UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-3
FOR APPLICATION FOR QUALIFICATION OF INDENTURES UNDER THE TRUST
INDENTURE ACT OF 1939
Premium Standard Farms, Inc.
(Name of applicant)
Highway 65 North
Princeton, Missouri 64673
(Address of principal executive offices)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
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11% Senior Secured Notes Due 2003 $117,500,000
Approximate date of proposed public offering: Securities are to be issued
pursuant to Section 1145 of the United States Bankruptcy Code, 11 U.S.C. Section
101 et. seq., on the Effective Date, as defined in the Plan of Reorganization of
PSF Finance, L.P., et al. It is anticipated that the Effective Date will occur
on or about September 17, 1996.
Name and address of agent for service: William Patterson
Premium Standard Farms, Inc.
Highway 65 North
Princeton, Missouri 64673
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ITEM 1. GENERAL INFORMATION.
(A) Applicant is a corporation.
(B) Applicant is incorporated in Delaware.
ITEM 2. SECURITIES ACT EXEMPTION APPLICABLE.
Registration of the indenture securities under the Securities Act of 1933
(the "Securities Act") is not required because the issuance of the indenture
securities is exempt from registration in part pursuant to Section 1145 of Title
11 of the United States Code (the "Bankruptcy Code") and in part pursuant to
Section 4(2) of the Securities Act and, in particular, pursuant to the safe
harbor under Rule 506 of Regulation D. The indenture securities are being issued
pursuant to a Debtors' Amended Joint Plan of Reorganization under Chapter 11 of
the Bankruptcy Code (the "Plan"). The Plan is pending before the United States
Bankruptcy Court for the District of Delaware (In re PSF Finance L.P., et al.,
Chapter 11 Case No. 96-1032 HSB). A confirmation hearing on the Plan is
scheduled for September 6, 1996 (the "Confirmation Hearing").
Under the Plan, the indenture securities will be issued in an aggregate
original principal amount of $117,500,000 as follows: (i) $101,496,978 to former
holders (the "Senior Note Holders") of PSF Finance, L.P.'s (the "Debtor")
various series of Senior Secured Notes due 1997, 2000, 2003 and 2004,
respectively; (ii) $5,321,204 to former holders (the "Preferred Equity Holders")
of the Debtor's preferred limited partnership equity interests, each in exchange
for claims against or interest in the Debtor; and (iii) $10,681,818 to the
Morgan Stanley Funds, as defined in the Plan, for cash consideration.
Section 1145(a)(1) of the Bankruptcy Code exempts the issuance of
securities under a plan of reorganization from registration under the Securities
Act and state securities laws if the following requirements are satisfied: (i)
the securities must be issued by the debtor, an affiliate of the debtor
participating in a joint plan of reorganization with the debtor or the debtor's
successor under the plan of reorganization; (ii) the recipients of the
securities must hold a claim against, an interest in, or a claim for an
administrative expense in the case concerning, the debtor or such affiliate; and
(iii) the securities must be issued entirely in exchange for the recipient's
claim against or interest in the debtor or such affiliate, or "principally" in
such exchange and "partly" for cash or property.
The applicant believes that the issuance of the indenture securities under
the Plan to the Senior Note Holders and the Preferred Equity Holders will
satisfy the requirements of Section 1145(a)(1) of the Bankruptcy Code and is,
therefore, exempt from registration under federal and state securities law. The
applicant, a newly created Delaware corporation, is the successor by merger to
the Debtor involved in that case. The recipients of the indenture securities
which are Senior Note Holders and Preferred Equity Holders hold claims against,
interests in, or claims for administrative expenses against the
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debtors. The indenture securities are being issued to the Senior Note Holders
and the Preferred Equity Holders in exchange for such recipients' claims against
or interests in the debtor.
Section 4(2) of the Securities Act exempts from the registration
requirements of the Securities Act a transaction by an issuer which does not
involve any public offering. The applicant believes that the issuance of the
indenture securities under the Plan to the Morgan Stanley Funds will satisfy the
requirements of Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder including Rule 506 of Regulation D and is, therefore,
exempt from registration.
ITEM 3. AFFILIATES.
Prior to effectiveness of the Plan, the applicant will have no
affiliates. After the effectiveness of the Plan, the applicant will
have the following affiliates:
______________________________________________________________________________
[GRAPHIC MATERIAL (1) OMITTED: PURSUANT TO RULE 304 OF REGULATION S-T
A NARRATIVE DESCRIPTION OF OMITTED MATERIAL IS AS FOLLOWS:
PSF Holdings, L.L.C., a Delaware limited liability company, will own 100%
of the voting securities of the applicant and various entities(1) will own
100% of the voting securities of PSF Holdings, L.L.C.]
______________________________________________________________________________
_________________
(1) PSF Holdings, L.L.C. will have members whose equity interests may be
sufficient to result in their being considered "affiliates". Based on the
holdings of securities of the debtors as of August 28, 1996, the total equity
of PSF Holdings, L.L.C., will be issued as follows (all holders will have
voting rights except Morgan Stanley & Co., Inc.): (a) 97% of the limited
liability company interests ("L.L.C. Interests") issued to the Senior
Note Holders and the Preferred Equity Holders as follows: 37.83% to 23
entities for which Putnam Investment Management, Inc., One Post Office Square,
Boston, Massachusetts, acts as investment adviser; 7.67% to entities for which
Cypress/GEM Capital Management, 70 East 55th Street, New York, New York, acts
as investment adviser; 11.35% to Prudential Insurance Company, 100 Mulberry
Street, Newark, New Jersey; 7.42% to Loews Corporation, 667 Madison Avenue,
New York, New York; 4.53% to Hanwa Co., Limited, 13-1%, 1 Chome, T5UK1J1,
Chuo-Ku, Tokyo, Japan; and 28.21% to Morgan Stanley & Co., Inc. and certain
of its affiliates, 1585 Broadway, New York, New York; and (b) 3% of the L.L.C.
Interests issued to holders of equity interests in the Debtor, in exchange for
such interests.
PSF Holdings, L.L.C. will issue warrants to purchase up to 2,048,192 L.L.C.
Interests (based on 10,000,000 L.L.C. Interests outstanding as of the Effective
Date) to various holders of equity interests in the Debtor.
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Item 4. Directors and executive officers.
NAME ADDRESS OFFICE
- ---------------------------- ----------------------- --------------------------
Not yet appointed or elected.(2)
ITEM 5. PRINCIPAL OWNERS OF VOTING SECURITIES.
As of August 30, 1996, no voting securities of the applicant have
been issued. After the effectiveness of the plan of reorganization, applicant's
voting securities will be owned as follows:
PERCENTAGE
OF VOTING
NAME AND COMPLETE AMOUNT SECURITIES
MAILING ADDRESS TITLE OF CLASS OWNED OWNED OWNED
- -------------------------- -------------------------- ------------- ------------
PSF Holdings, L.L.C. Common Stock 1,000 100%
Highway 65 North
Princeton, Missouri 64673
ITEM 6. UNDERWRITERS.
(a) No person has acted as an underwriter of the applicant's
securities within the three years prior to the date of filing this application.
(b) No person will act as an underwriter in connection with the
issuance of the indenture securities.
ITEM 7. CAPITALIZATION.
(A) As of August 30, 1996 (prior to effectiveness of
the Plan).
_________________
(2)The Board of Directors of the applicant will consist of one management
director and five directors named by an informal committee of certain holders of
Senior Notes and Preferred Equity Interests (the "Bondholders Committee"). The
initial officers of the applicant will be individuals satisfactory to the
Bondholders Committee. Such officers and directors will be named prior to or at
the Confirmation Hearing on the Plan.
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TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
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Common Stock 1,000 0
As of September 17, 1996 (after effectiveness of the Plan).
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
- -------------------------- -------------------------- --------------------------
Common Stock 1,000 1,000
11% Senior Secured Notes $117,500,000 (3) $117,500,000
due 2003
(B) Each share of Common Stock is entitled to one vote on any matter
submitted to the vote of stockholders.
ITEM 8. ANALYSIS OF INDENTURE PROVISIONS.
All references herein to the "indenture" shall refer to that certain
Indenture, dated as of September __, 1996, among the applicant, PSF L.L.C., a
Delaware limited liability company and parent of the applicant, as guarantor,
and Fleet National Bank, as trustee, pursuant to which the 11% Senior Secured
Notes will be issued, and all references herein to the "security agreement"
shall refer to the Security and Collateral Agency Agreement, dated as of
September __, 1996, among the same parties, pursuant to which certain collateral
is mortgaged and pledged as security for the 11% Senior Secured Notes. The
following summary of certain provisions of the indenture does not purport to be
complete and is subject to, and is qualified in its entirety, by reference to
all of the provisions of the indenture and the security agreement.
___________
(3) The indenture securities are partially pay-in-kind securities: interest
payments until a senior term credit has been discharged (estimated to be
September 30, 2001) will be paid through issuance of additional Senior Secured
Notes.
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Default and Withholding of Notice.
The following occurrences shall constitute an event of default under
the indenture: failure to pay interest for 30 days when due and payable; failure
to pay principal or premium, if any, at maturity; failure to pay principal and
interest pursuant to an Offer to Purchase (as defined in the indenture) the
indenture securities arising out of certain asset sales or changes of control;
failure to comply with certain indenture provisions regarding the sale of
substantially all of the assets or certain mergers or consolidations of the
applicant or guarantor; certain defaults under any debt or other evidence of
indebtedness of the applicant or guarantor in a principal amount of $10,000,000
or more or under instruments securing such indebtedness; breach or failure by
the applicant or guarantor to perform covenants, representations or warranties
contained in the indenture which continues for 30 days after notice to the
applicant or guarantor, unless the indenture provides otherwise; entry of a
judgment against the applicant or guarantor for the payment of money in excess
of $10,000,000 which remains undischarged, unstayed or unbonded for 60 days
after the right to appeal has expired; certain events of bankruptcy, insolvency
or reorganization involving the applicant or the guarantor; certain events
involving the validity or enforceability of the security interest in the
collateral; and the ceasing of the indenture or indenture securities to be in
full force and effect or the declaration that either is null and void, other
than by reason of satisfaction in full of the obligations thereunder. (Section
5.1)
The indenture provides that the trustee shall give the holders notice, as
and to the extent provided by the Trust Indenture Act, of any event which is or,
after notice or lapse of time or both would become, an event of default, except
that, in the case of any default resulting from the failure to comply with
indenture provisions regarding the sale of substantially all of the assets or
certain mergers or consolidations, no such notice to holders will be given until
at least 30 days after the delivery of a notice of default or such longer period
of time as the trustee shall determine to be in the interests of the holders.
(Section 6.2)
The indenture also contains provisions regarding the right of majority
holders to direct the actions of the trustee (Section 5.12) and the right of the
trustee to refrain from taking certain actions in certain circumstances (Section
6.3) which provisions could affect the giving or withholding of notice. The
security agreement also contains provisions regarding the right of the majority
holders to direct the actions of the Collateral Agent (Section 6.02).
Authentication and Delivery of Indenture Securities; Application of Proceeds.
The indenture provides that indenture securities bearing the manual or
facsimile signature of individuals who were at any time the appropriate officers
of the applicant shall bind the applicant, even if such individuals have ceased
to hold office prior to authentication and delivery of such securities or did
not hold such offices at the date of such securities. After execution and
delivery of the indenture, the applicant may deliver executed indenture
securities
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to the trustee for authentication and delivery. The trustee will authenticate
and deliver such securities in accordance with the applicant's order only as set
forth in the indenture. No indenture security will be entitled to any benefit
under the indenture or will be valid or obligatory unless it bears a certificate
of authentication in the form provided for in the indenture executed by the
trustee by manual signature. Such certificate on any indenture security shall be
the sole and conclusive evidence that such security has been duly authenticated
and delivered. (Section 3.3)
There are no provisions in the indenture regarding the application of
proceeds. There will be no proceeds from the issuance of the indenture
securities to the Senior Note Holders and Equity Holders because such securities
will be issued pursuant to a plan of reorganization approved by the United
States Bankruptcy Court in exchange for the claims of such holders arising from
ownership of certain securities of the debtors involved in the bankruptcy
proceeding. The proceeds of the sale of indenture securities to the Morgan
Stanley Funds will be used to repay indebtedness owed to certain lenders of bank
financing to the debtors, to pay fees and expenses arising from the bankruptcy,
to pay claims and for general corporate purposes.
Release or Release and Substitution of Property Subject to the Lien of the
Indenture.
The indenture contains no provisions regarding release or release and
substitution of property subject to the lien of the indenture. The security
agreement provides that requests for releases of collateral must comply with the
Trust Indenture Act (Section 6.05) and that dispositions of collateral no longer
useful in this business shall not be deemed to impair the security interest
under the security Agreement (Section 6.06).
Satisfaction and Discharge of the Indenture.
The indenture provides that it will cease to be of further effect (with
limited exceptions) and that the trustee, on demand of the applicant, will
execute instruments acknowledging satisfaction and discharge upon satisfaction
of the following conditions: delivery of securities for cancellation or, for
securities not delivered for cancellation, such securities become or will become
within one year due and payable or are called for redemption within one year;
the applicant has deposited with the trustee funds sufficient to pay and
discharge the entire outstanding indebtedness for principal, premium, if any,
and interest; the applicant has paid all other sums payable under the indenture;
and delivery by the applicant of an officer's certificate and an opinion of
counsel relating to compliance with all conditions to satisfaction and
discharge. (Section 4.1)
The indenture also contains provisions permitting the applicant, upon the
satisfaction of certain conditions, to elect to be discharged from certain
obligations under the indenture (referred to in the indenture as "defeasance"
and "covenant defeasance"). If the applicant
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makes such election, other obligations under the indenture remain in full force
and effect. (Article XII)
Evidence Required to be Furnished by Obligor upon the Indenture Securities to
the Trustee as to Compliance with the Conditions and Covenants Provided for in
Such Indenture.
The indenture provides that upon any application or request by the
applicant to the trustee to take any action under a provision of the indenture,
the applicant must furnish to the trustee such certificates and opinions as are
required by the Trust Indenture Act or the indenture. Each such certificate or
opinion must be in the form of an officers' certificate, if to be given by
officers of the applicant, or an opinion of counsel, if to be given by counsel,
each as described in the indenture. Any certificate or opinion must comply with
the requirements of the Trust Indenture Act and the indenture, and, if given
with respect to compliance with conditions and covenants under the indenture,
must be in a form satisfactory to the trustee and must include the following: a
statement that each individual signing the certificate or opinion has read such
covenant or condition and related definitions; a statement of the nature and
scope of investigation or examination upon which such certificate or opinion is
based; a statement that, in the opinion of such individual, he has made such
investigation or examination as is necessary to enable him to express an
informed opinion as to whether such covenant or condition has been complied
with; and a statement as to whether, in the opinion of such individual, such
condition or covenant has been complied with. A certificate or opinion of any
independent firm of public accountants must state that such firm is independent.
(Section 1.2)
ITEM 9. OTHER OBLIGORS.
PSF Holdings, L.L.C. (a guarantor of the indenture securities)
Highway 65 North
Princeton, Missouri 64673
CONTENTS OF APPLICATION FOR QUALIFICATION.
(A) Pages numbered to , consecutively.(4)
(B) The statement of eligibility and qualification of each trustee under
the indenture to be qualified.(5)
(C) The following exhibits in addition to those filed as a part of the
statement of eligibility and qualification of the trustee.
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(4) Pursuant to Rule 309(a) of Regulation S-T, requirements as to sequential
numbering shall not apply to this electronic format document.
(5) Such statement to be filed seperately by amendment.
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Sequentially
Exhibit Description Numbered Page
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Exhibit T3A Certificate of Incorporation of Premium
Standard Farms, Inc. (a Delaware Corporation)
Exhibit T3B By-laws of Premium Standard Farms, Inc.
Exhibit T3C(i) Form of Indenture dated as of September ,
1996 among Premium Standard Farms, Inc., as
Issuer, PSF Holdings, L.L.C., as Guarantor,
and Fleet National Bank, as Trustee.
Exhibit T3C(ii) Form of Security and Collateral Agent Agreement dated as
of September __, 1996 among Premium Standard Farm, Inc., as
Issuer, PSF Holdings, L.L.C., as Guarantor, and Fleet National
Bank, Trustee, as Collateral Agent.
Exhibit T3D Not applicable.
Exhibit T3E1 Debtor's Amended Joint Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code Relating to Debtor's Amended
Joint Plan of Reorganization, dated July 29, 1996.
Exhibit T3E2 Order (i) Approving the Debtor's Disclosure
Statement, Form of Ballots and Proposed
Solicitation Procedures, (ii) Setting the Date,
Time and Place for Voting on the Debtors' Joint
Plan of Reorganization, (iii) Setting the Date,
Time and Place for a Hearing to Consider
Confirmation of the Debtor's Plan and (iv)
Prescribing the Form and Manner of Notice
Thereof (United States Bankruptcy Court for the
District of Delaware, August 1, 1996).
Exhibit T3F Cross-reference sheet.
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Premium Standard Farms, Inc., a corporation organized and existing
under the laws of the State of Delaware, has duly caused this application to be
signed on its behalf by the undersigned, thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in the city of Princeton, and State
of Missouri, on the 30th day of August, 1996.
PREMIUM STANDARD FARMS, INC.,
a Delaware Corporation
[SEAL] By: /s/ Dennis Harms
----------------------------
Dennis Harms
President
Attest: /s/ Kristy L. Snapp By: /s/ Dennis Rippe
---------------------- ----------------------------
Kristy L. Snapp Dennis Rippe
Secretary
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EXHIBIT INDEX
Exhibit No. Exhibit Description
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Exhibit T3A Certificate of Incorporation of Premium
Standard Farms, Inc. (a Delaware Corporation)
Exhibit T3B By-laws of Premium Standard Farms, Inc.
Exhibit T3C(i) Form of Indenture dated as of September ,
1996 among Premium Standard Farms, Inc., as
Issuer, PSF Holdings, L.L.C., as Guarantor,
and Fleet National Bank, as Trustee.
Exhibit T3C(ii) Form of Security and Collateral Agent Agreement dated as
of September __, 1996 among Premium Standard Farm, Inc., as
Issuer, PSF Holdings, L.L.C., as Guarantor, and Fleet National
Bank, Trustee, as Collateral Agent.
Exhibit T3D Not applicable.
Exhibit T3E1 Debtor's Amended Joint Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code Relating to Debtor's Amended
Joint Plan of Reorganization, dated July 29, 1996.
Exhibit T3E2 Order (i) Approving the Debtor's Disclosure
Statement, Form of Ballots and Proposed
Solicitation Procedures, (ii) Setting the Date,
Time and Place for Voting on the Debtors' Joint
Plan of Reorganization, (iii) Setting the Date,
Time and Place for a Hearing to Consider
Confirmation of the Debtor's Plan and (iv)
Prescribing the Form and Manner of Notice
Thereof (United States Bankruptcy Court for the
District of Delaware, August 1, 1996).
Exhibit T3F Cross-reference sheet.
EXHIBIT T3A
CERTIFICATE OF INCORPORATION
of
PREMIUM STANDARD FARMS, INC.
1. The name of this corporation is Premium Standard Farms, Inc.
2. The registered office of this corporation in the State of Delaware is
located at 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is Corporation Service Company.
3. The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
4. The total number of shares of stock that this corporation shall have
authority to issue is one thousand (1000) shares of Common Stock, $0.01 par
value per share. Each share of Common Stock shall be entitled to one vote.
5. The name and mailing address of the incorporator is: James A. Heeter,
c/o Sonnenschein Nath & Rosenthal, Twentieth Century Tower II, 4520 Main Street,
11th Floor, Kansas City, MO 64111.
6. Except as otherwise provided in the provisions establishing a class of
stock, the number of authorized shares of any class of stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the voting power of the
corporation entitled to vote irrespective of the provisions of Section 242(b)(2)
of the General Corporation Law of the State of Delaware.
7. This corporation is subject to the requirements of Section 1123(a)(6)
of the United States Bankruptcy Code (11 U.S.C. 1123(a)(6)) and shall be
prohibited from issuing any nonvoting equity securities.
8. The election of directors need not be by written ballot unless the
by-laws shall so require.
9. In furtherance and not in limitation of the power conferred upon the
board of directors by law, the board of directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of this corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter and repeal by-laws made by the board of directors.
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10. A director of this corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liability is not permitted
under the General Corporation Law of the State of Delaware as in effect at the
time such liability is determined. No amendment or repeal of this paragraph 10
shall apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
11. This corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request advance
expenses to any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit, proceeding or claim,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was or has agreed to be a director or officer of this
corporation or while a director or officer is or was serving at the request of
this corporation as a director, officer, partner, trustee, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorney's fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred (and not otherwise recovered) in connection
with the investigation, preparation to defend or defense of such action, suit,
proceeding or claim; provided, however, that the foregoing shall not require
this corporation to indemnify or advance expenses to any person in connection
with any action, suit, proceeding, claim or counterclaim initiated by or on
behalf of such person. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law, agreement, vote of directors or
stockholders or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any person seeking indemnification under this
paragraph 10 shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary shall be established. Any repeal or
modification of the foregoing provisions of this paragraph 10 shall not
adversely affect any right or protection of a director or officer of this
corporation with respect to any acts or omissions of such director or officer
occurring prior to such repeal or modification.
12. The books of this corporation may (subject to any statutory
requirements) be kept outside the State of Delaware as may be designated by the
board of directors or in the by-laws of this corporation.
THE UNDERSIGNED, the sole incorporator named above, hereby certifies that
the facts stated above are true as of this ___ day of August, 1996.
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James A. Heeter
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EXHIBIT T3B
BY-LAWS
of
PREMIUM STANDARD FARMS, INC.
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These by-laws are subject to the certificate of incorporation of the
corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1 Annual Meeting. The annual meeting of stockholders shall be held at
10:00 A.M. on the third Tuesday in May in each year, unless that day be a legal
holiday at the place where the meeting is to be held, in which case the meeting
shall be held at the same hour on the next succeeding day not a legal holiday,
or at such other date and time as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which they shall
elect a board of directors and transact such other business as may be required
by law or these by-laws or as may properly come before the meeting.
2.2 Special Meetings. A special meeting of the stockholders may be called
at any time by the chairman of the board, if any, the president or the board of
directors. A special meeting of the stockholders shall be called by the
secretary, or in the case of the death, absence, incapacity or refusal of the
secretary, by an assistant secretary or some other officer, upon application of
a majority of the directors. Any such application shall state the purpose or
purposes of the proposed meeting. Any such call shall state the place, date,
hour, and purposes of the meeting.
2.3 Place of Meeting. All meetings of the stockholders for the election of
directors or for any other purpose shall be held at such place within or without
the State of Delaware as may be determined from time to time by the chairman of
the board, if any, the president or the board of directors. Any adjourned
session of any meeting of the stockholders shall be held at the place designated
in the vote of adjournment.
2.4 Notice of Meetings. Except as otherwise provided by law, a written
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such stockholder at his
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address as it appears in the records of the corporation. Such notice shall be
given by the secretary, or by an officer or person designated by the board of
directors, or in the case of a special meeting by the officer calling the
meeting. As to any adjourned session of any meeting of stockholders, notice of
the adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment was taken except that if the
adjournment is for more than thirty days or if after the adjournment a new
record date is set for the adjourned session, notice of any such adjourned
session of the meeting shall be given in the manner heretofore described. No
notice of any meeting of stockholders or any adjourned session thereof need be
given to a stockholder if a written waiver of notice, executed before or after
the meeting or such adjourned session by such stockholder, is filed with the
records of the meeting or if the stockholder attends such meeting without
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any meeting of the stockholders or any
adjourned session thereof need be specified in any written waiver of notice.
2.5 Quorum of Stockholders. At any meeting of the stockholders a quorum as
to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.6 Action by Vote. When a quorum is present at any meeting, a plurality
of the votes properly cast for election to any office shall elect to such office
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7 Action without Meetings. Unless otherwise provided in the certificate
of incorporation, any action required or permitted to be taken by stockholders
for or in connection with any corporate action may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in Delaware by hand or certified or registered
mail, return receipt requested, to its principal place of business or to an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Each such written
-2-
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<PAGE>
consent shall bear the date of signature of each stockholder who signs the
consent. No written consent shall be effective to take the corporate action
referred to therein unless written consents signed by a number of stockholders
sufficient to take such action are delivered to the corporation in the manner
specified in this paragraph within sixty days of the earliest dated consent so
delivered.
If action is taken by consent of stockholders and in accordance with the
foregoing, there shall be filed with the records of the meetings of stockholders
the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders, prompt
notice of the taking of such action without a meeting shall be given to those
who have not consented in writing and a certificate signed and attested to by
the secretary that such notice was given shall be filed with the records of the
meetings of stockholders.
In the event that the action which is consented to is such as would have
required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
2.8 Proxy Representation. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that if a proxy limits
its authorization to a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
2.9 Inspectors. The directors or the person presiding at the meeting may,
and shall if required by applicable law, appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting
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<PAGE>
power of each, the shares of stock represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by them.
2.10 List of Stockholders. The secretary shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1 Number. The corporation shall have one or more directors, the number
of directors to be determined from time to time by vote of a majority of the
directors then in office. Except in connection with the election of directors at
the annual meeting of stockholders, the number of directors may be decreased
only to eliminate vacancies by reason of death, resignation or removal of one or
more directors. No director need be a stockholder.
3.2 Tenure. Each director shall hold office until the next annual meeting
and until his successor is elected and qualified, or until he sooner dies,
resigns, is removed or becomes disqualified.
3.3 Powers. The business and affairs of the corporation shall be managed
by or under the direction of the board of directors who shall have and may
exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4 Vacancies. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
holders of the particular class or series of stock entitled to elect such
director at a meeting called for the purpose, or by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director, in
each case elected by the particular class or series of stock entitled to elect
such directors. When one or more directors shall resign from the board,
effective at a future date, a majority of the directors then in office,
including those who have resigned, who were elected by the particular class or
series of stock entitled to elect such resigning director or directors shall
have power to fill such vacancy or vacancies, the vote or action by writing
thereon to take effect when such resignation or resignations shall become
effective. The directors shall have and may exercise all their powers
notwithstanding the existence of one or more vacancies in their number, subject
to any requirements of law or of the certificate of incorporation or of these
by-laws as to the number of directors required for a quorum or for any vote or
other actions.
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3.5 Committees. The board of directors may, by vote of a majority of the
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, including the power to authorize
the seal of the corporation to be affixed to all papers which require it and the
power and authority to declare dividends or to authorize the issuance of stock;
excepting, however, such powers which by law, by the certificate of
incorporation or by these by-laws they are prohibited from so delegating. In the
absence or disqualification of any member of such committee and his alternate,
if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Except as the board of
directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the board or such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these by-laws for the conduct of business by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
3.6 Regular Meetings. Regular meetings of the board of directors may be
held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.7 Special Meetings. Special meetings of the board of directors may be
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board, if any, the president, or by one-third or more in number of the
directors, reasonable notice thereof being given to each director by the
secretary or by the chairman of the board, if any, the president or any one of
the directors calling the meeting.
3.8 Notice. It shall be reasonable and sufficient notice to a director to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
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3.9 Quorum. Except as may be otherwise provided by law, by the certificate
of incorporation or by these by-laws, at any meeting of the directors a majority
of the directors then in office shall constitute a quorum; a quorum shall not in
any case be less than one-third of the total number of directors constituting
the whole board. Any meeting may be adjourned from time to time by a majority of
the votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice.
3.10 Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
3.11 Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.12 Participation in Meetings by Conference Telephone. Members of the
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.13 Compensation. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.14 Interested Directors and Officers.
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of the
corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors
or the committee, and the board or committee in good faith authorizes the
contract or transaction by the affirmative votes
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of a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1 Enumeration; Qualification. The officers of the corporation shall be a
president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the board
of directors to secure the faithful performance of his duties to the corporation
by giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
4.2 Powers. Subject to law, to the certificate of incorporation and to the
other provisions of these by-laws, each officer shall have, in addition to the
duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3 Election. The officers may be elected by the board of directors at
their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4 Tenure. Each officer shall hold office until the first meeting of the
board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
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4.5 Chairman of the Board of Directors, President and Vice President. The
chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time by the board of directors. Unless the board of
directors otherwise specifies, the chairman of the board, or if there is none
the chief executive officer, shall preside, or designate the person who shall
preside, at all meetings of the stockholders and of the board of directors.
Unless the board of directors otherwise specifies, the president shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set
forth in these by-laws or as shall be designated from time to time by the board
of directors or by the president.
4.6 Treasurer and Assistant Treasurers. Unless the board of directors
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the president. If no controller is elected, the
treasurer shall, unless the board of directors otherwise specifies, also have
the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7 Controller and Assistant Controllers. If a controller is elected, he
shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been appointed
the secretary shall keep or cause to be kept the stock and transfer records of
the corporation, which shall contain the names and record addresses of all
stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to time
be designated by the board of directors or the president.
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Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1 Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, or
the secretary or to a meeting of the board of directors. Such resignation shall
be effective upon receipt unless specified to be effective at some other time,
and without in either case the necessity of its being accepted unless the
resignation shall so state. A director (including persons elected by
stockholders or directors to fill vacancies in the board) may be removed from
office with or without cause by the vote of the holders of a majority of the
issued and outstanding shares of the particular class or series entitled to vote
in the election of such director. The board of directors may at any time remove
any officer either with or without cause. The board of directors may at any time
terminate or modify the authority of any agent.
Section 6. VACANCIES
6.1 If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any
person or body empowered to elect or appoint that officer may choose a
successor. Each such successor shall hold office for the unexpired term, and in
the case of the president, the treasurer and the secretary until his successor
is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship shall be filled
as specified in Section 3.4 of these by-laws.
Section 7. INDEMNIFICATION OF DIRECTORS AND OFFICERS
7.1 Indemnification Provision. The terms and conditions of the
indemnification provision set forth in paragraph 10 of the corporation's
certificate of incorporation are hereby incorporated into and made a part of
these bylaws, through this reference.
7.2 Insurance. The corporation may, from time to time, purchase and
maintain insurance on behalf of an individual who is or was a director, officer,
employee or agent of the corporation, or who, while a director, officer,
employee or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by him/her in that capacity or arising from his/her status as a
director, officer, employee, or agent, whether or not the corporation would have
the power to indemnify him/her against the same liability under the law of the
State of Delaware.
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Section 8. CAPITAL STOCK
8.1 Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the chairman
or vice chairman of the board, if any, or the president or a vice president and
by the treasurer or an assistant treasurer or by the secretary or an assistant
secretary. Any of or all the signatures on the certificate may be a facsimile.
In case an officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the time of its issue.
8.2 Loss of Certificates. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim on account thereof, as
the board of directors may prescribe.
Section 9. TRANSFER OF SHARES OF STOCK
9.1 Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
9.2 Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no such record date is fixed by the board of directors, the record date for
determining the
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stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
such record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
the General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. If no record date has been fixed by the board of directors and prior
action by the board of directors is required by the General Corporation Law of
the State of Delaware, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
In order that the corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the board of directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty days prior to such payment, exercise or other action. If no such
record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 10. CORPORATE SEAL
10.1 Subject to alteration by the directors, the seal of the corporation
shall consist of a flat-faced circular die with the word "Delaware" and the name
of the corporation cut or engraved thereon, together with such other words,
dates or images as may be approved from time to time by the directors.
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Section 11. EXECUTION OF PAPERS
11.1 Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board, if any, the president, a vice president or the treasurer.
Section 12. FISCAL YEAR
12.1 The fiscal year of the corporation shall end on the 31st of December.
Section 13. AMENDMENTS
13.1 These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the voting
power of the stock outstanding and entitled to vote. Any by-law, whether
adopted, amended or repealed by the stockholders or directors, may be amended or
reinstated by the stockholders or the directors.
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EXHIBIT T3C(i)
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PREMIUM STANDARD FARMS, INC.
Issuer
PSF L.L.C.
Guarantor
FLEET NATIONAL BANK
Trustee
-------------------------------
Indenture
Dated as of September __, 1996
-------------------------------
$117,500,000
11% SENIOR SECURED NOTES
DUE 2003
(Partial Pay-in-Kind)
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<PAGE>
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section
ss.310 (a) (1) ....................................... 6.9
(a) (2) ....................................... 6.9
(a) (3) ....................................... Not
Applicable
(a) (4) ....................................... Not
Applicable
(a) (5) ....................................... Not
Applicable
(b) ....................................... 6.8
(c) ....................................... Not
Applicable
ss.311 (a) ....................................... 6.13
(b) ....................................... 6.13
(c) ....................................... Not
Applicable
ss.312 (a) ....................................... 7.1
7.2 (a)
(b) ....................................... 7.2 (b)
(c) ....................................... 7.2 (c)
ss.313 (a) ....................................... 7.3 (a)
(b) ....................................... 7.3 (a)
(c) ....................................... 7.3 (a)
(d) ....................................... 7.3 (b)
ss.314 (a) ....................................... 7.4;
10.17; 10.22
(b) ....................................... 15.2
(c) (1) ....................................... 1.2
(c) (2) ....................................... 1.2
(c) (3) ....................................... Not
Applicable
(d) ....................................... 15.3
(e) ....................................... 1.2
(f) ....................................... 1.2
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<PAGE>
Trust Indenture Indenture
Act Section
ss.315 (a) ....................................... 6.1, 6.3
(b) ....................................... 6.2
(c) ....................................... 6.1
(d) ....................................... 6.1; 6.3
(e) ....................................... 5.14
ss.316 (a) ....................................... 1.1
last sentence
(a)(1)(A) ....................................... 5.12
(a)(1)(B) ....................................... 5.13
(a)(2) ....................................... Not
Applicable
(b) ....................................... 5.8
(c) ....................................... 1.4 (c)
ss.317 (a)(1) ....................................... 5.3
(a)(2) ....................................... 5.4
(b) ....................................... 10.3
ss.318 (a) ....................................... 1.7
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Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-b-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I
Definitions and Other Provisions
of General Application..........................................................................................2
SECTION 1.1. Definitions...................................................................................2
SECTION 1.2. Compliance Certificates and Opinions.........................................................18
SECTION 1.3. Form of Documents Delivered to Trustee.......................................................19
SECTION 1.4. Acts of Holders; Record Dates................................................................19
SECTION 1.5. Notices, Etc., to Trustee and Company........................................................20
SECTION 1.6. Notice to Holders; Waiver....................................................................21
SECTION 1.7. Application of Trust Indenture Act...........................................................21
SECTION 1.8. Effect of Headings and Table of Contents.....................................................21
SECTION 1.9. Successors and Assigns.......................................................................21
SECTION 1.10. Separability Clause..........................................................................22
SECTION 1.11. Benefits of Indenture........................................................................22
SECTION 1.12. Governing Law................................................................................22
SECTION 1.13. Legal Holidays...............................................................................22
ARTICLE II
Security Forms.................................................................................................23
SECTION 2.1. Forms Generally..............................................................................23
SECTION 2.2. Forms of Face of Security....................................................................23
SECTION 2.3. Form of Reverse of Security..................................................................25
SECTION 2.4. Form of Trustee's Certificate of Authentication..............................................30
SECTION 2.5. Form of Guarantee............................................................................30
SECTION 2.6. Form of Legend...............................................................................30
ARTICLE III
The Securities.................................................................................................31
SECTION 3.1. Title and Terms..............................................................................31
SECTION 3.2. Denominations................................................................................31
SECTION 3.3. Execution, Authentication, Delivery and Dating...............................................32
SECTION 3.4. Temporary Securities.........................................................................33
SECTION 3.5. Registration, Registration of Transfer and Exchange..........................................33
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.............................................34
SECTION 3.7. Payment of Interest; Interest Rights Preserved...............................................35
SECTION 3.8. Persons Deemed Owners........................................................................37
SECTION 3.9. Cancellation.................................................................................37
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SECTION 3.10. Computation of Interest......................................................................37
ARTICLE IV
Satisfaction and Discharge.....................................................................................38
SECTION 4.1. Satisfaction and Discharge of Indenture......................................................38
SECTION 4.2. Application of Trust Money...................................................................39
ARTICLE V
Remedies.......................................................................................................39
SECTION 5.1. Events of Default............................................................................39
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment...........................................41
SECTION 5.3. Collection of Debt and Suits for Enforcement by Trustee......................................42
SECTION 5.4. Trustee May File Proofs of Claim.............................................................43
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities..................................44
SECTION 5.6. Application of Money Collected...............................................................44
SECTION 5.7. Limitation on Suits..........................................................................44
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest.....................................................................................45
SECTION 5.9. Restoration of Rights and Remedies...........................................................45
SECTION 5.10. Rights and Remedies Cumulative...............................................................46
SECTION 5.11. Delay or Omission Not Waiver.................................................................46
SECTION 5.12. Control by Holders...........................................................................46
SECTION 5.13. Waiver of Past Defaults......................................................................46
SECTION 5.14. Undertaking for Costs........................................................................47
SECTION 5.15. Waiver of Stay or Extension Laws.............................................................47
ARTICLE VI
The Trustee....................................................................................................47
SECTION 6.1. Certain Duties and Responsibilities..........................................................47
SECTION 6.2. Notice of Defaults...........................................................................48
SECTION 6.3. Certain Rights of Trustee....................................................................48
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.......................................50
SECTION 6.5. May Hold Securities..........................................................................50
SECTION 6.6. Money Held in Trust..........................................................................50
SECTION 6.7. Compensation and Reimbursement...............................................................50
SECTION 6.8. Disqualification; Conflicting Interests......................................................51
SECTION 6.9. Corporate Trustee Required; Eligibility......................................................51
SECTION 6.10. Resignation and Removal; Appointment of Successor............................................52
SECTION 6.11. Acceptance of Appointment by Successor.......................................................53
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business..................................53
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SECTION 6.13. Preferential Collection of Claims Against Company............................................54
ARTICLE VII
Holders' Lists and Reports by Trustee and Company..............................................................54
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders....................................54
SECTION 7.2. Preservation of Information; Communications to Holders.......................................54
SECTION 7.3. Reports by Trustee...........................................................................55
SECTION 7.4. Reports by Company...........................................................................55
ARTICLE VIII
Merger, Consolidation, Etc.....................................................................................55
SECTION 8.1. Company or the Guarantor May Merge, Consolidate, etc.... Only on
Certain Terms................................................................................55
SECTION 8.2. Successor Substituted........................................................................57
ARTICLE IX
Supplemental Indentures........................................................................................57
SECTION 9.1. Supplemental Indentures Without Consent of Holders...........................................57
SECTION 9.2. Supplemental Indentures With Consent of Holders..............................................58
SECTION 9.3. Execution of Supplemental Indentures.........................................................59
SECTION 9.4. Effect of Supplemental Indentures............................................................59
SECTION 9.5. Conformity with Trust Indenture Act..........................................................59
SECTION 9.6. Reference in Securities to Supplemental Indentures...........................................59
SECTION 9.7. Revocation and Effect of Consents............................................................60
ARTICLE X
Covenants......................................................................................................60
SECTION 10.1. Payment of Principal, Premium and Interest...................................................60
SECTION 10.2. Maintenance of Office or Agency..............................................................60
SECTION 10.3. Money for Security Payments to be Held in Trust..............................................61
SECTION 10.4. Existence....................................................................................62
SECTION 10.5. Maintenance of Properties....................................................................62
SECTION 10.6. Payment of Taxes and Other Claims............................................................62
SECTION 10.7. Maintenance of Insurance.....................................................................63
SECTION 10.8. Limitation on Consolidated Debt..............................................................63
SECTION 10.9. Limitation on Restricted Payments............................................................65
SECTION 10.10. Limitations Concerning Disposal of Assets...........................................67
SECTION 10.11. Permitted Investments...............................................................68
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SECTION 10.12. Limitation on Issuance of Capital Stock of Subsidiaries.............................68
SECTION 10.13. Dividends and Distributions; Liens Affecting Subsidiaries...........................68
SECTION 10.14. Limitations on Liens................................................................69
SECTION 10.15. Limitation on Transactions with Affiliates..........................................71
SECTION 10.16. Limitation on Related Business......................................................71
SECTION 10.17. Provision of Financial Information..................................................71
SECTION 10.18. Change of Control...................................................................72
SECTION 10.19. Environmental and Safety Compliance.................................................73
SECTION 10.20. Statement by Officers as to Default.................................................74
SECTION 10.21. Waiver of Certain Covenants.........................................................74
SECTION 10.22. Further Assurances..................................................................74
SECTION 10.23. Compliance with Security Documents..................................................75
ARTICLE XI
Redemption of Securities.......................................................................................75
SECTION 11.1. Right of Optional Redemption.................................................................75
SECTION 11.2. Applicability of Article.....................................................................75
SECTION 11.3. Election to Redeem; Notice to Trustee........................................................76
SECTION 11.4. Selection by Trustee of Securities to be Redeemed............................................76
SECTION 11.5. Notice of Redemption.........................................................................76
SECTION 11.6. Deposit of Redemption Price..................................................................77
SECTION 11.7. Securities Payable on Redemption Date........................................................77
SECTION 11.8. Securities Redeemed in Part..................................................................78
ARTICLE XII
Defeasance and Covenant Defeasance.............................................................................78
SECTION 12.1. Company's Option to Effect Defeasance or Covenant Defeasances................................78
SECTION 12.2. Defeasance and Discharge.....................................................................78
SECTION 12.3. Covenant Defeasance..........................................................................79
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance..............................................79
SECTION 12.5. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions........................................................81
SECTION 12.6. Reinstatement................................................................................82
ARTICLE XIII
Meeting of Holders of Securities ..............................................................................82
SECTION 13.1. Purposes for Which Meetings May Be Called....................................................82
SECTION 13.2. Call, Notice and Place of Meetings...........................................................82
SECTION 13.3. Persons Entitled to Vote at Meetings.........................................................83
SECTION 13.4. Quorum; Action...............................................................................83
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SECTION 13.5. Determination of Voting Rights; Conduct and Adjournment of
Meetings.....................................................................................84
SECTION 13.6. Counting Votes and Recording Action of Meetings..............................................85
ARTICLE XIV
Guarantee......................................................................................................85
SECTION 14.1. Guarantee....................................................................................85
SECTION 14.2. Execution and Delivery of Guarantee..........................................................87
SECTION 14.3. Successors and Assigns.......................................................................87
SECTION 14.4. No waiver, etc...............................................................................88
SECTION 14.5. Modification, etc............................................................................88
ARTICLE XV
SECURITY DOCUMENTS.............................................................................................88
SECTION 15.1. Security Documents....................................................................88
SECTION 15.2. Recording, Opinion of Counsel, Etc....................................................89
SECTION 15.3. Trust Indenture Act Requirements; Release of Collateral...............................90
SECTION 15.4. Impairment of Security Interest.......................................................90
SECTION 15.5. Authorization of Receipt of Funds by the Trustee Under the
Security Documents....................................................................................91
ARTICLE XVI
Miscellaneous..................................................................................................91
SECTION 16.1. Usury Savings Clause..................................................................91
EXHIBIT A - Form of Subsidiary Guaranty Agreement......................................................................A-1
EXHIBIT B - Form of Security and Collateral Agency Agreement...........................................................B-1
EXHIBIT C - Form of Pledge Agreement...................................................................................C-1
EXHIBIT D - Form of Indemnity, Subrogation and Contribution Agreement..................................................D-1
EXHIBIT E - Form of Texas Deed of Trust................................................................................E-1
EXHIBIT F - Form of Missouri Deed of Trust.............................................................................F-1
</TABLE>
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INDENTURE, dated as of [September __, 1996] between Premium Standard
Farms, Inc., a Delaware corporation (herein called the "Company"), having its
principal office at Highway 65 North, Princeton, Missouri 64673, PSF L.L.C., a
Delaware limited liability company (herein called the "Guarantor"), having its
principal office at Highway 65 North, Princeton, Missouri 64673, and Fleet
National Bank, a national banking association having its principal office at One
Monarch Place, Springfield, Massachusetts 01144, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation of an issue of up
to $117,500,000 aggregate original principal amount of its 11% Senior Secured
Notes due 2003 (the "Securities") of substantially the tenor hereinafter set
forth, and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
WHEREAS, all things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company and the Guarantor in accordance with their and
its terms, have been done.
WHEREAS, pursuant to a joint Plan of Reorganization of PSF Finance
L.P., a Delaware limited partnership, and certain of its affiliates (the "Plan")
confirmed on [August __, 1996] by an order of the bankruptcy court pursuant to
Section 1129 of the United States Bankruptcy Code, $117,500,000 aggregate
original principal amount of the Securities are to be issued to the holders of,
and in exchange for the claims of, the 12% Senior Secured Exchange Notes due
2000, 12% Senior Secured Exchange Discount Notes due 2003, 12 1/4% Senior
Secured Exchange Notes due 2004, 12 1/4% Senior Secured Notes due 1997 and 12
1/2% Exchangeable Preference Units of PSF Finance L.P. and to an affiliate of
PSF Finance L.P. in exchange for a specified amount of cash and cancellation of
certain capital contribution notes held by Collings Farm, Inc., a Missouri
corporation.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises, and the exchange of certain
claims and the purchase of the Securities by certain Holders pursuant to the
Plan, the Company and the Guarantor, jointly and severally, covenant and agree,
for the equal and proportionate benefit of all Holders of the Securities, with
the Trustee as follows:
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ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles;
(4) unless otherwise specifically set forth herein, all
calculations or determinations of a person shall be performed or made
on a consolidated basis in accordance with generally accepted
accounting principles; and
(5) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
Certain terms, used principally in Article VI (The Trustee), are
defined in that Article.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.4 hereof.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" shall mean, with respect to any Person, any sale,
lease, transfer or other disposition (including by way of merger, consolidation
or sale and leaseback transaction, but excluding any sales of assets or property
that (i) are substantially concurrently replaced with the proceeds of such sale
and (ii) are no longer used or useful in the business of such
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Person) in one transaction or a series of related transactions by such Person or
any of its subsidiaries to any Person other than the Guarantor, the Company or
any of its Wholly Owned Subsidiaries of (a) any of the Capital Stock of any
subsidiary of such Person, (b) all or substantially all of the Real Property,
Leaseholds or Personal Property of such Person or any of its subsidiaries or (c)
any other Real Property, Leaseholds or Personal Property of such Person or any
of its subsidiaries, except, in the case of clause (c), for (i) sales of
inventory, livestock, processed pork inventories, breeding stock, grain,
feedstock or Hedge Agreements in the ordinary course of business and (ii) any
sale, lease, transfer or other disposition in one transaction or a series of
related transactions of Real Property, Leaseholds or Personal Property with a
value not in excess of $250,000.
"Average Life" means, as of the date of determination with respect to
any Debt, the quotient obtained by dividing (a) the sum of the products of (i)
the number of years from such date to the date or dates of each successive
scheduled principal payment of such Debt multiplied by (ii) the amount of each
such principal payment by (b) the sum of all such principal payments.
"Benefit Plan" shall mean any employee pension benefit plan (other than
a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Company or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a resolution certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of real or personal property of such
Person which is required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person in accordance with
generally accepted accounting principles. The stated maturity of such obligation
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
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"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Change of Control" has the meaning specified in Section 10.18.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all of the property and possessions, and the
proceeds thereof, pledged and mortgaged under the Security Documents.
"Collateral Agent" means the Trustee, in its capacity as Collateral
Agent under the Security Documents.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Company" means Premium Standard Farms, Inc., a Delaware corporation,
until a successor Person shall have become such pursuant to the applicable
provisions of this Indenture and thereafter shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman or Vice-Chairman of the Board,
its President, a Vice President, its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated" means, when used in reference to any term, that term as
applied to the accounts of the Company, the Guarantor and all of their
Subsidiaries, or such of their Subsidiaries as may be specified, consolidated
(or combined) in accordance with generally accepted accounting principles and
with appropriate deductions for minority interests in such Subsidiaries.
"Consolidated EBITDA" means, with respect to any Person for any period,
(a) the sum of the amounts for such period of Consolidated Net Income, plus, to
the extent deducted in determining such Consolidated Net Income, (i)
Consolidated Interest Expense, (ii) federal, state and local income taxes, (iii)
depreciation expense, (iv) amortization expense and (v) any
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non-cash charges or non-cash losses, minus (b) to the extent included in
determining such Consolidated Net Income, the sum of the amounts for such period
of (i) interest income, (ii) any non-cash gains and (iii) any extraordinary
gains and gains received by such Person from sales of assets (other than sales
of inventory, breeding stock, grain, feedstock or Hedge Agreements in the
ordinary course of business).
"Consolidated Interest Expense" for any Person means for any period the
Consolidated interest expense included in a Consolidated income statement
(without deduction of interest income) of such Person and its Subsidiaries for
such period included in the Consolidated financial statements in accordance with
generally accepted accounting principles.
"Consolidated Net Income" of any Person means for any period the
Consolidated net income (or loss) of such Person for such period determined on a
Consolidated basis in accordance with generally accepted accounting principles;
provided that there shall be excluded therefrom (a) the net income (or net loss)
of any Person acquired by such Person or a Subsidiary of such Person in a
pooling-of-interests transaction for any period prior to the date of such
transaction, (b) the net income (or net loss) of any Subsidiary of such Person
which is subject to restrictions which prevent the payment of dividends or the
making of distributions to such Person to the extent of such restrictions, (c)
the net income (or net loss) of any Person that is not a Subsidiary of such
Person except to the extent of the amount of dividends or other distributions
actually paid to such Person by such other Person during such period, (d) gains
or losses on Asset Dispositions by such Person, (e) all extraordinary gains and
extraordinary losses and (f) amortization of any discount arising out of the
sale of the Securities.
"Consolidated Net Worth" of any Person as of any date of determination
means the stockholders' equity of such Person and its Subsidiaries at such date
determined in accordance with generally accepted accounting principles on a
Consolidated basis.
"Corporate Trust Office" means the principal office of the Trustee in
Boston, Massachusetts, New York, New York, or such other jurisdiction within the
United States as the Company may approve, at which at any particular time its
corporate trust business shall be administered.
"Corporation" means a corporation, association, company, joint-stock
company, partnership or business trust.
"Credit Agreement" means the Credit Agreement, dated as of [September
__, 1996], among the Company, the lending banks identified therein and [The
Chase Manhattan Bank, a New York banking corporation], as administrative agent
for such lending banks, providing initially for a revolving credit loan of up to
$60,000,000 (the "Credit Loan") and a term loan of $30,000,000 (the "Term
Loan"), secured by a first priority lien on substantially all of the assets of
the Company pursuant to the Security Document of even date therewith, as at any
time amended, extended or otherwise modified, restated or refinanced.
5
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"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Subsidiary against fluctuations in currency values.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, (i) every
obligation of such Person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments
including obligations Incurred in connection with the acquisition of property,
assets or businesses (but excluding trade accounts payable or similar accrued
liabilities arising in the ordinary course of business), (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptance or similar facilities issued for the account of such Person,
(iv) every obligation of such Person upon which interest charges are customarily
paid, (v) every obligation of such Person issued or assumed as the deferred and
unpaid purchase price of property or services (but excluding trade accounts
payable or similar accrued liabilities arising in the ordinary course of
business), (vi) every Capital Lease Obligation of such Person, (vii) the maximum
fixed mandatory redemption or repurchase price of Redeemable Stock of such
Person at the time of determination, (viii) all Debt of others secured by a Lien
on any asset of such Person, whether or not such Debt is otherwise an obligation
of such Person, and (ix) every obligation of the type referred to in Clauses (i)
through (viii) of another Person and all dividends of another Person the payment
of which, in either case, such Person has guaranteed or is responsible or liable
for, directly or indirectly, as obligor, guarantor or otherwise, if and to the
extent any of the foregoing debt would appear as a liability upon a balance
sheet of such person prepared on a Consolidated basis in accordance with
generally accepted accounting principles.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Effective Date" means the date of the effectiveness of the Plan.
"Environmental and Safety Laws" mean any applicable treaties, laws,
rules, regulations, codes, ordinances, decrees, judgments, injunctions, or
binding agreements issued, promulgated or entered into by any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, release or threatened release of any
Hazardous Material or to employee health and safety matters, including the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Federal Water Pollution Control Act,
the Clean Air Act, the Toxic Substances Control Act, the Occupational Safety and
Health Act, the Emergency Planning and Community Right-to-Know Act, the
Hazardous Materials Transportation Act and any similar or implementing state or
local law, and all amendments or regulations promulgated thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Company, is treated as a single employer
under Section 414(b) or (c) of the
6
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Code, or solely for purposes of Section 302 of ERISA and Section 412 of the
Code, is treated as a single employer under Section 414 of the Code.
"Event of Default" has the meaning specified in Section 5.1.
"Excess EBITDA" shall mean, for any period of four consecutive fiscal
quarters, the excess, if any, of (a) the Consolidated EBITDA of the Guarantor,
the Company and any Subsidiaries for such period over (b) the Consolidated
EBITDA required to have been achieved for such period pursuant to Section 6.12
of the Credit Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" has the meaning specified in the definition of Offer
to Purchase.
" Governmental Actions" means authorizations, approvals, consents,
waivers, exceptions, licenses, filings, registrations, rulings, permits,
certificates, exemptions and other similar actions or requirements by, with of
from any Governmental Authority.
"Governmental Authority" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" means the guarantee contained in Article XIV hereof given
by the Guarantor or any guarantee contained in a Subsidiary Guarantee Agreement.
"Guarantor" means PSF L.L.C., a Delaware limited liability company, and
its successors and assigns.
"Hazardous Materials" means all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, infectious or medical wastes and all
other substances or wastes of any nature regulated pursuant to any Environmental
and Safety Law.
"Hedge Agreement" of any Person means any contract for, or option, put,
Currency Agreement or similar arrangement relating to, the purchase by such
Person of (a) grain, soy meal and other feed ingredients or related hedging
activities conducted in accordance with prudent business practice and (b) hogs
and related hedging activities conducted in accordance with prudent business
practice, in each case that are created to protect such Person against price
fluctuations and not for speculative purposes.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
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"Inactive Subsidiary" shall mean, at any time, any Subsidiary of the
Company that has no Debt at such time, less than $1,000 in units at such time
and has not engaged in any business activities within the previous 6 months.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that a
change in generally accepted accounting principles that results in an obligation
of such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt.
"Indemnity Agreement" shall mean
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Intercreditor Agreement" shall mean the Intercreditor Agreement, of
even date herewith, among the Company, the Guarantor, the Collateral Agent and
the Senior Collateral Agent.
"Interest Coverage Ratio" means, with respect to the Company as of any
date, the ratio of (i) the aggregate amount of the Consolidated EBITDA of the
Guarantor, the Company and their Subsidiaries for the [four fiscal quarters] for
which financial information in respect thereof is available immediately prior to
such date to (ii) the aggregate amount of the Consolidated Interest Expense of
the Guarantor, the Company and their subsidiaries during such [four fiscal
quarters].
"Interest Payment Date" has the meaning specified in Section 2.2.
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution to (by means of transfers
of cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidence of Debt issued
by any other Person, other than (i) loans or advances made to employees in the
ordinary course of business not in excess of $[100,000] outstanding at any time
to any employee and (ii) advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of any
Person or its Subsidiaries and any securities received in settlement thereof.
8
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"Leaseholds" of any Person shall mean all the right, title and interest
of such person as lessee or licensee in, to and under leases or licenses of Real
Property or fixtures annexed or to be annexed thereto.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Majority Holders" means the holders of more than 50% in aggregate
principal amount of the Second Priority Notes and the Securities at the time
outstanding, as determined from the records of the Company.
"Management Option Plan" means the 1996 Management Option Plan of the
Guarantor, effective as of _____________, 1996.
"Material Adverse Effect" means (a) a materially adverse effect on the
business, assets, operations or condition, financial or otherwise, of the
Company and its Subsidiaries (taken as a whole) or (b) a material impairment of
the rights of the Holders hereunder.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Member" means a Person admitted as an owner of a membership interest
in a limited liability company.
"Mineral Rights" shall mean rights and interests held by third parties
in the oil, gas and other minerals estate (including mineral and royalty
interests).
"Mortgages" means the mortgages, deeds of trust, leasehold mortgages,
assignments of leases and rents, amendments and modifications thereto pursuant
to Section 2.2 of the Security Agreement or Section 10.22 hereof to effect the
security interests intended by the Security Agreement.
"Morgan Stanley Note Agreement" means the commitment to purchase up to
$10,000,000 in aggregate principal amount of Senior Secured Second Priority
Notes due 2002 (the "Second Priority Notes") under the Note Purchase Agreement
dated as of [September __, 1996], among the Company, the Guarantor and Morgan
Stanley Group Inc., as the same may from time to time be amended, extended or
otherwise modified, restated or refinanced.
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"MSCP" shall mean Morgan Stanley Capital Partners III, L.P., a Delaware
limited liability partnership.
"MS Group" shall mean Morgan Stanley Group Inc., a Delaware
corporation.
"New Finishing Facility" shall mean a hog finishing facility acquired
or constructed by the Company after the Effective Date.
"New Finishing Facility Debt Service" shall mean, with respect to any
New Finishing Facility Debt, for any period the sum of the scheduled principal
and interest payments required to be made with respect to such New Finishing
Facility Debt during such period. For purposes of Section 10.8(vi), New
Finishing Facility Debt that bears interest at a floating rate for any period
shall be deemed to bear interest at a fixed rate for such period equal to the
interest rate thereon at the beginning of such period.
"New Finishing Facility Debt" shall mean Debt of the Company (including
Debt of others guaranteed by the Company) incurred after the Effective Date to
finance the construction or acquisition of New Finishing Facilities, so long as
the instruments governing such Debt do not contain (a) any financial covenants
or (b) any other covenants or defaults that are more onerous to the Company than
those contained in this Agreement (except for any such covenants that relate
solely to the New Finishing Facility financed thereby).
"Non-Surviving Combination" shall have the meaning specified in Section
8.1.
"Obligations" shall have the meaning specified in Section 14.1.
"Offer" has the meaning specified in the definition of Offer to
Purchase.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at its address
appearing in the Security Register on the date of the Offer, offering to
purchase up to the principal amount of Securities specified in such Offer at the
purchase price specified in such Offer (as determined pursuant to this
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase which shall
be, subject to any contrary requirements of applicable law, not less than 30
days or more than 65 days after the date of such Offer and a settlement date
(the "Purchase Date") for the purchase of Securities within five Business Days
after the Expiration Date. The Company shall notify the Trustee at least 15
Business Days (or such shorter period as is acceptable to the Trustee) prior to
the mailing of the Offer of the Company's obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company. The Offer
shall contain information concerning the business of the Company and its
Subsidiaries which the Company in good faith believes will enable such Holders
to make an informed decision with respect to the Offer to Purchase (which at a
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minimum will include (i) the most recent annual and quarterly financial
statements, (ii) a description of material developments in the Company's
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring the
Company to make the Offer to Purchase), (iii) if applicable, appropriate pro
forma financial information concerning the Offer to Purchase and the events
requiring the Company to make the Offer to Purchase, and (iv) any other
information required by applicable law to be included therein). The Offer shall
contain all instructions and materials necessary to enable such Holder to tender
Securities pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer
to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding
Securities offered to be purchased by the Company pursuant to the Offer
to Purchase (including, if less than 100%, the manner by which such has
been determined pursuant to the Section hereof requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price (expressed as a percentage of principal
amount) to be paid by the Company for each Security accepted for
payment (as specified pursuant to this Indenture) (the "Purchase
Price");
(5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that Securities
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Securities are to be surrendered
for tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become
due and payable upon each Security accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on
and after the Purchase Date;
(9) that each Holder electing to tender a Security pursuant to
the Offer to Purchase will be required to surrender such Security at
the place or places specified in the Offer prior to the close of
business on the Expiration Date, such Security being, if the Company or
the Trustee so requires, duly endorsed by, or accompanied by a
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written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing;
(10) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Company (or its Paying Agent)
receives, not later than the close of business two Business Days prior
to the Expiration Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Security the Holder tendered, the certificate number of the
Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of such tender;
(11) that if Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase
all such Securities; and
(12) that in the case of any Holder whose Security is
purchased only in part, the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the
Security so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
applicable securities laws and regulations and the Offer for such Offer to
Purchase. An Offer to Purchase made pursuant to Section 10.10(b) hereof may
require Holders to furnish to the Trustee written notice of intention to have
securities purchased on or before the date 35 days preceding the Purchase Date
as provided in that Section.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer, the Treasurer,
or the Secretary or Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President or any Vice President and
by the Chief Financial Officer, the Treasurer, the Secretary or the Assistant
Secretary of the Company or the Guarantor and delivered to the Trustee and
containing the statements provided for in Section 1.2.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee, and
containing the statements provided for in Section 1.2.
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"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust for the Holders of such
Securities; provided, that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been
made; except that if any such Security so called for redemption shall
not be paid upon surrender thereof in accordance with said notice, such
Security shall be deemed Outstanding until such time as it is paid; and
(iii) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor of the Securities or an Affiliate of the
Company (other than a Permitted Holder) or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or an Affiliate of the Company (other than a
Permitted Holder) or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Holders" means any of Morgan Stanley Co. Incorporated,
Putnam Investment Management, GEM Capital Management Inc., The Prudential
Insurance Company of America, Loews Corporation and Hanwa Co., Limited, any of
the Affiliates of any of them and any funds or institutional accounts managed or
advised by any of them.
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"Permitted Investments" shall include:
(i) certificates of deposit with final maturities of two years or
less issued by commercial banks organized under the laws of
either the United States of America having capital and surplus
in excess of $100,000,000;
(ii) commercial paper with minimum grade of A1 or P1;
(iii) a direct obligation of the United States of America or of a
United States of America agency with a maturity of two years
or less;
(iv) money market preferred stock rated "A" or above;
(v) shares of money market mutual or similar funds having assets
in excess of $100,000,000;
(vi) Hedge Agreements entered into by the Company or any Subsidiary
to the extent any such agreement is otherwise permitted
hereunder;
(vii) bank accounts maintained in any commercial bank;
(viii) endorsements of instruments for collection in the ordinary
course of business;
(ix) Investments in Wholly-Owned Subsidiaries;
(x) Guarantees by the Company of New Finishing Facility Debt of
others; and
(xi) any Investment made solely with the Proceeds of an Asset
Disposition, the payment or application of which is not
restricted by Section 10.10;
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization or government or
any agency or political subdivision thereof.
"Personal Property" of any Person shall mean the right, title and
interest of such person in assets, properties and items other than Real Property
and Leaseholds.
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"Plan" has the meaning set forth in the Recitals hereto.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Proceeds" has the meaning specified in Section 10.10.
"Purchase Amount" has the meaning specified in the definition of Offer
to Purchase.
"Purchase Date" has the meaning specified in the definition of Offer to
Purchase.
"Purchase Price" has the meaning specified in the definition of Offer
to Purchase.
"Qualified Capital Stock" of any Person means any and all Capital Stock
of such Person other than Redeemable Stock.
"Real Property" of any Person shall mean all the fee ownership right,
title and interest of such Person in and to land, improvements therein, fixtures
annexed or to be annexed thereto and any insurance and condemnation proceeds
relating thereto other than Leaseholds.
"Redeemable Stock" of any Person means any equity security of any
Person (not including any warrants/stock issued under the Management Option
Plan) that by its terms or otherwise is required to be redeemed prior to the
Stated Maturity of the Securities or is redeemable at the option of the holder
thereof at any time prior to the Stated Maturity of the Securities.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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"Regular Record Date" for the interest payable on any Interest Payment
Date means the fifteenth day of [February] and [August] in each year (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters and shall include any officer in its corporate trust department.
"Restricted Payments" has the meaning specified in Section 10.9.
"Second Priority Notes" has the meaning specified in the definition of
Morgan Stanley Note Agreement.
"Second Priority Obligations" means the obligations of the Company and
the Guarantor under the Morgan Stanley Note Agreement and the Second Priority
Notes.
"Secondary Security" has the meaning specified in Section 3.7.
"Securities" means the securities designated as such in the first
Recital hereto, any Secondary Securities and any Securities issued hereunder
upon transfer of, in exchange for or in lieu of any other Security or portion
thereof theretofore issued hereunder.
"Security Agreement" means the Security and Collateral Agency Agreement
of even date herewith, among the Company, the Guarantor, the Subsidiary
Guarantors and the Trustee, as Collateral Agent, for the benefit of the Holders
and the holders of notes issued under the Morgan Stanley Note Agreement.
"Security Documents" means the Security Agreement, the Pledge
Agreement, the Indemnity Agreement, the Mortgages, and each of the ancillary
agreements required by any of the foregoing and any agreements and other
instruments and documents executed and delivered pursuant to Section 10.22, each
as amended, supplemented or otherwise modified from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Collateral Agent" means The Chase Manhattan Bank, as
administrative agent under the Credit Agreement and collateral agent under the
security documents relating to the Credit Agreement, and its successors.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
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"Stated Maturity" when used with respect to any Security or any
installment of interest thereof means the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person, or by such Person
and one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof but shall not include any Person that has no
Debt, less than $1,000 in assets and has not engaged in any business within the
preceding six months.
"Subsidiary Guarantee Agreement" shall mean any guarantee agreement,
substantially in the form of Exhibit A hereto, executed by a Subsidiary pursuant
to Section 10.22, pursuant to which such Subsidiary guaranties payment of the
Securities on substantially the same terms and conditions set forth in Article
XIV.
"Subsidiary Guarantor" means each Subsidiary which executes a
Subsidiary Guarantee Agreement.
"Successor Company" shall have the meaning specified in Section
8.1(b)(2).
"Surviving Entity" has the meaning specified in Section 8.1(a).
"Term Loan" has the meaning specified in the definition of "Credit
Agreement".
"Term Loan Payout Date" means the date on which the Term Loan is paid
in full, whether upon maturity or by earlier prepayment.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by such amendment, the Trust
Indenture Act of 1939 as so amended
"United States Bankruptcy Code" means Title 11, United States Code, as
amended, or any similar United States Federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
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"U.S. Government Obligations" has the meaning specified in Section
12.4.
"Vice President" means any vice president, whether or not designated by
a number or a word or words added before or after the title "Vice President".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Voting Stock of which (other than director's
qualifying shares) shall at the time be owned by such Person or by one or more
Wholly Owned Subsidiaries of such Person.
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act and under this Indenture. Each such certificate or opinion shall
be given in the form of an Officers' Certificate, if to be given by Officers of
the Company, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the Trust Indenture Act and any other
requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall be in form
satisfactory to the Trustee and shall include
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm is
independent.
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SECTION 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons may certify or give an opinion as to such matters in
one or several documents.
Any certificate or opinion of an Officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of
counsel, unless such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representation with respect to the
matters upon which his certificate or opinion is based are erroneous. Any such
certificate or opinion of counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an Officer or
Officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders must, except as otherwise provided in Article XIII, be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the actions embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity,
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such certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 7.1)
prior to such first solicitation or vote, as the case may be, with regard to any
record date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 1.5. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
One Federal Street, Boston, Massachusetts 02110, Attention: Corporate
Trust Department; or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class certified
postage prepaid, return receipt requested, to the Company addressed to
it at the address of its principal office specified in the first
paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
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SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Application of Trust Indenture Act.
The Trust Indenture Act shall apply as a matter of law (or to the
extent not so required, as a matter of contract) to this Indenture for purposes
of interpretation, construction and definition of the rights and obligations
hereunder. If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Guarantor shall bind their respective successors and assigns, whether so
expressed or not.
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SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, expressed or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and (subject to Article XIII hereof) the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH OF THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR THE
GUARANTOR IN ANY OTHER JURISDICTION.
SECTION 1.13. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, Purchase
Date or at the Stated Maturity, provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Purchase Date
or Stated Maturity, as the case may be.
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ARTICLE II
Security Forms
SECTION 2.1. Forms Generally.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may be
produced in any other manner all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 2.2. Forms of Face of Security.
The form of the face of the Securities shall be substantially as
follows:
PREMIUM STANDARD FARMS, INC.
11% SENIOR SECURED NOTES DUE 2003
No. $
Premium Standard Farms, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to
, or registered assigns, the principal amount of Dollars on
[September 15], 2003, and to pay interest on the unpaid principal amount from
the most recent date to which interest has been paid or, if no interest has been
paid, from the date of the original issuance hereof, at the rate of 11% per
annum in cash in United States dollars until the principal hereof is paid or
made available for payment and at the rate of 11% per annum on any overdue
principal and premium and on any overdue installment of interest (but not to
exceed the maximum rate permitted by applicable law) until paid as specified on
the reverse hereof; provided, that on each Interest Payment Date prior to the
Term Loan Payout Date, the Company may, as hereafter provided, pay such interest
in whole or in part through the issuance of additional Securities ("Secondary
Securities") in an aggregate principal amount
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equal to the amount of interest (rounded to the nearest whole dollar) that would
be payable with respect to this Security if such interest were paid in cash;
provided, further, that interest payable on or after the Term Loan Payout Date
or on or after the Maturity of this Security shall be payable only in cash.
The Company shall pay interest semi-annually on [March 15] and
[September 15] of each year, commencing [March 15], 1997 or if any such day is
not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the [February 15] or [August 15] (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided (including by
issuing Secondary Securities as herein provided) for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities not less than 10 days prior to such Special Record Date,
or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
On each such Interest Payment Date prior to the Term Loan Payout Date
as provided in the proviso to the first paragraph hereof, the Company may pay
interest by the issuance of Secondary Securities and, the Trustee shall, upon
the Company's Order, authenticate and deliver Secondary Securities for original
issuance to the Holder of this Security on the relevant record date, as shown by
the records of the Security Registrar, in the aggregate principal amount
required to pay such interest (rounded up to the next whole dollar). Each
issuance of Secondary Securities shall be made as nearly as possible pro rata,
and any rounding may be made, with respect to the aggregate principal amount of
Outstanding Securities held by each Holder.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee, Security Registrar
or Paying Agent maintained for that purpose in New York, New York, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of any interest may be made by mailing a check (or
Secondary Securities, if applicable) therefor to the address of the Person
entitled thereto as such address shall appear in the Security Register.
This Security is one of the Securities issued and to be issued from
time to time and in accordance with the Indenture (as hereinafter defined), all
equally secured by a Security and
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Collateral Agency Agreement, dated as of even date with the Indenture
(hereinafter as amended and supplemented the "Security Agreement") among the
Guarantor (as hereinafter defined), the Company and the Trustee, as Collateral
Agent, and related Mortgages (collectively, the "Security Documents"), to which
Security Documents reference is made for a description of the property mortgaged
and pledged (the "security"), the nature and extent of this security, the other
indebtedness of the Company secured thereby, and the other provisions thereof;
provided, however, that the liens of said Security Documents are subject to the
terms and provisions of an Intercreditor Agreement, dated of even date
therewith, among the Guarantor, the Company, the Senior Collateral Agent, and
the Trustee, as Collateral Agent, to which reference is made for a description
of the terms and provisions thereof; and provided, further, that the rights and
interests of the holders of the Securities in the proceeds of the security under
the Indenture and the Security Documents are junior in priority to those of the
holders of the Second Priority Notes (as hereafter defined) of the Company.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
PREMIUM STANDARD FARMS, INC.
By
Attest:
SECTION 2.3. Form of Reverse of Security.
The form of the reverse of the Securities shall be substantially as
follows:
This Security is one of a duly authorized issue of Securities of the
Company designated as its 11% Senior Secured Notes due 2003 (the "Securities")
issued under an Indenture, dated
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as of September __, 1996 (herein called the "Indenture"), between the Company,
PSF, L.L.C., a Delaware limited liability company (the "Guarantor"), and Fleet
National Bank, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture). The Securities are limited in aggregate
principal amount to $117,500,000 plus the aggregate principal amount of
Secondary Securities issued pursuant to the Indenture. Reference is hereby made
to the Indenture and all indentures supplemental thereto for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption, in whole or in part, upon not
less than 20 nor more than 60 days' notice by mail, at the election of the
Company at any time at the following Redemption Prices (expressed as percentages
of principal amount), if redeemed during the 12- month period beginning
September of each of the years indicated below:
Redemption
Year Price
---- -----
1996 111%
1997 108%
1998 105%
1999 103%
2000 101%
2001 100%
The Redemption Prices as defined above, together in the case of any such
redemption with accrued interest to the Redemption Date, shall be paid in cash
upon surrender of such Securities in accordance with such notice, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, in cash or Secondary Securities, if applicable,
all as provided in the Indenture.
This Security does not have the benefit of any sinking fund.
The Indenture provides that, subject to certain conditions, if a Change
of Control or Asset Disposition occurs, the Company shall be required to make an
Offer to Purchase for the
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Securities at a purchase price equal to 101% of the principal amount thereof or
par, as the case may be, together in either case with all accrued and unpaid
interest through the Purchase Date.
Interest on the Debt evidenced by this Security is expressly limited so
that in no contingency or event whatsoever, whether by acceleration of the
maturity of the Debt evidenced by this Security or otherwise, shall the interest
contracted for, charged or received by the Holder exceed the maximum amount
permissible under applicable law. If under any circumstances whatsoever the
fulfillment of any provisions of this Security, the Indenture or any other
document evidencing, securing, guaranteeing or otherwise pertaining to the Debt
evidenced by this Security, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law, then
ipso facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstances any Holder shall ever receive
anything of value as interest or deemed interest by applicable law under this
Security, the Indenture or any other document evidencing, securing, guaranteeing
or otherwise pertaining to the Debt evidenced by this Security or otherwise an
amount that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing on the Debt of this Security held by the Holder, and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
of the Debt of this Security held by the Holder, such excess shall be refunded
to the Company. In determining whether or not the interest paid or payable with
respect to any Debt of the Company to the Holder, under any specific
contingency, exceeds the highest lawful rate, the Company and the Holder shall,
to the maximum extent permitted by applicable law, (a) characterize any
non-principal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effects thereof, (c) amortize, prorate,
allocate and spread the total amount of interest throughout the term of such
Debt so that the actual rate of interest on account of such Debt does not exceed
the maximum amount permitted by applicable law, and/or (d) allocate interest
between portions of such Debt, to the end that no such portion shall bear
interest at a rate greater than that permitted by law. The terms and provisions
of this paragraph shall control and supersede every other conflicting provision
of this Security and the Indenture.
In the event of redemption or purchase pursuant to an Offer to Purchase
of this Security in part only, a new Security or Securities of like tenor for
the unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of (i) the
entire Debt of this Security and (ii) certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth further therein.
The Indenture and the Security Documents provide that the security
described therein is pledged and mortgaged to the Collateral Agent for the
benefit of the holders of up to $10,000,000 aggregate principal amount of the
Company's Senior Secured Second Priority
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Notes due 2002 (the "Second Priority Notes") and the Holders of the Securities,
provided that the proceeds of such security, if any, shall be applied first to
the payment in full of the Second Priority Notes and thereafter to the payment
of the Securities.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages of the aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay (subject to Section 16.1 of said
Indenture) the principal of (and premium, if any) and interest on this Security
at the times, place and rate, and in the coin or currency or through issuance of
Secondary Securities, as herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
Corporate Trust Office or the office or agency of the Company in New York, New
York, or at any other office designated by the Company under the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and like tenor and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1.00 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like tenor and aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, provided, however, that the Company may require payment of (i) a
service charge with respect to any transfer or exchange as a result of which the
number of Securities not in a denomination of $1,000 or any integral multiple
thereof would be increased, and (ii) of a sum sufficient to
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cover any tax or other governmental charge payable in connection with such
transfer or exchange.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30- day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
--------------------------------
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 10.10 or 10.18 of the Indenture, check the box:
[_]
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Section 10.10 or 10.18 of the Indenture, state the
amount: $_____________
Dated: Your Signature:
(Sign exactly as name appears on the
other side of this Security)
Signature Guaranteed by:
- ---------------------------------
Participant in a Recognized
Signature Guarantee Medallion
Program
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SECTION 2.4. Form of Trustee's Certificate of Authentication.
The form of certificate of authentication shall be substantially as
follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
FLEET NATIONAL BANK,
as Trustee
Dated: By
Authorized Signatory
SECTION 2.5. Form of Guarantee.
The form of guarantee shall be substantially as follows:
For value received, PSF L.L.C., a Delaware limited liability company,
hereby unconditionally guarantees to the Holder of the Security upon which this
Guarantee is endorsed the due and punctual payment, as set forth in the
Indenture pursuant to which such Security and this Guarantee are issued, of the
principal of, premium (if any) and interest on, such Security when and as the
same shall become due and payable for any reason according to the terms of such
Security and Article XIV of the Indenture. The Guarantee of the Security upon
which the Guarantee is endorsed will not become effective until the Trustee
signs the certificate of authentication on such Security.
PSF L.L.C.
By __________________________
SECTION 2.6. Form of Legend.
The form of legend on each Security as required by the Intercreditor
Agreement shall be substantially as follows:
THE LIENS ON THE COLLATERAL WHICH SECURE THE SECURITIES REFERRED TO IN
THE WITHIN-MENTIONED INDENTURE, OF WHICH THIS SECURITY IS ONE, ARE
SUBJECT TO THE TERMS AND PROVISIONS OF THE WITHIN-MENTIONED
INTERCREDITOR AGREEMENT.
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ARTICLE III
The Securities
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $117,500,000 plus the aggregate
principal amount of Secondary Securities issued hereunder, except for Securities
authenticated and delivered upon registration or transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Sections 3.4, 3.5, 3.6, 9.6,
10.10, 10.18 and 11.8.
The Securities shall be known and designated as the "11% Senior Secured
Notes due 2003" of the Company. The Stated Maturity of the Securities shall be ,
2003. The Securities shall bear interest on the unpaid principal amount of such
Securities at the rate of 11% per annum, payable semi-annually on [March 15] and
[September 15], commencing [March 15], 1997, until the principal thereof is paid
or made available for payment, in the manner set forth in the form of Security
and in Section 3.7. Interest on any overdue principal, interest (to the extent
lawful) or premium, if any, shall be payable on demand.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Trustee, Security Registrar or
Paying Agent maintained in New York, New York for such purpose and at any other
office or agency maintained for such purpose; provided, however, that, at the
option of the Company, payment of any interest may be made by mailing a check
(or Secondary Securities, if applicable) therefor to the address of the Person
entitled thereto as such address shall appear in the Security Register.
The Securities shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 10.10 and 10.18 of the
Indenture.
The Securities shall be redeemable as provided in Article XI.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article XII.
SECTION 3.2. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1.00 and any integral multiple thereof.
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SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, the Chief Executive Officer, its President or one of its
Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
The Trustees shall authenticate Securities for original issue in an
aggregate principal amount of $117,500,000 upon receipt of the following:
(a) a Company Order for authentication, specifying the name,
address, FID number and principal amount for each Holder as
provided in the Plan;
(b) an executed copy of the Intercreditor Agreement;
(c) executed copies of the Junior Security Documents; and
(d) an Officers' Certificate and Opinion of Counsel, each stating,
inter alia, that such Securities have been duly and validly
issued in accordance with the Plan and this Indenture and are
entitled to the rights and benefits set forth herein.
(e) appropriate evidence that the conditions precedent to the
Effective Date are to be complied with concurrently with the
authentication of such Securities.
Subject to Section 6.1, the Trustee shall be fully protected in relying
upon the foregoing documents.
At any time and from time to time after the Effective Date, the Company
may deliver Securities executed by the Company and the Guarantor to the Trustee
for authentication, together with a Company Order for the authentication and
delivery of such Securities; and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities as in this Indenture
provided. In authenticating such Securities, and accepting the additional
responsibilities under the Indenture in relation to such Securities, the Trustee
shall be entitled to receive, and (subject to Section 6.1) shall be fully
protected in relying upon an Officers' Certificate and Opinion of Counsel, each
stating, inter alia, that such Securities have been duly and validly issued in
accordance with the terms of this Indenture and are entitled to the rights and
benefits set forth herein.
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Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such temporary Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the
Corporate Trust Office or any office or agency of the Company designated
pursuant to Section 10.2, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 3.5. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.2 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as the Security Registrar may prescribe, the Company
shall provide for the registration of Securities and transfers of Securities.
The Trustee is hereby appointed "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
By accepting delivery of their Securities, the Holders accept and agree
to be bound by the terms and provisions of this Indenture and the Security
Documents.
Upon surrender for registration of transfer of any Security at the
Corporate Trust Office or an office or agency of the Company designated pursuant
to Section 10.2 for such
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purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like tenor and aggregate
principal amount as the Security transferred or tendered.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like tenor and aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company and the Guarantor shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, provided, however, that the Company may require payment
of (i) a service charge with respect to any transfer or exchange as a result of
which the number of Securities not in a denomination of $1,000 or any integral
multiple thereof would be increased, and (ii) of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 3.4, 9.6, 10.10, 10.18 or 11.8.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 11.4 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
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If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company and the Guarantor shall execute and upon a Company Order
(which requirement may be waived by the Trustee) the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefit of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
On each Interest Payment Date prior to the Term Loan Payout Date, the
Company may pay interest on each Security through the issuance of additional
Securities ("Secondary Securities") in an aggregate principal amount equal to
the amount of interest (rounded up to the next whole dollar) that would be
payable with respect to such Security if such interest were paid in cash;
provided that interest payable on any date on or after the Term Loan Payout Date
or on or after the Maturity of any Security shall be payable solely in cash.
On each such Interest Payment Date, the Trustee shall, upon Company
Order, authenticate and deliver Secondary Securities for original issuance to
each holder of Securities on the relevant record date, as shown by the records
of the Security Register, in the aggregate principal amount required to pay such
interest (rounded up to the next whole dollar). Any Secondary Securities so
issued shall be dated the applicable Interest Payment Date, shall bear interest
from and after such date, shall mature on , 2003, and shall be governed by,
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and subject to the terms, provisions and conditions of, this Indenture and shall
have the same rights and benefits as Securities previously issued.
The Company shall have the right to aggregate amounts of interest
payable in the form of Secondary Securities to a Holder of Outstanding
Securities and issue to such Holder a single Secondary Security in payment
thereof.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for (including by the issuance of Secondary Securities as
herein provided), on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount (in the form of money or, if the Term Loan Payout
Date has not occurred, at the Company's option, Secondary Securities)
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payments,
such money or Secondary Securities when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be
not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at
his address as it appears in the Security Register, not less than 10
days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
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(2) The Company may establish a procedure to make payment of
any Defaulted Interest consistent with any lawful procedure and with
the requirements of any securities exchange on which the Securities may
be listed, and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment is approved by
the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of, (and premium, if
any) and (subject to Section 3.7) interest on, such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or pursuant to any Offer to Purchase pursuant to Sections
10.10 and 10.18 shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the Trustee shall
be disposed of as directed by a Company Order.
SECTION 3.10. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
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ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving obligations of the Company specified below), and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture (including, but not
limited to, Article XII hereof), when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust and
thereafter repaid to the Company or discharged from such
trust, as provided in Section 10.3) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for
the purpose money in an amount sufficient to pay and discharge the
entire Debt on such Securities not theretofore delivered to the Trustee
for cancellation, for principal (and premium, if any) and interest to
the date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
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(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article IV, the Company's obligations with respect to the Securities under
Sections 3.4, 3.5, 3.6, 10.2 and 10.3, obligations of the Company to the Trustee
under Section 6.7 and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of Clause (1) of this Section, the rights, powers,
trusts duties and immunities of the Trustee hereunder and the obligations of the
Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be segregated and
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent as the Trustee may determine, to the Persons entitled thereto, of
the principal (and premium, if any) and interest for whose payment such money
has been deposited with the Trustee.
ARTICLE V
Remedies
SECTION 5.1. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(1) default in the payment of any interest upon any Security
when it becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security at its Maturity; or
(3) default in the payment of principal (or premium, if any)
or interest pursuant to an Offer to Purchase pursuant to Sections 10.10
and 10.18; or
(4) default in the performance, or breach, of Section 8.1; or
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(5) default under the Second Priority Obligations or any other
Debt or other evidence of Debt of the Company or the Guarantor or any
Subsidiary in a principal amount of $10,000,000 or more, or under any
mortgage, indenture or security agreement with respect thereto, which
default shall constitute a failure to pay principal of such Debt when
due at final maturity thereof or shall have resulted in such Debt
becoming or being declared due and payable prior to the date on which
it would otherwise have become due and payable; or
(6) default in the performance, or breach, of any covenant,
representation or warranty of the Company or the Guarantor in this
Indenture (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of
30 days after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding
Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(7) a final judgment or final judgments for the payment of
money are entered against the Company or the Guarantor or any
Subsidiary in an aggregate amount in excess of $10,000,000 by a court
or courts of competent jurisdiction, which judgments remain
undischarged, unstayed or unbonded for a period (during which execution
shall not be effectively stayed) of 60 days [after the right to appeal
all such judgments has expired;] or
(8) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company or the
Guarantor or any Subsidiary in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or (B) a decree or order adjudging the Company or
the Guarantor or any Subsidiary a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or the
Guarantor or any Subsidiary or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 90 consecutive
days; or
(9) the commencement by the Company or the Guarantor or any
Subsidiary of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Company or the Guarantor in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or
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insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing
of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or the Guarantor or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of action by the Company or the Guarantor in furtherance of any such
action; or
(10) any Security Document shall, at any time, cease to be in
full force and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by the Company or
the Guarantor or the Collateral Agent shall not have or shall cease to
have a valid, perfected and subsisting Lien on the Collateral (other
than Collateral released as provided in the Security Documents and the
Intercreditor Agreement); or any Lien shall have a priority equal to or
greater than the Liens on the Collateral, except as permitted by
Section 10.14; or
(11) this Indenture or the Securities for any reason other
than satisfaction in full of the obligations thereunder shall cease to
be, or shall be asserted by the Company or the Guarantor not to be, in
full force and effect and enforceable in accordance with its terms or
is declared null and void.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(8) or (9)) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 50% in principal amount of Outstanding
Securities may declare the principal amount of all the Securities to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), and upon any such declaration such principal amount and
any accrued interest shall, subject to Section 16.1 hereof, become immediately
due and payable. If an Event of Default specified in Section 5.1(8) or (9)
occurs, the principal amount of and any accrued interest on the Securities then
Outstanding shall, subject to Section 16.1 hereof, become immediately due and
payable without any declaration or other Act on the part of the Trustee or any
Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of Outstanding Securities, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its consequences if
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(1) the Company has paid or deposited with the Trustee a sum
of money (or, if applicable, Secondary Securities) sufficient to pay
(A) all amounts due the Trustee under Section 6.7 and
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel,
(B) all overdue interest on all Securities,
(C) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration (including any Securities required
to have been purchased on the Purchase Date pursuant to an
Offer to Purchase made by the Company) and, interest thereon
at the rate provided by the Securities (but not to exceed the
maximum rate permitted by applicable law), and
(D) interest upon overdue interest at the rate
provided by the Securities but not to exceed the maximum rate
permitted by applicable law; and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3. Collection of Debt and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof or, with
respect to any Security required to have been purchased pursuant to an
Offer to Purchase made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee or the Holders of not less than 25%
in principal amount of the Outstanding Securities, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount (in money and/or
Secondary Securities, if applicable) then due and payable on such Securities for
principal (and premium, if any) and interest, and, to the extent that payment of
such interest shall be legally enforceable, interest on any overdue principal
(and premium, if any) and on any overdue interest, at the rate
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provided by the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, other than costs and expenses incurred through
negligence or bad faith.
If the Company fails to pay such amounts (in money and/or Secondary
Securities, if applicable) forthwith upon such demand, the Trustee, in its own
name and as trustee of an express trust, or subject to Section 5.7 hereof, the
Holders of not less than 25% in principal amount of the Outstanding Securities
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.7.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money or Secondary Securities collected by the Trustee pursuant to
this Article shall be applied in the following order, at the date or dates fixed
by the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment out of any money collected of all
amounts due the Trustee under Section 6.7;
SECOND, to the payment in full of the Second Priority
Obligations (the amounts so applied to be distributed among the holders
of the Second Priority Notes pro rata in accordance with the amounts of
the Second Priority Obligations owed to them on the date of any such
distribution);
THIRD, to the payment in full of the Securities Obligations
(the amounts as applied to be distributed among the holders of
Securities pro rata in accordance with the amounts of Securities
Obligations owed to them on the date of any such distribution); and
FOURTH, to the Grantors, their respective successors or
assigns, or as a court of competent jurisdiction may otherwise direct.
SECTION 5.7. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding (including an involuntary proceeding under the United States
Bankruptcy Code), judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
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(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 16.1) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of an Offer to Purchase made by the Company and accepted as
to such Security, on the Purchase Date) and to institute suit against the
Company and/or the Guarantor for the enforcement of any such payment (including
the commencement of an involuntary proceeding under the United States Bankruptcy
Code), and such rights may not be impaired without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Guarantor, the Trustee and
the Holders shall be restored severally and respectively to their former
positions
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hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.6 or to unclaimed moneys paid over to the Company under the last
paragraph of Section 10.3, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or Article
XIV or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 5.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
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(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to
have been purchased pursuant to an Offer to Purchase which has been
made by the Company), or
(2) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Trustee.
SECTION 5.15. Waiver of Stay or Extension Laws.
The Company and the Guarantor each covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE VI
The Trustee
SECTION 6.1. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
this Indenture and the Trust Indenture Act. Without limiting the generality of
the foregoing, if an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and
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powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the same
circumstances in the conduct of his own affairs. Notwithstanding the foregoing,
no provision of this Indenture shall require the Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. The Trustee shall not be deemed to have notice of any Event of Default or
event which with the passage of time might become an Event of Default unless (i)
the Trustee has received written notice thereof, addressed to a Responsible
Officer or (ii) in the case of an Event of Default under Section 5.1(1) or
5.1(2), the Trustee to the knowledge of a Responsible Officer is the sole Paying
Agent. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
The Trustee is expressly authorized and directed to enter into (i) the
Intercreditor Agreement, substantially in the form of Exhibit G hereto, for the
purpose of confirming that the lien of the Security Documents on the assets of
the Company or the Guarantor is junior to the lien of the security documents
relating to the Credit Agreement, (ii) the Security Agreement, substantially in
the form of Exhibit B hereto, (iii) any other Security Documents provided for in
the Security Agreement and (iv) any related financing statements or other
required filings, all as specified in any Officers' Certificates and Opinions of
Counsel submitted to the Trustee.
SECTION 6.2. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
in the case of any default of the character specified in Section 5.1(6), no such
notice to Holders need be given until at least 30 days after the delivery of a
Notice of Default as provided herein or such longer period of time as the
Trustee shall determine that the withholding of such notice is in the interests
of the Holders. For the purpose of this Section, the term "default" means any
event which is, or after notice or lapse of time or both would become, an Event
of Default.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of Debt or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
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(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(g) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of Debt or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney; and
(h) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
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SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be responsible for the
statements relating to the Securities set forth in any Offer, registration
statement or private placement memorandum applicable thereto.
SECTION 6.5. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law or this Agreement. The
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
SECTION 6.7. Compensation and Reimbursement.
The Company agrees
(A) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(B) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(C) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability, damage, cost or expense incurred without
negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this trust,
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including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
The obligations of the Company under this Section 6.7 to compensate or
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Trustee as such
or otherwise distributable to Holders of Securities, except funds in trust for
the benefit of the holders of particular Securities.
When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in Section 5.1(8) or (9), the
expenses and the compensation for the services are intended to constitute
expenses of administration in proceedings under any law therein referred to. To
the extent that such payment of reasonable compensation, expenses, liabilities
and counsel fees out of the estate in any such proceedings shall be denied for
any reason, payment of the same shall be secured by a lien on, and shall be paid
out of, any and all distributions, dividends, moneys, securities and other
property which the Holders of the Securities may be entitled to receive in such
proceedings, whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
"Trustee" for purposes of this Section 6.7 shall include any
predecessor Trustee, but the negligence or bad faith of any Trustee shall not
affect the rights of any other Trustee under this Section 6.7.
SECTION 6.8. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000 and its Corporate Trust
Office in the continental United States. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of a
Federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
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SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(A) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(B) the Trustee shall cease to be eligible under Section 6.9
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(C) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor
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Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(f) The successor Trustee shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided that
such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to, or successor to the corporate trust business of,
such authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated with the same effect as if such successor Trustee
had itself authenticated such Securities.
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SECTION 6.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished pursuant to clause (a) or (b) of this
Section 7.1.
SECTION 7.2. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
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SECTION 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times (May 1, in the case of annual reports) and in
the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 7.4. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
ARTICLE VIII
Merger, Consolidation, Etc.
SECTION 8.1. Company or the Guarantor May Merge, Consolidate, etc.... Only on
Certain Terms.
(a) The Guarantor shall not consolidate with or merge into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all its properties and assets as an entirety, unless either (i)
the Guarantor shall be the continuing Person, or (ii) the Person (if other than
the Guarantor) formed by such consolidation or into which the Guarantor is
merged or the Person which acquires by conveyance, transfer, lease or
disposition the properties and assets of the Guarantor (the "Surviving Entity")
shall be a corporation duly organized and validly existing under the laws of the
United States of America or any state thereof and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the Guarantee and the performance and observance of
any covenant of this Indenture and the Security Documents on the part of the
Guarantor to be performed and observed; and
(i) immediately after giving effect to such transaction,
and treating any Debt Incurrred by the Guarantor as a
result of such transaction as having been Incurred at
the time of such transaction, (A) the Guarantor or
the Surviving Entity would not be liable with respect
to any Debt which is
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not permitted udner Section 10.8 hereof and (B) the
Consolidated Net Worth of the Guarantor, the Company
or the Surviving Entity and their Subsidiaries would
be no less than the Consolidated Net Worth of the
Guarantor, the Company and their Subsidiaries
immediately prior to such transactions.
(ii) no Event of Default under Section 5.1 has occurred or
is continuing at the time of such transaction; and
(iii) the Guarantor has delivered to the Trustee an
Officers' Certificate stating that the consolidation,
merger, conveyance, transfer, lease or other
disposition and, if a supplemental indenture is
required in connection with such transaction, such
supplemental indenture complies with this Article and
all conditions precedent herein provided for relating
to such transaction have been complied with.
(b) The Company shall not consolidate with or merge into any other
Person or permit any other Person to consolidate with or merge into the Company
or transfer, convey, sell, lease or otherwise dispose of all or substantially
all of its properties or assets as an entirety, unless:
(1) the Company is the surviving Person; or
(2) in case the Company shall consolidate with or merge with
or into another Person or transfer, convey, sell, lease or otherwise
dispose of all or substantially all of its properties or assets as an
entirety, and the Company is not the surviving Person (a "Non-Surviving
Combination"), the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by transfer,
conveyance, sale, lease or otherwise the assets of the Company
substantially as an entirety (for purposes of this Article VIII, a
"Successor Company") shall be a corporation organized and validly
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee in
form satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Securities
and the performance of every covenant of this Indenture on the part of
the Company to be performed or observed; and
(i) immediately after giving effect to such transaction, and
treating any Debt Incurred by the Company as a result of such
transaction as having been Incurred at the time of such
transaction, (A) the Company or the Successor Company would
not be liable with respect to any Debt which is not permitted
under Section 10.8 hereof and (B) the Consolidated Net Worth
of the Guarantor, the Company or the Successor Company and
their Subsidiaries would be no less
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than the Consolidated Net Worth of the Guarantor, the Company
and their Subsidiaries immediately prior to such transaction;
(ii) no Event of Default under Section 5.1 has occurred or is
continuing at the time of such transaction; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate stating that such consolidation, merger,
conveyance, transfer, lease or acquisition and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture, complies with this
Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 8.2. Successor Substituted.
Upon any consolidation or merger, or any conveyance, transfer or lease
of the properties and assets of the Company or the Guarantor substantially as an
entirety in accordance with Section 8.1, the successor Person shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
or the Guarantor, as the case may be, under this Indenture with the same effect
as if such successor Person had been named as the Company or the Guarantor, as
the case may be, herein, and thereafter the predecessor Person shall be relieved
of all obligations and covenants under this Indenture and the Securities.
ARTICLE IX
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company or the Guarantor and the assumption by any such successor of
the covenants of the Company or the Guarantor, as the case may be,
herein and in the Securities; or
(2) to add to the covenants of the Company or the Guarantor
for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or the Guarantor; or
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(3) to secure the Securities pursuant to the requirements of
Section 10.22 or otherwise; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture, provided that such action
pursuant to this Clause (4) shall not adversely affect the interests of
the Holders in any material respect; or
(5) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act.
The Company shall provide notice of any supplemental indenture to the
Holders of Outstanding Securities promptly after the execution of such
supplemental indenture pursuant to this Section 9.1, such notice to state the
substance of the contents of such supplemental indenture.
SECTION 9.2. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or modifying
in any manner the rights of the Holders under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby;
(1) change the Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the place of payment where, or
the coin or currency (including Secondary Securities, if applicable) in
which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on or after the Maturity thereof (or, in the case of
redemption, on or after the Redemption Date or in the case of an Offer
to Purchase which has been made, on or after the applicable Purchase
Date), or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
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(3) modify any of the provisions of this Section, Section 5.13
or Section 10.21, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby, or
(4) following the making of an Offer with respect to an Offer
to Purchase pursuant to Section 10.10 or 10.18, modify the provisions
of this Indenture with respect to such Offer to Purchase in a manner
adverse to such Holder.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise,
except for any supplemental indenture required in order to comply with the
requirements of the Trust Indenture Act.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article, may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the
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Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
SECTION 9.7. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security if the Trustee receives
written notice of revocation before the date the amendment or waiver becomes
effective. An amendment or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
ARTICLE X
Covenants
SECTION 10.1. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Company will maintain in New York, New York an office or agency of
the Trustee, Security Registrar or Paying Agent where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside New York, New York) where the Securities may
be presented or surrendered for any or all such purposes and may from time to
time rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency of the Trustee, Security Registrar or Paying Agent in New
York, New York for such purposes. The Company will give prompt
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written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 10.3. Money for Security Payments to be Held in Trust.
Whenever the Company shall have one or more Paying Agents, it shall,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
Any money deposited with the Trustee or any Paying Agent in trust for
the payment of the principal of (and premium, if any) or interest on any
Security and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to the
Company upon delivery of a Company Request; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in New York, New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
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SECTION 10.4. Existence.
Subject to Article VIII, the Company and the Guarantor will, and will
cause each of their Subsidiaries to, do or cause to be done all things necessary
to preserve and keep in full force and effect its existence, rights (charter and
statutory) and franchises; provided, however, that the Company or the Guarantor
shall not be required to preserve any such right or franchise if its Board of
Directors or Members, as the case may be, in good faith shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company or the Guarantor, as the case may be, and that the loss thereof is
not disadvantageous in any material respect to the Holders; and, provided,
further, that the Guarantor may convert to a Delaware corporation if its Members
determine that such a conversion to corporate form is in its best interests.
SECTION 10.5. Maintenance of Properties.
The Company and the Guarantor will, and will cause each of their
Subsidiaries to, cause all properties used or useful in the conduct of its
business or the business of each Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company or
the Guarantor may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and to
comply in all material respects with all applicable laws, rules, regulations
(including zoning, building, Environmental and Safety Law, ordinance, code or
approval or agreements that affects its properties) and decrees and orders of
any Governmental Authority, whether now or hereafter enacted; provided, however,
that nothing in this Section shall prevent the Company or the Guarantor from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by its Board of Directors or Members, as the
case may be, or by an Officer (or other agent employed by the Company or the
Guarantor) of the Company or the Guarantor having managerial responsibility for
any such property, in good faith, desirable in the conduct of its business or
the business of any Subsidiary and not disadvantageous in any material respect
to the Holders.
SECTION 10.6. Payment of Taxes and Other Claims.
The Company and the Guarantor will, and will cause each of their
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (1) all taxes, assessments and governmental
charges levied upon the income, profits or property of the Company, the
Guarantor or such Subsidiaries, and (2) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien upon the property of
the Company, the Guarantor or any Subsidiaries; provided, however, that neither
the Company, the Guarantor nor any Subsidiary shall be required to pay or
discharge or cause to be paid or
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discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
SECTION 10.7. Maintenance of Insurance.
The Company and the Guarantor shall, and shall cause each of their
Subsidiaries to, keep at all times all of their properties and possessions which
are of an insurable nature insured with insurers believed by the Company to be
responsible and reputable insurance companies or associations against loss or
damage, in such amounts and against such risks as is customary in the hog
production and pork processing businesses, and, in any event, at a minimum to
the same extent that property of similar character is usually so insured by
corporations similarly situated and owning like properties in accordance with
good business practice.
SECTION 10.8. Limitation on Consolidated Debt.
Neither the Guarantor nor the Company will, nor will they cause or
permit any of their respective Subsidiaries to, Incur any Debt except:
(i) Debt of the Company and the Guarantor under (A) the Credit
Agreement, (B) the Morgan Stanley Note Agreement and (C) the
Securities and this Indenture;
(ii) Debt of the Company arising from reimbursement and other
obligations in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided in the
ordinary course of business in an aggregate amount not to
exceed $2,500,000 at any time outstanding;
(iii) Debt of the Company (other than Debt permitted by clause (vi)
of this Section) to finance the purchase or lease of
equipment, buildings and real estate in an aggregate principal
amount not to exceed $15,000,000 at any time outstanding;
(iv) Debt of the Company Incurred in the ordinary course of
business arising from Hedge Agreements;
(v) Debt arising from intercompany loans between the Guarantor and
the Company;
(vi) New Finishing Facility Debt in an aggregate principal amount
not to exceed $15,000,000 at any time outstanding; provided,
however, that the Company shall be permitted to incur New
Finishing Facility Debt only to the extent that (a) the New
Finishing Facility Debt Service with respect thereto for the
period of four consecutive fiscal quarters following the
Incurrence thereof would not exceed one-third of the Excess
EBITDA for the period of four consecutive fiscal quarters most
recently ended (and until delivery by the Company of the
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financial statements required by Section 10.17(a) with respect
to the fiscal quarter ended September 30, 1996, the aggregate
principal amount of New Finishing Facilities Debt that may be
Incurred pursuant to this clause (a) shall be deemed to be an
amount not in excess of $2,000,000) and (b) the lender or, in
the case of any Capital Lease Obligation, the lessor with
respect to any New Finishing Facility shall have entered into
an agreement, whereby it shall (A) waive any statutory or
common law lien it may have on the part of the Collateral
located at such New Finishing Facility and (B) grant the
Trustee access thereto, whether before or after the occurrence
of an Event of Default;
(vii) Debt assumed by merger or consolidation of another Person with
the Company or a Subsidiary or in connection with the
acquisition by the Company or a Subsidiary of all or part of
the assets of another Person, provided that the aggregate
principal amount of such Debt shall not exceed 50% of the fair
market value of the assets of such other Person;
(viii) Intercompany loans (A) made by the Company to any Subsidiary
that is a Wholly Owned Subsidiary, or (B) made by any
Subsidiary to the Company or any other Subsidiary that is a
Wholly Owned Subsidiary;
(ix) in addition to the Debt permitted by clauses (i) through
(viii) of this Section 10.8, the Company may become and remain
liable with respect to unsecured Debt, if at the date of and
immediately after giving effect to the Incurrence of such
Debt, the Interest Coverage Ratio is equal to or greater than
2.25 to 1.0; and
(x) Debt issued in exchange for or the net proceeds of which are
used to exchange, refinance or refund outstanding Debt of the
Company; in each case that is otherwise permitted by this
Section 10.8, so long as (A) the principal amount of any Debt
issued pursuant to this clause (x) does not exceed the
principal amount of, premium, if any, and accrued interest on,
and fees and expenses with respect to, the respective Debt
exchanged, refinanced or refunded, plus any transaction costs,
fees and expenses incurred in connection with or related to
such exchange, refinancing or refunding, (B) the Debt issued
pursuant to this clause (x) does not mature prior to the
stated maturity of, and does not have an Average Life shorter
than the remaining Average Life of, the respective Debt
exchanged, refinanced or refunded, and (C) where the Debt
exchanged, refinanced or refunded is subordinated to the
obligations of the Company or such Subsidiary under this
Indenture, the respective Debt issued pursuant to this clause
(x) is, to the same extent, also subordinated to such
obligations.
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SECTION 10.9. Limitation on Restricted Payments.
(a) Neither the Guarantor nor the Company will, nor will they cause or
permit any of their respective Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution, of any
kind or character (whether in cash, property or securities),
in respect of the Capital Stock of the Guarantor, the Company
or any Subsidiary, excluding any dividends or distributions
payable solely in shares of such Capital Stock (other than
Redeemable Stock) or in options, warrants or other rights to
acquire such Capital Stock (other than Redeemable Stock);
(ii) purchase, redeem or otherwise acquire or retire for value any
such Capital Stock of the Guarantor, the Company or any
Subsidiary;
(iii) make any Investment in, or payment on a guarantee of any
obligation of, any Person other than the Guarantor, the
Company or a Subsidiary; and
(iv) redeem, defease (including, but not limited to, legal or
covenant defeasance), repurchase, retire or otherwise acquire
or retire for value prior to any scheduled maturity, repayment
or sinking fund payment, Debt (other than the Securities)
which is subordinate in right of payment to the Securities;
(the transactions described in Clauses (i) through (iv) being referred to herein
as "Restricted Payments"), if at the time of and after giving effect to any
proposed Restricted Payment:
(A) an Event of Default, or an event that with the lapse of time or the
giving of notice, or both, would constitute an Event of Default, shall have
occurred and be continuing; or
(B) the aggregate of all Restricted Payments from the date of this
Indenture exceeds the sum of
(I) 50% of cumulative Consolidated Net Income of the
Guarantor, the Company and their Subsidiaries (or, in the case
Consolidated Net Income of the Guarantor, the Company and
their Subsidiaries shall be negative, less 100% of such
deficit) from the date of this Indenture through the last day
of the last full fiscal quarter immediately preceding such
Restricted Payment; plus
(II) the net proceeds received by the Company or the
Guarantor from the issuance or sale of Debt that is
convertible into Capital Stock after the date of this
Indenture, to the extent that such Debt has been actually
converted into Capital Stock (other than Redeemable Stock)
through the last day of the last full fiscal quarter
immediately preceding such Restricted Payment.
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(b) Notwithstanding anything to the contrary contained in this Section
10.9, the following Restricted Payments will be permitted on the respective
terms and conditions specified below:
(i) any Restricted Payment declared or made between Guarantor and
the Company;
(ii) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the
Guarantor (including options on such shares or related Capital
Stock appreciation rights or similar securities) held by
officers or employees, or former officers or employees (or
their estates or beneficiaries thereunder), or by any Benefit
Plan, upon death, disability, retirement or termination of
employment or pursuant to the terms of such Benefit Plan or
any other related agreement, provided that the aggregate cash
consideration paid for such purchase, redemption, acquisition,
cancellation or other retirement after the Closing Date shall
not exceed $1,000,000 in any one year;
(iii) the purchase of shares of Capital Stock of the Guarantor for
the purpose of contributing such Capital Stock to any Benefit
Plan or permitting any Benefit Plan to make payments to the
participants therein in cash rather than in such shares of
Capital Stock;
(iv) a Wholly Owned Subsidiary of the Company may (x) declare and
pay dividends or make distributions to the Company or any
other Wholly Owned Subsidiary of the Company and (y) transfer
any of its properties or assets to the Company or any other
Wholly Owned Subsidiary of the Company;
(v) Permitted Investments; and
(vi) dividends or other distribution in respect of the Company's
Capital Stock up to 50% of cumulative Consolidated Net Income
of the Guarantor, the Company and their Subsidiaries from the
date of this Indenture through the last day of the last full
final quarter immediately preceding such Restricted Payment.
provided that, in the case of any Restricted Payment made pursuant to paragraph
(ii) or (iii) above, no Default or Event of Default shall have occurred and be
continuing, or shall occur as a consequence thereof.
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SECTION 10.10. Limitations Concerning Disposal of Assets.
(a) Neither the Guarantor nor the Company will, nor will they cause or
permit any Subsidiary to, make any Asset Disposition unless:
(i) (A) 75% of the consideration received from any such
Asset Disposition is received in cash (including any
cash payments received by way of deferred payment of
principal pursuant to a note or installment
receivable or otherwise), net of all legal, title and
recording tax expenses, commissions and other
reasonable fees and expenses incurred, and any taxes
actually payable as a consequence of such disposition
(the "Proceeds") and (B) such consideration is at
least equal to the fair market value (as determined
in good faith by the Board of Directors or the
President or the Chief Financial Officer or acting
Chief Financial Officer of the Company or the
Commonwealth) of the assets being sold; and
(ii) (A) the Proceeds are applied to purchase, or such
Person enters into a definitive agreement to
purchase, within 180 days after receipt of such
Proceeds, assets or businesses used or engaged in the
line of business referred to in Section 10.16 hereof;
and (B) to the extent Proceeds are not applied as
provided in clause (A), either to repay within [180]
days after the date of such receipt with respect to
the Term Loan or Morgan Stanley Note Agreement in the
amount of such Proceeds or to make an Offer to
Purchase in accordance with Section 10.10(b) hereof
Securities at 100% of their principal amount plus
accrued interest, or both.
(b) If all or a portion of the Proceeds of any Asset Disposition are to
be applied to make an Offer to Purchase pursuant to Section 10.10(a)(ii)(B)
hereof, the Company shall, within [180] days after receipt of such Proceeds,
deliver to the Trustee an Officers' Certificate stating its intention to offer
to purchase Securities pursuant to that Section. Within 15 days thereafter, the
Trustee shall in accordance with Section 11.4 hereof select the Securities which
are to be the subject of such offer. Within 15 days thereafter, the Company
shall mail or cause the Trustee to mail an Offer to Purchase to each Holder
whose Securities have been selected to be the subject of such an Offer to
Purchase. The Offer to Purchase shall offer to purchase Securities, the
aggregate principal amount of which (including any Secondary Securities issued
with respect thereto between the date of the offer to Purchase and the Purchase
Date), together with accrued interest thereon to the Purchase Date, shall equal
to the amount of Proceeds required to be so applied.
A Holder receiving an Offer to Purchase pursuant to this Section may
elect to have purchased the Securities to which the Offer to Purchase relates by
furnishing to the Trustee on
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or before 35 days preceding the Purchase Date, written notice of its election to
have all such Securities so purchased. In the event that less than all of the
Holders receiving an Offer to Purchase elect to have the Securities subject
thereto purchased, the Company or the Trustee (in the name of the Company and at
its expense) shall, no later than 25 days preceding the Purchase Date, mail an
additional Offer to Purchase to the Holders of the Securities, if any, who have
provided written notice of election to have Securities purchased and all of
whose Securities would not otherwise have been purchased.
The Company shall perform its obligations specified in the Offer to
Purchase. Prior to the Purchase Date, the Company shall (i) accept for purchase
Securities or portions thereof tendered pursuant to the Offer to Purchase, (ii)
deposit with the Trustee money sufficient to pay the Purchase Price of all
Securities or portions thereof so accepted, and (iii) deliver to the Trustee all
the Securities so accepted together with an Officers' Certificate stating
Securities or portions thereof accepted for payment by the Company. The Trustee
shall promptly mail or deliver to Holders of Securities so accepted payment in
an amount equal to the Purchase Price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security or Securities
equal in principal amount to any unpurchased portion of the Security surrendered
as requested by the Holder. Any Security not accepted for payment shall be
promptly mailed or delivered by the Company to the Holder thereof.
SECTION 10.11. Permitted Investments.
The Company shall not, nor will any Subsidiary be permitted to, make
any Investment other than a Permitted Investment.
SECTION 10.12. Limitation on Issuance of Capital Stock of Subsidiaries.
The Company and the Guarantor shall not permit, directly or indirectly,
any Subsidiary that owns (or has a Subsidiary that owns) any Collateral or that
guarantees (or has a Subsidiary that guarantees) any obligation under this
Indenture to issue or sell any shares of its Capital Stock, except to the
Company or a Wholly Owned Subsidiary of the Company.
SECTION 10.13. Dividends and Distributions; Liens Affecting Subsidiaries.
The Company and the Guarantor will not, and will not permit any
Subsidiary of the Company to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Subsidiary of the Company to (a) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Subsidiary owned by the Company, the Guarantor or any other Subsidiary, (b) pay
any Debt owed to the Company, the Guarantor or any Subsidiary, (c) make loans or
advances to the Company, the Guarantor or any Subsidiary or (d) transfer any of
its property or assets to the Company, the Guarantor or any Subsidiary;
provided, however, that this Section 10.13 shall not restrict or prohibit any
such encumbrances or restrictions existing:
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(i) in this Indenture or any agreement in effect on the
Effective Date or in any amendments, restatements, refinancings or
other modifications of this Indenture or any such other agreement,
provided that the encumbrance or restrictions contained therein are
comparable to, or no less restrictive than, those originally set forth
therein;
(ii) under or by reason of applicable law, rule or regulation
(including applicable currency control laws and applicable state
corporate statutes restricting the payment of dividends in certain
circumstances);
(iii) with respect to any Person or the property or assets of
such Person acquired by the Company or any Subsidiary at the time of
such acquisition, which encumbrances or restrictions are not applicable
to any Person or the property or assets of any Person other than such
Person; or
(iv) in the case of clause (d) of this Section 10.13, that
restrict in a customary manner the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or
contract or similar property or asset.
SECTION 10.14. Limitations on Liens.
The Guarantor and the Company shall not, and shall not permit any of
their Subsidiaries to, Incur any Lien on property or assets now owned or
hereinafter acquired; except for:
(a) Liens Incurred to secure the Credit Agreement, the Morgan Stanley
Note Agreement and the Securities and this Indenture;
(b) Liens on equipment to secure Debt permitted pursuant to Section
10.8(iii);
(c) Liens securing Debt permitted pursuant to Section 10.8(x) to the
extent issued in exchange for, or the net proceeds of which are used to
exchange, refinance or refund, directly or indirectly, Debt referred to in
Sections 10.8(i)(A) and (B), 10.8(iii), 10.8(vi) or 10.8(vii);
(d) Liens for taxes not yet delinquent or which are being contested in
good faith by appropriate proceedings, provided, that adequate reserves with
respect thereto are maintained on the books of the Company or its Subsidiaries,
as the case may be, in conformity with generally accepted accounting principles;
(e) Landlords', carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business and
with respect to amounts which are not yet delinquent or are being contested in
good faith by appropriate proceedings;
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(f) Pledges or deposits made in the ordinary course of business in
connection with (A) leases, performance bonds and similar obligations, (B)
workers' compensation, unemployment insurance and other social security
legislation, (C) Liens imposed under the Packers and Stockyards Act of 1921, as
amended from time to time, and (D) to secure the performance of surety bonds and
appeal bonds required (1) in the ordinary course of business or in connection
with the enforcement of rights or claims of the Company or a Subsidiary or (2)
in connection with judgments that do not exceed $250,000 in the aggregate;
(g) Liens, easements, rights-of-way, zoning restrictions, Mineral
Rights and other similar restrictions, charges or encumbrances which do not
interfere with the ordinary conduct of the business of the Company and which do
not materially detract from the value of the property to which they attach or
materially impair the use thereof by the Company, the Guarantor or any
Subsidiary;
(h) Any attachment or judgment Lien, unless the judgment it secured
shall not, within 30 calendar days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or shall not have been discharged
within 30 calendar days after the expiration of any such stay;
(i) Liens securing Debt permitted by Section 10.8(vii), provided that
such Liens attach solely to the assets of the acquired entity and do not extend
to or cover any other assets of the Company or any of its Subsidiaries;
(j) Liens in favor of the Trustee for its own benefit and for the
benefit of the Holders;
(k) Any interest or title of a lessor pursuant to a lease constituting
a Capital Lease Obligation; and
(l) Any renewal of or substitution for any Lien permitted by any of the
preceding clauses, provided that the Debt secured is not increased nor the Lien
extended to any additional assets (other than proceeds and accessions); and
(m) Liens upon New Finishing Facilities to secure New Finishing
Facility Debt permitted hereunder; and
(n) Liens (including Liens consisting of Mineral Rights) in existence
on the Effective Date. and identified on Schedule 10.8(n).
Notwithstanding the foregoing, the Company shall not grant, or permit
to exist, any lien on or security interest in any Collateral in contravention of
Section 4.03 of the Security Agreement.
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SECTION 10.15. Limitation on Transactions with Affiliates.
The Company and the Guarantor shall not, and shall not permit any
Subsidiary to, directly or indirectly, enter into any transaction not in the
ordinary course of its business (excluding (i) transactions between the Company
and Subsidiaries or between or among Subsidiaries, and (ii) transactions
permitted under Section 10.9), with any Affiliate other than Permitted Holders,
unless a majority of its Board of Directors or its Members, as the case may be,
shall determine in its good faith judgment and evidenced by a Board Resolution
that:
(1) the terms of such transaction are in the best interests of
the Company, the Guarantor or such Subsidiary; and
(2) such transaction is on terms no less favorable to the
Company, the Guarantor or such Subsidiary than those that could be
obtained in a comparable arm's-length transaction with an entity that
is not an Affiliate.
Notwithstanding anything to the contrary contained herein, so long as
no Event of Default shall have occurred and be continuing, the foregoing
provisions shall not limit or apply to (i) any transaction or series of
transactions (A) which the Board of Directors of the Company or the Members of
the Guarantor, as the case may be, shall determine, in good faith, is in the
best interest of the Company and (B) as to which the Company shall have
delivered to the Trustee a written opinion of an independent nationally
recognized investment banking firm stating that this transaction is fair to the
Company or the Guarantor, as the case may be, from a financial point of view;
(ii) any Restricted Payment not prohibited by Section 10.9; (iii) payments
pursuant to any tax sharing agreement or arrangement among the Guarantor, the
Company and any Subsidiaries; and (iv) any transactions between the Guarantor,
the Company or any of its Subsidiaries and MS Group or any of its Affiliates
involving the provision of financial, investment banking, management consulting
or underwriting services by MS Group or any of its Affiliates, provided that the
fees payable to MS Group or any of its Affiliates do not exceed the usual and
customary fees of MS Group or any such Affiliate charged to persons that are not
Affiliates of MS Group or any of its Affiliates (through direct equity
ownership, warrants, contract rights or otherwise).
SECTION 10.16. Limitation on Related Business.
The Company and the Guarantor will not, and will not permit any
Subsidiary to, engage in any business other than the businesses in which they
are engaged on the date of this Indenture and business activities reasonably
complementary or incidental thereto.
SECTION 10.17. Provision of Financial Information.
The Company shall file with the Trustee:
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(a) within 45 days after the close of each quarterly accounting period
in each fiscal year of the Company, the Consolidated balance sheets of the
Guarantor, the Company and their Subsidiaries as at the end of such quarterly
accounting period and the related Consolidated statements of income and cash
flow for such quarterly accounting period, together with a management's
discussion and analysis relating thereto, all of which shall be certified by a
Responsible Officer of the Company and the Guarantor as fairly presenting the
Consolidated financial condition and results of operations of the Company and
the Guarantor in accordance with generally accepted accounting principles
consistently applied, subject to normal year-end audit adjustments;
(b) within 90 days after the end of each fiscal year of the Company,
the Consolidated balance sheets of the Guarantor, the Company and their
Subsidiaries as at the end of such fiscal year and the related Consolidated
statements of income and cash flow for such fiscal year, certified by
independent certified public accountants of recognized national standing,
together with (i) a management's discussion and analysis relating thereto and
(ii) a statement of such accounting firm that its audit of such financial
statements was conducted in accordance with generally accepted auditing
standards; and
(c) together with the delivery of financial statements under paragraph
(a) or (b) above, a certificate of an Officer of the Company certifying that, as
of the date of such certificate and as to his or her knowledge, the Company is
in compliance with all conditions and covenants under this Indenture and, since
the date of the last such certificate delivered by the Company, no Event of
Default has occurred or, if such Event of Default has occurred, specifying the
nature and extent thereof and any corrective action taken or proposed to be
taken with respect thereto.
(d) The Company shall, upon receipt of notice from any Holder that is
proposes to sell any Securities pursuant to the exemption provided by the
Commission's Rule 144A (or any successor thereto), provide at its expense the
information required by such Rule, including without limitation a brief
statement of the nature of the Company's business and its products and services
and the financial information required by such Rule.
SECTION 10.18. Change of Control.
(a) Upon the occurrence of a Change of Control (as defined below), each
Holder of a Security shall have the right to have such Security repurchased by
the Company. The Company shall, within 30 days following the date of the
consummation of a transaction resulting in a Change of Control, mail an Offer
with respect to an Offer to Purchase all Securities Outstanding on the Purchase
Date at a Purchase Price equal to 101% of their principal amount together with
all accrued and unpaid interest to the Purchase Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Purchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their
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terms and the provisions of Section 3.7. Each Holder shall be entitled to tender
all or any portion of the Securities owned by such Holder or payable to such
Holder on any intervening Interest Payment Date.
(b) The Company shall perform its obligations specified in the Offer
for the Offer to Purchase. Prior to the Purchase Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Offer, (ii) deposit with the Paying Agent (or, if the Company is acting as its
own Paying Agent, segregate and hold in trust as provided in Section 10.3) money
sufficient to pay the Purchase Price of all Securities or portions thereof so
accepted and (iii) deliver or cause to be delivered to the Trustee all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Purchase Price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security or Securities
equal in principal amount to any unpurchased portion of the Security surrendered
as requested by the Holder. Any Security not accepted for payment shall be
promptly mailed or delivered by the Company to the Holder thereof.
(c) "Change of Control" shall be deemed to have occurred if (a) any
person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act
of 1934 as in effect on the date hereof) other than one or more Permitted
Holders shall own directly or indirectly, beneficially or of record, shares
representing more than 35% of the aggregate ordinary voting power represented by
the issued and outstanding membership interests of the Guarantor; (b) a majority
of the seats (other than vacant seats) on the Board of Directors of the Company
shall at any time be occupied by persons who were neither (i) nominated by the
Board of Directors of the Company nor (ii) appointed by directors so nominated;
(c) any change in control (or similar event, however denominated) with respect
to the Company or the Guarantor shall occur under and as defined in any
indenture or agreement in respect of Debt to which the Company or the Guarantor
is a party; or (d) the Company ceases for any reason to be a Wholly Owned
Subsidiary of the Guarantor (other than as a result of the merger of the Company
into the Guarantor).
SECTION 10.19. Environmental and Safety Compliance.
The Company shall, and shall cause its Subsidiaries to, comply with all
Environmental and Safety Laws, except where failure so to comply could not
reasonably be expected to result in a Material Adverse Effect, and provide
prompt written notice to the Trustee following the receipt of any written notice
of any material violation of any Environmental and Safety Laws from any
Governmental Authority.
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SECTION 10.20. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year ending after the date hereof, an Officers' Certificate,
stating whether or not to the knowledge of the signers thereof the Company and
the Guarantor are in compliance with all conditions and covenants under this
Indenture, including without limitation Section 8.1 and Sections 10.4 to 10.20,
inclusive, and if the Company shall be in default, specifying all such defaults
and the nature and status thereof of which they may have knowledge. Said
Officers' Certificate shall be accompanied by or combined with a certificate
signed by an Officer and containing the statements required by Section 314(a)(4)
of the Trust Indenture Act.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within 10 days after the Company becomes aware of the occurrence of
an Event of Default or an event which, with notice or the lapse of time or both,
would constitute an Event of Default, an Officers' Certificate setting forth the
details of such Event of Default or default, and the action which the Company
proposes to take with respect thereto.
(c) The Company shall deliver to the Trustee, promptly after becoming
aware thereof, notice of the commencement of, any action, suit or proceeding
that, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect.
SECTION 10.21. Waiver of Certain Covenants.
The Company and the Guarantor may omit in any particular instance to
comply with any covenant or condition set forth in Section 8.1 and Sections 10.4
to 10.20, inclusive, if the Holders of at least a majority in principal amount
of the Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect; provided, however, with respect to an Offer to Purchase as to which an
Offer has been mailed, no such waiver may be made or shall be effective against
any Holder tendering Securities pursuant to such Offer, and the Company may not
omit to comply with the terms of such Offer as to such Holder.
SECTION 10.22. Further Assurances.
The Company and the Guarantor shall, upon request of the Trustee,
execute and deliver such further instruments and do such further acts as may
reasonably be necessary or proper to carry out more effectively the provisions
of this Indenture, including without limitation any instruments necessary to
preserve, protect or perfect the validity of security interests created or
intended to be created in the Collateral under the [Security] Agreement.
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The Guarantor and the Company will cause each of their existing and
subsequently acquired or organized Subsidiaries (other than an Inactive
Subsidiary) and each of their Subsidiaries that ceases to be an Inactive
Subsidiary (a) to execute and deliver to the Trustee a Subsidiary Guarantee
Agreement pursuant to which such Subsidiary will guarantee payment of the
Securities on substantially the same terms and conditions as those set forth in
Article XIV, and (b), at such time as there shall be two or more Subsidiary
Guarantors to execute and deliver to the Trustee the Indemnity, Subrogation and
Contribution Agreement (or a supplement thereto) and (c) each other applicable
Security Document in favor of the Trustee as may be deemed necessary by the
Company or the Trustees to create a valid, perfected and enforceable security
interest in the Collateral of such Subsidiary.
In addition, from time to time, each of the Company and the Guarantor
shall, and shall cause each of their existing and subsequently acquired or
organized Subsidiaries (other than an Inactive Subsidiary) and each of their
Subsidiaries that ceases to be an Inactive Subsidiary (a) whenever it files any
further instruments and documents or takes any other action to better assure,
preserve, protect and perfect the security granted to the holders of the First
Priority Debt, it will forthwith notify the Collateral Agent thereof and (b)
will promptly, at its own expense, execute, acknowledge, deliver and cause to be
duly filed comparable instruments and documents and take such comparable actions
to better assure, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby to the same extent as may be granted to the
First Priority Debt.
SECTION 10.23. Compliance with Security Documents.
Each of the Company and the Guarantor shall, and shall cause each of
their Subsidiaries to, comply with all of their respective covenants,
commitments and undertakings under each of the Security Documents to which it is
a party.
ARTICLE XI
Redemption of Securities
SECTION 11.1. Right of Optional Redemption.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time and at the Redemption Prices
specified in the form of Security hereinbefore set forth, together with accrued
interest to the Redemption Date.
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SECTION 11.2. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
or required by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 11.1 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company of less than all the Securities, the Company
shall, at least 45 days prior to the Redemption Date fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Securities to be
redeemed.
SECTION 11.4. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 45 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Securities of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 11.5. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
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(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) if an Interest Payment date will occur on or before the
Redemption date, that the interest then payable will be paid to the
Holder as of the appropriate Record Date,
(5) that on the Redemption Date the Redemption Price, together
with all accrued and unpaid interest to the Redemption Date, will
become due and payable upon each such Security to be redeemed and that
interest thereon will cease to accrue on and after said date, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued and unpaid
interest.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.6. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 11.7. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 3.7.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate provided by the
Security.
SECTION 11.8. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge (except as
otherwise provided in Section 3.5), a new Security or Securities of like tenor,
of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
ARTICLE XII
Defeasance and Covenant Defeasance
SECTION 12.1. Company's Option to Effect Defeasance or Covenant Defeasances.
The Company may at its option by Board Resolution, at any time, elect
to have either Section 12.2 or Section 12.3 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this Article
XII.
SECTION 12.2. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 12.1
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire Debt represented by the Outstanding Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Securities to receive, solely from
the trust fund described in Section 12.4 and as more fully set forth in such
Section, payments in respect of the principal of (and premium, if any) and
interest on such Securities when such payments are due, the Company's
obligations with respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2
and 10.3, the rights, powers, trusts, duties and immunities of the Trustee
hereunder and this Article XII. Subject to
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compliance with this Article XII, the Company may exercise its option under this
Section 12.2 notwithstanding the prior exercise of its option under Section
12.3.
SECTION 12.3. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 12.1
applicable to this Section (i) the Company shall be released from its
obligations under Section 10.5 through 10.19, inclusive, and clauses (i) and
(iii) of Section 8.1(b) and (ii) (except with respect to surviving obligations
of the Company under Section 12.2) the occurrence of an event specified in
Section 5.1(6) shall not be deemed to be an Event of Default, on and after the
date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"). For this purpose, such covenant defeasance means that the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section, Clause or Article,
whether directly or indirectly by reason of any reference elsewhere herein to
any such Section, Clause or Article or by reason of any reference in any such
Section, Clause or Article to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
12.2 or Section 12.3 to the then Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 6.9 who shall agree to comply with the
provisions of this Article XII applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will
provide, no later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the
principal of, premium, if any, and each installment of interest on the
Securities at Maturity in accordance with the terms of this Indenture
and of such Securities. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States
of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and
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shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian
with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default shall have occurred and
be continuing on the date of such deposit or, insofar as subsections
5.1(8) and (9) are concerned, at any time during the period ending on
the 121st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of
such period).
(3) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 6.8 and
for purposes of the Trust Indenture Act with respect to any securities
of the Company.
(4) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture
or any other agreement or instrument to which the Company is a party or
by which it is bound.
(5) The Company shall have delivered to the Trustee an
Officers' Certificate and Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 12.2 or the covenant defeasance under Section 12.3 (as
the case may be) have been complied with.
(6) In the case of an election under Section 12.2, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Securities will not
recognize gain or loss for Federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such deposit, defeasance and
discharge had not occurred.
(7) In the case of an election under Section 12.3, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize gain
or loss for Federal income tax purposes
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as a result of such deposit and covenant defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such deposit and covenant
defeasance had not occurred.
(8) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that the Securities, if then listed
on any securities exchange, will not be delisted as a result of such
deposit.
(9) Such defeasance or covenant defeasance shall not result in
the trust arising from such deposit constituting an investment company
as defined in the Investment Company Act of 1940, as amended, or such
trust shall be qualified under such act or exempt from regulation
thereunder.
SECTION 12.5. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee -- collectively, for purposes of
this Section 12.5, the "Trustee") pursuant to Section 12.4 in respect of the
Securities shall be held in trust for the benefit of the Holders of the
Securities and applied by the Trustee in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities, of all sums due and to
become due thereon in respect of principal (and premium, if any) and interest,
but such money need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 13.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article XII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 12.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
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SECTION 12.6. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 12.2 or 12.3 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article XII until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 12.2 or 12.3;
provided, however, that if the Company makes any payment of principal of (and
premium, if any) or interest on any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
the Paying Agent.
ARTICLE XIII
Meeting of Holders of Securities
SECTION 13.1. Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities may be called at any time and from
time to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities.
SECTION 13.2. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of Securities
for any purpose specified in Section 13.1, to be held at such time and at such
place in New York, New York as the Trustee shall determine. Notice of every
meeting of Holders of Securities, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be given, in the manner provided in Section 1.6, not less than 20 nor more
than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company pursuant to a Board Resolution, or
the Holders of at least 25% in principal amount of the Outstanding Securities
shall have requested the Trustee to call a meeting of the Holders of Securities
for any purpose specified in Section 13.1, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed a notice of meeting as provided above or shall not
thereafter proceed to cause the meeting to be held as provided herein, then the
Company or the Holders of Securities in the amount above specified, as the case
may be, may determine the time and the place in New York, New York for such a
meeting and may call such meeting for such purposes by giving notice thereof as
provided in subsection (a) of this Section.
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SECTION 13.3. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities, a
Person shall be (1) a Holder of one or more Outstanding Securities, or (2) a
Person appointed by an instrument in writing as proxy of a Holder or Holders.
The only Persons who shall be entitled to be present or to speak at any meeting
of Holders of Securities shall be the Persons entitled to vote at such meeting
and their counsel, any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 13.4. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities shall constitute a quorum for a meeting of Holders of
Securities. In the absence of a quorum within 30 minutes of the time appointed
for any such meeting, the meeting shall, if convened at the request of Holders
of Securities, be dissolved, or may, if convened in any other manner, be
adjourned for a period of not less than 10 days as determined by the chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further adjourned
for a period of not less than 10 days as determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Notice of the
reconvening of any such adjourned meeting shall be given as provided in Section
13.2(a), except that such notice need be given not less than ten days prior to
the date on which the meeting is scheduled to be reconvened. Notice of the
reconvening of any such adjourned meeting shall state expressly the percentage,
as provided above, of the principal amount of the Outstanding Securities which
shall constitute a quorum.
Except as limited by the proviso to Section 9.2, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Securities; provided, however,
that, except as limited by the proviso to Section 9.2, any resolution with
respect to any consent or waiver which this Indenture expressly provides may be
given by the Holders of not less than a majority in principal amount of the
Outstanding Securities may be adopted at a meeting or an adjourned meeting duly
convened and at which a quorum is present as aforesaid only by the affirmative
vote of the Holders of a majority in principal amount of the Outstanding
Securities; and provided, further, that, except as limited by the proviso to
Section 9.2, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture
expressly provides may be made, given or taken by the Holders of a specified
percentage, which is less than a majority, in principal amount of the
Outstanding Securities may be adopted at a meeting or any adjourned meeting duly
reconvened and at which a quorum is present by such specified percentage in
principal amount of the Outstanding Securities.
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Any resolution passed or decision taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities, whether or not present or represented at the meeting.
SECTION 13.5. Determination of Voting Rights; Conduct and Adjournment of
Meetings.
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities in regard to proof of the holding of Securities and of the
appointment of proxies and in regard to the appointment and duties of inspectors
of votes, the submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning the conduct of
the meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities shall be proved in
the manner specified in Section 1.4 and the appointment of any proxy shall be
proved in the manner specified in Section 1.4 or by having the signature of the
person executing the proxy guaranteed by any member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch or
agency in the United States. Such regulations may provide that written
instruments appointing proxies, regular on their face, may be presumed valid and
genuine without the proof specified above.
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Securities as provided in Section 13.2(b), in which
case the Company or the Holders of Securities that called the meeting, as the
case may be, shall in like manner appoint a temporary chairman. A permanent
chairman and permanent secretary of the meeting shall be elected by vote of the
Persons entitled to vote a majority in principal amount of the Outstanding
Securities represented at the meeting.
(c) At any meeting each Holder of a Security or proxy shall be entitled
to one vote for each $1.00 principal amount (or its equivalent) of the
Outstanding Securities held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Security
challenged as not Outstanding and ruled by the chairman of the meeting to be not
Outstanding. The chairman of the meeting shall have no right to vote, except as
a Holder of a Security or proxy.
(d) Any meeting of Holders of Securities duly called pursuant to
Section 13.2 at which a quorum is present may be adjourned from time to time by
Persons entitled to vote a majority in principal amount of the Outstanding
Securities represented at the meeting; and the meeting may be held as so
adjourned without further notice.
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SECTION 13.6. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amounts and serial numbers of the Outstanding Securities held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of the meeting
their verified written reports in duplicate of all votes cast at the meeting. A
record, at least in duplicate, of the proceedings of each meeting of Holders of
Securities shall be prepared by the Secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 13.2 and, if
applicable, Section 13.4. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE XIV
Guarantee
SECTION 14.1. Guarantee.
The Guarantor hereby, jointly and severally with any Subsidiary
Guarantors, unconditionally and irrevocably guaranties to each Holder and to the
Trustee, and their respective successors and assigns, the due and punctual
payment of principal of and, within applicable grace periods, interest on the
Securities when due, whether at Stated Maturity, by acceleration, by redemption
or Offer to Purchase or otherwise, and all other monetary obligations of the
Company under this Indenture and the Securities and the due and punctual
performance within applicable grace period of all other obligations of the
Company under this Indenture and the Securities (the foregoing being hereinafter
collectively called the "Obligations"). The Guarantor further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from the Guarantor, and that the Guarantor will remain bound by
this Article XIV notwithstanding any extension or renewal of any Obligation.
The Guarantor waives presentation to, demand of payment from and
protest to the Company of any of the Obligations, and also waives notice of
protest for nonpayment. The Guarantor waives notice of any default under the
Securities or the Obligations. The Obligations of the Guarantor hereunder shall
not be affected by (a) the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any right or remedy against the
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Company or any other person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(e) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Obligations or (f) (except as provided in
Section 14.3 ) any change in the ownership of any Guarantor.
The Guarantor further agrees that its Guarantee herein constitutes a
guaranty of payment when due (and not a guaranty of collection) and waives any
right to require that any resort be had by any Holder or the Trustee to any
security held for payment of the Obligations.
The Obligations of the Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, and recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
Obligations of the Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Securities or
any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any act or thing or omission or delay to do any other act or
thing which may or might in any manner or to any extent vary the risk of the
Guarantor or would otherwise act as a discharge of the Guarantor as a matter of
law or equity.
The Guarantor further agrees that its Guarantee herein shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Obligation when and as the same shall become due, whether
at Stated Maturity, by acceleration, by redemption or otherwise, or to perform
its obligations specified in any Offer to Purchase, the Guarantor hereby,
jointly and severally with any Subsidiary Guarantors, promises to and will, upon
receipt of written demand by the Trustee, forthwith pay or cause to be paid, in
cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
principal amount of such Obligations, (ii) accrued and unpaid interest on such
Obligations (but not to exceed the maximum rate permitted by applicable law) and
(iii) all other monetary Obligations of the Company to the Holders and the
Trustee.
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The Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Obligations guarantied
hereby until payment in full of all Obligations. The Guarantor further agrees
that, as between the Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Obligations guarantied
hereby may be accelerated as provided in Article V for the purposes of such
Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guarantied hereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article V, such Obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantor for
purposes of this Section.
The Guarantor also agrees, jointly and severally, with any Subsidiary
Guarantors, to pay any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights
under this Section.
SECTION 14.2. Execution and Delivery of Guarantee.
To evidence its Guarantee set forth in Section 14.1, the Guarantor
agrees that a notation of such Guarantee substantially in the form set forth in
Section 2.5 hereof, shall be endorsed on each Security authenticated and
delivered by the Trustee and that such endorsement shall be executed on behalf
of the Guarantor by an Officer or a holder of a power of attorney authorized to
execute the Guarantee by manual or facsimile signature.
The Guarantor agrees that its Guarantee set forth in Section 14.1 shall
remain in full force and effect and apply to all the Securities notwithstanding
any failure to endorse on each Security a notation of such Guarantee.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security on which a Guarantee
is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this indenture on behalf of the Guarantor.
SECTION 14.3. Successors and Assigns.
This Article XIV shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges conferred upon
that party in this Indenture and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.
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SECTION 14.4. No waiver, etc.
Neither a failure nor a delay on the part of either the Trustee or the
Holders in exercising any right, power or privilege under this Article XIV shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege. The
rights, remedies and benefits of the Trustee and the Holders herein expressly
specified are cumulative and not exclusive of any other rights, remedies and
benefits which either may have under this Article at law, in equity, by statute
or otherwise.
SECTION 14.5. Modification, etc.
No modification, amendment or waiver of any provision of this Article
XIV, nor the consent to any departure by the Guarantor therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on any
Guarantor in any case shall entitle the Guarantor or any other guarantor to any
other or further notice or demand in the same, similar or other circumstances.
ARTICLE XV
SECURITY DOCUMENTS
SECTION 15.1. Security Documents.
(a) In order to secure the due and punctual payment of the Second
Priority Notes and the Securities, the Company, the Guarantor and the Trustee,
in its capacity as Collateral Agent, have entered into or will enter into, as
the case may be, the Security Documents to create the security interests
thereunder and for related matters. The Company and the Guarantor covenant and
agree that they have full right, power and lawful authority to grant, bargain,
sell, release, convey, hypothecate, assign, mortgage, pledge, transfer, confirm
and grant a security interest in the property constituting the Collateral, in
the manner and form done in the Security Documents or intended to be done, and
that (a) each will forever warrant and defend the title to the same against the
claims of all Persons whatsoever in each case free and clear of all Liens
whatsoever, except Liens permitted by Section 10.14, (b) each will execute,
acknowledge and deliver to the Trustee, as such Collateral Agent, such further
assignments, transfers, assurances or other instruments and will do or cause to
be done all such acts and things as may be necessary or proper to assure and
confirm to the Trustee, as Collateral Agent, its interest in the Collateral, or
any part thereof, as from time to time constituted, and the right, title and
interest in and to the Security Documents so as to render the same available for
the security and benefit of this Indenture and of the Second Priority Notes and
the Securities.
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(b) Each Holder, by accepting the Securities, consents and agrees to
all of the terms and provisions of the Security Documents, including the
relative priority of the interests of the Second Priority Notes and the
Securities with respect to the Collateral, as the same may be amended from time
to time pursuant to the provisions of the Security Documents and this Indenture,
and authorizes and directs the Trustee to enter into each of Security Documents
to which it is a party and to perform its obligations and exercise its rights
thereunder in accordance therewith; provided, however, that if any provision of
the Security Documents limits, qualifies, or conflicts with the duties imposed
by the provisions of the Trust Indenture Act, the Trust Indenture Act controls.
(c) So long as the Morgan Stanley Notes Agreement remains in effect, as
between the holders of the Second Priority Notes and the Holders of the
Securities, the Collateral (including for this purpose the Real Property covered
by the Mortgages) as now or hereafter constituted shall be held for the benefit
of all such holders without distinction as security for the Second Priority
Obligations and the Obligations, except that, after foreclosure any proceeds
shall be applied first to the payment in full of the Second Priority Obligations
pursuant to Section 5.6. Thereafter, as amongst the Holders, the Collateral
(including for this purpose the Real Property covered by the Mortgages) as now
or hereafter constituted shall be held for the equal and ratable benefit of the
Holders without preference, priority or distinction of any thereof over any
other by reason of difference in time of issuance, sale or otherwise, as
security for the Obligations.
SECTION 15.2. Recording, Opinion of Counsel, Etc.
The Company and the Guarantor will cause, at their own expense, this
Indenture, the Security Documents, and all amendments or supplements thereto, to
be registered, recorded and filed and/or re-recorded and/or re-filed and/or
renewed in such manner and in such place or places, if any, as may be required
by law in order fully to preserve and protect the Liens of the Security
Documents and all parts of the Collateral and to effectuate and preserve the
security of the Holders and all rights of the Trustee.
The Company and the Guarantor shall furnish to the Trustee and the
Collateral Agent:
(a) promptly after the execution and delivery of this Indenture and
each of the Security Documents or other instrument of further assurance, an
Opinion of Counsel stating that, in the opinion of such Counsel, the Security
Documents and other instruments of further assurance, and any required financing
statements with respect thereto, have been properly recorded, endorsed,
registered and filed or other action has been taken, so as to make effective the
Liens intended to be created thereby, and reciting the details of such action or
stating that, in the opinion of such Counsel, no such action is necessary to
make such Liens effective; and
(b) within 15 days after September 30 in each year beginning with the
year 1997, an Opinion of Counsel, dated as of such date, either stating that, in
the opinion of such
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counsel, such action has been taken with respect to the recording, registering,
filing, rerecording, re-registering and re-filing of this Indenture and the
Security Documents, financing statements, supplemental indentures, continuation
statements or other instruments of further assurance as is necessary to maintain
the Liens of the Security Documents and reciting the details of such action, or
stating that, in the opinion of counsel, no such action prior to September 30 of
the subsequent year is necessary to maintain such Lien.
The Trustee shall hold in its possession the Security Documents, except
as it from time to time may be required for actions, suits or proceedings
relating to the Security Documents or for the purpose of enforcing or realizing
upon any right or value thereby represented. The Trustee may, from time to time,
in its sole discretion, for the purpose of convenient location of the Security
Documents, appoint one or more agents to hold physical custody, for the account
of the Trustee, of the Security Documents.
SECTION 15.3. Trust Indenture Act Requirements; Release of
Collateral.
The release of any Collateral from the terms of any of the Security
Documents or the release, in whole or in part, of the Liens created by any of
the Security Documents, will not be deemed to impair the security interests
thereunder in contravention of the provisions of this Indenture if and to the
extent the Collateral or Liens are released pursuant to, and in accordance with,
the applicable Security Documents and pursuant to, and in accordance with, the
terms hereof. To the extent applicable, without limitation, the Company, the
Guarantor and each other obligor on the Securities shall cause ss. 314(d) of the
Trust Indenture Act relating to the release of property or securities from the
Liens of the Security Documents to be complied with. Any certificate required by
ss. 314(d) of the Trust Indenture Act may be made by two officers of the
company, except in cases which ss. 314(d) of the Trust Indenture Act requires
that such certificate be made by an independent Person.
SECTION 15.4. Impairment of Security Interest.
The Guarantor and the Company will not, and will not permit any
Subsidiary to, take or omit to take any action which reasonably might or would
have the result of affecting or impairing the security interests with respect to
the Collateral in contravention of this Indenture, and the Company and the
Guarantor shall not (and shall cause the Subsidiaries not to) grant to, or
suffer to exist in favor of, any Person any interest whatsoever in the
Collateral except as permitted by the Security Documents or this Indenture.
Except for the Credit Agreement, the Guarantor and the Company will not, and
will not permit any Subsidiary to, enter into any agreement or instrument that
by its terms expressly requires that the proceeds received from the sale of any
Collateral or Real Property be applied to repay, redeem or otherwise retire any
Debt of any Person other than as set forth in this Article XV and the Security
Documents.
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SECTION 15.5. Authorization of Receipt of Funds by the Trustee Under
the Security Documents.
The Trustee is authorized to receive any funds for the benefit of
Holders of Securities distributed by the Collateral Agent under the Security
Documents, and to make further distributions of such funds to the Holders
according to the provisions of this Indenture.
ARTICLE XVI
Miscellaneous
SECTION 16.1. Usury Savings Clause.
Interest on the Debt evidenced by the Securities is expressly limited
so that in no contingency or event whatsoever, whether by acceleration of the
maturity of the Debt evidenced by the Securities or otherwise, shall the
interest contracted for, charged or received by the Holders exceed the maximum
amount permissible under applicable law. If from any circumstances whatsoever
fulfillment of any provisions of this Indenture, the Securities or of any other
document evidencing, securing, guaranteeing or otherwise pertaining to the Debt
evidenced by the Securities, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law, then
ipso facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any such circumstances any Holder shall ever receive
anything of value as interest or deemed interest by applicable law under this
Indenture, the Securities or any other document evidencing, securing,
guaranteeing or otherwise pertaining to the Debt evidenced by the Securities or
otherwise an amount that would exceed the highest lawful rate, such amount that
would be excessive interest shall be applied to the reduction of the principal
amount owing on the Debt of the Securities held by such Holder, and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal of the Debt of the Securities held by such Holder, such excess shall
be refunded to the Company. In determining whether or not the interest paid or
payable with respect to any Debt of the Company to the Holders, under any
specific contingency, exceeds the highest lawful rate, the Company and the
Holders shall, to the maximum extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, (c)
amortize, prorate, allocate and spread the total amount of interest throughout
the term of such Debt so that the actual rate of interest on account of such
Debt does not exceed the maximum amount permitted by applicable law, and/or (d)
allocate interest between portions of such Debt, to the end that no such portion
shall bear interest at a rate greater than that permitted by law. The terms and
provisions of this Section shall control and supersede ever other conflicting
provision of this Indenture and the Securities.
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(Seal) PREMIUM STANDARD FARMS, INC.
Attest:
___________________ By____________________________
Name:
Title:
(Seal) PSF L.L.C.
Attest:
___________________ By____________________________
Name:
Title:
(Seal) FLEET NATIONAL BANK
Attest:
___________________ By____________________________
Name:
Title:
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STATE OF __________) ss.:
COUNTY OF _________)
On the _____ day of ______________, 1996, before me personally came
_______________________, to me known, who, being by me duly sworn, did depose
and say that he is a _____________________ of Premium Standard Farms, Inc., one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto by
like authority.
------------------------------
STATE OF __________) ss.:
COUNTY OF _________)
On the _____ day of ______________, 1996, before me personally came
_______________________, to me known, who, being by me duly sworn, did depose
and say that he is a _____________________ of PSF L.L.C., the limited liability
company described in and which executed the foregoing instrument; and that he
signed his name thereto by authority of the Members of said limited liability
company.
------------------------------
STATE OF __________) ss.:
COUNTY OF _________)
On the _____ day of ______________, 1996, before me personally came
_______________________, to me known, who, being by me duly sworn, did depose
and say that he is a _____________________ of Fleet National Bank, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
------------------------------
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EXHIBIT A
[FORM OF]
SUBSIDIARY GUARANTY AGREEMENT
[Guarantor], a corporation (such corporation, and its successors and
assigns hereunder, being herein called the "Subsidiary Guarantor"), agrees with
Fleet National Bank, as Trustee under the Indenture referred to below, for the
equal and ratable benefit of the Holders of the 11% Senior Secured Notes due
2003 of Premium Standard Farms, Inc., a Delaware corporation (the "Company"), as
follows:
The Company, PSF L.L.C., a Delaware limited liability company, and
Fleet National Bank, as Trustee (the "Trustee"), have entered into an Indenture
dated as of September _____, 1996 (the "Indenture"), relating to the Securities
in order to secure the Holders of the Securities. The Indenture requires each
Subsidiary existing on the date of the Indenture and each Subsidiary which
becomes or comes into existence as a Subsidiary after the date of the Indenture
to execute and deliver to the Trustee a Subsidiary Guaranty Agreement pursuant
to which such Subsidiary will guaranty payment of the Securities on
substantially the same terms and conditions as those set forth in Article XIV of
the Indenture. The undersigned is a Subsidiary and is executing this Subsidiary
Guaranty Agreement in accordance with the requirements of the Indenture in order
to become a Subsidiary Guarantor under the Indenture and as consideration for
Securities previously purchased.
Capitalized terms used herein without definition shall have the
meanings set forth in the Indenture.
ARTICLE I
Guaranty
SECTION 1.01. Guaranty. For value received, the Subsidiary Guarantor
hereby, jointly and severally with the Guarantor and each of the other
Subsidiary Guarantors, unconditionally and irrevocably guaranties to each Holder
and to the Trustee, and their respective successors and assigns, (a) the due and
punctual payment of principal of and, within applicable grace periods, interest
on the Securities when due, whether at Stated Maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
the Indenture and the Securities and (b) the due and punctual performance within
applicable grace periods of all other obligations of the Company under the
Indenture and the Securities (all the foregoing being hereinafter collectively
called the "Obligations").
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The Subsidiary Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice of further assent from
the undersigned, and that the undersigned will remain bound hereby
notwithstanding any extension or renewal of any Obligation.
The Subsidiary Guarantor waives presentation to, demand of payment from
and protest to the Company of any of the obligations, and also waives notice of
protest for nonpayment. The Subsidiary Guarantor waives notice of any default
under the Securities or the Obligations. The obligations of the Subsidiary
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other person under the Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any thereof;
(c) any rescission, waiver, amendment or modification of any of the terms or
provisions of the Indenture, the Securities or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Obligations or
any of them; (e) the failure of any Holder or the Trustee to exercise any right
or remedy against any other guarantor of the Obligations or (f) (except as
provided in Section 1.02) any change in the ownership of the Guarantor or any
Subsidiary Guarantor.
The Subsidiary Guarantor further agrees that its Guaranty herein
constitutes a guaranty of payment, performance and compliance when due (and not
a guaranty of collection) and waives any right to require that any resort be had
by any Holder or the Trustee to any security held for payment of the
Obligations.
The obligations of the Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, and recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Subsidiary Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under the Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, wilful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of the Subsidiary Guarantor or would
otherwise act as a discharge of the Subsidiary Guarantor as a matter of law or
equity.
The Subsidiary Guarantor further agrees that its Guaranty herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
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In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at Stated Maturity, by acceleration, by redemption, offer to
Purchase or otherwise, or to perform or comply with any other Obligation, the
Subsidiary Guarantor hereby, jointly and severally with the Guarantor and the
other Subsidiary Guarantors, promises to and will, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Holders or the Trustee an amount equal to the sum of (i) the unpaid principal
amount of such Obligations, (ii) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders and the Trustees.
The Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any Obligations
guarantied hereby until payment in full of all Obligations. The Subsidiary
Guarantor further agrees that, as between the Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guarantied hereby many be accelerated as provided in Article V of
the Indenture for the purposes of the Subsidiary Guarantor's Guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guarantied hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article V of the Indenture, such Obligations (whether or not due and payable)
shall forthwith become due and payable by the Subsidiary Guarantor for purposes
of this Section.
The Subsidiary Guarantor also agrees, jointly and severally with the
Guarantor and any other Subsidiary Guarantors, to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 1.02. Releases. Concurrently with any sale, lease, transfer or
other disposition permitted by and in accordance with the terms of the Indenture
(other than to the Company or any Affiliate of the Company), by way of merger,
consolidation or otherwise, of all or substantially all of the assets of the
Subsidiary Guarantor or all of the Capital Stock of the Subsidiary Guarantor
owned by the Company and its Affiliates, the Subsidiary Guarantor (in the event
of such a sale, lease, transfer or other disposition of all such Capital Stock)
or the corporation acquiring the property (in the event of such a sale, lease,
transfer or other disposition, by way of a merger, consolidation or otherwise,
of all or substantially all of the assets of the Subsidiary Guarantor) shall be
released and relieved of its guaranty obligations. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale, lease, transfer or other disposition was made by the
Company as permitted by and in accordance with the provisions of the Indenture,
the Trustee shall execute any documents reasonably required to evidence the
release of the Subsidiary Guarantor from its guaranty obligations.
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SECTION 1.03. Successors and Assigns. Except as provided in Section
1.02, this Guaranty Agreement shall be binding upon the Subsidiary Guarantor and
its successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in the Indenture and in the Securities shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of the Indenture.
SECTION 1.04. No Waiver, etc. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Subsidiary Guaranty Agreement shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The rights, remedies and benefits of
the Trustee and the Holders herein expressly specified are cumulative and not
exclusive of any other rights, remedies and benefits which either may have under
this Subsidiary Guaranty Agreement at law, in equity, by statute or otherwise.
SECTION 1.05. Modification, etc. No modification, amendment or waiver
of any provision of this Subsidiary Guaranty Agreement, nor the consent to any
departure by the Subsidiary Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Trustee, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Subsidiary Guarantor in
any case shall entitle the Subsidiary Guarantor or any other guarantor to any
other or further notice or demand in the same, similar or other circumstances.
ARTICLE II
Miscellaneous
SECTION 2.01. Notices. Any notice or communication to the Subsidiary
Guarantor shall be in writing and delivered in person or mailed by first-class
mail addressed to the address for Subsidiary Guarantor set forth below,
SECTION 2.02. Governing Law. This Subsidiary Guarantee Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that he application of the laws of another jurisdiction would be
required thereby.
SECTION 2.03. Successors. All agreements of the Subsidiary Guarantor in
this Subsidiary Guaranty Agreement shall bind its successors.
SECTION 2.04. Multiple Originals. The Subsidiary Guarantor may sign any
number of copies of this Subsidiary Guaranty Agreement. Each signed copy shall
be an original, but
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all of them together represent the same agreement. One signed copy is enough to
prove this Subsidiary Guaranty Agreement.
SECTION 2.05. Headings. The headings of the Articles and Sections of
this Subsidiary Guaranty Agreement have been inserted for convenience of
reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
Dated:
[SUBSIDIARY GUARANTOR],
by
-------------------------------
President
Address: _______________________________
Secretary
- ------------------------
- ------------------------
- ------------------------
5
EXHIBIT T3C(ii)
SECURITY AND COLLATERAL AGENCY AGREEMENT
dated as of [___], 1996, among PSF L.L.C., a Delaware
limited liability company (the "Guarantor"), PREMIUM
STANDARD FARMS, INC., a Delaware corporation and a
wholly owned subsidiary of the Guarantor (the
"Company"), each subsidiary of the Company listed on
Schedule I hereto (each such subsidiary individually,
a "Subsidiary Guarantor", and collectively, the
"Subsidiary Guarantors"; the Guarantor, the Company
and the Subsidiary Guarantors are referred to
collectively herein as the "Grantors"), and FLEET
NATIONAL BANK, a national banking association, in its
capacity as Trustee under the Indenture dated as of
September __, 1996 (as from time to time in effect,
the "Indenture") among the Guarantor, the Company and
Fleet National Bank, as trustee and not individually,
as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as
defined herein).
WHEREAS, the Company proposes to issue up to $10,000,000 aggregate
principal amount of its Senior Secured Second Priority Notes due 2002 (the
"Second Priority Notes") pursuant to the Note Purchase Agreement of even date
herewith among the Company, the Guarantor and Morgan Stanley Group, Inc. (as
from time to time in effect, the "Note Agreement"), the Company's obligations
with respect to the Second Priority Notes and under the Note Agreement and the
other Security Documents being referred to herein as the "Second Priority
Obligations"; and
WHEREAS, the Company proposes to issue its 11% Senior Secured Notes due
2003 in an original aggregate principal amount of $117,500,000 and interests
thereon in the form of additional such Notes (collectively, the "Securities")
pursuant to the Indenture, the Company's obligations with respect to the
Securities and under the Indenture and the other Security Documents, including
any amendments, extensions and modifications thereto, being referred to herein
as the "Securities Obligations"; and
WHEREAS, the Guarantor and Subsidiary Guarantors, pursuant to the Note
Agreement, the Indenture and the Subsidiary Guaranty Agreements, have
guaranteed, or will hereafter guarantee, the due payment and performance of all
of the Obligations; and
WHEREAS, concurrently herewith the Guarantor and the Company have
entered into a Credit Agreement, dated as of September __, 1996 and related
security documents (collectively, as from time to time in effect, the "Senior
Loan Documents") with The Chase Manhattan Bank and other lenders identified
therein with respect to borrowings by the Company of up to an aggregate
principal amount not exceeding $90,000,000 (together with interest thereon and
the other fees and expenses provided for in the Senior Loan Documents, the
"First Priority Debt") and pursuant to which the Grantors have granted a first
priority security interest and lien in the Collateral to secure the First
Priority Debt; and
WHEREAS, the Note Agreement and the Indenture contemplate that the
Second Priority Obligations and the Securities Obligations will be secured by
the Collateral assigned, transferred, mortgaged and pledged hereunder and under
the other Security Documents provided for therein or herein by the Grantors to
the Collateral Agent for the benefit of the holders of the Second
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Priority Notes and the Securities, any proceeds thereof to be applied first to
the payment in full of the Second Priority Notes and thereafter to the payment
in full of the Securities, all as herein provided, subject to the prior liens
and security interests in such Collateral granted by the Grantors for the
benefit of the First Priority Creditors (as defined herein); and
WHEREAS, the holders of the Second Priority Notes have in the Note
Agreement acknowledged that their rights and interests in the Collateral and
Real Estate are second in priority after those of the First Priority Creditors
and have agreed to be bound by the terms and provisions of the Agreement and the
Intercreditor Agreement (as defined below) and the holders of the Securities, in
accepting delivery thereof, have acknowledged that their rights and interests in
any proceeds of the Collateral and Real Estate are third in priority after those
of the holders of the First Priority Debt and the Second Priority Notes and have
agreed to be bound by the terms and provisions of this Agreement and the
Intercreditor Agreement; and
WHEREAS, the Guarantor, the Company, the Senior Collateral Agent and
the Collateral Agent have entered into an Intercreditor Agreement of even date
herewith (as from time to time in effect, the "Intercreditor Agreement"),
pursuant to which the parties thereto have acknowledged their respective
interests in the Collateral and have set forth the relative positions with
respect thereto of the First Priority Creditors, on the one hand and the Secured
Parties, on the other hand.
Accordingly, the Grantors and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the
context otherwise requires, all capitalized terms used but not defined herein
shall have the meanings set forth in the Indenture.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may
become obligated to any Grantor under, with respect to or on account of an
Account.
"Accounts" shall mean any and all right, title and interest of
any Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right,
title and interest in any returned goods, together with all rights, titles,
securities and guarantees with respect thereto, including any rights to stoppage
in transit, replevin, reclamation and resales, and all related
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security interests, liens and pledges, whether voluntary or involuntary, in each
case whether now existing or owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable, (b)
Documents, (c) Equipment, (d) General Intangibles, (e) Inventory, (f) Proceeds,
(g) Payments, (h) Capital Stock of the Guarantor's and Company's subsidiaries,
and (i) cash and cash accounts (including the Concentration Account, the
Collection Deposit Accounts and any other accounts established in the name of
the Company with the Senior Collateral Agent), whether now owned or hereafter
acquired. For purposes of Article VI hereof, the term Collateral shall also
include Real Property.
"Collection Deposit Account" shall mean a lockbox account of a
Grantor maintained for the benefit of the Secured Parties with the Collateral
Agent or with a Sub-Agent pursuant to a Lockbox and Depository Agreement.
"Concentration Account" shall mean the cash collateral account
to be established at the office of the Collateral Agent in the name of the
Collateral Agent pursuant to the Lockbox and Depository Agreements.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned by any Grantor or which such Grantor otherwise has the
right to license, or granting any right to such Grantor under any Copyright now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by any Grantor: (a) all copyright rights in any work subject
to the copyright laws of the United States or any other country, whether as
author, assignee, transferee or otherwise, and (b) all registrations and
applications for registration of any such copyright in the United States or any
other country, including registrations, recordings, supplemental registrations
and pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such
term in the Recitals to this Agreement.
"Documents" shall mean all instruments, documents of title,
drafts, notes, acceptances and chattel paper, whether now owned or hereafter
acquired, files, records, ledger sheets and documents covering or relating to
any of the Collateral.
"Equipment" shall mean all equipment, furniture and
furnishings, and all tangible personal property similar to any of the foregoing,
including tools, parts and supplies of every kind and description, and all
improvements, accessions or appurtenances thereto, that are now or hereafter
owned by any Grantor. The term Equipment shall include Fixtures.
"Events of Default" shall mean the Events of Default defined
in the Second Priority Notes and in the Indenture.
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"First Priority Creditors" shall mean (a) the Lenders, (b) the
Administrative Agent, (c) the Senior Collateral Agent, (d) the Issuing Bank, (e)
the beneficiaries of each indemnification obligation undertaken by any Grantor
under any Senior Loan Document and (f) the successors and assigns of each of the
foregoing, which capitalized terms if not defined herein have the meanings
provided in the Credit Agreement.
"Fixtures" shall mean all items of Equipment, whether now
owned or hereafter acquired, of any Grantor that become so related to particular
real estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and
causes of action and all other assignable intangible personal property of any
Grantor of every kind and nature (other than Accounts Receivable) now owned or
hereafter acquired by any Grantor, including corporate or other business
records, indemnification claims, contract rights (including rights under leases,
whether entered into as lessor or lessee, and other agreements), Intellectual
Property, goodwill, registrations, franchises, tax refund claims and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Accounts Receivable.
"Grantor" shall have the meaning assigned to that term in the
opening paragraph of this Agreement.
"Indemnitee" shall mean .
"Indemnity Agreement" shall mean the Indemnity, Subrogation
and Contribution Agreement of even date herewith among the Company and the
Subsidiary Guarantors, the Security Guarantor as from time to time in effect.
"Intellectual Property" shall mean all intellectual and
similar property of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, confidential or proprietary technical and
business information, know-how, show-how or other data or information, software
and databases and all embodiments or fixations thereof and related
documentation, registrations and franchises, and all additions, improvements and
accessions to, and books and records describing or used in connection with, any
of the foregoing.
"Intercreditor Agreement" shall have the meaning assigned to
that term in the Recitals to this Agreement.
"Inventory" shall mean all goods of any Grantor, whether now
owned or hereafter acquired, held for sale or lease, or furnished or to be
furnished by any Grantor under contracts of service, or consumed in any
Grantor's business, including all farm products and inventories of the following
types: (a) all hogs, pigs and swine ("Stock"), Stock in gestation, Stock semen
and Stock embryos, including all increase thereof, issue thereof (including
conceived but unborn young), and products thereof, including processed pork,
owned or held by the Grantor, now or hereafter existing, including any of the
foregoing that are returned to or repossessed by or on behalf of any Grantor,
and all accessions thereto, products thereof and documents therefor and (b) all
stores and
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supplies now owned or hereafter acquired by any Grantor, including feed, seed,
fertilizer, chemicals, pesticides and all other such supplies used in any
Grantor's operations.
"License" shall mean any Patent License, Trademark License,
Copyright License or other license or sublicense to which any Grantor is a
party, including those listed on Schedule III (other than, to the event so
indicated on Schedule III, those license agreements in existence on the date
hereof and listed on Schedule III and those license agreements entered into
after the date hereof, which by their terms prohibit assignment or a grant of a
security interest by such Grantor as licensee thereunder).
"Lockbox and Depository Agreement" shall mean any Lockbox and
Depository Agreement substantially in the form of Annex 1 hereto among a
Grantor, the Collateral Agent and a Sub-Agent.
"Lockbox System" shall have the meaning assigned to such term
in Section 5.02.
"Majority Holders" shall mean the holders of more than 50% in
aggregate principal amount of the Second Priority Notes and the Securities at
the time outstanding, as determined from the records of the Company or the
Security Register under the Indenture.
"Note Agreement" shall have the meaning assigned to such term
in the Recitals to this Agreement.
"Obligations" shall mean the Second Priority Obligations and
the Securities Obligations.
"Patent License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to make, use or sell
any invention on which a Patent, now or hereafter owned by any Grantor or which
any Grantor otherwise has the right to license, is in existence, or granting to
any Grantor any right to make, use or sell any invention on which a Patent, now
or hereafter owned by any third party, is in existence, and all rights of any
Grantor under any such agreement.
"Patents" shall mean all of the following now owned or
hereafter acquired by any Grantor: (a) all letters patent of the United States
or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and pending applications in the United
States Patent and Trademark Office or any similar offices in any other country,
including those listed on Schedule IV, and (b) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof, and the
inventions disclosed or claimed therein, including the right to make, use and/or
sell the inventions disclosed or claimed therein.
"Payments" shall mean all payments under any governmental
subsidy, loan or payment programs, or the like, including all subsidy
deficiency, diversion, disaster and price support payments and each Grantor's
beneficial interest under any trust or letter of credit established for the
benefit of such Grantor (and others, if applicable) under any Federal or state
laws, Agricultural Commodities Act, the United States Warehouse Act and the
like.
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"Perfection Certificate" shall mean a certificate
substantially in the form of Annex 2 hereto, completed and supplemented with the
schedules and attachments contemplated thereby, and duly executed by the chief
financial officer and the chief legal officer of the Company.
"Pledge Agreement" shall mean the Pledge Agreement of even
date herewith among the Guarantor, the Company and the Subsidiary Pledgors (as
therein defined) and the Collateral Agent.
"Proceeds" shall mean any consideration received from the
sale, exchange, license, lease or other disposition of any asset or property
that constitutes Collateral, any value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft, damage or other
involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, and shall include (a) all cash and negotiable
instruments received by or held on behalf of the Collateral Agent pursu ant to
the Lockbox System, (b) any claim of any Grantor against any third party for
(and the right to sue and recover for and the rights to damages or profits due
or accrued arising out of or in connection with) (i) past, present or future
infringement of any Patent now or hereafter owned by any Grantor, or licensed
under a Patent License, (ii) past, present or future infringement or dilution of
any Trademark now or hereafter owned by any Grantor or licensed under a
Trademark License or injury to the goodwill associated with or symbolized by any
Trademark now or hereafter owned by any Grantor, (iii) past, present or future
breach of any License and (iv) past, present or future infringement of any
Copyright now or hereafter owned by any Grantor or licensed under a Copyright
License and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Second Priority Obligations" shall have the meaning assigned
to such term in the Recitals to this Agreement.
"Securities Obligations" shall have the meaning assigned to
such term in the Recitals to this Agreement.
"Secured Notes" shall mean the Second Priority Notes and the
Securities at the time outstanding.
"Secured Parties" shall mean (a) the holders of the Second
Priority Notes, (b) the holders of the Securities, (c) the Trustee and (d) the
Collateral Agent.
"Securityholders" means the holders of the Secured Notes.
"Security Interest" shall mean the security interests granted
under Section 2.01.
"Senior Loan Documents" shall have the meaning assigned to
that term in the Recitals to this Agreement.
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"Senior Security Agreement" shall mean the Security Agreement
of even date herewith among the Grantors and The Chase Manhattan Bank, as
collateral agent for the benefit of the First Priority Creditors, as amended or
modified from time to time.
"Stock" shall have the meaning assigned to that term in the
definition of Inventory.
"Sub-Agent" shall mean a financial institution that shall have
delivered to the Collateral Agent an executed Lockbox and Depository Agreement.
"Trademark License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to use any Trademark
now or hereafter owned by any Grantor or which any Grantor otherwise has the
right to license, or granting to any Grantor any right to use any Trademark now
or hereafter owned by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Grantor: (a) all trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office, any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule V, (b) all goodwill
associated therewith or symbolized thereby and (c) all other assets, rights and
interests that uniquely reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of
interpretation specified in Section 1.1 of the Indenture shall be applicable to
this Agreement.
SECTION 1.04. Actions by Securityholders. Any request, demand,
authorization, direction, notice, consent or waiver or other action hereunder to
be given or taken by Securityholders must be embodied in and evidenced by one or
more instruments in substantially similar tenor signed by such Securityholders
in person or by agent duly appointed in writing; and such action shall become
effective when such instrument or instruments are delivered to the Collateral
Agent. Such instrument or instruments (and the actions embodied therein and
evidenced thereby) are herein sometimes referred to as the "Actions" of the
Securityholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Collateral Agent and the Company, if made in the manner provided in this
Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such
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instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Collateral Agent deems sufficient.
Any request, demand, authorization, direction, notice, comment or
waiver or other Action hereunder of the holder of any Security Priority Note or
any of the Securities shall bind every future holder of he same security and the
holder of any security issued upon the transfer or exchange thereof or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Collateral Agent or any Guarantor in reliance thereon, whether or not notation
of such action is made upon such security.
SECTION 1.05. Application of Trust Indenture Act. The Trust
Indenture Act shall apply as a matter of law (or to the extent not so required,
as a matter of contract) to this Agreement and the other Security Documents for
purposes of interpretation, construction and definition of rights and
obligations hereunder and under the other Security Documents. If any provision
hereof or thereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act that is required under such Act to be a part of and govern this
Agreement, the latter shall control. If any provision hereof or thereof modifies
or excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to the Agreement or such
other Security Document as so modified or excluded, as the case may be.
SECTION 1.06. Respective Rights of Securityholders. The
Security Interest hereunder and the security granted under the other Security
Documents are intended for the benefit of all the Secured Parties, provided,
only, that any proceeds hereunder or thereunder collected by the Collateral
Agent are to be applied, after payment of its fees and expenses, first to
payment in full of the Second Priority Notes and thereafter to payment of the
Securities.
With respect to all other Actions taken by Securityholders
hereunder or thereunder, the holders of the Second Priority Notes and the
Securities shall act as a single class.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment
or performance, as the case may be, in full of the Obligations, each Grantor
hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Collateral Agent, its successors and assigns,
for the benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the benefit of the Secured Parties, a
security interest in all of such Grantor's right, title and interest in, to and
under the Collateral (the "Security Interest"). Without limiting the foregoing,
the Collateral Agent is hereby authorized to file one or more financing
statements (including fixture filings), continuation statements, filings with
the United States Patent and Trademark Office or United States Copyright Office
(or any successor office or any similar office in any other country) or other
documents for the purpose of perfecting, confirm ing, continuing, enforcing or
protecting the Security Interest granted by each Grantor, without the signature
of any Grantor, and naming any Grantor or the Grantors as debtors and the
Collateral Agent as secured party.
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SECTION 2.02. Other Security. As additional security for the
payment or performance of Obligations, and in confirmation of the grant of the
Security Interest, there are concurrently herewith being, or will hereafter be,
delivered to the Collateral Agent, its successors and assigns, for the benefit
of the Secured Parties, (a) by the Company, the documents identified in Schedule
VI hereto, mortgaging all of its Real Property and (b), by one or more of the
Guarantor, the Company and the Guarantor Subsidiaries (as therein defined), the
Pledge Agreement, pledging the Capital Stock of the Subsidiaries, the Indemnity
Agreement and the ancillary agreements referred to therein. The Collateral
Agent's rights, interests and duties under such documents are to be construed
and exercised in a manner consistent with the provisions of this Agreement..
SECTION 2.03. No Assumption of Liability. The Security
Interest and the Mortgages are granted as security only and shall not subject
the Collateral Agent or any other Secured Party to, or in any way alter or
modify, any obligation or liability of any Grantor with respect to or arising
out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to
the Collateral Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and
valid rights in and title to the Collateral with respect to which it has
purported to grant the Security Interest hereunder and has full power and
authority to grant to the Collateral Agent the Security Interest in such
Collateral and to execute, deliver and perform its obligations in accordance
with the terms of this Agreement, without the consent or approval of any other
person other than any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been
duly prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been delivered to the Collateral Agent for filing in each governmental,
municipal or other office specified in Section 6 to the Perfection Certificate,
which are all the filings, recordings and registrations (other than filings
required to be made in the United States Patent and Trademark Office and the
United States Copyright Office in order to perfect the Security Interest in
Collateral consisting of United States Patents, Trademarks and Copyrights) that
are necessary to publish notice of and protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral in
which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the
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filing of continuation statements. Each Grantor shall ensure that such financing
statements are filed in said offices promptly after the execution and delivery
of this Agreement.
(b) Each Grantor shall ensure that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property shall have been received and recorded within
three months after the execution of this Agreement with respect to United States
Patents and United States registered Trademarks (and Trademarks for which United
States registration applications are pending) and within one month after the
execution of this Agreement with respect to United States registered Copyrights
by the United States Patent and Trademark Office and the United States Copyright
Office pursuant to 35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205
and the regulations thereunder, as applicable, and otherwise as may be required
pursuant to the laws of any other necessary jurisdiction, to protect the
validity of and to establish a legal, valid and perfected security interest in
favor of the Collateral Agent (for the ratable benefit of the Secured Parties)
in respect of all Collateral consisting of Patents, Trademarks and Copyrights in
which a security interest may be perfected by filing, recording or registration
in the United States (or any political subdivision thereof) and its territories
and possessions, or in any other necessary jurisdiction, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect
the Security Interest with respect to any Collateral consisting of Patents,
Trademarks and Copyrights (or registration or application for registration
thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
to the filings described in Section 3.02 above, a perfected security interest in
all Collateral in which a security interest may be perfected by filing,
recording or registering a financing statement or analogous document in the
United States (or any political subdivision thereof) and its territories and
possessions pursuant to the Uniform Commercial Code or other applicable law in
such jurisdictions and (c) a security interest shall be perfected in all
Collateral in which a security interest may be perfected by the filing of such
financing statements in each such jurisdiction and upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable, within the three month
period (commencing as of the date hereof) pursuant to 35 U.S.C. ss. 261 or 15
U.S.C. ss. 1060 or the one month period (commencing as of the date hereof)
pursuant to 17 U.S.C. ss. 205 and otherwise as may be required pursuant to the
laws of any other necessary jurisdiction. The Security Interest is and shall be
prior to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.10 of the
Note Agreement and Section 10.14 of the Indenture.
SECTION 3.04. Absence of Other Liens. The Collateral is owned
by the Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.10 of the Note Agreement and Section 10.14 of the
Indenture. Other than the filings made with respect to the First Priority Debt,
the Grantor has not filed or consented to the filing of (a) any financing
statement or analogous document under the Uniform Commercial Code or any other
applicable laws covering any Collateral, (b) any assignment in which any Grantor
assigns any Collateral or any security agreement or similar instrument covering
any Collateral with the United States Patent and Trademark Office or the United
States Copyright Office or (c) any assignment
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in which any Grantor assigns any Collateral or any security agreement or similar
instrument covering any Collateral with any foreign governmental, municipal or
other office, which financing statement or analogous document, assignment,
security agreement or similar instrument is still in effect, except, in each
case, for Liens expressly permitted pursuant to Section 10.14 of the Indenture.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records;
Place of Business. (a) Each Grantor agrees promptly to notify the Collateral
Agent in writing of any change (i) in its corporate name or in any trade name
used to identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees not to effect or permit any change
referred to in the preceding sentence unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral. Each
Grantor agrees promptly to notify the Collateral Agent if any material portion
of the Collateral owned or held by such Grantor is damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and
expense, such complete and accurate records with respect to the Collateral owned
by it as is consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which such Grantor is engaged, but in any event to include
complete accounting records indicating all payments and proceeds received with
respect to any part of the Collateral.
SECTION 4.02. Periodic Certification. (a) Each year, at the
time of delivery of annual financial statements with respect to the preceding
fiscal year pursuant to Section 7.3 of the Indenture, the Company shall deliver
to the Collateral Agent a certificate executed by the chief financial officer
and the chief legal officer of the Company (i) setting forth the information
required pursuant to Section 2 of the Perfection Certificate or confirming that
there has been no change in such information since the date of such certificate
or the date of the most recent certificate delivered pursuant to this Section
4.02 and (ii) certifying that all Uniform Commercial Code financing statements
(including fixture filings, as applicable) or other appropriate filings,
recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (i) above to the extent necessary to
protect and perfect the Security Interest for a period of not less than 18
months after the date of such certificate (except as noted therein with respect
to any continuation statements to be filed within such period). Each certificate
delivered pursuant to this Section 4.02 shall identify in the format of Schedule
II, III, IV or V, as applicable, all Intellectual Property of any Grantor in
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existence on the date thereof and not then listed on such Schedules or
previously so identified to the Collateral Agent.
(b) Concurrently with the delivery of the certificate required
by clause (a) above, the Company shall deliver to the Collateral Agent an
Officers' Certificate certifying that, based upon their review of the Indenture,
the Security Documents and other relevant information and after consulting with
counsel, the Company is in compliance with its covenants in the Indenture and
Security Documents, including without limitation Sections 3.02, 4.01, 4.04, 4.07
and 4.13 of this Agreement, Section 2, 15 and 23 of the Pledge Agreement,
Sections 16, 18, 19 and 20 of the Texas Deed of Trust, Sections ___ and ___ of
the Missouri Deed of Trust and Section 10.22 of the Indenture, or if a default
under any of the foregoing is continuing, describing the same and setting forth
the actions being undertaken by the Company to cure the same.
SECTION 4.03. Protection of Security. Each Grantor shall, at
its own cost and expense, take any and all actions necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.10 of the Note Agreement and Section
10.14 of the Indenture.
SECTION 4.04. Further Assurances. Each Grantor agrees that,
whenever it files any further instruments and documents or takes any other
action to better assure, preserve, protect and perfect the security granted to
the holders of the First Priority Debt or whenever it is necessary to further
assure, preserve, protect or perfect the Security Interests, it will forthwith
notify the Collateral Agent thereof and will promptly, at its own expense,
execute, acknowledge, deliver and cause to be duly filed comparable instruments
and documents and take such comparable actions to better assure, preserve,
protect and perfect the Security Interest and the rights and remedies created
hereby to the same extent as may be granted to the First Priority Debt.
Without limiting the generality of the foregoing, each Grantor
hereby agrees, from time to time, to supplement this Agreement by supplementing
Schedule II, III, IV or V hereto or adding additional schedules hereto to
specifically identify any after-acquired asset or item that may constitute
Copyrights, Licenses, Patents or Trademarks. Each Grantor agrees that it will
use its best efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct with respect
to such Collateral within 30 days after the date it acquires the same.
SECTION 4.05. Inspection and Verification. The Collateral
Agent and such persons as the Collateral Agent may reasonably designate shall
have the right, at the Grantors' own cost and expense, to inspect the
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Collateral is located, to
discuss the Grantors' affairs with the officers of the Grantors and their
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, health or other condition and status of, or
any other matter relating to, the Collateral, including, in the case of Accounts
or Collateral in the possession of any third person, by contacting Account
Debtors or the third person possessing such Collateral for the purpose of making
such a verification. The Collat eral Agent shall have the absolute right to
share any information it gains from such inspection or verification with the
Secured Parties or their respective legal, financial or other advisor.
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SECTION 4.06. Taxes; Encumbrances. At its option, the
Collateral Agent may discharge past due taxes, assessments, charges, fees,
Liens, security interests or other encumbrances at any time levied or placed on
the Collateral and not permitted pursuant to Section 6.10 of the Note Agreement
and Section 10.14 of the Indenture, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Note Agreement, the Indenture or this Agreement, and each
Grantor jointly and severally agrees to reimburse the Collateral Agent on demand
for any payment made or any expense incurred by the Collateral Agent pursuant to
the foregoing authorization; provided, however, that nothing in this Section
4.06 shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any Secured Party to cure or
perform, any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees, liens, security interests or other encumbrances and
maintenance as set forth herein or in the Note Agreement and the Indenture.
SECTION 4.07. Assignment of Security Interest. If at any time
any Grantor shall take a security interest in any property of an Account Debtor
or any other person to secure payment and performance of an Account, such
Grantor shall promptly assign such security interest to the Collateral Agent.
Such assignment need not be filed of public record unless necessary to continue
the perfected status of the security interest against creditors of and
transferees from the Account Debtor or other person granting the security
interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each
Grantor shall remain liable to observe and perform all the conditions and
obligations to be observed and performed by it under each contract, agreement or
instrument relating to the Collateral, all in accordance with the terms and
conditions thereof, and each Grantor jointly and severally agrees to indemnify
and hold harmless the Collateral Agent and the Secured Parties from and against
any and all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the
Grantors shall make or permit to be made an assignment, pledge or hypothecation
of the Collateral or shall grant any other Lien in respect of the Collateral,
except as expressly permitted by Section 6.10 of the Note Agreement and Section
10.14 of the Indenture. None of the Grantors shall make or permit to be made any
transfer of the Collateral and each Grantor shall remain at all times in
possession of the Collateral owned by it, except that (a) Inventory and Hedge
Agreements may be sold in the ordinary course of business and (b) unless and
until the Collateral Agent shall notify the Grantors that an Event of Default
shall have occurred and be continuing and that during the continuance thereof
the Grantors shall not sell, convey, lease, assign, transfer or otherwise
dispose of any Collateral (which notice may be given by telephone if promptly
confirmed in writing), the Grantors may use and dispose of the Collateral in any
lawful manner not inconsistent with the provisions of this Agreement, the Note
Agreement or the Indenture. Without limiting the generality of the foregoing,
each Grantor agrees that it shall not permit any Inventory to be in the
possession or control of any warehouseman, bailee, agent or processor at any
time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory, whether arising by operation of law or otherwise.
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SECTION 4.10. Limitation on Modification of Accounts. None of
the Grantors will grant any extension of the time of payment of any of the
Accounts Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for the
payment thereof or allow any credit or discount whatsoever thereon, other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business and consistent with its current practices and in
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which such Grantor is engaged, without first
obtaining the written consent of the Majority Holders.
SECTION 4.11. Insurance. The Grantors, at their own expense,
shall maintain or cause to be maintained insurance covering physical loss or
damage to their properties, including the Inventory and Equipment, in accordance
with Section 10.7 of the Indenture, and shall cause such policies to be endorsed
or otherwise amended to name the Collateral Agent as a loss payee, as its
interest may appear, and to provide that such policies may not be terminated
without 30 days prior written notice to the Collateral Agent. Annually with the
delivery of the certificate required by Section 4.02(a) hereof, the Company
shall deliver to the Collateral Agent a list of all the insurance policies
maintained by the Company, together with certification by the insurers that the
same are in full force and effect. Each Grantor irrevocably makes, constitutes
and appoints the Collateral Agent (and all officers, employees or agents
designated by the Collateral Agent) as such Grantor's true and lawful agent (and
attorney-in-fact) for the purpose, during the continuance of an Event of
Default, of making, settling and adjusting claims in respect of Collateral under
policies of insurance, endorsing the name of such Grantor on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that any Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, without waiving or
releasing any obligation or liability of the Grantors hereunder or any Event of
Default, in its sole discretion, obtain and main tain such policies of insurance
and pay such premium and take any other actions with respect thereto as the
Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.11, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.
SECTION 4.12. Legend. Each Grantor shall legend its Accounts
Receivable and its books, records and documents evidencing or pertaining thereto
with an appropriate reference to the fact that such Accounts Receivable have
been assigned to the Collateral Agent for the benefit of the Secured Parties and
that the Collateral Agent has a security interest therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and
Copyright Collateral. (a) Each Grantor agrees that it will not, nor will it
permit any of its licensees to, do any act, or omit to do any act, whereby any
Patent that is material to the conduct of such Grantor's business may become
invalidated or dedicated to the public, and agrees that it shall continue to
mark any products covered by a Patent with the relevant patent number as
necessary and sufficient to establish and preserve its maximum rights under
applicable patent laws.
(b) Each Grantor (either itself or through its licensees or
its sublicensees) will, for each Trademark material to the conduct of such
Grantor's business, (i) maintain such Trademark
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in full force free from any claim of abandonment or invalidity for non-use, (ii)
maintain the quality of products and services offered under such Trademark,
(iii) display such Trademark with notice of Federal or foreign registration to
the extent necessary and sufficient to establish and preserve its maximum rights
under applicable law and (iv) not knowingly use or knowingly permit the use of
such Trademark in violation of any third party rights.
(c) Each Grantor (either itself or through licensees) will,
for each work covered by a material Copyright, continue to publish, reproduce,
display, adopt and distribute the work with appropriate copyright notice as
necessary and sufficient to establish and preserve its maximum rights under
applicable copyright laws.
(d) In no event shall any Grantor, either itself or through
any agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States
or in any other country or any political subdivision thereof, unless it promptly
informs the Collateral Agent, and executes and delivers to the Collateral Agent
and files or records any and all agreements, instruments, documents and papers
as may be necessary to evidence the Collateral Agent's security interest in such
Patent, Trademark or Copyright.
(e) Each Grantor will take all necessary steps that are
consistent with the practice in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any office or agency in
any political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of Trademarks and Copyrights that is material to the conduct of any
Grantor's business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(f) In the event that any Grantor has reason to believe that
any Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor shall, if consistent
with good business judgment, promptly sue for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and take such other actions as are appropriate
under the circumstances to protect such Collateral.
(g) Upon and during the continuance of an Event of Default,
each Grantor shall use its best efforts to obtain all requisite consents or
approvals by the licensor of each Copyright License, Patent License or Trademark
License to effect the assignment of all of such Grantor's right, title and
interest thereunder to the Collateral Agent or its designee.
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ARTICLE V
Collections
SECTION 5.01. Senior Lockbox System. (a) The Grantors have
established in the name of the Senior Collateral Agent, and subject to the
control of the Senior Collateral Agent pursuant to certain Lockbox and
Depository Agreements between the Grantors and the Senior Collateral Agent, for
the ratable benefit of the First Priority Creditors, a system of lockboxes and
related deposit accounts into which the Proceeds of all Accounts Receivable and
Inventory shall be deposited and forwarded to the Senior Collateral Agent in
accordance with said Lockbox and Depository Agreements. The Senior Collateral
Agent has been notified of the Security Interest and in the Intercreditor
Agreement the Senior Collateral Agent has acknowledged that it holds any
Collateral in its possession as bailee for the Collateral Agent for the benefit
of the Secured Parties, subject only to the prior rights of the First Priority
Creditors. Until the claims of the First Priority Creditors have been satisfied
in full, the Grantors shall comply with their obligations under the Senior Loan
Documents.
SECTION 5.02. Successor Lockbox System. (a) Concurrently with
the satisfaction in full of the claims of the First Priority Creditors, the
Grantors shall establish in the name of the Collateral Agent, and subject to the
control of the Collateral Agent, pursuant to the Lockbox and Depository
Agreements, for the benefit of the Collateral Agent and the Secured Parties, a
system of lockboxes and related deposit accounts (the "Lockbox System") into
which the Proceeds of all Accounts Receivable and Inventory, including any then
held by the Senior Collateral Agent as bailee, shall be deposited and forwarded
to the Collateral Agent in accordance with the Lockbox and Depository Agreements
and thereafter shall comply with the provisions of this Article V with respect
to all collections.
(b) All Proceeds of Inventory and Accounts Receivable that
have been received on any Business Day through the Lockbox System will be
transferred into the Concentration Account on such Business Day to the extent
required by the applicable Lockbox and Depository Agreement. All Proceeds
stemming from the sale of a substantial portion of the Collateral (other than
Proceeds of Accounts) that have been received by a Grantor on any Business Day
will be transferred into the Concentration Account on such Business Day. All
Proceeds received on any Business Day by the Collateral Agent pursuant to
Section 6.03 will be transferred into the Concentration Account on such Business
Day.
(c) The Concentration Account is, and shall remain, under the
sole dominion and control of the Collateral Agent. Each Grantor acknowledges and
agrees that (i) such Grantor has no right of withdrawal from the Concentration
Account, (ii) the funds on deposit in the Concentration Account shall continue
to be collateral security for all of the Obligations and (iii) upon the
occurrence and during the continuance of an Event of Default, at the Collateral
Agent's election, the funds on deposit in the Concentration Account shall be
applied as provided in Section 6.02. So long as no Event of Default has occurred
and is continuing, the Collateral Agent shall promptly remit any funds on
deposit in the Concentration Account to the General Fund Account and the Company
shall have the right, at any time and from time to time, to withdraw such
amounts from the General Fund Account as it shall deem to be necessary or
desirable.
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(d) Effective upon notice to the Grantors from the Collateral
Agent after the occurrence and during the continuance of an Event of Default
(which notice may be given by telephone if promptly confirmed in writing), the
Concentration Account will, without any further action on the part of any
Grantor, the Collateral Agent or any Sub-Agent, convert into a closed lockbox
account under the exclusive dominion and control of the Collateral Agent in
which funds are held subject to the rights of the Collateral Agent hereunder.
Each Grantor irrevocably authorizes the Collateral Agent to notify each
Sub-Agent (i) of the occurrence of an Event of Default and (ii) of the matters
referred to in this paragraph (d). Following the occurrence of an Event of
Default, the Collateral Agent may instruct each Sub-Agent to transfer
immediately all funds held in each deposit account to the Concentration Account.
SECTION 5.03. Collections. (a) Each Grantor agrees after the
claims of the First Priority Creditors have been fully satisfied, (i) to notify
and direct promptly each Account Debtor and every other person obligated to make
payments on Accounts Receivable or in respect of any Inventory to make all such
payments directly to the Lockbox System established in accordance with Section
5.02, (ii) to use all reasonable efforts to cause each Account Debtor and every
other person identified in clause (i) above to make all payments with respect to
Accounts Receivable and Inven tory directly to such Lockbox System and (iii)
promptly to deposit all payments received by it on account of Accounts
Receivable and Inventory, whether in the form of cash, checks, notes, drafts,
bills of exchange, money orders or otherwise, in the Lockbox System in precisely
the form in which received (but with any endorsements of such Grantor necessary
for deposit or collection), and until they are so deposited such payments shall
be held in trust by such Grantor for and as the property of the Collateral
Agent.
(b) Without the prior written consent of the Collateral Agent,
no Grantor shall, in a manner adverse to the Secured Parties, change the general
instructions given to Account Debtors in respect of payment on Accounts to be
deposited in the Lockbox System. Until the Collateral Agent shall have advised
the Grantors to the contrary, each Grantor shall, and the Collateral Agent
hereby authorizes each Grantor to, enforce and collect all amounts owing on the
Inventory and Accounts Receivable, for the benefit and on behalf of the
Collateral Agent and the other Secured Parties; provided, however, that such
privilege may at the option of the Collateral Agent be terminated upon the
occurrence and during the continuance of any Event of Default.
SECTION 5.04. Power of Attorney. Each Grantor irrevocably
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as such Grantor's true
and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent
shall have the right, with power of substitution for each Grantor and in each
Grantor's name or otherwise, for the use and benefit of the Collateral Agent and
the Secured Parties, upon the occurrence and during the continuance of an Event
of Default (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (b) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading
relating to any of the Collateral; (d) to send verifications of Accounts
Receivable to any Account Debtor; (e) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (f) to settle, compromise,
compound, adjust or defend any
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actions, suits or proceedings relating to all or any of the Collateral; (g) to
notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent or any Secured Party to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received by
the Collateral Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent or
any Secured Party with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of any Grantor or to any
claim or action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as the agent
and attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section shall in no
event relieve any Grantor of any of its obligations hereunder or under any other
Security Document with respect to the Collateral or any part thereof or impose
any obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any other
or further right that it may have on the date of this Agreement or hereafter,
whether hereunder, under any other Security Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Subject to the provisions
of the Intercreditor Agreement, upon the occurrence and during the continuance
of an Event of Default, each Grantor agrees to deliver each item of Collateral
to the Collateral Agent on demand, and it is agreed that the Collateral Agent
shall have the right (to the extent permitted by law) to take any of or all the
following actions at the same or different times: (a) with respect to any
Collateral consisting of Intellectual Property, on demand, to cause the Security
Interest to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any then-existing licensing arrangements to the extent that
waivers cannot be obtained), and (b) with or without legal process and with or
without prior notice or demand for performance, to take possession of the
Collateral and without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral and, generally, to exercise any and all rights afforded to a
secured party under the Uniform Com mercial Code, the provisions of any Mortgage
related thereto or other applicable law. Without limiting the generality of the
foregoing, each Grantor agrees that the Collateral Agent shall have the right,
subject to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale or at
any broker's board or on any
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securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
that such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of Collateral governed by that statute. Such notice,
in the case of a public sale, shall state the time and place for such sale and,
in the case of a sale at a broker's board or on a securities exchange, shall
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or portion thereof, will first be offered for sale at such
board or exchange and in the case of a private sale, shall state the time after
which any such sale is to be made. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice (if any) of such sale. At any
such sale, the Collateral, or a portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Collateral Agent may (in its
sole and absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwith standing the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit
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or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
SECTION 6.02. Directions by the Securityholders. Upon the
occurrence and during the continuance of an Event of Default, the Majority
Holders, acting as a single class, shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Collateral Agent or exercising any trust or power conferred upon the Collateral
Agent by Actions in accordance with Section 1.04 hereof, provided, that such
direction shall not be in conflict with any rule of law and that the Collateral
Agent may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
SECTION 6.03. Application of Proceeds. Any money collected by
the Collateral Agent pursuant to this Agreement or any other Security Document
shall be applied by the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by
the Collateral Agent (in its capacity as such hereunder and under the
other Security Documents or as Trustee under the Indenture) in
connection with the management, operation and maintenance of any
Collateral after an Event of Default and any collection or sale of the
Collateral of or otherwise in connection with this Agreement, any other
Security Document or any of the Obligations, including all court costs
and the reasonable fees and expenses of its agents and legal counsel,
the repayment of all advances made by the Collateral Agent hereunder or
under any other Security Document on behalf of any Grantor and any
other costs or expenses incurred in connection with the exercise of any
right or remedy hereunder or under any other Security Document;
SECOND, to the payment in full of the Second Priority
Obligations (the amounts so applied to be distributed among the holders
of the Second Priority Notes pro rata first in accordance with the
amounts of accrued and unpaid interest on the Second Priority Notes and
then in accordance with the amounts of principal due with respect to
the Second Priority Notes and the Second Priority Obligations owed to
them on the date of any such distribution);
THIRD, to the Trustee for the payment in full of the
Securities Obligations (the amounts so applied to be distributed among
the holders of Securities pro rata in accordance with the amounts of
Securities Obligations owed to them on the date of any such
distribution); and
FOURTH, to the Grantors, their respective successors or
assigns, or as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or
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purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Collateral Agent or such officer or be
answerable in any way for the misapplication thereof.
SECTION 6.04. Grant of License to Use Intellectual Property.
For the purpose of enabling the Collateral Agent to exercise rights and remedies
under this Article at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies, each Grantor hereby grants to the
Collateral Agent an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Grantors) to use, license or
sub-license any of the Collateral consisting of Intellectual Property now owned
or hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof. The use of such license
by the Collateral Agent shall be exercised, at the option of the Collateral
Agent, upon the occurrence and during the continuation of an Event of Default;
provided that any license, sub-license or other transaction entered into by the
Collateral Agent in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.
SECTION 6.05. Trust Indenture Act Requirements; Release of
Collateral. The release of any Collateral from the terms of any of the Security
Documents or the release, in whole or in part, of the Liens created by any of
the Security Documents, will not be deemed to impair the security interests
thereunder in contravention of the provisions of this Indenture if and to the
extent the Collateral or Liens are released pursuant to, and in accordance with,
the applicable Security Documents and pursuant to, and in accordance with, the
terms hereof. To the extent applicable, without limitation, the Company, the
Guarantor and each other obligor on the Securities shall cause ss. 314(d) of the
Trust Indenture Act relating to the release of property or securities from the
Liens of the Security Documents to be complied with. Any certificate required by
ss. 314(d) of the Trust Indenture Act may be made by two officers of the
company, except in cases which ss. 314(d) of the Trust Indenture Act requires
that such certificate be made by an independent Person.
SECTION 6.06. Disposition of Certain Collateral without
Requesting Release.
(a) Notwithstanding the provisions of Section 6.05 hereof, the
Company and the Guarantor may, pursuant to and in accordance with this
Agreement, the other Security Documents and the Indenture, without requesting
the release or consent of the Trustee:
(i) sell or dispose of, free from the Liens of the
Security Documents, any Personal Property which, in its
reasonable opinion, may have become obsolete or unfit for use
or which is no longer necessary in the conduct of its
businesses or the operation of the Collateral or the disposal
of cash free from the Liens of the Security Documents in the
ordinary course of business;
(ii) alter, repair, replace, change the
location or position of and add to any Personal Property; and
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(iii) renew, extend, surrender, terminate, modify or
amend any leases or Personal Property, when, in its reasonable
opinion, it is prudent to do so.
(b) Notwithstanding the provisions of Subsection (a) above,
(x) the Company and the Guarantor shall not dispose of or transfer (by lease,
assignment, sale or otherwise), or pledge, mortgage or otherwise encumber (other
than Liens permitted by Section 6.10 of the Note Agreement and Section 10.14 of
the Indenture), Collateral pursuant to the provisions of Section 15.4(a) with a
fair value to the Company equal to 10% or more of the aggregate fair value of
all Collateral then existing (as determined in the good faith judgment of the
Company or the Guarantor and, if required by the Trust Indenture Act, an
independent appraiser), in any transaction or any series of related transactions
without complying with Sections 10.10 of the Indenture and Section 6.05 hereof;
and (y) the right of the Company and the Guarantor to rely upon the provisions
of Subsection (a) above from the date of this Indenture to December 1996 and for
each semiannual period thereafter shall be conditioned upon the Company and the
Guarantor delivering to the Trustee, on or before February 28, 1997 and
thereafter within 60 days following each June 30 and December 31, an Officer's
Certificate to the effect that all of such dispositions by the Company and the
Guarantor during such preceding semiannual period ending on such dates (other
than those such dispositions, collections or payments wherein the Company and
the Guarantor have complied with Section 6.05 hereof) were in the ordinary
course of their business and that the proceeds therefrom were used by the
Company in connection with its business.
(c) Any disposition of Collateral made in compliance with the
provisions of this Section 6.06 shall be deemed not to impair the Liens of the
Security Documents in contravention of the provisions of this Indenture.
(d) Upon receipt of a Company Request and subject to Section
314(c) of the Trust Indenture Act and Section 1.2 of the Indenture, the Trustee
shall execute and deliver, within five business days from the receipt of the
Company Request, any instrument deemed by the Company to be necessary or
appropriate to dispose of portions of the Collateral pursuant to this Section
6.06 if the provisions of this Section 6.06 have been complied with.
SECTION 6.07. Suits to Protect the Collateral. Upon the
occurrence of an Event of Default and subject to the provisions of the Security
Documents and the Intercreditor Agreement, (i) the Trustee may, in its sole
discretion and without the consent of the Holders, take all actions it deems
necessary or appropriate in order to (a) enforce any of the terms of the
Security Documents and (b) collect and receive any and all amounts payable in
respect of the obligations of the Company and the Guarantor and (ii) the Trustee
shall have the power to institute and to maintain such suits and proceedings as
it may deem expedient to prevent any impairment of the Collateral by any acts
which may be unlawful or in violation of any of the Security Documents or this
Indenture, including such suits and proceedings as the Trustee may deem
expedient to preserve or protect its interests and the interests of the Holders
in the Collateral and in the principal, interest, issues, profits, rents,
revenues and other income arising therefrom (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative or other governmental enactment, rule or order would impair the
security interests or be prejudicial to the interests of the Holders or the
Trustee).
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SECTION 6.08. Determinations Relating to Collateral. In the
event (i) the Trustee shall receive any written request from the Company or the
Guarantor under any Security Document for consent or approval with respect to
any matter or thing relating to any Collateral or the Company's or the
Guarantor's obligations with respect thereto or (ii) there shall be due to or
from the Trustee under the provisions of any Security Document any material
performance or the delivery of any material instrument, then, in each such
event, the Trustee shall be entitled to hire experts, consultants, agents and
attorneys to advise the Trustee on the manner in which the Trustee should
respond to such request or render any requested performance. The Trustee shall
be fully protected in the taking of any action recommended or approved by any
such expert, consultant, agent or attorney or agreed to by an Act of the Holders
of a majority in principal amount of the Second Priority Notes and the
Securities acting as a single class, pursuant to Section 1.4.
SECTION 6.09. Impairment of Security Interest. The Guarantor
and the Company will not, and will not permit any Subsidiary to, take or omit to
take any action which reasonably might or would have the result of affecting or
impairing the security interests with respect to the Collateral in contravention
of this Indenture, and the Company and the Guarantor shall not (and shall cause
the Subsidiaries not to) grant to, or suffer to exist in favor of, any Person
any interest whatsoever in the Collateral except as permitted by the Security
Documents or this Indenture. The Guarantor and the Company will not, and will
not permit any Subsidiary to, enter into any agreement or instrument that by its
terms expressly requires that the proceeds received from the sale of any
Collateral or Real Property be applied to repay, redeem or otherwise retire any
Debt of any Person other than as set forth in the Credit Agreement, Article V of
the Indenture, this Article VI and the other Security Documents.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices
hereunder shall (except as otherwise expressly permitted herein) be in writing
and given as provided in Section 8.1 of the Note Agreement and Sections 1.5 and
1.6 of the Indenture.
SECTION 7.02. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the Security Interest and all obligations of the
Grantors hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Note Agreement, the Indenture, any
other Security Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Note Agreement, the Indenture, any other Security
Document or any other agreement or instrument relating to the foregoing, (c) any
exchange, release or non-perfection of any Lien on other collateral, or any
release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
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SECTION 7.03. Survival of Agreement. All covenants,
agreements, representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the issuance of the Second Priority Notes and
the Securities, regardless of any investigation made by the holders thereof or
on their behalf, and shall continue in full force and effect until this
Agreement shall terminate in accordance with Section 7.14.
SECTION 7.04. Binding Effect; Several Agreement. This
Agreement shall become effective as to any Grantor when a counterpart hereof
executed on behalf of such Grantor shall have been delivered to the Collateral
Agent and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon such Grantor and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of such Grantor, the Collateral Agent and the other Secured Parties
and their respective successors and assigns, except that no Grantor shall have
the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such assignment or transfer shall
be void) except as expressly contemplated by this Agreement or the Credit
Agreement. This Agreement shall be construed as a separate agreement with
respect to each Grantor and may be amended, modified, supplemented, waived or
released with respect to any Grantor without the approval of any other Grantor
and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Grantor or the Collateral Agent
that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and assigns.
SECTION 7.06. Certifying Rights of Collateral Agent. The
rights, powers and protections afforded the Trustee, by the Indenture, including
without limitation those enumerated in Section 6.03 thereof, will hereby
incorporate therein by reference and made applicable to the Collateral Agent,
provided that referenced therein to "Holders" shall for this purpose be deemed
to mean "Securityholders".
SECTION 7.07. Collateral Agent's Fees and Expenses;
Indemnification. (a) Each Grantor jointly and severally agrees to pay upon
demand to the Collateral Agent the amount of any and all reasonable expenses,
including the reasonable fees, disbursements and other charges of its counsel
and of any experts or agents, that the Collateral Agent may incur in connection
with (i) the administration of this Agreement (including the customary fees and
charges of the Collateral Agent for any audits conducted by it or on its behalf
with respect to the Accounts Receivable or Inventory), (ii) the custody or
preservation of, or the sale of, collection from or other realization upon any
of the Collateral, (iii) the exercise, enforcement or protection of any of the
rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Security Documents, each Grantor jointly and severally agrees to
indemnify the Collateral Agent and the
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other Indemnitees against, and hold each of them harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
fees, disbursements and other charges of counsel, incurred by or asserted
against any of them arising out of, in any way connected with, or as a result
of, the execution, delivery or performance of this Agreement or any claim,
litigation, investigation or proceeding relating hereto or to the Collateral,
whether or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obliga tions secured hereby. The provisions of this Section 7.06
shall remain operative and in full force and effect regardless of the
termination of this Agreement or any other Security Document, the consummation
of the transactions contemplated hereby, the repayment of any of the Second
Priority Notes or the Securities, the invalidity or unenforceability of any term
or provision of this Agreement or any other Security Document, or any
investigation made by or on behalf of the Collateral Agent or any Secured Party.
All amounts due under this Section 7.07 shall be payable on written demand
therefor.
SECTION 7.08. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 7.09. Waivers; Amendment. (a) No failure or delay of
the Collateral Agent in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and under the other Security Documents and of the Secured Parties under the Note
Agreement or the Indenture are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provisions of this
Agreement or any other Security Document or consent to any departure by any
Grantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Grantor in any case shall entitle such Grantor or any
other Grantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any other Security Document nor
any provision hereof or thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Collateral
Agent and the Grantor or Grantors with respect to which such waiver, amendment
or modification is to apply without the prior written consent of the Majority
Holders in accordance with Section 1.04 hereof.
SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
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THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER SECURITY DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.
SECTION 7.11. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.12. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective as provided in Section 7.04. Delivery of an executed signature page to
this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.
SECTION 7.13. Headings. Article and Section headings used
herein are for the purpose of reference only, are not part of this Agreement and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 7.14. Jurisdiction; Consent to Service of Process. (a)
Each Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Security Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent or any Secured Party may otherwise have to bring
any action or proceeding relating to this Agreement or the other Security
Documents against any Grantor or its properties in the courts of any
jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby
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irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 7.15. Termination. (a) This Agreement and the
Security Interest shall terminate when all the Obligations have been paid in
full in cash.
(b) Upon any sale or other transfer by any Grantor of any
Collateral that is permitted under the Note Agreement and the Indenture, or upon
the effectiveness of any written consent to the release of the Security Interest
in any Collateral pursuant to the Note Agreement and the Indenture, the Security
Interest in such Collateral shall be automatically released.
(c) In connection with any termination or release pursuant to
paragraphs (a) and (b) above, the Collateral Agent shall execute and deliver to
the Grantors, at the Grantors' expense, all Uniform Commercial Code termination
statements and similar documents that the Grantors shall reasonably request to
evidence such termination. Any execution and delivery of termination statements
or documents pursuant to this Section 7.15 shall be without recourse to or
warranty by the Collateral Agent.
SECTION 7.16. Additional Grantors. Pursuant to Section 10.22
of the Indenture, each Subsidiary (other than any Inactive Subsidiary) of the
Company that was not in existence or not such a Subsidiary on the date of the
Indenture is required to enter into this Security Agreement upon becoming such a
Subsidiary (or upon ceasing to be an Inactive Subsidiary). Upon execution and
delivery by the Collateral Agent and a Subsidiary of an instrument in the form
of Exhibit A to the Indenture, such Subsidiary shall become a Grantor and a
Subsidiary Guarantor hereunder with the same force and effect as if originally
named as a Grantor and a Subsidiary Guarantor herein. The execution and delivery
of any such instrument shall not require the consent of any Subsidiary Guarantor
hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Subsidiary Guarantor as a party to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PSF L.L.C.
by
-----------------------------------
Name:
Title:
PREMIUM STANDARD FARMS, INC.
by
-----------------------------------
Name:
Title:
FLEET NATIONAL BANK, as Trustee,
as Collateral Agent,
by
-----------------------------------
Name:
Title:
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SCHEDULE II
COPYRIGHTS
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SCHEDULE III
LICENSES
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SCHEDULE IV
PATENTS
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SCHEDULE V
TRADEMARKS
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SCHEDULE VI
LIST OF MORTGAGES
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Annex 1 to the
Security Agreement
LOCKBOX AND DEPOSITORY AGREEMENT dated as of [ ],
1996, among [Name of Grantor], a [ ] corporation (the
"Grantor"), FLEET NATIONAL BANK, a national banking
corporation, as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (such term, and
each other capitalized term used but not defined herein,
having the meaning given it in the Security and Collateral
Agency Agreement referred to below) and [ ], a [ ] banking
corporation (the "SubAgent").
A. The Grantor and the Collateral Agent are parties to a
Security and Collateral Agency Agreement dated as of [ ], 1996, (as amended,
supplemented or otherwise modified from time to time, the "Security Agreement").
Pursuant to the terms of the Security Agreement, the Grantor has granted to the
Collateral Agent, for the ratable benefit of the Secured Parties, a security
interest in its Accounts Receivable and other Collateral (including Inventory,
cash, cash accounts and Proceeds) to secure the payment and performance of the
Obligations and has irrevocably appointed the Collateral Agent as its agent to
collect amounts due in respect of Accounts Receivable and Inventory.
B. The Sub-Agent has agreed to act as collection sub-agent of
the Collateral Agent to receive and forward payments with respect to the
Accounts Receivable and Inventory on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Collateral Agent hereby appoints the Sub-Agent as its
collection sub-agent under the Security Agreement and authorizes the Sub-Agent,
on the terms and subject to the condi tions set forth herein, to receive
payments in respect of Collateral consisting of Accounts Receivable and
Inventory.
2. The Sub-Agent has established and shall maintain deposit
account number [] (including all subaccounts thereof) for the benefit of the
Collateral Agent (such account being called the "Collection Deposit Account").
The Collection Deposit Account shall be designated with the title "Fleet
National Bank, as Collateral Agent under the Premium Standard Farms, Inc.
Security and Collateral Agency Agreement dated as of [ ], 1996" (or a similar
title). [Subject to the Sub-Agent's Terms for Remittance Banking (Lockbox)
Services attached hereto as Exhibit A, to the extent that the terms thereof
relate to procedures or fees and to the extent not inconsistent with the terms
hereof,] all payments received by the Sub-Agent in Lockbox Number [ in respect
thereof (the "Lockboxes") shall be promptly deposited in the Collection Deposit
Account and shall not be commingled with other funds. All funds at any time on
deposit in the Collection Deposit Account shall be held by the SubAgent for
application in accordance with the terms of this Agreement. The Sub-Agent agrees
to give the Collateral Agent prompt notice if the Collection Deposit Account
shall become subject to any writ, judgment, warrant of attachment, execution or
similar process. As security for the payment and performance of the Obligations,
the Grantor hereby confirms and pledges, assigns and transfers to the Collateral
Agent, and hereby creates and grants to the Collateral Agent, a
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security interest in the Collection Deposit Account, all property and assets
held therein and all Proceeds thereof.
3. The Collection Deposit Account shall be under the sole
dominion and control of the Collateral Agent, who shall possess all right, title
and interest in all of the items from time to time in the Collection Deposit
Account and their Proceeds. The Sub-Agent shall be the Collateral Agent's agent
for the purpose of holding and collecting such items and their Proceeds. Neither
the Grantor nor any person or entity claiming by, through or under the Grantor
shall have any right, title or interest in, or control over the use of, or any
right to withdraw any amount from, the Collection Deposit Account, except that
the Collateral Agent shall have the right to withdraw amounts from the
Collection Deposit Account. The Sub-Agent shall be entitled to rely on, and
shall act in accordance with, all instructions given to it by the Collateral
Agent with respect to the Collection Deposit Account. The Collateral Agent shall
have the sole power to agree with the SubAgent as to specifications for Lockbox
services.
4. Upon receipt of written, telecopy or telephonic notice
(which, in the case of telephonic notice, shall be promptly confirmed in writing
or by telecopy) from the Collateral Agent, the Sub-Agent shall, if so directed
in such notice (subject to the Sub-Agent's right to request that the Collateral
Agent furnish, in form satisfactory to the Sub-Agent, signature cards and/or
other appropriate documentation), promptly transmit or deliver to the Collateral
Agent at the office specified in paragraph 12 hereof (or such other office as
the Collateral Agent shall specify) (a) all funds, if any, then on deposit in,
or otherwise to the credit of, the Collection Deposit Account (provided that
funds on deposit that are subject to collection may be transmitted promptly upon
availability for withdrawal), (b) all checks, drafts and other instruments for
the payment of money received in the Lockboxes and in the possession of the
Sub-Agent, without depositing such checks, drafts or other instruments in the
Collection Deposit Account or any other account and (c) any checks, drafts and
other instruments for the payment of money received in the Lockboxes by the
Sub-Agent after such notice, in whatever form received, provided that the
Sub-Agent may retain a reasonable reserve in a separate deposit account with the
Sub-Agent in respect of unpaid fees and amounts that may be subject to
collection.
5. The Sub-Agent is hereby instructed and authorized to
transfer by wire transfer or Automated Clearing House ("ACH") from the
Collection Deposit Account all funds that are from time to time deposited or
otherwise credited to such account (after such funds become available to the
Sub-Agent, either through the Federal Reserve System or other clearing mechanism
used by the Sub-Agent's branch and to the extent such funds exceed $[1,000]), to
such account as the Collateral Agent may from time to time direct, provided
that, unless the Collateral Agent otherwise instructs, no such transfer shall be
required if such transfer would result in the transfer of an amount less than
$[1,000]. Unless otherwise directed by the Collateral Agent, such funds shall be
transferred on each business day by wire transfer or ACH and shall be identified
as follows:
Fleet National Bank
ABA Number
For credit to Fleet National Bank, Boston, MA 02110
Account Number
Re:[ ] Cash Collateral Account
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These transfer instructions and authorizations may not be
amended, altered or revoked by the Grantor without the prior written consent of
the Collateral Agent. The Collateral Agent, however, shall have the right to
amend or revoke these transfer instructions and authorizations at any time
without the consent of the Grantor.
6. The Sub-Agent shall furnish the Collateral Agent with
monthly statements setting forth the amounts deposited in the Collection Deposit
Account and all transfers and withdrawals therefrom, and shall furnish such
other information at such times as shall be reasonably requested by the
Collateral Agent.
7. The fees for the services of the Sub-Agent shall be
mutually agreed upon between the Grantor and the Sub-Agent and shall be the
obligation of the Grantor; provided, however, that, notwithstanding the terms of
any agreement under which the Collection Deposit Account shall have been
established with the Sub-Agent, the Grantor and the Sub-Agent agree not to
terminate such Collection Deposit Account for any reason (including the failure
of the Grantor to pay such fees) for so long as this Agreement shall remain in
effect (it being understood that the foregoing shall not be construed to
prohibit the resignation of the Sub-Agent in accordance with paragraph 9 below).
Neither the Collateral Agent nor the Secured Parties shall have any liability
for the payment of any such fees. The Sub-Agent may perform any of its duties
hereunder by or through its agents, officers or employees.
8. The Sub-Agent hereby represents and warrants that (a) it is
a banking corporation duly organized, validly existing and in good standing
under the laws of [] and has full corporate power and authority under such laws
to execute, deliver and perform its obligations under this Agreement and (b) the
execution, delivery and performance of this Agree ment by the Sub-Agent have
been duly and effectively authorized by all necessary corporate action and this
Agreement has been duly executed and delivered by the Sub-Agent and constitutes
a valid and binding obligation of the Sub-Agent enforceable in accordance with
its terms.
9. The Sub-Agent may resign at any time as Sub-Agent hereunder
by delivery to the Collateral Agent of written notice of resignation not less
than thirty days prior to the effective date of such resignation. The Sub-Agent
may be removed by the Collateral Agent at any time, with or without cause, by
written, telecopy or telephonic notice (which, in the case of telephonic notice,
shall be promptly confirmed in writing or by telecopy) of removal delivered to
the Sub-Agent. Upon receipt of such notice of removal, or delivery of such
notice of resignation, the Sub-Agent shall (subject to the Sub-Agent's right to
request that the Collateral Agent furnish, in form satisfactory to the
Sub-Agent, signature cards and/or other appropriate documentation), promptly
transmit or deliver to the Collateral Agent at the office specified in paragraph
12 (or such other office as the Collateral Agent shall specify) (a) all funds,
if any, then on deposit in, or otherwise to the credit of, the Collection
Deposit Account (provided that funds on deposit that are subject to collection
may be transmitted promptly upon availability for withdrawal), (b) all checks,
drafts and other instruments for the payment of money received in the Lockboxes
and in the possession of the Sub-Agent, without depositing such checks, drafts
or other instruments in the Collection Deposit Account or any other account and
(c) any checks, drafts and other instruments for the payment of money received
in the Lockboxes by the Sub-Agent after such notice, in whatever form received.
<PAGE>
<PAGE>
10. The Grantor consents to the appointment of the Sub-Agent
and agrees that the Sub-Agent shall incur no liability to the Grantor as a
result of any action taken pursuant to an instruction given by the Collateral
Agent in accordance with the provisions of this Agreement. The Grantor agrees to
indemnify and defend the Sub-Agent against any loss, liability, claim or expense
(including reasonable attorneys' fees) arising from the Sub-Agent's entry into
this Agreement and actions taken hereunder, except to the extent resulting from
the Sub-Agent's gross negligence or willful misconduct.
11. The term of this Agreement shall extend from the date
hereof until the earlier of (a) the date on which the Sub-Agent has been
notified in writing by the Collateral Agent that the Sub-Agent has no further
duties under this Agreement and (b) the date of termination specified in the
notice of removal given by the Collateral Agent, or notice of resignation given
by the SubAgent, as the case may be, pursuant to paragraph 9. The obligations of
the Sub-Agent contained in the last sentence of paragraph 9 and in paragraph 15,
and the obligations of the Grantor contained in paragraphs 7 and 10, shall
survive the termination of this Agreement.
12. All notices and communications hereunder shall be in
writing and shall be delivered by hand or by courier service, mailed by
certified or registered mail or sent by telecopy (except where telephonic
instructions or notices are authorized herein) and shall be effective on the day
on which received (a) in the case of the Collateral Agent, to Fleet National
Bank, One Federal Street, Boston, MA 02110, Attention of Corporate Trust
Department, and (b) in the case of the Sub-Agent, addressed to [], Attention of
[ purposes of this Agreement, any officer of the Collateral Agent shall be
authorized to act, and to give instructions and notices, on behalf of the
Collateral Agent hereunder.
13. The Sub-Agent will not assign or transfer any of its
rights or obligations hereunder (other than to the Collateral Agent) without the
prior written consent of the other parties hereto, and any such attempted
assignment or transfer shall be void.
14. Except as provided in paragraph 5 above, this Agreement
may be amended only by a written instrument executed by the Collateral Agent,
the Sub-Agent and the Grantor, acting by their duly authorized representative
officers.
15. The Sub-Agent hereby irrevocably waives any right to set
off against, or otherwise deduct from, any funds held in the Collection Deposit
Account and all items (and Proceeds thereof) that come into its possession in
connection with the Collection Deposit Account any indebtedness or other claim
owed by the Grantor or any affiliate thereof to the Sub-Agent; provided,
however, that this paragraph shall not limit the ability of the Sub-Agent to,
and the SubAgent may, (a) exercise any right to set off against, or otherwise
deduct from, any such funds to the extent necessary for the Sub-Agent to collect
any fees owed to it by the Grantor in connection with the Collection Deposit
Account, (b) charge back and net against the Collection Deposit Account any
returned or dishonored items or other adjustments in accordance with the
Sub-Agent's usual practices and (c) (i) establish the reserves contemplated in
paragraph 4 in respect of unpaid fees and amounts that may be subject to
collection and (ii) transfer funds in respect of such reserves from the
Collection Deposit Account to the separate deposit account with the Sub-Agent as
contemplated in paragraph 4.
<PAGE>
<PAGE>
16. This Agreement shall inure to the benefit of and be
binding upon the Collateral Agent, the Sub-Agent, the Grantor and their
respective permitted successors and assigns.
17. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
18. EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF [ ] GOVERN
THE COLLECTION DEPOSIT ACCOUNT, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. The Sub-Agent shall be an independent contractor. This
Agreement does not give rise to any partnership, joint venture or fiduciary
relationship.
20. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
[Name of Grantor],
by
Name:
Title:
FLEET NATIONAL BANK,
as Collateral Agent,
by
Name:
Title:
<PAGE>
<PAGE>
[Sub-Agent],
by
Name:
Title:
<PAGE>
<PAGE>
Annex 2 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Note Purchase Agreement dated as
of [ ], 1996 (as amended, supplemented or otherwise modified from time to time,
the "Note Agreement"), among the Grantor and Morgan Stanley Group, Inc., (b) the
Indenture dated as of [ ], 1996 (as amended, supplemented or otherwise
identified from time to time as the "Indenture"), among the Grantors and Fleet
National Bank, as Trustee, (c) the Security and Collateral Agency Agreement
dated as of ________, 1996, among the Guarantor, the Company and the Collateral
Agent, and (d) the Intercreditor Agreement dated as of ________, 1996, among the
Guarantor, the Company, the Senior Collateral Agent and the Collateral Agent:
[To be completed in conformity with Senior Documents]
EXHIBIT T3E1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- -----------------------------------x
:
In re :
: Chapter 11 Case Nos.
PSF FINANCE L.P., : 96-1032 (HSB) through 96-1036 (HSB)
PREMIUM STANDARD FARMS, INC., :
COLLINGS FARM, INC., : (Jointly Administered)
PSF FINANCE HOLDINGS INC., :
and PREMIUM HOLDINGS CORP., :
:
Debtors. :
- -----------------------------------x
DEBTORS' AMENDED JOINT DISCLOSURE STATEMENT PURSUANT
TO SECTION 1125 OF THE BANKRUPTCY CODE
RELATING TO DEBTORS' AMENDED JOINT PLAN OF REORGANIZATION
WEIL, GOTSHAL & MANGES LLP
Attorneys for the Debtors
and Debtors in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
and
RICHARDS, LAYTON & FINGER, P.A.
Attorneys for the Debtors
and Debtors in Possession
One Rodney Square
Wilmington, Delaware 19899
(302) 658-6541
Dated: Wilmington, Delaware
July 29, 1996
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TABLE OF CONTENTS
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I. INTRODUCTION.........................................................................................................1
A. Holders of Claims and Equity Interests Entitled to Vote....................................................2
B. Voting Procedures..........................................................................................3
II. OVERVIEW OF THE PLAN.................................................................................................4
III. GENERAL INFORMATION..................................................................................................9
A. PSF's Business.............................................................................................9
1. General..........................................................................................9
2. Products.........................................................................................9
3. Employees and Consultants.......................................................................10
4. Properties......................................................................................10
5. The Texas Expansion.............................................................................10
6. Regulatory and Environmental Matters............................................................11
B. Corporate Farming Law.....................................................................................11
C. Ownership Structure.......................................................................................13
D. Long-Term Debt, Other Debt and Preference Unit Equity Interests...........................................14
1. Bank Credit Agreement...........................................................................14
2. Secured Notes...................................................................................16
3. Lien Priorities of Secured Creditors............................................................17
4. Preference Unit Equity Interests................................................................18
5. Certain Interaffiliate Obligations
and Other Transactions..........................................................................19
IV. EVENTS PRECEDING THE COMMENCEMENT OF THE
CHAPTER 11 CASES....................................................................................................20
A. Factors That Precipitated the Need
for Financial Restructuring...............................................................................20
B. Remedial Action Taken by PSF..............................................................................21
V. THE REORGANIZATION CASES............................................................................................23
A. Commencement of the Reorganization Cases..................................................................23
B. Creditors' Committee......................................................................................23
C. Administration of the Chapter 11 Cases....................................................................23
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VI. THE PLAN............................................................................................................24
A. Treatment of Compensation and Reimbursement
Claims and Other Administrative Expenses..................................................................25
1. Compensation and Reimbursement Claims...........................................................25
2. Other Administrative Expense Claims.............................................................25
3. Compensation to Attorneys and Advisors to Bondholders'
Committee, and the Indenture Trustee and the Collateral Trustee.................................26
B. Classification and Treatment of Claims and Equity Interests...............................................26
1. Class 1 - Priority Tax Claims..................................................................26
2. Class 2 - Other Priority Claims.................................................................26
3. Class 3 - Secured Bank Claims...................................................................26
4. Class 4 - Secured Note Claims...................................................................27
5. Class 5 - Other Secured Claims..................................................................27
6. Class 6 - Construction Claims...................................................................27
7. Class 7 - General Unsecured Claims..............................................................28
8.A. Subclass 8.A - Farms/Finance Note Claim.........................................................28
8.B. Subclass 8.B - Other Intercompany Claims........................................................28
9.A. Subclass 9.A - Preference Unit Equity Interests in Finance......................................28
9.B. Subclass 9.B - Premium Holdings' Limited Partnership
Interests in Finance............................................................................28
9.C. Subclass 9.C - Finance Holdings' Limited Partnership
Interests in Finance............................................................................29
9.D. Subclass 9.D - CFI's General Partnership Interest in Finance....................................29
10. Class 10 - Equity Interests in Farms............................................................29
11. Class 11 - Equity Interests in Premium Holdings.................................................29
12. Class 12 - Equity Interests in Finance Holdings.................................................29
13. Class 13 - Equity Interests in CFI..............................................................29
C. Securities to Be Issued Under the Plan....................................................................29
1. New PIK Notes...................................................................................29
2. New LLC Interests and Warrants..................................................................30
3. Registration of New LLC Interests, New PIK Notes and Warrants ..................................31
D. Treatment of Executory Contracts and Unexpired Leases.....................................................31
E. Implementation of the Plan................................................................................33
1. Restructuring Transactions......................................................................33
2. Compliance with Farming Laws....................................................................35
3. Financing to Be Provided As of the Effective Date...............................................36
F. Method of Distributions Under the Plan....................................................................37
G. Procedures for Treating Disputed Claims and Equity Interests..............................................38
H. Conditions Precedent to the Effectiveness of the Plan.....................................................39
I. Effect of Confirmation of the Plan........................................................................40
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J. Other Provisions of the Plan..............................................................................41
1. Exculpation.....................................................................................41
2. Releases........................................................................................41
3. Indemnification Obligations.....................................................................42
4. Exemption From Transfer Taxes...................................................................43
5. Amendment or Modification of the Plan...........................................................43
6. Severability....................................................................................43
VII. GOVERNANCE AND MANAGEMENT OF REORGANIZED FINANCE,
NEWCO AND REORGANIZED DEBTORS.......................................................................................44
A. Management of Reorganized Finance,
Newco and Reorganized Debtors ............................................................................44
1. General.........................................................................................44
2. Reorganized Finance.............................................................................44
3. Boards of Directors of Newco and Reorganized Debtors............................................45
4. Identity of Officers of Newco and Reorganized Debtors...........................................45
5. Compensation of Executive Officers..............................................................46
6. Compensation of Insiders........................................................................46
7. Articles of Incorporation and Bylaws of Newco and
Reorganized Debtors.............................................................................46
B. Management Option Plan....................................................................................47
VIII. PROJECTIONS.........................................................................................................47
IX. FINANCIAL INFORMATION...............................................................................................48
A. General...................................................................................................48
X. VALUATION...........................................................................................................49
A. Estimated Liquidation Value of Assets.....................................................................49
B. Reorganization Value......................................................................................49
XI. RISK FACTORS........................................................................................................51
A. Sensitivity to Commodity Prices...........................................................................52
B. Herd Productivity and Feed Efficiency.....................................................................52
C. Impact of Disease.........................................................................................52
D. Variance from Projections.................................................................................52
E. Lack of Trading Market....................................................................................53
F. Funding After the Effective Date..........................................................................53
G. Certain Taxation Matters..................................................................................54
H. Competition...............................................................................................54
I. Compliance with Local Laws................................................................................54
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XII. EXEMPTIONS FROM SECURITIES ACT
REGISTRATION; REGISTRATION RIGHTS...................................................................................54
A. Issuance of New Securities Pursuant to the Plan...........................................................54
B. Registration Rights.......................................................................................56
XIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.................................................................57
1. General...................................................................................................58
2. Cancellation of Debt......................................................................................58
3. Restructuring Transactions................................................................................59
4. Possible Applicable High Yield Debt Obligations...........................................................60
XIV. VOTING PROCEDURES AND REQUIREMENTS..................................................................................61
A. Parties in Interest Entitled to Vote......................................................................61
B. Classes Impaired and Entitled to Vote Under the Plan......................................................62
C. Vote Required for Acceptance by Class of Claims or Equity Interests.......................................62
XV. PROCEDURES FOR CONFIRMATION
AND CONSUMMATION OF THE PLAN........................................................................................62
A. Confirmation Hearing......................................................................................62
B. Conditions to Confirmation of the Plan....................................................................63
1. Statutory Requirements..........................................................................63
2. Unfair Discrimination and Fair and Equitable Tests..............................................64
3. Feasibility.....................................................................................65
4. Best Interests Test.............................................................................66
C. Consummation..............................................................................................67
XVI. ALTERNATIVES TO CONFIRMATION
AND CONSUMMATION OF THE PLAN........................................................................................68
A. Liquidation Under Chapter 7...............................................................................68
B. Alternative Plan of Reorganization........................................................................68
XVII. CONCLUSION AND RECOMMENDATION.......................................................................................69
</TABLE>
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EXHIBITS
<S> <C>
AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
OF THE BANKRUPTCY CODE ........................................................................................................ A
ORDER APPROVING DISCLOSURE STATEMENT .......................................................................................... B
FINANCIAL STATEMENTS ......................................................................................................... C
LIQUIDATION ANALYSIS . ....................................................................................................... D
PROJECTIONS . . ............................................................................................................... E
</TABLE>
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I.
INTRODUCTION
PSF Finance L.P. ("Finance"), Premium Standard Farms, Inc.
("Farms"), Premium Holdings Corp. ("Premium Holdings"), PSF Finance Holdings
Inc. ("Finance Holdings") and Collings Farm, Inc. ("CFI") (each individually, a
"Debtor" and collectively, the "Debtors") submit this Amended Disclosure
Statement in connection with the solicitation of acceptances of the Debtors'
Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy
Code (the "Plan") filed with the United States Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court") on July 30, 1996. Unless otherwise defined,
all capitalized terms used herein shall have the same meanings ascribed to them
in the Plan.
Attached as Exhibits to or accompanying this Disclosure
Statement are copies of the following:
1. The Plan (Exhibit A);
2. Order of the Bankruptcy Court dated August 1, 1996
approving the Disclosure Statement (Exhibit B);
3. Financial Statements (Exhibit C);
4. Liquidation Analysis (Exhibit D); and
5. Projections (Exhibit E).
In addition, a ballot for the acceptance or rejection of the
Plan is enclosed with this Disclosure Statement submitted to the holders of
Claims and Equity Interests that the Debtors believe may be entitled to vote to
accept or reject the Plan.
On August 1, 1996, after notice and a hearing, the Bankruptcy
Court approved this Disclosure Statement (the "Disclosure Statement Order") as
containing adequate information to enable hypothetical, reasonable investors
typical of the holders of Claims against and Equity Interests in the Debtors to
make an informed judgment whether to accept or reject the Plan. See Exhibit B to
the Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A
DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN,
INCLUDING, WITHOUT LIMITATION, THE TRANSACTIONS CONTEMPLATED BY THE PLAN.
The Disclosure Statement Order, a copy of which is annexed
hereto as Exhibit B, sets forth in detail the deadlines, procedures and
instructions for voting to accept or reject the Plan and for filing objections
to confirmation of the Plan, the record date for voting purposes, and the
applicable standards for tabulating ballots. In addition, detailed voting
instructions accompany each ballot. Each holder of a Claim or an Equity Interest
entitled to vote on the Plan should read the Disclosure Statement, the Plan, the
Disclosure Statement Order, and the instructions accompanying the ballots in
their entirety before voting on the Plan. These documents contain,
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among other things, important information concerning the classification of
Claims and Equity Interests for voting purposes and the tabulation of votes. No
solicitation of votes to accept the Plan may be made except pursuant to section
1125 of the Bankruptcy Code.
A. Holders of Claims and Equity Interests Entitled to Vote
Under the Bankruptcy Code, only classes or subclasses of
claims or equity interests that are impaired are entitled to vote to accept or
reject a proposed chapter 11 plan. Classes or subclasses of claims or equity
interests in which the holders of claims or interests will not receive or retain
any property under a proposed chapter 11 plan are deemed to have rejected the
plan. The holders of claims or equity interests that are unimpaired under a
proposed chapter 11 plan are deemed to have accepted the plan.
Claims and Equity Interests in each of Class 3 (Secured Bank
Claims), Class 4 (Secured Note Claims), Class 6 (Construction Claims), Class 8
(Intercompany Claims), Class 9 (Equity Interests in Finance) and each subclass
thereof under the Plan are impaired and, to the extent such Claims and Equity
Interests are Allowed, the holders of such Claims and Equity Interests will
receive distributions under the Plan. Holders of Claims and Equity Interests in
those Classes and Subclasses are entitled to vote to accept or reject the Plan.
Claims in each of Class 1 (Priority Tax Claims), Class 2
(Other Priority Claims), Class 5 (Other Secured Claims), Class 7 (General
Unsecured Claims), Class 11 (Equity Interests in Premium Holdings), Class 12
(Equity Interests in Finance Holdings), and Class 13 (Equity Interests in CFI)
are unimpaired under the Plan and the holders of Claims in those Classes are
deemed to have accepted the Plan.
Equity Interests in Class 10 (Equity Interests in Farms) will
be canceled and will receive no distributions under the Plan, and, therefore,
the holders of Equity Interests in such class are deemed to have rejected the
Plan.
The Debtors are soliciting acceptances only from holders of
Allowed Claims and Equity Interests in Classes 3, 4, 6, 8 and 9 and each
Subclass thereof.
The Bankruptcy Code defines "acceptance" of a chapter 11 plan
by a class of claims if holders of at least two-thirds in amount, and more than
one-half in number, of the claims of that class that actually vote to accept or
reject the Plan vote to accept the Plan. Votes cast by holders of Claims in each
subclass of a class under the Plan will be tabulated separately by subclass, and
a subclass will have accepted the Plan if holders of at least two-thirds in
amount, and more than one-half in number, of the Claims of each such subclass
that actually vote to accept or reject the Plan vote to accept the Plan.
Acceptance by a class of equity interest holders requires the acceptance by the
holders of two-thirds of the total number of shares or interests held by the
equity interest holders in that class that actually vote to accept or reject the
Plan. For a discussion of these matters, see Article XIV "Voting Procedures and
Requirements," and Section XV.B, "Conditions to Confirmation of the Plan."
If a class or subclass of Claims or Equity Interests rejects
the Plan, the Debtors have the right to request confirmation of the Plan under
section 1129(b) of the Bankruptcy Code.
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Section 1129(b) of the Bankruptcy Code permits the confirmation of a plan of
reorganization, notwithstanding the rejection of such plan by one or more
impaired classes or subclasses of claims or interests, if it does not
discriminate unfairly and is "fair and equitable" with respect to the rejecting
class. If any class or subclass fails to accept the Plan by the requisite
majorities required under section 1126(c) or 1126(d) of the Bankruptcy Code, as
applicable, the Debtors may move before the Bankruptcy Court to confirm the Plan
in accordance with section 1129(b) of the Bankruptcy Code without amendment or
modification to the treatment of the rejecting Class or Subclass. See Section
XV.B "Conditions to Confirmation of the Plan."
Liabilities incurred in the ordinary course of business by
Debtors in Possession since the Commencement Date, and indebtedness or
obligations arising under loans or advances to or other obligations incurred by
Debtors in Possession, other than loans or advances to or other obligations
incurred by Debtors in Possession under the DIP Credit Agreement (as such term
is defined below), whether or not incurred in the ordinary course of the
Debtors' business, that are described in the Plan as Administrative Expense
Claims will be paid by the applicable Reorganized Debtor (or Newco, to the
extent such Administrative Expense Claims are against Finance or Farms) in
accordance with the terms and subject to the conditions of any agreements
governing, instruments evidencing or other documents relating to such
transactions. Holders of Administrative Expense Claims are not entitled to vote
to accept or reject the Plan.
B. Voting Procedures
A ballot, appropriate to the Claim or Equity Interest held, is
enclosed for voting on the Plan for those entities that are entitled to vote on
the Plan. If a holder holds Claims or Equity Interests in more than one class or
subclass and is entitled to vote such Claims or Equity Interests, separate
ballots must be used for each class or subclass of Claims or Equity Interests.
TO BE COUNTED AS VOTES TO ACCEPT OR REJECT THE PLAN, BALLOTS MUST BE PROPERLY
EXECUTED AND RECEIVED BY 4:30 P.M. ON AUGUST 1, 1996 (THE "VOTING DEADLINE") BY
ARTHUR ANDERSEN LLP, THE BALLOTING AGENT, AS PROVIDED ON THE BALLOT. ANY
EXECUTED BALLOT RECEIVED BY THE BALLOTING AGENT WHICH DOES NOT INDICATE EITHER
AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE DEEMED TO CONSTITUTE AN
ACCEPTANCE OF THE PLAN. See Article XIV "Voting Procedures and Requirements."
The Disclosure Statement Order provides, among other things, that any entity
entitled to vote to accept or reject the Plan may change its vote before the
Voting Deadline (4:30 p.m. on August 1, 1996), by casting a superseding ballot
so that it is received on or before such deadline. Entities desiring to change
their votes after the Voting Deadline may do so, if they file a motion with the
Bankruptcy Court with sufficient notice so that it can be heard and considered
at the confirmation hearing, and they demonstrate "cause" pursuant to Bankruptcy
Rule 3018(a).
Any Claim or Equity Interest in an impaired class or subclass
as to which an objection is pending or which is scheduled by the Debtors as
unliquidated, disputed or contingent is not entitled to vote unless the holder
of such Claim or Equity Interest has obtained an order of the Bankruptcy Court
temporarily Allowing such Claim or Equity Interest for the purpose of
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voting on the Plan. See Section XIV.A "Voting Procedures and Requirements --
Parties in Interest Entitled to Vote."
The Bankruptcy Court entered an order setting August 1, 1996
as the record date for voting on the Plan. Accordingly, only holders of record
as of August 1, 1996 that are otherwise entitled to vote under the Plan will
receive a ballot and may vote.
Entities not voting to accept the Plan will be bound by the
Plan if it is accepted by the requisite holders of Claims and Equity Interests,
as described in Article XIV "Voting Procedures and Requirements," and confirmed.
See Section XV.B, "Conditions to Confirmation of the Plan."
If you are a creditor or Equity Interest holder entitled to
vote on the Plan and did not receive a ballot, received a damaged ballot, or
lost your ballot, please call Todd Overbergen at (713) 237-5181 or if you have
any questions about the Disclosure Statement, the Plan, the Disclosure Statement
Order or the procedures for voting on the Plan, please call Alexander Simon,
Esq. at (212) 310-8694.
II.
OVERVIEW OF THE PLAN
The following table briefly summarizes the classification and
treatment of Claims and Equity Interests under the Plan.
<TABLE>
<CAPTION>
SUMMARY OF CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS
Estimated
Percent
Class Type Treatment Recovery
----- ---- --------- --------
<S> <C> <C> <C>
-- Compensation and Unimpaired; to be paid in full, in Cash, on the 100%
Reimbursement, and Other Effective Date, or in accordance with such terms
Administrative Expense Claims as may be mutually agreed to by the holder and the
applicable Reorganized Debtor
(or Newco, with respect to
Claims against Finance or
Farms).
1 Priority Tax Claims Unimpaired; to the extent unpaid in the ordinary 100%
course of business during the Chapter 11 Cases, to
be paid in full by the applicable Reorganized
Debtor (or Newco, with respect to Claims against
Finance or Farms) in accordance with the terms
and conditions of governing agreements or
applicable law.
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<CAPTION>
Estimated
Percent
Class Type Treatment Recovery
----- ---- --------- --------
<S> <C> <C> <C>
2 Other Priority Claims Unimpaired; to the extent unpaid in the ordinary 100%
course of business during the
Chapter 11 Cases, to be paid in
full by the applicable
Reorganized Debtor (or Newco,
with respect to Claims against
Finance or Farms) in accordance
with the terms and conditions
of governing agreements or
applicable law.
3 Secured Bank Claims Impaired; to be paid in full, in Cash, on the 100%
(Allowed in principal amount of Effective Date.
approximately $67,153,000, plus
interest at the non-default rate,
fees, expenses and unreimbursed
draws on the letter of credit
issued under the Bank Credit
Agreement)
4 Secured Note Claims Impaired; distribution of the following, in 45%
(Allowed in an aggregate amount accordance with the Restructuring Transactions:
of $446,357,630, consisting of
$129,896,640 in Allowed 1992 $101,496,978 in principal amount of New PIK
Note Claims, $202,860,976 in Notes, which will have the following terms:
Allowed 1993 Note Claims,
$106,666,680 in Allowed 1994 o maturity on the seventh anniversary of the
Note Claims, and $6,933,334 in Effective Date;
Allowed 1995 Note Claims) o interest at 11% per annum compounded semi-
annually, non-Cash payment-in-kind until
payment in full of the Term Loan, thereafter
payable in Cash; and
o third lien on all assets of Newco; plus
9,216,789 New LLC Interests
representing approximately 92%
of total New LLC Interests
issued on the Effective Date.
5 Other Secured Claims Unimpaired; reinstated and rendered unimpaired 100%
pursuant to section 1124 of the Bankruptcy Code.
6 Construction Claims Impaired; to be paid in full, in Cash, on the 100%
Effective Date.
7 General Unsecured Claims Unimpaired; to the extent not paid in the ordinary 100%
course of business during the Chapter 11 Cases, to
be paid in full by the applicable Reorganized
Debtor (or Newco, with respect to Claims against
Finance or Farms) or in accordance with such
terms as may be mutually agreed to by the holder
and such Reorganized Debtor.
8 Intercompany Claims
8.A Farms/Finance Note Claim Impaired; pursuant to the Restructuring 100%
Transactions, the Farms/Finance Note will be
ultimately assigned to Newco, which will receive,
in satisfaction of the Farms/ Finance Note, all of
the assets of Farms subject to the liabilities.
-5-
<PAGE>
<PAGE>
<CAPTION>
Estimated
Percent
Class Type Treatment Recovery
----- ---- --------- --------
<S> <C> <C> <C>
8.B Other Intercompany Claims Impaired; distribution of $1,000 per Claim. N/A
9 Equity Interests in Finance
9.A Preference Unit Equity Interests Impaired; distribution of the following, in 34%
in Finance accordance with the Restructuring Transactions:
$5,321,204 in principal amount
of New PIK Notes, which will
have the following terms:
o maturity on the seventh anniversary of the
Effective Date;
o interest at 11% per annum
compounded semi-annually,
non-Cash payment-in-kind
until payment in full of
the Term Loan, thereafter
payable in Cash; and
o third lien on all assets of Newco; plus
483,211 New LLC Interests
representing approximately
4.83% of total New LLC
Interests issued on the
Effective Date.
-6-
<PAGE>
<PAGE>
Estimated
Value of
Class Type Treatment Recovery(1)
----- ---- --------- -----------
<S> <C> <C> <C>
9.B Premium Holdings' Limited Impaired; distribution of the following: $936,000
Partnership Interests in Finance
78,000 New LLC Interests representing .78% of
total New LLC Interests issued on the Effective
Date; and
Warrants to purchase 532,530
New LLC Interests in an amount
representing approximately 4.4%
of the outstanding New LLC
Interests, on a fully diluted
basis, at $45 per New LLC
Interest for a ten-year period
following the Effective Date.
9.C Finance Holdings' Limited Impaired; distribution of the following: $2,628,000
Partnership Interests in Finance
219,000 New LLC Interests representing 2.19% of
total New LLC Interests issued on the Effective
Date; and
Warrants to purchase 1,495,180
New LLC Interests in an amount
representing approximately
12.41% of the outstanding New
LLC Interests, on a fully
diluted basis, at $45 per New
LLC Interest for a ten-year
period following the Effective
Date.
9.D CFI's General Partnership Interest Impaired; distribution of the following: $36,000
in Finance
3,000 New LLC Interests representing .03% of
total New LLC Interests issued on the Effective
Date; and
Warrants to purchase 20,482 New
LLC Interests in an amount
representing approximately .2%
of the outstanding New LLC
Interests, on a fully diluted
basis, at $45 per New LLC
Interest for a ten-year period
following the Effective Date.
<CAPTION>
Estimated
Percent
Recovery
--------
<S> <C> <C> <C>
10 Equity Interests in Farms Impaired; no distributions; common stock 0%
canceled.
11 Equity Interests in Premium Unimpaired; retain common stock. 100%
Holdings
12 Equity Interests in Finance Unimpaired; retain common stock. 100%
Holdings
13 Equity Interests in CFI Unimpaired; retain common stock. 100%
<FN>
- --------
1. The estimated value of recovery is based upon the estimated unit price of
each New LLC Interest, times the number of New LLC Interests, without taking
into account any value for the Warrants. The recovery could increase depending
upon the future value of Reorganized Finance and the exercise of the Warrants.
</FN>
</TABLE>
-7-
<PAGE>
<PAGE>
The Confirmation Hearing
The Bankruptcy Court has scheduled a hearing to consider the
confirmation of the Plan (the "Confirmation Hearing") on September 6, 1996, at
2:30 p.m., at the United States Bankruptcy Court, 824 Market Street, Sixth
Floor, Wilmington, Delaware 19801. The Bankruptcy Court has directed that
objections, if any, to confirmation of the Plan be served and filed on or before
August 30, 1996, at 4:30 p.m. (Eastern Daylight Time), in the manner described
in Article XIV "Voting Procedures and Requirements." The Confirmation Hearing
may be adjourned from time to time by the Bankruptcy Court without further
notice except for the announcement of the adjournment date made at the
Confirmation Hearing or at any subsequent adjourned Confirmation Hearing.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE
AS OF THE DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN, AND THE DELIVERY
OF THIS DISCLOSURE STATEMENT SHALL NOT CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE INFORMATION STATED SINCE THE DATE HEREOF. HOLDERS OF CLAIMS AND
EQUITY INTERESTS SHOULD CAREFULLY READ THIS DISCLOSURE STATEMENT IN ITS ENTIRETY
PRIOR TO VOTING ON THE PLAN.
FOR THE CONVENIENCE OF HOLDERS OF CLAIMS AND EQUITY INTERESTS,
THIS DISCLOSURE STATEMENT SUMMARIZES THE TERMS OF THE PLAN, BUT THE PLAN ITSELF
QUALIFIES ALL SUMMARIES. IF ANY INCONSISTENCY EXISTS BETWEEN THE PLAN AND THE
DISCLOSURE STATE MENT, THE TERMS OF THE PLAN ARE CONTROLLING. THE DISCLOSURE
STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER
TO VOTE TO ACCEPT OR REJECT THE PLAN, AND NOTHING STATED SHALL CONSTITUTE AN
ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY, OR BE ADMISSIBLE IN ANY
PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE
EVIDENCE OF THE TAX OR OTHER LEGAL EFFECTS OF THE PLAN ON THE DEBTORS OR HOLDERS
OF CLAIMS OR EQUITY INTERESTS. CERTAIN OF THE STATEMENTS CONTAINED IN THIS
DISCLOSURE STATEMENT, BY NATURE, ARE FORWARD LOOKING AND CONTAIN ESTIMATES AND
ASSUMPTIONS. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL BE REFLECTIVE
OF ACTUAL OUTCOMES. ALL HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD CAREFULLY
READ AND CONSIDER FULLY ARTICLE XI "RISK FACTORS" BEFORE VOTING TO ACCEPT OR
REJECT THE PLAN.
SUMMARIES OF CERTAIN PROVISIONS OF AGREEMENTS REFERRED TO IN
THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, THE FULL TEXT AND TO ALL OF THE
PROVISIONS OF THE APPLICABLE AGREEMENT, INCLUDING THE DEFINITIONS OF CERTAIN
TERMS CONTAINED IN SUCH AGREEMENT.
-8-
<PAGE>
<PAGE>
THE DEBTORS BELIEVE THAT THE PLAN ENABLES THEM TO SUCCESSFULLY
REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND PROVIDES FOR THE BEST
RECOVERIES TO HOLDERS OF CLAIMS AND EQUITY INTERESTS. ESSENTIALLY, THE NET
RESULT OF THE PLAN IS TO DELEVERAGE THE BUSINESS OF FARMS AND FINANCE BY
REDUCING APPROXIMATELY $461 MILLION IN DEBT TO APPROXIMATELY $110 MILLION AND
EXCHANGING THE BALANCE OF DEBT FOR EQUITY INTERESTS, AND BY PROVIDING NEW
FINANCING FOR FUTURE OPERATIONS.
ALL HOLDERS OF THE SECURED BANK CLAIMS AND THE HOLDERS
OF 95% OF THE SECURED NOTE CLAIMS HAVE AGREED TO VOTE FOR THE PLAN,
SUBJECT TO CERTAIN CONDITIONS.
III.
GENERAL INFORMATION
A. PSF's Business
1. General
Currently, Farms and Finance (collectively, "PSF") operate the
largest vertically integrated pork producer in the Midwest and are the fourth
largest owner of sows in the United States. PSF has approximately 86,500 sows in
production operations located on over 37,000 acres in northwest Missouri and
approximately 18,000 sows located on approximately 14,000 acres in the Texas
Panhandle area, with an aggregate capacity to produce 2.1 million hogs annually.
PSF uses modern, efficient buildings, sophisticated genetic methods, and strict
control of animal health and diet to produce premium pork and pork products.
PSF's operations include hog-production units, a pork processing facility
capable of processing 7,000 hogs per day, feed mills, genetic improvement
facilities, office and training facilities and additional production
infrastructure. Its Milan, Missouri processing plant is designed to have the
capacity to produce over 270 million pounds of pork and pork products from the
1.8 million hogs that its 86,500 sows in Missouri are expected to produce
annually.
2. Products
PSF's products consist of fresh and processed pork, which is
sold to (i) retailers and retail distributors in the form of chilled and boxed
bone-in or boneless tenderloins, loins, hams, picnics, butts and bone-in ribs;
(ii) further processors, in the form of containers of chilled bone-in or
boneless hams and picnics, boneless Boston butts, trimmings and other products;
and (iii) institutional food customers in the form of large containers of
chilled bone-in or boneless loins. PSF's other operations include live hog sales
and processed pork products in the variety meat market, the feed processing
industry and the pet food industry. PSF is a global marketer and distributor of
pork products and is the only United States meat processor approved for shipment
of pork to the members of the European Economic Community.
-9-
<PAGE>
<PAGE>
3. Employees and Consultants
As of May 1, 1996, PSF had in excess of 1,900 employees
(including part-time personnel) in the combined Missouri and Texas operations.
None of the employees are subject to collective bargaining agreements.
PSF also uses services of consultants as necessary to provide
management expertise and to augment its executive staff. HWS & Associates, Inc.
and Patterson Consulting LLC are the primary consultants engaged by Finance and
Farms, respectively. HWS & Associates, Inc. has agreed to make available the
personal services of Horst W. Schroeder, Chairman of the Board of Directors of
CFI and a member of the advisory committee of Finance, under a consulting
agreement dated as of June 1, 1995, pursuant to which Mr. Schroeder (i) counsels
and assists Finance in the development, implementation and control of Finance's
business objectives and strategies, (ii) assists in developing and implementing
operational and marketing strategies to support PSF's business plan, and (iii)
assists and counsels the management of Farms in implementing PSF's business
plan. Mr. Schroeder is a turn-around specialist and food industry expert. A
former President and member of the Board of Directors of Kellogg Corporation,
Mr. Schroeder has played a key role in restructuring many troubled entities.
In addition, Patterson Consulting LLC has agreed to make
available the personal services of William R. Patterson, pursuant to a
consulting agreement dated April 12, 1996, as Acting Chief Financial Officer of
Farms. Mr. Patterson is also responsible for management information systems,
purchasing and insurance at Farms. Prior to joining Farms in January 1996, Mr.
Patterson had been a partner at Arthur Andersen LLP for more than 30 years.
4. Properties
PSF conducts its hog processing operations in a 260,000 sq.
ft. processing facility in Missouri and its hog-production operations on
approximately 37,000 acres of land in Missouri and 14,000 acres of land in
Texas. PSF owns an additional 39,000 acres of land in Texas that were developed
in connection with the Texas Expansion (described below). See Section III.A.5,
"General Information -- PSF's Business; Texas Expansion." All of the
hog-production and processing facilities were constructed after 1989.
PSF also owns two modern pelletizing feed mills (one 600,000
tons/year mill in Lucerne, Missouri and another 180,000 tons/year mill in
Princeton, Missouri), which meet all the feed requirements of its Missouri
operations. The Texas operations include a 180,000 tons/year mill that was
completed in May 1993.
5. The Texas Expansion
In 1994, PSF began the development of a second fully
integrated production and processing operation located in the Texas Panhandle
(the "Texas Expansion"). The first phase in that expansion was the acquisition
in June 1994, of hog-production operations from National Hog Farms of Texas,
Inc. and the adjacent 33,000 acre High Plains Ranch. The second phase of that
expansion included a planned construction of additional hog- production
facilities on the High Plains Ranch, a state-of-the-art processing plant (based
on the Missouri plant), and the acquisition
-10-
<PAGE>
<PAGE>
of an adjacent 7,000 acre ranch. The $350 million Texas Expansion was commenced
in January 1995 and was planned to be completed in the fourth quarter of 1996.
As a consequence of business conditions and results, in May
1995, PSF suspended the completion of the Texas Expansion project. Approximately
$52 million has been expended on the acquisition and development of the project,
and, in light of such suspension, the previously committed construction
financing was amended to reduce it to $10.2 million and to make complementary
revisions to the loan covenants.
6. Regulatory and Environmental Matters
PSF is subject to various federal, state and local laws and
regulations, particularly in the health and environmental areas administered by
the Occupational Safety and Health Administration, the United States Department
of Agriculture, the Food and Drug Administration, the Environmental Protection
Agency and corresponding state agencies such as the Missouri Department of
Natural Resources ("MDNR") and the Texas Natural Resources Conservation
Commission.
Current environmental regulations impose standards and
limitations on PSF's waste treatment lagoons, water treatment facilities and new
construction projects. Animal waste from PSF's hog production facilities is
anaerobically digested (using lagoons in Missouri and solid separators and
aeration tanks in Texas) and the resultant fluids are then applied to
surrounding farm land.
In 1995, there were five alleged spills of hog waste into
public waters in the Missouri operations, allegedly in violation of the Missouri
Clean Water Law and regulations promulgated thereunder. Pursuant to the
Settlement Agreement and Consent Order dated January 29, 1996, between MDNR and
Farms (the "Settlement Agreement"), which addressed all of the five alleged
spills, Farms paid the specified penalties and compensatory damages, and agreed
to certain remedial actions, subject to review and approval by MDNR. Farms
believes that it has been and is in full compliance with the terms of the
Settlement Agreement.
Reorganized Finance and Newco, on the Effective Date, will
assume the Settlement Agreement and intend to continue to abide by and comply
with the terms thereof or any other agreements made with the State of Missouri
or its subdivisions. Subsequent to the Effective Date, Reorganized Finance and
Newco are projected to have sufficient and adequate resources and revenues to
satisfy any obligations under the Settlement Agreement and to meet foreseeable
environmental problems. There is no intention to discharge obligations under the
Settlement Agreement or any other agreements or varying or amending the terms of
those Agreements. It is the intention of Reorganized Finance and Newco to fully
comply with the environmental laws and regulations of the State of Missouri,
including, but not limited to, the Settlement Agreement.
-11-
<PAGE>
<PAGE>
B. Corporate Farming Law
Several states, including Missouri, but excluding Texas, have
enacted "corporate farming laws," which restrict the ability of corporations to
engage in farming activities. Missouri has a corporate farming law which, with
certain exceptions, bars corporations from owning agricultural land and engaging
in farming activities. The exceptions to this law include corporations owned
directly by individuals and which derive at least two-thirds of their income
from farming (known as "authorized farm corporations"), such as Farms, and
corporations engaged in farming prior to September 28, 1975 (known as
"grandfathered corporations"), such as CFI.
PSF's operations have been structured to comply with Missouri
corporate farming law and its exemption for authorized farm corporations. PSF's
assets and operations are divided between Finance and Farms, each of which is an
operating entity. In general, all the agricultural real property and farming
activities in Missouri are concentrated in Farms, an authorized farm
corporation. All other personal property (including the hogs), all
non-agricultural real property (including the Missouri processing plant, feed
mills and Missouri headquarters), the Texas operations and the bulk of capital
are concentrated in Finance, a limited partnership not expressly included within
the scope of the Missouri corporate farming law. In addition, Finance's general
partner, CFI, is a grandfathered corporation. Pursuant to an Agreement dated as
of January 24, 1995, between Finance and Farms (the "Operating Agreement"),
Farms, using the breeding stock, feed and personal property provided by Finance,
breeds the hogs and produces feeder pigs and finished hogs for Finance, and
provides certain other management services. The Operating Agreement provides
that Finance shall reimburse Farms for substantially all costs incurred in
performing these services, as well as certain additional specified amounts.
In addition, in 1993, Missouri enacted a statute that provides
an additional exemption from the corporate farming law for hog-farming
operations such as those of Farms conducted in the three counties in northern
Missouri in which Farms operates (the "County Exemption"). This exemption,
however, is subject to certain county population limitations which may be
exceeded in one or more of the three counties in which Farms operates when the
next federal decennial census occurs in the year 2000, which might cause the
County Exemption to be thereafter unavailable unless the statute is amended.
Missouri also restricts the ability of an alien or a "foreign
business" (i.e., a business entity in which a "controlling interest" is owned by
aliens) to own agricultural land in Missouri. To the Debtors' knowledge, no
foreign interests own what would be considered a "controlling interest" in
either Farms or Finance.
-12-
<PAGE>
<PAGE>
C. Ownership Structure
The organizational structure of the Debtors and their
relationships to each other are as follows:
_____________________________________________________________________________
[GRAPHIC MATERIAL (2) OMITTED: PURSUANT TO RULE 304 OF REGULATION S-T
A NARRATIVE DESCRIPTION OF OMITTED MATERIAL IS AS FOLLOWS:
EXISTING PSF STRUCTURE
Certain secured noteholders own 99% of the limited
partnership interests of Premium Holdings L.P. and Finance Holdings
owns a 1% general partnership interest in Premium Holdings L.P.
Various shareholders (including Harms & Gordon) own 79.5% of
the capital stock of Premium Holdings, Premium Holdings L.P. owns 2.5%
of the capital stock of Premium Holdings and MSLEF II(2) owns 18% of
the capital stock of Premium Holdings.
MSLEF II(2) owns 41% of the capital stock of Finance
Holdings and MSCP III(2) owns 59% of the capital stock of Finance
Holdings. Finance Holdings owns 73% of the limited partnership interests
of Finance, Premium Holdings owns 26% of the limited partnership interests
of Finance and CFI owns a 1% general partnership interest in Finance.
MSLEF II owns 55% of the capital stock of CFI and MSCP III owns 45% of
the capital stock of CFI. Finance owns 100% of the capital stock of
Princeton Development Corp. and 100% of the capital stock of High
Plains Ranch, Inc.
In addition, Harms & Gordon owns a 100% interest in Farms.]
_____________________________________________________________________________
Farms. Farms, a Missouri corporation, is owned in equal
proportions by its two founders, Messrs. Dennis W. Harms and Theodore J. Gordon,
Jr. Finance holds an option to acquire 100% of that equity in the event of a
change in Missouri corporate farming law. See Section III.D.5, "General
Information -- Long-Term Debt, Other Debt and Preference Unit Equity Interests;
Certain Interaffiliate Obligations and Other Transactions." As described above,
Farms conducts hog-raising activities in Missouri and owns all the agricultural
real property and hog-production equipment located in Missouri.
Finance. Finance, a Delaware limited partnership, is owned by
three partners: CFI, which holds a general partnership interest representing 1%
of common partnership units; Finance Holdings, which holds a limited partnership
interest representing approximately 73% of common partnership units; and Premium
Holdings, which holds a limited partnership interest representing approximately
26% of common partnership units. Finance conducts hog-raising activities in
Texas and owns all the real and personal property located in Texas and
non-agricultural real and personal property in Missouri. Finance has two wholly
owned subsidiaries:
- --------
(2.) Stock ownership of MSLEF II and MSCP III in CFI, Finance Holdings
and Premium Holdings includes Morgan Stanley Capital Investors, L.P. and MSCP
III 892 Investors, L.P.
-13-
<PAGE>
<PAGE>
Princeton Development Corp. ("Princeton Development"), which owns a rental
apartment complex in Princeton, Missouri, and High Plains Ranch, Inc., which is
inactive and has no assets. These subsidiaries are not debtors in these Chapter
11 Cases.
CFI. CFI, a Missouri corporation, is the sole general partner
of Finance. CFI is wholly owned by The Morgan Stanley Leveraged Equity Fund II,
L.P., Morgan Stanley Capital Partners III, L.P., Morgan Stanley Capital
Investors, L.P., and MSCP III 892 Investors, L.P. (collectively, the "Morgan
Stanley Funds").
Finance Holdings. Finance Holdings, a Delaware corporation, is
one of the two common limited partners of Finance holding approximately 73% of
common partnership units, and the sole general partner of Premium Holdings L.P.,
holding 1% of the general partnership interest. The Morgan Stanley Funds wholly
own Finance Holdings.
Premium Holdings. Premium Holdings, an Iowa corporation, is
the other common limited partner of Finance, holding approximately 26% of common
partnership units in Finance. The outstanding shares of common stock of Premium
Holdings are dispersed among certain individuals (including Messrs. Harms and
Gordon) and certain institutions who, in the aggregate, own 79.5% of such
shares. The Morgan Stanley Funds own approximately 18% of the shares of common
stock of Premium Holdings, and Premium Holdings L.P., a non-debtor entity in
which Finance Holdings is the general partner, owns 2.5% of the shares of such
common stock.
D. Long-Term Debt, Other Debt
and Preference Unit Equity Interests
The long-term debt of Finance and Farms generally consists of
obligations under or pursuant to (i) the Bank Credit Agreement, (ii) the Secured
Notes, and (iii) interaffiliate indebtedness. Finance also has outstanding
certain Preference Unit Equity Interests. A chart describing the collateral
security, if any, for each type of indebtedness is set forth in Section III.D.3,
"General Information -- Long-Term Debt, Other Debt and Preference Unit Equity
Interests; Lien Priorities of Secured Creditors."
1. Bank Credit Agreement
Pursuant to the Credit Agreement dated as of December 23, 1994
(as amended, the "Bank Credit Agreement"), among Finance, Farms, the financial
institutions listed therein, and Chemical Bank as fronting bank, as
administrative agent and as collateral agent (collectively, the "Lenders"),
Finance obtained a term loan (the "Term Loan") from certain Lenders (the "Term
Loan Lenders") and a revolving credit loan (the "Revolving Credit Facility")
from certain Lenders (the "Revolving Credit Facility Lenders"). Farms provided
an unsecured guarantee of the payment of Finance's obligations under the Bank
Credit Agreement.
-14-
<PAGE>
<PAGE>
Revolving Credit Facility
Principal, Maturity and Interest. The maximum availability
under the Revolving Credit Facility is $80 million. As of the Commencement Date,
approximately $57 million in principal amount was outstanding under the
Revolving Credit Facility (excluding the letter of credit). The maturity date is
December 31, 1999. The interest rate is the applicable base rate from time to
time, plus 1.5%, payable quarterly in arrears.
Borrowing Base. The availability of credit under the Revolving
Credit Facility is measured by a borrowing base formula tied to, among other
things, the live hog market value and eligible accounts receivable.
Collateral. Finance's obligations under the Revolving Credit
Facility are collaterally secured by, among other things, a first lien on
Finance's working capital assets, including all inventory, accounts receivable,
cash and certain contract rights. For a more detailed explanation of the
collateral security, see Section III.D.3, "General Information -- Long-Term
Debt, Other Debt and Preference Unit Equity Interests; Lien Priorities of
Secured Creditors."
Term Loan
Principal, Maturity and Interest. The outstanding principal
amount of the Term Loan, as of the Commencement Date, was approximately $10.2
million. The maturity date is June 30, 1999. The interest rate is the applicable
base rate from time to time, plus 1.5%, payable quarterly in arrears.
Amortization of principal on the Term Loan was to commence in the second quarter
of 1997.
Collateral. Finance's obligations under the Term Loan are
collaterally secured by, among other things, a shared first lien on certain
fixed assets located in Texas (including the National Hog Farms property and the
High Plains Ranch property), a shared second lien on the Texas Working Capital
Assets and a first lien on certain other Texas fixed assets. For a more detailed
explanation of the collateral security, see Section III.D.3, "General
Information -- Long-Term Debt, Other Debt and Preference Unit Equity Interests;
Lien Priorities of Secured Creditors."
Collateral Sharing. To the extent the proceeds of the
collateral securing the Revolving Credit Facility or the Term Loan are
insufficient to repay the obligations related to such indebtedness, the
Revolving Credit Facility Lenders and the Term Loan Lenders agreed to share pro
rata in the proceeds of the total collateral security pledged to both groups of
Lenders, based on the amount of each Lender's outstanding loans.
Finance has been in default under the Bank Credit Agreement
since April 15, 1996.
-15-
<PAGE>
<PAGE>
2. Secured Notes
As of the Commencement Date, Finance had four series of
Secured Notes outstanding:
o 12% Senior Secured Exchange Notes due 2000 (the "1992 Notes")
issued pursuant to the Indenture dated as of March 15, 1995
(the "1992 Note Indenture"), among Finance, Farms and United
States Trust Company of New York as trustee;
o Senior Secured Discount Exchange Notes due 2003 (the "1993
Notes") issued pursuant to the Indenture dated as of March 15,
1995, among the same parties;
o 12 1/4% Senior Secured Exchange Notes due 2004 (the "1994
Notes") issued pur suant to the Indenture dated as of March
15, 1995, among the same parties; and
o 12 1/4% Senior Secured Note due 1997 (the "1995 Note") issued
pursuant to the Note Purchase Agreement dated as of December
15, 1995, among Finance, Farms and Morgan Stanley Group Inc.
("Morgan Stanley Group").
On the Commencement Date, the 1992 Notes, 1993 Notes, and 1994
Notes were held by six institutions for their own account or for funds and other
accounts advised by such institutions. The 1995 Note currently is held by Morgan
Stanley Group. Morgan Stanley & Co. Incorporated ("MS&Co."), after the
Commencement Date, has agreed to purchase a substantial amount of the Secured
Notes and Preference Unit Equity Interests from funds and accounts managed by
one institution. As a result, the amount of New PIK Notes and non-voting New LLC
Interests to be issued to Morgan Stanley Group and its affiliates pursuant to
the Plan may increase by a material amount. MS&Co. may sell this position at any
time and may do so promptly. As provided in the "lock-up" agreement, MS&Co.
would be bound by the terms thereof.
The 1992 Notes, 1993 Notes and 1994 Notes were registered
under the Securities Act of 1933, as amended, and were deregistered on or about
April 17, 1996, with the consent of the Securities and Exchange Commission.
1992 Notes. As of the Commencement Date, the aggregate allowed
amount of principal and interest for the 1992 Notes (the "1992 Note Claims") was
$129,896,640. The stated maturity is September 15, 2000. The interest rate is
12% per annum, payable semiannually each March 15 and September 15. No interest
has been paid on the 1992 Notes since September 15, 1995. On March 15, 1996,
Finance defaulted in the payment of interest then due and payable on the 1992
Notes. Under the terms of the 1992 Note Indenture, such default matured into an
Event of Default 30 days after such default. Farms guaranteed the payment of the
1992 Notes and collaterally secured such guarantee.
1993 Notes. The aggregate principal amount of the 1993 Notes
at maturity is $207,761,000 ($150 million gross sale proceeds at the time of
issuance). As of the Commencement Date, the aggregate allowed amount of
principal and interest for the 1993 Notes (the "1993 Note Claims") was
$202,860,976. The interest rate is accrued at the rate of 12% per
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<PAGE>
annum, with no cash interest accruing prior to September 15, 1996. Commencing
March 15, 1997, cash interest on the 1993 Notes would be payable March 15 and
September 15 of each year. The stated maturity is September 15, 2003. Farms
guaranteed the payment of the 1993 Notes and collaterally secured such
guarantee.
1994 Notes. As of the Commencement Date, the aggregate allowed
amount of principal and interest for the 1994 Notes (the "1994 Note Claim") was
$106,666,680. The stated maturity is June 15, 2004. The interest rate is 12 1/4%
per annum, payable semiannually each June 15 and December 15. Farms has been
current in making interest payments on the 1994 Notes through December 15, 1995.
Farms guaranteed the payment of the 1994 Notes, but has not collaterally secured
such guarantee.
1995 Note. As of the Commencement Date, the aggregate allowed
amount of principal and interest for the 1995 Note (the "1995 Note Claim") was
$6,933,334. The stated maturity is March 31, 1997, subject to extension, at the
holder's option, to May 31, 1997. The interest rate is 12 1/4% per annum,
payable semiannually each June 1 and December 1. Farms guaranteed the payment of
the 1995 Note and has collaterally secured such guarantee.
3. Lien Priorities of Secured Creditors
The relative lien priorities among the Revolving Credit
Facility, the Term Loan, the 1992 Notes, the 1993 Notes, the 1994 Notes and the
1995 Note are established pursuant to the Amended and Restated Collateral Trust
and Intercreditor Agreement dated as of September 15, 1992, as amended (the
"Collateral Trust Agreement"), among Finance, Farms, Finance Holdings, Firstar
Financial Services (a division of Firstar Bank Milwaukee, N.A.), Citizens Bank
of Princeton, MS&Co., and United States Trust Company of New York as collateral
trustee. The following is a summary of such priorities; capitalized terms used
in the chart are defined in the Collateral Trust Agreement:
<TABLE>
<CAPTION>
Type of Description of Collateral Security Previously
Indebtedness Granted to the Lenders and the Holders of Secured Notes
------------ -------------------------------------------------------
<S> <C>
Revolving Credit First liens on Working Capital Lender Collateral wherever located.
Facility
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Type of Description of Collateral Security Previously
Indebtedness Granted to the Lenders and the Holders of Secured Notes
------------ -------------------------------------------------------
<S> <C>
Term Loan First liens on (i) 1994 Additional Finance Real
Property, (ii) 1994 Additional Finance Personal
Property, (iii) 1994 Additional Finance Equipment to
the extent not securing obligations to the Equipment
Finance Lenders, and (iv) 1994 Additional Finance
Account Collateral, such liens to be shared pari
passu with the 1994 Notes and the 1995 Note;
First liens on (i) Chisum Ranch and the Headquarters
Site located in Hartley and Dallam Counties in
Texas, respectively, (ii) property located in Dallam
County, Texas and Hartley County, Texas, and (iii)
Additional Finance Equipment that constitutes
Additional Specified Texas Property and does not
secure the obligations of the Equipment Finance
Lenders;
Second liens on (i) 1994 Additional Finance
Livestock, and (ii) 1994 Additional Finance
Equipment to the extent securing obligations to the
Equipment Finance Lenders, such liens to be shared
pari passu with the 1994 Notes and the 1995 Note;
and
Second liens on (i) Additional Finance Equipment
that constitutes Additional Specified Texas Property
and secures the obligations to the Equipment Finance
Lenders, and (ii) Additional Finance Livestock that
constitutes Additional Specified Texas Property.
1992 Notes, 1993 First liens on (i) Finance/Noteholder Real Property, and (ii)
Notes and 1995 Note, Finance/Noteholder Personal Property;
pari passu
First liens on (i) Finance Account Collateral, (ii)
the Farms/Finance Note and collateral securing such
note, and (iii) Finance Equipment to the extent not
securing obligations to the Equipment Finance
Lenders; and
Second liens on (i) Finance Livestock, (ii) certain
bank deposits, and (iii) Finance Equipment to the
extent securing obligations to the Equipment Finance
Lenders.
1992 Notes, 1993 Farms' Guarantee of First liens on (i) PSF Account
Notes and 1995 Note, Collateral, (ii) PSF/Noteholder Real Property, and (iii) PSF/Noteholder Personal
pari passu Property.
1994 Notes and 1995 First liens on (i) 1994 Additional Finance Real Property,
Note, pari passu (ii) 1994 Additional Finance Personal Property, (iii) 1994
Additional Finance Equipment to the extent not
securing obligations to the Equipment Finance
Lenders, and (iv) 1994 Additional Finance Account
Collateral, such liens to be shared pari passu with
the Term Loan and the 1995 Note; and
Second liens on (i) 1994 Additional Finance
Livestock, and (ii) 1994 Additional Finance
Equipment to the extent securing obligations to the
Equipment Finance Lenders, such liens to be shared
pari passu with the Term Loan and the 1995 Note.
</TABLE>
4. Preference Unit Equity Interests
In September 1992, Finance privately placed $26,600,000 of
preferred limited partnership interests in Finance (collectively, the
"Preference Unit Equity Interests"), pursuant to the Amended and Restated
Exchangeable Preference Unit Purchase Agreement dated as of September 15, 1992,
as amended and restated as of October 7, 1993. Farms guaranteed the obligations
of Finance with respect to the Preference Unit Equity Interests on an unsecured
basis. The Preference Unit Equity Interests, which mature on October 1, 1996,
carry the dividend rate of 12.5% per annum payable in cash semiannually. Unpaid
distributions are cumulative and compounded, and are paid when sufficient funds
are available. The outstanding amount of the Preference Unit Equity Interests as
of the Commencement Date was approximately $31 million,
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including accretions. On the Commencement Date, the Preference Unit Equity
Interests were held by (i) five institutions for their own account or for funds
and other accounts managed by such institutions (which are also holders of one
or more series of the Secured Notes), which held in the aggregate 99% of such
interests, and (ii) CFI, which holds 1% of such interests.
5. Certain Interaffiliate Obligations
and Other Transactions
Farms/Finance. As of the Commencement Date, Farms' long-term
debt included a secured demand note dated September 15, 1992, as amended and
restated on October 7, 1993, issued to Finance relating to the construction
funding provided by Finance to Farms (the "Farms/Finance Note"). Interest on the
Farms/Finance Note is accreted monthly at the Federal short-term rate. The
obligations of Farms under the Farms/Finance Note are secured by substantially
all the assets of Farms, such obligations being subordinated to the security
interests granted by Farms as collateral security for the guarantees of payment
of the 1992 Notes, 1993 Notes and 1995 Note. The Farms/Finance Note and the
related collateral have been pledged by Finance to the Collateral Trustee for
the benefit of the holders of the 1992 Notes, 1993 Notes and 1995 Note.
Approximately $216 million was outstanding under the Farms/Finance Note as of
December 31, 1995. The net amount of the Claims of Finance against Farms under
the Farms/Finance Note, after deducting approximately $48 million owed by
Finance to Farms for transactions pursuant to the Operating Agreement, is
approximately $172 million (the "Farms/Finance Note Claim").
Finance Holdings/Finance. At the time Finance was created, it
granted Finance Holdings a put on Finance Holdings' common limited partnership
interests in Finance pursuant to that certain Amended and Restated Put Agreement
dated as of September 15, 1992, as amended (the "Put Agreement"). The put may be
exercised in the event of certain changes in Missouri corporate farming law and
has not been exercised as of the Commencement Date. The put is secured by a
subordinated security interest in Finance's assets, including an assignment of
Finance's security interest under the Farms/Finance Note. Farms guaranteed
Finance's obligations under the put on a secured basis.
Harms & Gordon/Finance. In August 1991, Messrs. Harms and
Gordon jointly borrowed $1 million from Finance to finance the purchase of the
capital stock of Farms (the "Farms Stock Loan"). The Farms Stock Loan is secured
by the capital stock of Farms. The obligations of Messrs. Harms and Gordon with
respect to the Farms Stock Loan are non-recourse and, accordingly, there is no
personal liability associated with the Farms Stock Loan. The Farms Stock Loan
bears interest at the Federal short-term rate. Pursuant to the Stock Option
Agreement, dated as of August 13, 1991 (the "Option Agreement"), Finance holds
an option to acquire all of the capital stock of Farms from Messrs. Harms and
Gordon at a price equal to the adjusted net asset value of Farms. The option may
be exercised in the event of certain changes in Missouri corporate farming law
and has not been exercised as of the Commencement Date.
CFI/Finance. As of the Commencement Date, CFI owed
approximately $268,700 to Finance.
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<PAGE>
Premium Holdings/Finance. As of the Commencement Date, Premium
Holdings owed approximately $270,000 for professional fees, debt issuance costs
and other expenses that Finance paid on behalf of Premium Holdings.
CFI/Morgan Stanley Funds. As of the Commencement Date, CFI was
a holder of certain unsecured capital contribution notes issued by the Morgan
Stanley Funds over a period of time in an aggregate outstanding amount of $20
million (collectively, the "Capital Contribution Notes").
IV.
EVENTS PRECEDING THE COMMENCEMENT OF THE CHAPTER 11 CASES
A. Factors That Precipitated the Need
for Financial Restructuring
o Commodities Prices. PSF's operations and financial condition
are significantly affected by the cost of feed stocks and by the selling prices
for hogs, pork and pork products, all of which are determined by constantly
changing market forces of supply and demand over which PSF has no control. PSF's
feed component costs are primarily dependent on crop conditions in the United
States, which can be volatile as a result of a number of factors, the most
important of which are weather, current and projected feed stock supplies and
prices, grain export prices and supports, and the federal government's
agricultural policies.
Poor harvest results for 1995 caused feed stock prices to
increase significantly in 1996, while hog prices descended to unprecedented low
levels. Live hog market prices did not begin to increase until the end of the
first quarter of 1996. Such commodities prices are of material importance to the
Debtors. The cost of feed in any swine livestock business ranges between 55% and
65% of the total cost to raise an animal to market weight. The average market
price of corn rose between 1994 and 1995 from $2.60 per bushel to $2.99 per
bushel, reaching approximately $5.07 per bushel as at May 22, 1996. During the
same period of time, the average market price of soybeans rose from $182.07 per
ton to $187.84 per ton, reaching approximately $238 per ton as at May 22, 1996.
During the same period of time, the average market price of
live hogs plummeted to reach levels not experienced on a comparative basis
during the last 20 years. For example, in November 1994, the average live hog
market price was $28.76 per hundredweight (100 pounds). This is in marked
contrast to the average live hog market price of $43.70 per hundredweight in
November 1993. Although the current average live hog market price has risen to
$63.00 per hundredweight, as at May 22, 1996, operating income continued to be
significantly negatively affected by the unprecedented cost of feed stocks.
Escalation of prices for feed stocks and volatility in live
hog prices have had a materially adverse effect on the operations of Farms.
Farms estimates that, on an annual basis, a $1 per hundredweight change in live
hog market prices has an impact of approximately $4.7 million in annual
revenues, a $.10 per bushel change in corn prices has an impact of approximately
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$1.4 million in annual revenues, and a $10/ton change in soybean prices has an
impact of approximately $1.4 million on Farms' revenues.
o Herd Productivity and Processing Plant. Furthermore, in
1995, which was the first complete year of full capacity operations, PSF
experienced productivity problems with its sow herd. The number of pigs born
alive per litter, the farrowing death loss and the nursery death loss, the
number of pigs placed per sow per year, the grow/finish death loss, and the feed
conversion ratio, were, for the most part, materially less than anticipated. All
of these factors contributed to lower than projected revenues.
o Personnel. Recruitment and retention of qualified personnel
have been a challenge for PSF. PSF initially has experienced a shortage of
sufficiently qualified people for necessary positions. That situation has been
substantially remedied.
o Leverage. The majority of PSF's facilities have been
recently built and required substantial capital expenditures, which were
financed at high rates of interest. As a consequence, PSF is highly leveraged
with a debt to total capitalization ratio exceeding 90%, which is much higher
than its competitors. PSF's interest expense in 1995 aggregated approximately
$62 million.
o Reduction in Credit Availability. Since the availability of
credit to PSF under the Revolving Credit Facility is tied to, among other
things, the live hog market prices and eligible accounts receivable, the fall in
the live hog market prices contracted PSF's borrowing capacity under the
Revolving Credit Facility. In February 1996, the Revolving Credit Facility
Lenders exercised powers under that facility to reduce availability of credit
thereunder. Since that time, PSF has been unable to borrow any additional
amounts under the Revolving Credit Facility. PSF has also experienced some
contraction of normal trade credit with the resulting need for increased working
capital funds.
B. Remedial Action Taken by PSF
In response to the problems described above, PSF implemented a
number of actions and strategies in an attempt to improve its operations. For
instance, PSF implemented a cost-cutting program involving, among other things,
workforce reductions of approximately 175 employees, reductions in annualized
management compensation of approximately $1.1 million as at May 15, 1995, and
other actions intended to reduce operating costs at PSF's Missouri and Texas
facilities.
PSF also began selling or disposing of certain assets which
were not integral to its operations. In February 1996, PSF sold Mariah(R) Foods,
an Indiana processor of live hogs and producer of smoked hams, for the gross
purchase price of approximately $2 million, plus an additional adjustment for
inventory. In December 1995, PSF sold Bird Farm(R), a Midwestern marketer of
sausage and other pork products, to its original owners, for a nominal amount in
order to avoid substantial liabilities associated with its operations. The sale
of Bird Farm(R) resulted in a loss of approximately $250,000 to PSF.
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Notwithstanding the foregoing efforts, the contraction of bank
credit availability, the high cost of capital, the limitations of normal trade
credit terms, and volatility in live hog and feed stock prices, led to liquidity
problems and recurring losses. Consequently, the need for a restructuring of
PSF's existing highly leveraged capital structure became manifest. PSF
extensively reviewed and analyzed the constituent parts of its business and
developed a comprehensive business plan for the years 1996 through 1998 (the
"Business Plan"). After a review and analysis of its position in the live hog
and pork processing industry and the reassessment of its viability, PSF
undertook to implement a financial restructuring.
During the end of 1995, PSF initiated discussions with the
Lenders and holders of the Secured Notes as to the need to restructure and
reorganize its business and finances. In early 1996, an informal committee of
certain holders of the Secured Notes (the "Bondholders' Committee") was
organized in connection with a restructuring of the obligations evidenced by the
Secured Notes. The Bondholders' Committee currently consists of representatives
of Putnam Investment Management, The Prudential Insurance Company of America,
Inc., GEM Capital Corporation (Cypress), and Loews Corporation, which together
hold approximately 85% of the Secured Notes. Negotiations as to the terms and
conditions of a restructuring and a proposed chapter 11 plan extended over a
period of several months. The Lenders and the Bondholders' Committee each
engaged professionals to review and assess the business of, and restructuring
proposals made by, PSF. Concurrently, PSF conducted negotiations with the
Lenders with respect to providing financing during the administration of cases
under chapter 11 of the Bankruptcy Code, if necessary, and providing additional
financing upon emergence from chapter 11. As a consequence of these discussions
and negotiations, the parties have agreed to a restructuring transaction which
forms the basis of the Plan. The parties believe that such restructuring, as
incorporated into the Plan, if implemented, would remedy PSF's financial
distress and enhance PSF's overall creditworthiness and viability.
The Lenders, the members of the Bondholders' Committee, Morgan
Stanley Group Inc. and MS&Co. executed a "lock-up" agreement, dated as of July
1, 1996, pursuant to which they agreed to vote to accept the Plan and no other
chapter 11 plan for the Debtors and not to transfer their Claims except to
entities that agree to be bound by the terms of the agreement. In addition, each
holder of a Secured Bank Claim severally agreed to enter into the New Senior
Credit Agreement at the time of consummation of the Plan, subject to the terms
and conditions of the New Senior Credit Agreement. PSF agreed to pursue
diligently the plan confirmation process. The obligations under the agreement
terminate if (i) the order approving the Disclosure Statement is not entered by
September 1, 1996, (ii) the Effective Date of the Plan does not occur by October
31, 1996, (iii) an event occurs having a material adverse change on PSF's
business, assets or operations, or (iv) the Bankruptcy Court enters an order,
the practical effect of which is to render it highly unlikely that the Plan can
be consummated.
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V.
THE REORGANIZATION CASES
A. Commencement of the Reorganization Cases
Consistent with the agreements reached with the Lenders and
the Bondholders' Committee, the Chapter 11 Cases were commenced on July 2, 1996,
and a disclosure statement and a chapter 11 plan were concurrently filed. The
Debtors continue to operate their business and manage their properties as
Debtors in Possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
B. Creditors' Committee
In light of the prearranged chapter 11 plan, the existence and
continued functioning of a Bondholders' Committee, the Bankruptcy Court's order
authorizing the Debtors to pay prepetition ordinary course liabilities (with
certain exceptions) and the acquiescence of the major unsecured creditors, the
United States Trustee elected in the exercise of its discretion not to appoint a
statutory committee of unsecured creditors.
C. Administration of the Chapter 11 Cases
o Operational Matters. On the Commencement Date, the Debtors
obtained a series of orders from the Bankruptcy Court designed to minimize any
disruption of business operations and to facilitate their reorganization.
o Payment of Debt Incurred in the Ordinary Course of Business.
The objective of the Chapter 11 Cases is to restructure the outstanding
indebtedness to institutional creditors holding the Secured Notes and the
outstanding Preference Unit Equity Interests held by institutional equity
security holders. It is essential to the Plan that relationships with trade
vendors and other holders of debt incurred in the ordinary course of business,
and relationships with employees and consultants, not be disrupted or impaired.
In that connection, by order dated July 2, 1996, the Bankruptcy Court authorized
the Debtors to pay, in their discretion, all undisputed indebtedness and
obligations (other than the indebtedness or liabilities that are impaired and to
be restructured under the Plan and the liabilities relating to the Texas
Expansion) incurred in the ordinary course of business as such indebtedness and
obligations mature in accordance with their terms, and to pay salaries, wages,
benefits and other amounts owed to employees and consultants. These include
obligations that were, or may have been, incurred prior to the Commencement
Date.
o DIP Credit Agreement, Use of Cash Collateral and Adequate
Protection. In order to have sufficient funds to operate during the course of
the Chapter 11 Cases and to provide confidence to suppliers and employees, PSF
entered into that certain Credit Agreement, dated as of July 2, 1996, among
Finance, as borrower, Farms as guarantor, Chemical Bank as agent, and the
Lenders named in such agreement (together with related documents delivered
pursuant to such agreements, the "DIP Credit Agreement").
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By order dated July 2, 1996, the Bankruptcy Court authorized
PSF to obtain credit pursuant to the DIP Credit Agreement in an amount not
exceeding $39 million (the "Interim DIP Financing Order"). As there were no
objections to the Interim DIP Financing Order, it became a final order on July
24, 1996 (the "DIP Financing Order"), and PSF may obtain credit to incur
obligations not exceeding the commitment amount of $99,831,517. The DIP Credit
Agreement is scheduled to expire, in the absence of an event of default
thereunder, on the earlier of December 31, 1996, or the Effective Date of a
consummated plan of reorganization for PSF, subject to extension to June 1997.
Pursuant to the DIP Financing Order, PSF is required to and
has provided adequate protection to the Lenders for the use of cash collateral
during the pendency of the Chapter 11 Cases and for the liens primed by the DIP
Financing Documents. The adequate protection consists of (i) the granting of new
liens and security interests to the Lenders to secure the amount, if any, equal
to the excess of (a) the aggregate diminution after the Commencement Date of the
value of the Lenders' collateral over (b) the aggregate reductions after the
Commencement Date in the Secured Bank Claims from the proceeds of such
collateral, (ii) the payment of current interest to the Lenders at the
non-default rate during the pendency of the Chapter 11 Cases on account of the
indebtedness outstanding under the Bank Credit Agreement, (iii) application of
substantially all cash in the possession and control of PSF to pay down the
prepetition obligations under the Bank Credit Agreement, and (iv) the granting
of administrative expense priority to the holders of the Secured Notes for
Claims arising from diminution of value of their liens during the pendency of
the Chapter 11 Cases and payment of reasonable professional fees and expenses of
attorneys and financial advisors to the Bondholders' Committee.
o Bar Date Order. On July 23, 1996, the Bankruptcy Court
entered an order establishing August 15, 1996, as the last date by which proofs
of claim against the Debtors had to be filed (the "Bar Date Order"). On or
before July 26, 1996, notice of entry of the Bar Date Order was given to all
current holders of claims against the Debtors.
VI.
THE PLAN
The Debtors believe that (i) the Plan will result in
substantially greater recoveries for the holders of Allowed Claims and Equity
Interests than would otherwise be recovered if PSF were liquidated under chapter
7 of the Bankruptcy Code, and (ii) the Plan will afford PSF the opportunity and
ability to continue in business as a viable going concern.
The Plan is annexed hereto as Exhibit A and forms a part of
this Disclosure Statement. The following is a summary of the Plan:
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A. Treatment of Compensation and Reimbursement
Claims and Other Administrative Expenses
1. Compensation and Reimbursement Claims
Compensation and reimbursement Claims are Administrative
Expense Claims for compensation of professionals and reimbursement of expenses
incurred by such professionals, pursuant to subsections 503(b)(2), 503(b)(3),
503(b)(4), and 503(b)(5) of the Bankruptcy Code (the "Compensation and
Reimbursement Claims"). All payments for Compensation and Reimbursement Claims
will be made in accordance with the procedures established by the Bankruptcy
Code, the Bankruptcy Rules, the Local Rules and requirements of the office of
the United States Trustee guidelines relating to the allowance of interim and
final compensation for services rendered and reimbursement of expenses. The
Bankruptcy Court will review and determine all applications of compensation for
services rendered and reimbursement of expenses.
Section 503(b) of the Bankruptcy Code also provides for
payment of compensation to creditors, indenture trustees and other entities
making a "substantial contribution" to a reorganization case, and to attorneys
for and other professional advisors to such entities. Such requests must be
approved by the Bankruptcy Court after a hearing on notice at which the Debtors
and other parties in interest may participate and, if appropriate, object to the
allowance of any compensation and reimbursement of expenses.
Each holder of a Compensation and Reimbursement Claim (i)
shall file its respective final application for an allowance of compensation for
services rendered and reimbursement of expenses incurred by the date that is
forty-five (45) days after the Effective Date, and (ii) will be paid in full
such amounts as are Allowed by the Bankruptcy Court (a) upon the later of the
Effective Date and the date upon which the order relating to the allowance of
any such Administration Expense Claim becomes a Final Order or (b) upon such
other terms as may be mutually agreed between such holder of such Claim and the
Reorganized Debtors.
2. Other Administrative Expense Claims
Other Administrative Expense Claims are rights to payment as a
cost or expense of administration of the Chapter 11 Cases that are allowed under
sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without
limitation, any actual and necessary costs and expenses of preserving the
estates, any actual and necessary costs or expenses of operating the business of
the Debtors, any indebtedness or obligations incurred by the Debtors in
Possession in connection with the conduct of their business, including, without
limitation, for the indebtedness or acquisition or lease of property, and fees
or charges assessed against the estates of the Debtors under section 1930,
chapter 123, title 28, United States Code.
The Plan provides that Administrative Expense Claims will be
paid in full on the Effective Date. Liabilities incurred in the ordinary course
of business by the Debtors in Possession after the Commencement Date and
indebtedness or obligations arising under loans or advances to the Debtors in
Possession, whether or not incurred in the ordinary course of the business of
the Debtors will be paid by the Reorganized Debtors in accordance with the terms
and
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subject to the conditions of any agreements governing, instruments evidencing on
other documents relating to such transactions.
3. Compensation to Attorneys and Advisors to Bondholders'
Committee, and the Indenture Trustee and the Collateral Trustee
Notwithstanding anything contained in the Plan or this
Disclosure Statement to the contrary, the fees and expenses of the legal and
financial advisors to the Bondholders' Committee will be paid as set forth in
the DIP Financing Order. To the extent not previously paid during the Chapter 11
Cases pursuant to the DIP Financing Order, the reasonable fees and expenses
incurred on or after the Commencement Date by attorneys and financial advisors
retained by the Bondholders' Committee with the consent of the Debtors prior to
the Commencement Date and the reasonable fees and expenses incurred by the
Indenture Trustee and the Collateral Trustee will be paid (without application
by or on behalf of any such professionals to the Bankruptcy Court, and without
notice and a hearing, unless specifically required by the Bankruptcy Court upon
request of a party in interest) by Reorganized Finance and Newco as an
Administrative Expense Claim under the Plan. If there is a dispute about the
amount of fees and expenses to be paid to any such professional, the amount of
any such fees and expenses will be determined by the Bankruptcy Court.
B. Classification and Treatment of Claims and Equity Interests
1. Class 1 - Priority Tax Claims - Priority Tax Claims are those
Claims for taxes entitled to priority in payment under section
507(a)(8) of the Bankruptcy Code. Allowed Priority Tax Claims
will be paid in the ordinary course of business during the
Chapter 11 Cases and, to the extent unpaid, will be paid in
full by the applicable Reorganized Debtor if against Finance
Holdings, Premium Holdings or CFI, and, with respect to such
Claims against Finance or Farms, by Newco in accordance with
the terms and conditions of governing agreements or applicable
law.
2. Class 2 - Other Priority Claims - Other Priority Claims are
Claims which are entitled to priority in accordance with
section 507(a) of the Bankruptcy Code (other than
Administrative Expense Claims and Priority Tax Claims).
Allowed Other Priority Claims will be paid in the ordinary
course of business during the Chapter 11 Cases and, to the
extent unpaid, will be paid in full by the applicable
Reorganized Debtor if against Finance Holdings, Premium
Holdings or CFI, and, with respect to such Claims against
Finance or Farms, by Newco in accordance with the terms and
conditions of governing agreements or applicable law. The
Debtors estimate that there are no unpaid Allowed Other
Priority Claims.
3. Class 3 - Secured Bank Claims - Secured Bank Claims are those
Claims against Finance as obligor and Farms as guarantor
arising from or relating to the Bank Credit Agreement,
including Claims under the Revolving Credit Facility and the
Term Loan. Pursuant to the Plan, on the Effective Date, each
holder of an Allowed Secured Bank Claim will receive, in full
satisfaction of such Allowed Claim, Cash equal to the full
amount of such Allowed Claim. As of the Effective
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Date, (i) all of the liens and security interests securing
Secured Bank Claims, and (ii) all Secured Bank Claims based
upon guarantees of collection, payment or performance of any
obligation by Farms, will be deemed relinquished and released.
Pursuant to the Plan, the Secured Bank Claims are Allowed
Claims in the principal amount of approximately $67,153,000,
plus interest at the non-default rate, fees, expenses and
unreimbursed draws on the letter of credit issued under the
Bank Credit Agreement.
4. Class 4 - Secured Note Claims - Secured Note Claims are those
Claims against Finance as borrower and Farms as guarantor
arising from the 1992 Notes, the 1993 Notes, the 1994 Notes
and the 1995 Note. Pursuant to the Plan and in accordance with
the Restructuring Transactions, on the Effective Date, each
holder of an Allowed Secured Note Claim will receive in full
satisfaction of such Allowed Claim its Pro Rata Share of
$101,496,978 in principal amount of New PIK Notes to be issued
by Newco and 9,216,789 New LLC Interests representing
approximately 92% of total New LLC Interests issued on the
Effective Date. As of the Effective Date, (i) all of the liens
and security interests securing Secured Note Claims; and (ii)
all Claims based upon guarantees of collection, payment or
performance of any obligation by Farms, will be deemed
relinquished and released. Pursuant to the Plan, the Secured
Note Claims are Allowed in the aggregate amount of
$446,357,630, representing principal plus accrued but unpaid
interest to the Commencement Date, as follows: (i)
$129,896,640 in 1992 Note Claims, (ii) $202,860,976 in 1993
Note Claims, (iii) $106,666,680 in 1994 Note Claims, and (iv)
$6,933,334 in 1995 Secured Note Claims.
5. Class 5 - Other Secured Claims - Other Secured Claims are
Secured Claims (other than the Secured Bank Claims, the
Secured Note Claims, the Construction Claims, and the
Farms/Finance Note Claim) that are secured by a lien, pledge,
or a security interest in the Debtors' real or personal
property, including Claims arising from certain financing
leases for machinery, equipment, or other personal property of
Finance or Farms. Pursuant to the Plan, all Allowed Other
Secured Claims will be reinstated as against the applicable
Reorganized Debtor (or, pursuant to the Restructuring
Transactions, against Newco) and rendered unimpaired pursuant
to section 1124 of the Bankruptcy Code on the later of the
Effective Date or the date such Claim becomes an Allowed
Claim.
6. Class 6 - Construction Claims - Construction Claims are those
Claims, whether secured or unsecured, arising from a contract
or subcontract related to the Texas Expansion. Pursuant to the
Plan, each holder of an Allowed Construction Claim will
receive, in full satisfaction of such Claim, Cash in the full
amount of such Allowed Claim, on the later of the Effective
Date or the date that such Claim becomes an Allowed Claim.
Upon payment in full of an Allowed Construction Claim pursuant
to the Plan, each holder of such Allowed Claim shall be deemed
to have relinquished and released any Lien securing such
Claim, and shall, prior to receiving any distribution under
the Plan, execute appropriate written documentation
effectuating or confirming such relinquishment or release. The
Debtors estimate that the Allowed Construction Claims
aggregate approximately $3.8 million.
7. Class 7 - General Unsecured Claims - General Unsecured Claims
are all unsecured Claims, other than (i) Compensation and
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Reimbursement Claims, (ii) Other Administrative Expense
Claims, (iii) Priority Tax Claims, (iv) Other Priority Claims,
(v) Construction Claims, (vi) Farms/Finance Note Claim, and
(vii) Other Intercompany Claims. General Unsecured Claims
include, among other things, Claims of the Debtors' trade
vendors and suppliers and Claims arising from the Debtors'
rejection of executory contracts and unexpired leases.
Pursuant to the Plan, to the extent unpaid prior to the
Effective Date, all Allowed General Unsecured Claims will be
paid in full by the applicable Reorganized Debtor if against
Finance Holdings, Premium Holdings or CFI, and, with respect
to such Claims against Finance or Farms, by Newco in
accordance with the terms and conditions of governing
agreements, custom or trade practice.
8.A. Subclass 8.A - Farms/Finance Note Claim - The Farms/Finance
Note Claim is a Claim held by Finance against Farms for funds
advanced to Farms for construction, capital expenditures and
operating needs, and is secured by a pledge of certain real
and personal property of Farms. On the Effective Date,
pursuant to the Restructuring Transactions, the Farms/Finance
Note Claim will be transferred and assigned to Reorganized
Finance, which, in turn, will transfer and assign such note to
Newco. On the Effective Date, Newco will receive, by process
of law and in satisfaction of the indebtedness represented by
the Farms/Finance Note, and by enforcement of the Liens on
Farms' assets to secure the payment of such indebtedness, all
of the assets of Farms subject to the liabilities of Farms as
provided under the Plan.
8.B. Subclass 8.B - Other Intercompany Claims - Other Intercompany
Claims are all Claims held by one Debtor against any other
Debtor, excluding the Farms/Finance Note Claim. On the
Effective Date, each holder of an Allowed Other Intercompany
Claim will receive payment of $1,000 per such claim.
9.A. Subclass 9.A - Preference Unit Equity Interests in Finance -
The Preference Unit Equity Interests in Finance arise from the
Preference Unit Equity Interests issued by Finance in 1992 to
certain of the holders of the Secured Notes and CFI. Pursuant
to the Plan and in accordance with the Restructuring
Transactions, each holder of an Allowed Preference Unit Equity
Interest will receive, in full satisfaction of such Equity
Interest, its Pro Rata Share of $5,321,204 in principal amount
of New PIK Notes to be issued by Newco and 483,211 New LLC
Interests representing approximately 4.83% of total New LLC
Interests issued on the Effective Date.
9.B. Subclass 9.B - Premium Holdings' Limited Partnership Interests
in Finance - The Limited Partnership Interests in Finance held
by Premium Holdings are Equity Interests arising from Premium
Holdings' 26% common limited partnership interest in Finance.
On the Effective Date, Premium Holdings will receive, in full
satisfaction of such Equity Interests, (i) 78,000 New LLC
Interests representing
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.78% of total New LLC Interests issued on the Effective Date,
and (ii) Warrants to purchase 532,530 New LLC Interests in an
amount representing approximately 4.4% of the outstanding New
LLC Interests, on a fully diluted basis.
9.C. Subclass 9.C - Finance Holdings' Limited Partnership Interests
in Finance - The Limited Partnership Interests in Finance held
by Finance Holdings are Equity Interests arising from Finance
Holdings' 73% common limited partnership interest in Finance.
On the Effective Date, Finance Holdings will receive, in full
satisfaction of such Equity Interests, (i) 219,000 New LLC
Interests representing 2.19% of total New LLC Interests issued
on the Effective Date, and (ii) Warrants to purchase 1,495,180
New LLC Interests in an amount representing approximately
12.41% of the outstanding New LLC Interests, on a fully
diluted basis.
9.D. Subclass 9.D - CFI's General Partnership Interest in Finance -
The General Partnership Interest in Finance held by CFI is an
Equity Interest arising from CFI's 1% general partnership
interest in Finance. On the Effective Date, CFI will receive,
in full satisfaction of such Equity Interest, (i) 3,000 of New
LLC Interests representing .03% of total New LLC Interests
issued on the Effective Date, and (ii) Warrants to purchase
20,482 New LLC Interests in an amount representing
approximately .2% of the outstanding New LLC Interests, on a
fully diluted basis.
10. Class 10 - Equity Interests in Farms - Class 10 consists of
all Equity Interests of Farms. Pursuant to the Plan, all
Allowed Equity Interests in Farms will be canceled and the
holders thereof will receive no distributions on account of
such interests.
11. Class 11 - Equity Interests in Premium Holdings - Class 11
consists of all Equity Interests of Premium Holdings. Pursuant
to the Plan, each holder of an Allowed Equity Interest in
Premium Holdings will retain such interest.
12. Class 12 - Equity Interests in Finance Holdings - Class 12
consists of all Equity Interests of Finance Holdings. Pursuant
to the Plan, each holder of an Allowed Equity Interest in
Premium Holdings will retain such interest.
13. Class 13 - Equity Interests in CFI - Class 13 consists of all
Equity Interests of CFI. Pursuant to the Plan, each holder of
an Allowed Equity Interest in CFI will retain such interest.
C. Securities to Be Issued Under the Plan
1. New PIK Notes
The New PIK Notes will be issued by Newco pursuant to a trust
indenture (the "New PIK Notes Indenture"), which will be qualified under the
Trust Indenture Act of 1939, as amended. An indenture trustee will be selected
before the Confirmation Hearing.
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The New PIK Notes will be issued in an original aggregate
principal amount of $117,500,000, to be distributed as follows: (i) $101,496,978
to the holders of the Secured Note Claims, (ii) $5,321,204 to the holders of
Preference Unit Equity Interests, and (iii) $10,681,818 to the Morgan Stanley
Funds. The New PIK Notes will bear interest at a fixed annual rate of 11%,
compounded semiannually. Interest will be paid in-kind until payment in full of
the New Term Loan, and thereafter will be payable in Cash. The New PIK Notes
will mature on the seventh anniversary of the Effective Date. To the extent not
prohibited by the New Senior Credit Agreement or the New Second Priority Note
Agreement, the PIK Notes will be subject to optional redemption by Newco at any
time at a premium starting at 111% of principal amount, declining to par at the
fifth anniversary of the Effective Date, and to optional redemption by the
holders of the New PIK Notes upon a change in control.
The New PIK Notes will be guaranteed by Reorganized Finance
and will be collaterally secured by a lien on all assets of Newco, which lien
will be junior to the indebtedness and liens under the New Senior Credit
Agreement and to the indebtedness and liens under the New Second Priority Note
Agreement.
The New PIK Notes Indenture will contain customary and usual
affirmative covenants, including compliance with laws, payment of taxes and
maintenance of corporate existence, properties and insurance, and negative
covenants, including limitations on (i) the incurrence of new indebtedness and
liens, subject to permitted exceptions, (ii) disposition of assets, (iii)
transactions with affiliates, and (iv) restricted payments. Events of default
for the New PIK Notes will be usual for the indebtedness of this kind, with
customary grace and notice provisions, including non-payment of principal and
interest, violation of covenants, cross-default and cross-acceleration, material
judgments, bankruptcy, and invalidity of security documents.
2. New LLC Interests and Warrants
Pursuant to the Restructuring Transactions described in
Section VI.E.1, "The Plan -- Implementation of the Plan; Restructuring
Transactions," on the Effective Date, Finance will be merged into Reorganized
Finance to be formed prior to the Effective Date. All of the partnership
interests in Finance, including, without limitation, the general partnership
interest, the common limited partnership interests, and the Preference Unit
Equity Interests will be canceled on the Effective Date. Options to acquire
common limited partnership interests in Finance are executory contracts and will
be rejected as of the Effective Date.
In connection with the merger of Finance into a limited
liability company and pursuant to the Restructuring Transactions, holders of
Allowed Secured Note Claims and Allowed Preference Unit Equity Interests and
Premium Holdings, Finance Holdings and CFI (Classes 4 and Subclasses 9.A, 9.B,
9.C and 9.D, respectively) will receive all of the outstanding New LLC Interests
in Reorganized Finance, which will be a limited liability company.
Pursuant to the Plan and the LLC Agreement (described in
Section VII.A.2, "Governance and Management of Reorganized Finance, Newco and
Reorganized Debtors --Management of Reorganized Finance, Newco and Reorganized
Debtors; Reorganized Finance"), and after giving effect to the Restructuring
Transactions, Reorganized Finance will issue 10,000,000 New LLC Interests,
which, subject to dilution for any employee options, will be
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distributed as follows: (i) 9,216,789 New LLC Interests, in the aggregate, to
the holders of Allowed Secured Note Claims, (ii) 483,211 New LLC Interests, in
the aggregate, to the holders of Preference Unit Equity Interests, (iii) 78,000
New LLC Interests to Reorganized Premium Holdings, (iv) 219,000 New LLC
Interests to Reorganized Finance Holdings, and (v) 3,000 New LLC Interests to
Reorganized CFI.
Pursuant to the Plan, Reorganized Finance will issue Warrants
to purchase up to 2,048,192 New LLC Interests (based on there being 10,000,000
such interests outstanding as of the Effective Date) at an exercise price of $45
per share. The Warrants will be distributed as follows: (i) Warrants to purchase
532,530 New LLC Interests, to Reorganized Premium Holdings, (ii) Warrants to
purchase 1,495,180 New LLC Interests, to Reorganized Finance Holdings, and (iii)
Warrants to purchase 20,482 New LLC Interests, to Reorganized CFI. The Warrants
will expire ten years following the Effective Date. The terms and provisions of
the Warrants are set forth in the Warrant Agreement, the form of which is
contained in the Plan Supplement as Exhibit I.
The LLC Agreement provides that all New LLC Interests will
have voting rights, except that those New LLC Interests to be received by Morgan
Stanley Group Inc. and its affiliates (other than Premium Holdings) will have no
voting rights for the New LLC Interests (including any New LLC Interests
acquired by them upon exercise of Warrants) for so long as they hold such
interests. Certain of the entities which will receive equity securities of
Reorganized Finance have agreed among themselves to enter into an agreement on
the Effective Date which will impose certain rights to participate, or to cause
other parties to such agreement to participate, in sales of substantial portions
of the equity interests in Reorganized Finance.
3. Registration of New LLC Interests,
New PIK Notes and Warrants
The holders of each of the New LLC Interests, the New PIK
Notes and the Warrants will receive registration rights entitling them to (i)
have their securities included in a four-year shelf registration, (ii) certain
"piggy-back" registration rights with respect to other registration statements,
and (iii) certain demand registration rights after expiration of the four-year
shelf, in each case, in accordance with the terms of the registration rights
agreements, the forms of which are contained in the Plan Supplement as Exhibits
D, F and J, respectively.
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D. Treatment of Executory Contracts and Unexpired Leases
Pursuant to sections 365(a), 365(f) and 1123(b)(2) of the
Bankruptcy Code, all executory contracts and unexpired leases that exist between
a Debtor and any person, including the Settlement Agreement and any other
agreements with the State of Missouri or its subdivisions, shall be deemed
assumed by the applicable Reorganized Debtor, and, subject to the consent of the
Bondholders' Committee, those executory contracts and unexpired leases to which
Farms or Finance is a party shall be assumed and assigned to Newco, other than
those executory contracts and unexpired leases (i) which have been rejected
pursuant to an order of the Bankruptcy Court entered prior to the Confirmation
Date, (ii) as to which a motion for approval of the rejection of such contracts
or leases has been filed and served prior to the Confirmation Date, or (iii)
which are set forth in Schedule 5.1 to the Plan. The Put Agreement, the Option
Agreement and all options for Finance limited partnership interests and for
Premium Holdings common stock are executory contracts and will be rejected as of
the Effective Date. Farms' guarantee of Finance's obligations under the Put
Agreement will be canceled and the liens on Farms' property pledged as
collateral for Farms' guarantee will be extinguished as of the Effective Date.
All of the notes, pledges, liens and security interests related to the Farms
Stock Loan and the Put Agreement will also be extinguished as of the Effective
Date.
The Confirmation Order will constitute an order of the
Bankruptcy Court approving all such (i) assumptions, (ii) subject to the consent
of the Bondholders' Committee, assumptions and assignments to Newco of those
executory contracts and unexpired leases to which Farms or Finance is a party,
including the Settlement Agreement and any other agreements with the State of
Missouri or its subdivisions, and (iii) rejections of executory contracts and
unexpired leases set forth in Schedule 5.1 to the Plan as of the Effective Date.
The Plan requires that all Claims for damages, if any, arising from the
rejection of an executory contract or unexpired lease be evidenced by a proof of
claim that is filed with the Bankruptcy Court and served upon attorneys for the
Debtors no later than thirty (30) days after the later of (i) notice of entry of
an order approving the rejection of such contract or lease and (ii) notice of
entry of the Confirmation Order. Failure to file a timely proof of claim will
result in such Claim being forever barred.
Pursuant to the Plan, all the Debtors' insurance policies and
any related agreements, documents or instruments, including, without limitation,
property, general liability, feed mill property, boiler and machinery,
automobile and physical damage, foreign liability, commercial general liability,
excess liability, commercial crime, fiduciary liability, title insurance and
directors' and officers' liability policies, and any retrospective premium
rating plans relating to such policies, are treated as executory contracts and
are assumed by the applicable Reorganized Debtor and, subject to the consent of
the Bondholders' Committee, those policies, instruments and agreements to which
Farms or Finance is a party, are assumed and assigned to Newco.
Unless otherwise modified, terminated, or rejected prior to
the Effective Date, all employment, consulting and severance policies, and all
compensation and benefit plans, policies and programs of the Debtors applicable
generally to their present and former directors, officers, employees,
consultants or independent contractors, including, without limitation, all
savings plans, retirement and supplemental retirement plans, health care plans,
disability plans, severance benefit plans, incentive plans, and life, accidental
death and dismemberment insurance plans, but
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excluding options for receipt of stock and/or partnership interests of any of
the Debtors, (i) are treated as executory contracts under the Plan and are
assumed by the applicable Debtor, (ii) subject to the consent of the
Bondholders' Committee, with respect to those executory contracts to which Farms
or Finance is a party, are assumed and assigned to Newco pursuant to sections
365(a), 365(f) and 1123(b)(2) of the Bankruptcy Code, (iii) survive confirmation
of the Plan and remain unaffected thereby, and (iv) shall not be discharged in
accordance with section 1141 of the Bankruptcy Code.
Pursuant to the Plan, payments, if any, due to any person for
the purpose of providing reimbursement payments for retired employees and their
spouses and dependents for medical, surgical, or hospital care benefits, or
benefits in the event of sickness, accident, disability, or death under any
plan, fund, or program (through the purchase of insurance or otherwise)
maintained or established in whole or in part by the applicable Debtor prior to
the Commencement Date will be continued for the duration of the period such
Debtor has obligated itself to provide such benefits.
E. Implementation of the Plan
1. Restructuring Transactions
On or as of the Effective Date, the distributions provided for
under the Plan shall be effectuated pursuant to the following transactions (the
"Restructuring Transactions") in the following order:
a. Finance shall be merged with and into Reorganized Finance,
with Reorganized Finance surviving and Reorganized Premium Holdings, Reorganized
Finance Holdings, Reorganized CFI and holders of Allowed Preference Unit Equity
Interests becoming the initial members of Reorganized Finance with economic
interests in the form of New LLC Interests substantially identical to their
partnership interests in Finance, including that the former holders of Allowed
Preference Unit Equity Interests shall have the right to receive distributions
totaling the Preference Unit Accumulated Liquidation Preference with respect to
their membership interests prior to any of Reorganized Finance, Reorganized
Holdings or Reorganized CFI being entitled to receive any distribution with
respect to their membership interests, except that the management of Reorganized
Finance shall be vested in all of its members, and all of the members of
Reorganized Finance shall have limited liability;
b. Thereafter, (i) holders of Allowed Secured Note Claims
shall contribute, on a pro rata basis, all but $101,496,978 of their Secured
Note Claims in exchange for New LLC Interests in Reorganized Finance as members,
(ii) former holders of Allowed Preference Unit Equity Interests in Finance will
have a pro rata portion of their New LLC Interests in Reorganized Finance
redeemed in exchange for the obligation of Reorganized Finance to pay $5,321,204
("New LLC Debt") and (iii) the LLC Agreement shall be deemed adopted by all of
the members after giving effect to the foregoing clauses (i) and (ii), and, as
so adopted, shall reflect the fact that, following the admission of holders of
Allowed Secured Note Claims as members and the partial redemption of the
interests of former holders of Allowed Preference Unit Equity Interests, such
persons as a group will collectively hold (i) as members of Reorganized Finance
97% of the outstanding New LLC Interests of Reorganized Finance and (ii) debt of
Reorganized Finance in
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the total amount of $106,818,182, in each case, in aggregate; Reorganized
Premium Holdings, Reorganized Finance Holdings and Reorganized CFI will
collectively hold 3% of the outstanding New LLC Interests of Reorganized Finance
and Morgan Stanley Group Inc. and its affiliates (other than Premium Holdings)
will have no right to participate in the management of Reorganized Finance;
c. Reorganized Premium Holdings, Reorganized Finance Holdings
and Reorganized CFI shall receive Warrants to purchase New LLC Interests;
d. Reorganized Finance shall transfer to Newco, in exchange
for all the capital stock of Newco, all of the assets of Finance (including the
Farms/Finance Note and all the capital stock of Princeton Development Corp.),
subject to all of the liabilities of Reorganized Finance (including the New LLC
Debt issued to former holders of Allowed Preference Unit Equity Interests and
the remaining Allowed Secured Note Claims that were not exchanged for New LLC
Interests, which indebtedness totals $106,818,182). Moreover, Newco shall
assume, and Reorganized Finance shall thereafter have no further obligation or
responsibility for, such liabilities (other than as guarantor), and Newco shall
issue to the holders of the New LLC Debt and Allowed Secured Note Claims, in
substitution of such obligations assumed by Newco, New PIK Notes in an aggregate
principal amount of $106,818,182;
e. Newco shall receive, in satisfaction of the Farms/Finance
Note (that was contributed by Reorganized Finance to Newco), all of the assets
of Farms subject to all of the remaining liabilities of Farms, and, as of the
Effective Date, Farms shall be dissolved; and
f. The Morgan Stanley Funds shall collectively pay $20 million
in cash to Newco in exchange for New PIK Notes having an aggregate principal
amount of $10,681,818 and the cancellation by CFI of the Capital Contribution
Notes.
The foregoing Restructuring Transactions shall be effective as
of the Effective Date pursuant to the Confirmation Order without any further
action by the members, stockholders, directors, or partners of the Reorganized
Debtors, Newco or Farms.
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The following chart illustrates the structure of the Debtors
after giving effect to the Restructuring Transactions:
______________________________________________________________________________
[GRAPHIC MATERIAL (3) OMITTED: PURSUANT TO RULE 304 OF REGULATION S-T
A NARRATIVE DESCRIPTION OF OMITTED MATERIAL IS AS FOLLOWS:
POST-REORGANIZATION PSF STRUCTURE
Certain former secured noteholders will own 99% of the
limited partnership interests in Premium Holdings, L.P. and Finance
Holdings will own a 1% general partnership interest.
Various shareholders (including Harms & Gordon) will own
79.5% of the capital stock of Premium Holdings, Premium Holdings,
L.P. will own 2.5% of the capital stock of Premium Holdings and MSLEF II(3)
will own 18% of the capital stock of Premium Holdings.
MSLEF II(3) also will own a 41% interest in Finance Holdings
and a 55% interest in CFI.
MSCP III(3) will own a 59% interest in Finance Holdings and
a 45% interest in CFI.
Reorganized Finance (an LLC) will be 97% owned by former
Secured Noteholders and preferred unitholders; .78% by Premium
Holdings, 2.19% by Finance Holdings and .03% by CFI.
Reorganized Finance will own 100% of Newco, a Delaware
corporation.]
______________________________________________________________________________
2. Compliance with Farming Laws
As of the Effective Date, Farms will no longer be the owner of
the Missouri agricultural real property and Newco will not qualify as an
"authorized farm corporation." The Restructuring Transactions, however, qualify
under another exception to the Missouri corporate farming restrictions for
corporations that acquire agricultural land in connection with the collection of
debts or the enforcement of a lien or claim on such land. In this regard, on the
Effective Date, (i) the holders of the Secured Note Claims and the Preference
Unit Equity Interests will have acquired ownership of 97% of the New LLC
Interests in Reorganized Finance in partial exchange for their claims and
interests and Reorganized Finance will convey the Farms/Finance Note to Newco,
and (ii) Newco will acquire the agricultural land and other assets of Farms in
cancellation of the Farms/Finance Note Claim.
Under this exemption for agricultural land acquired in payment
of a debt, PSF believes that Newco may own such agricultural land and conduct
its hog operations thereon (including farming activities). This exemption does
not authorize Newco to acquire additional agricultural land in Missouri beyond
that acquired from Farms on the Effective Date, but PSF does not presently
contemplate the need for additional agricultural land in Missouri, and other
options may be available if such land is required in the future. Furthermore,
the 1993 statute
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(3.) Stock ownership of MSLEF II and MSCP III in CFI, Finance Holdings and
Premium Holdings includes Morgan Stanley Capital Investors, L.P. and MSCP III
892 Investors, L.P.
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described in Section III.B, "General Information -- Corporate Farming Law,"
provides an additional exemption for Newco's hog-farming operations to the
extent of its availability.
With respect to restrictions on ownership of agricultural land
in Missouri by aliens or foreign businesses, the only significant foreign
interests known to the Debtors that contemplate having an ownership interest in
Reorganized Finance on the Effective Date is Hanwa Co., Ltd., which based on its
holding of the Secured Note Claims would own less than a 5% interest in
Reorganized Finance, which interest would not be a controlling interest in
Reorganized Finance or Newco. Therefore, Newco would not be a "foreign business"
prohibited from acquiring Missouri agricultural land. The LLC Agreement contains
provisions restricting ownership of New LLC Interests by foreign entities.
3. Financing to Be Provided As of the Effective Date
New Senior Credit Facilities
To enable PSF to exit chapter 11, the Lenders are providing an
aggregate of $90 million in financing for the working capital and operating
needs of Newco on and after the Effective Date subject to and in accordance with
the terms of a credit agreement, among Newco, as borrower, Reorganized Finance,
as guarantor, Chase Manhattan Bank, N.A., as issuing bank, collateral agent and
administrative agent, and the Lenders (the "New Senior Credit Agreement"), the
form of which is contained in the Plan Supplement as Exhibit H.
The facilities to be provided under the New Senior Credit
Agreement will consist of a revolving credit facility in the amount of $60
million (the "New Revolving Credit Facility") and a term loan facility in the
amount of $30 million (the "New Term Loan"). Availability under the New
Revolving Credit Facility will be based upon a borrowing base formula. Letters
of credit may be issued under the New Revolving Credit Facility up to a sublimit
of $5 million.
The repayment of any indebtedness under the New Senior Credit
Agreement will be (i) secured by a first priority perfected lien on
substantially all of the assets of Newco, Reorganized Finance and Princeton
Development, and (ii) guaranteed by Reorganized Finance and Princeton
Development.
The New Revolving Credit Facility will mature on September 30,
1999, and the New Term Loan will mature on September 30, 2001. The New Term Loan
will be amortized on a quarterly basis, beginning on September 30, 1997, in the
amount of $1.5 million each quarter, with a final amortization of $6 million
payable at maturity, and will contain other mandatory prepayment provisions.
At Newco's option, the interest rates per annum applicable to
loans under the New Senior Credit Agreement will be (i) Chemical Bank's
Alternate Base Rate plus 2 1/2% or (ii) Adjusted LIBOR plus 3 1/2%; provided,
however, that the applicable margin over the Alternate Base Rate and Adjusted
LIBOR shall decrease to 1 1/2% and 2 1/2%, respectively, at such time following
the six-month anniversary of the Closing Date as Newco shall have repaid
$2,500,000 in principal amount of the New Term Loan. Interest will be payable
monthly in arrears. Commitment fees will be equal to 1/2% per annum on the
average daily undrawn amount of the
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New Revolving Credit Facility. Amounts not paid when due will bear interest at a
default rate which will be the applicable interest rate (including the
applicable margin) plus 2% (or if there is no applicable interest rate, the
Alternate Base Rate plus 2%). The letter of credit fee under the New Revolving
Credit Facility will be 3% per annum on the undrawn amount of each letter of
credit issued and outstanding. Newco will also pay to the Issuing Bank standard
fronting, issuance and drawing fees with respect to each letter of credit
issued.
The New Senior Credit Agreement will include mandatory
prepayment provisions and affirmative and negative covenants customary for
facilities of this type. In addition, such agreement will contain minimum EBITDA
requirements and limits on capital expenditure levels, and customary events of
default (with customary grace and notice provisions) typical for facilities of
this type.
New Second Priority Notes
Morgan Stanley Group is providing up to $10 million in
financing for working capital and operating needs of Newco after the Effective
Date, pursuant to the terms of the New Second Priority Note Agreement, the form
of which is contained in the Plan Supplement as Exhibit G.
The New Second Priority Notes will be purchased, subject to
conditions contained therein, only if the sum of the unused amount available
under the New Senior Credit Agreement and total Cash and certain short-term
investments of Newco is less than $5 million. The obligation of Morgan Stanley
Group to purchase the New Second Priority Notes will terminate two years after
the Effective Date. The maturity of the New Second Priority Notes is six years
from the Effective Date, subject to earlier redemption. The New Second Priority
Notes will bear interest at the rate of 11% per annum payable in cash, quarterly
in arrears.
The New Second Priority Notes will be guaranteed by
Reorganized Finance and will be secured by a second priority lien on
substantially all assets of Newco, junior to the lien of the lenders under the
New Senior Credit Agreement but senior to the lien of the New PIK Notes.
The New Second Priority Notes will incorporate by reference
all events of default and covenants for the New PIK Notes, except that
acceleration of the New Second Priority Notes will be triggered only by
acceleration under the New Senior Credit Agreement or the New PIK Notes
Indenture, or breach of specified covenants. The New Second Priority Notes will
include additional covenants to preserve the relative priority of the New Second
Priority Notes vis-a-vis other secured debt and the collateral securing such
notes.
F. Method of Distributions Under the Plan
Subject to Bankruptcy Rule 9010, all distributions to a holder
of an Allowed Claim or Allowed Equity Interest shall be made by the applicable
Reorganized Debtor and in the case of PSF, by Reorganized Finance or Newco, at
the address of such holder as listed on the Schedules filed with the Bankruptcy
Court unless superseded by the address listed on a proof of Claim or Equity
Interest filed by such holder (or at the last known address of such holder if no
proof of Claim or Equity Interest is filed or if the applicable entity has been
notified in writing of a change
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of address). If any distribution to any holder is returned as undeliverable,
such Debtor, or Reorganized Finance or Newco, as applicable, shall use
reasonable efforts to determine the current address of such holder, but no
distribution to such holder shall be made unless and until a determination has
been made concerning the then current address of such holder, at which time such
distribution shall be made to such holder without interest. Amounts in respect
of any undeliverable distributions made by the applicable Reorganized Debtor and
in the case of PSF, by Reorganized Finance or Newco, shall be returned to
Reorganized Finance until such distribution is claimed. If no proofs of Claim or
Equity Interest are filed and the Schedules filed with the Bankruptcy Court fail
to state addresses for holders of Allowed Claims or Allowed Equity Interests,
the property distributable to the holders of such Allowed Claims or Allowed
Equity Interests shall be deemed unclaimed property under section 347(b) of the
Bankruptcy Code at the expiration of one year from the Effective Date. After
such date, all unclaimed property shall revert to Newco and the claim of any
holder to such property shall be discharged and forever barred. Notwithstanding
the foregoing, all distributions on account of the Secured Bank Claims shall be
paid by Reorganized Finance or Newco by wire transfer to the agent bank for the
Lenders for redistribution to the Lenders.
Any distributions and deliveries to be made as of the
Effective Date under the Plan shall be made on the Effective Date, or such later
date as a Claim or Equity Interest becomes an Allowed Claim or Allowed Equity
Interest, or as soon as practicable thereafter. If any payment or act under the
Plan is required to be made or performed on a date that is not a Business Day,
then the making of such payment or the performance of such act may be completed
on the next succeeding Business Day, but shall be deemed to have been completed
as of the required date.
At the option of Reorganized Finance, any Cash payment to be
made under the Plan may be made by a check or wire transfer (unless otherwise
specified in the Plan) or as otherwise required or provided in applicable
agreements. No payment of Cash of less than $100.00 shall be made by the
applicable Reorganized Debtor and in the case of PSF, by Reorganized Finance or
Newco to any holder of a Claim unless a request therefor has been made in
writing to Reorganized Finance. No fractional New LLC Interests or Warrants
shall be distributed.
G. Procedures for Treating Disputed Claims and Equity Interests
Unless otherwise ordered by the Bankruptcy Court after notice
and hearing, the Debtors, the Reorganized Debtors or Newco will have the
exclusive right (except as to applications for allowances of compensation and
reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code) to
make and file objections to proofs of Administrative Expense Claims, Claims, and
Equity Interests. The Debtors or the applicable Reorganized Debtor and in the
case of Farms and Finance, Reorganized Finance or Newco shall serve a copy of
each objection upon the holder of the Administrative Expense Claim, Claim, or
Equity Interest to which the objection is made as soon as practicable, but in no
event later than thirty (30) days after the Effective Date.
Notwithstanding any other provision of the Plan, if any
portion of a Claim or Equity Interest is Disputed, no payment or distribution
provided under the Plan will be made on
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account of any of such Claim or Equity Interest, unless and until such Disputed
Claim or Disputed Equity Interest becomes Allowed.
Payments and distributions to each holder of a Claim or Equity
Interest that is Disputed, or is not Allowed, to the extent that such Claim or
Equity Interest ultimately becomes Allowed, will be made in accordance with the
provisions of the Plan governing the class or subclass of Claims or Equity
Interests in which such Claim or Equity Interest is classified. As soon as
practicable after the date that the order or judgment of the Bankruptcy Court
Allowing any Disputed Claim or Disputed Equity Interest, or any other Claim or
Equity Interest that was not previously Allowed becomes a Final Order, the
applicable Reorganized Debtor and in the case of PSF, Reorganized Finance or
Newco, will distribute to the holder of such Claim or Equity Interest any
payment or property that would have been distributed to such holder if the Claim
or Equity Interest had been Allowed as of the Effective Date, without any
interest on such payment or property.
H. Conditions Precedent to the Effectiveness of the Plan
The Plan shall not become effective unless and until all of
the following conditions have been satisfied or waived by the Debtors, the
Bondholders' Committee and the lenders under the New Senior Credit Agreement:
(a) the Confirmation Order, in form and substance satisfactory
to the Debtors, the Bondholders' Committee and the lenders under the New Senior
Credit Agreement, shall have become a Final Order;
(b) the following agreements, in form satisfactory to the
Debtors, the Bondholders' Committee, and the lenders under the New Senior Credit
Agreement shall have been executed and delivered, and all conditions precedent
thereto shall have been satisfied:
(1) the New Senior Credit Agreement,
(2) the New Second Priority Note Agreement,
(3) the New PIK Notes Indenture,
(4) the Warrant Agreement,
(5) the New LLC Interests Registration Rights Agreement,
(6) the New PIK Notes Registration Rights Agreement,
(7) the Warrants Registration Rights agreement,
(8) the Intercreditor Agreement,
(9) the LLC Agreement, and
(10) Management Option Plan;
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(c) the New PIK Notes Indenture shall have been qualified
under the Trust Indenture Act of 1939;
(d) the Morgan Stanley Funds shall, simultaneously with the
effectiveness of the Plan, pay $20 million to Newco in accordance with the
Restructuring Transactions; and
(e) (x) a deadline for filing proofs of Claim against the
Debtors shall have been established by order of the Bankruptcy Court, as a date
not later than 15 days prior to the Confirmation Date and (y) neither the
Bondholders' Committee nor the Lenders under the New Senior Credit Agreement
shall, on or before the Confirmation Date, have determined that the aggregate
amount of Claims in Classes 5, 6 and 7 against PSF render the Plan not feasible.
If, by the earlier of (x) December 31, 1996 or (y) sixty days
after the Confirmation Date, one or more of the foregoing conditions have not
occurred or have not been waived, and upon notification submitted by the Debtors
to the Bankruptcy Court, attorneys for the Bondholders' Committee, and attorneys
for the lenders under the New Senior Credit Agreement, (i) the Confirmation
Order shall be vacated, (ii) no distributions under the Plan shall be made,
(iii) the Debtors and all holders of Claims and Equity Interests shall be
restored to the status quo ante as of the day immediately preceding the
Confirmation Date as though the Confirmation Date had never occurred, and (iv)
all the Debtors' obligations with respect to the Claims and Equity Interests
shall remain unchanged and nothing contained in the Plan shall be deemed to
constitute a waiver or release of any claims or Claims by or against the Debtors
or any other person, or to prejudice in any manner the rights of the Debtors or
any person in any further proceedings involving the Debtors.
The Debtors, with the written consent of the Bondholders'
Committee and the lenders under the New Senior Credit Agreement, may waive, by a
writing signed by an authorized representative of the Debtors and subsequently
filed with the Bankruptcy Court, one or more of the conditions to effectiveness
of the Plan.
I. Effect of Confirmation of the Plan
On the Effective Date, the property and estates of Finance and
Farms shall vest in Reorganized Finance and Newco as provided in the
Restructuring Transactions, and shall be free and clear of all interests of
holders of Claims and Equity Interests, except as otherwise provided in the
Plan. Unless otherwise provided herein, all injunctions or stays provided for in
the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code or
otherwise, and in existence on the Confirmation Date, shall remain in full force
and effect until the Effective Date.
The rights afforded in the Plan and the treatment of all
Claims and Equity Interests provided for in the Plan shall be in exchange for
and in complete satisfaction, discharge, and release of Claims and Equity
Interests of any nature whatsoever, other than environmental obligations or
other contractual obligations with the State of Missouri or any of its
subdivisions under federal or state laws, including any interest accrued on such
Claims from and after the Commencement Date, against the applicable Debtor and
Debtor in Possession, or any of its assets or property. Except as otherwise
provided in the Plan, (i) on the Effective Date, all such Claims against, and
Equity Interests in, the Debtors shall be satisfied, discharged, and released in
full, and
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(ii) all persons shall be precluded from asserting against Reorganized Premium
Holdings, Reorganized Finance Holdings, Reorganized CFI, Reorganized Finance,
Newco, their successors, or their assets or property any other or further Claims
or Equity Interests based upon any act or omission, transaction, or other
activity of any kind that occurred prior to the Confirmation Date.
J. Other Provisions of the Plan
1. Exculpation
Neither the Reorganized Debtors, Reorganized Finance, Newco,
the Bondholders' Committee, the Lenders under the Bank Credit Agreement, the
lenders under the DIP Credit Agreement, the lenders under the New Senior Credit
Agreement, Morgan Stanley Group Inc., the Indenture Trustee and the Collateral
Trustee, nor any of their respective members, officers, directors, employees,
attorneys, advisors, agents, general partners, partners, or consultants who
provide management personnel or who serve as members of management of any of the
Debtors, shall have or incur any liability to any holder of a Claim or Equity
Interest for any act or omission in connection with, or arising out of, the
formulation and negotiation of the Plan, the pursuit of confirmation of the
Plan, the consummation of the Plan, or the administration of the Plan or the
property to be distributed under the Plan, except for willful misconduct or
gross negligence, and, in all respects, Reorganized Premium Holdings,
Reorganized Finance Holdings, Reorganized CFI, Reorganized Finance, Newco, the
Bondholders' Committee, the Lenders under the Bank Credit Agreement, the lenders
under the DIP Credit Agreement, the lenders under the New Senior Credit
Agreement, Morgan Stanley Group Inc., the Indenture Trustee and the Collateral
Trustee, and each of their respective members, officers, directors, employees,
attorneys, advisors, agents, general partners, partners, and consultants who
provide management personnel or who serve as members of management of any of the
Debtors, shall be entitled to rely upon the advice of attorneys and other
professional advisors with respect to their duties and responsibilities under
the Plan.
2. Releases
General Release of Releasees and Other Entities. Pursuant to
the Plan, as of the Effective Date, each of the Debtors and Debtors in
Possession, and each holder of a Claim against or Equity Interest in any of the
Debtors or Debtors in Possession generally releases all present and former
officers, directors, attorneys, agents, advisors, partners and officers and
directors of such partners, of or to the Debtors, and consultants who provide
management personnel or who serve as members of management of any of the Debtors
(collectively, the "Releasees"), in any capacity, the Lenders under the Bank
Credit Agreement, the holders of the Secured Notes, the holders of Preference
Unit Equity Interests, the Indenture Trustee and the Collateral Trustee from
claims, obligations, rights, causes of action and liabilities held by such
Debtor, Debtor in Possession or such holder against such individuals and
entities, whether known or unknown, existing or hereafter arising, based in
whole or in part upon any act or omission or other event occurring prior to the
Commencement Date or during the course of the Chapter 11 Cases, including
through the Effective Date, in any way relating to the Debtors, the Debtors in
Possession, the Chapter 11 Cases, the Plan, the Bank Credit Agreement, the
Secured Notes, the Preference Unit Equity Interests and the Equity Interests in
the Debtors, the Indenture Trustee and the Collateral Trustee and the ownership,
management and operation of the Debtors.
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General Release by Releasees and Certain Entities. As of the
Effective Date, each of the Releasees, in any capacity, the Lenders under the
Bank Credit Agreement, the holders of the Secured Notes, the holders of
Preference Unit Equity Interests, the Indenture Trustee and the Collateral
Trustee generally releases each of the Debtors, the Debtors in Possession, and
each holder of a Claim against or Equity Interest in any of the Debtors or
Debtors in Possession, in each case in any capacity, from claims, obligations,
rights, causes of action and liabilities held by such Releasee, the Lenders
under the Bank Credit Agreement, the holders of the Secured Notes, the holders
of Preference Unit Equity Interests, the Indenture Trustee and the Collateral
Trustee against any of the Debtors, the Debtors in Possession or any such
Releasee or holder, whether known or unknown, existing or hereafter arising,
based in whole or in part upon any act or omission or other event occurring
prior to the Commencement Date or during the course of the Chapter 11 Cases,
including through the Effective Date, in any way relating to the Debtors, the
Debtors in Possession, the Chapter 11 Cases, the Plan, the Bank Credit
Agreement, the Secured Notes, the Preference Unit Equity Interests and the
Equity Interests in the Debtors and the ownership, management and operation of
the Debtors; provided, however, that this sentence shall not affect the
obligations of the Debtors under Sections 2.3 and 5.6 of the Plan.
Binding Effect of Releases. Each Releasee and each holder of a
Claim and each holder of an Equity Interest, including, without limitation, a
Secured Bank Claim, a Secured Note Claim or a Preference Unit Equity Interest,
the Indenture Trustee and the Collateral Trustee will be deemed to have agreed
to the provisions of Sections 13.1 and 13.2 of the Plan, and shall be bound
thereby for all purposes whatsoever.
3. Indemnification Obligations
The Plan generally provides that the obligations of each
Debtor to indemnify its present and any former directors, officers, general
partners, partners, employees, and consultants who provide management personnel
or who serve as members of management of any of the Debtors, that were
directors, officers, general partners, partners, employees, or such consultants
at any time (each, an "Indemnified Person") on or after the Commencement Date
against any obligations pursuant to such Debtor's certificate or articles of
incorporation, bylaws, partnership agreement, applicable state law or specific
agreement, or any combination of the foregoing, will survive confirmation of the
Plan, remain unaffected thereby and not be discharged, irrespective of whether
indemnification is owed in connection with an event occurring before, on or
after the Commencement Date. To the knowledge of the Debtors, no claims giving
rise to a right of indemnification have been asserted against any director,
officer, general partner, partner, employee, or consultant who provides
management personnel or who serves as a member of management of any of the
Debtors, prior to the Commencement Date.
Notwithstanding any provision of the Plan, including, without
limitation, Sections 5.1 or 5.6(a), all obligations of the Debtors to indemnify,
or to pay contribution or reimbursement to any Indemnified Person, whether
pursuant to its respective articles of incorporation, by-laws, partnership
agreements, applicable law, or specific agreement, or any combination of the
foregoing, in respect of all past, present and future actions, suits and
proceedings against any such Indemnified Person based upon any act or omission
related to service with, for or on behalf of any of the Debtors or Debtors in
Possession or any present or former affiliate of any Debtor arising out of or
related, directly or indirectly, to any action, suit or proceeding against any
such person
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(i) brought by any person which is a present or former purchaser, seller,
underwriter or owner, in each case, acting in such capacity, of present or
former securities of any Debtor or of any present or former affiliate thereof,
including, without limitation, the Morgan Stanley Funds or brought by or in the
name of any Debtor, in each case, arising out of or related to any alleged right
of rescission of, or damages arising from, any purchase or sale of such
securities under federal or state securities laws (whether statutory or
otherwise) or (ii) brought by any other person (a "Third Party Claimant")
against an Indemnified Person asserting claims for contribution, reimbursement
or indemnity by such Third Party Claimant arising out of or related to any
action, suit or proceeding against such Third Party Claimant which, had it been
brought against an Indemnified Person, would be described in clause (i) above
(any such action, suit, claim or proceeding described in any of clauses (i) or
(ii), an "Excluded Claim"), and any and all such undertakings and agreements to
provide any indemnification, contribution or reimbursement with respect to any
Excluded Claim shall be terminated, and the Reorganized Debtors and Newco shall
have no obligation thereunder pursuant to the Plan or otherwise.
4. Exemption From Transfer Taxes
Pursuant to section 1146(c) of the Bankruptcy Code, the
issuance, transfer, or exchange of notes or equity securities under the Plan,
the creation of any mortgage, deed of trust, or other security interest, the
making or assignment of any lease or sublease, or the making or delivery of any
deed or other instrument of transfer under, in furtherance of, or in connection
with, the Plan, including any merger agreements or agreements of consolidation,
deeds, bills of sale, or assignments executed in connection with any of the
transactions contemplated under the Plan shall not be subject to any stamp, real
estate transfer, mortgage recording, or other similar tax.
5. Amendment or Modification of the Plan
The Debtors, with the consent of the Bondholders' Committee
and the lenders under the New Senior Credit Agreement, may alter, amend, or
modify the treatment of Claims or Equity Interests provided for under the Plan
to the extent provided in the Bankruptcy Code, or as agreed or consented to by
the holders of such Claims or Equity Interests.
6. Severability
The Plan constitutes a separate chapter 11 plan for each of
the Debtors; provided, however, that the chapter 11 plan for Finance will not be
confirmed without simultaneous confirmation of the chapter 11 plan for Farms,
and vice versa. Failure to confirm or consummate the Plan as to Finance
Holdings, Premium Holdings or CFI will not affect confirmation or consummation
of the chapter 11 plan for Finance or Farms.
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VII.
GOVERNANCE AND MANAGEMENT OF REORGANIZED FINANCE,
NEWCO AND REORGANIZED DEBTORS
A. Management of Reorganized Finance,
Newco and Reorganized Debtors
1. General
On the Effective Date, the management, control and operation
of each of Reorganized Finance, Newco, Reorganized Premium Holdings, Reorganized
Finance Holdings, and Reorganized CFI will become the general responsibility,
respectively, of the members of Reorganized Finance, and the Boards of Directors
of Newco, Reorganized Premium Holdings, Reorganized Finance Holdings and
Reorganized CFI.
2. Reorganized Finance
As described above, pursuant to the Restructuring
Transactions, Finance will be merged into a newly formed limited liability
company organized under the Delaware Limited Liability Company Act (the "LLC
Act"). The administration and regulation of Reorganized Finance's affairs,
voting by members, and admission of members will be governed by a limited
liability company agreement (the "LLC Agreement"), a form of which is contained
in the Plan Supplement as Exhibit B. The term of the LLC Agreement will be fifty
years, subject to extension as provided in the LLC Agreement, unless earlier
terminated pursuant to its terms or under applicable law.
On the Effective Date, the members of Reorganized Finance will
be the holders of Allowed Secured Note Claims, the holders of Allowed Preference
Unit Equity Interests, Reorganized Premium Holdings, Reorganized Finance
Holdings, and Reorganized CFI. The management of Reorganized Finance will be
vested in its members, and each member will have limited liability under the LLC
Act. All New LLC Interests will have voting rights, except that, following the
admission of Allowed Secured Note Claims as members pursuant to the
Restructuring Transactions, those New LLC Interests held by Morgan Stanley
Group, Inc. and its affiliates (other than Premium Holdings) will have no right
to vote their New LLC Interests (including any New LLC Interests acquired by
them upon exercise of Warrants) for so long as they hold such interests. Morgan
Stanley Group Inc. and its affiliates (other than Premium Holdings) also will
have no right, after such time, to participate in the management of Reorganized
Finance.
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3. Boards of Directors of Newco and Reorganized Debtors
The initial Board of Directors of Newco shall consist of one
(1) management director and five (5) directors named by the Bondholders'
Committee. The names of such directors will be disclosed prior to the
Confirmation Hearing. Subsequent Boards of Directors of Newco shall be elected
by the holders of New LLC Interests of Reorganized Finance, except that Morgan
Stanley Group Inc. and its affiliates (other than Premium Holdings) will have no
right to vote their New LLC Interests (including any New LLC Interests acquired
by them upon exercise of Warrants).
The initial Boards of Directors of Reorganized Premium
Holdings, Reorganized Finance Holdings and Reorganized CFI shall be appointed by
their respective stockholders and shall consist of the individuals whose names
shall be disclosed prior to the Confirmation Hearing. Each of the members of
such initial Boards of Directors shall serve in accordance with the articles of
incorporation or bylaws of such Reorganized Debtor.
4. Identity of Officers of Newco and Reorganized Debtors
The initial officers of Newco will be the individuals,
satisfactory to the Bondholders' Committee, whose names will be disclosed prior
to the Confirmation Hearing. The initial officers of Reorganized CFI,
Reorganized Finance Holdings and Reorganized Premium Holdings will be those
individuals who were officers of the applicable Debtor immediately prior to the
Effective Date. Thereafter, such officers will serve in accordance with any
employment agreement with such entity and applicable non-bankruptcy law.
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5. Compensation of Executive Officers
The following table sets forth all cash compensation paid by
the Debtors in fiscal year 1995 to each of the five highly compensated
executives of each entity, and to all executive officers as a group, for
services rendered in all of their respective capacities in fiscal year 1995:
Premium Standard Farms, Inc. and PSF Finance L.P.
Compensation of Executive Officers for Calendar Year 1995
<TABLE>
<CAPTION>
Name of Individual Capacities in Which Served Compensation
- ------------------ -------------------------- ------------
<S> <C> <C>
Dennis W. Harms CEO, President, and Co-Chairman $ 290,413
of the Board of Farms
Theodore J. Co-Chairman of the Board 273,819
Gordon, Jr. of Farms
Kevin Becker Chief Financial Officer 328,942
(no longer employed
by Debtors)
Rick Anderson Sr. Vice President of Construction 214,215
and Engineering
John Stadler President of the Premium Standard 206,592
(currently Foods Division of Finance and Sr.
serves as a Vice President of Pork Processing
consultant) of Farms
All executive officers
as a group, including the
above-referenced persons $2,483,199
</TABLE>
6. Compensation of Insiders
Pursuant to section 1129(a)(5)(B) of the Bankruptcy Code, the
amount of compensation to be paid to any insider to be employed or retained by
the Reorganized Debtors and Newco will be disclosed prior to the Confirmation
Hearing.
7. Articles of Incorporation and Bylaws
of Newco and Reorganized Debtors
The articles of incorporation and bylaws of Newco, Reorganized
CFI, Reorganized Finance Holdings and Reorganized Premium Holdings will contain
provisions necessary (i) to prohibit the issuance of non-voting equity
securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to
further amendment of such articles of incorporation as permitted by applicable
law; and (ii) to effectuate the provisions of the Plan.
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B. Management Option Plan
Reorganized Finance will adopt a Management Option Plan, the
form of which is contained in the Plan Supplement as Exhibit C. Under the
Management Option Plan, the Board of Directors of Reorganized Finance may, in
its discretion, authorize the issuance of options to Newco's employees to
purchase up to a total of 526,315 New LLC Interests.
VIII.
PROJECTIONS
Consolidated Projected Financial Statements
The Bankruptcy Code conditions confirmation of the Plan on,
among other things, a finding by the Bankruptcy Court that confirmation is not
likely to be followed by the liquidation or the need for further financial
reorganization of the Consolidated Company. See Section XV.B.3 "Conditions to
Confirmation of the Plan -- Feasibility." In this connection, the Debtors
developed the projections of operations, cash flows and financial position for
fiscal years ending December 31, 1996 through December 31, 2000, giving effect
to the adjustments necessary to reflect the confirmation and consummation of the
Plan, which is assumed to occur as of July 31, 1996 and for the subsequent 4 1/2
fiscal years ending December 31, 2000 (the "Projections"), annexed hereto as
Exhibit E.
The Projections should be read in conjunction with the
assumptions, qualifications, and the footnotes to tables containing the
Projections contained herein.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO COMPLYING
WITH THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE INDEPENDENT ACCOUNTANTS
FOR THE DEBTORS, ERNST & YOUNG LLP, AND THE FINANCIAL ADVISORS TO THE DEBTORS,
ARTHUR ANDERSEN LLP, HAVE NOT EXAMINED OR COMPILED THE ACCOMPANYING PROSPECTIVE
FINANCIAL INFORMATION AND ACCORDINGLY DO NOT EXPRESS AN OPINION OR ANY OTHER
FORM OF ASSURANCE WITH RESPECT THERETO.
THE DEBTORS DO NOT PUBLISH THEIR BUSINESS PLAN AND STRATEGIES
OR PROJECTIONS OF THEIR ANTICIPATED FINANCIAL POSITION OR RESULTS OF OPERATIONS.
ACCORDINGLY, THE DEBTORS DO NOT INTEND, AND DISCLAIM ANY OBLIGATION, TO (i)
FURNISH AN UPDATED BUSINESS PLAN OR PROJECTIONS TO HOLDERS OF CLAIMS OR EQUITY
INTERESTS PRIOR TO THE EFFECTIVE DATE OR TO ANY OTHER ENTITY AFTER THE EFFECTIVE
DATE, OR (ii) MAKE SUCH UPDATED INFORMATION PUBLICLY AVAILABLE.
THE PROJECTIONS PROVIDED IN THE DISCLOSURE STATEMENT,
ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, ARE BASED UPON A
SERIES OF ESTIMATES AND ASSUMPTIONS, WHICH MAY NOT BE REALIZED AND
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ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE
DEBTORS. IF CURRENT TRENDS AS TO HOG PRICES WERE TO CONTINUE, THE EBITDA RESULTS
FOR 1996 COULD INCREASE BY A RANGE OF $5 MILLION TO $7 MILLION AND THERE COULD
BE CORRESPONDING INCREASES IN 1997. THE DEBTORS ESTIMATE A $1 CHANGE IN LIVE HOG
MARKET PRICES WOULD HAVE AN IMPACT OF APPROXIMATELY $4.7 MILLION IN ANNUAL
REVENUES. CONVERSELY, A CHANGE IN CURRENT TRENDS COULD ADVERSELY AFFECT THE
PROJECTIONS. ACCORDINGLY, NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF
THESE FINANCIAL PROJECTIONS OR TO THE CAPACITY OF THE DEBTORS TO ACHIEVE THE
PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE, AND EVENTS
AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS
WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED, OR MAY BE UNANTICIPATED, AND,
ACCORDINGLY, MAY AFFECT FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE
MANNER. THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTEE OR
OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.
THE FOREGOING ASSUMPTIONS AND RESULTANT COMPUTATIONS WERE MADE
SOLELY FOR PURPOSES OF PREPARING THE PROJECTIONS. ALTHOUGH THE DEBTORS EXPECT TO
UTILIZE A CONSISTENT METHODOLOGY, THE CHANGES BETWEEN THE AMOUNTS OF ANY OR ALL
OF THE FOREGOING ITEMS AS ASSUMED IN THE PROJECTIONS AND THE ACTUAL AMOUNTS
THEREOF AS OF THE EFFECTIVE DATE MAY BE MATERIAL.
The accompanying projected consolidated pro forma balance
sheets, income statements and cash flows for the 4 1/2-year period ending
December 31, 2000, have been prepared assuming the confirmation of the Plan
occurs on or about August 31, 1996.
IX.
FINANCIAL INFORMATION
A. General
Finance and Farms were current in making their required
periodic filings on Forms 10-K and 10-Q until they voluntarily suspended their
registration on or about April 17, 1996. Such filings contained the audited
consolidated balance sheets, and the related consolidated statements of
operations, stockholders' equity and cash flows. Such filings are publicly
available for review by holders of Claims, Equity Interests and other parties in
interest.
The consolidated financial statements as of December 31, 1995
and December 31, 1994, together with the Report of Independent Public
Accountants, for Finance, which includes Farms, and the unaudited consolidated
financial statements as of July 1, 1996, are incorporated as Exhibit C hereto
and form a part of this Disclosure Statement.
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The Debtors are required to file monthly financial statements
with the Office of the United States Trustee and the Clerk of the Bankruptcy
Court. Accordingly, such financial information is on file with the Bankruptcy
Court and is publicly available for review by holders of Claims, Equity
Interests and other entities.
X.
VALUATION
A. Estimated Liquidation Value of Assets
As a condition to confirmation of the Plan, section
1129(a)(7)(A)(ii) of the Bankruptcy Code requires that each holder of a Claim or
Equity Interest in an impaired class of Claims or Equity Interests that has not
voted to accept the Plan must be distributed an account of such Claim or Equity
Interest consideration of a value not less than that which it would receive if
the Debtors were liquidated under chapter 7 of the Bankruptcy Code on the
Effective Date. The information contained in Exhibit D attached hereto provides
a summary of the liquidation values of the Debtors' properties and interests in
property, on a consolidated basis, assuming a chapter 7 liquidation in which a
trustee appointed by the Bankruptcy Court would liquidate the properties and
interests in property comprising the estates of the Debtors. Reference should be
made to the Liquidation Analysis annexed as Exhibit D hereto for a complete
discussion and presentation of such liquidation analysis. The Liquidation
Analysis was prepared by management of the Debtors.
Underlying the Liquidation Analysis are a number of estimates
and assumptions that, although developed and considered reasonable by management
of the Debtors, are inherently subject to significant economic and competitive
uncertainties and contingencies beyond the control of the Debtors and
management. The Liquidation Analysis is also based upon assumptions with regard
to liquidation decisions that are subject to change. Accordingly, the values
reflected may not be realized if the Debtors were actually to be the subject of
such a liquidation. The chapter 7 liquidation period is assumed to be a period
of six months following the operations of the Debtors in Possession for four
months. This period would allow for the collection of receivables, sale of
properties and interests in property, and the winding down of operations.
B. Reorganization Value
The Debtors have been advised by Arthur Andersen LLP ("Arthur
Andersen") with respect to the fair market value of the Debtors' business
enterprise following their capital restructuring under the Plan. As of July 1,
1996, the range of enterprise values (which includes the value of the Debtors'
business and the value of certain other assets) of the Reorganized Debtors,
after distributions of Cash under the Plan, was estimated for purposes of the
Plan by the Debtors, based on advice from Arthur Andersen, to be approximately
between $251 million and $271 million. Based upon the estimated reorganization
value of the Reorganized Debtors and an estimated total debt (including capital
lease obligations) with a total value of approximately $151 million, the Debtors
have employed an estimated range of equity value for the Reorganized Debtors of
approximately $111 million to $120 million or approximately $11.10 per unit to
$12.00 per unit of New LLC Interests based upon distribution of 10 million units
of New LLC
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Interests under the Plan. The foregoing valuations are based on a number of
assumptions, including a successful reorganization of the Debtors' finances in a
timely manner, the achievement of the forecasts reflected in the financial
projections, the amount of available cash at the Effective Date, the
availability of certain tax attributes, favorable market conditions and
commodities prices, no material changes between July 1, 1996, and the Plan
becoming effective in accordance with its terms.
Estimates of value do not purport to be appraisals or
necessarily reflect the values which may be realized if assets are sold. The
estimates of value represent hypothetical reor ganization enterprise values of
the Reorganized Debtors as the continuing owner and operator of the Debtors'
business and assets. Such estimates were developed solely for purposes of
formulation and negotiation of a plan of reorganization and analysis of
projected relative recoveries to creditors thereunder. Such estimates reflect
computations of the estimated reorganization value of the Reorganized Debtors
through the application of various valuation techniques and does not purport to
reflect or constitute appraisals, liquidation values or estimates of the actual
market value that may be realized through the sale of any securities to be
issued pursuant to the Plan, which may be significantly different than the
amounts set forth herein. The value of an operating business, such as the
business of the Debtors, is subject to uncertainties and contingencies which are
difficult to predict, and will fluctuate with changes in factors affecting the
financial conditions and prospects of such a business. AS A RESULT, THE ESTIMATE
OF THE RANGE OF REORGANIZATION VALUES SET FORTH HEREIN IS NOT NECESSARILY
INDICATIVE OF ACTUAL OUTCOMES, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE
THAN THOSE SET FORTH HEREIN. BECAUSE SUCH ESTIMATE IS INHERENTLY SUBJECT TO
UNCERTAINTIES, NEITHER THE DEBTORS, ARTHUR ANDERSEN, NOR ANY OTHER PERSON
ASSUMES RESPONSIBILITY FOR ITS ACCURACY. IN ADDITION, THE VALUATION OF NEWLY
ISSUED SECURITIES IS SUBJECT TO ADDITIONAL UNCERTAINTIES AND CONTINGENCIES, ALL
OF WHICH ARE DIFFICULT TO PREDICT. Actual market prices of such securities at
issuance will depend upon, among other things, prevailing interest rates,
conditions in the financial markets, the anticipated initial securities holdings
of the prepetition creditors, some of which may prefer to liquidate their
investment rather than hold it on a long-term basis, and other factors which
generally influence the prices of securities. It should be noted that there is
presently no trading market for New LLC Interests, and there can be no assurance
that a trading market for New LLC Interests will develop.
Arthur Andersen has undertaken its valuation analysis for
purposes of determining the value available to distribute to holders of Claims
against, and Equity Interests in, the Debtors and analyzing relative recoveries
by such entities thereunder. The analysis is based on the financial projections
by management of the Debtors as well as current market conditions, commodities
prices, and statistics. The values are of July 1, 1996. Arthur Andersen used the
market and income approaches to the valuation of PSF's business. These valuation
techniques reflect both the market's current view of the industry and PSF's
five-year Business Plan. The estimated range for the reorganization value of
Reorganized Debtors' business, after cash distributions in the Plan, is from
$251 million to $271 million, with a midpoint value of $261 million.
In preparing a range of the estimated enterprise value of
Reorganized Debtors,
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Arthur Andersen: (i) reviewed certain historical financial information of the
Debtors for recent years and interim periods; (ii) reviewed certain internal
financial and operating data of the Debtors, including five-year financial
projections provided by management relating to their business and prospects;
(iii) met with certain members of senior management of the Debtors to discuss
operations and future prospects; (iv) reviewed publicly available financial data
and considered the market values of public companies generally deemed comparable
to the operating business of the Debtors; (v) reviewed the financial terms to
the extent publicly available of certain acquisitions of companies believed to
be comparable to the operating business of the Debtors; (vi) considered certain
economic and industry information relevant to the operating business of the
Debtors; (vii) made site visits to the hog production facilities in Missouri and
Texas and the Milan, Missouri meat-processing plant; and (viii) conducted such
other analyses as Arthur Andersen deemed appropriate. Although Arthur Andersen
conducted a review and analysis of the Debtors' business, operating assets and
liabilities and Business Plan, Arthur Andersen assumed and relied on the
accuracy and completeness of all financial and other information furnished to it
by the Debtors and other firms retained by the Debtors, and publicly available
information. In addition, Arthur Andersen did not independently verify
management's projections in connection with such valuation. Arthur Andersen did
not perform any attest or audit functions under generally accepted accounting
principles on the Debtors' historical financial statements or financial
projections in the Business Plan.
THE ESTIMATED ENTERPRISE VALUE, EQUITY VALUE AND PER UNIT
VALUE OF NEW LLC INTERESTS IS HIGHLY DEPENDENT UPON ACHIEVING FUTURE FINANCIAL
RESULTS SET FORTH IN THE FINANCIAL PROJECTIONS WHICH ARE NOT GUARANTEED.
THE VALUATIONS REPRESENT ESTIMATED REORGANIZATION VALUES AND
DO NOT NECESSARILY REFLECT VALUES THAT COULD BE ATTAINABLE IN PUBLIC OR PRIVATE
MARKETS. THE EQUITY VALUE ASCRIBED IN THE ANALYSIS DOES NOT PURPORT TO BE AN
ESTIMATE OF THE POST-REORGANIZATION MARKET TRADING VALUE. SUCH TRADING VALUE, IF
ANY, MAY BE MATERIALLY DIFFERENT FROM THE REORGANIZATION EQUITY VALUE RANGES
ASSOCIATED WITH THE VALUATION ANALYSIS.
XI.
RISK FACTORS
HOLDERS OF CLAIMS AGAINST, AND EQUITY INTERESTS IN, THE
DEBTORS SHOULD CAREFULLY READ AND CONSIDER THE FACTORS SET FORTH BELOW, AS WELL
AS THE OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE
DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE), PRIOR
TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER,
BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN
AND ITS IMPLEMENTATION.
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A. Sensitivity to Commodity Prices
PSF's gross profitability is primarily dependent on the price
of its pork and pork products and the cost of feed stocks. The prices of these
products are highly volatile as a result of a number of factors beyond PSF's
control. As a consequence, PSF's revenues and costs could be materially impacted
by significant changes in such prices and PSF could encounter liquidity
problems.
B. Herd Productivity and Feed Efficiency
PSF's sow herd productivity and feed efficiency are primary
measures by which PSF evaluates its operating performance. Sow productivity, as
measured by the number of pigs which reach 45-50 pounds per sow per year, is a
measure of the performance of PSF's breeding, gestation, farrowing and nursery
operations. Changes in sow productivity can have a material effect on
profitability and margins because a substantial portion of the costs of
operating a sow unit are either fixed or related to the number of sows. Sow
productivity is influenced by a number of factors, including the rapid growth of
production, sow base and number of employees, the health condition of PSF's
hogs, and their genetics and environment. The feed conversion ratio is measured
by the number of pounds of feed consumed to produce a pound of live weight in
hogs in PSF's finishing units and is a measure of the performance of PSF's
hog-finishing operations. Changes in feed efficiency affect per head feed
consumption and hence the cost of feed, a primary cost component in PSF's
hog-production operations. Feed efficiency is affected by a number of factors,
including the rapid growth of production and number of new employees, the health
condition of PSF's animals, and the nutrient value of available feed
ingredients.
While PSF's sow productivity and feed efficiency have
fluctuated within a relatively narrow range, there can be no assurance that such
a trend will continue in the future.
C. Impact of Disease
The ability to maintain health and control disease is a large
factor in the productivity and profitability of a hog operation. Disease may
reduce the number of pigs weaned per sow and hamper the growth of pigs to
finished size. PSF experienced several outbreaks of disease in recent years. In
the second quarter of 1994, there was an outbreak of TGE, a viral disease of
swine herds, which affected fourteen of PSF's forty-seven 1,100-head sow units
then in operation in Missouri. A similar outbreak of TGE occurred in the Texas
operations in December 1994. There were several outbreaks of TGE and PURRS, a
respiratory disease affecting swine herds, in 1995. Although PSF believes that
its production system, the geographic separation of its units and biosecurity
measures have minimized the effect of disease outbreaks, no assurance can be
made that outbreaks of disease will not occur in the future.
D. Variance from Projections
The Projections reflect numerous assumptions concerning the
anticipated future performance of the Reorganized Debtors, many of which are
beyond their control and some of which may not materialize. The Projections
include, among other things, assumptions concerning general economic conditions
and commodity prices and the ability to control expenses and increase growth
margin. Although the Reorganized Debtors believe that the assumptions underlying
the projected financial statements are reasonable, unanticipated future events
and
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circumstances occurring subsequent to the preparation of the Projections may
affect the actual financial results of the Reorganized Debtors. Therefore, the
actual results achieved throughout the periods covered by the Projections will
vary from the projected results, which variations may be material and adverse.
E. Lack of Trading Market
After the Effective Date and issuance of the New PIK Notes,
there can be no assurance that an active trading market will develop therefor,
or, if developed, that it will continue for such securities. In addition, there
can be no assurance as to the degree of price volatility in any market for such
securities if one develops. Accordingly, no assurance can be given that a holder
of any such securities will be able to sell such securities in the future or as
to the price at which any sale may occur. If such markets were to exist, such
securities could trade at prices higher or lower than the value attributed to
such securities hereunder, depending upon many factors, including, without
limitation, the prevailing interest rates, markets for similar securities,
industry conditions, and the performance of, and investor expectations for, the
Reorganized Debtors.
F. Funding After the Effective Date
As described in Section VI.E.3, "The Plan -- Implementation of
the Plan; Financing to Be Provided As of the Effective Date," the Reorganized
Debtors have reached an agreement with (i) Chase Manhattan Bank, N.A. and the
Lenders under the New Senior Credit Agreement to refinance the existing bank
indebtedness of the Debtors and to fund the distributions provided for under the
Plan, and (ii) Morgan Stanley Group under the New Second Priority Note Agreement
to provide additional working capital under certain circumstances. Funding under
each of the New Senior Credit Agreement and the New Second Priority Note
Agreement is subject to material conditions precedent. No assurance can be given
that such conditions precedent shall be satisfied or waived by the Lenders under
the New Senior Credit Agreement and by Morgan Stanley Group under the New Second
Priority Note Agreement.
In addition, the New Senior Credit Agreement contains certain
restrictions on the operations of Newco and Reorganized Finance and requires
that they achieve and maintain certain financial ratios. Such restrictions will
likely include, among other things, limitations on their ability to incur
additional indebtedness, to create, incur or permit the existence of certain
liens, to make certain investments, to make capital expenditures in excess of
certain amounts, to sell assets over a certain value, to make certain payments
with respect to outstanding stock of Newco, to effect certain fundamental
changes and to enter into certain types of transactions. There can be no
assurance that Newco and Reorganized Finance will be able to achieve and
maintain compliance with the prescribed financial ratio tests or other
requirements of the New Senior Credit Agreement. Failure to achieve or maintain
compliance with such financial ratio tests or other requirements under the New
Senior Credit Agreement would result in a default and could lead to the
acceleration of the obligations of Newco and Reorganized Finance under the New
Senior Credit Agreement, which, in turn, could have a material adverse effect on
the Reorganized Debtors.
G. Certain Taxation Matters
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For a summary of the federal income tax consequences of the
Plan to the Debtors, see Article XIII, "Certain Federal Income Tax Consequences
of the Plan."
H. Competition
PSF faces significant competition in all of its markets.
Certain of its competitors may possess significantly greater financial,
technical and other resources than it has. If any of such competitors were to
devote additional resources to their hog-production and pork-processing
businesses, PSF's results of operations could be adversely affected. Some of
these larger competitors may also be able to use their substantial financial
resources to decrease pork and pork product pricing in the markets in which the
Debtors operate.
I. Compliance with Local Laws
Although the Debtors believe that the Restructuring
Transactions contemplated under the Plan are in full compliance with applicable
state and local laws, there can be no assurance that the propriety of such
restructuring will not be challenged at any time following confirmation of the
Plan.
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XII.
EXEMPTIONS FROM SECURITIES ACT
REGISTRATION; REGISTRATION RIGHTS
A. Issuance of New Securities Pursuant to the Plan
With respect to the New PIK Notes, the New LLC Interests, and
the Warrants (collectively, the "New Securities"), the Debtors intend to rely
upon the exemption from the registration requirements of the Securities Act (and
of equivalent state securities or "blue sky" laws) provided by section
1145(a)(1) of the Bankruptcy Code. Generally, section 1145(a)(1) of the
Bankruptcy Code exempts the issuance of securities from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and equivalent state securities and "blue sky" laws if the following conditions
are satisfied: (i) the securities are issued by a debtor (or its successor)
under a plan of reorganization; (ii) the recipients of the securities hold a
claim against, an interest in, or a claim for an administrative expense against,
the debtor; and (iii) the securities are issued entirely in exchange for the
recipient's claim against or interest in the debtor, or are issued "principally"
in such exchange and "partly" for cash or property. The Debtors believe that the
exchange of the New Securities will satisfy the aforementioned requirements.
The New Securities may be resold by the holders thereof
without restriction (other than the transfer restrictions described in Section
VI.E.2 "Implementation of the Plan -- Compliance with Farming Laws") unless, as
more fully described below, any such holder is deemed to be an "underwriter"
with respect to such securities, as defined in section 1145(b)(1) of the
Bankruptcy Code. Generally, section 1145(b)(1) of the Bankruptcy Code defines an
"underwriter" as any person who (i) purchases a claim against, or interest in, a
bankruptcy case, with a view towards the distribution of any security to be
received in exchange for such claim or interest, (ii) offers to sell securities
issued under a bankruptcy plan on behalf of the holders of such securities,
(iii) offers to buy securities issued under a bankruptcy plan from persons
receiving such securities, if the offer to buy is made with a view towards
distribution of such securities, or (iv) is an issuer as contemplated by section
2(11) of the Securities Act. Although the definition of the term "issuer"
appears in section 2(4) of the Securities Act, the reference (contained in
section 1145(b)(1)(D) of the Bankruptcy Code) to section 2(11) of the Securities
Act purports to include as "underwriters" all persons who directly, or
indirectly through one or more intermediaries, control, are controlled by, or
are under common control with, an issuer of securities. "Control" (as such term
is defined in Rule 405 of Regulation C under the Securities Act) means the
possession, direct or indirect, of the power to direct or cause the direction of
the policies of a person, whether through the ownership of voting securities, by
contract, or otherwise. Accordingly, an officer or director of a reorganized
debtor (or its successor) under a plan of reorganization may be deemed to be a
"control person," particularly if such management position is coupled with the
ownership of a significant percentage of the debtor's (or successor's) voting
securities. Moreover, the legislative history of section 1145 of the Bankruptcy
Code suggests that a creditor who owns at least 10% of the voting securities of
a reorganized debtor may be presumed to be a "control person."
Rule 144A under the Securities Act provides a non-exclusive
"safe harbor" exemption from the registration requirements of the Securities Act
for resales of "restricted securities" (within the meaning of the Securities
Act) to "qualified institutional buyers," irrespective
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of whether the seller purchased his or its securities with a view towards
reselling them pursuant to Rule 144A. Under Rule 144A, a "qualified
institutional buyer" is defined to include, among other persons (e.g., "dealers"
registered as such pursuant to section 15 of the Exchange Act and "banks" as
defined in section 3(a)(2) of the Securities Act), any entity which purchases
securities for its own account (or for the account of another qualified
institutional buyer) and which (in the aggregate) owns and invests on a
discretionary basis at least $100 million in the securities of unaffiliated
issuers. Subject to certain qualifications, Rule 144A does not exempt the offer
or sale of securities which, at the time of their issuance, were securities of
the same class of securities then listed on a national securities exchange
(registered as such under section 6 of the Exchange Act), or quoted in a U.S.
automated inter-dealer quotation system of a registered national securities
association (e.g., NASDAQ). Because none of the New Securities to be exchanged
on the Effective Date will, at such time, be securities of a class then listed
or quoted as described above, holders of New Secu rities who, in each case, are
deemed to be "underwriters" within the meaning of section 1145(b)(1) of the
Bankruptcy Code or who may otherwise be deemed to be "affiliates" or "control
persons" of Reorganized Finance or Newco within the meaning of Rule 405 of
Regulation C under the Securities Act should, assuming that all other conditions
of the Rule 144A are met, be entitled to avail themselves of the safe harbor
resale provisions thereof.
To the extent that Rule 144A is unavailable, such holders may,
under certain circumstances, be able to sell their securities pursuant to the
more limited safe harbor resale provisions of Rule 144 under the Securities Act.
Generally, Rule 144 provides that if certain conditions are met (e.g., volume
limitations, manner of sale, availability of current information about the
issuer, etc.), specified persons who resell "restricted securities" or who
resell securities which are not restricted but who are "affiliates" of the
issuer of the securities sought to be resold, will not be deemed to be
"underwriters" as defined in section 2(11) of the Securities Act. Under
paragraph (k) of Rule 144, the aforementioned conditions to resale will no
longer apply to restricted securities sold for the account of a holder who is
not an affiliate of Reorganized Finance (in the case of the New LLC Interests or
the Warrants) or Newco (in the case of the New PIK Notes) at the time of such
resale and who has not been such during the three-month period next preceding
such resale, so long as a period of at least three years have elapsed since the
later of (i) the Effective Date and (ii) the date on which such holder acquired
its securities from an affiliate of Reorganized Finance or Newco, as the case
may be.
Because the Debtors are not subject to the periodic reporting
and informational requirements of sections 13 and 15(d) of the Exchange Act,
each of Reorganized Finance and Newco will undertake in connection with any
proposed resale by a holder of New Securities under Rule 144A, to provide such
holder and any prospective purchaser (or his or its authorized representative)
with current business and financial information as prescribed by paragraph (d)
(4) of Rule 144A. Similarly, each of Reorganized Finance and Newco will
undertake in connection with any proposed resale under Rule 144 (other than
pursuant to paragraph (k) of Rule 144) to make available the current information
required by paragraph (c) (2) of Rule 144.
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B. Registration Rights
As discussed above, although upon their issuance pursuant to
section 1145(a)(1) of the Bankruptcy Code the New Securities may generally be
resold by the holders thereof without registration under the Securities Act (or
under equivalent state securities or "blue sky" laws), a holder may be unable to
resell his or its securities if such holder is deemed to be (i) an "underwriter"
within the meaning of section 1145(b)(1) of the Bankruptcy Code, or (ii) an
"affiliate" or "control person" of Reorganized Finance (in the case of the New
LLC Interests or the Warrants) or Newco (in the case of the New PIK Notes)
within the meaning of the Securities Act. In order to enable holders of New
Securities to sell their securities without restriction (and to obviate the need
to satisfy the requirements relating to applicable exemptions from federal and
state securities law registration), Reorganized Finance and Newco have agreed to
provide the holders of New PIK Notes, New LLC Interests, and Warrants,
respectively, with certain registration rights under separate agreements to that
effect which will be entered into among such holders and Reorganized Finance and
Newco, as applicable, on the Effective Date (respectively, the "New PIK Notes
Registration Rights Agreement," the "New LLC Interests Registration Rights
Agreement" and the "Warrants Registration Rights Agreement," the form of each
being included in the Plan Supplement, and collectively, the "Registration
Rights Agreements").
The Registration Rights Agreements will provide certain
demand, "piggy-back," and shelf registration rights to holders of the New
Securities upon the terms and subject to the conditions set forth in Exhibits D,
F and J to the Plan.
The Registration Rights Agreements will contain certain
"hold-back" provisions relating to the ability of a holder of securities who
participates in a Demand Registration to effect any public sale or other
distribution of its securities during certain periods both prior to and after
the effectiveness of certain offerings of securities of Reorganized Finance and
Newco, and will also contain customary provisions regarding indemnification and
contribution and the furnishing of information by holders for inclusion in the
prospectus relating to the Demand Registration.
THE FOREGOING SUMMARY DISCUSSION IS GENERAL IN NATURE AND HAS
BEEN INCLUDED IN THIS DISCLOSURE STATEMENT SOLELY FOR INFORMATIONAL PURPOSES.
THE DEBTORS MAKE NO REPRESENTATIONS CONCERNING, AND DO NOT HEREBY PROVIDE ANY
OPINION OR ADVICE WITH RESPECT TO, THE SECURITIES LAW AND BANKRUPTCY LAW MATTERS
DESCRIBED ABOVE. IN LIGHT OF THE COMPLEX AND SUBJECTIVE INTERPRETIVE NATURE OF
WHETHER A PARTICULAR RECIPIENT OF NEW SECURITIES MAY BE DEEMED TO BE AN
"UNDERWRITER" WITHIN THE MEANING OF SECTION 1145(b)(1) OF THE BANKRUPTCY CODE
AND/OR AN "AFFILIATE" OR "CONTROL PERSON" UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS AND, CONSEQUENTLY, THE UNCERTAINTY CONCERNING THE AVAILABILITY
OF EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
EQUIVALENT STATE SECURITIES AND "BLUE SKY" LAWS, THE DEBTORS ENCOURAGE EACH
HOLDER OF SECURITIES TO CONSIDER CAREFULLY AND CONSULT WITH ITS OWN LEGAL
ADVISOR(S) WITH RESPECT TO SUCH (AND ANY RELATED) MATTERS.
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XIII.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain federal income tax
consequences of the implementation of the Plan to the Debtors. This summary does
not address the income tax consequences to the holders of Claims or Equity
Interests (other than certain Claims and Equity Interests held by the Debtors),
as such Claims and Equity Interests (other than Secured Note Claims and Equity
Interests in CFI) will be either retained or satisfied in full under the Plan,
or, in the case of Equity Interests in Farms, extinguished without
consideration. In the case of holders of Secured Note Claims and Equity
Interests in CFI, the Debtors have been advised that such holders have engaged
or received independent counsel as to the federal income tax consequences of the
Plan.
The following summary is based on the Internal Revenue Code of
1986, as amended (the "Tax Code"), Treasury Department regulations promulgated
and proposed thereunder, judicial decisions and published administrative rules
and pronouncements of the Internal Revenue Service ("IRS") as in effect on the
date hereof. Changes in such rules or new interpretations thereof may have
retroactive effect and could significantly affect the federal income tax
consequences described below.
The federal income tax consequences of the Plan are complex,
subject to significant uncertainties and, with respect to the federal income tax
consequences to holders of Claims and Equity Interests, may vary based upon the
individual circumstances of each holder. The Debtors have not requested a ruling
from the IRS or an opinion of counsel with respect to any of the tax aspects of
the Plan. Thus, no assurance can be given as to the interpretation that the IRS
will adopt. In addition, this summary does not address foreign, state or local
tax consequences of the Plan.
ACCORDINGLY, EACH HOLDER OF A CLAIM OR EQUITY INTEREST IS
URGED TO CONSULT ITS OWN TAX ADVISOR AS TO THE CONSEQUENCES OF THE PLAN TO IT
AND THE DEBTORS UNDER FEDERAL AND APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS.
1. General. For federal income tax purposes, CFI expects to
report net operating loss ("NOL") carryforwards of approximately $2 million as
of December 31, 1995; Finance Holdings expects to report NOL carryforwards of
approximately $150 million as of December 31, 1995; Premium Holdings expects to
report NOL carryforwards and/or suspended losses of at least $30 million as of
March 31, 1996 (the end of its fiscal year); and Farms expects to report NOL
carryforwards of approximately $17 million as of December 31, 1995. In addition,
both CFI and Farms have substantial tax basis in their assets. In contrast,
Finance Holdings and Premium Holdings have little or no remaining tax basis in
their assets. Since its inception, Finance has been treated as a partnership for
federal income tax purposes. Accordingly, all items of income, gain, loss and
deduction earned or incurred by Finance have been allocated among, and are
includable in the computation of taxable income (or loss) of, its partners (CFI,
Finance Holdings and Premium Holdings).
Upon implementation of the Plan, certain of the Debtors will
incur substantial cancellation of debt. As discussed below, as a result of the
implementation of the Plan and the substantial cancellation of debt, each of the
corporate Debtors' NOL carryforwards may be
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substantially reduced and, in some cases, eliminated, and the tax basis of the
assets of CFI will be substantially reduced.
2. Cancellation of Debt. In general, the cancellation or
discharge of a debt obligation for an amount less than the adjusted issue price
(generally, the amount received upon incurring the debt plus the amount of any
previously amortized original issue discount, including any accrued but unpaid
interest) gives rise to cancellation of debt ("COD") income to the debtor for
federal income tax purposes, except to the extent that one or more statutory or
case law exceptions to COD apply.
An exception exists for corporate debtors if the COD income
arises in a case under the Bankruptcy Code pursuant to a confirmed bankruptcy
plan. Under this bankruptcy exception, a corporate debtor in bankruptcy in a
case under the Bankruptcy Code pursuant to a confirmed bankruptcy plan does not
include COD income arising from the implementation of such plan, but instead
must reduce certain tax attributes, including NOL carryforwards and tax basis,
by the amount of the excluded COD income. The reduction in tax attributes is
made after the determination of any tax imposed for the taxable year of the
discharge. Accordingly, any reduction in the tax attributes of Farms due to any
COD resulting from the satisfaction and discharge of the Farms/Finance Note
Claim will not affect the determination of the federal income tax liability of
Farms in respect of the transfer of their assets to Newco under the Plan.
In the case of Finance, a partnership, any resulting COD
income would be allocated among its partners and excludable by them under the
bankruptcy exception. Whether any COD income will result upon the satisfaction
of the Secured Note Claims in exchange for new debt and New LLC Interests
depends upon whether a so-called "equity-for-debt" exception to COD income
applies in the case of partnerships. (See discussion of "Restructuring
Transactions -- Merger of Finance into a Limited Liability Company", below,
regarding the continuation of Reorganized Finance's status as a partnership for
federal income tax purposes.) Although Congress recently repealed a similar
equity-for-debt exception with respect to corporate debtors, such repeal was
limited expressly to corporations. Although not affected by such repeal, the
existence of an equity-for-debt exception to COD income where the outstanding
debt of a partnership is exchanged for an equity interest in the partnership
remains unclear under existing law. Absent an administrative ruling or
pronouncement from the IRS sanctioning the application of an equity-for-debt
exception, the Debtors do not intend to rely upon such an exception.
Accordingly, upon implementation of the Plan, and based upon the estimated
reorganization value of the Reorganized Debtors (see "Valuation --Reorganization
Value") and the Allowed amount of the Secured Note Claims as of the Commencement
Date, the discharge of the Secured Note Claims pursuant to the Plan will result
in approximately $235 million to $243 million of COD income.
As among CFI, Finance Holdings and Premium Holdings, the
Debtors believe that it is likely that the COD income attributable to the
discharge of the Secured Note Claims (all of which is recourse debt) will be
allocated to CFI, as the sole general partner of Finance, to the extent of
Finance's insolvency immediately before the discharge of such Claims, and intend
to report accordingly. This will result in virtually all of the COD income being
allocated to CFI, with the result that, under the bankruptcy exception discussed
above, CFI's NOL carryforwards would be eliminated and CFI's tax basis in its
assets would be substantially reduced. The remainder of the COD income will be
allocated among CFI, Finance Holdings and Premium Holdings in accordance
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with the profit-sharing provisions of the current partnership agreement for
Finance. There is no assurance, however, that the IRS would not take a contrary
position. For example, the IRS might attempt to allocate the full amount of the
resulting COD income in accordance with the profit-sharing provisions of the
current partnership agreement, i.e., 99% to Finance Holdings and Premium
Holdings.
In addition, CFI will suffer further reduction in its tax
basis in its assets due to the elimination of any personal liability for the
continuing indebtedness of Reorganized Finance and Newco, leaving it with a tax
basis in its assets (principally its interest in Reorganized Finance) of at most
a couple of million dollars.
3. Restructuring Transactions.
a. Merger of Finance into a Limited Liability Company.
Pursuant to the Restructuring Transactions, Finance will be merged with and into
a newly formed Delaware limited liability company. Although Reorganized Finance
will be a limited liability company, it has been structured to qualify as a
partnership for federal income tax purposes, subject to the "publicly traded
partnership" provisions of the Tax Code. Neither the Plan nor the operating
agreement for Reorganized Finance will impose any restriction on the
transferability of the New LLC Interests (other than for transfers of the New
LLC Interests to foreign entities), although certain notice provisions will
apply. In addition, transferability of a control interest in Reorganized Finance
may be restricted under Missouri corporate farming law if the County Exemption
ceases to be applicable. See Section III.B, "General Information -- Corporate
Farming Law." If and when the New LLC Interests are considered traded on an
"established securities market" or otherwise "readily tradable on a secondary
market (or the substantial equivalent thereof)" within the meaning of the
publicly traded partnership provisions of the Tax Code, Reorganized Finance
would become taxable as a corporation for federal income tax purposes. No
assurance can be given as to whether or when a trading market in the New LLC
Interests will develop.
The discussion of the federal income tax consequences of the
Plan herein assumes that Reorganized Finance, like Finance, will be treated as a
partnership for federal income tax purposes. Accordingly, for federal income tax
purposes, the Debtors believe that Reorganized Finance should be treated as a
continuation of Finance (absent a deemed termination of the partnership for
federal income tax purposes in the event of a subsequent transfer of 50% or more
of the New LLC Interests within any 12-month period), and no gain or loss should
be recognized by the Debtors as a result of the merger.
b. Transfer of Assets of Reorganized Finance to Newco. The
transfer by Reorganized Finance of all of its assets to Newco in exchange for
all of the capital stock of Newco is intended to qualify as an exchange under
section 351 of the Tax Code, whereby Newco obtains a carryover tax basis in the
transferred assets (increased by any gain recognized by Reorganized Finance upon
the exchange) and a tacked holding period for such assets. However, there is no
assurance that the IRS will not assert a contrary position or that the tax
benefit of the portion of the carryover tax basis in excess of the fair market
value of such assets will not otherwise be limited.
Although it is possible that some gain may be recognized by
the Debtors for federal income tax purposes (as determined on an asset-by-asset
basis) upon the transfer of Reorganized
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Finance's assets to Newco, the Debtors anticipate that current year losses will
be sufficient to offset the entire amount of such gain.
Under section 351, Reorganized Finance would have a tax basis
in the capital stock of Newco equal to the tax basis in the assets transferred,
increased by any gain recognized by it upon such transfer and decreased by the
amount of the liabilities assumed by Newco (or to which the assets are otherwise
subject) and by the amount of any other non-stock consideration received. The
holding period which Reorganized Finance would have in such stock would include
Finance's holding period of the assets transferred, to the extent the assets
transferred were held as capital assets or described in section 1231(b) of the
Tax Code (thus excluding inventory and depreciable and real property held for
not more than one year). For federal income tax purposes, the allocation among
the holders of New LLC Interests of any loss incurred upon a subsequent sale of
the stock of Newco, to the extent Reorganized Finance has a tax basis in such
stock on the Effective Date in excess of the fair market value of the stock, is
uncertain.
c. Transfer of Assets of Farms. Farms does not expect to
recognize any gain for federal income tax purposes upon the transfer of its
assets to Newco in satisfaction of the Farms/Finance Note.
d. Distribution of Warrants to CFI, Finance Holdings and
Premium Holdings. Neither CFI, Finance Holdings nor Premium Holdings expects to
recognize gain upon the receipt of the Warrants for federal income tax purposes.
4. Possible Applicable High Yield Debt Obligations. If the New
PIK Notes are issued with original issue discount ("OID") resulting in a yield
to maturity (based on the "issue price" of the Notes for federal income tax
purposes) at least five percentage points over the applicable federal rate in
effect for the calendar month in which the New PIK Notes are issued (6.73% for
1996), such notes would be treated as applicable high-yield discount obligations
("AHYDO") within the meaning of section 163(e)(5) of the Tax Code. If the New
PIK Notes are treated as AHYDOs, all OID deductions would at least be deferred
until actually paid in cash and, to the extent the resulting yield to maturity
is in excess of six percentage points over the applicable federal rate, would be
disallowed.
Unless the New PIK Notes are traded on an "established
securities market" within generally 30 days of their issuance and initially
trade at a discount, the Debtors do not anticipate that the New PIK Notes would
be considered AHYDOs and that the foregoing deferral and disallowance rules
would apply.
Pursuant to Treasury regulations, an "established securities
market" includes a system of general circulation (including a computer listing
disseminated to subscribing brokers, dealers, or traders) that provides a
reasonable basis to determine fair market value by disseminating either recent
price quotations or actual prices of recent sales transactions.
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XIV.
VOTING PROCEDURES AND REQUIREMENTS
A. Parties in Interest Entitled to Vote
Any holder of a Claim or Equity Interest against the Debtors
on the date on which the Disclosure Statement Order is approved, and whose Claim
or Equity Interest has not previously been disallowed by the Bankruptcy Court,
is entitled to vote to accept or reject the Plan if (i) such Claim or Equity
Interest is impaired under the Plan and is not of a class that is deemed to have
rejected the Plan under section 1126(g) of the Bankruptcy Code and (ii) either
(a) such holder's Claim has been scheduled by the Debtors (and such Claim is not
scheduled as disputed, contingent or unliquidated) or (b) such holder has filed
a proof of claim or interest on or before the last date set by the Bankruptcy
Court for such filings. Any Claim or Equity Interest as to which an objection
has been filed is not entitled to vote, unless the Bankruptcy Court, upon
application of the holder to whose Claim or Equity Interest an objection has
been made, temporarily Allows such Claim or Equity Interest to the extent that
it deems proper for the purpose of accepting or rejecting the Plan. Any such
application will be heard and determined by the Bankruptcy Court prior to the
Confirmation Hearing. A vote may be disregarded if the Bankruptcy Court
determines, after notice and a hearing, that such vote was not solicited or
procured in good faith or in accordance with the provisions of the Bankruptcy
Code.
B. Classes Impaired and Entitled to Vote Under the Plan
The following Classes and Subclasses of Claims and Equity
Interests are impaired under the Plan and are entitled to vote to accept or
reject the Plan: Class 3 (Secured Bank Claims), Class 4 (Secured Note Claims),
Class 6 (Construction Claims), Class 8 (Intercompany Claims) and Class 9 (Equity
Interests in Finance) and each subclass thereof. Claims in each of Class 1
(Priority Tax Claims), Class 2 (Other Priority Claims), Class 5 (Other Secured
Claims), Class 7 (General Unsecured Claims), Class 11 (Equity Interests in
Premium Holdings), Class 12 (Equity Interests in Finance Holdings), and Class 13
(Equity Interests in CFI) are unimpaired under the Plan and the holders of
Claims in those Classes and Subclasses are conclusively presumed to have
accepted the Plan, and the solicitation of acceptance with respect to such
classes and subclasses is not required under section 1126(f) of the Bankruptcy
Code. Equity Interests in Class 10 (Equity Interests in Farms) are conclusively
presumed to have rejected the Plan, and the solicitation of votes with respect
to such class is not required under section 1126(g) of the Bankruptcy Code.
C. Vote Required for Acceptance
by Class of Claims or Equity Interests
The Bankruptcy Code defines acceptance of a plan by a class or
subclass of claims as acceptance by holders of at least two-thirds in dollar
amount, and more than one-half in number, of the claims of that class that are
actually voted for acceptance or rejection of the plan of reorganization.
Accordingly, acceptance by a class or subclass of claims occurs only if at least
two-thirds in amount and a majority in number of the holders of claims voting
cast their ballots in favor of acceptance.
The Bankruptcy Code defines acceptance of a plan of
reorganization by a class or subclass of equity interests as acceptance by
holders of at least two-thirds in amount of the allowed equity interests in that
class which actually cast ballots for acceptance or rejection of the plan of
reorganization.
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XV.
PROCEDURES FOR CONFIRMATION
AND CONSUMMATION OF THE PLAN
A. Confirmation Hearing
Section 1128(a) of the Bankruptcy Code requires the Bankruptcy
Court, after notice, to hold a hearing on confirmation of the Plan. After filing
a petition for relief under chapter 11 of the Bankruptcy Code, the Debtors will
prosecute confirmation of the Plan. In connection therewith, the Bankruptcy
Court will hold the Confirmation Hearing, notice of which will be provided to,
among other entities, holders of Claims or Equity Interests in Class 3 (Secured
Bank Claims), Class 4 (Secured Note Claims), Class 6 (Construction Claims),
Class 8 (Intercompany Claims) and Class 9 (Equity Interests in Finance) and each
subclass thereof. The Confirmation Hearing may be adjourned from time to time by
the Bankruptcy Court without further notice except for an announcement of the
adjourned date made at the Confirmation Hearing or any adjournment thereof.
Objections to confirmation must be made in writing, specifying in detail the
name and address of the entity objecting, the grounds for the objection, and the
nature and amount of the Claim or Equity Interest held by the objector.
Objections must be filed with the Bankruptcy Court, with a copy to chambers of
the Bankruptcy Judge, together with proof of service, and served upon the
parties so designated in the notice of the Confirmation Hearing on or before the
time and date designated in such notice as being the last date for serving and
filing objections to confirmation of the Plan. Objections to confirmation of the
Plan are governed by Bankruptcy Rule 9014 and any local rules of the Bankruptcy
Court. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT WILL
NOT BE CONSIDERED BY THE BANKRUPTCY COURT.
B. Conditions to Confirmation of the Plan
1. Statutory Requirements
At the Confirmation Hearing, the Bankruptcy Court will confirm
the Plan only if all of the conditions to confirmation under section 1129 of the
Bankruptcy Code are satisfied. Such conditions include the following:
o The Plan complies with the applicable
provision of the Bankruptcy Code.
o Each of the Debtors has complied with the
applicable provisions of the Bankruptcy
Code.
o The Plan has been proposed in good faith
and not be any means proscribed by law.
o Any payment made or promised by any of the
Debtors or by an entity issuing securities
or acquiring property under the Plan for
services or for costs and expenses in, or
in connection with, the Chapter 11 Cases,
or in connection with the Plan and
incident to the Chapter
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11 Cases, has been disclosed to the
Bankruptcy Court; and any such payment
made before the confirmation of the Plan
is reasonable, or if such payment is to be
fixed after confirmation of the Plan, such
payment is subject to the approval of the
Bankruptcy Court as reasonable.
o Each of the Debtors has disclosed the
identity and affiliations of any
individual proposed to serve, after
confirmation of the Plan, as a director or
officer of such Debtor and the appointment
to, or continuance in, such office of such
individual is consistent with the
interests of creditors and equity interest
holders and with public policy, and such
Debtor has dis closed the identity of any
insider that will be employed or retained
by such Debtor, and the nature of any
compensation for such insider.
o With respect to each impaired class or
subclass of Claims or Equity Interests,
each holder of an impaired Claim or
impaired Equity Interest either has
accepted the Plan or will receive or
retain under the Plan, on account of the
Claims or Equity Interests held by such
entity, property of a value, as of the
Effective Date, that is not less than the
amount that such entity would receive or
retain if the Debtors were liquidated on
such date under chapter 7 of the
Bankruptcy Code.
o If the Debtors do not move to confirm the
Plan non-consensually, each class or
subclass of Claims or Equity Interests
entitled to vote has either accepted the
Plan or is not impaired under the Plan.
o Except to the extent that the holder of a
particular Claim has agreed to a different
treatment of such Claim, the Plan provides
that Administrative Expense Claims,
Priority Tax Claims and Other Priority
Claims will be paid in full on the
Effective Date, or as soon thereafter as
is practicable.
o At least one impaired class of Claims has
accepted the Plan, determined without
including any acceptance of the Plan by
any insider holding a Claim in such class.
o Confirmation of the Plan is not likely to
be followed by the liquidation or the need
for further financial reorganization of
the Debtors or any successor to the
Debtors under the Plan.
o All fees payable under section 1930 of
title 28 have been paid on or prior to the
Effective Date.
o The Plan provides for the continuation,
after the Effective Date, of payment of
all retiree benefits at the level
established under section 1114 of the
Bankruptcy Code at any time prior to
confirmation of the Plan for the duration
of the period each of the Debtors has
obligated itself to provide such benefits.
The Company believes that the Plan will satisfy all the
statutory provisions of chapter 11 of the Bankruptcy Code, that each of the
Debtors has complied or will have complied with all the provisions of the
Bankruptcy Code, and that the Plan is being proposed and will be submitted to
the Bankruptcy Court in good faith.
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2. Unfair Discrimination and Fair and Equitable Tests
If any impaired class or subclass does not accept the Plan,
the Debtors nevertheless may move for confirmation of the Plan. To obtain such
confirmation, it must be demonstrated to the Bankruptcy Court that the Plan
"does not discriminate unfairly" and is "fair and equitable" with respect to
such class.
A plan of reorganization "does not discriminate unfairly" if
(i) the legal rights of a rejecting class are treated in a manner that is
consistent with the treatment of other classes whose legal rights are related to
the legal rights of the rejecting class, and (ii) no class receives payments in
excess of that which it is legally entitled to receive for its Claims or Equity
Interests. The Debtors believe that under the Plan all impaired classes and
subclasses of Claims and Equity Interests are treated in a manner that is
consistent with the treatment of other classes of Claims and Equity Interests to
which their legal rights are related, if any, and no class or subclass of Claims
or Equity Interests will receive payments or property with an aggregate value
greater than the aggregate value of the Allowed Claims and Allowed Equity
Interests in such class or subclass. Accordingly, the Debtors believe that the
Plan does not discriminate unfairly as to any impaired class or subclass of
Claims or Equity Interests.
The Bankruptcy Code establishes different "fair and equitable"
tests for secured creditors, unsecured creditors and equity interest holders as
follows:
o Secured Creditors - Either (i) each impaired secured
creditor retains its liens securing its secured claim and it receives on account
of its secured claim deferred cash payments having a present value equal to the
amount of its allowed secured claim, (ii) each impaired secured creditor
realizes the indubitable equivalent of its allowed secured claim, or (iii) the
property securing the claim is sold free and clear of liens, with such liens to
attach to the proceeds and the treatment of such liens on proceeds as provided
in clause (i) or (ii) of this subparagraph.
o Unsecured Creditors - Either (i) each impaired unsecured
creditor receives or retains under the plan property of a value equal to the
amount of its allowed claim or (ii) the holders of claims and interests that are
junior to the claims of the dissenting class will not receive any property under
the plan of reorganization, subject to the applicability of the judicial
doctrine of contributing new value.
o Equity Interest Holders - Either (i) each equity interest
holder will receive or retain under the plan of reorganization property of a
value equal to the greater of (a) the fixed liquidation preference or redemption
price, if any, of such stock or (b) the value of the stock or (ii) the holders
of interests that are junior to the stock will not receive any property under
the plan of reorganization, subject to the applicability of the judicial
doctrine of contributing new value.
The Debtors believe that the Plan may be confirmed on a
non-consensual basis if the holders of impaired Claims vote to reject the Plan.
If necessary, the Debtors will show at the Confirmation Hearing that the Plan
provides recoveries to the holders of such Allowed Claims that satisfy the
conditions of section 1129(b) of the Bankruptcy Code.
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THE DEBTORS MAY MOVE FOR CONFIRMATION OF THE PLAN IF LESS THAN THE REQUISITE
HOLDERS OF CLAIMS OR EQUITY INTERESTS VOTE TO ACCEPT THE PLAN.
3. Feasibility
The Bankruptcy Code conditions confirmation of a plan of
reorganization on, among other things, a finding that it is not likely to be
followed by the liquidation or the need for further financial reorganization of
a debtor. For purposes of determining whether the Plan satisfies this condition,
the Debtors have analyzed the capacity of Newco to service its debt obligations
under the Plan. As part of this analysis, the Debtors reviewed the Projections.
The Projections, and the significant assumptions on which they are based, are
included in Article VIII, "Projections," and the Projections annexed as Exhibit
E to the Disclosure Statement. Based upon its analysis of such projections, the
Debtors believe that Newco will be able to make all payments required to be made
under the Plan.
The Projections are based on the assumption that the Plan will
be confirmed by the Bankruptcy Court and, for projection purposes, that the
Effective Date under the Plan and distribu tions thereunder occur on or about
August 31, 1996. The Debtors have prepared the Projections based upon certain
assumptions that they believe to be reasonable under the circumstances. Those
assumptions considered to be significant are described in Article VIII,
"Projections," and the Projections annexed as Exhibit E to the Disclosure
Statement. The Projections have not been examined or compiled by independent
accountants. The Debtors make no representation as to the accuracy of the
Projections or the ability of Newco to achieve the projected results. Many of
the assumptions on which the Projections are based are subject to significant
uncertainties. Inevitably, some assumptions will not materialize and
unanticipated events and circumstances may affect the actual financial results.
Therefore, the actual results achieved may vary from the projected results and
the variations may be material. It is urged that all of the assumptions be
examined carefully in evaluating the Plan.
4. Best Interests Test
With respect to each impaired class of holders of Claims and
Equity Interests, confirmation of the Plan requires that each such holder either
(i) accept the Plan or (ii) receive or retain under the Plan property of a
value, as of the Effective Date, that is not less than the value such holder
would receive or retain if the Debtors were liquidated under chapter 7 of the
Bankruptcy Code.
To determine what holders of Claims and Equity Interests of
each impaired class would receive if the Debtors were liquidated, the Bankruptcy
Court must determine the proceeds that would be generated from the liquidation
of the properties and interests in property of the Debtors in a chapter 7
liquidation case. The proceeds that would be available for satisfaction of
Allowed General Unsecured Claims against, and Equity Interests in, the Debtors
would consist of the proceeds generated by disposition of the unencumbered
equity in the properties and interests in property of the Debtors and the cash
held by the Debtors at the time of the commencement of the liquidation case.
Such proceeds would be reduced by the costs and expenses of the liquidation and
by such additional administration and priority claims that may result from the
termination of the
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business of the Debtors and the use of chapter 7 for the purposes of
liquidation.
The costs of liquidation under chapter 7 of the Bankruptcy
Code would include the fees payable to a trustee in bankruptcy, and the fees
that would be payable to additional attorneys and other professionals that such
a trustee may engage, plus any unpaid expenses incurred by the Debtors during
the Chapter 11 Cases, such as compensation for attorneys, financial advisors,
accountants and costs and expenses of members of the Committee that are Allowed
in the chapter 7 case. In addition, Claims would arise by reason of the breach
or rejection of obligations incurred and executory contracts entered into or
assumed by the Debtors during the pendency of the Chapter 11 Cases.
The foregoing types of Claims and such other Claims which may
arise in the liquidation cases or result from the pending Chapter 11 Cases would
be paid in full from the liquidation proceeds before the balance of those
proceeds would be made available to pay unsecured Claims arising on or before
the Commencement Date.
To determine if the Plan is in the best interests of each
impaired class or subclass, the present value of the distributions from the
proceeds of the liquidation of the properties and interests in property of the
Debtors (net of the amounts attributable to the aforesaid claims) is then
compared with the present value offered to such classes or subclasses of Claims
and Equity Interests under the Plan.
In applying the "best interests" test, it is possible that
Claims and Equity Interests in the chapter 7 cases may not be classified
according to the seniority of such Claims and Equity Interests as provided in
the Plan. In the absence of a contrary determination by the Bankruptcy Court,
all unsecured Claims arising on or before the Commencement Date which have the
same rights upon liquidation would be treated as one class for the purposes of
determining the potential distribution of the liquidation proceeds resulting
from the chapter 7 cases of the Debtors. The distributions from the liquidation
proceeds would be calculated ratably according to the amount of the Claim held
by each creditor. The Debtors believe that the most likely outcome of
liquidation proceedings under chapter 7 would be the application of the rule of
absolute priority of distribu tions. Under that rule, no junior creditor
receives any distribution until all senior creditors are paid in full with
interest, and no stockholder receives any distribution until all creditors are
paid in full with interest. Consequently, the Debtors believe that under chapter
7, no holders of Allowed Claims or Equity Interests (other than the holders of
Allowed Secured Bank Claims and Secured Note Claims) would receive any
distribution.
After consideration of the effects that a chapter 7
liquidation would have on the ultimate proceeds available for distribution to
creditors in the Chapter 11 Cases, including: (i) the increased costs and
expenses of a liquidation under chapter 7 arising from fees payable to a trustee
in bankruptcy and professional advisors to such trustee; (ii) the erosion in
value of assets in a chapter 7 case in the context of the expeditious
liquidation required under chapter 7 and the "forced sale" environment in which
such a liquidation would occur; (iii) the adverse effects on the marketability
of business segments as a result of the departure of key employees and the loss
of customers; and (iv) the substantial increases in claims which would be
satisfied on a priority basis or on parity with creditors in the Chapter 11
Cases, the Debtors have determined that confirmation of the Plan will provide
each holder of a Claim or Equity Interest with a greater recovery than it would
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<PAGE>
receive pursuant to liquidation of the Debtors under chapter 7 of the Bankruptcy
Code.
The Debtors' Liquidation Analysis is attached hereto as
Exhibit D.
The Debtors also believe that the value of any distributions
from the liquidation proceeds to each class of Allowed Claims in a chapter 7
case would be less than the value of distri butions under the Plan because such
distributions in a chapter 7 case would not occur for a substantial period. It
is likely that distribution of the proceeds of the liquidation could be delayed
for one year or more after the completion of such liquidation in order to
resolve Claims and prepare for distributions.
C. Consummation
The Plan will be consummated on the first business day on
which all of the conditions to the effectiveness of the Plan have been satisfied
or waived. The Debtors believe that the Effective Date will occur on or about
September 16, 1996 and that the distributions under the Plan will commence on or
about such date. The Debtors cannot, however, provide any assurances that the
Effective Date will occur on such date or on any other date.
XVI.
ALTERNATIVES TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
A. Liquidation Under Chapter 7
If no chapter 11 plan can be confirmed, the Chapter 11 Cases
may be converted to cases under chapter 7 of the Bankruptcy Code in which a
trustee would be elected or appointed to liquidate the assets of the Debtors. A
discussion of the effect that a chapter 7 liquidation would have on the recovery
of the holders of Claims and Equity Interests is set forth in Section XV.B.4,
"Procedures for Confirmation and Consummation of the Plan -- Conditions to
Confirmation of the Plan; Best Interests Test" and the Liquidation Analysis
annexed as Exhibit D to the Disclosure Statement. The Debtors believe that
liquidation under chapter 7 would result in (i) smaller distributions being made
to creditors than those provided for in the Plan because of the additional
administrative expenses involved in the appointment of a trustee and attorneys
and other professionals to assist such trustee, (ii) additional expenses and
claims, some of which would be entitled to priority, which would be generated
during the liquidation and from the rejection of executory contracts in
connection with the cessation of the Debtors' operations, and (iii) failure to
realize the greater going-concern value of the Debtors' assets.
B. Alternative Plan of Reorganization
If the Plan is not confirmed, the Debtors or any other party
in interest could attempt to formulate a different plan of reorganization. Such
a plan might involve either a reorganization and continuation of the Debtors'
business or an orderly liquidation of their assets. During the course of
negotiations of the Plan, the Debtors explored various other alternatives and
concluded
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that the Plan represented the best alternative to reorganize and to protect the
interests of creditors and other parties in interest. The Debtors have not
changed their conclusions.
The Debtors believe that the Plan permits them to use the
provisions of chapter 11 expeditiously to preserve their business and allow
rehabilitation, to pay their general unsecured creditors in full, and to
accomplish the deleveraging of the Debtors' financial condition. The Debtors
believe that a restructuring outside of chapter 11 would not achieve the same
benefits or realize greater recovery for creditors and other parties in interest
than that provided for in the Plan.
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XVII.
CONCLUSION AND RECOMMENDATION
The Debtors believe that the Plan achieves the objectives of
chapter 11 and is in the best interests of all holders of Claims and Equity
Interests, and urge all holders of Claims and Equity Interests to vote to accept
the Plan.
Dated: Wilmington, Delaware
July 29, 1996
PSF FINANCE L.P.,
a Delaware Limited Partnership
By: Collings Farm, Inc.
Its Sole General Partner
By: Kenneth F. Clifford
Name: Kenneth F. Clifford
Title: Senior Vice President
PREMIUM STANDARD FARMS, INC.,
a Missouri Corporation
By: Dennis W. Harms
Name: Dennis W. Harms
Title: President and Chief Executive Officer
COLLINGS FARM, INC.,
a Missouri Corporation
By: Kenneth F. Clifford
Name: Kenneth F. Clifford
Title: Senior Vice President
PSF FINANCE HOLDINGS INC.,
a Delaware Corporation
By: Kenneth F. Clifford
Name: Kenneth F. Clifford
Title: Executive Vice President
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<PAGE>
PREMIUM HOLDINGS CORP.,
an Iowa Corporation
By: Dennis W. Harms
Name: Dennis W. Harms
Title: President
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EXHIBIT T3E2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- -----------------------------------
:
In re :
:
PSF FINANCE L.P., : Chapter 11 Case
PREMIUM STANDARD FARMS, INC., : Nos. 96-1032 (HSB)
COLLINGS FARMS, INC., : through 96-1036 (HSB)
PSF FINANCE HOLDINGS INC. and :
PREMIUM HOLDINGS CORP., : (Jointly Administered)
:
Debtors. :
- -----------------------------------:
ORDER (i) APPROVING THE DEBTORS'
DISCLOSURE STATEMENT, FORM OF BALLOTS AND
PROPOSED SOLICITATION PROCEDURES, (ii)
SETTING THE DATE, TIME AND PLACE FOR VOTING
ON THE DEBTORS' JOINT PLAN OF REORGANIZATION,
(iii) SETTING THE DATE, TIME AND PLACE FOR A HEARING
TO CONSIDER CONFIRMATION OF THE DEBTORS' PLAN AND
(iv) PRESCRIBING THE FORM AND MANNER OF NOTICE THEREOF
PSF Finance L.P., Premium Standard Farms, Inc., Collings Farm,
Inc., PSF Finance Holdings Inc. and Premium Holdings Corp. (collectively, the
"Debtors") having filed with the Court on July 2, 1996 a proposed joint plan of
reorganization, as amended on July 29, 1996 (the "Plan"); and the Debtors having
filed with the Court on July 2, 1996, a proposed disclosure statement relating
to the Plan, as amended on July 29, 1996 (the "Disclosure Statement"); and
notice of the hearing on the Disclosure Statement and other relief requested by
the Debtors having been given in accordance with the Order, dated
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July 2, 1996, (i) Setting the Date, Time and Place for a Hearing to Consider (a)
Approval of the Disclosure Statement, Form of Ballots, and Solicitation
Procedures, and (b) Confirmation of the Debtors' Joint Plan of Reorganization,
(ii) Setting the Date, Time and Place for Voting on the Debtors' Plan, (iii)
Prescribing the Form and Manner of Notice Thereof, and (iv) approving the
retention of Arthur Andersen LLP ("Andersen") as solicitation and balloting
agent (the "Scheduling Order"), to all known holders of claims against the
Debtors and other parties in interest by mail and by publication notice; and a
hearing on the Disclosure Statement and other relief requested by the Debtors
having been held on August 1, 1996 at which all parties in interest had an
opportunity to be heard (the "Disclosure Statement Hearing"); and the Court
having determined, based upon the Disclosure Statement, the Plan and all of the
proceedings had before the Court, that the Disclosure Statement contains
"adequate information" within the meaning of section 1125(a) of the Bankruptcy
Code;1 and upon all of the proceedings had before the Court; and after due
deliberation and sufficient cause appearing therefor, it is
ORDERED that pursuant to section 1125 of the Bankruptcy Code
and Bankruptcy Rule 3017(b), the Disclosure Statement is approved as containing
"adequate information" within the meaning of section 1125(a) of the Bankruptcy
Code; and it is further
- --------
(1) All defined terms which are not defined herein shall have the meaning
ascribed to them in the Plan.
2
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<PAGE>
ORDERED that the form of Ballots (annexed hereto as Exhibit
"A") and the proposed procedures (annexed hereto as Exhibit "B") for soliciting
votes to accept or reject the Plan are approved in all respects; and it is
further
ORDERED that in accordance with Bankruptcy Rules 3017(d) and
3018(a) and the Plan, the record date for determining holders of Claims and
Equity Interests eligible to vote to accept or reject the Plan shall be the date
of the entry of this Order (the "Record Date"); and it is further
ORDERED that pursuant to Bankruptcy Rule 3017(d), the Debtors
shall transmit or cause to be transmitted, within five (5) business days after
entry of this Order, by first-class mail, postage prepaid (i) a copy of the
Disclosure Statement and the Plan, (ii) a copy of the notice of entry of this
Order substantially in the form of the notice annexed hereto as Exhibit "C" (the
"Notice"), (iii) a Ballot(s) and voting instructions, and (iv) a pre-addressed
return envelope (collectively, a "Solicitation Package"), to all known holders
of Claims and Equity Interests as of the Record Date in each class of Claims or
Equity Interests impaired under the Plan; and it is further
ORDERED that the Debtors shall transmit or cause to be
transmitted, within five (5) business days after entry of this Order, by first
class mail, postage prepaid, a Solicitation Package (other than Ballots) to (i)
all known holders of Claims and Equity Interests as of the Record Date who are
unimpaired under the Plan (without the Ballots), (ii) all known holders of
Claims
3
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<PAGE>
and Equity Interests as of the Record Date who are not entitled to vote under
the Plan (without the Ballots), (iii) the United States Trustee and (iv) the
entities to whom notice is required to be given pursuant to Bankruptcy Rule
2002; and it is further
ORDERED that the Debtors are authorized to publish the Notice
in The Wall Street Journal (national edition), The New York Times (national
edition), The Kansas City Star and The Amarillo Daily News, once no later than
five (5) business days after the entry of this Order, which publication shall
constitute good and sufficient notice to all of the Debtors' creditors, equity
interest holders and other parties in interest of the time and place of the
hearing on confirmation of the Plan, the date by which Ballots must be
submitted, and the date by which all objections to confirmation of the Plan must
be served and filed with the Court, and all other information contained in the
Notice; and it is further
ORDERED that, pursuant to Bankruptcy Rule 3017(c), in order to
be considered as acceptances or rejections of the Plan, all Ballots must be
properly completed, executed, marked and actually received, via United States
mail, overnight delivery or hand delivery, by Arthur Andersen LLP (the
"Balloting Agent") on or before August 30, 1996 at 4:30 p.m. (Eastern Time) (the
"Voting Deadline"); and it is further
ORDERED that pursuant to Bankruptcy Rule 3017(c), the hearing
to consider confirmation of the Plan (the "Confirmation Hearing") shall be held
before the Court on September 6, 1996 at
4
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<PAGE>
2:30 p.m. (Eastern Time), or as soon thereafter as counsel may be heard; the
Confirmation Hearing may be adjourned from time to time without further notice
except for an announcement made at the Confirmation Hearing or any adjourned
Confirmation Hearing; and it is further
ORDERED that any objection to confirmation of the Plan be in
writing, state the name of the objector, its interest in the Chapter 11 Cases
and, if applicable, the nature and amount of its Claim or Equity Interest, that
it is an objection to confirmation of the Plan, as well as the grounds for the
objection and the legal basis therefor, and be served and filed with and
received by the Bankruptcy Court, Marine Midland Plaza, 824 Market Street, Sixth
Floor, Wilmington, Delaware 19801, and the parties listed below, together with
proof of service, on or before August 30, 1996 at 4:30 p.m. (Eastern Time):
(1) PSF FINANCE L.P.
Highway 65 North
Princeton, Missouri 64673
Attn: William R. Patterson
Acting Chief Financial Officer
(2) WEIL, GOTSHAL & MANGES LLP
Co-Attorneys for the Debtors and
Debtors in Possession
767 Fifth Avenue
New York, New York 10153
Attn: Lori R. Fife, Esq.
(3) RICHARDS, LAYTON & FINGER, P.A.
Co-Attorneys for the Debtors and
Debtors in Possession
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Attn: Thomas L. Ambro, Esq.
5
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(4) ROPES & GRAY
Co-Attorneys for the Noteholders
One International Place
Boston, Massachusetts 02110-2624
Attn: Don S. DeAmicis, Esq.
(5) MORRIS, NICHOLS, ARSHT & TUNNEL
Co-Attorneys for the Noteholders
1201 North Market Street
Wilmington, Delaware 19801
Attn: William H. Sudell, Esq.
(6) WACHTELL, LIPTON, ROSEN & KATZ
Co-Attorneys for the Bank Lenders
51 West 52nd Street
New York, New York 10019
Attn: Harold S. Novikoff, Esq.
(7) YOUNG, CONAWAY, STARGATT & TAYLOR
Co-Attorneys for the Bank Lenders
Rodney Square North, 11th Floor
P.O. Box 391
Wilmington, Delaware 19899
Attn: James L. Patton, Jr.
(8) OFFICE OF THE UNITED STATES TRUSTEE 601 Walnut Street
Curtis Center, Suite 950 W Philadelphia, Pennsylvania
19106;
and it is further
ORDERED that any party failing to file and serve objections to
the Plan in compliance with this Order shall be barred from raising any
objections at the Confirmation Hearing; and it is further
ORDERED that the Balloting Agent is authorized and directed to
effect any action reasonably necessary to accomplish the solicitation and ballot
tabulation services, as contemplated by the Disclosure Statement, including,
without limitation, to review, tabulate, and make preliminary determinations as
to the validity of all acceptances and rejections of the Plan and to
6
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<PAGE>
provide a written report of the results of such tabulation to the Court not
later than two (2) business days prior to the date of the Confirmation Hearing;
and it is further
ORDERED that any executed ballot received by the Balloting
Agent which does not indicate either an acceptance or rejection of the Plan
shall be deemed to constitute an acceptance of the Plan; and it is further
ORDERED that any executed ballot received by the Balloting
Agent which does not indicate a Debtor to which it pertains shall be deemed to
constitute an acceptance of the Plan proposed by that Debtor whose books and
records reflect the entity executing such ballot as a holder of a Claim against,
or Equity Interest in, such Debtor; and it is further
ORDERED that the Debtors are not required to mail Solicitation
Packages to any individual or entity at an address from which notice of the
Disclosure Statement Hearing was returned by the United States Postal Office as
undeliverable, unless the Debtors were provided with a more accurate address
prior to the Record Date; and it is further
ORDERED that any executed ballot sent to the Balloting Agent
by facsimile or telecopy transmission will not be counted; and it is further
ORDERED that if an entity holds Claims or Equity Interests in
more than one class or subclass and is entitled to vote such Claims or Equity
Interests, separate ballots must be
7
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<PAGE>
used for each class or subclass of Claims or Equity Interests;
and it is further
ORDERED that votes cast by holders of Claims or Equity
Interests in each subclass of a class under the Plan will be tabulated
separately by subclass; and it is further
ORDERED that any entity entitled to vote to accept or reject
the Plan may change its vote before the Voting Deadline, by casting a
superseding ballot so that it is received on or before such deadline, but any
entity desiring to change its vote after the Voting Deadline may do so only if
it files a motion with the Court with sufficient notice so that it can be heard
and considered at the Confirmation Hearing, and it demonstrates "cause" pursuant
to Bankruptcy Rule 3018(a); and it is further
ORDERED that each holder of a Claim who has filed a proof of
claim in the Debtors' chapter 11 cases as to which Claim an objection is pending
and is not resolved before the Confirmation Hearing shall not be permitted to
vote on the Plan unless the holder of such Claim has obtained an order of the
Court on or before 7 days prior to the Confirmation Hearing, pursuant to
Bankruptcy Rule 3018(a), temporarily allowing its Claim for purposes of voting
on the Plan; and it is further
8
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<PAGE>
ORDERED that the Debtors are authorized and empowered
to take such actions as may be necessary and appropriate to
implement the terms of this Order.
Dated: Wilmington, Delaware
August 1, 1996
/s/ Helen S. Balick
United States Bankruptcy Judge
9
EXHIBIT T3F
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section
ss.310 (a) (1) ......................................... 6.9
(a) (2) ......................................... 6.9
(a) (3) ......................................... Not
Applicable
(a) (4) ......................................... Not
Applicable
(a) (5) ......................................... Not
Applicable
(b) ......................................... 6.8
(c) ......................................... Not
Applicable
ss.311 (a) ......................................... 6.13
(b) ......................................... 6.13
(c) ......................................... Not
Applicable
ss.312 (a) ......................................... 7.1
7.2 (a)
(b) ......................................... 7.2 (b)
(c) ......................................... 7.2 (c)
ss.313 (a) ......................................... 7.3 (a)
(b) ......................................... 7.3 (a)
(c) ......................................... 7.3 (a)
(d) ......................................... 7.3 (b)
ss.314 (a) ......................................... 7.4;
10.17; 10.22
(b) ......................................... 15.2
(c) (1) ......................................... 1.2
(c) (2) ......................................... 1.2
(c) (3) ......................................... Not
Applicable
(d) ......................................... 15.3
(e) ......................................... 1.2
(f) ......................................... 1.2
ss.315 (a) ......................................... 6.1, 6.3
(b) ......................................... 6.2
(c) ......................................... 6.1
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(d) ......................................... 6.1; 6.3
(e) ......................................... 5.14
ss.316 (a) ......................................... 1.1
last sentence
(a)(1)(A) ......................................... 5.12
(a)(1)(B) ......................................... 5.13
(a)(2) ......................................... Not
Applicable
(b) ......................................... 5.8
(c) ......................................... 1.4 (c)
ss.317 (a)(1) ......................................... 5.3
(a)(2) ......................................... 5.4
(b) ......................................... 10.3
ss.318 (a) ......................................... 1.7
