EXHIBIT 10.2
The Equity Agreement
EXHIBIT 10.2
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EQUITY AGREEMENT
DATED
OCTOBER 29, 1998
BY AND AMONG
CGW SOUTHEAST PARTNERS III, L.P.
AND
GORGES HOLDING CORPORATION
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EXECUTION COPY
EQUITY AGREEMENT
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THIS EQUITY AGREEMENT (this "Agreement") is entered into on this 29th day
of October, 1998, by and among CGW SOUTHEAST PARTNERS III, L.P., a Delaware
limited partnership ("CGW") and GORGES HOLDING CORPORATION, a Delaware
corporation ("GHC").
WHEREAS, CGW and GHC are parties to that certain Securities Purchase and
Stockholders Agreement dated November 25, 1996 (the "Stockholders Agreement") by
and among GHC, CGW, Mellon Bank, N.A., as Trustee for First Plaza Group Trust
("First Plaza"), NationsBanc Investment Corporation, a Delaware corporation
("NationsBank"), J. Xxxxx Xxxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxx,
Xxxxxx X. Xxxxxx, Xxxxxxxx Xxxxxx and Xxxxxx Xxxx Xxxxx (First Plaza,
NationsBank and Messrs. Culwell, Mitchell, Collins, Powers, Xxxxxx and Xxxxx are
each an "Other Stockholder" and, collectively, the "Other Stockholders");
WHEREAS, the capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Stockholders Agreement;
WHEREAS, the Board of Directors of GHC has approved a plan for the
reorganization and refinancing of GHC intended to reduce indebtedness and
improve GHC's ability to meet its debt service obligations (the "Reorganization
Plan");
WHEREAS, as part of the Reorganization Plan, and subject to the Minimum
Tender Condition, Senior Financing Condition, Bridge Financing Condition and
Amendment Condition (as those terms are defined herein), GHC proposes to issue
and sell up to 3,675,000 shares of Stock (the "Shares") for Four Dollars
($4.00) per share (the "Price Per Share");
WHEREAS, Section 8 of the Stockholders Agreement requires GHC to offer the
Shares to CGW and each of the Other Stockholders in proportion to their
respective pro rata share of the current number of outstanding and issued shares
of Common Stock ("Pro Rata Share") for the Price Per Share;
WHEREAS, Gorges/Quik-To-Fix Foods, Inc., a Delaware corporation and wholly
owned subsidiary of GHC ("Gorges"), proposes to make an offer (the "Tender
Offer") to purchase not less than Thirty Six Million Dollars ($36,000,000) and
up to Forty Six Million Dollars ($46,000,000) aggregate principal amount of its
11 1/2% Senior Subordinated Notes Due 2006, Series B (the "Notes") guaranteed by
GHC using a written offer in substantially the form attached hereto as Exhibit A
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(the "Offer to Purchase");
WHEREAS, upon consummation of the Offer to Purchase, Gorges will be
obligated to make an interest payment on the outstanding Notes in an amount
up to
$3,000,000, depending on the aggregate principal amount of Notes that remain
outstanding after the consummation of the Offer to Purchase (the "Interest
Payment");
WHEREAS, GHC desires to provide Gorges with the funds necessary to make the
Interest Payment using funds made available to GHC by CGW under the Bridge
Financing Condition (as defined herein);
WHEREAS, because of timing considerations related to Gorges making the
Offer to Purchase, it is not practical for GHC to comply with the provisions of
Section 8 of the Stockholders Agreement prior to the consummation of the Offer
to Purchase;
WHEREAS, in order to provide assurances to GHC that the Shares it proposes
to issue and sell will be fully subscribed for prior to such time as Gorges
makes the Offer to Purchase, CGW has agreed, subject to the satisfaction of the
Minimum Tender Condition, the Senior Debt Condition, the Bridge Financing
Condition and the Amendment Condition, to subscribe for and purchase all of the
Shares; and
WHEREAS, as soon as practical, GHC will notify the Other Stockholders of
such proposed issuance, and CGW shall afford to the Other Stockholders the right
to purchase from it each Other Stockholders' Pro Rata Share of the Shares at the
Price Per Share.
NOW, THEREFORE, for and in consideration of the above mutual
representations, warranties, covenants and agreements and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto mutually covenant and agree as follows:
SECTION 1
PURCHASE AND SALE OF SECURITIES
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1.1 Purchase and Sale of Class A Stock by CGW. Subject to the
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satisfaction of the conditions precedent in Section 1.2, GHC agrees to issue and
sell the shares to CGW and CGW agrees to purchase the Shares from GHC for the
Price Per Share. The amount equal to the product of the Shares and the Price Per
Share is hereinafter referred to as the "Aggregate Purchase Price".
1.2 Conditions Precedent to Closing. Notwithstanding any other provisions
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set forth herein, the obligation of CGW to purchase the Shares at the Closing
(as defined below) is subject to the fulfillment or waiver of all of the
following conditions prior to, or contemporaneously with, the Closing.
1.2.1 The Minimum Tender Condition. There shall have been validly
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tendered (and not withdrawn) prior to the Expiration Date (as defined in the
Offer to Purchase) not less than Thirty Six Million Dollars ($36,000,000) in the
aggregate principal amount of the Notes ("the Minimum Tender Condition").
1.2.2 The Senior Financing Condition. There shall have been
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completed an amendment to the Credit Agreement, which amendment is in a form and
substance satisfactory to CGW in its sole and absolute discretion (the "Senior
Financing Condition").
1.2.3 The Bridge Financing Condition. GHC shall have made available
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to Gorges, through the purchase of additional equity or debt securities of
Gorges, up to Three Million Dollars ($3,000,000) to finance the Interest Payment
(the "Bridge Financing Condition").
1.2.4 The Amendment Condition. The following actions shall have been
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taken and completed by GHC (the "Amendment Condition"):
(a) The Board of Directors of GHC shall have adopted, by
unanimous written action of such directors, without a meeting formally convened,
resolutions substantially in the form of Exhibit B hereto (i) adopting an
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Amendment of the Certificate of Incorporation, pursuant to which the
capitalization of GHC shall be increased such that the number of authorized
shares of Class A Stock is Ten Million (10,000,000), the number of authorized
shares of Class B Stock is Two Million (2,000,000) and the number of shares of
Preferred Stock without designation is One Million (1,000,000) (the
"Amendment"), (ii) calling a special meeting of the stockholders of GHC by no
later than November 10, 1998, and (iii) recommending that the Amendment be
approved by the stockholders of GHC.
(b) By no later than November 10, 1998, the stockholders of GHC
shall have acted by unanimous written action, without a meeting formally
convened, to adopt resolutions substantially in the form attached as Exhibit C
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hereto.
(c) As soon as practicable following an approval of the
Amendment by the stockholders of GHC, GHC shall file the Amendment with the
Secretary of State of the State of Delaware, and shall cause the same to become
effective in accordance with Section 103 of the Delaware General Corporation
Law.
(d) GHC shall receive a certificate from the Secretary of State
of the State of Delaware certifying the filing of the Amendment.
1.3 Closing. Subject to the satisfaction or waiver of all conditions
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precedent which are set forth in Section 1.2, the purchase of the Shares by CGW
and consummation of the Bridge Financing described in Section 2 below shall take
place contemporaneously at a closing (the "Closing") to be held at the offices
of Xxxxxx & Bird, 0000 X. Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, on December
1, 1998, or such later date agreed upon by GHC and CGW (the "Closing Date)".
1.4 Deliveries at the Closing. CGW shall pay for the Shares subscribed
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for hereunder by (a) transferring to GHC at the Closing Twelve Million Dollars
($12,000,000)
in aggregate face amount of Notes now owned by CGW which shall be valued at Four
Million Dollars ($4,000,000) for purposes of payment for the Shares, and (b)
paying by wire transfer to the account of GHC, subject to the adjustments in
Section 3.2, the balance of the Aggregate Purchase Price for the Shares. In
consideration of the delivery of the Aggregate Purchase Price, GHC shall deliver
to CGW a certificate registered in the name of CGW representing the Shares
purchased by CGW hereunder.
SECTION 2
BRIDGE FINANCING
2.1 Bridge Financing. Subject to the satisfaction of the Minimum Tender
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Condition, the Senior Financing Condition and the Amendment Condition set forth
in Sections 1.2.1, 1.2.2 and 1.2.4, respectively, CGW shall make available to
GHC, through the purchase of debt or equity securities of GHC, up to Three
Million Dollars ($3,000,000) to GHC (the "Bridge Financing"). Promptly upon
consummation of the Bridge Financing, the proceeds of the Bridge Financing shall
be made available by GHC to Gorges to satisfy the Bridge Financing Condition
described in Section 1.2.3.
2.2 Subordination of the Bridge Loan Financing. If the Bridge Financing
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is made through the purchase by CGW of debt securities of GHC, CGW agrees to
execute and deliver such other evidence of the subordination of the Bridge
Financing to the prior payment of the indebtedness from time to time outstanding
under the Credit Agreement, as the same may be from time to time amended,
supplemented or replaced, and the indebtedness evidenced by the Notes that
remain outstanding following completion of the Offer to Purchase.
SECTION 3
OFFER TO THE OTHER STOCKHOLDERS
3.1 Notice to the Other Stockholders. As soon as practicable, but in all
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events within three business days following the Closing, GHC and CGW shall give
the notice required by Section 8 of the Stockholders Agreement to the Other
Stockholders.
3.2 Shares Offered to Other Stockholders. If GHC receives timely notice
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from any Other Stockholder stating that such Other Stockholder desires to
purchase his, her or its Pro Rata Share of the Shares, CGW will promptly
transfer to such Other Stockholder such Pro Rata Share of the Shares against
payment to CGW by such Other Stockholder of an amount equal to the product of
the Price Per Share times the number of shares transferred to such Other
Stockholder.
SECTION 4
REPRESENTATIONS AND WARRANTIES
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4.1 Representations and Warranties of CGW. CGW represents and warrants to
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GHC as follows:
4.1.1 Organization and Qualification. CGW is a partnership that is
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duly organized, validly existing and in good standing under the laws of
Delaware.
4.1.2 Authority. CGW is an "accredited investor" as such term is
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defined in Rule 501 of the Rules and Regulations promulgated under the
Securities Act of 1933, as amended, and has full power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by CGW of this Agreement have been duly and
validly authorized and approved by all necessary action on the part of CGW.
4.1.3 Investment. The Class A Stock to be purchased by CGW hereunder
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is being acquired for investment purposes only and for CGW's own account and not
with a view to the resale or distribution of any part thereof, except for
resales to Other Stockholders as provided in Section 3 to satisfy the rights of
such Other Stockholders under Section 8 of the Stockholders Agreement.
4.1.4 Sophistication. CGW has such knowledge and experience in
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financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Class A Stock; CGW has the ability to bear the
economic risks of such investment; CGW has the capacity to protect his or its
own interests in connection with the transactions contemplated by this
Agreement; and CGW has had an opportunity to obtain such financial and other
information from GHC as it deems necessary or appropriate in connection with
evaluating the merits of the investment in the Class A Stock.
4.2 Representations and Warranties of GHC. GHC represents and warrants to
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CGW as follows:
4.2.1 Legal Status; Qualification.
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(a) GHC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. GHC is duly qualified or
licensed to do business and in good standing as a foreign corporation in all
jurisdictions where the failure to be so qualified or licensed would have a
Material Adverse Effect (as defined in the Stockholders Agreement). GHC is not
in violation of any of the provisions of its Certificate of Incorporation or
Bylaws.
(b) As of the Closing, the only subsidiary of GHC is Gorges. Gorges
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Gorges is duly qualified or licensed to do
business and in good standing as a foreign corporation in all jurisdictions
where the failure to be so qualified or licensed would have a Material Adverse
Effect. Gorges is not in violation of any of the provisions of its Certificate
of Incorporation or Bylaws.
4.2.2 Corporate Power and Authority; Governmental or Other Consents.
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Gorges and GHC each have all requisite corporate power and authority to carry on
their business as presently conducted and as currently proposed to be conducted,
and to own, lease, sell or operate their properties. GHC has the requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement, and any other instruments or documents executed and
delivered by it hereunder. No governmental or other consents, approvals,
authorizations, registrations, declarations or filings are required for the
execution, delivery and performance of this Agreement by GHC. Neither GHC nor
any of its subsidiaries are subject to any law, rule or regulation restricting
in any way its ability to issue shares of its capital stock or rights to acquire
such shares.
4.2.3 Due Authorization; Validity; Enforceability. This Agreement
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and all other instruments or documents executed by GHC in connection herewith
have been duly authorized, executed and delivered, and constitute legal, valid
and binding obligations of GHC, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and general principles of equity (whether
considered in an action at law or in equity).
4.2.4 Truth and Accuracy of Information. None of the documents,
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instruments and other information furnished to CGW by GHC contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make any statements made therein not misleading. No representation,
warranty or statement made by GHC in this Agreement, or in any document or
certificate delivered in connection herewith, contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make any statements made therein not misleading. There is no
fact which could reasonably be expected to have a Material Adverse Effect and
which has not been disclosed in the documents provided to CGW.
4.2.5 Litigation. There is no (a) legal, administrative, arbitration
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or other proceeding, suit, claim or action of any nature, investigation or
controversy, pending or, to the knowledge of GHC, threatened against Gorges or
GHC, whether at law or in equity, or before or by any arbitrator or any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality that, if decided adversely to Gorges or GHC would have
a Material Adverse Effect or would restrain or prohibit GHC from consummating
the transactions provided for herein; or (b) judgment, decree, injunction or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator against Gorges or GHC that would have a Material Adverse Effect or
that would restrain or prohibit GHC from consummating the transactions provided
for herein.
4.2.6 Valid Issuance. All of the outstanding capital stock of GHC
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has been duly authorized and validly issued and is fully paid and non-assessable
and has been issued in compliance with applicable securities and other similar
laws. When issued in accordance with, and for the consideration specified in,
this Agreement, the Class A Stock
to be purchased by CGW hereunder will have been duly authorized and validly
issued and will be fully paid and non-assessable with no personal liability
attaching to the ownership thereof. CGW will receive title to the Class A Stock
purchased by it hereunder free and clear of any lien, charge or encumbrance,
other than as may be created by the action or inaction of CGW.
SECTION 5
COVENANTS, RIGHTS, OBLIGATIONS AND RESTRICTIONS
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CGW and GHC hereby agree that CGW shall have, and continue to have the
benefit of the covenants, rights, obligations and restrictions set forth in
Sections 5 through 11 in the Stockholders Agreement with respect to the Shares
purchased by CGW under this Agreement; provided that, such covenants, rights,
obligations and restrictions are subject to termination under Section 11.1.4 of
the Stockholders Agreement.
SECTION 6
MISCELLANEOUS
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6.1 Termination. This Agreement and the transactions contemplated herein
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may be terminated at any time prior to the Closing by (a) CGW if the
transactions contemplated hereby have not been closed or if any of the
conditions set forth in Section 1.2 have not been satisfied or waived by CGW by
December 5, 1998; or (b) the agreement of GHC and CGW.
6.2 Successors and Assigns. This Agreement shall be binding upon and
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inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
6.3 Entire Agreement, Amendment. This Agreement by GHC and CGW in
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connection with, or as required by, this Agreement constitutes the entire
agreement between GHC and CGW with respect to the transactions contemplated by
this Agreement; supersedes all prior or contemporaneous negotiations,
communications, discussions and correspondence concerning the subject matter
hereof; and may be amended or modified only with the written consent of GHC and
CGW.
6.4 Severability of Provisions. If any provision of this Agreement shall
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be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement, and the parties shall use their respective best efforts to negotiate
and enter into an amendment to this Agreement whereby such provision will be
modified in a manner that is consistent with the intended economic consequences
of the invalid provision and that, as modified, is legal and enforceable.
6.5 Governing Law. This agreement shall be governed by and construed in
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accordance with the internal laws of the State of Delaware without giving effect
to any choice of law or conflict, provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of Delaware to be applied.
6.6 Counterparts. This Agreement may be executed in separate
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counterparts, each of which, when so executed, shall be deemed to be an original
and all of which, when taken together, shall constitute but one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first written above.
GORGES HOLDING CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
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Vice President and Secretary
CGW SOUTHEAST PARTNERS III, L.P.
By: CGW Southeast III, L.L.C., its
General Partner
By: CGW, Inc., its Manager
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Managing Director
