1
================================================================================
EXHIBIT 10(v)
THORN APPLE VALLEY, INC.
__________________________________
AMENDMENT AGREEMENT
__________________________________
RE:
NOTE AGREEMENT DATED AS OF MAY 15, 1995
AND
$42,500,000 7.58% SENIOR NOTES DUE MAY 15, 2005
DATED AS OF SEPTEMBER 11, 1996
$42,500,000 SENIOR NOTES DUE MAY 15, 2005
================================================================================
2
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "Agreement"), dated as of September 11, 1996,
among THORN APPLE VALLEY, INC. (the "Company"), a Michigan corporation,
ALLSTATE LIFE INSURANCE COMPANY ("Allstate"), PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY ("Principal"), and GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
("Great-West"; Allstate, Principal and Great-West are herein collectively
referred to as the "Noteholders").
RECITALS:
A. Pursuant to that certain Note Agreement, dated as of May 15, 1995
(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 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 (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 Noteholders 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
Noteholders are 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 each of the Noteholders 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.
1
3
"Allstate" -- introductory sentence hereof.
"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.
2
4
"Noteholders" -- introductory sentence hereof.
"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 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 and (ii) that certain Note Agreement,
dated as of October 1, 1994, by and between the Company and Allstate, pursuant
to which 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, 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, each of the Noteholders hereby
consents and agrees 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, each of the Noteholders hereby consents and agrees 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.
3
5
SECTION 3. WAIVER OF NON-COMPLIANCE.
Effective upon the satisfaction of the conditions set forth in Section
5 hereof, the Noteholders hereby irrevocably waive (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 Noteholders to enter into this Agreement, the Company
warrants and represents to the Noteholders 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
4
6
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 Noteholders 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 Noteholders 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 each of the
Noteholders 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.
5
7
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 each of the Noteholders a counterpart of this
Agreement.
5.2 EXECUTION AND DELIVERY OF OTHER DOCUMENTS. The following
documents, each in form and substance satisfactory to the Noteholders and their
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,
6
8
which agreements, in each case, shall be in form and substance
satisfactory to the Noteholders;
(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 Noteholders;
(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 Noteholders;
(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 Noteholders;
(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 Noteholders; and
(g) an Intercreditor Agreement (the "Intercreditor Agreement"),
among the Noteholders, 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 Noteholders.
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 each 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 Noteholders. 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.
7
9
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 Noteholders in their
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 Noteholders 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
Noteholders, 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 Noteholders 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 Noteholders, 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
Noteholders 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 Noteholders shall have received from
Honigman Miller Schwartz and Cohn, counsel to the Company, a legal opinion, in
form and substance satisfactory to the Noteholders and their 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 Noteholders 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 Noteholders.
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.
8
10
5.12 PROCEEDINGS SATISFACTORY. All documents executed and delivered,
and actions and proceedings taken, in connection with this Agreement shall be
satisfactory to the Noteholders and their special counsel. The Noteholders and
their 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 Noteholders of, or
otherwise prejudice the Noteholders' 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.
9
11
7.5 COSTS AND EXPENSES. On the Amendment Effective Date, the Company
shall pay all costs and expenses of the Noteholders 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 Noteholders' special
counsel and (ii) the statement for reasonable out-of-pocket expenses of the
Noteholders, 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
Noteholders' special counsel or (ii) reasonable out-of-pocket expenses of the
Noteholders, 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
Noteholders and shall survive the execution of the Amended Note Documents,
regardless of any investigation made by or on behalf of the Noteholders. 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 each of the Noteholders, together with their respective 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 Noteholders 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
10
12
interference with contractual relations, tortious interference with corporate
governance or 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.
11
13
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 Noteholders
and their respective 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:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By
-----------------------------
Name:
Title:
By
-----------------------------
Name:
Title:
[AMENDMENT AGREEMENT IN RESPECT OF THORN APPLE VALLEY, INC.]
15
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By
-----------------------------
Name:
Title:
By
-----------------------------
Name:
Title:
[AMENDMENT AGREEMENT IN RESPECT OF THORN APPLE VALLEY, INC.]
16
ANNEX 1
INFORMATION AS TO COMPANY
[SUPPLEMENTAL INFORMATION WITH RESPECT TO
REPRESENTATIONS AND WARRANTIES IN EXISTING NOTE AGREEMENT]
17
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 $42,500,000 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
7.58% 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 May 15, 2005 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' and, together with the other Purchasers, as the
'Purchasers'."
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.
(a) The phrase "(a)" is hereby inserted in Section 2.1 of the
Existing Note Agreement after the heading of such Section and before the
first sentence thereof.
Exhibit A-1-1
18
(b) A new Section 2.1(b), a new Section 2.1(c), and a new
Section 2.1(d) are hereby added to the Existing Note Agreement, after
the existing Section 2.1 and before Section 2.2 thereof, which shall
read in their entirety as follows:
"(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 Noteholders 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 7.58% 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 7.58% 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 7.58% 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 7.58% 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 7.58% 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 7.58% 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
Exhibit A-1-2
19
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
Noteholders of 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 7.58% 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
7.58% 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 7.58% 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 7.58% 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 7.58% 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
Exhibit A-1-3
20
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 7.58% 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 repurchase of less than all of the Notes
outstanding shall be applied to reduce, on a pro rata basis, the
prepayments and payment at maturity required by Section 2.1(a)."
(c) Section 2.2(d) of the Existing Note Agreement is hereby
amended to read in its entirety as follows:
"(d) Except as provided in Section 2.1 and this Section 2.2,
the Notes shall not be prepayable in whole or in part."
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).
Exhibit A-1-4
21
Amendment Agreement - That certain Amendment Agreement, dated as of
September 11, 1996, by and among the Company and the Noteholders.
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.
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.
Exhibit A-1-5
22
Intercreditor Agreement - That certain Intercreditor Agreement dated as
of September 11, 1996, by and among the Banks, the Noteholders, Old Kent, 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.
October 1994 Series Notes - Shall mean the Company's Senior Notes due
October 1, 2003 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 October 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.
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.
Post-Restructuring Rate - In respect of any Note, a rate of interest
equal to the sum of (i) 7.58% plus (ii) the Applicable Spread.
Pre-Restructuring Rate - In respect of any Note, a rate of interest
equal to the sum of (i) 7.58% 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
Exhibit A-1-6
23
(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
Noteholders in their sole and absolute discretion.
Scheduled Amount - An amount equal to the remainder of
(a) the product of
(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 Noteholders in their sole discretion.
Security Documents - Shall have the meaning ascribed to such
term in the Intercreditor Agreement.
Exhibit A-1-7
24
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
(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
Exhibit A-1-8
25
(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".
(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 7.3 of the Existing Note Agreement is hereby amended
by deleting the phrase "twenty percent (20%)" contained therein and
replacing it with "ten percent (10%)".
Exhibit A-1-9
26
(d) Section 7.4 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 7.5 of the Existing Note Agreement is hereby amended
as follows:
(i) The word "and" at the end of Section 7.5(j) of the
Existing Note Agreement is hereby deleted.
(ii) The phrase "20%" contained in Section 7.5(k) of the
Existing Note Agreement is hereby deleted and replaced with "10%".
(iii) The period at the end of Section 7.5(k) of the Existing
Note Agreement is hereby deleted and the phrase "; and" is hereby
inserted in its place.
(iv) A new Section 7.5(l) is hereby added to the Existing Note
Agreement, after Section 7.5(k) of the Existing Note Agreement and
before the final paragraph of Section 7.5 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 7.5 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 7.6 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)".
Exhibit A-1-10
27
(iii) Each reference to "May 31, 1994" contained therein is
hereby deleted and replaced with "May 31, 1996".
(iv) The phrase "$22,000,000" appearing in paragraph (x)
thereof is hereby deleted and replaced with "$5,000,000".
(g) Section 7.7(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:
"(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
Exhibit A-1-11
28
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 7.11 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;"
(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:
Exhibit A-1-12
29
"(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
(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 April 1994 Series Notes and the
October 1994 Series Notes (taken together and voting as one class) then
outstanding (exclusive of Notes, April 1994 Series Notes and October
1994 Series Notes owned by 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
Exhibit A-1-13
30
(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 7.58% 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:
"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 April 1994 Series Notes and
the October 1994 Series Notes (taken together and voting as one class)
then outstanding (exclusive of Notes, April 1994 Series Notes and
October 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 April 1994 Series Notes and the
October 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, April 1994 Series Notes and
October 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,
Exhibit A-1-14
31
(iii) change any provision of any instrument affecting the
preferences between holders of 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, April 1994
Series Notes and October 1994 Series Notes, have made or concurred in
any waiver, consent, approval, notice or other communication under this
Agreement, any and all Notes, April 1994 Series Notes and October 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
April 1994 Series Notes and October 1994 Series Notes (irrespective of
the amount of Notes or April 1994 Series Notes or October 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 April 1994
Series Notes and October 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 April 1994 Series Notes or October 1994 Series
Notes as consideration for or as an inducement to the entering into by
any holder of Notes or any holder of April 1994 Series Notes or October
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, April
1994 Series Notes and October 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 April 1994 Series Notes and October
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
Exhibit A-1-15
32
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:
[Remainder of page intentionally left blank.]
Exhibit A-1-16
33
"EXHIBIT A
THORN APPLE VALLEY, INC.
SENIOR NOTE
DUE MAY 15, 2005
PPN: 885184 B# 7
_________________________
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]
$________________________
THORN APPLE VALLEY, INC., a Michigan corporation (the "Company"), for
value received, hereby promises to pay to ________________________ or
registered assigns, on the fifteenth day of May, 2005, the principal amount of
_________________ Dollars ($________) 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 May 15, 1995, entered into by the Company with the
Purchasers 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
34
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
35
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
36
(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
37
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
38
(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
39
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
40
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
41
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
42
contemporaneously with, or within 270 days after, such
acquisition or the completion of such construction (except Liens in
connection with the Ponca City Litigation shall not be permitted under
this clause (j)(i)), or (ii) any Lien in Property existing in such
Property at the time of acquisition thereof, whether or not the debt
secured thereby is assumed by the Borrower or such Subsidiary;
provided, that the Indebtedness secured by any such Lien referred to in
clauses (i) and (ii) above shall not exceed 100% of the fair market
value on the related Property at the time the Lien was originally
created;
(k) the Shared Lien; and
(l) Liens created, in the ordinary course of the Borrower's and
each Subsidiary's business, under the Packers and Stockyards Act of
1921, as amended, and the regulations promulgated thereunder, provided,
that the creation and continued existence of any such Liens, either
individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) of the Borrower and the Subsidiaries, taken as a whole, or
on the Borrower's ability to perform its obligations under any of the
Financing Agreements (as defined in the Intercreditor Agreement).
SECTION 2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) At any time during any period set forth in the table below,
Consolidated Adjusted Net Worth to be less than the amount set forth
opposite such period in such table:
CONSOLIDATED ADJUSTED NET WORTH SHALL
DURING THE PERIOD NEVER BE LESS 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 $91,000,000 plus 50% of the Consolidated Net
on 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
43
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
44
(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
45
(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
46
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
47
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
48
"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
49
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
50
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
51
($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
52
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
53
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
54
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
55
EXHIBIT A TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Operating Leases
Disclosure Schedule - 3
56
EXHIBIT B TO DISCLOSURE SCHEDULE TO EXHIBIT A-2
Thorn Apple Valley, Inc.
Standby Letters of Credit Summary as of May 31, 1996
57
EXHIBIT A-3
COLLATERAL AGAINST WHICH PERFECTION WILL OCCUR POST-CLOSING
AND OTHER COLLATERAL MATTERS
Exhibit A-3-1