrower's and each Subsidiary's business, under the Packers and
Stockyards Act of 1921, as amended, and the regulations promulgated
thereunder,
provided, that the creation and continued existence of any such Liens, either
individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Borrower and the Subsidiaries, taken as a whole, or
on the Borrower's ability to perform its obligations under any of the
Financing Agreements (as defined in the Intercreditor Agreement).
SECTION 2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) At any time during any period set forth in the table
below, Consolidated Adjusted Net Worth to be less than the amount set
forth opposite such period in such table:
CONSOLIDATED ADJUSTED NET WORTH SHALL NEVER BE LESS
DURING THE PERIOD THAN
From September 12, 1996 through and including $72,000,000
December 14, 1996
From December 15, 1996 through and including March $74,000,000
8, 1997
From March 9, 1997 through and including April 30, $76,000,000
1997
From May 1, 1997 through and including the date on $91,000,000 plus 50% of the Consolidated Net
which the Loans (under the Bank Credit Agreement Earnings for each Fiscal Year commencing with the
and the New Seasonal Line of Credit Agreement), 1997 Fiscal Year; provided, however, that if
-------- -------
other Obligations and the Insurance Notes shall Consolidated Net Earnings is less than zero in any
have been paid in full in cash Fiscal Year, Consolidated Net Earnings shall be
deemed to be zero in such Fiscal Year for purposes
of this Section 2.4(a).
As of any date (prior to May 1, 1997) on which the Borrower receives
the proceeds of any Subordinated Debt, the amount set forth in the
table above opposite (i) the period
Appendix A-8
34
containing such date and (ii) each subsequent period (other than the
last such period), shall be increased by the amount of such proceeds;
provided, however, that the aggregate amount of such increases shall
in no event exceed $15,000,000 in respect of any such period
regardless of the aggregate amount of such proceeds.
(b) As of the end of each Fiscal Period commencing with
the seventh Fiscal Period in the 1997 Fiscal Year and ending with the
seventh Fiscal Period in the 1998 Fiscal Year, the ratio of
Consolidated Earnings Available for Interest Expense to Consolidated
Interest Expense for the Relevant Period to be less than 1.65 to 1.
As of the end of each Fiscal Period commencing with the eighth Fiscal
Period in the 1998 Fiscal Year and ending with the twelfth Fiscal
Period in the 1998 Fiscal Year, the ratio of Consolidated Earnings
Available for Interest Expense to Consolidated Interest Expense for
the Relevant Period to be less than 1.85 to 1. As of the end of each
Fiscal Period commencing with the thirteenth Fiscal Period in the 1998
Fiscal Year, the ratio of Consolidated Earnings Available for Interest
Expense to Consolidated Interest Expense for the Relevant Period to be
less than 2.0 to 1. For purposes of this clause (b), "Relevant
Period" shall mean (i) in respect of any Fiscal Period ending on or
before May 30, 1997, the period commencing on May 31, 1996 and ending
on the last Business Day of such Fiscal Period, and (ii) in respect of
any other Fiscal Period (each, a "Testing Period"), the period
commencing on the first Business Day of the twelfth preceding Fiscal
Period and ending on the last Business Day of such Testing Period.
(c) At any time, the obligations of the Borrower and its
Subsidiaries for the payment of rental for any Property during the
next succeeding 365-day period under existing leases, subleases or
similar arrangements (other than Capital Leases) to exceed in the
aggregate $9,000,000.
(d) The aggregate amount of Consolidated Earnings
Available for Interest Expense in respect of the 1997 Fiscal Year to
be less than $24,630,880.
(e) (i) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first seven
(7) Fiscal Periods of the 1997 Fiscal Year to be less than
$2,000,000.
(ii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the first ten
(10) Fiscal Periods of the 1997 Fiscal Year to be less than
--$1,000,000.
(iii) The aggregate amount of Fresh Meats Earnings
Available for Interest Expense in respect of the 1997 Fiscal
Year to be less than --$3,000,000.
SECTION 2.5. INVESTMENTS. The Borrower will not, and will not
permit any Subsidiary to, make, incur, assume or suffer to exist any Investment
in any other Person, except:
(a) Investments existing on the Effective Date set forth
in Item 2.5(a) of the Disclosure Schedule attached hereto;
Appendix A-9
35
(b) Investments in certificates of deposit, repurchase
agreements or bankers' acceptances, maturing within one year from the
date or origin, issued by a bank organized under the laws of the
United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000;
(c) Investments in commercial paper maturing in 270 days
or less from the date of issuance which, at the time of acquisition by
the Borrower or any Subsidiary, is accorded at least an "A-1" rating
by Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.;
(d) Investments in direct obligations of the United
States of America, or any agency thereof, the obligations of which are
guaranteed by the United States of America, maturing in twelve months
or less from the date of acquisition thereof;
(e) Investments in "money market" preferred stock rated
"A" or better by Standard & Poor's Corporation or "A2" by Moody's
Investors Service, Inc.;
(f) Investments in tax-exempt floating rate option tender
bonds backed by an irrevocable letter of credit issued by a bank the
long-term debt rating of which is at least "AA" by Standard & Poor's
Rating Group or "Aa2" by Moody's Investors Service, Inc.;
(g) Investments in Subsidiaries in existence on the
Effective Date and which operate principally in lines of business
similar to lines of business of the Borrower or its Subsidiaries
existing on the Effective Date; and
(h) Investments in or commitments to purchase foreign
currency; provided, that such Investment is made solely to the extent
that the Borrower and its Subsidiaries are obligated to make payments
to other Persons in such foreign currency.
In valuing any Investments for the purpose of applying the limitations
set forth above, such Investments shall be taken at the original cost thereof,
without allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered on account of capital or
principal.
For purposes of this Section 2.5 at any time when a corporation
becomes a Subsidiary, all investments of such corporation at such time shall be
deemed to have been made by such corporation, as a Subsidiary, at such time.
SECTION 2.6. RESTRICTED PAYMENTS, ETC. On and at all times after
the Effective Date, the Borrower will not:
(a) declare or pay any dividends, either in cash or
Property, on any shares of its capital stock of any class (except
dividends or other distributions payable solely in shares of capital
stock of the Borrower); or
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of Borrower's capital stock of
any class or any warrants, rights or options to purchase or acquire
any shares of the Borrower's capital stock; or
Appendix A-10
36
(c) make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect of its
capital stock; or
(d) make any payment, either directly or indirectly or
through any Subsidiary, of principal of any Subordinated Debt other
than at the expressed maturity date thereof and scheduled mandatory
prepayments or redemptions thereof in accordance with the terms in
effect on the date of creation of such Subordinated Debt.
SECTION 2.7. CONSOLIDATION, MERGER, ETC. The Borrower will not,
and will not permit any Subsidiary to, liquidate or dissolve, consolidate with,
or merge into or with, any other corporation, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division
thereof) except any such Subsidiary may liquidate or dissolve voluntarily into,
and may merge with and into, the Borrower or any other Subsidiary, and the
assets or stock of any Subsidiary may be purchased or otherwise acquired by the
Borrower or any other Subsidiary.
SECTION 2.8. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any Subsidiary to, sell, lease, transfer or otherwise dispose
of any assets, including the disposition of the stock of any Subsidiary and
including any Sale and Lease-Back Transaction (collectively, a "Disposition"),
in one or a series of transactions to any Person other than the Borrower or a
Majority-Owned Subsidiary, other than:
(a) in the ordinary course of business (including,
without limitation, the disposition of tractors and trailers owned by
the Borrower in the ordinary course of business and consistent with
the Borrower's past practice);
(b) in the Frederick Disposition, provided that the
Borrower receives all cash consideration, and the net cash proceeds
therefrom are simultaneously paid to the Creditor Parties (in
accordance with the Intercreditor Agreement), in each case, on or
before November 30, 1997, or thereafter with the consent of each of
the Creditor Parties, which consent shall not be unreasonably
withheld; or
(c) the following Dispositions:
(i) the plant and equipment located in Concordia,
Missouri which is subject to a purchase option in favor of the
lessee of such facility (approximate balance of purchase
price: $2,000,000);
(ii) the Borrower's facility known as "Tri-Miller"
located in Hyrum, Utah, which has an approximate value of
$600,000;
(iii) A building known as the "H&R Building"
located in Detroit, Michigan, which has an approximate value
of $475,000; and
(iv) a condominium located in Bloomfield Hills, Mi
chigan (approximate balance of purchase price: $300,000);
Appendix A-11
37
provided that the aggregate book value of all such assets sold,
leased, transferred or otherwise disposed of from time to time
pursuant to this Section 2.8(c) shall not exceed $4,000,000;
provided, however, that:
(x) the Borrower may, and may permit any Subsidiary to,
sell, lease, transfer or otherwise dispose of equipment if the cash
proceeds therefrom are utilized within one year after such Disposition
to purchase or are committed to the purchase of Property of a similar
nature and of at least equivalent value; and
(y) the Borrower may otherwise, and may permit any
Subsidiary otherwise to, sell, lease, transfer or otherwise dispose of
equipment so long as the aggregate amount of the book value of
equipment so disposed (as of the time of its disposition) does not
exceed $2,000,000 in any 365-day period.
SECTION 2.9. SALES AND LEASEBACKS. The Borrower will not, and
will not permit any Subsidiary to, effect any Sale and Lease-Back Transaction
with respect to:
(a) any Property of the Borrower or any Subsidiary which
Property was owned or leased by the Borrower or any Subsidiary on or
prior to September 12, 1996; or
(b) any other Property, if the aggregate book value of
all such other Property that is the subject of a Sale and Lease- Back
Transaction during any period of 365 consecutive days would exceed
$1,000,000.
SECTION 2.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction (including
the furnishing of goods or services) with an Affiliate except in the ordinary
course of business and on terms and conditions no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 2.11. COMPLIANCE WITH BORROWING BASE. The Borrower will
not incur any Borrowing Base Debt if, after giving effect to such incurrence,
and any concurrent repayment of Loans or Other Borrowing Base Debt, the
aggregate principal amount of Borrowing Base Debt would exceed the Borrowing
Base.
SECTION 2.12. HEDGING ACTIVITIES. The Borrower will not, and will
not permit any Subsidiary to, buy, sell, trade or otherwise deal in futures
contracts or options thereon or other derivatives thereof except pursuant to
transactions that represent substitutes for transactions to be made by the
Borrower or such Subsidiary at a later time in the physical pork or pork
products market and the purpose of which is solely to reduce the risk to the
Borrower or such Subsidiary of future fluctuations in the market prices of pork
or pork products.
Appendix A-12
38
SECTION 2.13. NET CAPITAL EXPENDITURES.
(a) Net Capital Expenditures of the Borrower and its
Subsidiaries shall not exceed $8,200,000 in either the 1997 or the 1998
Fiscal Year. In each Fiscal Year thereafter, Net Capital Expenditures
shall not exceed the sum of $8,200,000 plus twenty-five percent (25%) of
Consolidated Net Earnings in respect of such Fiscal Year; provided,
however, that if Consolidated Net Earnings is less than zero in any
Fiscal Year, Consolidated Net Earnings shall be deemed to be zero in
such Fiscal Year for purposes of this Section 2.13(a).
(b) To the extent that the Net Capital Expenditures of
the Borrower during any Fiscal Year are less than the amount permitted
in respect of such Fiscal Year under Subsection 2.13(a) above, such
difference in respect of such period shall be available during the
first Fiscal Year succeeding such period to support capital
expenditures of the Borrower during such first succeeding Fiscal Year,
and, if such difference shall not be fully utilized by the end of such
first succeeding Fiscal Year, it shall not be available to support any
additional capital expenditures thereafter. With respect to the
utilization of the availability for the making of capital expenditures
by the Borrower in each Fiscal Year, any availability for such period
provided in Subsection 2.13(a) above shall be deemed utilized first to
support the capital expenditures to be made during such period, and
any availability carried forward from the previous Fiscal Year shall
be deemed utilized second to support the capital expenditures to be
made during such period.
(c) Up to an aggregate amount of $5,000,000 paid by the
Borrower in settlement of, or in satisfaction of a judgment against
the Borrower in respect of, the Ponca City Litigation shall not be
considered a Net Capital Expenditure for purposes of this Section
2.13.
SECTION 2.14. CERTAIN SALARIES. At no time will the Borrower, nor
will it permit any Subsidiary to, pay, directly or indirectly, any salary,
bonus, or other cash compensation to any person who, as of the date hereof, is
(i) the chairman of the Borrower's board of directors, (ii) the Borrower's
president and chief executive officer, or (iii) the Borrower's executive vice
president for finance and administration, if such payment or payments would
exceed, in the aggregate, 110% of the aggregate amount of salary, bonus and
other cash compensation paid to such person in the immediately preceding Fiscal
Year. Notwithstanding the foregoing, for each Fiscal Year after the 1998
Fiscal Year, the Borrower may compensate the persons described in this Section
2.14 in accordance with the bonus plan previously delivered to the Creditor
Parties.
SECTION 3. DEFINED TERMS. As used in this Exhibit A-2, the
following terms shall have the meanings set forth below or in the Section of
this document referenced below. The terms used herein and not defined herein
shall have the respective meanings ascribed to such terms in the Bank Credit
Agreement (as defined herein).
"Bank Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of September 11, 1996, among (i)
Thorn Apple Valley, Inc. and (ii) Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and
Harris Trust and Savings Bank, as in effect on the Effective Date.
Appendix A-13
39
"Collateral" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Collateral Agent" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Consolidated Adjusted Net Worth" shall mean the sum of:
(a) (i) Consolidated Shareholders' Equity less
(ii) all goodwill, trade names, trademarks, patents,
organizational expense, unamortized debt discount and expense
and other intangible assets properly classified as intangibles
in accordance with GAAP and incurred after the date of
consummation of the Wilson Acquisition; plus
(b) Subordinated Debt.
"Consolidated Earnings Available for Interest Expense" shall
mean, for any period, the sum of:
(a) Consolidated Net Earnings for such period
before deduction of any amount which, in conformity with GAAP,
would be set forth opposite the caption "income tax expense"
(including deferred income taxes) (or any like caption) on a
consolidated income statement of Borrower for such period;
plus
(b) Consolidated Interest Expense for such
period; plus
(c) the amortization of any financing cost and of
any debt discount; plus
(d) an amount which, in conformity with GAAP,
would be set forth, opposite the caption "depreciation and
amortization expense" (or any like caption) (including,
without limitation, amortization of intangible assets) on such
income statement for such period, to the extent the same are
deducted from Borrower's net revenues, in conformity with
GAAP, in determining Consolidated Net Earnings for such
period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition costs including
agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Interest Expense" shall mean the interest
expense (including capitalized and non-capitalized interest, the
interest component of rentals under Capital
Appendix A-14
40
Leases and any expense associated with the termination of a swap
arrangement) of the Borrower and its Subsidiaries on a consolidated
basis for any period.
"Consolidated Net Earnings" shall mean the net earnings of the
Borrower and its Subsidiaries in accordance with GAAP, excluding:
(a) extraordinary items (including extraordinary
gains and losses, and including acquisition closing costs
including agents' fees); and
(b) any equity interest of the Borrower on the
unremitted earnings of any corporation not a Subsidiary.
"Consolidated Shareholders' Equity" shall mean consolidated
shareholders' equity of the Borrower and its Subsidiaries determined
in accordance with GAAP.
"Creditor Obligations" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Creditor Parties" shall mean, collectively and individually
(as the context requires) (i) the "Lenders" as defined in the Bank
Credit Agreement and (ii) the Noteholders.
"Disposition" is defined in Section 2.8.
"Fiscal Period" shall mean each period of four consecutive
weeks ending on (i) the last Friday in May in each Fiscal Year or (ii)
the Friday which is four weeks, or any even multiple of four weeks,
thereafter.
"Frederick Disposition" shall mean the sale of the plant,
property, inventory and equipment located at 1487 Farnsworth Avenue,
Detroit, Michigan, and the goodwill, licenses, permits, franchises,
patents, copyrights, trademarks, service marks and trade names
associated therewith.
"Fresh Meats Earnings Available for Interest Expense" shall
mean Consolidated Earnings Available for Interest Expense but only in
respect of the Borrower's fresh meats division, as regularly and
historically reported by the Borrower.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of the Borrower, any qualification or exception:
(a) which is of a "going concern" or similar
nature;
(b) which relates to the limited scope of
examination of relevant to such financial statement; or
(c) which relates to the treatment or
classification of any item in such financial statement and
which, as a condition to its removal, would require an
Appendix A-15
41
adjustment to such item the effect of which would be to cause
the Borrower to be in default of its obligations under Section
2.4 of this Exhibit A-2.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed
money and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether
or not drawn, and banker's acceptances issued for the account
of such Person;
(c) all obligations of such Person as lessee
under leases which have been or should be, in accordance with
GAAP, recorded as Capital Leases;
(d) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side
of the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under all
Hedging Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of Property or services, and
indebtedness (excluding prepaid interest thereon) secured by a
Lien on Property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Guaranties of such Person in respect of
any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Insurance Note Agreements" shall mean, collectively, (i) that
certain Note Agreement, dated as of April 1, 1994, by and between the
Borrower and Allstate Life Insurance Company, pursuant to which the
Borrower issued Fifteen Million Dollars ($15,000,000) in aggregate
principal amount of its six and forty-five one-hundredths percent
(6.45%) Senior Notes due April 21, 2006, (ii) that certain Note
Agreement, dated as of October 1, 1994, by and between the Borrower
and Allstate Life Insurance Company, pursuant to which the Borrower
issued Eight Million Dollars ($8,000,000) in aggregate principal
amount of its eight and forty-two one-hundredths percent (8.42%)
Senior Notes due October 1, 2003, and (iii) that certain Note
Agreement, dated as of May 15 1995, by and among the Borrower,
Allstate Life Insurance Company, Principal Mutual Life Insurance
Company, and Great-West Life & Annuity Insurance Company, pursuant to
which the Borrower issued Forty-Two Million Five Hundred Thousand
Dollars
Appendix A-16
42
($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15,
2005, in each case, as amended from time to time.
"Insurance Notes" shall mean those certain Notes, as amended
from time to time, issued pursuant to the Insurance Note Agreements.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated as of September 11, 1996 by and among
the Creditor Parties, and acknowledged and agreed to by the Borrower
and its Subsidiaries.
"Investment" shall mean, relative to any Person:
(a) any loan or advance made by such Person to
any other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary course
of business);
(b) any Guaranty of such Person; or
(c) any ownership or similar interest held by
such Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof, less all returns of principal or equity
thereon (and without adjustment by reason of the financial condition
of such Person) and shall, if made by the transfer or exchange of
Property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such
Property.
"Majority-Owned Subsidiary" shall mean, when applied to a
Subsidiary, any Subsidiary 80% or more of the Voting Stock of which is
owned by the Borrower or a Majority-Owned Subsidiary (other than
Voting Stock required to be held as directors' qualifying stock).
"Net Capital Expenditures" shall mean, in any period, the remainder of
(i) the aggregate cost of acquisition or
construction of all tangible assets acquired or constructed
during such period which at the time of acquisition or
construction have an expected useful life of more than one (1)
year and would be shown on a balance sheet of the acquiring or
constructing Person as an asset ("Capital Assets"), minus
(ii) the aggregate net proceeds of all sales or
other Dispositions of Capital Assets during such period, other
than proceeds which were used to permanently reduce Creditor
Obligations.
"New Seasonal Line of Credit Agreement" shall mean that
certain letter agreement regarding a Senior Secured Seasonal Line of
Credit for the Borrower dated as of September 11, 1996 by and among
(i) Thorn Apple Valley, Inc. and (ii) Cooperatieve
Appendix A-17
43
Centrale Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank.
"Noteholders" shall mean the holders of the Insurance Notes
from time to time.
"Ongoing Indebtedness" is defined in Section 2.2(b).
"Ponca City Litigation" shall mean that certain action
entitled Facility Constructors, Inc. v. Thorn Apple Valley, Inc. filed
in February, 1996, in District Court, Kay County, Oklahoma against the
Company in connection with the construction of the Company's plant in
Ponca City, Oklahoma.
"Rolling Projection" is defined in Section 1.1(c).
"Section" unless otherwise specified, shall mean a Section of
this Exhibit A-2.
"Security Documents" shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Shared Lien" shall mean the lien upon the Collateral (as
defined in the Intercreditor Agreement) created by the Security
Documents (as defined in the Intercreditor Agreement) in favor of the
Creditor Parties (as defined in the Intercreditor Agreement).
"Subordinated Debt" shall mean the principal of and premium,
if any, and interest on all indebtedness of the Borrower, whether
currently outstanding or hereafter created, for money borrowed, or any
indebtedness incurred in connection with an acquisition or lease of
Property or with a merger, consolidation, or acquisition of assets
which is expressly subordinated, on terms satisfactory to the Creditor
Parties, in right of payment pursuant to its terms to the Loans and
the Insurance Notes (regardless of whether it is subordinated to other
indebtedness of the Borrower).
"Subsidiaries Guaranty" shall have the meaning assigned to the
term "Guaranty" in the Intercreditor Agreement.
"Weekly P&L Statement" shall mean, in respect of any week, a
statement, in form acceptable to the Creditor Parties, setting forth,
for each of the Borrower's fresh meats and processed meats divisions,
the income and expenses of the Borrower during such week.
Appendix A-18
44
DISCLOSURE SCHEDULE TO APPENDIX A
ITEM 2.2(B) - ONGOING INDEBTEDNESS:
Operating Leases. See Exhibit A to Disclosure Schedule to Exhibit A-2.
BALANCE OUTSTANDING
@ 8/23/96
Lines of Credit:
Combined $94,100,000
-----------
Notes Payable:
Corporate: Allstate Unsecured Notes 23,000,000
Corporate: Allstate Life Ins. Unsecured Notes 15,000,000
Principal Mutual Life Unsecured Notes 14,000,000
Great-West Life & Annuity Unsecured Notes 13,500,000
Dixie: Forrest City Note 1,282,222
---------
Subtotal 160,882,000
-----------
Industrial Revenue Bonds:
Corporate: (Branch Banking) 2,400,000
Dixie Plant: (Economic Development Revenue Bond) 2,442,000
Corporate: (Michigan Strategic Fund - Adjustable Rate Demand
Limited Obligation Revenue bond, Series 1993)
5,500,000
---------
Subtotal:
10,342,000
----------
Capital Leases:
Corporate 518,744
Frederick division 2,304,521
Smoked Meats division 314,296
Concordia & Shreveport division 93,018
Dixie division 1,913,235
---------
Subtotal 5,143,814
Total Outstanding Indebtedness $176,367,814
============
Letters of Credit - See Exhibit B to Disclosure Schedule to Exhibit A-2.
Disclosure Schedule - 1
45
ITEM 2.3(F) - EXISTING LIENS:
DEBT DESCRIPTION OF COLLATERAL AMOUNT OF
LOCATION REFERENCE O/S DEBT
Industrial Revenue Bonds:
Corporate Branch Banking Carolina manufacturing
facility $2,400,000
Dixie division Dixie facility $2,442,000
Mich. Strat. Fund. Grand Rapids $5,500,000
Capital Leases:
Corporate, Frederick, Smoked Meats, Concordia, Various machinery and $5,143,814
Shreveport and Dixie divisions. equipment located at the
company's various divisions
and subsidiaries
All other Liens existing as of the Effective Date and permitted under Section 1.8 of Exhibit A-2.
ITEM 2.5(A) ONGOING INVESTMENTS:
-------------------
INVESTMENT BALANCE
FINANCIAL INSTITUTION TYPE @ 8/23/96
Short-Term Investments
United Carolina Bank CD 500,000
Providence TempCash 3,059,000
Chicago operation U.S. Treasury Bills 300,000
Subtotal $3,859,000
Michigan Livestock Exchange Preferred Stock 2,000,000
Total Investments $5,859,000
==========
Disclosure Schedule - 2
46
EXHIBIT A TO DISCLOSURE SCHEDULE TO APPENDIX A
Operating Leases
Disclosure Schedule - 3
47
EXHIBIT B TO DISCLOSURE SCHEDULE TO APPENDIX A
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
48
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1