Subsequent Events

Revolving Credit Facility.

On July 10, 2018, we entered into a $100.0 million Senior Secured Revolving Credit Facility (the “Revolving Credit Facility”) with a five-year term. The credit agreement for the Revolving Credit Facility includes an accordion feature permitting the Company, with the consent of the administrative agent, to increase the revolving commitments in the aggregate up to $125.0 million. As of July 20, 2018, no amounts were borrowed under the facility.

The interest rate is based, at the Company’s election, on either the Eurodollar Rate plus the Applicable Margin or the Base Rate plus the Applicable Margin. The “Eurodollar Rate” means the reserve adjusted rate at which Eurodollar deposits in the London interbank market for an interest period of one, two, three, six or twelve months (as selected by the Company) are quoted. The “Base Rate” means a fluctuating rate per annum equal to the highest of (a) the federal funds rate plus 0.50% per annum, (b) the prime rate of interest established by the administrative agent, and (c) the Eurodollar Rate for an interest period of one month plus 1% per annum, subject to certain interest rate floors. The “Applicable Margin” means 0.00% to 0.75% per annum for Base Rate Loans and 1.00% to 1.75% per annum for Eurodollar Rate Loans, in each case depending upon the average outstanding balance at the quarterly pricing date. The Company will pay a commitment fee of 0.20% on the unused portion of the facility.

The Revolving Credit Facility is guaranteed by all the current and future wholly-owned direct and indirect domestic subsidiaries of the Company, and is secured by a first-priority perfected security interest in substantially all of the Company’s and the guarantors’ accounts, payment intangibles, instruments (including promissory notes), chattel paper, inventory (including farm products) and deposit accounts maintained with the administrative agent.

The credit agreement for the Revolving Credit Facility contains customary covenants, including restrictions on the incurrence of liens, incurrence of additional debt, sales of assets and other fundamental corporate changes and investments. The credit agreement requires maintenance of two financial covenants (i) a minimum working capital ratio of 2.00 to 1.00 and (ii) an annual limit on capital expenditures of $100.0 million. Additionally, the credit agreement requires that Fred R. Adams Jr., his spouse, natural children, sons-in-law or grandchildren, or any trust, guardianship, conservatorship or custodianship for the primary benefit of any of the foregoing, or any family limited partnership, similar limited liability company or other entity that 100% of the voting control of such entity is held by any of the foregoing, shall maintain at least 50% of the Company’s voting stock. Failure to satisfy any of these covenants will constitute a default under the terms of the credit agreement. Further, dividends are restricted to the Company’s current dividend policy of one-third of the Company’s net income computed in accordance with generally accepted accounting principles. The Company is allowed to repurchase up to $75.0 million of its capital stock in any year provided there is no default under the credit agreement and the Company has availability of at least $20.0 million under the facility.

The credit agreement also includes customary events of default and customary remedies upon the occurrence of an event of default, including acceleration of the amounts due and foreclosure of the collateral.

Amendments to the Company’s Certificate of Incorporation.

At a special meeting on July 20, 2018, the Company’s stockholders approved amendments to the Company’s certificate of incorporation. The Company’s amended and restated certificate of incorporation, reflecting the amendments approved by the stockholders, is included as an exhibit to this report, and the description of the amendments below is qualified by reference to such exhibit.

Pursuant to the amendments, the term “immediate family member” was expanded to include the estates of each of the persons included as “immediate family members.” In addition, the amendments added a number of arrangements and entities that will be permitted to receive and hold shares of Class A Common Stock, with ten votes per share, without such shares converting into shares of Common Stock, with one vote per share (“Permitted Transferees”). The Permitted Transferees include arrangements and entities such as revocable trusts and limited liability companies that could hold Class A Common Stock for the benefit of immediate family members and which have a specified relationship with another Permitted Transferee or immediate family member. Accordingly, the amendments were designed to permit immediate family members to hold Class A Common Stock indirectly through common estate planning vehicles but not to change or expand the group or class of individuals who may beneficially own Class A Common Stock, with ten votes per share, under the certificate of incorporation prior to the amendments.

In addition, the amendments added the following provisions to the Company’s certificate of incorporation:

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a sunset provision pursuant to which all of the outstanding Class A Common Stock will automatically convert into Common Stock if either: (a) less than 4,300,000 shares of Class A Common Stock, in the aggregate, are beneficially owned by immediate family members and/or Permitted Transferees, or (b) if less than 4,600,000 shares of Class A Common Stock and Common Stock, in the aggregate, are beneficially owned by immediate family members and/or Permitted Transferees;


•	a provision that once shares of Class A Common Stock are converted into Common Stock, the shares of Class A Common Stock will be retired and may not be reissued; and

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provisions providing or clarifying that the Class A Common Stock and Common Stock will be treated identically with respect to consideration in a merger or tender offer, dividends or other distributions (except pro rata subdivisions, combinations, stock splits or dividends, where the Class A Common Stock would continue to have ten votes per share, rather than one vote per share like Common Stock), and distribution rights in the event of dissolution.

The amendments also made certain ancillary changes to update certain provisions of the certificate of incorporation that were out-of-date or obsolete and to correct a typographical error.

Agreement Regarding Common Stock (and Registration Rights).

On June 4, 2018, the Company’s Board of Directors authorized the Company to enter into an Agreement Regarding Common Stock (including the Registration Rights exhibit thereto) with Jean Reed Adams (the spouse of Fred R. Adams, Jr., the Company’s Founder and Chairman Emeritus) and Mr. Adams’ four daughters, to be joined by certain Permitted Transferees thereof (collectively, the “Stockholder Parties”). A copy of the Agreement Regarding Common Stock is included as Exhibit 10.1 to this report, and the description of the agreement below is qualified by reference to such exhibit.

The Agreement Regarding Common Stock relates to the approximately 12 million shares of Common Stock expected to be held by the Stockholder Parties (together, the “Subject Shares”) after completion of certain anticipated transfers of shares of the Company’s Common Stock and Class A Common Stock..

Pursuant to the Agreement Regarding Common Stock, the Stockholder Parties agree to cooperate with the Company in any proposed transfer of the Subject Shares and to ensure that all appropriate securities filings and reports are timely made. The agreement provides that if any Stockholder Party intends to sell any of the Subject Shares, such party must give the Company a right of first refusal to purchase all or any of such shares. The price payable by the Company to purchase shares pursuant to the exercise of the right of first refusal will reflect a 6% discount to the then-current market price based on the 20 business-day volume weighted average price. If the Company does not exercise its right of first refusal and purchase the shares offered, such Stockholder Party will, subject to the approval of a special committee of independent directors of the Board of Directors (“Special Committee”), be permitted to sell the shares not purchased by the Company pursuant to a Company registration statement, Rule 144 under the Securities Act of 1933, or another manner of sale agreed to by the Company.

Pursuant to the agreement, if the Company receives a right of first refusal notice, the Special Committee would review and approve or disapprove any share repurchase pursuant to the Company’s right of first refusal and any matter related thereto, including (i) the number of shares, if any, to be purchased by the Company; and (ii) the amount of debt, if any, to be incurred by the Company in connection with any repurchase.

The agreement provides specified registration rights to the Stockholder Parties for the sale of their shares of Company Common Stock after the death of Mr. Adams. The stockholders requesting registration and the Company will each pay 50% of the costs of the Company related to the sale of shares, provided that if the Company determines to participate in any offering, it will pay 100% of the costs. The selling stockholders will pay any fees of underwriters relating to the sale of their shares, and the Company will pay the fees of underwriters relating to sales of any shares by the Company.

The Stockholder Parties may include Subject Shares in any offering pursuant to the registration rights only so long as immediate family members and Permitted Transferees, as defined in the Company’s certificate of incorporation, will continue to own shares that have at least a majority of the Company’s voting power.

The Agreement Regarding Common Stock terminates with respect to all Stockholder Parties immediately upon such time as Stockholder Parties, collectively, no longer own shares that have at least a majority of the Company’s voting power. The agreement may terminate earlier as to a particular Stockholder Party under certain circumstances as set forth in the Agreement Regarding Common Stock.

In connection with the negotiations relating to the amendments to the Company’s certificate of incorporation, the conservatorship established to manage Mr. Adams’ affairs, of which Mrs. Adams and Mr. Baker are co-conservators, agreed to pay for the costs of the Special Committee relating to the amendments, the Agreement Regarding Common Stock and related matters, including fees of counsel and the financial adviser to the Special Committee, up to $750,000.