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EXHIBIT 10(u)
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THORN APPLE VALLEY, INC.
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AMENDMENT AGREEMENT
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RE:
NOTE AGREEMENT DATED AS OF OCTOBER 1, 1994
AND
$8,000,000 8.42% SENIOR NOTES DUE OCTOBER 1, 2003
DATED AS OF SEPTEMBER 11, 1996
$8,000,000 SENIOR NOTES DUE OCTOBER 1, 2003
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AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "Agreement"), dated as of September 11,
1996, between THORN APPLE VALLEY, INC. (the "Company"), a Michigan corporation,
and ALLSTATE LIFE INSURANCE COMPANY (referred to herein as "Allstate" or the
"Noteholder").
RECITALS:
A. Pursuant to that certain Note Agreement, dated as of October
1, 1994 (as amended prior to the date hereof, the "Existing Note Agreement",
and, as amended and supplemented by this Agreement and the other agreements and
instruments to be executed in connection herewith and therewith, the "Amended
Note Agreement"), the Company 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 (as amended prior to the date hereof,
the "Existing Notes", and, as amended and supplemented by this Agreement and
the other agreements and instruments to be executed in connection herewith and
therewith, the "Amended Notes"). The Existing Notes are substantially in the
form of Exhibit A attached to the Existing Note Agreement.
B. The Company has requested that the Noteholder amend or waive
certain terms of the Existing Note Agreement, as more particularly set forth in
this Agreement.
C. Subject to the terms and conditions hereinafter set forth, the
Noteholder is willing to amend certain terms of the Existing Note Agreement and
the Existing Notes and waive other terms of the Existing Note Agreement, all as
more particularly set forth in this Agreement.
D. The Company and the Noteholder are desirous of entering into
this Agreement on the terms and conditions hereinafter set forth.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
As used herein, the following terms shall have the meanings set forth
below or in the document or the Section of this Agreement referenced below.
The terms used herein and not defined herein shall have the respective meanings
ascribed to such terms in the Amended Note Agreement.
"Agreement, this" -- introductory sentence hereof.
"Allstate" -- introductory sentence hereof.
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"Amended Bank Credit Documents" -- Section 5.2(b).
"Amended Note Agreement" -- Recital A hereof.
"Amended Note Documents" -- means, collectively, the Amended Note
Agreement, the Amended Notes, the Security Documents (as defined herein), the
Intercreditor Agreement (as defined herein), and the Subsidiary Guaranty (as
defined herein), as each may be amended from time to time.
"Amended Notes" -- Recital A hereof.
"Amendment Effective Date" -- introductory language to Section 5.
"Bank Credit Agreement" -- means, collectively, (i) that certain
Credit Agreement dated as of May 30, 1995 by and among the Company and the
Banks, pursuant to which the Banks agreed to provide the Company with an
$80,000,000 revolving credit facility and (ii) that certain letter agreement
dated March 11, 1996 by and among the Company and the Banks (or their
successors in interest), pursuant to which the Banks agreed to provide the
Company with a $20,000,000 revolving credit facility, in each case, as amended
to the date hereof.
"Banks" -- means, collectively, Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Old Kent Bank, National City Bank and Harris
Trust and Savings Bank.
"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.
"Company" -- introductory sentence hereof.
"Covenant Reversion Date" -- means the later to occur of (i) the date
on which all of the obligations in respect of the Bank Credit Agreement shall
have been paid in full in cash and (ii) the date on which the Company shall
have obtained from a nationally recognized debt rating agency a rating in
respect of the Notes of BBB or better.
"Existing Note Agreement" -- Recital A hereof.
"Existing Notes" -- Recital A hereof.
"Intercreditor Agreement" -- Section 5.2(g).
"IRB Obligations" -- shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"L/C Issuer" -- Old Kent Bank, in its capacity as issuer of the Old
Kent Letters of Credit.
"Noteholder" -- introductory sentence hereof.
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"Old Kent L/C Documents" -- shall have the meaning ascribed to such
term in the Intercreditor Agreement.
"Old Kent Letters of Credit" -- shall have the meaning ascribed to
such term in the Intercreditor Agreement.
"Other Note Agreements" -- means, collectively, (i) that certain Note
Agreement, dated as of May 15, 1995, by and among the Company, Allstate,
Principal Mutual Life Insurance Company and Great-West Life & Annuity Insurance
Company, pursuant to which the Company issued Forty-Two Million Five Hundred
Thousand Dollars ($42,500,000) in aggregate principal amount of its seven and
fifty-eight one-hundredths percent (7.58%) Senior Notes due May 15, 2005 and
(ii) that certain Note Agreement, dated as of April 1, 1994, by and between the
Company and Allstate, pursuant to which the Company 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, in each case,
as amended to the date hereof.
"Restated Notes" -- Section 5.2(a).
"Security Documents" -- Section 5.2(e).
"Subsidiary Guaranty" -- Section 5.2(f).
SECTION 2. AMENDMENTS TO EXISTING NOTE AGREEMENT AND EXISTING
NOTES.
2.1 GENERAL AMENDMENTS. The Company and, subject to the
satisfaction of the conditions set forth in Section 5 hereof, the Noteholder
hereby consent and agree to the amendments to the Existing Note Agreement and
the Existing Notes as set forth in Exhibit A-1 to this Agreement. Each such
amendment shall become effective on the Amendment Effective Date (as defined
herein) and is incorporated herein by reference as if set forth verbatim in
this Agreement.
2.2 TEMPORARY SUSPENSION AND AMENDMENTS TO COVENANTS. The Company
and, subject to the satisfaction of the conditions set forth in Section 5
hereof, the Noteholder hereby consent and agree as follows:
(a) During the period commencing on the Amendment
Effective Date and ending on the Covenant Reversion Date, the Company
(i) shall comply with the requirements of the covenants set forth in
Exhibit A-2 to this Agreement, and (ii) except as set forth in said
Exhibit A-2, shall not be required to comply with the requirements of
the covenants contained in Section 6 or Section 7 of the Existing Note
Agreement.
(b) During the period commencing on the Covenant
Reversion Date and ending on the date on which the Notes shall have
been paid in full in cash, the Company shall comply with all of the
requirements of the covenants contained in Section 6 and Section 7 of
the Amended Note Agreement.
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SECTION 3. WAIVER OF NON-COMPLIANCE.
Effective upon the satisfaction of the conditions set forth in Section
5 hereof, the Noteholder hereby irrevocably waives (a) non-compliance by the
Company with any provision of Section 7 of the Existing Note Agreement for the
period prior to the Amendment Effective Date and (b) any Default or Event of
Default during such period resulting from any such failure of the Company to be
in compliance with the provisions of Section 7 of the Existing Note Agreement.
SECTION 4. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholder to enter into this Agreement, the Company
warrants and represents to the Noteholder that, as of the Amendment Effective
Date:
4.1 ORGANIZATION, EXISTENCE AND AUTHORITY. The Company is a
corporation duly incorporated, validly existing and is in good standing under
the laws of the State of Michigan. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations under the Amended Note Documents.
4.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The execution
and delivery by the Company of this Agreement and the performance by the
Company of its obligations under the Amended Note Documents have been duly
authorized by all necessary action on the part of the Company. This Agreement
has been duly executed and delivered by the Company. Each of the Amended Note
Documents constitutes a valid and binding obligation of the Company,
enforceable in accordance with its respective terms, except that the
enforceability thereof may be:
(a) limited by bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
4.3 NO CONFLICTS OR DEFAULTS. Neither the execution and delivery
by the Company of this Agreement and the other Amended Note Documents, nor the
performance by the Company of its obligations under any of the Amended Note
Documents, conflicts with, results in any breach in any of the provisions of,
constitutes a default under, violates or results in the creation of any Lien
(other than pursuant to the Amended Note Documents) upon any Property of the
Company under the provisions of:
(a) any charter document, partnership agreement or bylaws
of the Company;
(b) assuming the contemporaneous execution and delivery
of an amendment to the Bank Credit Agreement and an amendment
(substantially similar to this Agreement) to the Other Note Agreements
(as such terms are defined herein), any agreement, instrument or
conveyance to which the Company or any Properties of the Company may
be bound or affected, except for such breaches, defaults and
violations that, in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or
on the Company's ability to perform its obligations under this
Agreement, the Amended
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Note Agreement and the Amended Notes; provided, however, that if the
granting of Liens pursuant to any of the Security Documents will
violate the terms of any of the IRB Obligations, no such Security
Documents which create Liens which violate the terms of any such IRB
Obligations will be filed or recorded by any Person unless and until
any required consents thereto shall have been obtained from the
appropriate secured parties; or
(c) any statute, rule or regulation or any order,
judgment or award of any court, tribunal or arbitrator by which the
Company or any Properties of the Company may be bound or affected,
except for such violations that, in the aggregate, could not
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or on the Company's ability to perform
its obligations under this Agreement, the Amended Note Agreement and
the Amended Notes.
4.4 GOVERNMENTAL CONSENT. Neither the execution and delivery by
the Company of this Agreement and the other Amended Note Documents nor the
performance by the Company of its obligations under each of the Amended Note
Documents, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority on the
part of the Company as a condition thereto under the circumstances and
conditions contemplated by this Agreement and each of the Amended Note
Documents.
4.5 NO DEFAULTS OR EVENTS OF DEFAULT. After giving effect to the
transactions contemplated by this Agreement, including the contemporaneous
execution and delivery of an amendment to the Bank Credit Agreement and an
amendment (substantially similar to this Agreement) to each of the Other Note
Agreements, no Default or Event of Default will exist under any of the Amended
Note Documents, the Bank Credit Agreement (as amended as of the date hereof) or
the Other Note Agreements (as amended as of the date hereof).
4.6 DISCLOSURE. The financial statements and certificates
delivered to the Noteholder by the Company or the Company's accountants, as the
case may be, pursuant to Section 6.6 of the Existing Note Agreement do not, nor
does this Agreement or any written statement furnished by the Company in
connection herewith, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. There is no fact existing as of the date hereof which the Company
has not disclosed to the Noteholder in writing which has had or, so far as the
Company can now reasonably foresee, could reasonably be expected to have, a
material adverse effect on the condition, financial or otherwise, of the
Company or its Subsidiaries, or the operations of any of them, or upon the
Company's ability to perform its obligations under this Agreement, the Amended
Note Agreement and the Amended Notes.
4.7 TRUE AND CORRECT COPIES. The Company has delivered to the
Noteholder true and correct copies of the Bank Credit Agreement, each of the
Old Kent L/C Documents, each of the Other Note Agreements, each of the Security
Documents (including, without limitation, all schedules and exhibits thereto
and all miscellaneous agreements and certificates delivered in connection
therewith), the Subsidiary Guaranty, and the Intercreditor Agreement, each as
in effect on the Amendment Effective Date.
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4.8 CERTAIN REPRESENTATIONS AND WARRANTIES. As supplemented by
the information set forth on Annex 1 hereto, all of the representations and
warranties contained in Section 3 of the Existing Note Agreement are true and
correct in all material respects as of the Amendment Effective Date as if such
representations and warranties were made on the Amendment Effective Date. All
of the representations and warranties contained in (i) the most recent
amendment to the Bank Credit Agreement, (ii) each of the Security Documents,
(iii) the Subsidiary Guaranty, and (iv) the Intercreditor Agreement, each as in
effect on the Amendment Effective Date, are true and correct in all respects.
4.9 NO UNDISCLOSED CONSIDERATION. Except as expressly set forth
in the documents described in Section 5.1 or Section 5.2 hereof, neither the
Company nor any Subsidiary has paid or will pay, directly or indirectly, any
fee, charge or other consideration to any Creditor Party (as defined in the
Intercreditor Agreement) as a condition to, or otherwise in connection with,
the amendments, modifications or restatements, as the case may be, to the Bank
Credit Agreement, the L/C Documents (as defined in the Intercreditor
Agreement), the Other Note Agreements or the Existing Note Agreement, in each
case, as described in the Intercreditor Agreement.
4.10 SOLVENCY.
(a) As of the date hereof, the fair value of all of the
Company's property (other than property that the Company could exempt
from its estate were it a debtor under the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq.) exceeds the aggregate amount of
the Company's debts.
(b) The Company has not transferred, concealed, or
removed any of its property with intent to hinder, delay, or defraud
any of the Company's creditors.
SECTION 5. CONDITIONS PRECEDENT.
The amendments set forth in Section 2 hereof and the waiver set forth
in Section 3 hereof shall not become effective unless all of the following
conditions precedent shall have been satisfied on or before September 12, 1996
(the date of such satisfaction being herein referred to as the "Amendment
Effective Date"):
5.1 EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company shall
have executed and delivered to the Noteholder a counterpart of this Agreement.
5.2 EXECUTION AND DELIVERY OF OTHER DOCUMENTS. The following
documents, each in form and substance satisfactory to the Noteholder and its
special counsel, shall have been duly executed and delivered by the parties
thereto, and shall be in full force and effect:
(a) an amendment and restatement of each of the Existing
Notes (collectively, the "Restated Notes") in the form set forth in
paragraph 10 of Exhibit A-1 hereto;
(b) an Amended and Restated Credit Agreement and a letter
agreement regarding a Senior Secured Seasonal Line of Credit for the
Company (collectively, the "Amended Bank Credit Documents"), in each
case among the Company and the Banks,
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which agreements, in each case, shall be in form and substance
satisfactory to the Noteholder;
(c) an amendment to each of the L/C Documents (including,
without limitation, a waiver of each default or event of default
existing thereunder as of the date hereof), in each case, dated as of
the date hereof and executed by each of the parties to such L/C
Document, which agreements, in each case, shall be in form and
substance satisfactory to the Noteholder;
(d) an amendment to each of the Other Note Agreements, in
each case, dated as of the date hereof and executed by each of the
parties to such Other Note Agreement, which agreements, in each case,
shall be in form and substance satisfactory to the Noteholder;
(e) those certain security agreements, mortgages and
other collateral documents more fully set forth on Schedule I to the
Intercreditor Agreement (collectively, the "Security Documents"),
which documents, in each case, shall be in form and substance
satisfactory to the Noteholder;
(f) a guaranty of the Amended Notes by each Subsidiary of
the Company (the "Subsidiary Guaranty"), which shall be in form and
substance satisfactory to the Noteholder; and
(g) an Intercreditor Agreement (the "Intercreditor
Agreement"), among Allstate, Principal Mutual Life Insurance Company,
Great-West Life & Annuity Insurance Company, the Banks, the L/C Issuer
and the Collateral Agent, and acknowledged and agreed to by the
Company and the Subsidiaries, which agreement shall be in form and
substance satisfactory to the Noteholder.
5.3 PRIVATE PLACEMENT NUMBER. The Company shall have obtained or
caused to be obtained a private placement number for the Restated Notes from
the CUSIP Service Bureau of Standard & Poor's, a division of McGraw-Hill, Inc.,
and the Noteholder shall have been informed of such private placement number.
5.4 COLLATERAL. The Security Documents shall be in full force and
effect and there shall be no Default or Event of Default thereunder and as
defined therein. Except in respect of those items of Collateral identified on
Exhibit A-3 hereto, all actions necessary to perfect the Liens of the
Collateral Agent created by the Security Documents (including, without
limitation, the filing of all appropriate financing statements and the
recording of all appropriate documents with appropriate public officials) shall
have been taken in accordance with the terms of the Security Documents and
confirmation thereof shall be received by the Noteholder. The Liens of the
Collateral Agent created by the Security Documents shall be valid, enforceable
and perfected (except as permitted by Section 1.8 of Exhibit A-2 hereto), and
the Property of the Company shall be subject to no other Lien not otherwise
permitted under Section 2.3 of Exhibit A-2 hereto.
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5.5 EQUITY INFUSION. The Company shall have received an
aggregate of not less than $3,000,000 in capital contributions from one or more
of its shareholders upon terms and conditions satisfactory to the Noteholder in
its sole discretion.
5.6 NO DEFAULT; REPRESENTATIONS AND WARRANTIES TRUE. The
warranties and representations set forth in Section 4 hereof shall be true and
correct on the Amendment Effective Date and no Default or Event of Default
shall exist which would not be waived by this Agreement and by an amendment to
each of the Other Note Agreements. The Noteholder shall have received a
certificate dated the Amendment Effective Date and signed by the President and
the Chief Financial Officer of the Company, in form and substance satisfactory
to the Noteholder, certifying to the conditions specified in the preceding
sentence.
5.7 AUTHORIZATION OF TRANSACTIONS.
(a) The Company shall have duly authorized the execution
and delivery of this Agreement and each of the documents executed and
delivered in connection herewith and the performance of all of its
obligations contemplated by this Agreement. The Noteholder shall have
received a certificate dated the Amendment Effective Date and signed
by the Secretary or an Assistant Secretary of the Company, in form and
substance satisfactory to the Noteholder, certifying as to the
resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of the Restated Notes and
this Agreement.
(b) Each Subsidiary shall have duly authorized the
execution, delivery and performance of its respective Subsidiary
Guaranty. The Noteholder shall have received a certificate dated the
Amendment Effective Date and signed by the Secretary or an Assistant
Secretary of each Subsidiary, certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Subsidiary Guaranty.
5.8 OPINION OF COUNSEL. The Noteholder shall have received from
Honigman Miller Schwartz and Cohn, counsel to the Company, a legal opinion, in
form and substance satisfactory to the Noteholder and its special counsel, with
respect to the transactions contemplated by this Agreement.
5.9 PAYMENT OF CERTAIN EXPENSES. The Company shall have paid all
reasonable costs and expenses of the Noteholder relating to this Agreement and
the other Amended Note Documents, including without limitation (i) the fees and
expenses of Hebb & Gitlin, the Noteholder's special counsel and (ii) the
out-of-pocket expenses of the Noteholder.
5.10 PAYMENT OF INTEREST. The Company shall have paid all accrued
and unpaid interest in respect of each Existing Note, at the rates specified
herein, to the Amendment Effective Date.
5.11 MINIMUM REVOLVER AVAILABILITY. The Company shall have
obtained commitments from the Banks, pursuant to the Amended Bank Credit
Documents, which shall be available to the Company as of the Amendment
Effective Date, in an amount equal to at least $110,000,000.
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5.12 PROCEEDINGS SATISFACTORY. All documents executed and
delivered, and actions and proceedings taken, in connection with this Agreement
shall be satisfactory to the Noteholder and its special counsel. The
Noteholder and its special counsel shall have received copies of such documents
and papers as they may reasonably request in connection therewith, in form and
substance satisfactory to them.
SECTION 6. NO PREJUDICE OR WAIVER; REAFFIRMATION.
6.1 NO PREJUDICE OR WAIVER. Except as provided herein, the terms
of this Agreement shall not operate as a waiver by the Noteholder of, or
otherwise prejudice the Noteholder's rights, remedies or powers under, the
Amended Note Documents or under applicable law. Except as expressly provided
herein:
(a) no terms and provisions of any agreement are modified
or changed by this Agreement; and
(b) the terms and provisions of the Existing Note
Agreement and the Existing Notes shall continue in full force and
effect.
6.2 REAFFIRMATION. The Company hereby acknowledges and reaffirms
all of its obligations and duties under the Amended Note Documents.
SECTION 7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
7.2 DUPLICATE ORIGINALS. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in one or more counterparts and shall be effective
when at least one counterpart shall have been executed by each party hereto,
and each set of counterparts which, collectively, show execution by each party
hereto shall constitute one duplicate original.
7.3 WAIVERS AND AMENDMENTS. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally, or by any
action or inaction, but only by an instrument in writing signed in accordance
with the amendment provisions set forth in the Existing Note Agreement.
7.4 SECTION HEADINGS. The titles of the sections hereof appear as
a matter of convenience only, do not constitute a part of this Agreement and
shall not affect the construction hereof.
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7.5 COSTS AND EXPENSES. On the Amendment Effective Date, the
Company shall pay all costs and expenses of the Noteholder relating to this
Agreement and the other Amended Note Documents, including, but not limited to,
(i) the statement for reasonable fees and disbursements of the Noteholder's
special counsel and (ii) the statement for reasonable out-of-pocket expenses of
the Noteholder, in each case, presented to the Company on the Amendment
Effective Date. The Company will also pay upon receipt of any statement
thereof, each additional statement for (i) reasonable fees and disbursements of
the Noteholder's special counsel or (ii) reasonable out-of-pocket expenses of
the Noteholder, rendered after the Amendment Effective Date in connection with
the Amended Note Documents.
7.6 SURVIVAL. All warranties, representations, certifications and
covenants made by or on behalf of the Company or any Subsidiary in the Amended
Note Documents or in any certificate or other instrument delivered pursuant to
the Amended Note Documents shall be considered to have been relied upon by the
Noteholder and shall survive the execution of the Amended Note Documents,
regardless of any investigation made by or on behalf of the Noteholder. All
statements in any such certificate or other instrument shall constitute
warranties and representations of the Company hereunder.
7.7 WAIVER AND RELEASE. For and in consideration of the
agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the Company, on its own behalf, and to the extent that it is
lawfully able to do so, on behalf of its predecessors, successors, assigns,
Subsidiaries, affiliates and agents and all of their respective past, present
and future officers, directors, shareholders, employees, contractors and
attorneys, and the predecessors, heirs, successors, and assigns of each of them
(collectively referred to in this Section 7.7 as the "RELEASORS") do hereby
jointly and severally fully RELEASE, REMISE, ACQUIT, IRREVOCABLY WAIVE and
FOREVER DISCHARGE the Noteholder, together with its predecessors, successors,
assigns, subsidiaries, affiliates and agents and all of their respective past,
present and future officers, directors, shareholders, employees, contractors
and attorneys, and the predecessors, heirs, successors and assigns of each of
them (the Noteholder and all of the foregoing being collectively referred to in
this Section 7.7 as the "RELEASED PARTIES"), from and with respect to any and
all Claims (as defined below).
As used in this Section 7.7, the term "CLAIMS" shall mean and include
any and all, and all manner of, action and actions, cause and causes of action,
suits, disputes, controversies, claims, debts, sums of money, offset rights,
defenses to payment, agreements, promises, notes, bonds, bills, covenants,
losses, damages, judgments, executions and demands of whatever nature, known or
unknown, whether in contract, in tort or otherwise, at law or in equity, for
money damages or dues, recovery of property, or specific performance, or any
other redress or recompense which have accrued or may ever accrue, may have
been had, may be now possessed, or may or shall be possessed in the future by
or on behalf of any one or more of the Releasors against any one or more of the
Released Parties for, upon, by reason of, on account of, or arising from or out
of, or by virtue of, any transaction, event or occurrence, duty or obligation,
indemnification, agreement, promise, warranty, covenant or representation,
breach of fiduciary duty, breach of any duty of fair dealing, breach of
confidence, breach of funding commitment, undue influence, duress, economic
coercion, conflict of interest, negligence, bad faith, malpractice, violations
of federal or state securities laws or the Racketeer Influenced and Corrupt
Organizations Act, intentional or negligent infliction of mental distress,
tortious interference with contractual relations, tortious interference with
corporate governance or
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prospective business advantage, breach of contract, deceptive trade practices,
libel, slander, usury, conspiracy, wrongful acceleration of any indebtedness,
wrongful foreclosure or attempt to foreclose on any collateral relating to any
indebtedness, action or inaction, relationship or activity, service rendered,
matter, cause or thing, whatsoever, express or implied, transpiring, entered
into, created or existing from the beginning of time to the date of the
execution of this Agreement in respect of the Existing Notes or the Existing
Note Agreement, and shall include, but not be limited to, any and all Claims in
connection with, as a result of, by reason of, or in any way related to or
arising from the existence of any relationships or communications by and
between the Releasors and the Released Parties with respect to the Existing
Notes, the agreements pursuant to which the Existing Notes were issued, and all
agreements, documents and instruments related thereto, as presently constituted
and as the same may from time to time be amended.
The Releasors acknowledge that they may hereafter discover facts,
which exist or existed on or before the date hereof, different from or in
addition to those they now know or believe to be true with respect to the
Claims herein released. Notwithstanding the foregoing, the Releasors agree
that this Section 7.7 shall survive the termination hereof and shall remain
effective in all respects and waive the right to make any new, different or
additional claim on account of such different or additional facts. The
Releasors acknowledge that no representation or warranty of any kind or
character has been made to the Releasors by any one or more of the Released
Parties or any agent, representative or attorney of the Released Parties to
induce the execution of this Agreement containing this Section 7.7.
The Releasors hereby represent and warrant unto the Released Parties
that:
(a) the Releasors have the full right, power, and
authority to execute and deliver this Agreement containing this
Section 7.7 without the necessity of obtaining the consent of any
other party;
(b) the Releasors have received independent legal advice
from attorneys of their choice with respect to the advisability of
granting the release provided herein, and with respect to the
advisability of executing this Agreement containing this Section 7.7;
(c) the Releasors have not relied upon any statements,
representations or promises of any of the Released Parties in
executing this Agreement containing this Section 7.7, or in granting
the release provided herein;
(d) the Releasors have not entered into any other
agreements or understandings relating to the Claims;
(e) the terms of this Section 7.7 are contractual, not a
mere recital, and are the result of negotiation among all the parties;
and
(f) this Section 7.7 has been carefully read by, and the
contents hereof are known and understood by, and it is signed freely
by the Releasors.
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The Releasors covenant and agree not to bring any claim, action, suit
or proceeding regarding or related in any manner to the matters released
hereby, and the Releasors further covenant and agree that this Section 7.7 is a
bar to any such claim, action, suit or proceeding.
All prior discussions and negotiations regarding the Claims have been
and are merged and integrated into, and are superseded by, this Section 7.7.
The Releasors understand, agree and expressly assume the risk of any fact not
recited, contained or embodied in this Section 7.7 which may hereafter turn out
to be other than, different from, or contrary to, the facts now known to the
Releasors or believed by the Releasors to be true, and further agree that this
Section 7.7 shall not be subject to termination, modification, or rescission,
by reason of any such difference in facts.
7.8 INDEMNIFICATION. The Company agrees to indemnify the
Noteholder and its directors, officers, employees, agents and attorneys from,
and hold each of them harmless against, any and all losses, liabilities,
claims, damages or expenses incurred by any of them arising out of or by reason
of any investigation or litigation or other proceedings (including any
threatened investigation, litigation or other proceedings) relating to, or in
connection with, the Existing Notes or the Amended Notes including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
[REMAINDER OF PAGE IS INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
12
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by a duly authorized officer or agent thereof, as
the case may be, as of the date first above written.
THORN APPLE VALLEY, INC.
By_________________________________
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
[AMENDMENT AGREEMENT IN RESPECT OF THORN APPLE VALLEY, INC.]
15
ANNEX 1
INFORMATION AS TO COMPANY
[SUPPLEMENTAL INFORMATION WITH RESPECT TO
REPRESENTATIONS AND WARRANTIES IN EXISTING NOTE AGREEMENT]
Annex 1-1
16
EXHIBIT A-1
AMENDMENTS TO EXISTING NOTE AGREEMENT AND TO EXISTING NOTES
1. AMENDMENTS TO SECTION 1.1 OF THE EXISTING NOTE AGREEMENT.
Section 1.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"1.1 Description of Notes. The Company has authorized the
issuance and sale of $8,000,000 aggregate principal amount of its
Senior Notes, to be dated the date of issuance thereof, to bear
interest
(a) from such date until June 20, 1996 at the
rate of 8.42% per annum;
(b) from June 21, 1996 through and including July
31, 1996 at the Pre-Restructuring Rate; and
(c) from August 1, 1996 through the date of
maturity at the Post-Restructuring Rate,
payable monthly on the first day of each month, and at maturity, to
bear interest on overdue principal (including any overdue required or
optional prepayment), premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the greater of
(i) the rate of interest publicly announced from time to time by
Harris Trust and Savings Bank (or its successors or assigns) as its
prime rate plus two percent (2%) or (ii) the Post-Default Rate, to be
expressed to mature on October 1, 2003 and to be substantially in the
form attached as Exhibit A. The term "Notes" as used herein shall
include each Note delivered pursuant to this Note Agreement (the
"Agreement") and each Note delivered in substitution or exchange
therefor and, where applicable, shall include the singular number as
well as the plural. Any reference to you in this Agreement shall in
all instances be deemed to include any nominee of yours or any
separate account on whose behalf you are purchasing Notes. You are
sometimes referred to herein as the 'Purchaser'."
2. NEW SECTION 1.3 OF THE EXISTING NOTE AGREEMENT. A New Section
1.3 is hereby added to the Existing Note Agreement, after Section 1.2 thereof
and before Section 2 thereof, which shall read in its entirety as follows:
"1.3 Collateral Security. The obligations of the Company
hereunder and under the Notes are secured by the Shared Lien in the
Collateral."
3. AMENDMENTS TO SECTION 2.1 OF THE EXISTING NOTE AGREEMENT.
Section 2.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"2.1 Required Prepayments. (a) The Company shall pay all
of the outstanding principal of the Notes at maturity.
Exhibit A-1-1
17
(b) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and there
shall become due and payable on the tenth Business Day after each
Qualified Capital Infusion Date, a principal amount of the Notes equal
to the Qualified Capital Infusion Amount. The Company shall notify
the Noteholder of its intent to make such prepayment on such Qualified
Capital Infusion Date. Such prepayment shall be at a price of (i)
100% of the principal amount prepaid, together with interest accrued
thereon to the date of payment, if the Reinvestment Yield, on the
applicable Determination Date, equals or exceeds 8.42% per annum, or
(ii) 100% of the principal amount prepaid, together with interest
accrued thereon to the date of payment, plus a premium, if the
Reinvestment Yield, on such Determination Date, is less than 8.42% per
annum. The premium shall equal (x) the aggregate present value of the
amount of principal being repaid (taking into account the manner of
application required by Section 2.2(c)) and the present value of the
amount of interest (exclusive of interest accrued to the date of
prepayment) which would have been payable in respect of such principal
(at the rate of 8.42% per annum) absent such prepayment, determined by
discounting (semi-annually on the basis of a 360-day year composed of
twelve 30-day months) each such amount utilizing an interest factor
equal to the Reinvestment Yield, less (y) the principal amount to be
prepaid. Payment of such premium shall be deferred until the earlier
of (1) the date on which the obligations in respect of the Amended
Bank Credit Documents shall have been paid in full, (2) the date on
which the Company shall have obtained from a nationally recognized
debt rating agency a rating in respect of the Notes of BBB or better,
(3) acceleration of the Notes, (4) bankruptcy of the Company, or (5)
May 31, 1998.
(c) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and there
shall become due and payable on April 30, 1997, a principal amount of
the Notes equal to the Scheduled Amount. Such prepayment shall be at
a price of (i) 100% of the principal amount prepaid, together with
interest accrued thereon to the date of payment, if the Reinvestment
Yield, on the applicable Determination Date, equals or exceeds 8.42%
per annum, or (ii) 100% of the principal amount prepaid, together with
interest accrued thereon to the date of payment, plus a premium, if
the Reinvestment Yield, on such Determination Date, is less than 8.42%
per annum. The premium shall equal (x) the aggregate present value of
the amount of principal being repaid (taking into account the manner
of application required by Section 2.2(c)) and the present value of
the amount of interest (exclusive of interest accrued to the date of
prepayment) which would have been payable in respect of such principal
(at the rate of 8.42% per annum) absent such prepayment, determined by
discounting (semi-annually on the basis of a 360-day year composed of
twelve 30-day months) each such amount utilizing an interest factor
equal to the Reinvestment Yield, less (y) the principal amount to be
prepaid. Payment of such premium shall be deferred until the earlier
of (1) the date on which the obligations in respect of the Amended
Bank Credit Documents shall have been paid in full, (2) the date on
which the Company shall have obtained from a nationally recognized
debt rating agency a rating in respect of the Notes of BBB or better,
(3) acceleration of the Notes, (4) bankruptcy of the Company, or (5)
May 31, 1998.
(d) In addition to all other prepayments of the Notes
permitted or required hereunder, the Company shall prepay and there
shall become due and payable on the tenth Business Day after each
Unscheduled Amortization Date, a principal amount of the Notes equal
to the Unscheduled Amount. The Company shall notify the Noteholder of
Exhibit A-1-2
18
its intent to make such prepayment on such Unscheduled Amortization
Date. Such prepayment shall be at a price of (i) 100% of the
principal amount prepaid, together with interest accrued thereon to
the date of payment, if the Reinvestment Yield, on the applicable
Determination Date, equals or exceeds 8.42% per annum, or (ii) 100% of
the principal amount prepaid, together with interest accrued thereon
to the date of payment, plus a premium, if the Reinvestment Yield, on
such Determination Date, is less than 8.42% per annum. The premium
shall equal (x) the aggregate present value of the amount of principal
being repaid (taking into account the manner of application required
by Section 2.2(c)) and the present value of the amount of interest
(exclusive of interest accrued to the date of prepayment) which would
have been payable in respect of such principal (at the rate of 8.42%
per annum) absent such prepayment, determined by discounting
(semi-annually on the basis of a 360-day year composed of twelve
30-day months) each such amount utilizing an interest factor equal to
the Reinvestment Yield, less (y) the principal amount to be prepaid
Payment of such premium shall be deferred until the earlier of (1) the
date on which the obligations in respect of the Amended Bank Credit
Documents shall have been paid in full, (2) the date on which the
Company shall have obtained from a nationally recognized debt rating
agency a rating in respect of the Notes of BBB or better, (3)
acceleration of the Notes, (4) bankruptcy of the Company, or (5) May
31, 1998."
4. AMENDMENTS TO SECTION 2.2 OF THE EXISTING NOTE AGREEMENT.
(a) Section 2.2(a) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(a) Upon notice as provided in Section 2.3, the
Company may prepay the Notes, in whole or in part, at any
time, in an amount of not less than $1,000,000 or in integral
multiples of $100,000 in excess thereof (or the remaining
principal amount of the Notes) at a price of (i) 100% of the
principal amount prepaid, together with interest accrued
thereon to the date of payment, if the Reinvestment Yield, on
the applicable Determination Date, equals or exceeds 8.42% per
annum, or (ii) 100% of the principal amount prepaid, together
with interest accrued thereon to the date of payment, plus a
premium, if the Reinvestment Yield, on such Determination
Date, is less than 8.42% per annum. The premium shall equal
(x) the aggregate present value of the amount of principal
being repaid (taking into account the manner of application
required by Section 2.2(c)) and the present value of the
amount of interest (exclusive of interest accrued to the date
of prepayment) which would have been payable in respect of
such principal (at the rate of 8.42% per annum) absent such
prepayment, determined by discounting (semi-annually on the
basis of a 360-day year composed of twelve 30-day months) each
such amount utilizing an interest factor equal to the
Reinvestment Yield, less (y) the principal amount to be
prepaid."
(b) Section 2.2(c) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(c) Any prepayment pursuant to Section 2.2(a) or
Section 2.2(b), any prepayment required by Sections 2.1(b),
2.1(c) or 2.1(d), or any optional
Exhibit A-1-3
19
repurchase of less than all of the Notes outstanding shall be
applied to reduce the payment at maturity required by Section
2.1(a)."
5. AMENDMENTS TO SECTION 5.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 5.1 of the Existing Note Agreement is hereby
amended as follows:
(i) The definition of "Material Work Stoppage" is
hereby deleted.
(ii) (A) The word "and" is inserted at the
end of paragraph (g) of the definition of "Permitted
Investments".
(B) Paragraph (h) of the definition of
"Permitted Investments" is hereby deleted.
(C) Paragraph (i) the definition of
"Permitted Investments" is hereby re-numbered as
paragraph (h) thereof.
(b) Section 5.1 of the Existing Note Agreement is hereby
amended to modify in their entirety or add, each in their proper
alphabetical order, the following definitions:
Amended Bank Credit Documents - (i) That certain
Amended and Restated Credit Agreement and (ii) that certain
letter agreement re: Senior Secured Seasonal Line of Credit,
in each case, dated as of September 11, 1996 and by and among
the Company and the Banks, in each case, as in effect on the
Amendment Effective Date (as defined in the Amendment
Agreement).
Amendment Agreement - That certain Amendment
Agreement, dated as of September 11, 1996, by and among the
Company and the Noteholder.
Applicable Spread - An incremental rate of interest
equal to 200 basis points; provided, however, that, in the
event the Company shall make the prepayment in respect of the
Notes required by Section 2.1(c) hereof, Applicable Spread
shall mean an incremental rate of interest equal to 100 basis
points from and after the date of such prepayment; provided
further that if the Company shall have complied with the
requirements of the immediately preceding proviso and shall
have obtained from a nationally recognized debt rating agency
a rating in respect of the Notes of BBB or better, Applicable
Spread shall mean an incremental rate of interest equal to 30
basis points from and after the date of such rating.
April 1994 Series Notes - Shall mean the Company's
Senior Notes due April 21, 2006 and each note delivered in
substitution or exchange therefore, as the same may be
amended, restated or otherwise modified from time to time in
accordance with the terms of that certain Note Agreement dated
as of April 1, 1994, by and between the Company and Allstate
Life Insurance Company, as such agreement may be amended,
restated or otherwise modified from time to time.
Exhibit A-1-4
20
Banks - Cooperatieve Centrale
Raiffeisen-Boerenleenbank, B.A., Old Kent Bank, National City
Bank and Harris Trust and Savings Bank, collectively.
Capital Infusion Proceeds. - The net proceeds
received by the Company from any issuance of (i) debt of the
Company or (ii) equity of the Company, other than Scheduled
Equity Proceeds.
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
Creditor Obligations - Shall have the meaning
ascribed to such term in the Intercreditor Agreement.
Creditor Parties - Shall have the meaning ascribed to
such term in the Intercreditor Agreement.
Determination Date - Either (i) the Business Day
which is two Business Days before the date fixed for a
prepayment pursuant to Section 2.1(b), Section 2.1(c), Section
2.1(d) or Section 2.2(a) or (ii) the date of any acceleration
pursuant to Section 8.2.
Intercreditor Agreement - That certain Intercreditor
Agreement dated as of September 11, 1996, by and among the
Banks, the Noteholder, Principal Mutual Life Insurance
Company, Great-West Life & Annuity Insurance Company, Old Kent
Bank, in its capacity as issuer of the Old Kent Letters of
Credit (as defined therein) and the Collateral Agent, and
acknowledged and agreed to by the Company and its
Subsidiaries.
May 1995 Series Notes - Shall mean the Company's
Senior Notes due May 15, 2005 and each note delivered in
substitution or exchange therefore, as the same may be
amended, restated or otherwise modified from time to time in
accordance with the terms of that certain Note Agreement dated
as of May 15, 1995, by and among the Company, the Noteholder,
Principal Mutual Life Insurance Company and Great-West Life &
Annuity Insurance Company, as such agreement may be amended,
restated or otherwise modified from time to time.
Ponca City Litigation - An 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.
Post-Default Rate - In respect of any Note, a rate of
interest equal to the sum of (i) the rate of interest
otherwise accruing in respect of the Notes under Section
1.1(a), Section 1.1(b) or Section 1.1(c), as the case may be,
plus (ii) 200 basis points.
Exhibit A-1-5
21
Post-Restructuring Rate - In respect of any Note, a
rate of interest equal to the sum of (i) 8.42% plus (ii) the
Applicable Spread.
Pre-Restructuring Rate - In respect of any Note, a
rate of interest equal to the sum of (i) 8.42% plus (ii) 175
basis points.
Qualified Capital Infusion Amount - In respect of a
Qualified Capital Infusion Date, an amount equal to the
remainder of
(a) the product of
(i) (y) if the aggregate
amount of Qualified Capital Infusion
Proceeds received after July 31,
1996 and on or before such Qualified
Capital Infusion Date is greater
than or equal to $15,000,000, the
greater of (A) $15,000,000 and (B)
fifty percent (50%) of such
aggregate amount; or
(z) if the aggregate amount of
Qualified Capital Infusion Proceeds
received after July 31, 1996 and on
or before such Qualified Capital
Infusion Date is less than
$15,000,000, such aggregate amount,
times
(ii) a fraction the numerator of
which is the initial stated principal balance
of the Notes (on the date of initial issuance
thereof) and the denominator of which is
$162,500,000,
minus
(b) the aggregate principal amount of
the Notes prepaid with Qualified Capital Infusion
Proceeds pursuant to Section 2.1(b) prior to such
Qualified Capital Infusion Date.
Qualified Capital Infusion Date - Any date, other
than April 30, 1997, on which the Company shall receive any
Qualified Capital Infusion Proceeds.
Qualified Capital Infusion Proceeds - Any Capital
Infusion Proceeds which are received by the Company after July
31, 1996 and on or before April 30, 1997, in connection with
the issuance of (i) equity of the Company or (ii) debt of the
Company which is expressed to be subordinated to the Notes on
terms which are satisfactory to the Noteholder in its sole and
absolute discretion.
Scheduled Amount - An amount equal to the remainder of
(a) the product of
Exhibit A-1-6
22
(i) the greater of (A) $15,000,000
and (B) fifty percent (50%) of the aggregate
amount of Qualified Capital Infusion
Proceeds,
times
(ii) a fraction the numerator of
which is the initial stated principal balance
of the Notes (on the date of initial issuance
thereof) and the denominator of which is
$162,500,000,
minus
(b) the aggregate principal amount of
the Notes prepaid with Qualified Capital Infusion
Proceeds pursuant to Section 2.1(b) prior to April
30, 1997.
Scheduled Equity Proceeds -- An amount equal to the
lesser of (i) $3,000,000 and (ii) the actual amount of cash
and cash equivalents received by the Company after July 31,
1996 and on or before September 12, 1996 in respect of equity
investments from one or more of its shareholders, which shall
be provided on terms and conditions satisfactory to the
Noteholder in its sole discretion.
Security Documents - Shall have the meaning ascribed
to such term in the Intercreditor Agreement.
Shared Lien -- The lien upon the Collateral created
by the Security Documents in favor of the Creditor Parties.
Subsidiaries Guaranty - Shall have the meaning
ascribed to the term "Guaranty" in the Intercreditor Agreement.
TAVFSC - Shall mean Thorn Apple Valley Foreign Sales
Corporation, a U.S. Virgin Islands corporation.
Unscheduled Amortization Date - Any date on which
the Company receives any Unscheduled Proceeds.
Unscheduled Amount - In respect of an Unscheduled
Amortization Date, an amount equal to the product of
(a) the amount of Unscheduled Proceeds
received by the Company on such Unscheduled
Amortization Date,
times
Exhibit A-1-7
23
(b) a fraction the numerator of which is
the initial stated principal balance of the Notes (on
the date of initial issuance thereof) and the
denominator of which is $162,500,000.
Unscheduled Proceeds - On any date, means:
(a) with respect to the sale, transfer
or other disposition by the Company or any Subsidiary
of any capital asset (including the capital stock of
any Subsidiary), the aggregate cash proceeds
(including cash proceeds received by way of deferred
payment of principal (together with interest thereon)
pursuant to a note, installment receivable or
otherwise, but only as and when received) received by
the Company or any Subsidiary pursuant to such sale,
transfer or other disposition, other than (i) the
proceeds of asset sales as and to the extent
permitted by Section 2.8(c), Section 2.8(x) or
Section 2.8(y) of Exhibit A-2 to the Amendment
Agreement, (ii) insurance proceeds permitted by the
terms of the Security Documents to be used to repair
or replace damaged or destroyed Property, and (iii)
condemnation awards permitted by the terms of the
Security Documents to be used to replace any subject
Property, in each case, net of (A) the direct costs
and expenses relating to such sale, transfer or other
disposition (including, without limitation, sales
commissions and legal, accounting and investment
banking fees), (B) taxes paid or reasonably estimated
by the Company to be payable as a result thereof
(after taking into account any available tax credits
or deductions and any tax sharing arrangements) and
(C) amounts required to be applied to the repayment
of any Indebtedness secured by a Lien on the asset
subject to such sale, transfer or other disposition
(other than any Creditor Obligations) that is senior
to the Shared Lien; and
(b) with respect to any Capital Infusion
Proceeds which are received after April 30, 1997, the
aggregate cash proceeds received by the Company or
any Subsidiary pursuant to such issuance, net of the
direct costs relating to such issuance (including,
without limitation, sales and underwriter's
commissions and legal, accounting and investment
banking fees).
6. AMENDMENTS TO SECTION 7 OF THE EXISTING NOTE AGREEMENT.
(a) Section 7.1 of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"7.1 Net Worth. The Company will not at any time
permit Consolidated Adjusted Net Worth to be less than the sum
of $70,000,000 plus forty percent (40%) of Consolidated Net
Income for each fiscal year of the Company commencing after
May 30, 1996; provided, however, that if Consolidated Net
Income is less than zero in any such fiscal year, Consolidated
Net Income shall be deemed to be zero in such fiscal year for
purposes of this Section 7.1".
Exhibit A-1-8
24
(b) Section 7.2(d) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(d) Funded Debt (including refinancings,
refundings or extensions of Funded Debt described in Annex II
hereto and Current Debt deemed to constitute Funded Debt
pursuant to the definition of Funded Debt in Section 5.1), so
long as after giving effect thereto and the application of the
proceeds thereof:
(i) at all times on or before May 31,
1998, the amount of total Funded Debt of the Company
and its Subsidiaries then outstanding would not
exceed sixty-two and one-half percent (62.5%) of
Consolidated Total Capitalization determined as of
the end of the Company's prior fiscal quarter; and
(ii) at all times after May 31, 1998, (x)
the amount of total Funded Debt of the Company and
its Subsidiaries (other than Subordinated Debt)
outstanding would not exceed fifty-five percent (55%)
of Consolidated Total Capitalization and (y) the
amount of total Funded Debt of the Company and its
Subsidiaries outstanding would not exceed sixty-five
percent (65%) of Consolidated Total Capitalization."
(c) Section 7.2(e) of the Existing Note Agreement is
hereby amended by deleting the phrase "twenty percent (20%)" contained
therein and replacing it with "ten percent (10%)".
(d) Section 7.3 of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"Fixed Charge Ratio. The Company will not, (a) as of
the end of any fiscal quarter from the date hereof to and
including May 31, 1996, permit the ratio of Consolidated Cash
Flow Available for Fixed Charges to Consolidated Fixed Charges
for the preceding twelve months to be less than 0.75 to 1.0,
and (b) as of the end of any fiscal quarter from and after
June 1, 1996, permit the ratio of Consolidated Net Income
Available for Fixed Charges to Consolidated Fixed Charges for
the preceding twelve months to be less than 1.5 to 1.0.
(e) Section 7.4 of the Existing Note Agreement is hereby
amended as follows:
(i) The word "and" at the end of Section 7.4(j)
of the Existing Note Agreement is hereby deleted.
(ii) The phrase "20%" contained in Section 7.4(k)
of the Existing Note Agreement is hereby deleted and replaced
with "10%".
(iii) The period at the end of Section 7.4(k) of
the Existing Note Agreement is hereby deleted and the phrase
"; and" is hereby inserted in its place.
Exhibit A-1-9
25
(iv) A new Section 7.4(l) is hereby added to the
Existing Note Agreement, after Section 7.4(k) of the Existing
Note Agreement and before the final paragraph of Section 7.4
of the Existing Note Agreement, which shall read in its
entirety as follows:
"(i) the Shared Lien."
(v) A new sentence is hereby added at the end of
the last paragraph of Section 7.4 of the Existing Note
Agreement, which shall read in its entirety as follows:
"The creation, assumption, incurrence or permission
to exist of any such non-permitted Lien will
constitute an Event of Default hereunder, regardless
of whether any such provision is made in accordance
with the immediately preceding sentence."
(f) Section 7.5 of the Existing Note Agreement is hereby
amended as follows:
(i) The phrase "the Company could not incur an
additional $1.00 of Funded Debt pursuant to Section 7.2, (ii)"
contained in the text after paragraph (e) thereof and before
paragraph (x) thereof is hereby deleted.
(ii) The phrase "(iii)" contained in the text
after paragraph (e) thereof and before paragraph (x) thereof
is hereby deleted and replaced with "(ii)".
(iii) Each reference to "May 31, 1993" contained
therein is hereby deleted and replaced with "May 31, 1996".
(iv) The phrase "$15,000,000" appearing in
paragraph (x) thereof is hereby deleted and replaced with
"$5,000,000".
(g) Section 7.6(a) of the Existing Note Agreement is
hereby amended as follows:
(i) The word "and" is hereby inserted at the end
of paragraph (i) thereof.
(ii) The phrase "; and" at the end of paragraph
(ii) thereof is hereby deleted and replaced with a period.
(iii) Paragraph (iii) thereof is hereby deleted in
its entirety.
7. AMENDMENTS TO SECTION 8.1 OF THE EXISTING NOTE AGREEMENT.
(a) Section 8.1(c) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
Exhibit A-1-10
26
"(c) Default shall occur (i) in the payment of the
principal of, premium, or interest on any other Indebtedness
of the Company or its Subsidiaries, aggregating in excess of
$1,000,000 in principal amount as and when due and payable
(whether by lapse of time, declaration, call for redemption or
otherwise), (ii) under any mortgage, agreement or other
instrument of the Company or any Subsidiary securing such
Indebtedness or under or pursuant to which such Indebtedness
aggregating in excess of $1,000,000 is issued, (iii) under any
leases other than Capitalized Leases of the Company or any
Subsidiary, with aggregate Rentals in excess of $1,000,000,
(iv) with respect to any combination of the foregoing
involving Indebtedness and/or Rentals aggregating in excess of
$1,000,000, regardless of whether such defaults would be
Events of Default hereunder, or (v) in the performance or
observance of any obligation or condition with respect to any
such Indebtedness and/or Rentals aggregating in excess of
$1,000,000, regardless of whether such defaults would be
Events of Default hereunder, if the effect of such default is
to accelerate the maturity of any such Indebtedness and/or
Rentals or such default shall continue unremedied for any
applicable period of time sufficient to permit the holder or
holders of such Indebtedness or the parties to such
Capitalized Leases, or any trustee or agent for such holders
or parties, to cause such Indebtedness and/or Rentals to
become due and payable prior to its/their expressed maturity."
(b) Section 8.1(d) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(d) (i) At any time prior to the Covenant
Reversion Date (as defined in the Amendment
Agreement), default in the observance or performance
of any of the provisions of Section 1.8 or Section 2
of Exhibit A-2 to the Amendment Agreement or Section
8.7 of this Agreement.
(ii) At any time on or after the Covenant
Reversion Date (as defined in the Amendment
Agreement), default in the observance or performance
of any of the provisions of Sections 7.1 through 7.10
or Section 8.7 of this Agreement."
(c) Section 8.1(f) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(f) Any representation or warranty made by the
Company in this Agreement or the Amendment Agreement, or made
by the Company or any Subsidiary in any written statement or
certificate furnished by the Company or any Subsidiary in
connection with the issuance, or any amendment or restatement
of, the Notes, or furnished by the Company pursuant to this
Agreement or the Amendment Agreement, proves incorrect in any
material respect as of the date of the issuance or making
thereof;"
Exhibit A-1-11
27
(d) Section 8.1(g) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(g) Any fines, penalties, judgments, writs or
warrants of attachment or any similar processes individually
or in the aggregate in excess of $2,000,000 shall be entered
or filed against the Company or any Subsidiary or against any
Property or assets of either and remain unpaid, unvacated,
unbonded or unstayed (through appeal or otherwise) for a
period of 30 days after the Company or any Subsidiary receives
notice thereof; provided, however, that this clause (g) shall
not include any judgment against the Company in respect of the
Ponca City Litigation for an amount not greater than the sum
of $6,000,000 plus interest accrued thereon;"
(e) The word "or" at the end of Section 8.1(h) of the
Existing Note Agreement is hereby deleted.
(f) The period at the end of Section 8.1(i)(vii) of the
Existing Note Agreement is hereby deleted and a semi-colon is hereby
inserted in its place.
(g) Section 8.1(j) of the Existing Note Agreement is
hereby amended to read in its entirety as follows:
"(j) The Company shall fail to receive at least
$15,000,000 of Qualified Capital Infusion Proceeds on or
before April 30, 1997;"
(h) A new Section 8.1(k), a new Section 8.1(l) and a new
Section 8.1(m) are hereby added to the Existing Note Agreement, after
Section 8.1(j) and before Section 8.2 thereof, which shall read in
their entirety as follows:
"(k) The Company or any Subsidiary shall fail to
comply in any material respect with any one or more of the
provisions or requirements contained in the Security
Documents; or any of the Security Documents shall cease for
any reason to be in full force or effect or is declared to be
null and void or the Company or any Subsidiary shall disavow
its respective obligations thereunder, or shall contest the
validity or enforceability of any thereof or gives notice to
such effect; or any Lien purported to be granted pursuant to
any of the Security Documents for any reason (other than
release or termination thereof by the Collateral Agent or the
Creditor Parties) shall cease to be a legal, valid or
enforceable Lien on the Property subject thereto with the
priority purported to be granted pursuant to such Security
Documents (other than as a result of the failure of the
Collateral Agent or any Creditor Party to take any action
solely within its control);
(l) Any Subsidiary shall fail to comply in any
material respect with any one or more of the provisions or
requirements contained in the Subsidiaries Guaranty; or the
Subsidiaries Guaranty shall cease for any reason to be in full
force or effect or is declared to be null and void (other than
in respect of TAVFSC) or any Subsidiary shall disavow its
respective obligations thereunder, or shall contest the
validity or enforceability thereof or gives notice to such
effect; or
Exhibit A-1-12
28
(m) The Company shall make, or shall be required
by one or more final judgments to make, any payment or
payments in an aggregate amount greater than the sum of
$6,000,000 plus accrued interest in satisfaction of one or
more judgments against the Company in respect of the Ponca
City Litigation."
8. AMENDMENT TO SECTION 8.2 OF THE EXISTING NOTE AGREEMENT.
Section 8.2 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"8.2 Remedies on Default. When any Event of Default
described in paragraph (a) through paragraph (h), inclusive, or
paragraph (j) through paragraph (m), inclusive, of Section 8.1 has
happened and is continuing, the holder or holders of at least 66 2/3%
in aggregate principal amount of the Notes, the May 1995 Series Notes
and the April 1994 Series Notes (taken together and voting as one
class) then outstanding (exclusive of Notes, May 1995 Series Notes and
April 1994 Series Notes held in the name of, or owned beneficially by,
any one or more of the Company, any Subsidiary or any Affiliate) may
by notice to the Company declare the entire principal, together with
the premium set forth below, and all interest accrued on all Notes to
be, and such Notes shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind,
all of which are expressly waived. Notwithstanding the foregoing,
when
(i) any Event of Default described in paragraph
(a) or paragraph (b) of Section 8.1 has happened and is
continuing, any holder may by notice to the Company declare
the entire principal, together with the premium set forth
below, and all interest accrued on the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or
other notice of any kind, all of which are expressly waived,
and
(ii) any Event of Default described in paragraph
(i) of Section 8.1 has happened, then all outstanding Notes
shall immediately become due and payable without presentment,
demand or notice of any kind.
Upon the Notes or any of them becoming due and payable as aforesaid,
the Company will forthwith pay to the holders of such Notes the entire
principal of and interest accrued on such Notes, plus, to the extent
permitted by law, a premium in the event that the Reinvestment Yield
shall, on the Determination Date, be less than the interest rate
payable on or in respect of the Notes. Such premium shall equal (x)
the aggregate present value of the principal so accelerated and the
aggregate present value of the interest which would have been payable
in respect of such principal (at the rate of 8.42% per annum) absent
such accelerated payment, determined by discounting (semi-annually on
the basis of a 360-day year composed of twelve 30-day months) each
such amount utilizing an interest factor equal to the Reinvestment
Yield, less (y) the principal amount so accelerated."
9. AMENDMENT TO SECTION 8.3 OF THE EXISTING NOTE AGREEMENT.
Section 8.3 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
Exhibit A-1-13
29
"8.3 Annulment of Acceleration of Notes. The provisions
of Section 8.2 are subject to the condition that if the principal of
and accrued interest on the Notes have been declared immediately due
and payable by reason of the occurrence of any Event of Default
described in paragraph (c) through paragraph (h), inclusive, or
paragraph (j) through paragraph (m), inclusive, of Section 8.1, the
holder or holders of at least 70% in aggregate principal amount of the
Notes, the May 1995 Series Notes and the April 1994 Series Notes
(taken together and voting as one class) then outstanding (exclusive
of Notes, May 1995 Series Notes and April 1994 Series Notes held in
the name of, or owned beneficially by, any one or more of the Company,
any Subsidiary or any Affiliate) may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences
thereof; provided that (i) at the time such declaration is annulled
and rescinded no judgment or decree has been entered for the payment
of any monies due pursuant to the Notes or this Agreement, (ii) all
arrears of interest upon all the Notes and all other sums payable
under the notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable
solely by reason of such declaration under Section 8.2) shall have
been duly paid and (iii) each and every Event of Default shall have
been cured or waived; and provided further, that no such rescission
and annulment shall extend to or affect any subsequent Default or
Event of Default or impair any right consequent thereto."
10. AMENDMENT TO SECTION 8.4 OF THE EXISTING NOTE AGREEMENT.
Section 8.4 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"8.4 Remedies on Default. If an Event of Default shall be
continuing, any holder of Notes may enforce its rights by suit in
equity, by action at law, or by any other appropriate proceedings,
whether for the specific performance (to the extent permitted by law)
of any covenant or agreement contained in this Agreement, and may
enforce the payment of any Note held by such holder and any of its
other legal or equitable rights, provided that the maturity of such
holder's Notes may be accelerated only in accordance with Section
8.2."
11. AMENDMENTS TO SECTION 9.1 OF THE EXISTING NOTE AGREEMENT.
Section 9.1 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"9.1 Matters Subject to Modification. Any term, covenant,
agreement or condition of this Agreement may, with the consent of the
Company, be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in
writing of the holder or holders of at least 66 2/3% in aggregate
principal amount of the Notes, the May 1995 Series Notes and the April
1994 Series Notes (taken together and voting as one class) then
outstanding; provided, however, that, without the written consent of
the holder or holders of all of the Notes, May 1995 Series Notes and
April 1994 Series Notes then outstanding, no such waiver,
modification, alteration or amendment shall be effective which will
(i) change the time of payment (including any required prepayment) of
the principal of or the interest on any Note, (ii) reduce the
principal amount thereof or the premium, if any, or change the rate of
interest thereon, (iii) change any provision of any instrument
affecting the preferences between holders of
Exhibit A-1-14
30
the Notes or between holders of the Notes and other creditors of the
Company, or (iv) change any of the provisions of Section 6.10, Section
8 or this Section 9.
For the purpose of determining whether the holder or holders
of all or any requisite principal amount of Notes, or of Notes, May
1995 Series Notes and April 1994 Series Notes, have made or concurred
in any waiver, consent, approval, notice or other communication under
this Agreement, any and all Notes, May 1995 Series Notes and April
1994 Series Notes held in the name of, or owned beneficially by, the
Company, any Subsidiary or any Affiliate thereof, shall not be deemed
outstanding.
12. AMENDMENTS TO SECTION 9.2 OF THE EXISTING NOTE AGREEMENT.
Section 9.2 of the Existing Note Agreement is hereby amended to read in its
entirety as follows:
"9.2 Solicitation of Holders of Notes. The Company will
not solicit, request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions of this Agreement or the
Notes unless each record holder of the Notes and each record holder of
May 1995 Series Notes and April 1994 Series Notes (irrespective of the
amount of Notes or May 1995 Series Notes or April 1994 Series Notes
then owned by it) shall concurrently be informed thereof by the
Company and shall be afforded the opportunity of considering the same
and shall be supplied by the Company with sufficient information to
enable it to make an informed decision with respect thereto. Executed
or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 9 shall be delivered by the Company
to each holder of outstanding Notes and each holder of May 1995 Series
Notes and April 1994 Series Notes forthwith following the date on
which the same shall have become effective in accordance with the
terms thereof and of this Section 9. The Company will not, directly
or indirectly, pay or cause to be paid any remuneration, whether by
way of supplemental or additional interest, fee or otherwise, to any
holder of Notes or any holder of May 1995 Series Notes or April 1994
Series Notes as consideration for or as an inducement to the entering
into by any holder of Notes or any holder of May 1995 Series Notes or
April 1994 Series Notes of any waiver or amendment of any of the terms
and provisions of this Agreement unless such remuneration is
concurrently paid, on the same terms, ratably to the holders of all
Notes, May 1995 Series Notes and April 1994 Series Notes then
outstanding. Any consent made pursuant to this Section 9 by a holder
of Notes that has transferred or has agreed to transfer its Notes to
the Company or any Affiliate or has agreed to provide such written
consent as a condition to such transfer shall be void and of no force
and effect except solely as to such holder, and any amendments
effected or waivers granted or to be effected or granted that would
not have been or would not be so effected or granted but for such
consent (and the consents of all other holders of Notes and holders of
May 1995 Series Notes and April 1994 Series Notes that were acquired
under the same or similar conditions) shall be void and of no force
and effect, retroactive to the date such amendment or waiver initially
took or takes effect, except solely as to such holder.
13. AMENDMENT TO FORM OF NOTES AND AMENDMENT AND RESTATEMENT OF
NOTES. (i) Exhibit A to the Existing Note Agreement is hereby amended to read
in its entirety as set forth below and (ii) each of the Notes shall,
contemporaneously with the delivery of this Agreement, be amended and restated
in the form set forth below:
Exhibit A-1-15
31
[Remainder of page intentionally left blank.]
Exhibit A-1-16
32
"EXHIBIT A"
THORN APPLE VALLEY, INC.
SENIOR NOTE
DUE OCTOBER 1, 2003
PPN: 885184 B@ 9
_________________________
THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT
AND ACCORDINGLY ANY PROSPECTIVE PURCHASERS SHOULD FIRST VERIFY THE
UNPAID PRINCIPAL AMOUNT WITH THE COMPANY.
_________________________
Registered Note No. R-____
[Date]
$________________________
THORN APPLE VALLEY, INC., a Michigan corporation (the
"Company"), for value received, hereby promises to pay to
________________________ or registered assigns, on the first day of
October, 2003, the principal amount of _________________ Dollars
($________) and to pay interest (computed on the basis of a 360-day
year of twelve 30-day months) on the principal amount from time to
time remaining unpaid hereon at the rate set forth in the Note
Agreement hereinafter defined from the date hereof until maturity,
payable at the times set forth in the Note Agreement hereinafter
defined, and at maturity, and to pay interest on overdue principal,
premium and (to the extent legally enforceable) on any overdue
installment of interest at the rate set forth in the Note Agreement
hereinafter defined after maturity or the due date thereof, whether by
acceleration or otherwise, until paid. Payments of the principal of,
the premium, if any, and interest on this Note shall be made in lawful
money of the United States of America in the manner and at the place
provided in Section 2.5 of the Note Agreement hereinafter defined.
This Note is issued under and pursuant to the terms of a Note
Agreement, dated as of October 1, 1994, entered into by the Company
with the Purchaser named in Schedule I thereto (as amended from time
to time, the "Note Agreement"), and this Note and any holder hereof
are entitled to all of the benefits and are bound by the terms
provided for in such Note Agreement. The provisions of the Note
Agreement are incorporated in this Note to the same extent as if set
forth at length herein.
This Note has not been registered under the Securities Act as
provided in the Note Agreement, any transfer is subject to compliance
with the terms of the Note Agreement and upon surrender of this Note
for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder
hereof or its attorney duly authorized in writing, a new Note for a
like unpaid principal
Exhibit A-1-17
33
amount will be issued to, and registered in the name of, the
transferee upon the payment of the taxes or other governmental
charges, if any, that may be imposed in connection therewith. The
Company may treat the person in whose name this Note is registered as
the owner hereof for the purpose of receiving payment for all other
purposes, and the Company shall not be affected by any notice to the
contrary.
Under certain circumstances, this Note may be declared due
prior to its expressed maturity date. Required prepayments must be
made hereon as set forth in the Note Agreement. Voluntary and other
prepayments may be made hereon in the events, on the terms and in the
manner as provided in the Note Agreement.
Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the Note
Agreement or be placed in the hands of attorneys for collection, the
Company agrees to pay, in addition to the principal, premium, if any,
and interest due and payable hereon, to the extent legally
enforceable, all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
This Note and the Note Agreement are governed by and construed
in accordance with the laws of the State of Illinois.
THORN APPLE VALLEY, INC.
By:_______________________
Its:
Exhibit A-1-18
34
EXHIBIT A-2
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 Exhibit A-2 are defined in Section
3 of this Exhibit A-2.
Exhibit A-2-1
35
(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
Exhibit A-2-2
36
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
Exhibit A-2-3
37
(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
Exhibit A-2-4
38
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
Exhibit A-2-5
39
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.
Exhibit A-2-6
40
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
Exhibit A-2-7
41
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:
NEVER BE LESS CONSOLIDATED ADJUSTED NET WORTH SHALL
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
Exhibit A-2-8
42
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;
Exhibit A-2-9
43
(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
Exhibit A-2-10
44
(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,
Michigan (approximate balance of purchase price: $300,000);
Exhibit A-2-11
45
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.
Exhibit A-2-12
46
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.
Exhibit A-2-13
47
"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
Exhibit A-2-14
48
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
Exhibit A-2-15
49
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
Exhibit A-2-16
50
($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
Exhibit A-2-17
51
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.
Exhibit A-2-18
52
DISCLOSURE SCHEDULE TO EXHIBIT A-2
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
53
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
54
EXHIBIT A TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Operating Leases
Disclosure Schedule - 3
55
EXHIBIT B TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
Disclosure Schedule - 4
56
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1